SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number
March 31, 1997 No. 0-13943
STOKELY USA, INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0513230
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1230 Corporate Center Drive, Oconomowoc, WI 53066
(Address of principal executive office)
(414) 569-1800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.05 par value
(Title of Class)
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
-----<PAGE>
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of June 16, 1997: $9,964,904
Common Stock, $.05 par value
Number of shares of Common Stock, $.05 par value, outstanding as of
June 16, 1997 - 11,388,462
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement to be dated July 14, 1997 (Part
III).
<PAGE>
The discussion in this Form 10-K includes certain forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995 with respect to the results of operations, financial condition
and business of Stokely. Statements in this document that are not
historical facts are hereby identified as "forward-looking statements" for
the purpose of the safe harbor provided by Section 21E of the Securities
Exchange Act of 1934 and Section 17A of the Securities Act of 1933.
Stokely cautions readers that such "forward-looking statements," including
without limitation, those relating to Stokely's future business prospects,
revenues, working capital, liquidity, capital needs and interest costs,
wherever they occur in this document or in other statements attributable to
Stokely, are necessarily estimates reflecting the best judgment of
Stokely's senior management and involve a number of risks and uncertainties
that could cause actual results to differ materially from those suggested
by the "forward-looking statements." Factors which could cause future
results to differ from these expectations include the following: general
economic conditions; vegetable processing industry conditions and price and
volume fluctuations; competitive pressures and pricing pressures; inventory
risks; supply-related risks; demand-related risks; third party lender
actions; and results of Company-specific cost containment and profit
enhancement initiatives. Additional factors are described in the Company's
other reports filed with the Securities and Exchange Commission. The words
"estimate," "project," "intend," "expect," and similar expressions are
intended to identify forward-looking statements. These "forward-looking
statements" can be found at various places thoughout this document.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Stokely does not
undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
PART I
ITEM 1. BUSINESS
General Development of Business
Stokely USA, Inc. ("Stokely" or the "Company") is a domestic producer of
canned vegetables. The Company processes, markets and sells a broad range
of vegetables under customer private labels and under the Stokely's Finest
Label, Stokely's Gold label and other brand labels through the retail,
foodservice and industrial channels of distribution. The Company is a
large processor of private label canned vegetables in the United States,
selling to many major supermarket chains, and to many food wholesalers.
The Company is also an exporter of canned vegetables to Europe and Asia.
Prior to February 1996, the Company also processed, marketed and sold
frozen vegetables, primarily in bulk size quantities for the industrial
market. In February 1996, the Company announced it was exiting the frozen
vegetable processing business. Essentially all the assets associated with
the frozen vegetable processing business were sold during fiscal 1997.
<PAGE>
Industry Conditions and Price and Volume Fluctuations
The Company's financial performance and growth are related to conditions in
the vegetable processing industry. The United States vegetable processing
industry is a mature industry. The Company's net sales are a function of
product availability and market pricing. In the vegetable processing
industry, product availability and market prices tend to have an inverse
relationship: market prices tend to decrease as more product is available,
whereas if less product is available, market prices tend to increase.
Product availability is a direct result of plantings, growing conditions,
crop yields and inventories, all of which vary from year to year. In
addition, price can be affected by the planting, inventory level and
individual pricing decisions of the three or four largest processors in the
industry. Generally, the market prices in the vegetable processing
industry tend to adjust more quickly to variations in product availability
than an individual processor can adjust its cost structure; thus, in an
over-supply situation, a processor's margins likely will weaken, as
suppliers generally are not able to adjust their cost structure as rapidly
as market prices adjust for the over-supply. The Company typically has
experienced lower margins during times of industry over-supply. There can
be no assurance the Company's margins will improve in response to favorable
market conditions. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a further discussion of
industry conditions.
Seasonality and Quarterly Fluctuations
The Company's operations are affected by the growing cycle of the
vegetables it processes. Most of the Company's production occurs during
the second quarter of each fiscal year (due to the timing of crop
production and climate conditions) and typically a majority of sales occur
during the third and fourth quarters of each fiscal year (due to seasonal
consumption patterns for its products). Accordingly, inventory levels are
highest during the second and third quarters. Net sales generated during
the third and fourth quarter of each fiscal year have a significant impact
on the Company's results of operations. Because of seasonal fluctuations,
there can be no assurance that the results of any particular quarter will
be indicative of results for the full year or for future years.
The Vegetable Processing Industry
The United States vegetable processing industry is a mature industry. The
vegetable processing industry is characterized by several large producers,
but also includes a number of smaller independently owned producers. In
general, the canned processing vegetable industry is mature and capital
intensive, and, as such, there have been few entrants into the market in
recent years. Over the past ten years, the Company believes the industry
has been characterized by plant reduction and consolidation.
The pricing structure in the canned vegetable processing industry is
dependent in part upon the supply of agricultural products and is subject
to the variable nature of agricultural production. Selling prices of
canned products usually are a direct result of industry product supply,
which correlate to plantings, growing conditions, crop yields and
inventories. A year of high supply generally results from two critical
factors. First, inventory carryover levels provide processors with an
indication of which markets might be short on product and, therefore, might
hold the best promise for favorable price trends. Declining carryovers
typically encourage processors to expand acreage devoted to a particular
crop in anticipation of higher prices. Second, weather impacts total
production through its influence on yield per acre. Favorable growing
conditions typically boost yield per acre and, therefore, total production.
Unfavorable growing conditions have the opposite effect. Weather impacts
not only crop size, but also crop quality.
During fiscal 1994, market prices improved due to reduced plantings,
unfavorable growing conditions and the consequential effects on supply and
pricing. These favorable market price conditions continued during the
first quarter of fiscal 1995, but industry prices declined the balance of
fiscal 1995 in response to record production in the summer of 1994 and
certain competitive market situations, including unanticipated individual
pricing decisions by a few of the large processors in the industry.
Reduced planted acreage and unfavorable growing conditions in the summer of
1995 reduced industry production and improved market prices in the latter
part of fiscal 1996, continuing into fiscal 1997. Unfavorable growing
conditions in the spring and early summer of 1996 further improved market
prices during the first three quarters of fiscal 1997. However, favorable
growing conditions in the late summer and early fall resulted in downward
pressure on industry pricing and margins during the fourth quarter of
fiscal 1997. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a further discussion of
the industry conditions.
Restructuring Programs and Business Strategy
In response to the depressed market conditions that have persisted in the
vegetable processing industry for most of the past five years, the Company
has pursued a strategy that focuses on its core product lines and major
channels of distribution. Since fiscal 1993, the Company has narrowed its
product focus to product lines in which it has significant market share -
corn, green beans, peas and root crops. Since fiscal 1992, the Company has
placed significant emphasis on its presence in the private label channel of
distribution. Private label has been the Company's primary distribution
channel since it was established in 1920, and the Company currently holds a
leading market share in this channel. The Company implemented three
significant restructure programs which involved the closing of certain
plants and the consolidation of other production at larger, more efficient
facilities, eliminating certain low margin or unprofitable product lines,
reducing operating overhead and lowering interest expense through debt
reduction.
In 1993, the Company redefined its core products as corn, green beans, peas
and root crops produced in the Midwest (canned processing) and Northwest
(frozen processing), and exited the canned tomato and fruit product lines
and southern frozen vegetable lines, including frozen broccoli, okra and
cauliflower. Stokely also eliminated certain marginally contributing
channels of distribution and facilities in its frozen vegetable business.
In addition, the Company's general and administrative workforce was reduced
by 25% from fiscal 1992 levels.
As part of the 1993 restructuring, the Company recorded a non-recurring
restructuring charge of $14.7 million ($21.1 million pre-tax) relating to
the write-down of eight processing plants which were sold, closed or
downsized and the costs associated therewith, including provisions for
severance, consolidation costs and plant closing costs, and the write-down
of inventory of discontinued product lines. The fiscal 1993 restructure
program was substantially completed in fiscal 1995 and benefits fully
realized.
While these restructure measures resulted in substantial cost and expense
reductions which contributed to the Company's improved fiscal 1994 and 1995
operating results compared to its fiscal 1993 results, the vegetable
processing industry continued to experience depressed market conditions in
fiscal 1995 and 1996, particularly in the frozen vegetable business.
Declines in the Company's frozen sales and margins in fiscal 1995 and 1996
reflected the general decline in the frozen vegetable markets due to excess
industry inventories and excess production capacity. These conditions
caused an extremely competitive market climate and decreased margins. As a
result, the Company decided to exit the frozen vegetable business entirely
and recorded a nonrecurring charge of $12.5 million in the fourth quarter
of fiscal 1996 relating to the write-down of three closed processing plants
and associated costs and the liquidation of related inventories.
Subsequently, the Company entered into an agreement with three third
parties for the sale of two processing plants and substantially all of the
Company's frozen inventory. The sale closed in the second quarter of
fiscal 1997 and the proceeds were used to pay down long-term debt and
revolving credit obligations. The third processing plant representing less
than 10% of total frozen production capacity remains for sale.
During the second quarter of fiscal 1997, the Company announced a major
restructuring of its core canned vegetable business. The action was
designed to improve operating margins in the Company's core business. The
margin improvement initiatives involve a combination of customer value
analysis, production consolidation and related reductions in general and
administrative areas. Six of the Company's nine processing facilities were
affected by the consolidation moves, with two facilities being closed, two
facilities downsized and two facilities expanded. The consolidation moves
are intended to increase efficiency while installation of some of the
latest automated inspection equipment in the expanded facilities should
enhance product quality and lower product costs. The Company also sold its
headquarters building and relocated its headquarters to a new leased
facility during the fourth quarter of fiscal 1997. The total charge
recorded by the Company in fiscal 1997 for the above actions and the write-
off of certain deferred debt costs was $13.5 million. See "Item 7.
Management's Discussion and Analysis of Financial Conditions and Results of
Operations" for a further discussion of the Company's restructuring charge
and business strategy.
Financial Information about Product Groups
The Company cans and sells a variety of vegetables. Its principal products
are corn, green beans, peas and root crops, including carrots, beets, mixed
vegetables and potatoes. Other products processed and marketed by the
Company include processed dry beans and pumpkin, supplemented by purchased
items such as asparagus and sauerkraut, which are packed for Stokely by
others under co-pack arrangements. Prior to February 1996, the Company
processed and sold frozen vegetables. In February 1996, the Company
announced that it was exiting the frozen vegetable business and sold
essentially all the remaining inventory by the end of the third quarter of
fiscal 1997. The following table shows, for each of the last three fiscal
years, the amount and percentage of net sales for each of the Company's
principal product groups.
<TABLE>
Fiscal Year Ended March 31,
1997 1996 1995
<CAPTION>
Net Net Net
Sales Percent Sales Percent Sales Percent
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Canned Vegetables:
Corn $ 64,800 35.0% $ 64,200 31.1% $ 67,500 29.2%
Green beans 30,800 16.7 36,000 17.5 40,000 17.3
Peas 20,400 11.0 22,600 11.0 20,500 8.9
Root crops 17,900 9.7 17,000 8.2 13,800 6.0
Other 24,000 13.0 28,400 13.8 33,300 14.3
Total canned vegetables 157,900 85.4 168,200 81.6 175,100 75.7
Frozen Vegetables:
Corn 12,700 6.9 13,900 6.7 22,200 9.6
Peas 4,900 2.6 5,800 2.8 11,100 4.8
Other 9,400 5.1 18,400 8.9 23,000 9.9
Total frozen vegetables27,000 14.6 38,100 18.4 56,300 24.3
Total canned and frozen
vegetables $184,900 100.0% $206,300 100.0% $231,400 100.0%
</TABLE>
Description of Business
Canned Vegetables
The Company produces nine different canned vegetable products, each in
numerous varieties, styles and quality grades, and utilizes seven different
can sizes and three different glass jar sizes. Each vegetable product is
produced and sold in three to seven quality grades, which are mainly
defined by maturity of the raw product. The highest grades typically are
used for premium private label products and Stokely's Gold brand label
products. The lower grades typically are used by customers who emphasize
price value. The Company uses a white-lined can for most of its brand
products.
By supplying all major Midwest-type vegetables in all major can sizes and a
variety of styles, mixtures and features, as well as supplying certain
other vegetables purchased for resale as accommodation items, the Company
is a "full-line" or "turn" supplier to its customers. "Turn" business refers
to supplying a broad line of products to a retailer on a regular basis
principally in single shipments, to support that retailer's everyday needs.
"Turn" business typically is sold at higher prices than "promotion"
business, which usually consists of a large quantity of various items.
The Company's product development efforts are designed to respond to
customer needs and emerging markets and to create more demand for its
vegetable products by focusing on new varieties, styles and mixtures. The
Company produces to order for certain customers based on their product
specification demands. In addition, in recent years, the Company has
developed and now offers no-salt versions of many of its vegetable
products. The Company also has introduced new mixtures and varieties.
CORN. Corn is the Company's leading product, as measured by both sales
dollars and volume. The Company's canned corn consists of various
varieties (super sweet, Gold'n White, Shoepeg White Corn and traditional)
and styles (whole kernel, cream style, mixtures and no-salt versions).
During fiscal 1997, approximately 66% of the Company's canned corn was sold
to the private label industry, 18% was sold under the Company's brand
labels and 16% was sold to the foodservice industry. The Company's corn
for canned products was grown primarily in Wisconsin, Minnesota, Illinois
and Iowa.
GREEN BEANS. Green beans are the Company's second highest volume product.
The Company's canned green beans consist of various varieties (including
Italian flat pod beans and European slender whole green beans) and styles
(cut, french style and whole). During fiscal 1997, approximately 41% of
the Company's canned green beans were sold to the private label industry,
43% were sold under the Company's brand labels and 16% were sold to the
foodservice industry. The Company's green beans were grown primarily in
Wisconsin and Michigan.
PEAS. The Company's canned peas consist of various varieties (early
maturing, small berry, large berry and various mixtures) and styles,
including no-salt versions. During fiscal 1997, approximately 57% of the
Company's canned peas were sold to the private label industry, 24% were
sold under the Company's brand labels and 19% were sold to the foodservice
industry. The Company's peas were grown primarily in Wisconsin and
Minnesota.
ROOT CROP VEGETABLES. The Company's root crop vegetables consist of
carrots, beets, mixed vegetables and potatoes, all of which are grown
primarily in Wisconsin. The Company occasionally will source root crop
vegetables from various Southern states, to assure the Company has a
continuous supply. The Company's root crop vegetable products consist of
various varieties (based on count and mix) and styles (whole, sliced,
crinkled slices and waffle slices). During fiscal 1997, approximately 52%
of the Company's canned root crop vegetables were sold to the private label
industry, 19% were sold under the Company's brand labels and 29% were sold
to the foodservice industry.
