________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
[X] 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: 2-98277C
THE COLONEL'S INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-3262264
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
620 SOUTH PLATT ROAD, MILAN, MICHIGAN 48160
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 439-4200
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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_
Number of shares outstanding of the registrant's Common Stock, $0.01 par
value (excluding shares of treasury stock) as of March 25, 1996: 24,177,830
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant based on the closing price on the Nasdaq
SmallCap Market on March 14, 1996: $3,803,469
________________________________________________________________________________
PART I
ITEM 1. BUSINESS
Effective December 31, 1995, Brainerd International, Inc.
("Brainerd") merged with and into The Colonel's International, Inc.
(the "Company"), pursuant to an agreement and plan of reorganization
(the "Merger"). The Company was the surviving corporation and the
separate existence of Brainerd ceased at the effective time of the
Merger. Prior to the Merger, Brainerd was a Minnesota corporation.
The Company is a Michigan corporation.
Prior to the Merger, Brainerd common stock was traded on the
National Association of Securities Dealers, Inc. ("Nasdaq") SmallCap
Market. Effective January 2, 1996, Brainerd common stock (trading
symbol "BIRI") was delisted from the Nasdaq SmallCap Market and common
stock of the Company (trading symbol "COLO") was listed on the
SmallCap market.
Pursuant to a separate agreement and plan of merger, Brainerd
Merger Corporation, a wholly owned subsidiary of Brainerd, was merged
with and into The Colonel's, Inc., a Michigan corporation ("The
Colonel's"). The Colonel's was the surviving corporation in that
merger and the separate existence of Brainerd Merger Corporation
ceased at the effective time of that merger. Shares of common stock
in The Colonel's were converted into the right to receive an aggregate
amount of 23,500,000 shares of common stock in the Company.
As a result of these transactions, The Colonel's became a wholly
owned subsidiary of the Company. Brainerd transferred all of its
operating assets to Brainerd International Raceway, Inc., a Minnesota
corporation and a wholly owned subsidiary of the Company ("Brainerd
International Raceway"). The Company is a holding company with no
significant operations of its own. The Company has two wholly owned
subsidiaries, which are The Colonel's and Brainerd International
Raceway. A description of the business of these two subsidiaries
follows.
THE COLONEL'S, INC.
GENERAL. The Colonel's is a leading domestic manufacturer of
plastic replacement bumpers and facias for the automotive aftermarket
industry in North America. The Colonel's designs, manufactures and
distributes plastic bumpers, facias, support beams and brackets for
application as replacement collision parts for domestic automobile
models. In addition, The Colonel's purchases and resells plastic
replacement bumpers and facias for use as replacement collision
parts on import automobile models and for models manufactured
domestically by foreign-based automobile manufacturers,
and manufactures parts for these models to a limited extent. In late
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1995, The Colonel's also began production of pickup truck bedliners.
The Colonel's manufactures its products through the use of reaction
injection molding, plastic injection molding and thermoforming
technology at its manufacturing facilities in Michigan.
The Colonel's distributes its products through warehouses
operated by The Colonel's located in Michigan, Texas, Arizona and
Arkansas. The Colonel's sells its products through a network of
independent distributors located in all fifty states, The District of
Columbia, Puerto Rico, Canada, Mexico and The Bahamas.
The Colonel's strategy is to provide a readily available, high
quality, low cost alternative to original equipment manufacturer
("OEM") replacement bumpers, facias, truck bedliners and other plastic
components through The Colonel's streamlined manufacturing process and
extensive distribution network.
As of December 31, 1995, The Colonel's had 243 employees.
PRODUCTS. The Colonel's designs, manufactures and distributes
plastic bumpers, facias, support beams and brackets for application as
replacement collision parts for current, high volume, domestic
automobile models. The Company has added the design and manufacture
of pickup truck bedliners, tailgate covers and rail kits. The
Colonel's also purchases and resells plastic bumpers and facias for
application as replacement collision parts on current, high volume,
import automobile models, including automobiles manufactured
domestically by foreign-based companies. The products manufactured
and sold by The Colonel's are primarily plastic molded front and rear
bumper panels designed for application to specific automobile makes
and models. The Colonel's products are sold for distribution to
collision repair shops, dealers and others in the automobile
aftermarket collision industry and are used for the replacement of
damaged automobile bumpers and related components.
The table set forth below shows The Colonel's sales for the years
ended December 31, 1995, 1994 and 1993 divided between products that
are manufactured by The Colonel's and products that are purchased by
The Colonel's from other manufacturers and marketed by The Colonel's:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C>
Manufactured Products 92% 89% 90%
Purchased Products 8% 11% 10%
</TABLE>
Each product manufactured or distributed by The Colonel's is
designed for application to an automobile of a specific make, model
and year. Certain products may have more than one application because
different but similarly designed automobile models may have identical
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bumpers or plastic molded components or because different years of the
same model automobile may have identical bumpers or plastic molded
components. In selecting products to manufacture and distribute, The
Colonel's targets high volume automobile models and models that
statistically incur a higher frequency of accidents, since these
models support a higher volume of product sales for each dollar
invested in production tooling.
A majority of the specified parts manufactured by The Colonel's
are produced to meet the design standards and engineering tolerances
of the Certified Auto Parts Association ("CAPA"), a national standard
setting organization. A sticker acknowledging compliance with these
standards and tolerances is affixed to each certified part
manufactured by The Colonel's. CAPA is an independent association
that publishes specifications for high quality aftermarket automobile
body parts and certifies specific products as equivalent to factory
built service and replacement body parts. CAPA only certifies parts
for domestic automobile models. Approximately 72% of the automotive
components manufactured by The Colonel's are examined and tested by
CAPA and are certified as equivalent or superior to comparable OEM
replacement parts in terms of fit, form, function and material grade.
The Colonel's certified products are listed in the nationally
distributed CAPA Directory of Certified Competitive Auto Parts and the
CAPA certification of The Colonel's products is generally relied upon
throughout the automobile aftermarket industry and the automobile
insurance industry as an assurance of quality and dependability.
As of December 31, 1995, The Colonel's manufactured and
distributed molded plastic replacement components for a total of 415
automotive applications and purchased and distributed replacement
components for approximately 1,300 automotive applications. The
Colonel's anticipates continuing to manufacture and distribute
replacement components for an equal or greater number of applications
in future operations. Although The Colonel's has no specific plans at
this time to manufacture additional types of plastic automotive
replacement components, The Colonel's believes that there are numerous
additional automobile applications for its manufacturing process
including doors, hoods, fenders and other body or interior components
and believes that plastic components will continue to be utilized in
an increased number of applications by automobile OEMs. Only new
tooling for the injection presses and certification of new products
need be obtained to add additional applications to existing lines.
Additionally, The Colonel's existing manufacturing facilities have the
capacity to produce an increased volume of products through the
addition of work shifts.
The Colonel's present inventory of new bumpers covers 415
different bumper applications. According to their most recent sales
brochures and literature, none of The Colonel's domestic competitors
offer more than 98 applications and none of its foreign competitors
-4-
offer more than 190. Although The Colonel's believes that it is
number one in sales of non-OEM aftermarket automotive bumpers,
specific sales information is not available on The Colonel's
competitors because they are privately held companies and do not
publicly report sales information.
The Colonel's believes it maintains a significant market
advantage by offering its automotive replacement components at lower
prices than those offered by OEMs for comparable replacement
components. The Colonel's believes that its products are equivalent
in quality, durability and function to OEM manufactured replacement
components, but are generally sold at prices which are less than the
OEM suggested list price. Furthermore, The Colonel's believes its
competitive pricing secures a significant market advantage for its
products in the aftermarket collision industry. Competitive pricing
of collision parts is generally believed to be particularly important
to automobile insurance companies which fund the purchase of a
significant percentage of automotive crash replacement parts.
The Colonel's provides a limited lifetime warranty against
defects in material and workmanship and guarantees that the products
generally meet or exceed factory and industry specifications.
The Colonel's has two patents with respect to its products. The
patents relate to the manufacture of bedliners.
MANUFACTURING. In Milan, Michigan, The Colonel's uses two
distinct chemical processes to manufacture its plastic products. The
production cycle for each process is similar. Raw materials are
introduced into a machine press that contains a machined tool or mold.
Heat and pressure are applied to the raw materials, forcing them into
the shape of the mold. The resulting plastic molded part is then
removed from the molds to an adjacent work station where small amounts
of excess plastic are trimmed from each part. After trimming, the
part is cleaned and placed on a conveyor belt leading to the paint
application room. There, the part is typically painted with a water-based
black primer finish. After the finish is dried in infrared
ovens on the conveyor belt, each part is then labeled and placed in a
plastic bag, packaged in boxes of five and shipped or stored for
shipment.
In Owosso, Michigan, The Colonel's uses extruders to form plastic
pellets into large sheets that are then used by a thermoformer to mold
the sheets into bedliner products. In this process, the sheets are
heated into a very flexible state. The hot plastic is then placed
over a mold where the plastic is drawn into the mold using vacuum
pressure. The bedliner and tailgate are made at one time. The parts
are then hand-trimmed and stacked on a skid for shipment.
-5-
The Colonel's primarily uses custom molding machines manufactured
by Cincinnati Milacron, which management believes are generally
recognized as state-of-the-art for the industry. The toolings are
primarily made of zinc alloy, aluminum, or steel and are built to The
Colonel's custom specifications. The Colonel's presently maintains
over 330 specially designed tools, enabling production of
approximately 415 different automotive applications.
The primary manufacturing process used by The Colonel's is
referred to as Reaction Injection Molding or the "RIM" process.
Because the RIM process is a low-temperature, low-pressure operation,
The Colonel's can use zinc alloy tools for a majority of its
manufacturing. Zinc alloy tools are less expensive to build than
conventional steel injection molds.
The raw materials for the RIM process, consisting of polyol and
polyisocyanate, are available from several sources. The materials are
stored in two large closed tanks and are distributed to the presses by
a computer-regulated flow monitoring system. In the RIM process, two
reactive streams (a polyol containing extenders, catalysts and a
blowing agent; and a polyisocyanate) are mixed together under
controlled temperature and pressure while being injected into the
tooling attached to each press.
The RIM tool is filled to approximately 90% of capacity during
the injection process. A chemical reaction causes the material to
heat and expand, forcing air out through a vent, and allowing the
material to fill the mold completely. The result is a microcellular
plastic elastomeric or polyurethane part. The polyurethane part
produced is lightweight, corrosion resistant, and will recover its
original form after minor impact, lessening the likelihood of
automobile body damage at very low speeds.
An alternative process used by The Colonel's is referred to as
injection molding. In injection molding, small pellets containing
reactive polymers and catalysts are melted through heat and pressure.
The melted material is forced into the mold until it is completely
filled. The result is a thermoplastic olefin polypropylene part. A
significant benefit of this process is that excess plastic can be
reused after it has been trimmed off a completed part. Additionally,
a part manufactured using this injection molding process that is
damaged in production or rejected as scrap for quality-control reasons
can be reground into pellets and completely recycled and used as raw
material in the injection molding process. The recycling ability
offered by the injection molding process appears increasingly
important with steadily rising solid waste disposal costs.
At the end of each production run, the tooling and the last part
produced by the tooling are inspected by production personnel.
Preventive maintenance and repair of the tooling are performed on-site
-6-
by The Colonel's tool and die personnel in order to minimize waste,
reduce down-time, prolong tooling life, and maintain product quality.
The Colonel's manufacturing facility in Milan, Michigan houses 7
reaction injecting molding machines and 6 injection molding machines.
Those machines had the combined capacity to produce the number of
units sold in 1995 without operating a second or third shift. The
Colonel's believes that it will be able to fully meet all of its
customers' 1996 and 1997 orders by running a first shift year round
and a limited second shift workforce during the four-month period of
time preceding and during the winter months, when demand for
automotive crash parts is traditionally the greatest.
The manufacturing facility in Owosso houses two large extruders
and six large thermoforming machines. It is management's best
estimate that those machines are expected to produce enough units to
meet anticipated customer demands running two shifts.
The Colonel's has purchased raw materials from three primary
suppliers, Dow Chemical Company, Montel, Inc. (formerly Himont
Advanced Materials) and Phillips Petroleum on open credit terms for
over ten years. The Colonel's does not maintain any fixed quantity or
requirements contract with either supplier. The Colonel's is not
contractually obligated to purchase any minimum quantity from either
supplier and neither supplier is obligated to sell product to The
Colonel's at any predetermined quantity or any predetermined price.
The Colonel's generally estimates and orders raw materials for
production by individual purchase orders at approximately ten-day to
two-week intervals. Similarly, The Colonel's orders molding machines
and tooling from Cincinnati Milicron by individual purchase order and
does not maintain any agreement with Cincinnati Milicron, HPM or Brown
Machinery concerning the purchase of manufacturing equipment. The
Colonel's has not experienced any material difficulties in obtaining
raw materials or equipment for production as needed and management of
The Colonel's believes that the absence or unavailability of any
current source of raw materials or equipment for production would not
have a material adverse effect on The Colonel's because an adequate
number of alternative sources for both raw materials and production
equipment exist to satisfy production requirements in a timely manner.
DISTRIBUTION AND SALES; PROPERTIES. The Colonel's products are
distributed nationally from The Colonel's manufacturing facilities and
from affiliated warehouse facilities. The Colonel's manufacturing
facilities are located in Milan and Owosso, Michigan. Products are
shipped by The Colonel's directly from its manufacturing facilities to
customers or to distribution warehouses operated by The Colonel's or
its distributors. The Colonel's does not maintain any fixed quantity
or requirement contracts (or distributor agreements) with any
customers. All sales are made in response to individual orders from
customers and distributors. Price terms are determined by the volume
-7-
each customer buys during each calendar month and credit terms are
standard. The Colonel's believes that its success has been achieved
in part because of an emphasis on rapid delivery of customer orders.
To accomplish this, The Colonel's maintains large inventories of the
products it manufactures. The Colonel's, Inc. fills orders from
existing inventory stock and does not build parts to fill a particular
customer's order. Customer orders are generally filled and shipped
within 48 hours after their receipt. For these reasons, The Colonel's
has virtually no backlog of product orders.
The Milan manufacturing plant is a 350,000 square foot facility
(plus a 45,000 square foot covered crane bay) situated on a 62 acre
site on the outskirts of Milan, Michigan. Milan is located
approximately 10 miles south of Ann Arbor, Michigan, 60 miles west of
Detroit, and 25 miles northwest of Toledo, Ohio. There is sufficient
room to expand the physical plant. The Milan plant manufactures the
aftermarket bumper fascias. This facility is leased from a company
owned by Donald and Patsy Williamson.
The new Owosso manufacturing facility occupies a 210,000 square
foot building located on 27 acres on the outskirts of Owosso,
Michigan. The Colonel's former manufacturing plant (lost due to a
fire in 1993) was located at the other end of town. Owosso is located
about 100 miles north west of Milan, Michigan and about 30 miles north
east of Lansing, Michigan. The building has power capacities
exceeding current use and would permit expansion if necessary. This
plant manufactures the truck accessories. This facility is leased
from a company owned by Donald and Patsy Williamson.
The Colonel's Sales Manager and a staff of four sales personnel
have responsibility for sales and distribution of The Colonel's
products, promotion and advertising. The sales staff is located in
Milan, Michigan.
The Colonel's operates a warehouse distribution facility in
Houston, Texas. The distribution facility is approximately 25,410
square feet in size, has four full-time employees of The Colonel's and
is leased by The Colonel's pursuant to a lease agreement having a term
through July 1998.
The Colonel's operates a second warehouse distribution facility
in Dallas, Texas. This distribution facility is approximately 25,000
square feet in size, has five full-time employees of The Colonel's and
is leased by The Colonel's pursuant to a lease agreement having a term
through September 1998.
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The Colonel's operates a third warehouse distribution facility in
Phoenix, Arizona. This distribution facility is approximately 52,360
square feet in size, has four full-time employees of The Colonel's and
is leased by The Colonel's pursuant to a lease agreement having a term
through January 2000.
The Colonel's fourth warehouse is in West Memphis, Arkansas.
This warehouse and distribution facility of approximately 45,000
square feet and six full-time employees sells chrome-plated steel
bumpers and custom chrome trim pieces. The Colonel's Factory Outlet
of Arkansas, Inc., an Arkansas corporation, occupies a 55,000 square
foot manufacturing facility which manufactures chrome-plated steel
bumpers and its products are sold to The Colonel's Distribution
Warehouses and to many of the same customers as The Colonel's. Donald
J. Williamson, President and Chief Executive Officer of the Company,
owns all of the issued and outstanding capital stock of The Colonel's
Factory Outlet of Arkansas, Inc.
The Colonel's bedliner division operates out of a newly renovated
219,000 square foot building in Owosso, Michigan. This division of
The Colonel's manufactures bedliners and leases the building from a
company owned by Donald and Patsy Williamson.
The Colonel's maintains a fleet of 26 trucks for the
transportation and distribution of its products. The Colonel's trucks
are maintained pursuant to capital and operating equipment leases and
are operated by 17 full-time drivers employed by The Colonel's.
Approximately 68% of The Colonel's products are delivered by The
Colonel's trucks. The balance of The Colonel's products are shipped
by common carrier FOB to customer's location at the customer's
expense. The means of delivery utilized by The Colonel's in
combination with fairly flexible manufacturing processes, allows
orders to be filled on a substantially faster basis than by OEM
competitors. Plastic replacement parts for import model automobiles
purchased by The Colonel's internationally, for domestic resale, are
generally transported to distribution warehouse facilities at The
Colonel's expense.
The Colonel's products are principally marketed through
independent sales representatives and are sold primarily to automobile
collision body shops, automobile aftermarket supply stores and to
regional and national chain stores that sell automobile aftermarket
parts. There are approximately 180 independent sales representatives
for The Colonel's products who are located in all 50 states, The
District of Columbia, Puerto Rico, Canada, Mexico and The Bahamas.
Independent sales representatives for The Colonel's are not limited to
exclusive sales of The Colonel's products and The Colonel's does not
have any written agreements with its independent sales
representatives. Compared with OEMs that generally sell only their
own parts to service departments in a dealership network, The
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Colonel's offers a relatively full line of replacement bumpers and
facias for multiple automobile models and sells directly to
distributors, body shops, automobile service centers and retail
customers.
The Colonel's sold products to over 205 customers throughout the
United States, Canada, Mexico and the Caribbean during 1995. The
Colonel's customer base has grown in each of the last ten years. In
each of the last three years, at least 94% of the prior year's
customers have continued to order products from The Colonel's. None
of The Colonel's 305 active customers represent more than 10% of total
sales.
The Colonel's participates in industry and automotive trade shows
each year, including Automobile Body Parts Association, Bumper
Recyclers Association of North America and NACE, at which The
Colonel's promotes its lines of plastic bumpers, facias, support beams
and brackets. The Colonel's products are reviewed in national
industry publications such as COLLISION PARTS JOURNAL, BODY LANGUAGE,
and VOICE OF THE AUTOMOTIVE BODY PARTS ASSOCIATION and approximately
72% of The Colonel's products are listed in the Certified Automotive
Parts Association Directory of Aftermarket Body Parts. The Colonel's
also promotes its products through advertisements in specialized trade
and consumer magazines, through distribution of various professionally
prepared product catalogs and brochures and through publication of a
quarterly newsletter distributed to customers. In addition, The
Colonel's sponsors an annual conference and golf outing with its major
customers and suppliers in order to strengthen customer and supplier
relations and facilitate feedback with respect to product performance,
emerging technology and current market demands.
COMPETITION. The automotive aftermarket for plastic replacement
bumpers and facias is highly competitive. The market is dominated by
OEMs such as General Motors Corporation, Ford Motor Company, Chrysler
Corporation, Toyota Motor Sales, U.S.A. Inc. and Nissan Motor Corp.,
U.S.A. These OEMs are more established and have greater financial
resources than The Colonel's. These larger OEMs, however, also
generally charge higher prices than The Colonel's for their products
and generally distribute their products through their own automobile
dealership networks rather than through independent distributors and
body shops. Automobile insurance companies have successfully
advocated the use of less expensive parts by body shops, and OEMs have
lost market share in the collision parts market as a result. This may
lead OEMs to reduce their prices or pursue such strategies as
industrial rights litigation against aftermarket parts competitors.
In addition, The Colonel's competes with other non-OEM
manufacturers of plastic bumpers for the automotive aftermarket
industry in North America. The Colonel's believes it is larger and
offers a wider selection of products than any of its non-OEM
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competitors. Recycling companies and auto salvage companies also
compete with The Colonel's; however, The Colonel's believes that such
competitors are generally small in size, service only local or
regional markets, and offer products of varying quality.
There are also a number of potential competitors to The Colonel's
for the non-OEM market. Certain Asian-based companies manufacture
replacement plastic automobile bumpers and facias for imported and
domestically made foreign automobiles. The major Asian-based
companies that offer competing products for sale in North America are
Tan Yang and Legion Mold, Tool & Manufacturing Co., Ltd. There can
be no assurance that these foreign-based companies that manufacture
plastic automotive replacement parts will not enter the domestic
replacement bumper and facia market and directly compete with The
Colonel's products.
PLANT FIRE AND INSURANCE SETTLEMENT; PROPERTIES. On June 1,
1993, The Colonel's leased facility in Owosso, Michigan, which
included its headquarters, sales offices, and principal manufacturing
and warehouse facilities, was destroyed by a fire. The fire caused a
complete loss of the 280,000 square foot leased facility and damaged
inventory, equipment and other contents therein. As a result of the
fire, The Colonel's transferred certain of its headquarters personnel
and production to its production facility located in Sarasota,
Florida, on an interim basis, to supplement a portion of the lost
production of the Owosso facility.