OTHER VEGETABLES. The Company also sells various other vegetables,
including pumpkin, processed dry beans (pinto, kidney, pork'n beans and
garbanzo beans) and sauerkraut. During fiscal 1997, approximately 39% of
the Company's other vegetables were sold to the private label industry, 13%
were sold under the Company's brand labels and 48% were sold to the
foodservice industry. Processed dry beans, such as canned kidney beans,
pork'n beans, pinto beans and garbanzo beans, are processed year-round, and
have a consumption pattern counter-seasonal to traditional Midwest items.
<PAGE>
Frozen Vegetables
Most of the Company's frozen vegetable products were sold as part of the
frozen sale agreement which closed in the second quarter of fiscal 1997.
The Company also sold certain of its frozen vegetable products through the
industrial channel of distribution in bulk quantities and to the private
label industry, the foodservice industry and export markets that were
packaged in individual boxes and polybags. The Company's vegetables for
its frozen products, primarily corn and peas, were grown primarily in the
state of Washington.
Customers, Marketing and Sales
General
The Company markets and sells its canned vegetable products under private
labels and its brand labels for home use, and also to the foodservice
industry, including restaurants, fast food chains, hospitals, schools and
the military, and to industrial accounts. The Company is a leading
processor of private label canned vegetables in the United States, and
sells to many major supermarket chains and other food distributors who
market the products under their own label. The Company also processes and
markets its vegetable products under the Stokely's Finest, Stokely's Gold
and other brand labels to grocery wholesalers, grocery chain stores and
other retail channels of distribution. The Company's foodservice sales
involve sales, generally in large containers, directly or through
foodservice distributors, to purchasers of food products such as the United
States government, fast food chains, restaurants and hospitals.
The Company emphasizes responsiveness to customer needs as a point of
competitive differentiation, and the Company has invested in technology to
support its Efficient Customer Response initiatives. For example, the
Company has developed modular pallets that allow customers to avoid storage
costs by "cross-docking" a pallet of mixed items directly to the retail
outlet, allowing customers to avoid set-up labor costs when the product
arrives at the retail location.
<PAGE>
The following table shows the net sales and percentage of total net sales
contributed by the Company's canned brand label, private label, and
foodservice markets and frozen sales markets for each of the last three
fiscal years.
<TABLE>
Fiscal Year Ended March 31,
1997 1996 1995
<CAPTION>
Net Net Net
Sales Percent Sales Percent Sales Percent
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Private label <F1> $ 85,500 46.3% $ 80,300 38.9% $ 77,600 33.6%
Brand label 36,300 19.6 49,300 23.9 53,300 23.0
Foodservice <F2> 36,100 19.5 38,600 18.7 44,200 19.1
Frozen 27,000 14.6 38,100 18.5 56,300 24.3
Total $184,900 100.0% $206,300 100.0% $231,400 100.0%
<FN>
<F1> Of the Company's total private label sales shown above, export sales totalled $15.3
million, $16.3 million and $10.9 million for fiscal 1997, 1996 and 1995,
respectively.
<F2> Of the Company's total foodservice sales shown above, U.S. government sales totalled
$5.4 million, $9.5 million and $8.2 million for fiscal 1997, 1996 and 1995,
respectively.
</FN>
</TABLE>
For the fiscal year ended March 31, 1997, no single customer accounted for
more than 6% of the Company's total sales.
Private Label Sales
The Company's private label sales involve sales to major supermarket chains
and other food distributors who market the products under their own labels.
The Company is a leading supplier of Midwest-type canned vegetables (such
as corn, green beans, peas and root crops) to the grocery private label
industry, with significant private label canned corn sales.
Private label sales are made through the Company's wholly-owned subsidiary,
Oconomowoc Canning Company, Inc. The majority of private label sales are
made through commissioned brokerage representatives, while the remaining
sales are made direct to the customer. The Company's private label
division's primary responsibilities include selling private label products,
marketing the Company's service capabilities, ensuring customer
satisfaction, managing inventories and gaining new customers and
distribution.
Customers include major grocery wholesalers and chains. Customer and
market development efforts focus primarily on helping customers lower costs
of buying, receiving and merchandising canned vegetables through a combined
"partnering" approach. For example, the Company's sales force meets with
key customer representatives from various divisions within the customer's
organization to develop a joint logistics plan. Development efforts also
include increasing profitability by targeting higher price/quality-seeking
customers in an attempt to benefit from the emerging upscale private label
market.
Brand Label Sales
The Company's brand label division sells brand canned vegetables to grocery
wholesalers and chains. The products include a complete line of Midwest-
type vegetables sold under the Stokely's Finest brand name, and also
include products sold under the premium Stokely's Gold brand and other
regional labels.
The Company sells its brand label products through a broker network of
independent food brokers who sell on a commission basis and provide local
marketing and service support to their distributors. This broker network
focuses upon gaining display, advertising and other retailer support, in
addition to ensuring customer satisfaction and developing the customer
base. Marketing efforts include primarily regional print media-delivered
promotions in major markets, primarily coupon circulation and newspaper
advertisements, in addition to strong emphasis on in-store point-of-sale
promotions. Initiatives that help customers increase their category
profitability include the Stokely's Gold program (with the principal
advantage of higher margins for both the Company and its customers) and
joint brand-private label shipping options (with the competitive selling
point of higher inventory turns and lower average inventories for the
customer). These initiatives are instrumental in maintaining shelf
presence and customer support.
Foodservice Sales
Foodservice sales are made, generally in larger containers, directly to or
through foodservice distributors, to purchasers of food products such as
the United States government, fast food chains, restaurants and hospitals.
Most foodservice sales are made through commissioned brokerage
organizations.
The majority of the Company's canned foodservice sales are private label,
primarily to large corporate distributors and large buying groups.
Foodservice distributors then sell to restaurants, schools and hospitals.
Contact with foodservice distributors also cultivates relationships with
national chain restaurant accounts, a growing part of the Company's
foodservice business. The Company has a strong position in corn, a growing
position in canned pumpkin, and a growing position as a supplier to
national chain restaurant accounts.
Frozen Sales
Historically, the Company's frozen sales principally involved sales to
industrial customers that either blend, repack or use the vegetable
products as an ingredient. National restaurant chains were another large
customer in frozen sales. In February 1996, the Company announced that it
was exiting the frozen vegetable business and would cease processing of
frozen vegetables. Essentially all of the remaining frozen inventory was
sold by the end of the third quarter in fiscal 1997.
Sources of Supply
The Company acquires its raw agricultural products for processing from
independent growers who operate under annual contracts with the Company.
Most raw agricultural production is contracted before the growing season
with farmers who agree to plant and cultivate the crops. This method of
securing raw product has been satisfactory to the Company and its growers,
and the Company has not experienced difficulty in contracting for raw
agricultural products. Contracts are negotiated in late winter for the
upcoming processing season. Contracts specify, among other things, the
type and quantity of raw product to be supplied as well as the price. The
Company has an established base of experienced growers and has experienced
only modest turnover from year to year.
The Company attempts to reduce the agricultural risk of unfavorable growing
conditions by utilizing a higher proportion of irrigated acreage than its
competitors. Contracted acreage is in close proximity to producing plants
due to the perishable nature of the raw product. Processing generally is
performed within several hours of harvest to assure the best possible
product quality.
Stokely field personnel are involved in all phases of crop production. The
Company works closely with major seed companies in the testing of improved
varieties. Desirable traits include superior flavor and color retention,
pest and disease resistance, yield improvement and drought resistance.
Field personnel provide the proper seed variety to the grower and instruct
them on the precise time to plant. This is important to assure harvest
schedules that result in sufficient supplies of raw product to capture
operating efficiencies associated with maximum plant output. The Company
conducts periodic inspections of crops during the growing cycle and
generally performs the actual harvesting for the growers.
The Company utilizes integrated pest management techniques to assure
maximum control of damaging insects while minimizing the use of chemical
control methods. Such techniques include field location selection for
specific crops, rotation patterns, census activity during the growing
season and chemical control only when necessary based on census data. This
results in minimizing insect related damage problems while keeping chemical
control usage well below allowable levels.
Stokely agricultural personnel monitor crop maturation rates utilizing
sophisticated harvest management practices. Maturity is a primary
determinant of product quality and the maturity "window" to meet a required
specification is very narrow. To assure that product is harvested within
this window, the Company directs all harvesting operations utilizing its
own equipment and personnel. In this manner, the Company maintains proper
supplies of raw product entering the processing facilities at the desired
maturity level while minimizing unharvested acreage.
Cans are a major component in the final product cost for the Company's
canned business, representing approximately one-third of total direct
manufacturing cost. Cans are sourced principally from Ball Corporation and
Crown Cork & Seal under supply agreements. The Company has not experienced
difficulty in obtaining adequate supplies of cans for production.
<PAGE>
Production and Distribution
At March 31, 1997, the Company operated seven canned vegetable processing
plants. The Company closed its Merrill, Wisconsin and Wells, Minnesota
plants in the fall of fiscal 1997 after completion of the pack as part of
its restructuring efforts. The Company also ceased production of
sauerkraut at its Poynette, Wisconsin plant and will no longer process corn
at its Hoopeston, Illinois plant after fiscal 1997. The Company closed its
three frozen processing plants in fiscal 1996.
Most of the Company's raw products must be processed within hours of
harvesting to maintain desired product quality, so plants are located in
close proximity to the Company's principal growing areas. Following
harvesting, raw products are transported to the processing facility where
they are sorted, sized, cut or trimmed, washed, inspected and then canned
and cooked. In addition to visual inspection, the Company increasingly
relies on electronic inspection machinery that recognizes and rejects any
off-color or blemished product. The Company's high emphasis on quality
assurance during the production process also includes the grading and
inspection of raw products, inspection of incoming cans, sampling and
laboratory testing of products during production and inspection of finished
goods on a sample basis prior to shipment. Monitoring systems continuously
record cooking times and temperatures so that each product is processed
according to the precise method proven to yield consistent quality results
and ensure maximum retention of flavor and texture. The Company employs
quality control inspectors at each facility and food technologists
supervised by a Director of Quality Management, whose primary
responsibilities include quality assurance and compliance. Technologists
also run tests to ensure that all standards for food safety are met or
exceeded.
The Company recognizes that consistent product quality is crucial to the
success of its business and has a formal program in place utilizing Total
Quality Management ("TQM") techniques. These techniques employ statistical
analysis that enable employees to identify problems, gather and prioritize
data, evaluate solutions and implement them. An essential part of the TQM
process relating to production is attribute grading, which is a statistical
product evaluation technique utilized at all of the Company's plants. From
thousands of non-destructive samples taken, quality assurance personnel are
able to observe potentially troublesome trends developing. Supervisors are
alerted who then trace problems to sources such as seed varieties, growing
conditions, bird or insect damage, harvesting or handling.
Finished products are carefully monitored throughout the handling and
storage process. Some finished canned goods for the Stokely brand are
labeled prior to storage. Private label retail and foodservice finished
goods are stored unlabeled until orders are received. The appropriate
customer label is affixed at that time and the order shipped. The Company
maintains a large inventory of customer-owned can labels to assure rapid
order fulfillment.
In addition to producing quality products, careful storage and efficient
distribution are vital to success. The Company distributes its products
through its two distribution centers in Wisconsin and through a network of
rented forward warehouses. The Company also ships full loads directly from
its processing facilities. The Company's transportation personnel are
responsible for routing goods from production plants to regional and
consolidating warehouses and finally to customers. Depending on quantities
and distance, finished goods are shipped by rail or truck, whichever is
most cost-effective.
Management Information Systems
The Company depends upon the accuracy, quality and proper utilization of
its management information systems to effectively manage its business. The
Company has installed both customized and purchased management information
systems operating on an IBM AS/400 computer that allow for centralized data
collection and management of key functions such as inventory control,
accounts receivable, order processing, production control, sales and
distribution, and general accounting. These systems provide concise and
timely information critical to business operations and are adequate to
support current operations. Currently approximately 80% of the Company's
sales are ordered through electronic means.
The Company is seeking to use service innovation as a point of competitive
differentiation. As it develops increasingly sophisticated programs to
bring value to its customers, new demands will be placed on its information
systems. In order to prepare for this, the Company completed the
implementation of new core processing systems in fiscal 1996. The new
systems are more flexible and facilitate greater fact based analysis and
decision making throughout all levels of the Company. This added
analytical capability and flexibility assists the Company in meeting the
increasingly complex and rapidly evolving needs of its customers. These
needs include vendor managed inventory programs, executive information
systems, improved customer and market region sales management, and
additional Electronic Data Interchange services. Customer service, order
entry and distribution system improvements were the major areas of
implementation.
Competition
All of the Company's products compete with those of other major national
and smaller regional vegetable processing companies under highly
competitive conditions. The principal factors of competition in the brand
and private label canned vegetable business are price and product quality,
availability of a broad line of products, timely delivery, and customer
service and satisfaction. An additional competitive factor for the
Company's brand canned products is consumer demand as developed through
expenditures on advertising, sales promotion and maintenance of retail
shelf space.
Three of the Company's major competitors in the brand market, Del Monte,
Green Giant and Dean Foods, have greater financial and marketing resources
than the Company. The Company believes it can compete effectively in the
canned vegetable business by focusing on private label retail sales and
core brand products, delivering consistent product quality, meeting
customer service expectations, continuing to improve the Company's cost
structure and focusing capital expenditures on quality and service
innovations.
The Company's principal competitors in the private label canned business
are major and smaller regional companies, including Seneca Foods
Corporation and Friday Canning Company, owned by Chiquita Brands. The
Company's major competitors in the international export market are Green
Giant, Dean Foods, and Friday Canning Company, most of whom are larger and
have greater resources than the Company.
Trademarks
In the course of its business, the Company uses various trademarks, trade
names and service marks in the packaging and advertising of its products.
"Stokely's Finest" is a registered United States trademark and is
significant to the Company. Stokely's ability to compete in the brand
product vegetable market depends in part upon having a nationally
recognized trademark. Some of the Company's other less significant
registered United States trademarks include "School Days," "Chef's Best,"
"Hart," "Our Favorite," "Shellie," "Sweet & Sour Kraut" and "Meeter's
Sauerkraut." "Stokely's Crisp'n Sweet Corn" and "Stokely's Gold" are
registered United States trademarks on an intent-to-use basis, and Stokely
has a common law right to "Bavarian Style."