In November 1993, the Company relocated its principal operations
and headquarters to Milan, Michigan, and is leasing a 350,000 square
foot facility from a company owned by Donald and Patsy Williamson.
The Colonel's began production at the Milan facility in December 1993
and was producing the company's full range of products by August 1994.
Subsequently, The Colonel's has ceased manufacturing operations in
Florida and all manufacturing is now conducted at the Milan facility.
The Colonel's believes the Milan manufacturing facility is suitable
for the company's requirements and has adequate capacity to
accommodate foreseeable production demands. In addition to The
Colonel's manufacturing facility located in Milan, a description of
all other manufacturing, sales and distribution facilities used by is
The Colonel's contained under "Distribution and Sales; Properties."
The Colonel's finalized negotiations with its insurance carrier
for amounts to be received on all coverages in effect at the date of
the fire. Total insurance proceeds received for the replacement cost
of lost property, lost profits, and other direct costs of the fire
were approximately $31,000,000, of which approximately $6,630,000 was
due to a shareholder as indemnification of damages to the Owosso
facility. The Colonel's recognized in other income a net gain of
approximately $9,082,000 and $9,043,000 in 1994 and 1993,
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respectively, which represents the amount by which The Colonel's
insurance proceeds of $24,370,000 exceeded the sum of the net book
value of the assets destroyed and the liabilities resulting from the
fire.
BRAINERD INTERNATIONAL RACEWAY, INC.
Because Brainerd International Raceway is a new corporation that
has acquired substantially all of the assets of its predecessor,
Brainerd, much of the following discussion describes the activities of
Brainerd prior to the Merger. However, it is anticipated that
Brainerd International Raceway will continue the business conducted by
Brainerd prior to the Merger.
GENERAL OPERATIONS. Brainerd International Raceway organizes and
promotes various spectator events such as road and drag races,
including races for sports cars, stock cars, motorcycles, and go-karts, and
derives a substantial portion of its revenues from ticket
sales and spectator attendance. In addition, Brainerd International
Raceway permits the use of its racing facility by others who organize
and promote racing events, and by individuals or commercial
organizations who may use the Brainerd International Raceway for
things such as automobile road testing or filming. All racing events,
whether or not organized by Brainerd International Raceway, are
conducted over a two to four-day period, usually encompassing a
weekend.
Brainerd International Raceway derives its revenues from four
principal sources: (i) ticket sales; (ii) camping fees, concession
sales, and track rentals; (iii) entry fees; and (iv) sponsorship fees.
Sponsorship fees were received in 1995 from commercial businesses such
as Viking Coca-Cola, Inc., Anheuser-Busch (Budweiser), Pontiac Motor
Division, Champion Auto Stores, and R.J. Reynolds Company which
promote their names and products at and in connection with the racing
events. Sponsorship fees are contracted for and often paid in whole
or in part several months prior to the commencement of each racing
season. Entry fees are received from race participants.
Brainerd International Raceway permits overnight camping during
racing events within the area surrounded by the Brainerd International
Raceway track, which will accommodate tents, trailers, and motor
homes. In 1995, Brainerd (as predecessor of Brainerd International
Raceway) charged from $10 per person to $16 per person for each
weekend, or from $5 per person to $14 per person for one day, for use
of the camping facilities. Material revenues from camping were
received by Brainerd with respect to only six spectator events in
1995. Brainerd International Raceway uses a local nonprofit
organization to manage the camping activities during the principal
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spectator events. The nonprofit organization is currently paid 20% of
the camping revenues generated by the events in exchange for which the
organization supplies personnel to staff the gates to collect camping
fees.
Beer, soft drinks, candy, and fast food items such as hot dogs
are served at concession stands at various locations around the
raceway, but principally near the grandstand area. Brainerd allowed
both for-profit and nonprofit organizations to operate the concession
stands for the six principal spectator events in 1995. For all other
1995 events, Brainerd permitted a single for-profit organization to
operate the concession stands. Brainerd International Raceway
receives a percentage of the gross sales of all concessions, but
neither Brainerd International Raceway nor any of its affiliates
operates any of the concession stands. Brainerd International Raceway
currently plans to continue its practice of allowing independent
for-profit and nonprofit organizations to operate the concession stands.
Brainerd International Raceway rents the raceway to other
organizations to conduct races, hold driving schools, or to test or
film motor vehicle operations. It has also rented the raceway for use
as the site of a camping convention. The fee charged for such use
varies and is negotiated in each case.
For the calendar years 1995, 1994, and 1993, the percentage of
revenues derived from Brainerd's various revenue sources were as
follows:
<TABLE>
<CAPTION>
ACTIVITY 1995 1994 1993
<S> <C> <C> <C>
Ticket Sales 68% 71% 70%
Track Rentals, Concessions
and Camping Fees 12% 11% 13%
Entry Fees 11% 8% 9%
Sponsorship Fees 9% 10% 8%
</TABLE>
During 1995, Brainerd organized and promoted seven major
spectator events, including two drag races (the "Winston Drag Racing
Series" and the "NHRA/Champion Auto Stores Nationals"), two special
events (the "Champion Auto Stores Show & Go" and the "Champion Auto
Stores Muscle Car Shootout"), one motorcycle race (the "Suzuki
Classic"), one road race by stock cars (the "Pontiac Excitement 300")
and one snowmobile race (the "ISOC/McDonald's 100").
The Winston Drag Racing Series, held on June 3 and 4, 1995, was a
drag racing event sponsored nationally by R.J. Reynolds Tobacco
Company of Winston-Salem, North Carolina. A drag race is generally
conducted between two vehicles from a standing start over a one-quarter
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mile track, using sophisticated starting and timing systems.
The Winston Drag Racing Series was sanctioned by the National Hot Rod
Association (the "NHRA") and was one of a series of five events in the
Central States Division of the NHRA. The Winston Drag Racing series
was organized and promoted jointly by Brainerd and the NHRA, and
included both professional and amateur drivers who paid Brainerd an
entry fee. A similarly sponsored event has been held at the Brainerd
International Raceway annually since 1977, with the exception of 1984,
when there was a scheduling conflict. The Sponsorship Agreement with
R.J. Reynolds Tobacco Company for this event will expire in December
1996, subject to the option of R.J. Reynolds Tobacco Company to extend
the agreement for an additional two years. This event drew
approximately 3,500 paid spectators in 1995, as compared to
approximately 3,300 in 1994 and 3,100 in 1993. The event is scheduled
for June 1 and 2, 1996.
The Pontiac Excitement 300, held on June 24 and 25, 1995, was a
300 kilometer (180 mile) road race by stock cars driven by
professional drivers and sanctioned by the American Speed Association
(the "ASA"). The event was one of only two road races included in the
ASA's AC-Delco Challenge Series. Most stock car races, including the
remaining sixteen races in the AC-Delco Challenge Series, are held on
oval tracks. The event in 1994 was sponsored by the Pontiac Motor
Division of General Motors and was nationally televised on the
Nashville Network cable television program. Management of Brainerd
estimates that it realized operating losses of $63,700 and $154,000 on
the event in 1994 and 1993, respectively. In 1995 the event was held
with the ASA acting as the promoter of the event. Under such
arrangement, Brainerd was paid rent in the amount of $10,000 and
allowed to retain certain concession revenue from the event. This
event is not scheduled for 1996.
The Champion Auto Stores Show & Go event, held on July 1 and 2,
1995, was sponsored by Champion Auto Stores under an agreement which
extends through 1998. This event featured "street rods," "street
machines," antiques, and other classic cars that participated in both
a car show and drag races emphasizing a "back-to-the-fifties" style.
The drag racing portion of the event was sanctioned by the NHRA. The
event had approximately 7,500 paid spectators in 1995 and 7,300 and
7,000 in 1994 and 1993, respectively. The event is scheduled for July
6 and 7, 1996.
The Champion Auto Stores Muscle Car Shootout was held on July 22
and 23, 1995. As with the Show & Go event, this event is both a car
show and a drag race. The Muscle Car Shootout involves 1974 to 1995
model year vehicles. The event is subject to the same sponsorship
agreement as the Champion Auto Stores Show & Go event. The event had
approximately 6,800 paid spectators in 1995 and 6,200 and 6,100 paid
spectators in 1994 and 1993, respectively. The event is scheduled for
August 3 and 4, 1996.
-14-
The Suzuki Classic, held on July 14, 15, and 16, 1995, was one of
a series of nine races conducted throughout the United States pursuant
to the sanction of the American Motorcyclist Association (the "AMA").
The event featured six races of motorcycles operating on the road
course. The races involved motorcycles of 250cc, 600cc, 750cc, and
the Harley Davidson Twin Sport and Superbike classes. The event had
approximately 8,600 paid spectators in 1995 compared to approximately
9,200 in 1994 and 7,200 in 1993. This event is scheduled this year
for July 12, 13, and 14, 1996.
The Champion Auto Stores Nationals event, held on August 17, 18,
19, and 20, 1995, was sponsored by Champion Auto Stores under an
agreement with the NHRA. This event features all professional
drivers, most of whom have national reputations, and was one of a
series of nineteen drag races conducted throughout the United States
in 1993 under the national sponsorship of the R.J. Reynolds Tobacco
Company and the sanction of the NHRA. The Champion Auto Stores
Nationals are organized and promoted by the NHRA. The NHRA leases the
Brainerd International Raceway for a rental equal to one-half of the
net profit of this event as defined in the lease agreement. Such
profit is earned primarily through the receipt of promotional fees and
ticket sales. Brainerd's responsibilities in this event are, among
other things, to provide the Brainerd International Raceway, ticket
sellers and takers and security personnel, as well as assisting in the
management and operation of the event. The lease agreement with the
NHRA is currently scheduled to terminate upon completion of the 1996
racing season, but is subject to an option of the NHRA to extend the
term of the lease through the 2001 racing season. Under the lease
agreement, Brainerd is not permitted to conduct any drag races at the
Brainerd International Raceway that are not sanctioned by the NHRA.
Champion Auto Stores has agreed to sponsor the event through the 2001
racing season. The Champion Auto Stores Nationals drew approximately
48,200 paid spectators in 1995. The event, which has been held at the
Brainerd International Raceway since 1982, drew approximately 45,100
paid spectators in 1994 and 42,500 in 1993. The event is scheduled
for August 15 through 18, 1996.
Additionally, during the New Year's weekend of December 30, 1994,
through January 2, 1995, Brainerd held the Brainerd 200 snowmobile
race at the Brainerd International Raceway. The race was one of eight
races on the International Series of Champions and featured Pro 500,
Semi-Pro, and Stock classes of snowmobiles competing in 200 kilometer
races on a cross country course. The race was sponsored by
McDonald's, Skidoo, Polaris, and Arctic Cat. The races were held on a
prepared track constructed adjacent to the road course. The event
drew approximately 3,800 paid spectators. Management of Brainerd
believes attendance was adversely affected by the limited snowfall
preceding the event. The event which had been scheduled for
December 30 and 31, 1995 was canceled due to inadequate sponsorship
support.
-15-
Brainerd also organized and sponsored five weekend drag racing
"bracket" events in 1995, primarily for non-professional drivers from
Minnesota and surrounding states. In bracket racing, each driver
attempts to predict his car's performance, and whether he wins or
loses a particular race will depend partially on how much his actual
time over a one-quarter mile distance exceeds his predicted time.
While spectators are encouraged to attend these drag racing events,
and Brainerd receives revenues from ticket sales, camping fees, and
concessions, they are not highly promoted. Brainerd has scheduled
four bracket races for 1996.
In addition to the spectator events and the bracket races
discussed above, there are racing events conducted on approximately 21
other weekends that are primarily for nonprofessional drivers and are
often organized and sponsored by local and regional racing clubs some
of which may be members of or affiliated with national sanctioning
organizations. While spectators attend these events, Brainerd does
not receive any revenues from ticket sales from, or engage in any
significant promotion of these events.
In 1995, two weekend events involved sports car racing and were
sponsored by the "Land O' Lakes" regional affiliate of The Sports Car
Club of America (the "SCCA") which sanctions these events. In
addition, in 1995, four motorcycle racing events were held, each of
which was sponsored by the Central Roadracing Association, a club
located in the Minneapolis/St. Paul, Minnesota area and associated
with the AMA. During 1995, the Northland Region Karting Association,
affiliated with the World Karting Association, (the "WKA"), organized
and sponsored seven go-kart racing events, and the Nord Stern Regional
Club of the Porsche Club of America organized four weekend racing
events for Porsche cars. A similar schedule has been established for
1996.
Brainerd International Raceway will rent the raceway to various
individuals or organizations for their own unsanctioned events and
driving schools, or to test or film the operation of various motor
vehicles. In July 1992, Brainerd leased the raceway to the National
Campers and Hikers Association for use as the site for a camping
convention. Only the camping areas and the grandstand, which was used
for a country music concert, were used.
In addition to attempting to continue to schedule the events
discussed above, other than the Brainerd 200 snowmobile race, Brainerd
is also seeking to establish additional revenue producing uses for the
Brainerd International Raceway. Events under consideration include
additional spectator racing events, a street rod show, snowmobile
events and music festivals.
-16-
In January 1995, Brainerd (as predecessor of Brainerd
International Raceway) entered into an agreement with the
International Motor Sport Association ("IMSA") for the Brainerd
International Raceway to be the site of endurance road races featuring
domestic and foreign sports cars in 1995, 1996 and 1997. The
inaugural event was scheduled for August 4, 5 and 6, 1995. On June
16, 1995, IMSA announced that it had canceled the events it had
scheduled to be held at the Brainerd International Raceway as well as
at a site in Portland, Oregon. Under its agreement with IMSA,
Brainerd was to be paid a track rental fee of $20,000 and be
reimbursed, on an accountable basis, for the expenses it incurred in
connection with the event. In February 1996, the Company agreed to
settle claims against the IMSA relating to termination of the
agreement for $65,000. The terms of the settlement call for scheduled
payments to be received by Brainerd International Raceway throughout
1996.
Most racing events conducted at the Brainerd International
Raceway, including the seven principal spectator events held by
Brainerd in 1995, are sanctioned by an organization which establishes,
publishes, and enforces rules relating to a specific class or type of
participating vehicle. These rules generally relate to the
specifications which each class of car or other vehicle must meet in
order to be eligible to race, and to driver conduct and other racing
matters. Brainerd enters into agreements annually with the various
applicable sanctioning bodies with respect to each race it organizes
and promotes. These agreements provide that the appropriate
sanctioning organization will sanction the race and provide personnel
to interpret and enforce its rules. The sanctioning bodies include
the SCCA (governing sports cars), the NHRA (governing drag racing),
the AMA (governing motorcycles), the ASA (governing stock cars), and
the WKA (governing go-karts).
Brainerd International Raceway promotes its principal spectator
events (discussed under "Events and Activities" above) primarily
through radio and television advertising in Minnesota, through
mailings made to selected potential spectators from a list developed
by Brainerd, and through racing posters placed in service stations and
auto parts and accessory stores. Brainerd also attends five auto
shows in Minnesota, where it promotes all of its events. In a few
instances, sponsoring organizations may also promote these events.
When undertaken, such sponsor promotion is generally through newspaper
or point of sale advertising.
Ticket sales are made at various locations by ticket agents, at
Brainerd's offices primarily by mail, and at the Brainerd
International Raceway. Brainerd sells three types of tickets: a
Sunday only ticket, a weekend ticket, and a Super Weekend ticket that
includes all days of each event as well as paddock admission and
camping. Ticket agents are located throughout Minnesota and include
-17-
the retail outlets of Champion Auto Stores. Most ticket agents
receive a commission equal to 9% of the ticket prices. Ticket prices
for the six principal racing events scheduled for 1996 will range from
$8 to $95 per ticket, depending primarily on the event and the number
of days the event is held.
Brainerd estimates that over 60% of Brainerd's ticket sales are
made to residents of the Minneapolis/St. Paul, Minnesota metropolitan
area, and that approximately 25% of Brainerd's ticket sales are by mail.
Advance sales of tickets represent approximately 50% of all ticket sales.
As of December 31, 1995, Brainerd International Raceway had 4 employees.
ITEM 2. PROPERTIES
The Company is a holding company with no operations of its own.
The properties of the Company's two wholly-owned subsidiaries, which
are The Colonel's and Brainerd International Raceway, are addressed
below.
THE COLONEL'S. The properties of The Colonel's are discussed in
"Item 1--The Colonel's--Distribution and Sales; Properties" and "Plant
Fire and Insurance Settlement; Properties."
BRAINERD INTERNATIONAL RACEWAY. Brainerd International Raceway
owns and operates a three mile race track including a one-quarter mile
drag strip (referred to herein as the "Brainerd International Raceway"),
located approximately six miles northwest of Brainerd, Minnesota. The
Brainerd International Raceway was initially constructed and first
utilized for competitive racing in 1968. The site of the Brainerd
International Raceway consists of approximately 600 acres. The terrain
of the site is slightly rolling and partially wooded. The track and
various access roads are composed of blacktop.
The Brainerd International Raceway is enclosed by a five foot
high chain link fence. The site provides camping facilities and
parking for approximately 12,000 vehicles. The Brainerd International
Raceway contains several buildings including a four-story tower
containing twelve executive viewing suites, a control tower, various
single story buildings containing concession stands, restrooms, and
storage and service facilities located throughout the property. The
buildings are concrete or wood frame and constructed for warm weather
use only. Grandstand bleachers for approximately 18,000 spectators
are primarily located along the dragstrip.
In 1995, Brainerd made additional improvements to the Brainerd
International Raceway with an approximate total cost of $309,000. The
improvements included the installation of additional restrooms, privacy
fencing and landscaping to a portion of the perimeter of the raceway, a new
pedestrian bridge over the road course and an above-ground gasoline storage
tank.
-18-
Brainerd International Raceway's executive offices are located at
17113 Minnetonka Boulevard, Suite 214, Minnetonka, Minnesota, where
Brainerd leases approximately 1,100 square feet of office space. The
lease term expires in February 1997.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in litigation and
various legal matters arising in the normal course of business.
Having considered facts that have been ascertained and opinions of
counsel handling these matters, the Company does not believe the
ultimate resolution of such litigation will have a material adverse
effect on the Company's financial position.
LITIGATION
The Company has reserved a total of $1,250,000 at December 31,
1995 against claims asserted by opposing parties in six unrelated
lawsuits:
1. The Colonel's is a defendant and counterplaintiff in a suit
filed December 5, 1991, in the United States District Court, Eastern
District of Michigan, Flint, Michigan, in a private action seeking
damages under the Federal Antitrust statutes. The Colonel's had made
a formal offer of judgment for $160,000 in 1994. Based upon the
plaintiff's latest admissions of no damages on all but two of its
previously pled claims, The Colonel's believes that amount is more
than sufficient to cover any liability arising from the alleged sale
of 1,900 bumpers at a price below their average variable cost. The
Colonel's believes that any damages that would result from an adverse
jury verdict on that aspect of the case would be more than offset by
damages that The Colonel's is seeking for the opposing party's actions
in concert with other named parties to force The Colonel's to stop
selling products to another company competing with those parties.
2. The Colonel's was a party in a construction lien action
brought by an unpaid creditor of a company that contracted with The
Colonel's to design, fabricate and install a $1.125 million automated
paint line system at The Colonel's's Milan manufacturing facility.
This suit was filed against the vendor on July 15, 1994, in Monroe
County Circuit Court, Monroe, Michigan. The vendor partially
performed its contract, but abandoned the project after its unpaid
labor and material bills exceeded the remaining balance owed to it as
future progress payments. The Colonel's was required to replace or
repair some of the work that had been performed and to complete the
project through new contracts. The Colonel's bypassed the contractor
and settled directly with all fourteen unpaid subcontractors for
$270,000 and a release of all liens.
-19-
3. The Colonel's is a plaintiff and counterdefendant in a suit
filed on February 14, 1994, in the United States District Court,
Eastern District of Michigan, Detroit, Michigan. The underlying
controversy arose because a machine, as delivered, did not have the
capacities promised at the time that The Colonel's issued a purchase
order for it. The trial court has issued an interim ruling that The
Colonel's cannot introduce evidence regarding those promises unless
they were incorporated in a writing signed by the defendant. The
defendant sold the rejected machine to another buyer for more money
than The Colonel's purchase order required it to pay, but has filed a
counterclaim seeking its costs for finding another buyer and for lost
profits. The vendor recently was found not to be entitled to damages.
The Colonel's is appealing the trial court's ruling regarding its
damages.
4. A former supplier, Teran Products, filed suit against The
Colonel's in the Shiawassee County Circuit Court in November, 1995
for alleged losses that the supplier suffered when materials it had
stored at the former Owosso manufacturing facility, but which The
Colonel's had not accepted, were destroyed in the June 1, 1993 fire
and for packaging materials that Teran had purchased in anticipation
that The Colonel's would order those products for use in ongoing
production at its Sarasota, Florida facility. Those materials had not
been ordered by The Colonel's at the time that it closed its Sarasota
facility. Management does not believe The Colonel's has a legal
responsibility for Teran's casualty loss of Teran's own property or
for Teran's decision to purchase materials for Sarasota prior to any
commitment by The Colonel's to purchase those materials from Teran.
The Colonel's filed a counterclaim for an accounting of prices charged
by Teran, after an investigation revealed that Teran may have failed
to pass on discounts and price reductions as promised.
5. In September of 1990, an action, Jane Doe v. Brainerd
International, Inc. and North Country Security, Inc., was commenced in
the District Court for Hennepin County, Minnesota, against Brainerd by
a person who allegedly was sexually assaulted in August 1988 in
connection with her participation in a wet T-shirt contest held at the
Brainerd International Raceway by individuals not associated with
Brainerd. The action called for compensatory damages of an
unspecified amount in excess of $50,000. Brainerd's insurer accepted
defense of the claim. The trial court granted summary judgment in
favor of Brainerd and its co-defendant, which had provided security
services for Brainerd during the event when the incident occurred.
The trial court found that the plaintiff had entered the contest
voluntarily, that Brainerd had not consented to the contest, and that
the plaintiff had assumed the risks of the injuries resulting from her
conduct. The plaintiff appealed the summary judgment. In April 1994,
the Minnesota Court of Appeals reversed the trial court decision
finding that issues of fact existed for a jury to resolve and a
-20-
statutory obligation for Brainerd to prevent a minor from engaging in
this type of activity. Brainerd appealed the Court of Appeals'
opinion to the Minnesota Supreme Court. On June 30, 1995, the
Minnesota Supreme Court reversed the opinion of the Court of Appeals
and reinstated the trial court's grant of summary judgment in favor of
Brainerd.
6. In June 1994, an action, Wade Jung v. Brainerd
International, Inc. and XYZ, Inc. (case number PI 94-19690), was
commenced against Brainerd and Brainerd's security contractor in the
District Court for Hennepin County, Minnesota, by a minor and his
parent. The action alleges that the minor was injured in July 1993
while attending a motorcycle race at the Brainerd International
Raceway when he fell into a campfire while intoxicated. The
plaintiffs allege Brainerd and its security contractor were negligent
in failing to prevent the minor from engaging in the conduct which
resulted in his injuries. The action calls for compensatory damages
of an unspecified amount in excess of $50,000. Brainerd's insurer has
accepted defense of this claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 21, 1995, the annual meeting (the "Meeting") of
shareholders of Brainerd (as predecessor to the Company) was held for
the purposes of considering and voting on the following: (1) a
proposal to adopt an agreement and plan of merger between Brainerd
Merger Corporation, a wholly owned subsidiary of Brainerd, and The
Colonel's; (2) a proposal to change the state of incorporation of
Brainerd from Minnesota to Michigan, adopt new articles of
incorporation to change the name of the corporation to "The Colonel's
International, Inc.", and to increase the number of shares of common
stock, par value $.01 per share, of Brainerd which Brainerd is
authorized to issue from 10,000,000 to 35,000,000 shares; (3) a
proposal to authorize the transfer of all of the operating assets of
Brainerd to Brainerd International Raceway; (4) a proposal to adopt
the Company's 1995 Long-Term Incentive Plan; (5) the election of
directors; and (6) a proposal to confirm the appointment of Deloitte &
Touche LLP as the independent auditors of the Company for the year
ending December 31, 1995.
At the Meeting, the following persons were elected to the
Company's Board of Directors: (1) Donald J. Williamson; (2) Richard L.
Roe; (3) Gary Moore; (4) Ted M. Gans; (5) J. Daniel Frisina; and (6)
Lisa K. Alexander. The Company's articles of incorporation provide
that the Board of Directors is divided into three classes. Messrs.
Williamson and Gans were elected to terms that expire at the Company's
1998 annual meeting of shareholders. Messrs. Moore and Frisina were
-21-
elected to terms that expire at the Company's 1997 annual meeting of
shareholders. Finally, Mr. Roe and Ms. Alexander were elected to
terms that expire at the Company's 1996 annual meeting of
shareholders.
The results of voting were as follows. At the Meeting, a total
of 677,830 shares of Brainerd voting common stock were entitled to
vote and a total of 642,474 shares of common stock were represented
in person or by proxy. With respect to the first proposal, the
acquisition of The Colonel's, Inc., 560,861 shares were voted in
favor, 300 shares were votes in opposition, and 81,313 shares
abstained from voting.
With respect to the second proposal, the reincorporation of
Brainerd in Michigan, 565,017 shares were voted in favor, 482 shares
were votes in opposition, and 76,975 shares abstained from voting.
With respect to the third proposal, the transfer of assets to
Brainerd International, Raceway, Inc., 563,364 shares were voted in
favor, 315 shares were votes in opposition, and 78,795 shares
abstained from voting.
With respect to the fourth proposal, the adoption of the
incentive plan, 551,139 shares were voted in favor, 15,758 shares were
votes in opposition, and 75,577 shares abstained from voting.
With respect to the election of directors, each director received
the number of votes set opposite his or her respective name:
<TABLE>
<CAPTION>
<S> <C> <C>
Donald J. Williamson 641,534 shares
Ted M. Gans 641,584 shares
Gary Moore 641,564 shares
J. Daniel Frisina 641,544 shares
Richard L. Roe 641,519 shares
Lisa K. Alexander 631,104 shares
</TABLE>
Finally, with respect to the sixth proposal, the appointment of
independent auditors, 631,651 shares were voted in favor, 10,100
shares were votes in opposition, and 723 shares abstained from voting.
The Company did not enter into any settlement terminating any
solicitation subject to Rule 14a-11 under the Securities Exchange Act
of 1934 relating to the Meeting.
-22-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's common stock has been traded on the Nasdaq SmallCap
Market since January 2, 1996. The number of holders of record of
Common Stock in the Company on March 25, 1996 was 252.
Prior to the Merger, Brainerd common stock was traded on the
Nasdaq SmallCap Market. Effective January 2, 1996, Brainerd common
stock was delisted from the Nasdaq SmallCap Market. The table below
sets forth the high and low transaction prices by calendar quarter for
1995 and 1994 of Brainerd common stock, prior to its delisting. Such
prices reflect inter-dealer prices, without retail mark-up, mark-down
or commissions, and may not necessarily represent actual transactions
Because of the Merger, these prices may not reflect the value of a
share of common stock in the Company after the Merger.
<TABLE>
<CAPTION>
1995 1994
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
January-March $12.00 $6.00 $ 1.19 $1.00
April-June $ 8.50 $6.50 $ 1.19 $1.19
July-September $ 6.00 $6.00 $ 9.00 $1.19
October-December $10.50 $4.50 $13.38 $4.75
</TABLE>
For the two fiscal years prior to the Merger, Brainerd did not
pay any cash dividends on its common stock. The Company does not
anticipate paying any dividends in the near future. Management
intends to apply earnings, if any, to the development of the business
of its subsidiaries.
-23-
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data shown below for the Company for each
of the five years in the period ended December 31, 1995, has been
derived from consolidated financial statements of the Company, which
have been audited by the Company's independent auditors, Deloitte &
Touche LLP. The following data should be read in conjunction with the
consolidated financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in this Form 10-K.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATIONS<F2>:
Operating revenues $28,503,726 $28,492,013 $25,174,656 $25,835,683 $27,013,430
Net Income (loss) from
continuing operations 4,970,770 2,401,905 (541,052) 3,716,198 7,116,632
Net Income 1,862,474 10,887,714 7,762,206 2,145,098 7,137,838
Pro forma earnings
per share <F1> $ 0.11
FINANCIAL CONDITION:
Current Assets $11,483,401 14,399,543 15,455,926 6,857,796 10,101,940
Current Liabilities 15,026,023 15,886,485 19,339,356 9,411,218 9,881,130
Total Assets 38,243,986 31,529,883 32,349,317 21,556,349 28,204,903
Long term obligations 6,064,705 1,366,615 3,176,218 5,129,296 6,952,516
<FN>
<F1> The pro forma earnings per share has been derived from the income
statement of The Colonel's International, Inc. for the year ended
December 31, 1995, adjusted to give effect to the change in tax status
of The Colonel's, Inc. as if such change had occurred at the beginning
of the period.
<F2> The merger pursuant to which The Colonel's, Inc. became a
subsidiary of The Colonel's International, Inc. was effective December
31, 1995. Therefore, the selected financial data reflect only the
results of operations of The Colonel's, Inc. the accounting acquiror.
Refer to "Note 3 - Business Combination" in the Notes to the Financial
Statements for proforma results of operations as if The Colonel's
International, Inc. and The Colonel's, Inc. had been combined for
1995.
</FN>
</TABLE>
-24-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BACKGROUND
As discussed in Item 1 of this Report on Form 10-K, effective
December 31, 1995, Brainerd merged with and into the Company. The
Company was the surviving corporation in the Merger. Prior to the
Merger, Brainerd had 677,830 shares of its common stock outstanding
and traded on the Nasdaq SmallCap Market (symbol BIRI). Pursuant to
the Merger, these shares were converted into the same number of shares
of common stock in the Company.
Also effective December 31, 1995, Brainerd Merger Corporation, a
Michigan corporation and a wholly owned subsidiary of Brainerd, merged
with and into The Colonel's, Inc. The Colonel's was the surviving
corporation in this merger. In consideration of this merger, the
Company issued 23,500,000 shares of its common stock to Donald J.
Williamson and Patsy L. Williamson, who were the sole shareholders in
The Colonel's. In addition, Brainerd transferred all of its operating
assets to its newly formed subsidiary, Brainerd International Raceway.
As a result of these transactions, the Company now has two wholly
owned subsidiaries: The Colonel's and Brainerd International Raceway.
For accounting purposes, the transaction was treated as a
recapitalization of the Company with the Company as the acquiror (a
reverse acquisition). The effective date of the merger of Brainerd
and the Company was December 31, 1995. Therefore, the assets acquired
and liabilities assumed are included in the Company's balance sheet at
December 31, 1995. The historical financial statements prior to
December 31, 1995 are those of the Company only and do not include any
operating results of Brainerd. Refer to "Note 3 - Business
Combination" in the Notes to Consolidated Financial Statements for
proforma selected financial information.
THE COLONEL'S, INC.
The Colonel's was organized in 1982 and began producing and
selling plastic bumpers and facias in 1983. By the start of 1996, The
Colonel's had grown through acquisitions, joint ventures, and normal
expansion to two manufacturing plants, four distribution warehouses
and a network of independent distributors that sell The Colonel's
products throughout the United States, Canada, Mexico, Puerto Rico,
Bahamas, and the District of Columbia. The start up of a new truck
accessory division (the "Truck Accessory Division") that will
manufacture and sell pickup truck bedliners and tail gate covers, and
the formation of Brainerd International Raceway as a subsidiary of the
Company, represents efforts by the Company to begin to diversify into
other areas outside the automotive collision parts industry.
-25-
The Colonel's designs, manufactures and distributes plastic
bumpers, facias, support beams and brackets for the automotive
collision parts industry. The Colonel's also purchases and resells
replacement steel and chrome bumpers, facias, header panels, steel
bumpers, rebars, step bumpers, paint, and body shop repair supplies
through its distributors as replacement collision parts for most
domestic and imported automobiles and light trucks.
The Colonel's is a leading domestic manufacturer of plastic
replacement bumpers and facias for the automotive and light truck
after market industry. The Colonel's competes with the original
equipment manufacturers ("OEMs"), other domestic and import
manufacturers for the aftermarket who offer new replacement bumpers,
and the recycled and junk yard industry who repairs and resells
previously damaged or salvaged automotive parts.
The Truck Accessory Division will sell new pickup truck
bedliners, tail gate covers, trim pieces, and other items and will
compete in the growing pickup truck and sport utility liner market.
Newly installed custom built equipment will make the Owosso
manufacturing facility one of the world's most modern bedliner
production plants. The Company believes that the Truck Accessory
Division can effectively compete in the market because it has the
ability to manufacture its own plastic sheet stock instead of
purchasing it from outside vendors and it has specialized tooling with
a dedicated mold for each part. The Company registered two patents on
this specialized tooling, which required extensive development. The
products of the Truck Accessory Division will be sold through a world
wide distributor network.
The Colonel's participates in the Certified Auto Parts
Association (CAPA) certification program. This independent
association inspects and promulgates guidelines that form strict
standards for quality. CAPA works closely with the insurance carriers
to relate their concerns and quality issues to the manufacturing
sector. The manufacturing sector places CAPA certification stickers
on each of the parts that have been tested and certified. The serial
number of the certification sticker is the means for CAPA to trace the
part back to its original manufacturer. A non-conforming part may
cause CAPA to call for an inspection of the part or facility and may
lead to the de-certification of that part or part lot. Any part that
is decertified has to start over with the certification process in
order to be re-certified. A CAPA catalogue is distributed quarterly
listing all certified and decertified parts or lots. Additionally,
CAPA issues monthly bulletins to keep everyone advised of the status
of all the parts in its program. Currently, The Colonel's has 202
applications that are certified by CAPA. At the present time, CAPA
only has a certification program for the Reaction Injection Molding
(RIM) process. It does not have a certification program for the 56
-26-
parts made by the injection molding (IM) process. It would be
expected that once CAPA has incorporated this process into its
certification program that The Colonel's may spend resources for
certification of the parts it produces from the IM process.
The Colonel's competes mainly on quality, price and delivery.
Prices are driven by the pricing levels that the respective OEM is
currently charging. The Colonel's considers price adjustments
whenever an OEM changes its prices. The Colonel's made general price
changes in September 1995 in an effort to stabilize market share and
boost sales exposure. The Colonel's believes that it can stay
competitive with OEM pricing because of its extensive distributor
network, which allows it to bring products to market with less cost or
markup than the OEM. OEM price changes cannot be anticipated and
could have a major impact either favorably (price increase) or
unfavorably (price reduction) on The Colonel's competitive position.
The Colonel's produces consistent quality products using state of
the art, domestically made machinery, domestically engineered raw
materials, and local labor forces. The Colonel's proudly displays
"Made in USA" on all of its products, packaging materials, and
literature. The manufacturing process, plant and parts are checked
and certified by an independent quality agency (CAPA) to assure that
parts meet or exceed acceptable industry standards.
BRAINERD INTERNATIONAL RACEWAY, INC.
From the time of its formation in 1982, Brainerd has operated a
motor sports facility located approximately six miles northwest of
Brainerd, Minnesota. As of 1996, this facility is now operated by
Brainerd International Raceway, a subsidiary of the Company.
Substantially all of Brainerd International Raceway's revenues have
been obtained from motor sports racing events at the raceway.
Historically, Brainerd International Raceway has scheduled racing and
other events to be held at the racetrack during weekends in the months
of May through September each year. However, Brainerd International
Raceway conducted a snowmobile racing event during the 1994-1995 New
Year's weekend.
While Brainerd International Raceway has scheduled approximately
35 events during each season, a limited number of the major spectator
events provide a substantial portion of Brainerd International
Raceway's revenues with one event, the Champion Auto Stores Nationals,
having provided approximately 56% of Brainerd International Raceway's
operating revenue for the past three years. Revenues from the major
spectator events are provided from the sale of admissions to the
event, the sale of concessions, and fees paid by the spectators and
participants for camping access on the grounds of Brainerd
International Raceway. The receipt of such revenues is affected by
-27-
weather conditions. Even if an event is not canceled due to rain or
other adverse conditions, poor weather will reduce the attendance and
the sale of concessions.
In addition to spectator-related revenues, Brainerd International
Raceway receives: (i) sponsorship fees from businesses which promote
their products and services at Brainerd International Raceway; (ii)
entry fees from participants in the races and other events; and (iii)
rent for use of the track for private racing events, driving schools
and the testing or filming of motor vehicle operations.
MAJOR FIRE LOSS AND INSURANCE CLAIM
The Colonel's suffered the loss of the former Owosso
manufacturing plant on June 1, 1993 to a fire that totally consumed
the building and the finished inventory stored in its warehouse area,
a significant percentage of the plant's machinery and equipment, as
well as many of The Colonel's's production molds. The Colonel's
settled the resulting insurance claim for all insured losses caused by
the fire for $31,000,000 in January 1995. That settlement caused The
Colonel's to recognize as "other income" net gains of approximately
$9,082,000 and $9,043,000 in 1994 and 1993 respectively. Those gains
represent the amount by which The Colonel's portion of insurance
proceeds of $24,370,000 exceeded the sum of the net book value of
assets destroyed by the fire. The Colonel's paid $6,630,000 for the
building's loss to the landlord. The Colonel's secured short term
bridge loans from its primary lender to enable the Company to begin
the rebuilding process. After consulting with government
investigators and concluding its own private investigation, The
Colonel's insurer unconditionally accepted coverage for the fire on
November 11, 1993. Once the insurance company began paying partial
claims, the bridge loans were repaid.
Immediately after the fire, The Colonel's increased the output of
its Sarasota, Florida manufacturing operations to minimize any loss of
sales and income. Sarasota's production was increased to and kept at
near capacity while salvageable machinery and equipment from Owosso
were moved to a newly leased facility in Milan, Michigan. By the end
of July 1994, the Milan plant was producing The Colonel's pre-fire
full line of products and inventory levels had been rebuilt to a point
where The Colonel's could resume full truck load deliveries to its
customers.
Because the combination of new and restored presses and an
improved layout at the Milan manufacturing facility afforded The
Colonel's more production capacity than it had enjoyed in Owosso,
management decided in October, 1994 to reduce manufacturing overhead
by closing the Sarasota facility which had been leased on a month-to-month
basis. Sarasota's inventory was reduced through normal sales and
shipments of remaining units went to Milan. Sarasota's machinery and
-28-
equipment was either sold or moved to another Colonel's operation.
The equipment designated for sale has been reclassified as "assets
held for sale" and valued at its estimated net realizable value at the
end of 1994. All of the production molds at the Sarasota facility
were acquired as part of The Colonel's's 1991 purchase of the assets
of a competitor, NuPar, Inc. That purchase resulted in some duplicate
molds. These duplicates, with net book value of $1,034,000, were
written off in 1994 and scrapped as a result of the close of
operations in Sarasota.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated current assets were reduced from
$14,568,000 in 1994 to $11,483,000 in 1995. This was due mainly to
the $4,352,000 collection of an insurance receivable at December
31, 1994. The Company reduced its current liabilities from
$16,051,000 in 1994 to $15,026,000 in 1995. The improvement in
working capital was due mainly to the retirement and refinancing of
long-term debt. The Company's subsidiaries made all of their
scheduled payments on long-term debt in 1995.
Accounts receivable were reduced by approximately $182,000 by
offering early payment discounts and incentives for prompt payments.
The $4,352,000 insurance accounts receivable that The Colonel's
recorded in 1994 was for the final settlement amounts received in
early 1995.
Inventories were increased by $1,100,000 because of the start up
of The Colonel's new warehouse in West Memphis, Arkansas, and the
introduction of 29 new bumper lines. The Colonel's purchased the
existing inventory and one building from The Colonel's Factory Outlet
of Arkansas, Inc. in exchange for the forgiveness of debt due to The
Colonel's. This purchase reduced the related party notes receivable
to The Colonel's. See "Note 13 - Related Party Transactions" in the
Notes to the financial statements. The tools to produce the large
inventory of bumpers are located in the Company's Milan, Michigan
facility and the increase in inventory is due to initial stocking of
the parts.
As a result of the Merger, The Colonel's tax status was changed
from an "S" corporation to a "C" corporation to conform with the rules
of the Internal Revenue Service. The $3,097,000 in deferred net taxes
represents the effect of temporary differences between book and tax
bases as a result of this change in tax status and the acquisition of
Brainerd. The effect of changing the Company's tax status was a
$2,333,000 charge to income, primarily resulting from temporary
differences in depreciation methods. The deferred tax liability
-29-
assumed in the acquisition of Brainerd was primarily due to book and
tax bases differences in the assets acquired. Deferred compensation
was reduced because of a termination of a long-term employment
contract.
Approximately $275,000 of the property placed in assets held for
sale at the end of 1994 was sold in 1995. The remaining balance of
$75,000 is still for sale. The values reflect current estimated
equipment values.
Plant property and equipment increased by over $8 million in 1995
compared to 1994 because of the acquisition of assets related to
Brainerd International Raceway and The Colonel's capital leases signed
for the Truck Accessory Division plant equipment. Brainerd
International Raceway's $4.8 million in assets were valued at
appraised value with adjustments for depreciation and additions since
the appraisal date. These asset additions will begin to be
depreciated in 1996 based on their average useful life. The
Colonel's's capital leases accounted for $2,700,000 and the balance of
$2,600,000 was spent for additional tooling.
Notes receivable have dropped by $2,300,000 because of the
repayment of a related party note receivable. The Company has one
remaining related party loan of $490,000 which is performing and being
paid back at $20,000 per month plus interest. The Colonel's sold
property during 1995 which was financed through note receivables due
the Company at year end. These were subsequently paid in full in
February 1996.
The Colonel's deposits on tools and machinery increased by
$3,500,000 to $4,757,000 in 1995 because the additional equipment
purchased for the start up of the Truck Accessory Division. The
Company treats advance deposits made toward machinery as separate from
regular assets until the equipment has been delivered, made
operational, and placed "in service". $1,600,000 of the balance for
tool deposits is for tools manufactured overseas. Although the
Company anticipates that such tooling will be delivered as ordered,
some risk of default by the manufacturers does exist.
As a result of the merger, the value paid for Brainerd
International Raceway exceeded the value of its assets by $425,000.
The excess has been booked as goodwill. Other assets were reduced
from $525,000 in 1994 to $184,802 in 1995 because property that had
been on the market for several years was leased to an unrelated tenant
for a lease term expiring in July 1998. As a result, this property
was transferred to operating assets.
-30-
OUTSTANDING LOANS
The Colonel's has a $4,500,000 line of credit secured by accounts
receivable and inventory with a term that expires in August 1996. The
Colonel's expects to negotiate a renewal with the current lending
institution. Interest is paid at prime on a monthly basis. The
outstanding balance on the line of credit was $4,180,000 at December
31, 1995. Brainerd International Raceway has a $300,000 line of
credit which is secured by all of its assets, of which $93,000 was
outstanding at year end.