Regulations
The Company is subject to regulation by the Food and Drug Administration,
the United States Department of Agriculture, the Federal Trade Commission,
the Environmental Protection Agency and various state agencies with respect
to the production, packaging, labeling and distribution of its food
products, and believes it is in material compliance with all applicable
rules and regulations of such federal and state agencies. The principal
federal laws that regulate the Company with respect to the production,
packaging, labeling and distribution of its food products include: (i) the
Food, Drug and Cosmetic Act of 1938, which ensures that foods are produced
under sanitary conditions and are properly labeled; (ii) the Federal
Insecticide, Fungicide and Rodenticide Act, which ensures that pesticides
used on food are registered with and approved by the Environmental
Protection Agency; (iii) the Fair Packaging and Labeling Act, which
regulates trade practices and requires that consumers receive accurate
information regarding the quality and value of products; (iv) the National
Label Education Act, which regulates information which must be included in
food labels; and (v) the Federal Trade Commission Act, which regulates
methods of competition, advertising and trade practices.
The Company is also subject to various state regulations in order for the
Company to operate as a vegetable contractor in those states. The State of
Wisconsin amended its regulations effective July 11, 1996 as it related to
certain instances when vegetable contractors are required to either pay
cash for raw products upon delivery, file security with the state, or file
financial statements that meet minimum financial standards. The Company
was required to file security of approximately $2 million on April 2, 1997
as it did not meet the minimum financial standards in the amended
regulations. Accordingly, the Company posted a surety bond with the State
of Wisconsin to meet this security requirement. The security filed with
the state on April 2, 1997 was required to equal 25% of the estimated
maximum liability expected to be owed to Wisconsin vegetable growers in the
calendar year ended December 31, 1997. The security requirement increases
to 50% for the calendar year ended December 31, 1998 and 75% thereafter for
those companies not meeting the minimum financial standards.
The disposal of solid and liquid vegetable waste material resulting from
the preparation and processing of foods is subject to various federal,
state and local laws and regulations relating to the protection of the
environment. While the Company cannot predict with certainty the effect of
any proposed or future environmental legislation or regulations on its
processing operations, Stokely believes the waste disposal systems which
are now in operation or which are being constructed and designed for
Stokely are sufficient to comply with all currently applicable
environmental laws and regulations. Expenditures for facilities related to
protection of the environment are made pursuant to the Company's capital
budget and have not had, nor are they expected to have, a material effect
on the earnings of the Company. The modification of existing, or the
adoption of new laws, regulations or policies could have an adverse effect
on the Company's business and results of operations.
Employees
At peak employment periods during the canned vegetable processing season,
the Company employed approximately 2,200 employees, of which approximately
1,720 were seasonal and part-time production personnel, 410 were full-time,
year-round production personnel, and 70 were management, sales and
administration personnel. Approximately 640 regular hourly and seasonal
employees belong to labor unions. Stokely's four union contracts are
generally three years in length and provide for average wage increases of
3.0% during fiscal 1998. There are two union contracts expiring in fiscal
1998. Stokely recruits migrant workers for seasonal employment at its
seasonal plants and maintains migrant housing facilities in Sun Prairie,
Wisconsin, Pickett, Wisconsin and Hoopeston, Illinois to accommodate those
employees. The Company believes that relationships with its employees are
good.
Foreign Operations
The Company's export sales principally involve sales of private label
canned vegetables. The Company's export sales accounted for 9.7%, 10.3%
and 6.6% of total canned sales for fiscal 1997, 1996 and 1995,
respectively. International sales are subject to various risks, including
exposure to currency fluctuations, political and economic instability, the
greater difficulty of administering business abroad and the need to comply
with a wide variety of international and domestic export laws and
regulatory requirements. The Company's international sales organization is
based in Oconomowoc, Wisconsin and sells through agents, commissioned
brokers and direct sales.
<PAGE>
ITEM 2. PROPERTIES
Stokely's principal facilities, all of which are owned except for the
corporate headquarters which is leased, are described below:
Plant and
Location Warehouse Size Principal Products
Canned Vegetable Production (Sq. ft.)
and Distribution:
Ackley, Iowa 199,000 Whole kernel corn; canned dry
pack beans
Cobb, Wisconsin 65,000 Warehouse
DeForest, Wisconsin 538,000 Warehouse and distribution center;
field department office
Hoopeston, Illinois 240,000 Pumpkin; warehouse and distribution
center
Pickett, Wisconsin 145,000 Peas; whole kernel corn
Poynette, Wisconsin 345,000 Green and wax beans; warehouse and
distribution center
Scottville, Michigan 238,000 Green, shellie and romano beans
Sun Prairie, Wisconsin 108,000 Peas; peas and carrots; whole
kernel corn; cream style corn
Waunakee, Wisconsin 181,000 Peas; peas and carrots; whole
kernel corn; beets; carrots;
potatoes; mixed vegetables
Corporate Headquarters:
Oconomowoc, Wisconsin 24,000 General offices
Closed Facilities Held for Sale<F1>
Vegetable Production:
Green Bay, Wisconsin 76,000
Merrill, Wisconsin 56,000
Wells, Minnesota 103,000
<F1> These facilities were closed during fiscal 1996 and 1997 as part of
the Company's restructuring plans.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
A class action lawsuit was filed on January 3, 1995, in the United States
District Court for the Eastern District of Wisconsin against the Company,
all of the individual members of the Board of Directors of the Company,
William Blair & Company and Dain Bosworth, Inc. The plaintiff alleged that
he sustained losses in connection with his purchase of shares of common
stock of the Company during the period from October 17,1994, to
December 19, 1994, as a result of defendants' alleged misleading statements
and omissions to state material facts. A second lawsuit seeking to
represent class members who purchased shares of common stock of the Company
during the period from October 17, 1994, to December 19, 1994, was filed on
May 10, 1995, in the United States District Court for the Eastern District
of Wisconsin. This second lawsuit made similar claims against the Company
and certain officers arising from the same facts and events. These
lawsuits were consolidated on September 22, 1995 and the complaint filed in
the first lawsuit was deemed the operative complaint superseding the
complaint filed in the second lawsuit. The plaintiff in the second lawsuit
subsequently elected to withdraw as a plaintiff in the consolidated
lawsuit.
The court dismissed the consolidated lawsuit in a judgment entered on March
21, 1996. The plaintiff subsequently filed a motion with the court which
sought to alter or amend that judgment. In a decision dated March 27,
1997, the court denied that motion and the judgment of dismissal became
final when it was not appealed by the plaintiff by April 28, 1997.
The Company also is involved in various other legal actions and claims
primarily arising in the normal course of its business. In the opinion of
management of the Company, the liability, if any, would not have a material
effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter of the
fiscal year.
<PAGE>
Executive Officers of the Company
The following is a list of Stokely's executive officers, their ages and
their positions and office at June 30, 1997.
Name Age Office and Business Experience
Frank J. Pelisek 67 Chairman of the Board since 1992; Chief
Executive Officer June 1992-93; Director
since 1983; Partner, Michael Best and
Friedrich, legal counsel to Stokely, since
1965.
Stephen W. Theobald 51 President and Chief Executive Officer
since April 1996; Vice Chairman and
Treasurer 1992-1996; Director since 1980;
Vice President Administration since 1985
when he joined Stokely.
Peter P. Caputa 35 Senior Vice President and Chief Financial
Officer since March 1997; Named Vice
President of Finance in December 1996;
Controller December 1995, when he
joined Stokely, to December 1996; Senior
Manager at Deloitte & Touche LLP 1991-
1995.
Robert M. Brill 49 Vice President, General Counsel and
Secretary since 1990; Vice President and
General Counsel since 1989; Senior
Partner, Brill and Eustice, 1986-89;
joined Stokely in 1989.
Eddie W. Foster 59 Vice President, National Sales Manager
since 1991; President, Merchandise
Warehouse, Inc. 1990-91; President LVS
Food Distributors 1989-90; Vice President
of Marketing and Sales Stokely USA, Inc.
1983-89.
John R. McCormick 54 Vice President of Sales and Marketing
since March 1997; Vice President of
Oconomowoc Canning Company, a Stokely
subsidiary, since April 1990; National
Sales Manager for Stokely Branded Business
1983-1990.
Jack R. McDowell 55 Vice President of Manufacturing since
joining Stokely in February 1997;
Operations Manager at Custom Cuts, Inc.
1996; Vice President, General Manager at
Lyco Manufacturing 1995; Senior Vice
President at Agripac, Inc. 1992-1994; Vice
President of Operations at Johnsonville
Foods 1989-1992.
Family Relationships
There are no family relationships among the executive officers listed and
there are no arrangements or understandings pursuant to which any of them
were elected as officers. However, all officers listed (except Mr.
Pelisek) are a party to change of control contingent employment agreements,
more fully described and hereby incorporated by reference from the
Company's definitive Proxy Statement, dated July 14, 1997. All officers
hold office for one year and until their successors shall have been duly
elected and qualified.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
Market Information
Stokely common stock is traded on the NASDAQ National Market System. The
market symbol is STKY. American Stock Transfer and Trust Company, 40 Wall
Street, New York, New York 10005 serves as transfer agent. The following
table sets forth the range of high and low sales price for the common stock
for the periods indicated as reported on the NASDAQ National Market System
for the periods indicated. Quotations represent the price between dealers
and do not reflect retail markups, markdowns or commissions.
Common Stock Price Range
(Dollars per share) Market Price
High Low
1997
First Quarter 3 13/16 2 3/8
Second Quarter 3 5/8 2 1/8
Third Quarter 2 7/8 1 1/4
Fourth Quarter 2 1 1/4
1996
First Quarter 6 5/8 5 1/8
Second Quarter 7 7/16 5 1/8
Third Quarter 6 15/16 4 7/8
Fourth Quarter 5 1/4 2 3/8
Holders
At June 16, 1997, there were 973 holders of record of the shares of common
stock.
<PAGE>
Dividends
The Company discontinued the payment of quarterly dividends during the
first quarter of the fiscal year ended March 31, 1993. Since that time,
the Company has not declared or paid any cash dividends on its shares of
Common Stock, and does not anticipate paying such dividends in the
foreseeable future. The Company's long-term debt agreements contain
certain conditions and provisions which restrict the Company's payment of
dividends. At March 31, 1997, all of the Company's retained earnings were
restricted as to the payment of cash dividends.
For information regarding restriction of the payment of cash dividends, see
Note D to Notes to Consolidated Financial Statements for the year ended
March 31, 1997, contained in Item 8 of this Form 10-K.
Recent Sales of Unregistered Securities
During the past three years, Registrant sold securities which were not
registered under the Securities Act of 1933, as amended, as described
below. The securities of Registrant were sold in reliance on the exemption
from registration contained in Section 4(2) of the Securities Act of 1933,
as amended. No underwriters were involved in the sale of the securities
and no commissions were paid to any person.
<TABLE>
Price Date
per of Nature of
Title and Amount Share Purchaser Sale Transaction
<S> <C> <C> <C> <C>
$9,841,805.00 Amended Promissory State of Wisconsin July 1996 Amended and Restated
and Restated Senior Note Investment Board Promissory Note in
Secured Note Due connection with
January 15, 2000 previous financings
$12,185,032.27 Amended Promissory Nationwide Life July 1996 Amended and Restated
and Restated Senior Note Insurance Company Promissory Note in
Secured Note Due connection with
January 15, 2000 previous financings
$1,782,582.17 Amended Promissory Employers Life July 1996 Amended and Restated
and Restated Senior Note Insurance Company Promissory Note in
Secured Note Due of Wausau connection with
January 15, 2000 previous financings
$891,585.31 Amended Promissory West Coast Life July 1996 Amended and Restated
and Restated Senior Note Insurance Company Promissory Note in
Secured Note Due connection with
January 15, 2000 previous financings
Warrants to purchase $2.25 State of Wisconsin July 1996 Warrants issued in
996,876 shares of Investment Board connection with
Common Stock amendments to a
promissory note,
price per share is
exercise price per
warrant share
Warrants to purchase $2.25 Nationwide Life July 1996 Warrants issued in
986,562 shares of Insurance Company connection with
Common Stock amendments to a
promissory note,
price per share is
exercise price per
warrant share
Warrants to purchase $2.25 Employers Life July 1996 Warrants issued in
144,374 shares of Insurance Company connection with
Common Stock of Wausau amendments to a
promissory note,
price per share is
exercise price per
warrant share
Warrants to purchase $2.25 West Coast Life July 1996 Warrants issued in
72,188 shares of Insurance Company connection with
Common Stock amendments to a
promissory note,
price per share is
exercise price per
warrant share
/TABLE
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
<CAPTION>
Years ended March 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $184,850 $206,251 $231,422 $256,145 $281,382
Other revenues 91 147 517 4,691 2,145
Total net revenues 184,941 206,398 231,939 260,836 283,527
Cost of products sold 153,139 175,865 186,814 216,392 249,982
Selling, general and
administrative expenses 28,446 36,672 33,617 36,476 42,139
Nonrecurring charge <F1><F2> 13,529 12,500 - - 21,145
Operating earnings(loss) (10,173) (18,639) 11,508 7,968 (29,739)
Interest expense 10,750 10,182 10,796 12,710 12,721
Earnings (loss) before
income taxes (credits)and
cumulative effect of
change in accounting
principle (20,923) (28,821) 712 (4,742) (42,460)
Income taxes (credits) - - 142 (2,527) (12,983)
Earnings (loss) before
cumulative effect of
change in accounting
principle (20,923) (28,821) 570 (2,215) (29,477)
Cumulative effect of change
in method of accounting for
postretirement benefits (net
of income taxes of $850) <F3> - - - - (1,650)
Net earnings (loss) $(20,923) $(28,821) $ 570 $ (2,215) $(31,127)
COMMON STOCK DATA
Net earnings (loss)
per share <F1><F2><F3> $ (1.84) $ (2.54) $ .06 $ (.27) $(3.75)
Stockholders' equity
per share $ .78 $ 2.61 $ 5.15 $3.92 $4.18
Average shares out-
standing (thousands) 11,360 11,326 9,336 8,320 8,302
Shares outstanding at
year-end (thousands) 11,374 11,326 11,325 8,325 8,316
<FN>
<F1> For the nonrecurring charge in fiscal 1997 and fiscal 1996 see Note J to Notes to
Consolidated Financial Statements. The charges accounted for $1.19 and $1.10 in
fiscal 1997 and fiscal 1996, respectively, of the loss per share reported.
<F2> In connection with a Company restructuring plan, the Company sold, closed or down-
sized certain processing facilities, resulting in a nonrecurring charge during
fiscal 1993 from the write-down of such processing facilities, equipment and
inventories to their estimated net realizable value and from provisions for
severance, consolidation costs and plant closing costs. This charge resulted in a
loss per share of $2.54.