The Colonel's received new financing of $6,000,000 in April 1995,
under a facility which calls for payments of $200,000 in principal
plus interest on a monthly basis calculated at 1/2 percent over prime
on the outstanding balance. The money received from this new loan
partially funded the purchase of the new equipment at the Owosso
facility and paid off all other outstanding term loans. The loan is
secured by machinery and equipment and had a balance of $4,800,00 at
December 31, 1995. If the need arose in the future, the Company
believes it could obtain additional financing by using these assets as
collateral.
Brainerd International Raceway has a term loan in the amount of
$450,000 which is secured by property. The loan requires quarterly
interest payments at 2 percent above prime and a single principal
payment of $50,000 per year through 2004.
The former Owosso manufacturing facility was encumbered by a real
estate mortgage in the amount of approximately $1,800,000 at the time
of the fire. That mortgage included a pre-payment penalty that would
have been triggered if the insurance proceeds had retired it in 1994.
That penalty could have been passed back to The Colonel's because of
loss indemnification provisions in the lease. The landlord paid The
Colonel's an amount equal to the balance of that mortgage and The
Colonel's assumed the mortgage. The Colonel's used the cash paid from
the landlord to reduce indebtedness having a shorter maturity than the
mortgage thereby automatically extending the repayment of needed
capital. The mortgage is cross collateralized by essentially all the
assets as are all the loans with the primary lender. The mortgage
will be fully paid by 1998.
The Colonel's entered into a capital lease to finance equipment
for the new Owosso, Michigan location. The Colonel's leased
$2,689,000 worth of that equipment under a six-year agreement that
calls for monthly payments of $41,000 and includes an option for the
Company to purchase the equipment for $1.00 upon expiration of the
lease term. That amount represents principal and interest at rates
between 7.5 and 8.5 percent. The leases are collateralized by the
machinery. In addition, The Colonel's has also financed additional
interim equipment orders with
-31-
leases in the amount of $2,087,000, which has been deposited with the
machinery manufacturers as advance payments. Upon final acceptance of
the machinery by The Colonel's, the leasing company will advance the
remaining amount on the machinery of $650,000. Once the equipment has
been accepted and paid for, The Colonel's will convert the interim
leases to long-term capital leases with similar terms.
The lending institutions of both Brainerd International Raceway
and The Colonel's consented to the Merger and related transactions and
allowed assignments of the loans to the entities under the new
structure.
RESULTS OF OPERATIONS
As discussed in "Background" above, the financial statements
contain only the operations of the Company prior to December 31, 1995
and do not include any results of operations of Brainerd. Refer to
"Note 3 - Business Combination" in the Notes to Consolidated Financial
Statements for proforma selected financial information.
Revenues for The Colonel's were $28,504,000, $28,492,000, and
$25,175,000 for the years ending 1995, 1994 and 1993, respectively.
The slower growth in 1995 was primarily due to selective product
discounts that were offered during the first nine month to customers
in an effort to obtain a larger percentage of their business. In
addition, The Colonel's offered free freight on truck-load purchases.
This was the first major sales effort The Colonel's put forth since
its fire in 1993. The Colonel's continues to aggressively market its
products through improved quality, services and delivery.
Cost of sales have risen $601,000 over the three-year period from
$19,397,000 in 1993 to $19,998,000 in 1995. Although general economic
increases in supplies and labor have increased over the past three
years, The Colonel's is offsetting these by operating more
efficiently. Gross profits climbed from 22.95 percent in 1993 to
31.21 percent in 1994 and decreased to 29.84 percent in 1995.
Selling and general and administrative expenses have
significantly decreased from $6,318,000 in 1993 to $5,101,000 in 1994
and $3,534,000 in 1995. In 1993 selling and general and administrative
expense was 25.1 percent of sales. This dropped to 18 percent in 1994
and 12.4 percent in 1995. This was primarily due to the closing and
consolidation of the Sarasota plant in late 1994, and the
consolidation of the Flint sales office to Milan in 1995. The
duplicated services that were performed at each site were eliminated.
-32-
The one-time charges of $1,389,000 in 1994 were for the costs of
closing the Sarasota manufacturing facility. These charges include
the write off of duplicated tools and equipment which were scrapped
and the cost of dismantling, moving and closing the plant.
Interest expense rose from $786,000 in 1994 to $972,000 in 1995,
due mainly to increased debt which was used to finance the new
equipment for the Truck Accessory Division. Interest expense dropped
from 1993 to 1994 by $80,000 because of scheduled principal payments.
Interest income was up slightly in 1995 over 1994 by $13,000 but
is down from 1993 by $87,000. As The Colonel's received fire proceeds
in 1993, it invested the money until it was needed, resulting in
increased interest income. The Colonel's interest income is normally
generated by customer finance charges and notes receivable.
The gain on insurance settlement of $9,082,000 and $9,043,000 in
1994 and 1993, respectively, represented the excess of insurance
proceeds over carrying value of the underlying property. Refer above
to "Major Fire Loss and Insurance Claim."
The Colonel's net income before income taxes in 1995 was
$4,195,000 or 14.72% of sales. Adjusting the 1994 net income by
removing the insurance proceeds leaves operational income of
$1,806,000 or 6.34% of sales.
The Colonel's operated as an "S" corporation until the Merger and
related transactions, which took place on December 31, 1995. As a
result of the Merger, The Colonel's changed its status to a "C"
corporation. This status change resulted in a change to income
of $2,333,000 which represents the net amount of deferred taxes
recorded at December 31, 1995.
SUBSEQUENT EVENTS
Two Notes Receivable totaling $270,000 that were recorded as open
at year end 1995 were paid in full in February 1996.
The Colonel's is in the process of negotiating a lease for a
fifth warehouse on the East coast. The lease is expected to be signed
before April 1, 1996. The warehouse is expected to operate in a
manner similar to that of the warehouses in Dallas, Houston, Phoenix,
and West Memphis.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required under Item 8 are set forth in
Appendix A of this Annual Report on Form 10-K and are here incorporated by
reference. The supplementary financial information required under Item 8 is
set forth below.
-33-
The following tabulation presents the Company's unaudited quarterly
results of operations for 1995 and 1994. Pro forma per share data is
calculated using the current number of shares outstanding (24,177,830) as if
that number of shares were outstanding during 1994 and 1995.
<TABLE>
<CAPTION>
1995
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Sales $7,819,252 $6,831,901 $7,062,036 $6,790,537
Gross Profit $2,567,592 $2,276,186 $1,586,113 $2,075,525
Net Income $1,345,324 $1,055,696 $ 409,065 $ (101,705)
Pro forma Earnings
Per Share $ 0.06 $ 0.04 $ 0.02 $ (0.00)
</TABLE>
<TABLE>
<CAPTION>
1994
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Sales $7,637,528 $6,896,008 $7,458,525 $ 6,499,952
Gross Profit $2,986,928 $1,716,056 $ 999,197 $ 3,190,362
Net Income $2,809,854 $ (245,669) $ 313,378 $ 8,010,151
Pro forma Earnings
Per Share $ 0.12 $ (0.01) $ 0.01 $ 0.33
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
-34-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
BOARD OF DIRECTORS. The members of the Company's Board of
Directors are:
Donald J. Williamson (63). Mr. Williamson is a Director,
President and Chief Executive Officer of the Company, which positions
he has held since November 21, 1995. He is also the Founder of The
Colonel's and currently serves as Chairman of the Board, Chief
Executive Officer, Treasurer, Secretary, and a Director of The
Colonel's. In addition, he serves as Chairman, Secretary, Treasurer
and a Director of Brainerd International Raceway. His term as a
Director of the Company expires in 1998.
Richard L. Roe (58). Mr. Roe is a Director of the Company as
well as a Director of Brainerd International Raceway. Mr. Roe served
as Vice President of Brainerd (1988-1995), Secretary of Brainerd
(1989-1995); President of Brainerd (1982 to 1987); and Treasurer of
Brainerd (1985 to 1986). His term as a Director of the Company
expires in 1996.
Gary Moore (46). Mr. Moore is a Director of the Company and also
serves as a Director of Brainerd International Raceway. Mr. Moore
also serves as director of operations for Brainerd International
Raceway and as a sales consultant for The Colonel's. Mr. Moore's
principal occupation is the position of National Sales & Accounts
Manager for Tremco Division of B.F. Goodrich (since 1987). From April
through November 1995, Mr. Moore served as Chairman of the Board and
Chief Executive Officer of Brainerd. His term as a Director of the
Company expires in 1997.
Ted M. Gans (60). Mr. Gans is a Director of the Company and also
serves as Chairman of the Company's Audit Committee. Mr. Gans's
principal occupation since 1965 has been as the President and Director
of Ted M. Gans, P.C., a law firm in Bloomfield Hills, Michigan of
which he is the sole owner. Mr. Gans also serves as a Director of
Williamson Lincoln Mercury Inc., Williamson Chrysler Plymouth Dodge,
Inc.; Blain Buick-GMC Truck, Inc.; and Williamson Chevrolet-Geo
Cadillac, Inc. All three of these companies are 100-percent owned
by Patsy L. Williamson, the wife of Donald J. Williamson. Mr. Gans's
term as a Director of the Company expires in 1988.
J. Daniel Frisina (47). Mr. Frisina is a Director of the
Company, a Director of The Colonel's, and a Director of Brainerd
International Raceway. Mr. Frisina's principal occupation is Director
of Global Development for Cheng Hong Legion Co., Ltd. where he has
previously served as a consultant (since 1992). He served as
President of The Colonel's from 1989 through 1991. Prior to the
-35-
Merger, he served as Treasurer and Chief Financial Officer of Brainerd
during 1995. His term as a Director of the Company expires in 1997.
Lisa K. Alexander (35). Ms. Alexander is a Director and
Treasurer of the Company. She is also the Secretary and Treasurer of
American Personnel, Inc. She has served as Vice President of Sales and
Secretary of The Colonel's since 1989. Her term as a Director of the
Company expires in 1996. Ms. Alexander is the step-daughter of Donald
J. Williamson.
EXECUTIVE OFFICERS. As mentioned above, Mr. Williamson is a
Director, President, and Chief Executive Officer, and Ms. Alexander is
a Director and Treasurer of the Company. The two additional executive
officers of the Company are:
Jeffrey A. Chimovitz (50). Mr. Chimovitz is Vice President,
Secretary and General Counsel of the Company. In addition, he serves
as Assistant Secretary of The Colonel's, and Assistant Secretary of
Brainerd International Raceway. Mr. Chimovitz became General Counsel
of The Colonel's, Inc. in 1993. From 1990 to 1993, he was a Partner
in the law firm of Jaffe, Raitt, Heuer & Weiss.
Richard S. Schoenfeldt (40). Mr. Schoenfeldt is Vice
President-Finance and Chief Financial Officer of the Company. Since 1994,
he has served as controller and Chief Financial Officer of The Colonel's.
From 1991 through 1994, he was Controller of The Colonel's and from
1987 through 1991 he was Operations Manager of The Colonel's.
INVOLVEMENT OF DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS IN CERTAIN LEGAL PROCEEDINGS.
The Company does not believe that any of its directors, executive
officers, promoters, or control persons are involved in legal
proceedings within the meaning of Item 401(f) of SEC Regulation S-K.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own
more than 10% of the Company's common stock, to file reports of
ownership and changes in ownership with the SEC and Nasdaq.
Directors, officers and greater than 10% beneficial owners are
required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the best of the Company's knowledge, no director, officer, or
beneficial owner of more than 10% of the Company's outstanding shares
failed to file on a timely basis any report required by Section 16(a)
of the Securities Exchange Act with respect to the year ended December
31, 1995.
-36-
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION SUMMARY
The following Summary Compensation Table shows certain
information concerning the compensation earned during each of the
three fiscal years in the period ended December 30, 1995, of the Chief
Executive Officer of the Company during the last completed fiscal
year, and the Company's most highly compensated executive officers who
served in positions other than Chief Executive Officer at the end of
the last completed fiscal year and were compensated in excess of
$100,000 for their services as officers of the Company and/or its
subsidiaries during the 1995 fiscal year.
-37-
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<CAPTION>
OTHER
NAME AND ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
Donald J. Williamson 1995 $520,000<F1> $ 0<F1> $3,478<F1>
President, Chief Executive 1994 $526,550<F2> $200,000<F2> $3,731<F2>
Officer, and Director 1993 $438,500<F2> $ 0<F2> $3,640<F2>
Jeffrey A. Chimovitz 1995 $150,000<F3> $ 100<F3> $4,313<F3>
Vice President, Secretary 1994 $150,000<F4> $ 25,100<F4> $5,015<F4>
and General Counsel 1993 $ 89,728<F4> $ 0<F4> $2,834<F4>
Lisa Alexander 1995 $ 86,000 $ 0 $1,672
Treasurer and Director 1994 $104,000<F5> $ 25,100<F5> $ 595<F5>
1993 $104,000<F5> $ 19,000<F5> $ 0<F5>
Gary Moore 1995 $ 53,084<F6> $ 100<F6> $ 0<F6>
President, Chief 1994 $ 0 $ 0 $ 0
Executive Officer and 1993 $ 0 $ 0 $ 0
Director
<FN>
<F1> Amounts reported include amounts paid by the Company for Mr.
Williamson's services as President and Chief Executive Officer as
well as by The Colonel's, Inc. for Mr. Williamson's services as
Chairman, Chief Executive Officer, Treasurer and Secretary and by
Brainerd International Raceway for Mr. Williamson's services as
Chairman, Secretary and Treasurer.
<F2> Amounts reported as Mr. Williamson's compensation for the 1994
and 1993 fiscal years only cover amounts for his services as an
executive officer and director of The Colonel's, Inc. Mr.
Williamson was paid no compensation by Brainerd (as predecessor
of the Company) during 1994 or 1993.
<F3> Amounts reported include amounts paid by the Company for Mr.
Chimovitz's services as Vice President, Secretary and General
Counsel, as well as by The Colonel's, Inc. for Mr. Chimovitz's
services as Assistant Secretary, and by Brainerd International
Raceway for Mr. Chimovitz's services as Assistant Secretary.
-38-
<F4> Amounts reported as Mr. Chimovitz's compensation for the 1994 and
1993 fiscal years only cover amounts for his services as an
employee of The Colonel's, Inc. Mr. Chimovitz was paid no
compensation by Brainerd (as predecessor of the Company) during
1994 or 1993.
<F5> Amounts reported as Ms. Alexander's compensation for the 1994 and
1993 fiscal years only cover amounts for her services as an
executive officer of The Colonel's, Inc. Ms. Alexander was paid
no compensation by Brainerd (as predecessor of the Company)
during 1994 or 1993.
<F6> Prior to the Merger, Mr. Moore was the President and Chief
Executive Officer of Brainerd. He presently serves only as a
Director to the Company.
</FN>
</TABLE>
STOCK OPTIONS
No stock options or stock appreciation rights ("SARs") were
awarded by the Company, or by Brainerd (as predecessor of the Company)
during the fiscal year ended December 31, 1995. No executive officer
of the Company or Brainerd (as predecessor of the Company) exercised
any stock option or SAR during the fiscal year ended December 31,
1995. In addition, no executive officer of the Company or Brainerd
(as predecessor of the Company) held any unexercised options or SARs
as of the end of the 1995 fiscal year.
LONG-TERM INCENTIVE AWARDS
The Company has established its 1995 Long-Term Incentive Plan
(the "LTIP") pursuant to which the Company may award cash and shares
of restricted stock to plan participants conditioned upon the
achievement of certain corporate performance goals over a three-year
performance period. No awards were made under the LTIP during the
fiscal year ended December 31, 1995. For a discussion of the LTIP,
see below under the heading "Board Report on Executive Compensation--Long-Term
Incentive Plan."
PENSION PLAN
The Company does not have a pension plan, a defined benefit plan
or an actuarial plan.
COMPENSATION OF DIRECTORS
No compensation was paid to any director of the Company or
Brainerd (as predecessor of the Company) for services rendered in such
-39-
capacity during the fiscal year ended December 31, 1995. Directors of
the Company who are not employees of the Company may be reimbursed for
expenses incurred in attending meetings of the Board of Directors.
John B. Welch, a director of Brainerd, received consulting fees of
$500 per month until his resignation from the Brainerd Board on
February 23, 1995.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company does not have any employment agreements,
termination-of-employment agreement, or change-in-control agreements with any
executive officer.
In 1992, Lisa Alexander (at the time Lisa Morrow) and The
Colonel's entered into a ten-year employment contract by which Ms.
Alexander would be paid an annual salary of $104,000, in addition to
benefits in conformity with benefits awarded to other executive
officers. On February 6, 1996 Ms. Alexander and The Colonel's entered
into an agreement terminating Ms. Alexander's employment contract.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's current directors were elected on November 21,
1995. Although the Board of Directors has authorized a Compensation
Committee, no appointments were made to the Compensation Committee in
1995. The Board will appoint members of the Compensation Committee in
early 1996. During 1995, Donald Williamson participated in
deliberations of the Board of Directors concerning executive officer
compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The Company's Board of Directors has fixed March 1, 1996 as the
record date for determining the information set forth below. On that
date, 24,177,830 shares of the Company's common stock were issued and
outstanding. Shareholders are entitled to one vote on each matter
presented for shareholder action for each share of common stock
registered in their names at the close of business on the record date.
The following table contains information with respect to
ownership of Company common stock by all directors, all nominees for
election as directors, executive officers, all directors and executive
officers as a group, and by each person known to the Company to own
beneficially more than 5 percent of the Company's outstanding common
stock. The content of this table is based upon information supplied
-40-
by the Company's officers, directors and nominees for election as
directors, and represents the Company's understanding of circumstances
in existence as of March 1, 1996.
<TABLE>
<CAPTION>
PERCENT
BENEFICIAL OF
OWNER<F1> OWNED OPTIONS TOTAL CLASS
<S> <C> <C> <C> <C>
Donald J. Williamson<F2> 23,567,080 0 23,567,080 97.5%
Patsy L. Williamson<F2> 23,567,080 0 23,567,080 97.5%
Richard L. Roe 2,195 0 2,195 0.01%
Gary Moore 0 0 0 0.00%
Ted M. Gans 0 500<F3> 500 0.002%
J. Daniel Frisina 0 500<F3> 500 0.002%
Lisa K. Alexander 0 0 0 0.00%
Jeffrey A. Chimovitz 0 0 0 0.00%
Richard Schoenfeldt 0 0 0 0.00%
<FN>
<F1> Except as otherwise disclosed, shares owned represent shares for
which the beneficial owner has sole voting and investment power.
<F2> In the Merger, a total of 23,500,000 shares of common stock in
the Company were issued to Donald J. Williamson and his wife
Patsy L. Williamson proportionate to their ownership of shares of
The Colonel's Common Stock. Because they are married, each is
deemed to be the beneficial owner of all of the stock owned by
both of them.
<F3> Automatic grant effective March 1, 1996 to non-employee directors
under the 1995 Long Term Incentive Plan.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Colonel's is a party to certain transactions with related
parties which are summarized below.
LEASE OF MILAN, MICHIGAN, FACILITY. In June of 1993, The
Colonel's began leasing its Milan, Michigan, facility from an
affiliated company 620 Platt Road, LLC. Donald J. Williamson and
Patsy L. Williamson are the sole members of 620 Platt Road, LLC. The
term of the current lease is for three years beginning June 18, 1993
with an option for The Colonel's to renew the lease for an additional
three year term. Rent expense to The Colonel's for the Milan facility
was $840,000 in 1995, $840,000 in 1994, and $490,000 in 1993.
-41-
THE COLONEL'S FACTORY WAREHOUSE OF ARKANSAS, INC. Donald J.
Williamson owns all of the outstanding capital stock of The Colonel's
Factory Warehouse of Arkansas, Inc. ("The Colonel's Arkansas"). The
Colonel's Arkansas is located in West Memphis, Arkansas, and is
primarily engaged in manufacturing chrome plated bumpers for sale as
aftermarket replacement parts. The Colonel's engages in certain
transactions with The Colonel's Arkansas including sales and purchases
of inventory and payment for and reimbursement of payroll expenses of
The Colonel's Arkansas. During 1995, sales of inventory by The
Colonel's to The Colonel's Arkansas were in the amount of $346,000 and
purchases of inventory were in the amount of $744,600.
At December 31, 1994, The Colonel's held a note receivable from
The Colonel's Arkansas in the amount of $2,138,186. In 1995, The
Colonel's received from The Colonel's Arkansas $425,976 in inventory,
$473,477 in other property and equipment, and $1,000,000 in
satisfaction of this note.
BLAIN BUICK-GMC, INC. Patsy L. Williamson owns all of the
outstanding capital stock of Blain Buick-GMC, Inc. ("Blain Buick").
Blain Buick is an automobile dealership located in Flint, Michigan.
The Colonel's engages in certain transactions with Blain Buick,
including the purchase of automobiles, parts, and automotive service
and the lease of certain property from which rental income is earned.
During 1995, purchases of automobiles, parts, and services by The
Colonel's from Blain Buick were in the amount of $73,500 and rental
income paid by Blain Buick to The Colonel's was in the amount of
$11,000. As of December 31, 1995, The Colonel's held a note
receivable from Blain Buick in the amount of approximately $490,000.
The note bears interest at 1% above the prime rate.
TRANSACTIONS WITH DIRECTORS. Ted M. Gans is a Director of
Brainerd and practices law with Ted M. Gans, P.C. During the past
year, The Colonel's retained Ted M. Gans, P.C. for certain legal
services and it is anticipated that the Company may retain Ted M.
Gans, P.C. to render certain legal services during the current year.
Gary Moore is currently serving as a director of the Company and
Brainerd International Raceway, as director of operations for Brainerd
International Raceway, as a sales consultant for The Colonel's and is
a National Sales and Accounts Manager for the Tremco Division of B.F.
Goodrich. During the past year, The Colonel's purchased paint from
Tremco in the ordinary course of business and it is anticipated that
The Colonel's will continue to purchase paint from Tremco during the
current year. J. Daniel Frisina is Director of Global Development for
Cheng Hong Legion Co., Ltd., which sells among other products,
automotive body replacement parts to The Colonel's as well as other
customers in the automotive crash parts industry.
-42-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON
FORM 8-K
ITEM 14(A)(1). FINANCIAL STATEMENTS. Attached as Appendix A.
The following consolidated financial statements of The Colonel's
International, Inc. and subsidiaries are filed as a part of this
report:
* Report of Independent Auditors
* Consolidated Balance Sheets as of December 31,
1995 and 1994
* Consolidated Statements of Income for years ended
December 31, 1995, 1994 and 1993
* Consolidated Statements of Stockholders' Equity for
years ended December 31, 1995, 1994 and 1993
* Consolidated Statements of Cash Flows for years ended
December 31, 1995, 1994 and 1993
* Notes to Consolidated Financial Statements for years
ended December 31, 1995, 1994 and 1993
ITEM 14(A)(2). FINANCIAL STATEMENT SCHEDULES. Financial
statement schedules have not been filed because such schedules are
either not applicable or full disclosure has been made in the
financial statements and notes thereto.
ITEM 14(A)(3). EXHIBITS. The following exhibits are filed as part of
this report.
EXHIBIT
NUMBER EXHIBIT
2.1 Agreement and Plan of Merger between The Colonel's, Inc. and
Brainerd Merger Corporation and joined in by Brainerd
International, Inc. Incorporated by reference from Exhibit
A to the Proxy Statement of Brainerd International, Inc. for
the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
2.2 Agreement and Plan of Reorganization among Brainerd
International, Inc. and The Colonel's Holdings, Inc.
Incorporated by reference from Exhibit D to the Proxy
Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held
on November 21, 1995.
-43-
3.1 Articles of Incorporation of the Company, as amended.
Incorporated by reference from Exhibit E to the Proxy
Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held
on November 21, 1995.
3.2 Certificate of Amendment to the Articles of Incorporation
changing name from "The Colonel's Holdings, Inc." to "The
Colonel's International, Inc."
3.3 Bylaws of the Company. Incorporated by reference from
Exhibit F to the Proxy Statement of Brainerd International,
Inc. for the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
4.1 Articles of Incorporation. See Exhibit 3(a) above.
10.1 The Company's 1995 Long-Term Incentive Plan. Incorporated
by reference from Exhibit G to the Proxy Statement of
Brainerd International, Inc. for the Annual Meeting of
Shareholders of Brainerd International, Inc. held on
November 21, 1995.
10.2 Incentive Stock Option Plan. Incorporated by reference from
the Annual Report on Form 10-K of Brainerd International
Inc. for the fiscal year ended December 31, 1987.
10.3 Form of Non-Statutory Stock Option Agreement used under the
Incentive Stock Option Plan. Incorporated by reference from
the Annual Report on Form 10-K of Brainerd International
Inc. for the fiscal year ended December 31, 1987.
10.4 Form of Incentive Stock Option Agreement used under the
Incentive Stock Option Plan. Incorporated by reference from
the Annual Report on Form 10-K of Brainerd International
Inc. for the fiscal year ended December 31, 1987.
10.5 Office Lease Agreement dated January 23, 1991 between
Brainerd International, Inc. and Woodland Office Partnership.
Incorporated by reference from the Annual Report on Form 10-K of
Brainerd International Inc. for the fiscal year ended
December 31, 1990.
10.6 Amendment dated December 11-12, 1991 to Office Lease
Agreement (see Exhibit 10(e) above) between Brainerd
International, Inc. and Woodland Office Partnership.
Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1991.
-44-
10.7 $404,700 Promissory Note dated January 1, 1992, from
Brainerd International, Inc. payable to Gene Snow and James
W. Littlejohn. Incorporated by reference from Brainerd
International, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10.8 Lease Agreement between Issuer and National Hot Rod
Association, Inc. consisting of March 17, 1984 Lease
Agreement; April 28, 1986 letter extending term to 1991;
March 12, 1987 Letter of Amendment; and April 7, 1992 letter
extending term to 1996 and amending agreement. Incorporated
by reference from Brainerd International, Inc.'s
Registration Statement on Form S-1 (Registration No. 33-055876).
10.9 November 8, 1988 Sponsorship Agreement between Champion Auto
Stores, Inc. and National Hot Rod Association, Inc.
Incorporated by reference from Brainerd International,
Inc.'s Registration Statement on Form S-1 (Registration No.
33-055876).
10.10 June 22, 1992 Title Rights Sponsorship Agreement
between Champion Auto Stores, Inc. and National Hot Rod
Association, Inc. Incorporated by reference from
Brainerd International, Inc.'s Registration Statement
on Form S-1 (Registration No. 33-055876).
10.11 February 16, 1994 Loan Agreement with American National
Bank of Brainerd; $550,000 Promissory Note; and
$300,000 Line of Credit Note. Incorporated by reference
from Brainerd International, Inc.'s Annual Report on
Form 10-KSB for the fiscal year ended December 31,
1993.
10.12 December 21, 1993 Agreement among Issuer, Motor
Stadium, Inc. and Gene M. Snow providing for
termination of March 23, 1993 Financing Agreement,
dissolution of Motor Sports Stadium, Inc. and grant of
interest by Mr. Snow in potential future project.
Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1993.
10.13 Amendment dated February 1, 1994 to Office Lease
Agreement (See Exhibits 10(e) and 10(f)). Incorporated
by reference from Brainerd International, Inc.'s Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1993.
-45-
10.14 September 1994 Stock Purchase Agreement among Gene M.
Snow, James W. Littlejohn and Donald J. Williamson.
Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1993.
10.15 December 1994 Letter of Intent between Issuer and The
Colonel's, Inc. Incorporated by reference from Brainerd
International, Inc.'s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1993.
10.16 Addendum to Lease dated December 16, 1994 (See Exhibits
10(e), 10(f) and 10(m)). Incorporated by reference
from Brainerd International, Inc.'s Annual Report on
Form 10-KSB for the fiscal year ended December 31,
1993.
10.17 Variable Rate-Installment Note ($6,000,000) between The
Colonel's and Comerica Bank dated April 14, 1995.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.18 Master Revolving Note ($4,500,000) between The
Colonel's and Comerica Bank dated May 1, 1995.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.19 Security Agreement between The Colonel's and Comerica
Bank (f/k/a Manufacturers National Bank of Detroit)
dated December 4, 1991. Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.20 Amended and Restated Security Agreement between The
Colonel's and Comerica Bank (f/k/a Manufacturers
National Bank of Detroit) dated December 4, 1991.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.21 Amended and Restated Guaranty between Donald and Patsy
Williamson and Comerica Bank dated October 8, 1992.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
-46-
10.22 Lease Agreement between 620 Platt Road, Inc. and The
Colonel's dated June 18, 1993 (for Milan, Michigan
manufacturing facility). Incorporated by reference
from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.23 First Amendment to Lease Agreement between 620 Platt
Road, L.L.C. (f/k/a 620 Platt Road, Inc.) and The
Colonel's dated June 16, 1995. Incorporated by
reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on
Form S-4 (Registration No. 33-91374).
10.24 Industrial/Warehouse Lease between JMB/Warehouse
Associates Limited Partnership and The Colonel's dated
August 1, 1993 (for Houston, Texas warehouse
distribution facility). Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.25 Lease Agreement between Industrial Properties
Corporation and The Colonel's dated September 15, 1992
(for Dallas, Texas warehouse distribution facility).
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.26 Standard Industrial Lease between Revco D.S., Inc. and
The Colonel's dated February 5, 1993 (for Phoenix
(Glendale), Arizona warehouse distribution facility).
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.27 Interim Equipment Lease Schedule ($2,729,370) between
The Colonel's and Comerica Leasing Corporation dated
July 27, 1995. Incorporated by reference from
Amendment No. 2 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.28 Interim Equipment Lease Schedule ($2,044,000) between
The Colonel's and Comerica Leasing Corporation dated
July 27, 1995. Incorporated by reference from
Amendment No. 2 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
-47-
10.29 Interim Equipment Lease Schedule ($383,468) between The
Colonel's and Comerica Leasing Corporation dated July
27, 1995. Incorporated by reference from Amendment No.
2 to Brainerd International, Inc.'s Registration
Statement on Form S-4 (Registration No. 33-91374).
10.30 Lease Schedule ($3,464,557) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
10.31 Interim Lease Schedule ($960,000) between The Colonel's,
Inc. and Comerica Leasing Corporation dated December 27,
1995.
10.32 Interim Lease Schedule ($542,811) between The Colonel's,
Inc. and Comerica Leasing Corporation dated December 27,
1995.
10.33 Interim Lease Schedule ($85,800) between The Colonel's, Inc.
and Comerica Leasing Corporation dated January 26, 1996.
10.34 Interim Lease Schedule ($52,556) between The Colonel's, Inc.
and Comerica Leasing Corporation dated February 16, 1996.
10.35 Interim Lease Schedule ($584,250) between The Colonel's,
Inc. and Comerica Leasing Corporation dated December 27, 1995.
10.36 Interim Lease Schedule ($364,650) between The Colonel's,
Inc. and Comerica Leasing Corporation dated January 26, 1996.
10.37 Interim Lease Schedule ($178,200) between The Colonel's,
Inc. and Comerica Leasing Corporation dated February 16, 1996.
11.1 Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
ITEM 14(B). REPORTS ON FORM 8-K.
On December 5, 1995, Brainerd (as predecessor to the Company)
filed a Report on Form 8-K with the SEC and Nasdaq (the "Report").
The Report reports the change in control of Brainerd that occurred as
a result of the Merger and related transactions, and the submission of
matters to a vote of security holders at the Meeting. Neither
Brainerd nor the Company filed other reports on Form 8-K during the
fourth quarter of the fiscal year ending December 31, 1995.
-48-
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.
THE COLONEL'S INTERNATIONAL, INC.
Dated: March 28, 1996 By: */S/ DONALD J. WILLIAMSON
Donald J. Williamson
President, Chief Executive Officer, and
Director
-49-
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/DONALD J. WILLIAMSON President, Chief Executive March 28, 1996
Donald J. Williamson Officer, and Director
(Principal Executive Officer)
*/S/RICHARD SCHOENFELDT Vice President-Finance, and March 28, 1996
Richard Schoenfeldt Chief Financial Officer
(Principal Financial and
Accounting Officer)
*/S/LISA K. ALEXANDER Treasurer and Director March 28, 1996
Lisa K. Alexander
_______________________ Director
Richard L. Roe
*/S/J. DANIEL FRISINA Director March 28, 1996
J. Daniel Frisina
*/S/TED M. GANS Director March 28, 1996
Ted M. Gans
*/S/GARY MOORE Director March 28, 1996
Gary Moore
*By /S/ JEFFREY A. CHIMOVITZ
Jeffrey A. Chimovitz
Attorney-in-fact
-50-
APPENDIX A
-51-
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
The Colonel's International, Inc.
Milan, Michigan
We have audited the accompanying consolidated balance sheets of The Colonel's
International, Inc. (the "Company") as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years ended December 31, 1995, in conformity with generally accepted
accounting principles.
/S/ DELOITTE & TOUCHE LLP
Ann Arbor, Michigan
March 4, 1996
-52-
THE COLONEL'S INTERNATIONAL, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash $ 634,290 $ 164,286
Accounts receivable:
Trade (net of allowance for doubtful accounts of
$401,200 and $345,900 at December 31, 1995
and 1994, respectively) (Note 7) 2,292,112 2,474,565
Insurance (Note 14) 4,352,239
Inventories (Note 4 and 7) 6,805,906 5,696,584
Prepaid expenses 164,692 239,935
Notes receivable:
Related party (Notes 6 and 13) 240,000 863,658
Other (Note 6) 302,401 222,381
Deferred taxes - current (Note 10) 917,000
Current portion of deferred compensation (Note 11) 52,000 204,436
Assets held for sale (Note 14) 75,000 350,000
Total current assets 11,483,401 14,568,084
PROPERTY, PLANT AND EQUIPMENT - Net
(Notes 5, 8 and 11) 20,876,669 12,552,006
OTHER ASSETS:
Notes receivable:
Related party (Notes 6 and 13) 250,000 1,969,645
Other (Note 6) 43,285
Long-term portion of deferred compensation (Note 11) 266,163 624,136
Deposits 4,757,342 1,247,727
Goodwill 425,609
Other 184,802 525,000
Total other assets 5,883,916 4,409,793
TOTAL ASSETS (Note 8) $ 38,243,986 $ 31,529,883
See notes to consolidated financial statements.
-53-
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 7) $ 4,180,000 $ 6,000,000
Current portion of long-term obligations (Note 8) 5,424,455 1,843,218
Accounts payable - trade 2,938,494 2,809,113
Accrued expenses (Note 9) 2,431,074 5,194,411
Current portion of deferred compensation (Note 11) 52,000 204,436
Total current liabilities 15,026,023 16,051,178
LONG-TERM OBLIGATIONS, NET OF CURRENT
PORTION (Note 8) 6,064,705 1,366,615
LONG-TERM PORTION OF DEFERRED
COMPENSATION (Note 11) 266,163 624,136
DEFERRED TAXES - LONG TERM (Note 10) 4,014,000
STOCKHOLDERS' EQUITY:
Common stock; 35,000,000 shares authorized at
$.01 par value, 24,177,830 shares issued and
outstanding (Note 3) 241,778
Common stock; 10,000,000 shares authorized at
$.10 par value, 6,021,000 shares issued and
outstanding 602,100
Additional paid-in capital 5,557,833 1,244,511
Retained earnings 7,073,484 11,641,343
Total stockholders' equity 12,873,095 13,487,954
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,243,986 $ 31,529,883
</TABLE>
See notes to consolidated financial statements.
-54-
THE COLONEL'S INTERNATIONAL, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995<F1> 1994 1993
<S> <C> <C> <C>
SALES (Note 13) $ 28,503,726 $ 28,492,013 $ 25,174,656
COST OF SALES (Note 13) 19,998,308 19,599,470 19,396,926
GROSS PROFIT 8,505,418 8,892,543 5,777,730
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,534,648 5,101,270 6,318,782
PLANT CLOSING COSTS (Note 15) 1,389,368
Income (loss) from operations 4,970,770 2,401,905 (541,052)
OTHER INCOME (EXPENSE):
Interest expense (971,623) (785,969) (864,681)
Interest income (Note 13) 119,628 106,773 206,480
Gain on insurance settlement (Note 14) 9,081,662 9,043,282
Rental income (Note 13) 71,000 73,000 87,750
Other 5,699 10,343 (169,573)
Other income (expense), net (775,296) 8,485,809 8,303,258
NET INCOME BEFORE INCOME TAXES 4,195,474 10,887,714 7,762,206
PROVISION FOR INCOME TAXES (Note 10) 2,333,000
NET INCOME $ 1,862,474 $ 10,887,714 $ 7,762,206
PROFORMA EARNINGS PER SHARE (Note 18) $ 0.11
<FN>
<F1> The merger by which The Colonel's, Inc. became a subsidiary
of The Colonel's International, Inc. ("CII") was effective
December 31, 1995. Therefore, the statements of income
reflect only the results of operations of The Colonel's,
Inc. See Note 3 for the pro forma results of operations of
The Colonel's, Inc. and CII as if they had been combined
for 1995.
</FN>
</TABLE>
See notes to consolidated financial statements.
-55-
THE COLONEL'S INTERNATIONAL, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
ADDITIONAL NOTE
COMMON STOCK PAID IN RECEIVABLE - RETAINED
SHARES AMOUNT CAPITAL STOCKHOLDERS EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 6,021,000 $ 602,100 $ 1,244,511 $ (4,500,000) $ 9,252,867 $ 6,599,478
Net income 7,762,206 7,762,206
Transactions with stockholders
(Notes 6 and 13) 1,500,000 (9,334,273) (7,834,273)
BALANCE, DECEMBER 31, 1994 6,021,000 602,100 1,244,511 (3,000,000) 7,680,800 6,527,411
Net income 10,887,714 10,887,714
Transactions with stockholders
(Notes 6 and 13) 3,000,000 (6,927,171) (3,927,171)
BALANCE, DECEMBER 31, 1994 6,021,000 602,100 1,244,511 None 11,641,343 13,487,954
Net income 1,862,474 1,862,474
Transactions with stockholders
(Notes 6 and 13) (6,430,333) (6,430,333)
Change in par value from $.10
to $.01 (596,079) 596,079
Exchange of common shares to
affect merger (see Note 3) 18,156,830 235,757 3,717,243 3,953,000
BALANCE, DECEMBER 31, 1995 24,177,830 $ 241,778 $ 5,557,833 None $ 7,073,484 $ 12,873,095
</TABLE>
See notes to consolidated financial statements.
-56-
THE COLONEL'S INTERNATIONAL, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 1,862,474 $ 10,887,714 $ 7,762,206
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 2,673,758 3,075,351 3,052,275
Deferred tax provision 2,333,000
Net book value of property and equipment
destroyed in fire 1,588,670
Provision for impairment of assets held for sale 1,109,368 200,000
(Gain) loss on sale of property and equipment 22,573 1,584 (2,499)
Changes in assets and liabilities that provided
(used) cash, net of effects from the
acquisition:
Accounts receivable:
Trade 182,453 (875,598) 146,064
Related parties 173,400 (48,055)
Insurance 4,352,239 (53,036) (4,299,203)
Inventories (683,346) (2,457,547) 228,732
Prepaid expenses 90,998 85,342 (150,020)
Accounts payable 71,600 (1,131,386) 2,079,525
Accrued expenses (2,855,361) 24,414 4,071,571
Net cash provided by operating activities 8,050,388 10,839,606 14,629,266
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Brainerd, net of cash
acquired (Note 3) 277,237
Expenditures for property, plant and equipment (5,584,083) (5,905,381) (3,468,238)
Proceeds from sale of property, plant and
equipment 8,964 2,802 10,300
Net change in deposits (principally for tooling
and equipment) (3,509,615) 1,384,885 (1,929,881)
Additions to notes receivable - related party (1,243,291) (886,369) (1,303,744)
Payments received on notes receivable -
related party 1,205,117 35,604 203,155
Payments received on notes receivable - other 237,209 237,663 37,422
Proceeds from sale of assets held for sale 275,000
Net cash used in investing activities (8,333,462) (5,130,796) (6,450,986)
</TABLE>
-57-
THE COLONEL'S INTERNATIONAL, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under notes payable (1,820,000) 3,900,000
Proceeds from long-term obligations 8,087,062 1,700,000
Principal payments on long-term debt (2,956,790) (5,993,777) (3,631,459)
Proceeds from issuance of capital leases 2,731,277
Principal payment on obligations under
capital leases (126,218) (173,995) (151,665)
Distributions paid to stockholders (5,162,253) (1,810,047) (7,834,273)
Net cash provided by (used in)
financing activities 753,078 (7,977,819) (6,017,397)
NET INCREASE (DECREASE) IN CASH 470,004 (2,269,009) 2,160,883
CASH, BEGINNING OF YEAR 164,286 2,433,295 272,412
CASH, END OF YEAR $ 634,290 $ 164,286 $ 2,433,295
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION - Cash paid during
the year for interest $ 910,706 $ 901,327 $ 821,167
SUPPLEMENTAL SCHEDULES OF
NONCASH FINANCING AND
INVESTING ACTIVITIES:
Reclassification of note receivable as
stockholder distribution $ 1,482,024 $ 3,000,000 $ 1,500,000
Property received as payment on note
receivable $ 473,477
Inventory received as payment on note
receivable $ 425,976
Stockholder contribution of note receivable $ 213,944
Notes payable received on sale of property $ 60,000
Assumption of mortgage $ 2,117,124
</TABLE>
See note to consolidated financial statements.
-58-
THE COLONEL'S INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION
The Colonel's International, Inc. ("CII") is a holding company for two
wholly-owned subsidiaries, The Colonel's, Inc. ("The Colonel's") and
Brainerd International Raceway, Inc. ("BIRI") (See Note 3). The Colonel's
was incorporated in Michigan in 1982 and principally designs, manufactures
and distributes plastic automotive bumper fascias and miscellaneous
reinforcement beams and brackets, as replacement collision parts to the
automotive aftermarket industry in North America. The Colonel's
manufactures its products using reaction injection molding and plastic
injection molding technology and sells its products throughout North
America through its warehouses and a network of distributors. BIRI was
incorporated in Minnesota in 1982 and operates a multi-purpose motor sports
facility in Brainerd, Minnesota. BIRI organizes and promotes various
spectator events relating to road and drag races.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts
of CII and its subsidiaries, the Colonel's and BIRI, from the date of
acquisition. All significant intercompany accounts and transactions have
been eliminated.
INVENTORIES are stated at the lower of cost or market, and cost is
determined by the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT is stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Track 7 years
Buildings 15 years
Leasehold improvements 10-25 years
Equipment 5-10 years
Bleachers and fencing 5 years
Furniture and fixtures 3-10 years
Vehicles 3-7 years
Tooling 5-7 years
</TABLE>
-59-
Leasehold improvements are amortized over the shorter of the life of the
lease or their estimated useful life of 10-25 years.