<F3> Fiscal 1993 includes a $.20 per share loss due to post-retirement benefits
accounting method change.
</FN>
</TABLE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
(Dollars in thousands except per share data)
<CAPTION>
Years ended March 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
BALANCE SHEET AND FINANCIAL DATA
Working capital $ 36,432 $ 48,418 $ 68,052 $ 42,071 $ 40,626
Current ratio 1.72 1.74 2.69 2.03 1.38
Property, plant and
equipment - net 40,469 57,501 68,597 67,356 68,419
Depreciation 5,979 8,190 7,508 7,230 9,286
Capital expenditures 3,220 7,521 6,421 5,174 12,871
Total assets 130,742 175,721 181,294 158,535 232,843
Long-term debt 68,041 77,230 78,497 80,438 82,854
Stockholders' equity 8,807 29,567 58,378 32,640 34,777
/TABLE
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company's financial performance and growth are directly related to
certain characteristics and trends in the vegetable processing industry.
The United States vegetable processing industry is a mature industry.
Therefore, any significant sales growth that may be experienced by the
Company likely would come at the expense of the loss of market share by
another processor, but also may occur through efforts designed to promote
increased consumption, such as through the introduction of new or improved
products or through increased sales internationally.
The Company's net sales are affected by product availability and market
pricing. In the vegetable processing industry, product availability and
market prices tend to have an inverse relationship: market prices tend to
decrease as more product is available, whereas if less product is
available, market prices tend to increase. Selling prices of canned and
frozen products are a direct result of industry product supply, which
correlate to plantings, growing conditions, crop yields and inventories,
all of which may vary from year to year. In addition, price can be
affected by the planting, inventory level and individual pricing decisions
of the three or four largest processors in the industry. Generally, the
market prices in the vegetable processing industry tend to adjust more
quickly to variations in product availability than an individual processor
can adjust its cost structure; thus, in an oversupply situation, a
processor's margins likely will weaken, as suppliers generally are not able
to adjust their cost structure as rapidly as market prices adjust for the
oversupply. The Company typically has experienced lower margins during
times of industry oversupply. There can be no assurance the Company's
margins will improve in response to favorable market conditions.
Nonrecurring Charge
During the second quarter of fiscal 1997, the Company announced a major
restructuring of its core canned vegetable business. The action was
designed to improve operating margins in the Company's core business. The
margin improvement initiatives involve a combination of customer value
analysis, production consolidation and related reductions in general and
administrative areas. Six of the Company's nine processing facilities were
affected by the consolidation moves, with two facilities being closed, two
facilities downsized and two facilities expanded. The consolidation moves
are expected to increase efficiency while installation of some of the
latest automated inspection equipment in the expanded facilities should
further enhance product quality and lower product costs. The Company also
sold its headquarters building and relocated its headquarters to a new
leased facility during the fourth quarter of fiscal 1997. The total charge
recorded by the Company in fiscal 1997 for the above actions and the write-
off of deferred debt costs was $13.5 million. See Note J of Notes to
Consolidated Financial Statements for a further discussion of the non-
recurring charges.
In the fourth quarter of fiscal 1996, the Company recorded a nonrecurring
charge of $12.5 million related to the Company's decision to exit the
frozen vegetable business. Sharply declining frozen operating margins in
fiscal 1996 caused primarily by excess frozen industry inventory coupled
with excess capacity in the frozen vegetable industry were major factors in
the decision to cease processing operations of the Company's frozen
business unit. In conjunction with that decision, the Company reached an
agreement with three third parties for the sale of two frozen processing
plants, located in the state of Washington, and substantially all its
frozen business inventory. The sale of the two plants was completed in the
second fiscal quarter of 1997. A third plant representing less than 10% of
the Company's total frozen capacity remains for sale. The nonrecurring
charge of $12.5 million, a major portion of which is non-cash, will cover
costs associated with the sale of its three frozen processing plants and
related inventories. The frozen business sales approximated 15% and 20% of
the Company's 1997 and 1996 fiscal year sales, respectively. The sale
proceeds of the frozen plant facilities and related inventory were used to
pay down long-term debt and reduce working capital requirements. The
frozen plants formerly employed approximately 400 full-time and seasonal
employees. The exit from the frozen business will allow the Company to
concentrate on its core business of canned vegetables. See also Note J of
Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31,
1996
Net Earnings (Loss)
The net loss for the fiscal year ended March 31, 1997 was $20.9 million
compared to a net loss of $28.8 million for the previous year. Excluding
the nonrecurring charges of $13.5 million in fiscal 1997 and $12.5 million
in fiscal 1996, results improved $8.9 million. This improvement was
primarily due to an improved selling environment for canned vegetable sales
and to cost reductions resulting from the Company's restructurings in
fiscal 1997 and 1996.
Net Sales
Net sales in fiscal 1997 decreased $21.4 million, or 10.4%, to $184.9
million from $206.3 million in fiscal 1996. Frozen sales decreased $11.1
million to $27.0 million in fiscal 1997 from $38.1 million in fiscal 1996,
as the Company completed its exit from the frozen vegetable business in
fiscal 1997. Total canned vegetable sales decreased $10.3 million, or
6.1%, to $157.9 million in fiscal 1997 from $168.2 million in fiscal 1996.
The decline in total canned vegetable sales was the result of a $17.8
million reduction in sales volume partially offset by a $7.5 million
increase in average selling prices.
The decrease in sales volume and increase in average selling prices appear
to have been initially caused by weather related delays in last summer's
production which created lower available inventories and concerns regarding
product availability later in the fiscal year. These concerns over product
availability and related pricing increases appear to have resulted in lower
trade promotion activity at the retail level and lower category consumption
than experienced historically during the third fiscal quarter. However,
the anticipated production shortfall did not materialize and that, in
combination with reduced consumption, resulted in excess inventory levels
and declining selling prices during the fourth quarter of fiscal 1997.
Cost of Products Sold
Cost of products sold decreased $22.8 million, or 13.0%, to $153.1 million
in fiscal 1997 from $175.9 million in fiscal 1996. The decrease in cost of
products sold was due primarily to the lower sales volume in both the
canned and frozen divisions. Cost of products sold as a percentage of net
sales decreased by 2.5% to 82.8% in fiscal 1997 compared to 85.3% in fiscal
1996. This decrease is due primarily to the improvement in average selling
prices associated with canned vegetable sales, partially offset by lower
selling prices associated with the liquidation of the frozen vegetable
inventory.
Selling, General and Administrative Expense
Selling, general and administrative expenses decreased by $8.3 million, or
22.6%, to $28.4 million in fiscal 1997 from $36.7 million in fiscal 1996.
This decrease is primarily the result of reduced selling expenses
associated with the decrease in canned vegetable sales and cost reduction
initiatives taken as part of the Company's restructurings in fiscal 1996
and 1997. Selling, general and administrative expenses as a percentage of
net sales were 15.4% in fiscal 1997 compared to 17.8% in fiscal 1996.
Interest Expense
Interest expense increased $0.6 million or 5.9%, to $10.8 million in fiscal
1997 compared to $10.2 million in fiscal 1996. This increase was primarily
due to higher average borrowing levels on the Company's revolving credit
facility.
Income Taxes
In fiscal 1997, no income tax expense or benefit was recorded. The tax
benefit of the pre-tax operating loss of fiscal 1997 was offset by a
corresponding increase in the valuation allowance of allowable tax
benefits. At March 31, 1997, the Company had net operating loss
carryforwards of $59.5 million and tax credit carryforwards of $2.9
million, which are available to reduce and/or offset future tax
liabilities.
<PAGE>
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended March 31,
1995
Net Earnings (Loss)
The net loss for the fiscal year ended March 31, 1996 was $28.8 million
compared to net income of $0.6 million for the previous year. The decline
in earnings in fiscal 1996, excluding the nonrecurring charge of $12.5
million as a result of the Company's decision to exit the frozen vegetable
business, was primarily due to decreased margins, particularly in the
frozen vegetable business, and increases in canned selling and promotional
expenses due to the depressed market conditions that prevailed for most of
fiscal 1996.
Net Sales
Net sales in fiscal 1996 decreased $25.1 million, or 10.8%, to $206.3
million from $231.4 million in fiscal 1995. The reduction in sales was due
primarily to a decline in frozen vegetable sales volume, a decline in
frozen vegetable prices and lower canned sales volume in the last half of
fiscal 1996 caused primarily by lower available inventories due to lower
planted acreage and a poor growing season during fiscal 1996. These volume
and pricing shortfalls were only partially offset by slightly higher
average pricing for canned vegetables.
Total canned vegetable sales decreased $6.9 million, or 3.9%, to $168.2
million in fiscal 1996 from $175.1 million in fiscal 1995. The decline in
total canned vegetable sales was the result of an $8.8 million reduction in
sales volume partially offset by a $1.9 million increase in sales due to
higher pricing.
Selling prices increased moderately in fiscal 1996 compared to fiscal 1995
primarily in response to last summer's lower production volume due to
reduced planted acreage and poor growing and harvesting conditions. The
Company believed that reduced industry production in the summer of 1995
resulted in more normal industry inventory levels. However, market
conditions did not substantially rebound as anticipated, indicating other
market forces were at work which continued to depress selling prices and
caused the Company to increase selling and promotion expenses in order to
respond to competitive pricing pressure. The Company believed these market
conditions may be the result of inventory distribution imbalances within
the industry, extremely competitive market conditions, including aggressive
pricing strategies of some industry participants, and the emergence of
large volume customers and the effects of their buying power.
Total frozen sales declined $18.2 million, or 32.3%, to $38.1 million in
fiscal 1996 compared to $56.3 million in fiscal 1995. The decline in sales
was the result of a $14.9 million reduction in sales volume, and a $3.3
million decrease in sales due to lower pricing. The decrease in sales
volume and pricing in fiscal 1996 reflects the general decline in the
frozen vegetable markets due to excess industry inventories and excess
industry production capacity causing an extremely competitive market
climate and sharply lower margins. These factors led to the Company's
decision announced in February 1996 to exit the frozen business.
Cost of Products Sold
Cost of products sold decreased $10.9 million, or 5.8%, to $175.9 million
in fiscal 1996 from $186.8 million in fiscal 1995. The decrease in cost of
products sold was due primarily to the lower sales volume in both the
canned and frozen divisions. Cost of products sold as a percentage of net
sales increased by 4.6% to 85.3% in fiscal 1996 compared to 80.7% in fiscal
1995. The increase in cost of products sold as a percent of sales is due
to increases in certain cost components, including containers and packaging
costs, and proportionate increases in the fixed cost component of product
costs due primarily to lower canned production volume caused by reduced
planted acreage and weather extremes during the summer of 1995.
Selling, General and Administrative Expense
Selling, general and administrative expenses increased by $3.1 million, or
9.2%, to $36.7 million in fiscal 1996 from $33.6 million in fiscal 1995.
Selling, general and administrative expenses as a percentage of net sales,
increased by 3.3% to 17.8% in fiscal 1996 compared to 14.5% in fiscal 1995.
These increases resulted primarily from a $2.0 million increase in variable
selling and promotion expense incurred in response to competitive pricing
pressures prevailing for most of fiscal 1996. General and administrative
expenses also increased $0.5 million as a result of legal costs incurred in
defense of two shareholder suits stemming from the November 1994 common
stock offering. See also Note I of Notes to Consolidated Financial
Statements.
Interest Expense
Interest expense decreased $0.6 million or 5.6%, to $10.2 million in fiscal
1996 compared to $10.8 million in fiscal 1995. This reduction was
primarily the result of lower revolving credit borrowing rates from a new
revolving credit facility entered into in early fiscal 1996 offset in part
by higher average borrowing levels.
Income Taxes
In fiscal 1996, no income tax expense or benefit was recorded. The tax
benefit of the pre-tax operating loss of fiscal 1996 was offset by a
corresponding increase in the valuation allowance of allowable tax
benefits. At March 31, 1996, the Company had net operating loss
carryforwards of $41.9 million and tax credit carryforwards of $2.9
million, which are available to reduce and/or offset future tax
liabilities.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY AND CAPITAL RESOURCES
General
Due to the seasonal production nature of the canned (and frozen) vegetable
processing business, the Company must maintain substantial inventories of
processed vegetables throughout the year. The working capital requirements
associated with producing and maintaining such inventories are financed
primarily through short-term borrowings and deferred payment terms with
major suppliers. The maximum amount of short-term borrowings in fiscal
1997 was $65.6 million compared to $65.4 million in fiscal 1996 and $59.7
million in fiscal 1995. Management believes that cash from operations and
its revolving credit facility will provide the Company with liquidity
sufficient to meet its operating and capital needs.
On May 21, 1996, the Company entered into a revolving credit agreement with
a commercial lender which provides for borrowings up to $70 million. The
agreement provides for an expanded collateral borrowing base, lower
interest rates and less restrictive financial and operating covenants than
the former agreement. The Company believes the new revolving credit
agreement will be adequate to meet the Company's seasonal borrowing needs.
Maximum revolving credit borrowings projected for fiscal 1998 are
approximately $55 million. For a more detailed description, see Note D of
Notes to Consolidated Financial Statements.
In addition to the revolving credit facility, the Company has various long-
term debt obligations, which aggregated $68.0 million at March 31, 1997,
excluding current maturities of $2.6 million. Included in the long-term
debt obligations are two senior notes totaling $17.2 million, various
Industrial Development Revenue Bonds totaling $25.3 million and $25.5
million of revolving credit notes which are not expected to be repaid
currently and are classified as long-term. See Note D of Notes to
Consolidated Financial Statements.
The senior note agreements were amended July 25, 1996. The amended
agreements provide that the note holders receive interest at 11%, payable
quarterly, plus 3% capitalized interest payable at maturity of the amended
agreements on January 15, 2000. The amended agreements also provide for
adjustments to the interest rates on July 25, 1998 based upon the Company
attaining certain reductions in the principal balance of the senior notes.
In addition, the Company issued warrants to the senior note holders in
consideration for amending the applicable note agreements. The warrants
entitle the holders to purchase an aggregate of 2,200,000 shares of common
stock through July 25, 2006 at a price per share equal to $2.25. The
number of shares covered by the warrants are subject to reduction upon the
Company attaining certain reductions in the principal balance of the senior
notes. The note holders' expenses related to the amended agreements also
were paid. The amended agreements require the Company to maintain certain
financial covenants including a minimum tangible net worth of $4.8 million
and a minimum current ratio of 1.25 to 1.00.