Expenditures for major renewals and betterments that extend the useful life
of the related property, plant and equipment are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred. When
properties are retired or sold, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss on
disposition is recognized.
REVENUE RECOGNITION - Sales and trade accounts receivable are recognized at
the time the product is shipped to the Company's customers.
ASSETS HELD FOR SALE - Assets held for sale include certain machinery,
equipment and real estate not needed in CII's operations. These assets
have been valued at the lower of cost or net realizable value, and are
classified as short or long term based on the anticipated time of sale.
GOODWILL - Goodwill is being amortized using the straight-line method over
15 years, the estimated period of benefit.
ACCRUED LEGAL FEES - Anticipated legal and other professional fees are
accrued in the same period that the related legal matters are accrued.
ACCRUED ENVIRONMENTAL COSTS - CII accounts for environmental costs when
environmental assessments or remedial efforts are probable, and the costs
can be reasonably estimated. Generally, the timing of these accruals
coincide with the earlier of a feasibility study or CII's commitment to a
plan of action based on the known facts. Accruals are recorded based on
existing technology available, presently enacted laws and regulations, and
without giving effect to insurance proceeds. Such accruals are not
discounted. As assessments and cleanups proceed, environmental accruals
are periodically reviewed and adjusted as additional information becomes
available as to the nature or extent of contamination, methods of
remediation required, and other actions by governmental agencies or private
parties.
INCOME TAX - Effective December 31, 1995, The Colonel's changed its tax
status from an S Corporation to a C Corporation for federal income tax
purposes. As a result this change from a non-taxable entity to a taxable
entity, The Colonel's recorded a $2,333,000 charge to income, to reflect
the tax consequences of differences between the tax bases of The Colonel's
assets and liabilities at that date. Prior to December 31, 1995, The
Colonel's income was not taxable to the company and was passed through to
its stockholders.
FINANCIAL INSTRUMENTS - The carrying value of financial instruments
included in the balance sheets approximate fair value.
-60-
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the operating period. Actual results could differ from
those estimates.
RECLASSIFICATIONS - Certain 1994 and 1993 amounts have been reclassified to
conform to the 1995 presentation.
3. BUSINESS COMBINATION
Effective December 31, 1995, CII completed its merger with The Colonel's.
CII issued 23,500,000 shares of its common stock in exchange for all of the
outstanding common stock of The Colonel's. For accounting purposes, the
acquisition has been treated as a recapitalization of The Colonel's with
The Colonel's as the acquirer ("reverse acquisition"). The historical
financial statements prior to December 31, 1995 are those of The
Colonel's. In addition, the weighted average common shares outstanding
for purposes of calculating the earnings per share have been retroactively
restated to give effect to the recapitalization.
The purchase price was $3,953,000 based on the fair value of CII at the
consummation date of the acquisition, which was allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the
date of acquisition. The excess of the purchase price over the estimated
fair values of the net assets acquired has been recorded as goodwill, which
will be amortized over 15 years. The estimated fair value of assets and
liabilities acquired are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash $ 277,237
Property and equipment 4,682,400
Goodwill 425,609
Other 25,556
Accrued liabilities (83,810)
Accrued federal income tax (66,000)
Debt (543,992)
Deferred tax liability (764,000)
Total $ 3,953,000
</TABLE>
There are no operating results of this acquisition included in CII's
consolidated results of operations since the date of acquisition was
December 31, 1995. The following unaudited proforma summary presents
the consolidated results of operations as if the acquisition had
-61-
occurred at the beginning of the period presented, giving effect to
certain adjustments for the amortization of goodwill and the effect
of income taxes. These proforma results have been prepared for
comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made at the
beginning of the period presented or of results that may occur in the
future.
<TABLE>
<CAPTION>
(In Thousands) 1995 1994
<S> <C> <C> <C>
Revenue $ 31,382 $ 30,942
Income before taxes $ 4,385 $ 10,886
Net income $ 2,915 $ 7,126
Earnings per share $ 0.12 $ 0.29
</TABLE>
4. INVENTORIES
Inventories at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Finished products $ 6,168,440 $ 5,320,211
Raw materials 637,466 376,373
Total inventories $ 6,805,906 $ 5,696,584
</TABLE>
-62-
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 is summarized by major
classifications as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Land and improvements $ 2,269,400 $ 30,000
Track 1,537,800
Buildings 622,000
Lease improvements 707,076 381,883
Bleachers and fencing 432,200
Equipment (including equipment under capital lease) 10,460,954 6,500,354
Transportation equipment (including equipment
under capital lease) 609,097 1,465,918
Furniture and fixtures 537,230 364,906
Tooling 19,658,447 17,107,267
Total 36,834,204 25,850,328
Less accumulated depreciation and amortization (15,957,535) (13,298,322)
Net property, plant and equipment $ 20,876,669 $ 12,552,006
</TABLE>
Included in the amounts above are trucks and equipment under capital
leases with a net book value of $2,666,598 and $228,629 at December
31, 1995 and 1994, respectively.
6. NOTES RECEIVABLE
Notes receivable at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Notes receivable from a company affiliated through
common control and ownership, due on demand,
bearing interest at the prime rate, collateralized
by property and assets $ 490,000 $ 695,117
Notes receivable from customer, aggregate monthly
installments of $20,629 including interest at 7%,
commencing February 1, 1993, secured by shares
of common stock of a company 28,457 242,887
Mortgage receivable from an individual, monthly
interest payments at 8% per annum, principal due
November 15, 1998, collateralized by land, paid
in March 1996 213,944
-63-
Land contract receivable from an individual, due
in monthly installments of $650, including
interest at 9% per annum, collateralized by land,
paid in March 1996 60,000
Note receivable from a company affiliated through
common control and ownership repaid in 1995 2,138,186
Other 22,799
Total 792,401 3,098,969
Less current portion (542,401) (1,086,039)
Long-term $ 250,000 $ 2,012,930
</TABLE>
7. NOTES PAYABLE
Notes payable at December 31 consist of the following short-term credit
facilities:
<TABLE>
<CAPTION> 1995 1994
<S> <C> <C> <C>
Line of credit with a bank, interest is due monthly at
the bank's prime rate (9.0% and 8.5% at December 31,
1995 and 1994, respectively) $ 4,180,000 $ 4,500,000
Bridge notes payable to a bank, repaid in 1995 1,500,000
$ 4,180,000 $ 6,000,000
</TABLE>
CII's has a line of credit with a bank which provides for maximum
borrowings of $4,500,000, based upon eligible accounts receivable and
inventories. Remaining availability under the line of credit at December
31, 1995 was $320,000. The line of credit expires August 1, 1996.
CII also has a second line of credit with a bank which provides for maximum
borrowings of $300,000 with interest at prime plus 1-1/2% (effective rate
of 10% at December 31, 1995), of which none was outstanding at December 31,
1995.
The short-term credit facilities are with the same bank as the term note
(Note 8) and are secured by the same collateral. The weighted average
interest rate on the short-term credit facilities were 8.81% and 7.25%
in 1995 and 1994, respectively.
-64-
8. LONG-TERM OBLIGATIONS
Long-term obligations at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Term note payable to a bank, monthly principal
payments of $200,000 plus interest at the bank's
prime rate plus 1/2% (effective rate of 9% at
December 31, 1995) through November 1997 $ 4,800,000
Term note payable to a bank, repaid in 1995 $ 1,275,000
Mortgage payable to bank, interest at 9.25%,
payable in monthly installments of $52,000
through May 1998, and secured by underlying
property 1,326,825 1,808,615
Mortgage payable to a bank, interest at the bank's
prime rate plus 2% (effective rate of 10.5% at
December 31, 1995), monthly principal
payments of $50,000 plus interest, through
September 2004. Secured by underlying
property 450,000
Capital lease obligations through December 2002;
monthly installments of $41,245 including
interest at rates between 7.5% and 8.75%,
collateralized by the related machinery and
equipment (see Note 11) 2,689,007
Bridge financing from a bank for future equipment
leases, interest due monthly at the bank's prime
rate (effective rate of 8.5% at December 31,
1995) 2,087,065
Other 136,263 126,218
Total 11,489,160 3,209,833
Less current portion (5,424,455) 1,843,218)
Long-term $ 6,064,705 $ 1,366,615
</TABLE>
The term note is part of a bank loan agreement that includes CII's
short-term credit facilities (Note 7). This bank loan agreement is
guaranteed by certain stockholders of CII and collateralized by a first
priority security interest in substantially all CII's assets and by all of
CII's issued and outstanding shares of common stock and contains certain
covenants which requires CII to maintain minimum levels of net worth and
not to exceed certain debt ratios.
The bridge financing from a bank represents amounts advanced to CII for the
purchase of tooling and machinery that CII expects to refinance as capital
leases on a long-term basis.
-65-
In 1994, CII assumed the outstanding mortgage payable of approximately
$2,100,000 on CII's Owosso facility from its stockholders. The
assumption of the mortgage was treated as a distribution to the
stockholders in the 1994 financial statements.
The scheduled future repayments of long-term obligations at December 31,
1995 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 $ 5,424,455
1997 3,373,164
1998 644,040
1999 452,405
2000 469,966
Thereafter 1,125,130
Total $ 11,489,160
</TABLE>
9. ACCRUED EXPENSES
Accrued expenses at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C>
Accrued legal (Note 16) $ 349,331 $ 1,095,406
Accrued compensation for NuPar (Note 16) 900,000 1,800,000
Accrued environmental costs (Note 17) 598,717 850,000
Accrued taxes 276,619 661,230
Accrued plant closing costs (Note 15) 355,000
Other 306,407 432,775
Total $ 2,431,074 $ 5,194,411
</TABLE>
-66-
10. INCOME TAXES
Effective December 31, 1995, The Colonel's changed its tax status from a
non-taxable entity to a taxable entity. The tax provision for 1995
reflects the charge to income for the changes in The Colonel's tax status.
CII expects its future effective tax rate to approximately 37%, at 34%
statutory federal rate and 3% state tax rate, net of federal benefit. The
temporary differences at December 31, 1995 that give rise to the recorded
deferred taxes, including amounts acquired in the acquisition (Note 3) are
as follows:
<TABLE>
<CAPTION>
DEFERRED
TAX ASSET
(LIABILITY)
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 140,000
Inventory 124,300
Accrued expenses 652,700
Net operating loss carryforwards 433,000
Other 77,000
Total 1,427,000
Valuation allowance (510,000)
917,000
Deferred liability:
Depreciation (3,494,000)
Other (520,000)
(4,014,000)
Total net deferred tax liability $ (3,097,000)
</TABLE>
At December 31, 1995, CII has net operating loss carryforwards for tax
purposes as follows:
<TABLE>
<CAPTION>
EXPIRATION DATE AMOUNT
<S> <C> <C>
2004 $ 342,000
2005 599,000
2008 332,000
</TABLE>
CII has put a valuation allowance on 100% of these amounts because
management believes it is more likely than not that the net operating loss
carryforwards will not be utilized due to limitations in existing tax laws
-67-
on their use. Should such net operating losses be utilized, the effect
will be a reduction in the amount of goodwill.
11. COMMITMENTS
CII leases trucks and equipment under capital leases (see Notes 5 and 8).
CII also leases warehouse space under noncancelable operating agreements.
The warehouse leases require that CII pay the taxes, insurance and
maintenance expense related to the leased property. Minimum future lease
payments under noncancelable leases at December 31, 1995 are summarized as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C> <C>
Years ending December 31:
1996 $ 494,937 $ 1,422,300
1997 494,937 1,143,228
1998 494,937 1,041,424
1999 494,937 934,248
2000 494,937 847,854
Thereafter 989,874 4,200,000
Total 3,464,559 $ 9,589,054
Less amount representing interest 775,552
Present value of minimum lease payments 2,689,007
Less current maturities 302,279
Long-term portion of capital lease obligations $ 2,386,728
</TABLE>
Rent expense, including month to month rentals, was approximately
$1,447,000, $2,242,000 and $2,072,000 for the three years ended December
31, 1995, 1994 and 1993, respectively. Included in rent expenses are
amounts paid to the related parties of CII for rental of its principal
operating facilities (see Note 13).
CII had a ten-year employment agreement ending in 1997 with a key employee
who is related to the CII's majority stockholder. CII recorded a liability
and related deferred costs for the remaining compensation due under the
terms of the agreement based upon the net present value of such payments.
In 1995, the employee terminated the agreement and relinquished these
rights to further compensation.
CII entered into a ten-year consulting agreement beginning January 1, 1994,
with the former president of the Company. The agreement guarantees him
$52,000 per year. CII may terminate this agreement, but is obligated to
pay the remaining compensation due under the terms of the agreement. CII
-68-
recorded a liability and related deferred costs for the remaining
compensation due under the terms of the agreement based upon the net
present value of such payments. The deferred cost amount is being
amortized to operations over the term of the agreement.
12. STOCK OPTIONS
CII has an incentive stock option plan that provides for up to
3,000,000 shares of common stock options to key employees, executive
officers and outside directors, and also permits the grant or award
of restricted stock, stock appreciation rights or stock awards.
There have been no issuances under this plan.
13. RELATED PARTY TRANSACTIONS
The primary parties related to the Company are as follows:
- The majority stockholders, with whom various transactions are made,
including payment of monthly rent for the Owosso facility through
March 1994;
- 620 Platt Road, Inc. ("Platt"), a company affiliated through common
ownership, to which rental payments are made for the Milan facility;
- The Colonel's Factory Outlet of Arkansas, Inc. ("Arkansas"), a
company affiliated through common ownership, with which various
transactions are made, including sales and purchases of inventory,
and payment for and reimbursement of Arkansas' expenses; and
- Blain Buick - GMC, Inc. ("Blain"), a company affiliated through
common ownership, from which automobiles, parts, and service are
purchased, and rental income is earned.
-69-
A summary of transactions with these related parties is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C>
Majority Stockholder:
Short-term advances to stockholders $ 5,162,753 $ 13,802,190 $ 8,040,744
Cash payments on short-term advances (500) (11,992,143) (206,471)
Reduction of note receivable 1,482,024 3,000,000 1,500,000
Assumption of land contract receivable (213,944)
Assumption of mortgage 2,117,124
Stockholder distributions 6,430,333 6,927,171 9,334,273
Rental expense 280,000 840,000
Platt - rental expense 840,000 840,000 490,000
Arkansas:
Sales of inventory 346,000 309,500 568,300
Purchases of inventory 744,600 224,300 300,400
Inventory in satisfaction of note receivable 425,976
Property, plant and equipment in
satisfaction of note receivable 473,477
Cash in satisfaction of note receivable 1,000,000
Blain:
Purchases of automobiles, parts and
service 73,500 147,000 52,000
Rental income 11,000 12,000 12,000
Interest income on note receivable 43,400 48,000 52,000
</TABLE>
14. PLANT FIRE
In 1993, CII's leased facility in Owosso, Michigan which included its
headquarters, sales offices and the principal manufacturing and warehouse
facilities, was destroyed by a fire. The fire caused a complete loss of
the approximate 280,000 square foot facility and damaged inventory,
equipment and other contents therein. In late 1993, CII relocated its
principal operations and headquarters to Milan, Michigan and is leasing a
350,000 square foot facility from a company owned by certain stockholders
of CII.
In 1994, CII finalized negotiations with its insurance carrier for
amounts to be received on all coverages in effect at the date of the fire.
Total insurance proceeds received for the replacement cost of lost
property, lost profits and other direct costs of the fire were
approximately $31,000,000, of which approximately $6,630,000 was due
-70-
to a stockholder as indemnification of damages to the Owosso facility.
CII has recognized in other income a net gain of approximately $9,082,000
and $9,043,000 in 1994 and 1993, respectively, which represents the amount
by which CII's insurance proceeds of $24,381,000 exceeded the sum of the
net book value of the assets destroyed and the liabilities resulting from
the fire.
15. PLANT CLOSING
In 1994, CII ceased operations and took the steps necessary to close its
Florida facility. At December 31, 1994, CII accrued estimated costs
required to close the facility. Such costs include approximately
$1,034,000 for the write down of assets to their net realizable value of
$350,000 and $355,000 for costs of the storage, dismantling and disposing
of the equipment, and other related expenses. Assets held at the facility
that are not expected to be transferred to the Milan facility have been
classified as short-term assets held for sale. At December 31, 1995,
approximately $75,000 of such assets remain.
16. LITIGATION
In connection with the acquisition of a facility in Florida (known as
"NuPar"), CII signed employment agreements with the former NuPar
stockholders for the three year period beginning December 1991. In
1994, the former NuPar stockholders filed a lawsuit against CII for
$1,800,000 claiming they had met the conditions of the agreements and
are therefore entitled to the payments thereunder. In July 1995, CII
settled these actions for $1.4 million, payable in installments through
January 1997, and has accrued for remaining compensation of $900,000 at
December 31, 1995.
A suit was filed against CII in 1992 claiming CII violated anti-trust
laws and alleging that CII has engaged in predatory pricing,
monopolization and anti-competitive acquisitions. Discovery has
narrowed the plaintiffs' theories of recoveries and the allegedly
offending predatorily priced sales at issue to only two bumper models
of which fewer than 2,000 parts were sold during the relevant period.
CII has offered to settle this dispute for $160,000. CII has accrued
its best estimate of the cost of litigation based on known facts. It
is possible that this estimate may change in the near term as the
lawsuit progresses. Although the final resolution of any such matters
could have a material effect on CII's operating results for the
particular reporting period in which an adjustment of the estimated
liability is recorded, CII believes that any resulting liability
should not materially affects its financial position.
The outside designer and installer of the automated paint line system
for the CII's Milan, Michigan facility abandoned the project before it
was completed, leaving his suppliers and subcontractors owed more than
-71-
CII owed to the installer under the sales contract if he had finished it.
CII arranged with third parties to have the installation completed. CII
bypassed the contractor and settled directly with all of the 14 unpaid
subcontractors for $270,000 and a release of all liens. CII still has
a damage claim against the main contractor.
CII is involved in various other legal proceedings which have arisen in
the normal course of its operations. CII has accrued its best estimate
of the cost of litigation based on known facts. It is possible that this
estimate may change in the near term as the lawsuits progress. Although
the final resolution of any such matters could have a material effect on
CII's operating results for the particular reporting period in which an
adjustment of the estimated liability is recorded, CII believes that any
resulting liability should not materially affects its financial position.
17. ENVIRONMENTAL REMEDIATION
CII is responsible for the remediation of hazardous materials and ground
contamination located at the Owosso facility as a result of the fire (see
Note 14). In August 1993, the Michigan Department of Natural Resources
required that CII perform a complete hydrogeological study of this site to
determine the extent of the contamination. CII plans to engage
environmental consultants in the summer of 1996 to determine the extent
of the hazardous materials located at this site, if any, and the cost of
any remediation. CII has accrued its best estimate of the cost of
remediation based on known facts. It is possible that this estimate may
change in the near term as the project progresses. Although the final
resolution of any such matters could have a material effect on CII's
operating results for the particular reporting period in which an
adjustment of the estimated liability is recorded, CII believes that
any resulting liability should not materially affects its financial
position.
As part of the lease agreement with a related party for the Milan,
Michigan facility, CII is also responsible for the remediation of
hazardous material, up to an amount of $2,000,000, which existed at
this site prior to CII entering into the lease in June 1993. CII has
accrued for estimated remediation costs based on an environmental study
of the site. CII has accrued its best estimate of the cost of
remediation based on known facts. It is possible that this estimate
may change in the near term as the project progresses. Although the
final resolution of any such matters could have a material effect on
CII's operating results for the particular reporting period in which
an adjustment of the estimated liability is recorded, CII believes that
any resulting liability should not materially affects its financial
position.
-72-
18. PROFORMA EARNINGS PER SHARE (UNAUDITED)
The following unaudited proforma earnings per share has been derived
from the income statement of CII for the year ended December 31, 1995,
adjusted to give effect to the change in tax status of The Colonel's
as if such change had occurred at the beginning of the period.
<TABLE>
<CAPTION>
<S> <C> <C>
Net income before taxes $ 4,195,474
Proforma revision for income taxes 1,470,000
Proforma net income $ 2,725,474
Proforma earnings per share $ 0.11
Proforma weighted average common shares $24,177,830
</TABLE>
* * * * * *
-73-
EXHIBIT
NUMBER EXHIBIT INDEX
2.1 Agreement and Plan of Merger between The Colonel's, Inc. and
Brainerd Merger Corporation and joined in by Brainerd
International, Inc. Incorporated by reference from Exhibit
A to the Proxy Statement of Brainerd International, Inc. for
the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
2.2 Agreement and Plan of Reorganization among Brainerd
International, Inc. and The Colonel's Holdings, Inc.
Incorporated by reference from Exhibit D to the Proxy
Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held
on November 21, 1995.
3.1 Articles of Incorporation of the Company, as amended.
Incorporated by reference from Exhibit E to the Proxy
Statement of Brainerd International, Inc. for the Annual
Meeting of Shareholders of Brainerd International, Inc. held
on November 21, 1995.
3.2 Certificate of Amendment to the Articles of Incorporation
changing name from "The Colonel's Holdings, Inc." to "The
Colonel's International, Inc."
3.3 Bylaws of the Company. Incorporated by reference from
Exhibit F to the Proxy Statement of Brainerd International,
Inc. for the Annual Meeting of Shareholders of Brainerd
International, Inc. held on November 21, 1995.
4.1 Articles of Incorporation. See Exhibit 3(a) above.
10.1 The Company's 1995 Long-Term Incentive Plan. Incorporated
by reference from Exhibit G to the Proxy Statement of
Brainerd International, Inc. for the Annual Meeting of
Shareholders of Brainerd International, Inc. held on
November 21, 1995.
10.2 Incentive Stock Option Plan. Incorporated by reference from
the Annual Report on Form 10-K of Brainerd International
Inc. for the fiscal year ended December 31, 1987.
10.3 Form of Non-Statutory Stock Option Agreement used under the
Incentive Stock Option Plan. Incorporated by reference from
the Annual Report on Form 10-K of Brainerd International
Inc. for the fiscal year ended December 31, 1987.
-74-
10.4 Form of Incentive Stock Option Agreement used under the
Incentive Stock Option Plan. Incorporated by reference from
the Annual Report on Form 10-K of Brainerd International
Inc. for the fiscal year ended December 31, 1987.
10.5 Office Lease Agreement dated January 23, 1991 between
Brainerd International, Inc. and Woodland Office Partnership.
Incorporated by reference from the Annual Report on Form 10-K of
Brainerd International Inc. for the fiscal year ended
December 31, 1990.
10.6 Amendment dated December 11-12, 1991 to Office Lease
Agreement (see Exhibit 10(e) above) between Brainerd
International, Inc. and Woodland Office Partnership.
Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1991.
10.7 $404,700 Promissory Note dated January 1, 1992, from
Brainerd International, Inc. payable to Gene Snow and James
W. Littlejohn. Incorporated by reference from Brainerd
International, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10.8 Lease Agreement between Issuer and National Hot Rod
Association, Inc. consisting of March 17, 1984 Lease
Agreement; April 28, 1986 letter extending term to 1991;
March 12, 1987 Letter of Amendment; and April 7, 1992 letter
extending term to 1996 and amending agreement. Incorporated
by reference from Brainerd International, Inc.'s
Registration Statement on Form S-1 (Registration No. 33-055876).
10.9 November 8, 1988 Sponsorship Agreement between Champion Auto
Stores, Inc. and National Hot Rod Association, Inc.
Incorporated by reference from Brainerd International,
Inc.'s Registration Statement on Form S-1 (Registration No.
33-055876).
10.10 June 22, 1992 Title Rights Sponsorship Agreement
between Champion Auto Stores, Inc. and National Hot Rod
Association, Inc. Incorporated by reference from
Brainerd International, Inc.'s Registration Statement
on Form S-1 (Registration No. 33-055876).
10.11 February 16, 1994 Loan Agreement with American National
Bank of Brainerd; $550,000 Promissory Note; and
$300,000 Line of Credit Note. Incorporated by reference
from Brainerd International, Inc.'s Annual Report on
Form 10-KSB for the fiscal year ended December 31,
1993.
-75-
10.12 December 21, 1993 Agreement among Issuer, Motor
Stadium, Inc. and Gene M. Snow providing for
termination of March 23, 1993 Financing Agreement,
dissolution of Motor Sports Stadium, Inc. and grant of
interest by Mr. Snow in potential future project.
Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1993.
10.13 Amendment dated February 1, 1994 to Office Lease
Agreement (See Exhibits 10(e) and 10(f)). Incorporated
by reference from Brainerd International, Inc.'s Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 1993.
10.14 September 1994 Stock Purchase Agreement among Gene M.
Snow, James W. Littlejohn and Donald J. Williamson.
Incorporated by reference from Brainerd International,
Inc.'s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1993.
10.15 December 1994 Letter of Intent between Issuer and The
Colonel's, Inc. Incorporated by reference from Brainerd
International, Inc.'s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1993.
10.16 Addendum to Lease dated December 16, 1994 (See Exhibits
10(e), 10(f) and 10(m)). Incorporated by reference
from Brainerd International, Inc.'s Annual Report on
Form 10-KSB for the fiscal year ended December 31,
1993.
10.17 Variable Rate-Installment Note ($6,000,000) between The
Colonel's and Comerica Bank dated April 14, 1995.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.18 Master Revolving Note ($4,500,000) between The
Colonel's and Comerica Bank dated May 1, 1995.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.19 Security Agreement between The Colonel's and Comerica
Bank (f/k/a Manufacturers National Bank of Detroit)
dated December 4, 1991. Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
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10.20 Amended and Restated Security Agreement between The
Colonel's and Comerica Bank (f/k/a Manufacturers
National Bank of Detroit) dated December 4, 1991.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.21 Amended and Restated Guaranty between Donald and Patsy
Williamson and Comerica Bank dated October 8, 1992.
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.22 Lease Agreement between 620 Platt Road, Inc. and The
Colonel's dated June 18, 1993 (for Milan, Michigan
manufacturing facility). Incorporated by reference
from Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.23 First Amendment to Lease Agreement between 620 Platt
Road, L.L.C. (f/k/a 620 Platt Road, Inc.) and The
Colonel's dated June 16, 1995. Incorporated by
reference from Amendment No. 1 to Brainerd
International, Inc.'s Registration Statement on
Form S-4 (Registration No. 33-91374).
10.24 Industrial/Warehouse Lease between JMB/Warehouse
Associates Limited Partnership and The Colonel's dated
August 1, 1993 (for Houston, Texas warehouse
distribution facility). Incorporated by reference from
Amendment No. 1 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.25 Lease Agreement between Industrial Properties
Corporation and The Colonel's dated September 15, 1992
(for Dallas, Texas warehouse distribution facility).
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
10.26 Standard Industrial Lease between Revco D.S., Inc. and
The Colonel's dated February 5, 1993 (for Phoenix
(Glendale), Arizona warehouse distribution facility).
Incorporated by reference from Amendment No. 1 to
Brainerd International, Inc.'s Registration Statement
on Form S-4 (Registration No. 33-91374).
-77-
10.27 Interim Equipment Lease Schedule ($2,729,370) between
The Colonel's and Comerica Leasing Corporation dated
July 27, 1995. Incorporated by reference from
Amendment No. 2 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.28 Interim Equipment Lease Schedule ($2,044,000) between
The Colonel's and Comerica Leasing Corporation dated
July 27, 1995. Incorporated by reference from
Amendment No. 2 to Brainerd International, Inc.'s
Registration Statement on Form S-4 (Registration No.
33-91374).
10.29 Interim Equipment Lease Schedule ($383,468) between The
Colonel's and Comerica Leasing Corporation dated July
27, 1995. Incorporated by reference from Amendment No.
2 to Brainerd International, Inc.'s Registration
Statement on Form S-4 (Registration No. 33-91374).
10.30 Lease Schedule ($3,464,557) between The Colonel's, Inc. and
Comerica Leasing Corporation dated December 27, 1995.
10.31 Interim Lease Schedule ($960,000) between The Colonel's,
Inc. and Comerica Leasing Corporation dated December 27,
1995.
10.32 Interim Lease Schedule ($542,811) between The Colonel's,
Inc. and Comerica Leasing Corporation dated December 27,
1995.
10.33 Interim Lease Schedule ($85,800) between The Colonel's, Inc.
and Comerica Leasing Corporation dated January 26, 1996.
10.34 Interim Lease Schedule ($52,556) between The Colonel's, Inc.
and Comerica Leasing Corporation dated February 16, 1996.
10.35 Interim Lease Schedule ($584,250) between The Colonel's,
Inc. and Comerica Leasing Corporation dated December 27, 1995.
10.36 Interim Lease Schedule ($364,650) between The Colonel's,
Inc. and Comerica Leasing Corporation dated January 26, 1996.
10.37 Interim Lease Schedule ($178,200) between The Colonel's,
Inc. and Comerica Leasing Corporation dated February 16, 1996.
11.1 Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
-78-
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
-79-
EXHIBIT 3.2
MICHIGAN DEPARTMENT OF COMMERCE
CORPORATION AND SECURITIES BUREAU
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
PURSUANT TO THE PROVISIONS OF ACT 284, PUBLIC ACTS OF 1972
(PROFIT CORPORATIONS), OR ACT 162, PUBLIC ACTS OF 1982 (NONPROFIT
CORPORATIONS), THE UNDERSIGNED CORPORATION EXECUTES THE FOLLOWING
CERTIFICATE:
1. The present name of the corporation is: The Colonel's Holdings, Inc.
2. The identification number assigned by the Bureau is: 344-630
2. The location of the registered office is:
620 SOUTH PLATT ROAD, MILAN, MICHIGAN 48160
(Street Address) (City) (Zip Code)
4. Article I of the Articles of Incorporation is hereby amended to
read as follows:
The name of the corporation is The Colonel's International, Inc.
5. The foregoing amendment to the Articles of Incorporation was duly
adopted on the 21st day of November, 1995. The amendment was duly
adopted by the written consent of all the shareholders or members
entitled to vote in accordance with Section 407(3) of the Act if a
nonprofit corporation, or Section 407(2) of the Act if a profit
corporation.
Signed this 30th day of November, 1995.
By /S/ DONALD J. WILLIAMSON
(Only Signature of President,
Vice-President, Chairperson or
Vice-Chairperson)
DONALD J. WILLIAMSON, PRESIDENT
(Type or Print Name) (Type or Print Title)
EXHIBIT 10.30
Lease Agreement No. 2885
Dated: December 27, 1995 Schedule No. 013
COMERICA LEASING CORPORATION
LEASE SCHEDULE
1. DESCRIPTION OF LEASE: Lease Agreement dated December 31, 1993, by and
between COMERICA LEASING CORPORATION (herein "CLC") as Lessor, and THE
COLONEL'S, INC. as Lessee (herein called "Lease Agreement").
2. DESCRIPTION OF EQUIPMENT: (Describe equipment fully, including make,
kind of unit, serial numbers, and other pertinent information which is
herein called "Equipment"):
Equipment as further described on attached Exhibit "A".
3. LOCATION: The equipment described above shall be located at 951 Aiken
Rd, Owosso, MI 49224.
4. TERM; RENTAL: The Term of the Lease Agreement for the Equipment
described in this Schedule shall be in accordance with the provisions of
the Lease Agreement and shall continue until all rental payments are fully
paid. Lessee agrees to pay CLC as rental payments aggregating
$3,464,557.32 plus any applicable sales and/or use taxes thereon payable in
84 monthly payments of $41,244.73 each, plus any applicable sales and/or
use taxes commencing January 30, 1996, and on the 30th calendar day of each
succeeding like period until fully paid. THE RENTAL PAYMENTS SHALL BE
REMITTED TO CLC AT P.O. DRAWER 67-042, DETROIT, MICHIGAN 48267, unless CLC
specifies otherwise in writing.
5. INSURANCE: Lessee agrees to maintain adequate property damage
insurance in accordance with the terms of the Lease Agreement, but in any
event not less than the sum of the payments due, protecting CLC as a loss
payee. The minimum amount indicated above shall not be construed to imply
such amount will be or is adequate, but rather as a minimum amount.
6. UCC 2A: In accordance with Section 2A of the Michigan Uniform
Commercial Code (MCLA Section 440.3101 et seq.) ("UCC") Lessee acknowledges
either (a) that lessee has reviewed and approved any written Supply
Contract (as defined by UCC Section 2A-103(i)(y)) covering the Equipment
purchased from the "Supplier" (as defined by UCC Section 2A-103(i)(x))
thereof for lease to Lessee or (b) that Lessor has informed or advised
Lessee, in writing, either previously or by this Lease Schedule of the
following: (i) the identity of the supplier; (ii) that the Lessee may have
rights under the Supply Contract; and (iii) that the Lessee may contact the
Supplier for a description of any such rights Lessee may have under the
Supply Contract.
Lessee acknowledges that Lessee has reviewed and approved the Purchase
Order, Supply Contract or Purchase Agreement covering the Equipment
purchased from the seller or supplier thereof for lease to Lessee.
Lessee's Initials: _____
7. ADDITIONAL CONDITIONS: At the end of the Lease term, Lessee may
purchase the equipment for $1.00 provided no event of default shall have
occurred and been left unremedied.
The foregoing is hereby approved and agreed to by the undersigned as a
Schedule to and a part of the Lease Agreement, the provisions of which are
hereby incorporated herein by reference and which shall govern,
notwithstanding anything contrary or inconsistent herein.
COMERICA LEASING CORPORATION THE COLONEL'S. INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
-2-
Lease Agreement No. 2885
Dated: December 27, 1995 Schedule No. 013
<TABLE>
COMERICA LEASING CORPORATION
"EXHIBIT A"
Equipment as fully described below:
<CAPTION>
SERIAL NUMBER
<S> <C> <C>
ONE (1) HPM 6.0" MODEL TM111 EXTRUDER INCLUDING: 95211
EXTRUSION LINES N/A
DIES N/A
FORMING LINES N/A
SCREEN CHANGERS N/A
TOOLING N/A
SHEET LINE SYSTEM 95213
OMART SHEET THICKNESS GAUGE 95221
SUPPLEMENTAL DIP TANK N/A
SHEAR 95215
STACKER 95217
SHEET DIE AND STAND 195007
KENICS MIXER 195008
PROCESS CONTROL HPM EPM-11 ALLEN BRADLEY CONTROL SYSTEM 95223
ADAPTOR 195009
TRAINING, SETUP, FREIGHT, RIGGING, AND INSTALLATION 95219
ALL ELECTRICAL, AIR, AND WATER HOOKUPS, AND ALL ACCESSORIES
AND ATTACHMENTS THERETO.
ONE(1) NELMOR S10045 SHREDDER/NELMORE G2056 GRANULATOR 951036961
COMBINATION CONVEYOR SYSTEM INCLUDING: N/A
INFEED CONVEYOR WITH METAL DETECTOR N/A
FAN EVACUATION SYSTEM N/A
EXTRA SET OF SCREENS N/A
ROTOR, BED KNIVES N/A
AND ALL ACCESSORIES AND ATTACHMENTS THERETO.
TWO (2) BROWN R-224-E ROTARY THERMOFORMERS INCLUDING: 13052
13053
TRAINING, SETUP, FREIGHT, RIGGING, AND INSTALLATION N/A
ALL ELECTRICAL, AIR, AND WATER HOOKUPS, AND ALL ACCESSORIES
AND ATTACHMENTS THERETO
-3-
FIVE (5) IMCS SILOS, MODEL #40-6239 AND ALL ACCESSORIES
AND ATTACHMENTS INCLUDING: N/A
ONE (1) LADDER AND SAFETY CAGE, MODEL #40-6063 N/A
FIVE (5) 4" AIR FILL KITS, MODEL #40-6065 N/A
FORTY-FIVE (45) TIERS OF 4" FILL TUBE, MODEL #40-0023 N/A
FOUR (4) 24" LONG CROSSWALKS WITH RAILING, MODEL #40-5098 N/A
FIVE (5) SLIDE GATE AND TRANSITIONS, MODEL #50-5000 N/A
FIVE (5) VACUUM BOXES, MODEL #50-5050 N/A
TEN (10) 2 1/2" OUTLETS, MODEL #50-5004 N/A
TEN (10) ROTARY LEVEL CONTROLS, MODEL #40-0022 N/A
FIVE (5) ROTARY CONTROL MTG. FLANGE, MODEL #40-5017 N/A
FIVE (5) ROTARY CONTROL MTG. FLANGE, MODEL #40-5054 N/A
</TABLE>
-4-
Lease Agreement No. 2885
Dated: December 27, 1995 Schedule No. 013
<TABLE>
COMERICA LEASING CORPORATION
"EXHIBIT A"
Equipment as fully described below:
<CAPTION>
SERIAL NUMBER
<S> <C> <C>
ONE (1) HIGH-LOW CONTROL ALARM BOX, MODEL #40-4004 N/A
FOUR (4) CONTROL BOX ADDITIONS, MODEL #40-4005 N/A
FIVE (5) REEL & BOBBER LEVEL INDICATORS, MODEL #40-4001 N/A
ONE (1) REEL & BOBBER CONTROL PANEL, MODEL #40-0020 N/A
ONE (1) H&W SYSTEMS ADVANTAGE PROCESS COOLING SYSTEM
INCLUDING:
ONE (1) 135 TON COOLING TOWER 29976
ONE (1) 135 TON WATER PUMP/RECIRCULATION SYSTEM 25872
ONE (1) 45 TON COOLING TOWER 26887
ONE (1) 45 TON WATER PUMP/RECIRCULATION SYSTEM 25875
THIRTY (30) CADET MODEL ADVANTAGE TEMPERATURE CONTROLLERS 25972
WITH FIVE (5) ZONES EACH 25973
25974
25975
25976
25977
TWO (2) HOLDING TANKS N/A
AND ALL PLUMBING, ELECTRICAL, AND ALL ACCESSORIES AND
ATTACHMENTS.
</TABLE>
Agreed and Accepted:
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
-5-
COMERICA LEASING CORPORATION
DELIVERY AND ACCEPTANCE CERTIFICATE
TO: COMERICA LEASING CORPORATION
RE: Lease Agreement Number 2885 dated as of December 21, 1993 between
COMERICA LEASING CORPORATION, Lessor, and the undersigned Lessee
The undersigned hereby certifies that all of the goods, chattels and
equipment ("Equipment") described in the Schedule Number 013 to that
certain lease referenced above have been furnished to the undersigned at
the location designated in said Schedule, that delivery and installation of
the Equipment have been inspected and accepted by the undersigned as
satisfactory as of the date set forth below.
The undersigned understands that Lessor is relying on this certificate in
its purchase of the Equipment and, to induce Lessor to purchase the
Equipment, the undersigned agrees to settle all claims, set-offs and
counterclaims it may have with the vendor or vendors of the Equipment
directly with such vendor or vendors and will not set-off any thereof
against Lessor; and the undersigned further understands and agrees that the
undersigned's obligations to Lessor under the Lease are absolute, that
Lessor is neither the manufacturer, distributor nor seller of the Equipment
and LESSOR HAS NOT MADE, NOR DOES IT MAKE, ANY REPRESENTATION OR WARRANTY
OR AGREEMENT WITH RESPECT TO THE FITNESS, MERCHANTABILITY, CONDITION,
QUALITY, DURABILITY OR SUITABILITY OF THE EQUIPMENT IN ANY RESPECT
INCLUDING ITS FITNESS FOR THE PURPOSE AND USES OF LESSEE. The undersigned
hereby acknowledges that it has reviewed and approved the Purchase Order,
Supply Contract or Purchase Agreement covering the Equipment purchased from
the vendor(s) or supplier(s) thereof for lease to the undersigned.
Dated: December 27, 1995
THE COLONEL'S, INC.
(Lessee)
By: /S/ RICHARD SCHOENFELDT
Richard Schoenfeldt
Its: Controller
-6-
December 27, 1995
Craig Hegstrom
Cambridge Underwriters, LTD.
15415 Middlebelt Road
Livonia, MI 48154
Phone Number: (313) 525-0927
RE: PHYSICAL DAMAGE INSURANCE
POLICY #35338463
COMPANY: FEDERAL INSURANCE COMPANY
EXPIRATION: OCTOBER 1, 1996
Dear Sir/Madam:
The undersigned is presently leasing the following equipment from Comerica
Leasing Corporation:
Equipment as further described on Exhibit "A"
Cost: $2,689,007.19
We hereby authorize and request that our policies be amended and that
Certificates of Insurance be issued showing Comerica Leasing Corporation as
loss payee for physical damage risks. We also request that 30-day notice
to Comerica Leasing Corporation of cancellation be noted and provided in
the certificates.
Please forward certificates to:
COMERICA LEASING CORPORATION
29201 Telegraph, 2nd Floor
Southfield, MI 48034
We appreciate your cooperation and request this matter be handled
expeditiously.
Very truly yours,
THE COLONEL'S, INC.
By: /S/ RICHARD SCHOENFELDT
Richard Schoenfeldt, Controller
-7-
EXHIBIT 10.31
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 001H THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, herein ("CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
One (1) HPM 6.0" Model TM111 Extruder, Serial No. 95212, including;
extrusion lines, dies, forming lines, screen changers, tooling, sheet
line system, omart sheet thickness gauge, supplemental dip tank,
process control HPM EPM-11 Allen Bradley, training, setup, freight,
rigging, and installation, all electrical, air, and water hookups, and
all accessories and attachments thereto.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, Michigan 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set for the below in subsection
a, b, and c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
rights, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of Nine Hundred Sixty Thousand and 00/100
Dollars ($960,000.00) (herein called "Funded Amount"), at the per annum
rate of the prime rate (currently 8.50%) of Comerica Bank, as determined
from time to time, commencing on December 27, 1995, until the expiration or
termination of this Schedule. Interest shall be computed on a daily basis
using a year of 360 days, and in such computation, effect shall be given to
any change in the interest rate resulting from a change in said prime rate
on the date of such change in said prime rate. The first rental shall be
January 30, 1996, with subsequent rental payments due on the 30th of each
succeeding month until the termination of this INTERIM LEASE SCHEDULE. If
any part of the above described rental payments shall not be paid when due,
Lessee shall pay to CLC, in addition to the rental payments due, a sum
equal to five percent (5%) of the said delinquent rental amounts for each
month or portion thereof for which said rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify
and to hold CLC harmless from any damages, claims or loss of any kind,
relative to this Schedule. CLC and Lessee agree that this Schedule and
CLC's commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and in witness thereof hereby executes this Interim Lease Schedule,
this 27th day of December, 1995.
ACCEPTED:
Date: December 27, 1995 Dated: December 27, 1995
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address
29201 Telegraph Road, 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
December 27, 1995
Craig Hegstrom
Cambridge Underwriters, LTD.