As a result of the nonrecurring charge recorded by the Company during the
quarter ended September 30, 1996, the Company was in violation of certain
financial and other covenants in most of its Industrial Development Revenue
Bonds. These covenant violations were waived and the covenants amended.
The financial covenants require the Company to maintain a minimum tangible
net worth of $4.8 million and a minimum current ratio of 1.25 to 1.00.
Cash Flows from Operating Activities
Cash provided by operations during fiscal 1997 totaled $17.3 million. Of
the total cash provided, changes in operating assets and liabilities
provided cash of $18.0 million, primarily due to a decrease in accounts
receivable of $6.3 million, a decrease in inventory of $11.0 million, and
an increase in accounts payable of $7.9 million, partially offset by a
decrease in restructure liabilities. The decrease in accounts receivable
of $6.3 million is due to a decrease in sales in the quarter ended
March 31, 1997 compared to a year ago. The increase in accounts payable of
$7.9 million is due primarily to extended terms negotiated with various
vendors and increases in deferred revenues. The decrease in inventory of
$11.0 million is due primarily to the liquidation of frozen vegetable
finished goods inventory partially offset by an increase of $15.9 million
in canned inventory caused by lower sales volume in fiscal 1997.
Cash used in operations during fiscal 1996 totaled $5.9 million. Of the
total cash used, changes in operating assets and liabilities provided cash
of $2.2 million, primarily due to a decrease in accounts receivable of $8.5
million and an increase in accounts payable of $7.9 million, partially
offset by an increase in inventory of $12.8 million less cash used in
operations totaling $8.1 million. The decrease in accounts receivable of
$8.5 million is due to a decrease in sales in the quarter ended March 31,
1996 compared to a year ago. The increase in accounts payable of $7.9
million is due to deferral of certain vendor payments to the first quarter
of fiscal 1997 while the new revolving credit agreement was being
finalized. The increase in inventory of $12.8 million is due primarily to
higher frozen vegetable finished goods at March 31, 1996 caused by lower
sales volume in fiscal 1996.
Cash used in operations during fiscal 1995 totaled $19.8 million. Of the
total cash used, changes in operating assets and liabilities used cash of
$29.5 million, primarily due to an increase in inventory of $24.1 million
and an increase in accounts receivable of $4.6 million, partially offset by
cash generated from operations totaling $9.7 million. The increase of
$24.1 million in inventory levels primarily reflects the contrast of the
fiscal 1994 and 1995 summer processing seasons. Inventory levels during
fiscal 1994 were unusually low due to the poor growing and harvesting
conditions of the summer of 1993 in contrast to inventory levels during
fiscal 1995 which were higher due to favorable growing conditions during
the summer of 1994. The increase in accounts receivable of $4.6 million is
due to an increase in sales in the quarter ended March 31, 1995, compared
to the previous year.
Cash Flows from Investing Activities
Net cash provided by (used in) investing activities during fiscal 1997,
1996 and 1995 was $10.6 million, $(5.5) million and $(4.9) million,
respectively. Purchase of property, plant and equipment was $3.2 million,
$7.5 million and $6.4 million during fiscal 1997, 1996 and 1995,
respectively.
Major capital expenditures during fiscal 1997 related to capacity
consolidation at Scottville, Michigan and Sun Prairie, Wisconsin. The
Company received $13.7 million in additional cash flow from the sale of the
frozen processing plants and the sale of the Oconomowoc headquarters.
Proceeds from these sales were primarily used to pay down long-term debt.
Major capital expenditures during fiscal 1996 related to the completion of
the new management information system installed August 1, 1995, additional
investments in product quality control equipment at various processing
plants, and the completion of the capacity consolidation at the Waunakee,
Wisconsin facility.
In fiscal 1996, the Company received $2.3 million in additional cash flow
from the sale of two previously idled processing plants and a warehouse.
Proceeds from these facility sales were used to pay down long-term debt.
Capital expenditures during fiscal 1995 were primarily related to the
capacity consolidation at the Waunakee, Wisconsin facility, investment in
product quality control equipment at several processing plants, and the
initial phase of a new management information system.
Cash Flows from Financing Activities
At March 31, 1997, the Company decreased its revolving credit borrowings by
$11.8 million to $41.1 million primarily due to cash provided by changes in
asset and liabilities discussed earlier. At March 31, 1997, the Company
had $41.1 million of revolving credit borrowings, of which $25.5 million
was classified as long-term and $15.6 million was classified as short-term.
At March 31, 1996, the Company increased its revolving credit borrowings by
$15.6 million to $52.9 million. The net increase in revolving credit
borrowings was used primarily to fund capital expenditures of $7.5 million
and fiscal 1996 operating losses. At March 31, 1996, the Company had $52.9
million of revolving credit borrowings, of which $33.0 million was
classified as long-term and $19.9 million was classified as short-term.
Litigation
The Company is involved from time to time in various legal actions and
claims. For a discussion of current matters, see "Item 3. Legal
Proceedings" and Note I of Notes to Consolidated Financial Statements.
Impact of Inflation
Current financial statements are prepared in accordance with generally
accepted accounting principles and report operating results in terms of
historical costs. They provide a reasonable, objective, quantifiable
statement of financial results but do not evaluate the impact of inflation.
Competitive conditions permitting, the Company modifies its selling prices
to recognize cost changes as incurred. Management believes the impact of
inflation does not distort the Company's financial statements since prices
are determined by supply and demand.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable until after June 15, 1998.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Stokely USA, Inc.:
We have audited the accompanying consolidated balance sheets of Stokely
USA, Inc. and subsidiaries as of March 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended March 31, 1997. Our audits
also included the consolidated financial statement schedule listed in the
Index at Item 14(a). These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Stokely USA, Inc. and
subsidiaries as of March 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, such consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Deloitte & Touche, LLP
Milwaukee, Wisconsin
June 19, 1997
<PAGE>
Stokely USA, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
ASSETS - Note D
March 31,
(Dollars in thousands) 1997 1996
CURRENT ASSETS:
Cash and cash equivalents - Note A $ 1,660 $ 777
Accounts receivable, less allowance for
losses ($508 and $570, respectively) 10,634 16,975
Inventories - Notes A, B and J 73,785 85,404
Prepaid expenses 728 1,417
Property held for disposition - Note J 537 9,500
TOTAL CURRENT ASSETS 87,344 114,073
OTHER ASSETS - Notes A and C 2,929 4,147
PROPERTY, PLANT AND EQUIPMENT, at cost - Note A
Land and land improvements 2,839 2,973
Buildings 18,825 27,217
Machinery and equipment 51,448 60,952
73,112 91,142
Less accumulated depreciation 32,643 33,641
40,469 57,501
TOTAL ASSETS $130,742 $175,721
See Notes to Consolidated Financial Statements.
<PAGE>
Stokely USA, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
(Dollars in thousands) 1997 1996
CURRENT LIABILITIES:
Notes payable - Note D $ 15,551 $ 19,887
Accounts payable 29,311 21,365
Accrued compensation and withholdings 1,426 2,546
Other accrued liabilities - Note J 2,040 6,707
Current maturities on long-term debt - Note D 2,584 15,150
TOTAL CURRENT LIABILITIES 50,912 65,655
LONG-TERM DEBT, less current maturities
- Note D 68,041 77,230
OTHER LIABILITIES - Notes F and G 2,982 3,269
STOCKHOLDERS' EQUITY - Notes D and H
Preferred stock - no par value, authorized
1,000,000 shares, none issued
Common stock - $.05 par value, authorized
20,000,000 shares, issued 11,435,195 572 572
Additional paid-in capital 43,593 43,683
Retained earnings (34,993) (14,070)
9,172 30,185
Less treasury stock at cost
(61,375 and 108,754 shares, respectively) (373) (618)
Cumulative translation adjustments 8 -
8,807 29,567
COMMITMENTS AND CONTINGENCIES - Note I
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $130,742 $175,721
See Notes to Consolidated Financial Statements.
<PAGE>
Stokely USA, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
Years ended March 31,
1997 1996 1995
REVENUES:
Net sales $184,850 $206,251 $231,422
Other 91 147 517
TOTAL REVENUES 184,941 206,398 231,939
COSTS AND EXPENSES:
Cost of products sold 153,139 175,865 186,814
Selling, general and
administrative expenses 28,446 36,672 33,617
Nonrecurring charge - Note J 13,529 12,500 -
Interest 10,750 10,182 10,796
TOTAL COSTS AND EXPENSES 205,864 235,219 231,227
EARNINGS (LOSS) BEFORE INCOME
TAXES (20,923) (28,821) 712
INCOME TAXES - Note E - - 142
NET EARNINGS (LOSS) $(20,923) $(28,821) $ 570
PER SHARE AMOUNTS:
NET EARNINGS (LOSS) PER SHARE OF
COMMON STOCK $ (1.84) $ (2.54) $ .06
WEIGHTED AVERAGE SHARES
OUTSTANDING 11,360,413 11,326,245 9,335,604
See Notes to Consolidated Financial Statements.<PAGE>
<TABLE>
Stokely USA, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Foreign
Additional Currency
Common Stock Paid-In Retained Treasury Stock Translation
Shares Amount Capital Earnings Shares AmountAdjustment
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
March 31, 1994 8,435,195 $422 $18,665 $14,181 110,550 $(628)
Net earnings 570
Common stock
offering, net
- Note H 3,000,000 150 25,018
Balances,
March 31, 1995 11,435,195 572 43,683 14,751 110,550 (628)
Net loss (28,821)
Stock issued (1,796) 10
Balances,
March 31, 1996 11,435,195 572 43,683 (14,070) 108,754 (618)
Net loss (20,923)
Stock issued (90) (47,379) 245
Translation
adjustments $ 8
Balances,
March 31, 1997 11,435,195 $572 $43,593 $(34,993) 61,375 $(373) $ 8
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
Stokely USA, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31,
(Dollars in thousands) 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(20,923) $(28,821) $ 570
Adjustments to net earnings (loss):
Depreciation 5,979 8,190 7,508
Deferred income taxes - (142) 142
Amortization of trademarks 40 79 79
Amortization of deferred debt
issuance costs 640 536 1,649
Nonrecurring charge 13,529 12,500 -
Gains on disposal of property,
plant and equipment 1 (461) (256)
(734) (8,119) 9,692
Changes in operating assets and
liabilities:
Accounts receivable 6,341 8,484 (4,642)
Inventories 11,019 (12,765) (24,133)
Prepaid expenses 689 788 1,757
Accounts payable 7,946 7,911 (413)
Accrued compensation and withholdings (1,120) (469) (50)
Other liabilities (6,857) (1,755) (2,011)
18,018 2,194 (29,492)
Net cash provided by (used in)
operating activities 17,284 (5,925) (19,800)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (3,220) (7,521) (6,421)
Proceeds from sales of property,
plant and equipment 13,656 2,328 863
Other - net 180 (332) 672
Net cash provided by (used in)
investing activities 10,616 (5,525) (4,886)
See Notes to Consolidated Financial Statements.
<PAGE>
Stokely USA, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended March 31,
(Dollars in thousands) 1997 1996 1995
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (net) $(11,836) $ 596 $ 1,299
(Payments) borrowings of long-term debt (14,255) 11,347 (3,273)
Payments of deferred debt
issuance costs (1,081) (903) (229)
Issuance of common stock 155 10 25,168
Exercise of stock options - - -
Net cash (used in) provided by
financing activities (27,017) 11,050 22,965
Net increase (decrease) in cash
and cash equivalents 883 (400) (1,721)
Cash and cash equivalents,
beginning of year 777 1,177 2,898
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,660 $ 777 $ 1,177
See Notes to Consolidated Financial Statements.
<PAGE>
Stokely USA, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended March 31, 1997, 1996 and 1995
Note A
Description of Company Business and Summary of Significant Accounting
Policies:
Stokely USA, Inc. and its subsidiaries (the "Company") are engaged
primarily in the processing, marketing and distribution of both branded and
private label canned vegetables, which management considers to be a single
segment.
Consolidation - The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash Equivalents - The Company considers all highly liquid investments with
original purchased maturities of three months or less to be cash
equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
has been determined using the average cost method.
Deferred Debt Issuance Costs - Debt issuance costs are being amortized
using the straight-line or interest method over the life of the related
debt issue.
Depreciation - Depreciation of plant and equipment is provided over the
estimated useful lives (land improvements - 10 years; buildings - 20-40
years; and machinery and equipment - 3-12 years) of the respective assets
using the straight-line method.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Reclassification - Certain amounts have been reclassified to conform to the
current year presentation.
Note B
Inventories:
Inventories (in thousands) consisted of the following:
Finished Manufacturing
Goods Supplies Total
March 31, 1997 $68,861 $4,924 $73,785
March 31, 1996 78,922 6,482 85,404
Note C
Other Assets:
Other assets (in thousands) consisted of the following:
March 31,
1997 1996
Property held for disposition - Note J $1,022 $ 993
Trademarks - 680
Other 1,907 2,474
$2,929 $4,147
Trademarks were written off as part of the fiscal 1997 restructure charge
as discussed in Note J of Notes to Consolidated Financial Statements.
Trademark accumulated amortization was $929,000 at March 31, 1996.
Included in other assets are unamortized deferred debt issuance costs of
$994,000 and $1,382,000 at March 31, 1997 and 1996, respectively. The
accumulated amortization was $939,000 and $746,000, respectively, at
March 31, 1997 and 1996.
Note D
Notes Payable and Long-Term Debt:
Long-term debt (in thousands) consisted of the following:
March 31,
1997 1996
Senior notes due January 2000 $19,630 $33,735
Revolving credit notes 25,500 33,000
Industrial Development Revenue Bonds:
7.75% to 8.92% 23,245 23,245
3.875% Variable 2,250 2,400
70,625 92,380
Less current maturities on long-term debt (2,584) (15,150)
$68,041 $77,230
On May 21, 1996, the Company entered into a loan and security agreement
with a commercial lender which provides for borrowings up to $70,000,000 as
revolving credit loans and matures on May 20, 1998. Revolving credit loans
under the facility may, at the Company's election, be either Domestic rate
loans or Eurodollar loans as declared at the time of borrowing. Interest
rates on Domestic rate loans are at prime rate plus .75%. Interest on
Eurodollar loans will vary depending on the adjusted Eurodollar rate plus
3.25% at the time of borrowing. The agreement requires a commitment fee at
a rate of .25% per annum on the unused portion of the commitments. The
credit agreement generally restricts borrowings to an amount equal to 85%
of eligible accounts receivable plus 70% of eligible inventory, as defined
in the agreement. The Company paid customary arrangement and closing fees
upon the execution of the new credit agreement.