15415 Middlebelt Road
Livonia, MI 48154
Phone Number: (313) 525-0927
RE: PHYSICAL DAMAGE INSURANCE
POLICY #35338463
COMPANY: FEDERAL INSURANCE COMPANY
EXPIRATION: OCTOBER 1, 1996
Dear Sir/Madam:
The undersigned is presently leasing the following equipment from Comerica
Leasing Corporation:
One (1) HPM 6.0" Model TM111 Extruder, Serial No. 95212, including;
extrusion lines, dies, forming lines, screen changers, tooling, sheet
line system, omart sheet thickness gauge, supplemental dip tank,
process control HPM EPM-11 Allen Bradley, training, setup, freight,
rigging, and installation, all electrical, air, and water hookups, and
all accessories and attachments thereto.
Cost: $1,364,685.00
We hereby authorize and request that our policies be amended and that
Certificates of Insurance be issued showing Comerica Leasing Corporation as
loss payee for physical damage risks. We also request that 30-day notice
to Comerica Leasing Corporation of cancellation be noted and provided in
the certificates.
Please forward certificates to:
COMERICA LEASING CORPORATION
29201 Telegraph, 2nd Floor
Southfield, MI 48034
We appreciate your cooperation and request this matter be handled
expeditiously.
Very truly yours,
THE COLONEL'S, INC.
By: /S/ RICHARD SCHOENFELDT
Richard Schoenfeldt, Controller
-4-
EXHIBIT 10.32
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 001A THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, herein ("CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
Equipment as further described on attached Exhibit A.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, Michigan 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set for the below in subsection
a, b, and c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
rights, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of Five Hundred Forty-Two Thousand Eight
Hundred Eleven and 29/100 Dollars ($542,811.29) (herein called "Funded
Amount"), at the per annum rate of the prime rate (currently 8.50%) of
Comerica Bank, as determined from time to time, commencing on December 27,
1995, until the expiration or termination of this Schedule. Interest shall
be computed on a daily basis using a year of 360 days, and in such
computation, effect shall be given to any change in the interest rate
resulting from a change in said prime rate on the date of such change in
said prime rate. The first rental shall be January 30, 1996, with
subsequent rental payments due on the 30th of each succeeding month until
the termination of this INTERIM LEASE SCHEDULE. If any part of the above
described rental payments shall not be paid when due, Lessee shall pay to
CLC, in addition to the rental payments due, a sum equal to five percent
(5%) of the said delinquent rental amounts for each month or portion
thereof for which said rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify
and to hold CLC harmless from any damages, claims or loss of any kind,
relative to this Schedule. CLC and Lessee agree that this Schedule and
CLC's commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and in witness thereof hereby executes this Interim Lease Schedule,
this 27th day of December, 1995.
ACCEPTED:
Date: December 27, 1995 Dated: December 27, 1995
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address
29201 Telegraph Road, 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
December 27, 1995
Craig Hegstrom
Cambridge Underwriters, LTD.
15415 Middlebelt Road
Livonia, MI 48154
Phone Number: (313) 525-0927
RE: PHYSICAL DAMAGE INSURANCE
POLICY #35338463
COMPANY: FEDERAL INSURANCE COMPANY
EXPIRATION: OCTOBER 1, 1996
Dear Sir/Madam:
The undersigned is presently leasing the following equipment from Comerica
Leasing Corporation:
Equipment as further described on attached Exhibit "A"
Cost: $966,488.35
We hereby authorize and request that our policies be amended and that
Certificates of Insurance be issued showing Comerica Leasing Corporation as
loss payee for physical damage risks. We also request that 30-day notice
to Comerica Leasing Corporation of cancellation be noted and provided in
the certificates.
Please forward certificates to:
COMERICA LEASING CORPORATION
29201 Telegraph, 2nd Floor
Southfield, MI 48034
We appreciate your cooperation and request this matter be handled
expeditiously.
Very truly yours,
THE COLONEL'S, INC.
By: /S/ RICHARD SCHOENFELDT
Richard Schoenfeldt, Controller
-4-
Lease Agreement No. 2885
Dated: December 27, 1995 Schedule No. 001A
COMERICA LEASING CORPORATION
"EXHIBIT A"
Equipment as fully described below:
One (1) Busch Quadruplex Central Vacuum System and all accessories and
attachments including;
Four (4) Busch 25 HP Vacuum Pumps, Model #RC0630
One (1) 400 Gallon Electrical Control Panel
One (1) 8" Vacuum Header with Multiple Lines
One (1) Gardner Denver Refrigerated Air Dryer
One (1) 5 Micron Prefilter
One (1) Automatic Drain
One (1) Conair 10HP Vacuum Pump System and
One (1) Conair Dust Collector System and all accessories and
attachments including attachments for six (6) Thermoformers
One (1) AEC, Inc. Flexible Hose and Tube Conveyor System, including;
One (1) 20 HP TEFC, 6PSI Capacity Motor
One (1) 4" Flexible Hose and Tube
One (1) NEMA-12 Control Enclosure System
One (1) Rotary Valve, Drop-Thru
Two (2) 30 cubic foot full capacity 16" flanged cones
Thirty (30) tubes of various size
One (1) 1/2 HP TEFC Gear Motor; and all accessories and attachments
One (1) Square-D Central Switch Gear & Electrical Circuit Panels and
Breakers, Model #59980C
Cabinet #1-1 Serial #D226966
Cabinet #1-2 Serial #D226965
Cabinet #1-3 Serial #D226963
Cabinet #1-4 Serial #D71350
Cabinet #2-1 Serial #D226960
Cabinet #2-2 Serial #D226961
Cabinet #2-3 Serial #D226962
Cabinet #2-4 Serial #D71351
Cabinet #3-1 Serial #D226968
Cabinet #3-2 Serial #D226964
Cabinet #3-3 Serial #D226825
Cabinet #3-4 Serial #D226826
Cabinet #3-5 Serial #D226870
Cabinet #4-1 Serial #D226827
Cabinet #4-2 Serial #D226868
Cabinet #4-3 Serial #D71103
Cabinet #4-4 Serial #D226869
Cabinet #4-5 Serial #D226824
-5-
One (1) Load Center - Main Cut Off, Switch #17-05999880A
Two (2) Transformers, Serial Nos. 17-05998811A, and 44036-325-50; and
all accessories and attachments
Agreed and Accepted:
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
-6-
EXHIBIT 10.33
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 002A THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
Equipment as further described on attached Exhibit A.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
a, b & c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of Eighty-Five Thousand Eight Hundred and
00/100 Dollars ($85,800.00) (herein called "Funded Amount"), at the per
annum rate of the prime rate (currently 8.50%) of Comerica Bank, as
determined from time to time, commencing on January 26, 1996, until the
expiration or termination of this Schedule. Interest shall be computed on
a daily basis using a year of 360 days, and in such computation, effect
shall be given to any change in the interest rate resulting from a change
in said prime rate on the date of such change in said prime rate. The
first rental shall be due February 29, 1996, with subsequent rental
payments due on the 30th of each succeeding month until the termination of
this INTERIM LEASE SCHEDULE. If any part of the above described rental
payments shall not be paid when due, Lessee shall pay to CLC, in addition
to the rental payments due, a sum equal to five percent (5%) of the said
delinquent rental amounts for each month or portion thereof for which said
rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify and
to hold CLC harmless from any damages, claims or loss of any kind, relative
to this Schedule. CLC and Lessee agree that this Schedule and CLC's
commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and in witness thereof hereby executes this Interim Lease Schedule,
this 26th day of January, 1996.
ACCEPTED:
Date: January 26, 1996 Date: January 26, 1996
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
EXHIBIT 10.34
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 003A THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
Equipment as further described on attached Exhibit A,
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
a, b & c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of Fifty-Two Thousand Five Hundred Fifty-Six
and 46/100 Dollars ($52,556.46) (herein called "Funded Amount"), at the
per annum rate of the prime rate (currently 8.25%) of Comerica Bank, as
determined from time to time, commencing on January 26, 1996, until the
expiration or termination of this Schedule. Interest shall be computed on
a daily basis using a year of 360 days, and in such computation, effect
shall be given to any change in the interest rate resulting from a change
in said prime rate on the date of such change in said prime rate. The
first rental shall be due February 29, 1996, with subsequent rental
payments due on the 30th of each succeeding month until the termination of
this INTERIM LEASE SCHEDULE. If any part of the above described rental
payments shall not be paid when due, Lessee shall pay to CLC, in addition
to the rental payments due, a sum equal to five percent (5%) of the said
delinquent rental amounts for each month or portion thereof for which said
rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify and
to hold CLC harmless from any damages, claims or loss of any kind, relative
to this Schedule. CLC and Lessee agree that this Schedule and CLC's
commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and it witness thereof hereby executes this Interim Lease Schedule,
this 16th day of February, 1996.
ACCEPTED:
Date: February 16, 1996 Date: February 16, 1996
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
EXHIBIT 10.35
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 001B THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
Equipment as further described on attached Exhibit A.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
a, b & c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of Five Hundred Eighty-Four Thousand Two
Hundred Fifty Dollars ($584,250.00) (herein called "Funded Amount"), at the
per annum rate of the prime rate (currently 8.50%) of Comerica Bank, as
determined from time to time, commencing on December 27, 1995, until the
expiration or termination of this Schedule. Interest shall be computed on
a daily basis using a year of 360 days, and in such computation, effect
shall be given to any change in the interest rate resulting from a change
in said prime rate on the date of such change in said prime rate. The
first rental shall be due February 29, 1996, with subsequent rental
payments due on the 30th of each succeeding month until the termination of
this INTERIM LEASE SCHEDULE. If any part of the above described rental
payments shall not be paid when due, Lessee shall pay to CLC, in addition
to the rental payments due, a sum equal to five percent (5%) of the said
delinquent rental amounts for each month or portion thereof for which said
rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify and
to hold CLC harmless from any damages, claims or loss of any kind, relative
to this Schedule. CLC and Lessee agree that this Schedule and CLC's
commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and it witness thereof hereby executes this Interim Lease Schedule,
this 27th day of December, 1995.
ACCEPTED:
Date: December 27, 1995 Date: December 27, 1995
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
December 27, 1995
Craig Hegstrom
Cambridge Underwriters, LTD.
15415 Middlebelt Road
Livonia, MI 48154
Phone Number: (313) 525-0927
RE: PHYSICAL DAMAGE INSURANCE
POLICY #35338463
COMPANY: FEDERAL INSURANCE COMPANY
EXPIRATION: OCTOBER 1, 1996
Dear Sir/Madam:
The undersigned is presently leasing the following equipment from Comerica
Leasing Corporation:
Four (4) Brown R-224-E Rotary Thermoformers, Serial Nos. 13054, 13055,
13056 and 13057, including; training, setup, freight, rigging, and
installation, all electrical, air, and water hookups, and all
accessories and attachments thereto.
Cost: $1,326,000.00
We hereby authorize and request that our policies be amended and that
Certificates of Insurance be issued showing Comerica Leasing Corporation as
loss payee for physical damage risks. We also request that 30-day notice
to Comerica Leasing Corporation of cancellation be noted and provided in
the certificates.
Please forward certificates to:
COMERICA LEASING CORPORATION
29201 Telegraph, 2nd Floor
Southfield, MI 48034
We appreciate your cooperation and request this matter be handled
expeditiously.
Very truly yours,
THE COLONEL'S, INC.
By: /S/ RICHARD SCHOENFELDT
Richard Schoenfeldt, Controller
-4-
EXHIBIT 10.36
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 002B THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
Four (4) Brown R-224-E Rotary Thermoformers, Serial Nos. 13054, 13055,
13056 and 13057, including; training, setup, freight, rigging, and
installation, all electrical, air, and water hookups, and all
accessories and attachments thereto.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
a, b & c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of Three Hundred Sixty-Four Thousand Six
Hundred Fifty and 00/000 Dollars ($364,650.00) (herein called "Funded
Amount"), at the per annum rate of the prime rate (currently 8.50%) of
Comerica Bank, as determined from time to time, commencing on January 26,
1996, until the expiration or termination of this Schedule. Interest shall
be computed on a daily basis using a year of 360 days, and in such
computation, effect shall be given to any change in the interest rate
resulting from a change in said prime rate on the date of such change in
said prime rate. The first rental shall be due February 29, 1996, with
subsequent rental payments due on the 30th of each succeeding month until
the termination of this INTERIM LEASE SCHEDULE. If any part of the above
described rental payments shall not be paid when due, Lessee shall pay to
CLC, in addition to the rental payments due, a sum equal to five percent
(5%) of the said delinquent rental amounts for each month or portion
thereof for which said rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify
and to hold CLC harmless from any damages, claims or loss of any kind,
relative to this Schedule. CLC and Lessee agree that this Schedule and
CLC's commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and it witness thereof hereby executes this Interim Lease Schedule,
this 26th day of January, 1996.
ACCEPTED:
Date: January 26, 1996 Date: January 26, 1996
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
EXHIBIT 10.37
COMERICA LEASING CORPORATION
INTERIM LEASE SCHEDULE
Interim Schedule No. 003B THE COLONEL'S, INC.
(Lessee)
Lease Agreement No. 2885 COMERICA LEASING CORPORATION
(Lessor)
1. LEASE AGREEMENT: This Interim Lease Schedule ("Schedule") is part of
and subject to a certain Lease Agreement bearing the above Lease Agreement
Number, dated December 21, 1993, made by and between COMERICA LEASING
CORPORATION, (herein "CLC"), as Lessor, and THE COLONEL'S, INC., as Lessee,
together with any amendments, attachments and exhibits thereto (herein
called "Lease Agreement") which is hereby incorporated by reference and
made a part hereof. In the event of a conflict between this Schedule and
the Lease Agreement, the provisions of the Lease Agreement shall prevail.
2. DESCRIPTION OF EQUIPMENT ("Equipment"):
Equipment as further described on attached Exhibit A.
3. LOCATION: The Equipment described above shall be delivered to the
Lessee and located at 951 Aiken Road, Owosso, MI 49224.
4. INTERIM LEASE SCHEDULE: CLC and Lessee hereby agree that CLC shall
purchase certain equipment chosen by Lessee, as described above, and which
is acceptable to Lessee. CLC agrees to lease said Equipment to Lessee,
pursuant to the terms of this Schedule, the terms of the Lease Agreement
and consistent with the terms of any other document referred to herein.
This Schedule shall be evidence of CLC's payment in full or in part for the
Equipment and Lessee's agreement to enter into a permanent Lease Schedule
and to repay to CLC all amounts advanced pursuant to the terms of this
Schedule and the Lease Agreement.
5. TITLE ACQUISITION: CLC and Lessee agree, pursuant to a proposal
letter or proposed permanent Lease Schedule attached hereto, that CLC, at
the Lessee's request, will make payments as set forth below in subsection
a, b & c, to acquire security interest in the equipment. Upon the
selection of one of the following subsections, the other subsections shall
not apply.
a. REIMBURSEMENT OF LESSEE: Lessee has made certain payments for
the Equipment, for which Lessee shall be reimbursed by CLC.
Simultaneously with the execution of this Schedule, Lessee shall
execute to CLC, security interest in the equipment. The amount paid
to the Lessee by CLC hereunder shall be the "Funded Amount" as
hereinafter described.
b. DEPOSIT OR PAYMENT WITH PURCHASE ORDER: Lessee has ordered the
Equipment and simultaneously with the execution of this Schedule,
Lessee shall execute to CLC, security interest in the equipment. CLC
will pay the amounts required for the purchase of the equipment as
provided in the purchase order. Such payments shall be the "Funded
Amount" as hereafter described.
c. PROGRESS PAYMENT: The amount advanced by CLC under this Schedule
shall be the Funded Amount as hereinafter described.
6. TERM: The term of this Schedule shall commence upon the execution
hereof, and shall continue until termination by either: (a) the execution
of a permanent Lease Schedule containing rates and terms agreeable to CLC
and Lessee, consistent with the proposal letter or proposed permanent Lease
Schedule, attached hereto, or (b) by CLC pursuant to the terms hereof,
including, but not limited to a default in the Lease Agreement.
In the event Lessee fails to execute a permanent Lease Schedule prior to
March 29, 1996, Lessee shall promptly pay CLC the Funded Amount as
hereinafter defined and all other amounts advanced by CLC in connection
with this transaction, including rent, late charges and interest as
described herein, without further demand or notice. Upon such payment by
Lessee to CLC, of said amounts, CLC shall assign to Lessee all of CLC's
right, title and interest in the Equipment, thereby terminating all
obligations of CLC to Lessee under this Schedule.
7. RENT: For the term of this Interim Lease Schedule, Lessee shall pay
rent to CLC determined as follows: An amount of Rent which would be equal
to interest on the principal sum of One Hundred Seventy-Eight Thousand Two
Hundred and 00/000 Dollars ($178,200.00) (herein called "Funded Amount"),
at the per annum rate of the prime rate (currently 8.52%) of Comerica Bank,
as determined from time to time, commencing on February 16, 1996, until the
expiration or termination of this Schedule. Interest shall be computed on
a daily basis using a year of 360 days, and in such computation, effect
shall be given to any change in the interest rate resulting from a change
in said prime rate on the date of such change in said prime rate. The
first rental shall be due February 29, 1996, with subsequent rental
payments due on the 30th of each succeeding month until the termination of
this INTERIM LEASE SCHEDULE. If any part of the above described rental
payments shall not be paid when due, Lessee shall pay to CLC, in addition
to the rental payments due, a sum equal to five percent (5%) of the said
delinquent rental amounts for each month or portion thereof for which said
rental amounts are delinquent.
-2-
8. PERMANENT SCHEDULE AND INDEMNITY: Lessee agrees to fully indemnify
and to hold CLC harmless from any damages, claims or loss of any kind,
relative to this Schedule. CLC and Lessee agree that this Schedule and
CLC's commitment to pay any amounts hereunder and to enter into a permanent
Schedule shall be subject to CLC's continued satisfaction with Lessee's
financial condition. Furthermore, if CLC deems itself insecure for any
reason whatsoever, this Schedule may be terminated. In the event CLC shall
give Lessee notice of the termination of this Schedule, all amounts due CLC
hereunder shall become immediately due and payable to CLC without further
notice.
The undersigned Lessee agrees to all the terms and conditions set forth
above, and it witness thereof hereby executes this Interim Lease Schedule,
this 16th day of February, 1996.
ACCEPTED:
Date: February 16, 1996 Date: February 16, 1996
COMERICA LEASING CORPORATION THE COLONEL'S, INC.
(Lessor) (Lessee)
By: /S/ BRIAN M. RIS By: /S/ RICHARD SCHOENFELDT
Brian M. Ris Richard Schoenfeldt
Its: Lease Marketing Officer Its: Controller
Comerica Leasing Corporation Lessee's Address:
29201 Telegraph Road 2nd Floor 620 South Platt Road
Southfield, MI 48034 Milan, MI 48160
-3-
EXHIBIT 11.1
A statement regarding the computation of per-share earnings of
the Company appears at Note 18 to the Financial statements of the Company
attached hereto as Appendix A.
EXHIBIT 21.1
The Company's subsidiaries are (1) The Colonel's, Inc., a
Michigan corporation, and (2) Brainerd International Raceway, Inc., a
Minnesota corporation. Both of these companies conduct business under
their official names.
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Donald J. Williamson and
Jeffrey A. Chimovitz, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 of The Colonel's International,
Inc., together with any and all amendments thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Signature: /s/ LISA ALEXANDER
Print Name: Lisa Alexander
Title: Director
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Donald J. Williamson and
Jeffrey A. Chimovitz, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 of The Colonel's International,
Inc., together with any and all amendments thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Signature: /s/ J. DANIEL FRISINA
Print Name: J. Daniel Frisina
Title: Director
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Donald J. Williamson and
Jeffrey A. Chimovitz, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 of The Colonel's International,
Inc., together with any and all amendments thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Signature: /s/ GARY M. MOORE
Print Name: Gary M. Moore
Title: Director
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Donald J. Williamson and
Jeffrey A. Chimovitz, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 of The Colonel's International,
Inc., together with any and all amendments thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Signature: /s/ TED M. GANS
Print Name: Ted M. Gans
Title: Director
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Donald J. Williamson and
Jeffrey A. Chimovitz, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 of The Colonel's International,
Inc., together with any and all amendments thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Signature: /s/ DONALD J. WILLIAMSON
Print Name: Donald J. Williamson
Title: President, Chief Executive Officer,
and Director
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Donald J. Williamson and
Jeffrey A. Chimovitz, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and
stead, in any and all capacities, to sign the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 of The Colonel's International,
Inc., together with any and all amendments thereto, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Signature: /s/ RICHARD S. SCHOENFELDT
Print Name: Richard S. Schoenfeldt
Title: Controller - CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED
STATEMENTS OF INCOME, CHANGES IN SHAREHOLDERS' EQUITY AND CASH
FLOWS, OF THE COLONEL'S AND ITS SUBSIDIARY AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 634,290
<SECURITIES> 0
<RECEIVABLES> 2,292,112
<ALLOWANCES> (401,200)
<INVENTORY> 6,805,906
<CURRENT-ASSETS> 11,483,401
<PP&E> 36,834,204
<DEPRECIATION> (15,957,585)
<TOTAL-ASSETS> 38,243,986
<CURRENT-LIABILITIES> 15,026,023
<BONDS> 0
<COMMON> 241,778
0
0
<OTHER-SE> 12,631,317
<TOTAL-LIABILITY-AND-EQUITY> 38,243,986
<SALES> 28,503,726
<TOTAL-REVENUES> 28,503,726
<CGS> 19,998,308
<TOTAL-COSTS> 19,998,308
<OTHER-EXPENSES> 3,534,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 971,623
<INCOME-PRETAX> 4,195,474
<INCOME-TAX> 2,333,000
<INCOME-CONTINUING> 1,862,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,862,474
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0
</TABLE>