Covenants contained in the credit agreement place limitations on liens,
disposition of assets, payment of dividends and the ability to incur
additional debt. In addition to the covenants under this loan and security
agreement, the Company also has similar covenants under various other debt
agreements.
The senior note agreements were amended on July 25, 1996. The senior note
agreements, as amended, provide that the note holders receive interest at
11% (weighted average interest of 9.52% in 1996 and 1995), payable
quarterly, plus 3% capitalized interest payable at maturity of the
agreements on January 15, 2000. The amended agreements provide for
adjustments to the interest rates on July 25, 1998 based upon the Company
attaining certain additional reductions in the principal balance of the
senior notes. In addition, the Company issued warrants to the senior note
holders. The warrants entitle the holders to purchase an aggregate of
2,200,000 shares of common stock through July 15, 2006 at a price per share
equal to $2.25. The number of shares covered by the warrants are subject
to reduction upon the Company attaining certain reductions in the principal
balance of the senior notes. The note holders' expenses related to the
amended agreements also were paid. The amended agreements require the
Company to maintain certain financial covenants including a minimum
tangible net worth of $4,816,000 and a minimum current ratio of 1.25 to
1.00.
The senior note agreements contain cross-default provisions. Such cross-
default provisions specify that a default on any other debt agreement is
also an event of default under the agreement containing the cross-default
provision. In addition, the new revolving credit agreements and the senior
note agreements contain clauses which give the holders the right to
accelerate the maturity date of the obligation if any other debt obligation
owed by the Company is accelerated or payment is demanded other than in
accordance with the stated maturity dates.
Substantially all of the assets of the Company are pledged as collateral
under the various debt agreements.
At March 31, 1997, $15,551,000 of revolving credit loans payable were
classified as short-term, reflecting the Company's intent to repay this
amount of revolving credit borrowings during fiscal 1998. The interest
rate on the outstanding revolving credit loans under the existing credit
agreement (including the amounts classified as long-term) at March 31,
1997, was 9.25%.
The stated aggregate amounts of scheduled maturities on long-term debt each
year for the five years subsequent to March 31, 1997, are as follows: 1998
- - $2,584,000; 1999 - $32,898,000; 2000 - $14,163,000; and 2001 - $150,000
and 2002 - $4,730,000.
Revolving credit loans payable at March 31, 1997, and 1996, under the
Company's then existing credit agreement approximated estimated fair value
because the interest rate is based on a banks' specified reference rate.
The senior notes, after considering the terms of the amended agreement,
approximated estimated fair value at March 31, 1997 and 1996. Management
of the Company has estimated the fair value of the Industrial Development
Revenue Bond issues to be approximately $25,009,000 and $25,159,000 at
March 31, 1997 and 1996, respectively.
Note E
Income Taxes:
Income taxes (in thousands) consisted of the following:
Years Ended March 31,
1997 1996 1995
Currently payable (refundable):
Federal - - -
State - $ 142 -
Deferred - Federal - (142) $142
$ 0 $ 0 $142
Total income taxes (credits) differ from the amounts computed by applying
the Federal income tax rate to income (loss) before income taxes. The
following table provides a reconciliation between the United States
statutory rate to the effective tax rate reported:
Years ended March 31,
1997 1996 1995
U.S. statutory rate 34.0% 34.0% 34.0%
State income taxes net of federal
income tax benefits - .5 -
Increase in valuation allowance (34.0) (35.1) -
Benefit of net operating loss
carryforwards - - (14.0)
Other items - net - .6 -
Effective tax rate 0.0% 0.0% 20.0%
Deferred income taxes are calculated using an asset and liability method,
which generally requires the recognition of the tax consequences on future
years of events which have been recognized in financial statements. In
addition, a valuation allowance is to be recognized if it is more likely
than not that some or all of a deferred tax asset will not be realized.
The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized due to the
uncertainty of fully utilizing operating losses and tax credit
carryforwards.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes,
and (b) net operating loss and tax credit carryforwards. Significant
components of the Company's net deferred tax liability are as follows (in
thousands):
<PAGE>
Years ended March 31,
1997 1996
Deferred tax assets:
Reserves not currently deductible $ 1,335 $ 1,276
Provision for nonrecurring charge 3,002 3,663
Postretirement benefits 531 931
Tax credit carryforwards 2,937 2,937
Net operating loss carryforwards 20,234 14,255
Valuation allowance (20,178) (13,063)
Total deferred tax assets $ 7,861 $ 9,999
Deferred tax liabilities:
Change in method of inventory valuation $ 612 $ 918
Deferred casualty gain - -
Tax over book depreciation 7,195 8,850
Other 54 231
Total deferred tax liabilities 7,861 9,999
Net deferred tax (liability) $ 0 $ 0
At March 31, 1997, the Company had an alternative minimum tax credit
carryforward of approximately $1,916,000 which may be carried forward
indefinitely, and a general business credit carryforward of approximately
$1,021,000 which expires in various years from 2003 to 2010. At March 31,
1997, the Company had net operating loss carryforwards of approximately
$59,512,000 which expire in the years 2009 through 2012.
Note F
Other Liabilities:
Other liabilities (in thousands) consisted of the following:
March 31,
1997 1996
Postretirement benefits - Note G $1,560 $1,613
Deferred compensation 1,422 1,656
$2,982 $3,269
<PAGE>
Note G
Employees' Retirement Plan And Other Benefit Plans:
The Company provides certain postretirement health care benefits and life
insurance benefits to certain existing retired employees. The benefits and
eligibility requirements varied by location and various union agreements.
The Company funds benefit expenses on a pay-as-you-go basis. Existing
employees are not entitled to postretirement health care benefits. The
medical benefits are generally subject to lifetime maximum benefits of
$750,000 and after age 65 are coordinated with Medicare.
The following table sets forth the plan's status reconciled with amounts
recognized in the balance sheet:
March 31,
(Dollars in thousands) 1997 1996
Accumulated postretirement benefit obligation:
Retirees $ 734 $1,438
Fully eligible active plan participants - -
Other active plan participants - -
734 1,438
Unrecognized prior service cost 575 -
Unrecognized net gain 251 175
Accrued postretirement benefits $1,560 $1,613
Years ended March 31,
1997 1996 1995
Net periodic postretirement benefit (income)
expense included the following components:
Service cost - benefits attributed to
service during the period $ 108 $ 89 $154
Interest cost on accumulated post-
retirement benefit obligation 185 160 203
Amortization of unrecognized net gain (2) (23) -
Curtailment gain (189) (1,088) (379)
Net periodic postretirement benefit (income) $ 102 $ (862) (22)
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 13% in 1997 and 1996, gradually
declining to 6% in 2002.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1997 and 1996.
If the health care cost trend assumptions were increased by 1%,the
accumulated postretirement benefit obligation as of March 31, 1997, would
increase by $4,000. The effect of this change on the aggregate of the
service cost and interest cost would be no additional charge to expense for
the year ended March 31, 1997.
Included in the Company's 1996 nonrecurring charge was the elimination of
the postretirement medical accrual for participants other than retirees of
$1,088,000 which is reflected as a curtailment gain in 1996. (See Note J.)
This curtailment gain was subsequently adjusted in fiscal 1997. Effective
in October of 1996 retirees pay full cost for prescription drug coverage.
The Company has a profit sharing plan which covers substantially all full-
time, non-union employees who have completed one year (minimum of 1,000
hours) of service and provides for Company contributions to a separate
trust based upon 8% of the profit sharing income base as defined in the
plan. No profit sharing contributions were required during the years ended
March 31, 1997 and March 31, 1996. Profit sharing contributions under this
plan were approximately $62,000 for the year ended March 31,1995.
In addition to the profit sharing plan, the Company has other salary
deferral profit sharing plans,(401(k)plans) and defined contribution plans.
It also has a supplemental employee retirement plan for career executive
officers. The Company's obligation and matching contributions under these
plans were $5,000, $581,000, and $436,000 in 1997, 1996 and 1995,
respectively.
Note H
Capital Stock:
In November 1994, the Company issued 3,000,000 shares of its common stock
at $9.00 per share in a public stock offering. Proceeds from the offering,
net of commissions and other related expenses totaling $1,832,000, were
$25,168,000. The proceeds were used to repay a portion of the borrowings
under its revolving credit agreement. If this transaction had occurred on
April 1, 1994, the net earnings per share for the year ended March 31,
1995, would have been $.15 per share. This supplemental earnings per share
amount assumes a reduction of interest expense, net of applicable taxes and
profit sharing amounts, assuming the $25,168,000 of proceeds from the stock
offering were used to reduce borrowings under the Company's existing
revolving credit facility.
In June 1989, the Company amended its Articles of Incorporation to grant,
in the event any person ("Acquiring Person") becomes the beneficial owner,
as defined, of 50% or more of the Company's common stock, any of which was
acquired pursuant to a tender offer, such holder of common stock other than
the Acquiring Person the right to have their shares repurchased for cash by
the Company. The repurchase price will be the highest of (i) the highest
price paid by Acquiring Person for those shares acquired within the prior
18 months, (ii) the highest price on any trading day in the prior 18 months
or (iii) the per common share amount of stockholders' equity as reflected
in the previously completed quarter.
In 1985, the stockholders approved a 1985 Incentive Stock Option Plan
pursuant to which 320,000 shares of the Company's common stock were
reserved for the grant of options to executive officers and other key
employees. Under the Plan, stock grants may be made over a 10-year period
at not less than 100% of fair market value at the date of grant. One year
after date of grant, 50% of the options become exercisable with the
remaining options exercisable after the second year. No option granted
under the Plan may be exercised more than 10 years after the date of grant.
In fiscal 1996, stock option grants in which the strike price was more than
25% greater than the fair market price of the common shares of the Company
on May 31, 1995, were reduced to a strike price which was 25% greater than
the fair market price of the common shares of the Company on that date.
Stock option grants which expired on August 30, 1995 were canceled and
replacement stock options were granted with an expiration date of June 17,
1998. There were no awards granted under this plan in fiscal 1996 and
1997.
In 1994, the stockholders approved a 1994 Executive Stock Option Plan
pursuant to which 400,000 shares of the Company's common stock were
reserved for the grant of options and stock appreciation rights (SARs) to
executive officers and other key employees. Under the Plan, stock awards
may be made over a 10-year period at not less than 100% of fair market
value at the date of grant for incentive stock options and 90% of the fair
market value at the date of grant for non-qualified stock options and SARs.
SARs, which may only be granted in tandem with a non-qualified stock
option, shall be exercisable only to the extent the underlying option is
exercisable and the grant price shall be equal to the exercise price of the
underlying option. One year after date of grant, 50% of the options and
SARs become exercisable with the remaining options and SARs exercisable
after the second year. No option granted under the Plan may be exercised
more than 10 years after the date of grant. There is a $100,000 fair
market value limit on incentive stock options that may be exercised by any
single holder in any calendar year.
In September, 1996 the Company granted 238,325 options under the 1994 Plan
to employees at all levels of the Company. These options vested 100% on
the date of grant.
Changes in shares, as to options, are as follows:
Shares
Outstanding
Reserved options Available
Balances at March 31, 1994
($5.125 to $15.875) 224,550 142,000 82,550
Granted ($7.75 to $8.50) 35,000 (35,000)
1994 Plan 400,000 400,000
Expired ($6.875 to $12.750) (3,400) 3,400
Balances at March 31, 1995
($5.125 to $15.875) 624,550 173,600 450,950
Granted ($5.50 to $6.875) 3,796 (3,796)
Expired ($5.125 to $6.875) (9,600) 9,600
Balances at March 31, 1996
($5.125 to $6.875) 624,550 167,796 456,754
Granted ($1.6250 to $2.8125) 258,631 (258,631)
Expired ($2.8125 to $8.50) (97,010) 97,010
Balances at March 31,1997 624,550 329,417 295,133
At March 31, 1997, a total of 307,248 options were exercisable at $2.8125
to $6.875.
<PAGE>
The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" and related interpretations in accounting
for its plans. Accordingly, no compensation expense has been reflected in
the financial statements. Had compensation cost for the Company's stock
option plans been determined based upon the fair value at the grant date
for awards under these plans consistent with the methodology prescribed
under Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation," the Company's net income and net earnings per
share would have been reduced by $442,000, or $.04 per share and 83,000 or
$.01 per share, for 1997 and 1996, respectively. The weighted average fair
value of the options granted during 1997 and 1996 was estimated as $1.83
and $2.22 respectively, on the date of grant using the Black-Scholes option
- - pricing model with the following weighted average assumptions: volatility
of 125.7% and 80.7%, for 1997 and 1996 respectively, risk-free interest
rate of 6.3% for both 1997 and 1996, and an expected term of approximately
two years for both 1997 and 1996.
In 1995, the Company granted options to purchase 15,000 shares of common
stock at $8.50 per share to certain executive employees. These options
have substantially the same terms as the 1985 Incentive Stock Option Plan.
The strike price was reduced to $6.875 during 1996.
In addition, during 1990, the Company granted options to purchase 2,500
shares of common stock at $10 per share to a former senior management
employee. These options have substantially the same terms as the 1985
Incentive Stock Option Plan. The strike price was reduced to $6.875 during
1996.
In fiscal 1996, non-employee members of the Board of Directors were awarded
a restricted stock grant of 5,000 shares of common stock vesting 25% per
year commencing in fiscal 1997. A former executive officer also was
awarded a restricted stock grant of 25,000 shares issued in fiscal 1997.
Note I
Commitments and Contingencies:
During fiscal 1997 the Company entered into a ten year operating lease for
its corporate headquarters building for which the Company is responsible
for certain maintenance, operating costs and insurance. The Company also
leases certain data processing and manufacturing equipment and land under
operating leases with terms that generally range from three to seven years.
Future minimum rental commitments for fiscal years ending March 31, are as
follows; 1998 - $1,239,000; 1999 - $705,000; 2000 - $577,000; 2001 -
$560,000; 2002 - $560,000; thereafter, $2,300,000.
In addition to the above lease arrangements, the Company also enters into
equipment leases for terms of one year or less. The Company does, however,
in some instances continue to lease the equipment beyond the minimum lease
period. Total rent expense aggregated $2,499,000, $2,639,000 and
$2,350,000 respectively, during fiscal 1997, 1996 and 1995.
A class action lawsuit was filed on January 3, 1995, in the United States
District Court for the Eastern District of Wisconsin against the Company,
all of the individual members of the Board of Directors of the Company,
William Blair & Company and Dain Bosworth, Inc. The plaintiff alleged that
he sustained losses in connection with his purchase of shares of common
stock of the Company during the period from October 17, 1994, to
December 19, 1994, as a result of defendants' alleged misleading statements
and omissions to state material facts. A second lawsuit seeking to
represent class members who purchased shares of common stock of the Company
during the period from October 17, 1994 to December 19, 1994 was filed on
May 10, 1995 in the United States District Court for the Eastern District
of Wisconsin. The second lawsuit made similar claims against the Company
and certain officers arising from the same facts and events. These
lawsuits were consolidated on September 22, 1995 and the complaint filed in
the first lawsuit was deemed the operative complaint superseding the
complaint filed in the second lawsuit. The plaintiff in the second lawsuit
subsequently elected to withdraw as a plaintiff in the consolidated
lawsuit.
The court dismissed the consolidated lawsuit in a judgment entered on
March 21, 1996. The plaintiff subsequently filed a motion with the court
which sought to alter or amend that judgment. In a decision dated
March 27, 1997, the court denied that motion and the judgment of dismissal
became final when it was not appealed by the plaintiff by April 28, 1997.
In addition to the above cases, the Company also is involved in various
other legal actions and claims primarily arising in the normal course of
its business. In the opinion of management of the Company, the liability,
if any, would not have a material effect on the Company's financial
condition or results of operations.
Note J
Nonrecurring Charge:
A nonrecurring charge of $13,529,000 was recognized during the first six
months of fiscal 1997 of which $13,096,000 was recorded during the second
quarter. The nonrecurring charge related to the restructuring of the
Company's core canned vegetable business and the write-off of deferred debt
costs associated with the replacement of the Company's revolving credit
facility on May 21, 1996 and the amendments made to the senior note
agreements on July 25, 1996. The nonrecurring charge included a write-down
of property, plant and equipment at two plants which were closed and two
plants which were downsized. The nonrecurring charge also included a
writedown for the loss on the sale of the Company's headquarters building
which was completed during the fourth quarter of fiscal 1997 at which time
the Company relocated its headquarters to a new leased facility. The
nonrecurring charge also included provisions for severance costs, a
writedown of certain discontinued inventory items to their estimated net
realizable values and the writedown of certain intangible assets. An
analysis of the 1997 nonrecurring charge is as follows (in thousands):
<PAGE>
Balance
Original Reserves at March 31,
Reserves Utilized 1997
Property, plant and
equipment writedowns $ 9,550 $2,710 $6,840
Write-off of deferred debt
issuance costs 829 829 -
Severance costs 1,250 732 518
Inventory writedowns 600 152 448
Intangible asset writedowns 640 640 -
Other costs 660 327 333
Total $13,529 $5,390 $8,139
Approximately $11,779,000 of the nonrecurring charge are non-cash charges.
Severance costs pertain to approximately 50 personnel. The write-off of
intangible assets pertains mainly to certain trademarks which will no
longer be actively marketed.
During the fourth quarter of fiscal 1996, the Company recorded a
nonrecurring charge aggregating $12,500,000 related to its decision to exit
its frozen vegetable business. The nonrecurring charge included a write-
down of inventories to their estimated net realizable values, and
provisions for severance costs and other costs associated with selling
inventories and exiting the frozen business. Subsequently, the Company
entered into an agreement with three third parties for the sale of
substantially all of the Company's frozen business assets. Two processing
plants were included as part of this sales agreement, while a third plant
accounting for less than 10% of the Company's frozen processing capacity
remains for sale. The sale of the two plants was completed during the
Company's second quarter of fiscal 1997. Sales proceeds after
consideration of selling expenses approximated $24,000,000.
An analysis of the 1996 nonrecurring charge is as follows (in thousands):
Reserves Balance
Original Utilized at
Reserves in fiscal 1996 March 31, 1996
Inventory write-downs $6,750 $ - $ 6,750
Inventory selling and
packaging costs 4,700 2,188 2,512
Severance costs 1,500 281 1,219
Other costs 1,135 60 1,075
Gain on sale of warehouse (497) (497) -
Gain on curtailment of post-
retirement benefits (1,088) (1,088) -
Total $12,500 $ 944 $11,556
Essentially all the reserves remaining at March 31, 1996 were fully
utilized during fiscal 1997. The only asset remaining from the frozen
business is the third plant discussed above which is shown as a current
asset held for disposition.
The inventory write-down and gain on settlement of post-retirement benefits
were non-cash charges. The other charges required future cash outlays,
principally during fiscal 1997. Severance costs pertained to approximately
300 personnel directly and indirectly associated with the frozen business.
Revenues of the frozen business approximated $27.0 million, $38.1 million
and $56.3 million in fiscal years 1997, 1996 and 1995, respectively.
Note K
Supplemental Cash Flow Disclosures:
Cash payments for (refunds of) interest and income taxes were as follows
(in thousands):
Years ended March 31,
1997 1996 1995
Interest $10,591 $ 9,578 $ 9,209
Income taxes - net 31 (283) (1,664)
<PAGE>
QUARTERLY FINANCIAL DATA (Unaudited)
(Dollars in thousands except per share)
Quarter Ended
1997 June September December March Year
Net sales $42,342 $51,630 $55,342 $35,536 $184,850
Gross profit 5,142 8,785 11,195 6,589 31,711
Net earnings (loss) (4,264) (14,912) 690 (2,437) (20,923)
Net earnings (loss)
per share (.38) (1.31) .06 (0.21) (1.84)
1996
Net sales $40,700 $51,294 $65,463 $48,794 $206,251
Gross profit 5,206 7,879 10,572 6,729 30,386
Net earnings (loss) (3,776) (3,640) (3,574) (17,831) (28,821)
Net earnings (loss)
per share (.33) (.32) (.32) (1.57) (2.54)
No dividends were paid during fiscal 1997 and 1996, and the Company does
not anticipate paying dividends in the foreseeable future.
The Company's operations are largely seasonal. The majority of its
production occurs during the second and third quarters of each fiscal year
due to the timing of crop production and climate conditions. Net canned
sales for the third and fourth quarters of fiscal 1997 and 1996 were 54%
and 53% of total canned sales. Sales for processed vegetables are greater
during the third and fourth quarters of each fiscal year due to general
consumption patterns for its products.
During the first quarter ended June 30, 1996, the Company recorded a
nonrecurring charge of $433,000 ($.04 per share) related to the write-off
of deferred debt cost associated with the replacement of the Company's
revolving credit facility on May 21, 1996. See Note J to the Consolidated
Financial Statements.
During the second quarter ended September 30, 1996, the Company recorded a
nonrecurring charge of $13,096,000 ($1.15 per share) related to the
Company's restructuring of its core canned vegetable business, sale of its
corporate headquarters and write-off of deferred debt costs, associated
with renegotiations of senior notes. See Note J to the Consolidated
Financial Statements.
During the fourth quarter ended March 31, 1996, the Company recorded a
nonrecurring charge of $12,500,000 ($1.10 per share) relating to the
Company's February 1996 decision to exit the frozen business and to
concentrate on its core strength of canned vegetables. See Note J to the
Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item with respect to directors is included under
the heading "Matter (1) - Election of Directors," and with respect to
compliance with Section 16(a) of the Securities Exchange Act of 1934, is
included under the heading "Section 16 Compliance," in the Company's
definitive Proxy Statement, dated July 14, 1997, related to the 1997 Annual
Meeting of Shareholders scheduled for August 28, 1997, filed separately with
the Securities and Exchange Commission pursuant to Rule 14a-6 under the
Securities Exchange Act of 1934, and which section is hereby incorporated
herein by reference.
Information concerning executive officers who are not directors is contained
in Part I of this Form 10-K pursuant to paragraph (b) of Item 401 of
Regulation S-K in reliance on Instruction G(3).
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is included under the heading "Compensation
of Executive Officers and Directors" in the Company's definitive Proxy
Statement, dated July 14, 1997, relating to the 1997 Annual Meeting of
Shareholders scheduled for August 28, 1997, filed with the Securities and
Exchange Commission separately pursuant to Rule 14a-6 under the Securities
Exchange Act of 1934, and which section is hereby incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is included under the heading "Security
Ownership of Certain Beneficial Owners" in the Company's definitive Proxy
Statement, dated July 14, 1997, relating to the 1997 Annual Meeting of
Shareholders scheduled for August 28, 1997, filed with the Securities and
Exchange Commission separately pursuant to Rule 14a-6 under the Securities
Exchange Act of 1934, and which section is hereby incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is included under the heading "Certain
Transactions" in the Company's definitive Proxy Statement, dated July 14,
1997, relating to the 1997 Annual Meeting of Shareholders scheduled for
August 28, 1997, filed with the Securities and Exchange Commission separately
pursuant to Rule 14a-6 under the Securities Exchange Act of 1934, and which
section is hereby incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
Form 10-K
Page Number
-----------
The following consolidated financial statements
of Stokely USA, Inc. and its subsidiaries are
included in Item 8 of this Annual Report:
Independent Auditors' Report 00
Consolidated Balance Sheets, March 31, 1997 and 1996 00-00
For the years ended March 31, 1997, 1996 and 1995:
Consolidated Statements of Operations 00
Consolidated Statements of Stockholders' Equity 00
Consolidated Statements of Cash Flows 00-00
Notes to Consolidated Financial Statements 00-00
The following consolidated financial statement
schedule of Stokely USA, Inc. and its subsidiaries
is included in Item 14 of this Annual Report:
Schedule VIII Valuation and Qualifying Accounts
and Reserves 00
All other schedules are omitted because they are inapplicable, not required
under the instructions, or the information is included in the Consolidated
Financial Statements or notes thereto.
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the three months ended March 31,
1997.
c) Exhibits
A complete listing of exhibits will be furnished upon request.
(d) Financial Statement Schedules
<PAGE>
<TABLE>
SCHEDULE VIII
STOKELY USA, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended March 31, 1997, 1996 and 1995
<CAPTION>
Description
Valuation Assets Valuation Assets Valuation Assets
Deducted from Assets- Deducted from Assets- Deducted from Assets-
Allowance for Losses Restructuring Reserves: Restructuring Reserves:
on Receivables Discontinued Inventory Property Held for Disposition
<S> <C> <C> <C>
Balance
March 31, 1994..... $ 385,000 $3,000,000 $ 3,926,000
Additions charged to
costs and expenses. 139,000 - -
Deductions.......... (72,000)<F1> (2,333,000) (1,832,000)
Balance
March 31, 1995..... 452,000 667,000 2,094,000
Additions charged to
costs and expenses. 124,000 6,750,000 -
Deductions.......... (6,000)<F1> (562,000) (2,094,000)
Balance
March 31, 1996..... 570,000 6,855,000 -
Additions charged to
costs and expenses. 700,000 600,000 9,550,000
Deductions.......... (762,000)<F1> (7,007,000) (2,710,000)
March 31, 1997..... $ 508,000 $ 448,000 $ 6,840,000
<FN>
<F1> Uncollectible accounts written off, net of recoveries and reduction in bad debt reserve.
</FN>
</TABLE>
<PAGE>
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 behalf of the undersigned, thereunto duly authorized.
STOKELY USA, INC.
Date: June 25, 1997
BY:
Stephen W. Theobald
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
Director June 25, 1997
Thomas W. Mount
Chairman of the Board June 25, 1997
Frank J. Pelisek
President and Chief June 25, 1997
Stephen W. Theobald Executive Officer
Senior Vice President and June 25, 1997
Peter P. Caputa Chief Financial Officer
Director June 25, 1997
Orren J. Bradley
Director June 25, 1997
Russell W. Britt
Director June 25, 1997
Ody J. Fish
Director June 25, 1997
James H. DeWees
Director June 25, 1997
Charles J. Carey
Director June 25, 1997
Carol Ward Knox
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File
March 31, 1997 0-13943
STOKELY USA, INC.
(Exact name of Issuer as specified in its Articles of Incorporation)
STOKELY USA, INC.
File No. 0-13943
Exhibits to Form 10-K for
fiscal year ended March 31, 1997
<PAGE>
EXHIBIT INDEX
A. Exhibits
3.1 Restated and Amended Articles of Incorporation of
Registrant(2).
3.2 By-laws of Registrant, as amended(2)(12).
10(a) Loan Agreement between the City of Green Bay, Wisconsin and
Stokely USA, Inc. dated December 1, 1988 with respect to
$3,000,000 in principal amount of City of Green Bay, Wisconsin
Industrial Revenue Bonds (Stokely USA, Inc. Project), relating
to Stokely's Green Bay, Wisconsin facility(4).
10(b) Loan and Mortgage Agreement with respect to $6,000,000 in
principal amount of Industrial Development Bonds relating to
Stokely's Poynette, Wisconsin sauerkraut facility(4).
10(c) Note Agreement between Stokely USA, Inc. and Nationwide Life
Insurance Company, Employers Life Insurance Company of Wausau
and West Coast Life Insurance Company dated January 5, 1990
with respect to $25,000,000 in principal amount of 9.12%
Senior Notes due January 15, 2000(9).
10(d) Loan Agreement between the Village of Poynette, Wisconsin and
Stokely USA, Inc. dated December 1, 1989, with respect to
$1,600,000 in principal amount of Refunding Revenue Bonds
(Stokely USA, Inc. Project) relating to Stokely's Poynette,
Wisconsin facility(5).
10(e) Loan Agreement between the Village of Waunakee, Wisconsin and
Stokely USA, Inc. dated June 1, 1989 with respect to
$4,000,000 in principal amount of Industrial Revenue Bonds
(Stokely USA, Inc. Project) relating to Stokely's Waunakee,
Wisconsin facility(5).
10(f) Loan Agreement between the City of Ackley, Iowa and Stokely
USA, Inc. dated July 1, 1989 with respect to $3,000,000 in
principal amount of Industrial Development Revenue Bonds
(Stokely USA, Inc. Project) Series 1989 relating to Stokely's
Ackley, Iowa facility(5).
10(g) Executive Deferred Compensation Agreements between Stokely
USA, Inc. and each of Thomas W. Mount, Joseph B. Weix and
Robert J. Whelan, Sr.(5).
10(h) 1985 Incentive Stock Option Plan(5).
10(i) Loan Agreement between the Town of Utica, Wisconsin and
Stokely USA, Inc. dated June 1, 1990 with respect to
$3,000,000 in principal amount of Industrial Revenue Bonds
(Stokely USA, Inc. Project) relating to Stokely's Pickett,
Wisconsin facility(6).
10(j) Loan Agreement between Port of Walla Walla Public Corporation
and Stokely USA, Inc. dated September 1, 1990 with respect to
$4,000,000 in principal amount of Industrial Revenue Bonds,
Series 1990 relating to Stokely's Walla Walla, Washington
facility(6).
10(k) Loan Agreement between the City of Wells, Minnesota and
Stokely USA, Inc. dated December 1, 1991 with respect to
$3,000,000 in principal amount of Industrial Revenue Bonds
(Stokely USA, Inc. Project) Series 1991 relating to Stokely's
Wells, Minnesota facility(7).
10(l) Note Agreement between the State of Wisconsin Investment Board
and Stokely USA, Inc. dated December 1, 1991 with respect to
$20,000,000 in principal amount of 9.49% Senior Notes due
December 15, 2001(7).
10(m) Loan and Security Agreement by and among Barclays Business
Credit, Inc. as agent and lender, various other lenders and
Stokely USA, Inc. dated August 18, 1992 with respect to a
$120,000,000 Credit Facility(10).
10(n) Amendment to Note Agreement dated August 18, 1992 regarding
$25,000,000 Original Principal Amount of 9.12% Senior Notes
due January 15, 2000 (see Exhibit 10(c))(10).
10(o) Amendment to Note Agreement dated August 18, 1992 regarding
$20,000,000 in principal amount of 9.49% Senior Notes due
December 15, 2000 (see Exhibit 10(l))(10).
10(p) Second Amendment to Note Agreement dated June 11, 1993
regarding $20,000,000 Promissory Note (see Exhibit 10(l))(8).
10(q) First Amendment to Security Agreement dated June 1993 relating
to the Credit Facility (see Exhibit 10(m))(8).
10(r) Second Amendment to Security Agreement dated June 11, 1993
regarding $25,000,000 Original Principal Amount of 9.37%
Senior Notes Due January 15, 2000 (see Exhibit 10(c))(8).
10(s) Warrant to Purchase Shares of Common Stock of Stokely USA,
Inc. issued to Nationwide Life Insurance Company dated June
1993(8).
10(t) Warrant to Purchase Shares of Common Stock of Stokely USA,
Inc. issued to EMPL and Co. dated June 1993(8).
10(u) Warrant to Purchase Shares of Common Stock of Stokely USA,
Inc. issued to West Coast Life Insurance Company dated June
1993(8).
10(v) First Amendment to Loan Agreement with the City of Ackley,
Iowa (see Exhibit 10(f)), dated as of March 31, 1994, between
Stokely USA, Inc. and Norwest Bank Minnesota, N.A., as
trustee(11).
<PAGE>
10(w) First Amendment to Loan Agreement with the Village of
Poynette, Wisconsin (see Exhibit 10(b)), dated as of March 31,
1994, between Stokely USA, Inc. and Norwest Bank Minnesota,
N.A., as trustee(11).
10(x) First Amendment to Loan Agreement with the Village of
Poynette, Wisconsin (see Exhibit 10(d)), dated as of March 31,
1994, between Stokely USA, Inc. and NationsBank of Virginia,
N.A., as trustee(11).
10(y) First Amendment to Loan Agreement with the Village of
Waunakee, Wisconsin (see Exhibit 10(e)), dated as of March 31,
1994, between Stokely USA, Inc. and NationsBank of Virginia,
N.A., as trustee(11).
10(z) First Amendment to Loan Agreement with the Port of Walla
Walla, Washington Public Corporation (see Exhibit 10(j)),
dated as of June 17, 1994, between Stokely USA, Inc. and
NationsBank of Virginia, N.A., as trustee(11).
10(aa) First Amendment to Loan Agreement with the Town of Utica,
Wisconsin (see Exhibit 10(i)), dated as of June 17, 1994,
between Stokely USA, Inc. and NationsBank of Virginia, N.A.,
as trustee(11).
10(bb) First Amendment to Loan Agreement with the City of Green Bay,
Wisconsin (see Exhibit 10(a)), dated as of June 17, 1994,
between Stokely USA, Inc. and NationsBank of Virginia, N.A.,
as trustee(11).
10(cc) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and Stephen W. Theobald dated October 16,
1992(12).
10(dd) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and Leslie J. Wilson dated October 16,
1992(12).
10(ee) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and Robert M. Brill dated October 16,
1992(12).
10(ff) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and Eddie Foster dated October 16, 1992(12).
10(gg) Stokely USA, Inc. 1994 Executive Stock Option Plan(12).
10(hh) Stock Option Agreement between Stokely USA, Inc. and Kenneth
C. Murray dated March 13, 1990(12).
10(ii) Stock Option Agreement between Stokely USA, Inc. and Vernon L.
Wiersma dated April 8, 1994(12).
10(jj) Stock Option Agreement between Stokely USA, Inc. and Stephen
W. Theobald dated April 8, 1994(12).
<PAGE>
10(kk) Warrant to Purchase Shares of Common Stock of Stokely USA,
Inc. issued to the State of Wisconsin Investment Board dated
June 1993(12).
10(ll) Second Amendment to Loan Documents dated October 13, 1992
regarding the Credit Facility (see Exhibit 10(m))(12).
10(mm) Third Amendment to Loan Documents dated December 16, 1992
regarding the Credit Facility (see Exhibit 10(m))(12).
10(nn) Fourth Amendment to Loan Documents dated June 11, 1993
regarding the Credit Facility (see Exhibit 10(m))(12).
10(oo) Fifth Amendment to Loan Document dated March 24, 1994
regarding the Credit Facility (see Exhibit 10(m))(12).
10(pp) Summary Plan Description of Split Dollar Life Insurance
Plan(12).
10(qq) Supplemental Employee Retirement Plan(13).
10(rr) Loan and Security Agreement by and among Harris Trust and
Savings Bank, as agent and lender, various other lenders and
Stokely USA, Inc. dated May 22, 1995 with respect to a
$65,000,000 Credit Facility(13).
10(ss) Third Amendment to Note Agreement dated May 31, 1995 regarding
$25,000,000 Original Principal Amount of 9.37% Senior Notes
due January 15, 2000 (see Exhibit 10(c))(13).
10(tt) Third Amendment to Note Agreement dated May 31, 1991 regarding
$20,000,000 in principal amount of 9.49% Senior Notes due
December 15, 2001 (see Exhibit 10(l))(13).
10(uu) Deferred Compensation Agreement for Highly Compensated
Employees(14).
10(vv) Loan and Security Agreement by and among Congress Financial
Corporation, as lender, and Stokely USA, Inc. dated May 21,
1996 with respect to a $70,000,000 Credit Facility(15).
10(ww) Amended and Restated Note Agreement dated July 25, 1996
regarding $20,000,000 Original Principal Amount of 9.74%
Senior Notes due January 15, 2000(15).
10(xx) Series A Warrant to purchase shares of Common Stock by State
of Wisconsin Investment Board(15).
10(yy) Series B Warrant to purchase shares of Common Stock by State
of Wisconsin Investment Board(15).
10(zz) Amended and Restated Note Agreement dated July 25, 1996
regarding $25,000,000 Original Principal Amount of 9.37%
Senior Notes due January 15, 2000(15).
10(aaa) Series A Warrant to purchase shares of Common Stock(15).
10(bbb) Series B Warrant to purchase shares of Common Stock(15).
10(ccc) Second Amendment to Loan Agreement with the Town of Utica,
Wisconsin (see Exhibit 10(i)), dated February 1, 1997, between
Stokely USA, Inc. and The Bank of New York, as trustee(1).
10(ddd) Second Amendment to Loan Agreement with Port of Walla Walla
Corporation (see Exhibit 10 (j)), dated February 1, 1997,
between Stokely USA, Inc. and The Bank of New York, as trustee
(1).
10(eee) Second Amendment to Loan Agreement with the City of Green Bay,
Wisconsin (see Exhibit 10(a)), dated February 1, 1997, between
Stokely USA, Inc. and The Bank of New York, as trustee(1).
10(fff) First Amendment to Indenture with the City of Ackley, Iowa
(see Exhibit 10(f)), dated March 31, 1997, between Stokely
USA, Inc. and Norwest Bank Minnesota, N.A., as trustee(1).
10(ggg) Second Amendment to Loan Agreement with the City of Ackley,
Iowa (see Exhibit 10 (f)), dated March 31, 1997, between
Stokely USA, Inc. and Norwest Bank Minnesota, N.A., as trustee
(1).
10(hhh) First Amendment to Indenture with the Village of Poynette,
Wisconsin (see Exhibit 10(d)), dated March 31, 1997, between
Stokely USA, Inc. and The Bank of New York, as trustee(1).
10(iii) Second Amendment to Loan Agreement with the Village of
Poynette, Wisconsin (see Exhibit 10(d)), dated March 31, 1997,
between Stokely USA, Inc. and The Bank of New York, as trustee
(1).
10(jjj) First Amendment to Indenture with the Village of Waunakee,
Wisconsin (see Exhibit 10(e)), dated March 31, 1997, between
Stokely USA, Inc. and The Bank of New York, as trustee(1).
10(kkk) Second Amendment to Loan Agreement with the Village of
Waunakee, Wisconsin (see Exhibit 10(e)), dated March 31, 1997,
between Stokely USA, Inc. and The Bank of New York, as trustee
(1).
10(lll) First Amendment to Indenture with the Village of Poynette,
Wisconsin (see Exhibit 10(f)), dated March 31, 1997, between
Stokely USA, Inc. and Norwest Bank Minnesota, N.A., as trustee
(1).
10(mmm) Second Amendment to Loan Agreement with the Village of
Poynette, Wisconsin (see Exhibit 10(b)), dated March 31, 1997,
between Stokely USA, Inc. and Norwest Bank Minnesota, N.A., as
trustee(1).
10(nnn) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and Peter P. Caputa dated March 17, 1997
(1).
<PAGE>
10(ooo) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and John R. McCormick dated October 16, 1992
(1).
10(ppp) Change of Control Contingent Employment Agreement between
Stokely USA, Inc. and Jack R. McDowell dated February 11,
1997(1).
10(qqq) Severance Agreement between Stokely USA, Inc. and Vernon L.
Wiersma dated May 29, 1996.
21.1 Subsidiaries of the Registrant(1).
23.1 Consent of Deloitte & Touche LLP(1).
24.1 Powers of Attorney for certain officers and directors(12).
27.1 Financial Data Schedule(1).
(1) Filed herewith.
(2) Incorporated by reference to exhibits filed with Registrant's
Form S-1 Registration Statement declared effective on
October 29, 1985 (Registration Number 33-339).
(3) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1986.
(4) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1989.
(5) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1990.
(6) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1991.
(7) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1992.
(8) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1993.
(9) Incorporated by reference to exhibits filed with Registrant's
Form 10-Q for the three months ended December 31, 1989.
(10) Incorporated by reference to exhibits filed with Registrant's
Form 10-Q for the three months ended September 30, 1992.
(11) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1994.
(12) Incorporated by reference to exhibits filed with Registrant's
Form S-1 Registration Statement declared effective on
November 17, 1994 (Registration Number 33-55447).
(13) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1995.
(14) Incorporated by reference to exhibits filed with Registrant's
Form 10-K for the year ended March 31, 1996.
(15) Incorporated by reference to exhibits filed with Registrant's
Form 10-Q for the three months ended June 30, 1996.<PAGE>
10(ccc)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
February 1, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the Town of Utica, Wisconsin (the "Issuer") has
previously issued $3,000,000 Town of Utica, Wisconsin Industrial
Revenue Bonds (Stokely USA, Inc. Project) (the "Bonds") pursuant to an
Indenture of Trust dated as of June 1, 1990 (the "Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
June 1, 1990 (as amended by a First Amendment to Loan Agreement dated
as of June 17, 1994, the "Loan Agreement") containing certain covenants
of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change the financial covenants therein; and
WHEREAS, Section 11.02 of the Indenture provides that the
Loan Agreement may be amended with the consent of owners of not less
than a majority in aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change the financial covenants therein and have
directed the Trustee to enter into, execute, and deliver an amendment
to the Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 7.12(i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,500,000"; and
(b) Section 7.12(ii) is deleted in its entirety.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement on the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
THE BANK OF NEW YORK
By:
Title:_____________________________
<PAGE>
10(ddd)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
February 1, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the Port of Walla Walla Public Corporation (the
"Issuer") has previously issued $4,000,000 Port of Walla Walla Public
Corporation Industrial Revenue Bonds, Series 1990 (Stokely USA, Inc.
Project) (the "Bonds") pursuant to an Indenture of Trust dated as of
September 1, 1990 (the "Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
September 1, 1990 (as amended by a First Amendment to Loan Agreement
dated as of June 17, 1994, the "Loan Agreement") containing certain
covenants of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change certain covenants therein; and
WHEREAS, Section 11.02 of the Indenture provides that the
Loan Agreement may be amended with the consent of owners of not less
than a majority in aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change certain covenants therein and have directed
the Trustee to enter into, execute, and deliver an amendment to the
Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 5.01 is deleted in its entirety;
(b) Section 5.03 is deleted in its entirety;
(c) Section 7.10(i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,500,000"; and
(d) Section 7.10(ii) is deleted in its entirety.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Washington.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement on the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
THE BANK OF NEW YORK
By:
Title:_____________________________<PAGE>
10(eee)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
February 1, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the City of Green Bay, Wisconsin (the "Issuer") has
previously issued $3,000,000 City of Green Bay, Wisconsin Industrial
Revenue Bonds (Stokely USA, Inc. Project) (the "Bonds") pursuant to an
Indenture of Trust dated as of December 1, 1988 (the "Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
December 1, 1988 (as amended by a First Amendment to Loan Agreement
dated as of June 17, 1994, the "Loan Agreement") containing certain
covenants of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change certain covenants therein; and
WHEREAS, Section 11.02 of the Indenture provides that the
Loan Agreement may be amended with the consent of owners of not less
than a majority in aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change certain covenants therein and have directed
the Trustee to enter into, execute, and deliver an amendment to the
Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 5.01 is deleted in its entirety;
(b) Section 5.03 is deleted in its entirety;
(c) Section 7.12(i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,500,000"; and
(d) Section 7.12(ii) is deleted in its entirety.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement on the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
THE BANK OF NEW YORK
By:
Title:_____________________________<PAGE>
10(fff)
FIRST AMENDMENT TO INDENTURE
This First Amendment to Indenture, dated as of March 31,
1997, is by and between the City of Ackley, Iowa (the "Issuer") and
Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
WHEREAS, the Issuer has previously issued $3,000,000 City of
Ackley, Iowa Industrial Development Revenue Bonds (Stokely USA, Inc.
Project) (the "Bonds") pursuant to an Indenture of Trust dated as of
July 1, 1989 (the "Indenture"); and
WHEREAS, Stokely USA, Inc. (the "Borrower") has requested
that the Indenture be amended to increase the interest rate on the
Bonds; and
WHEREAS, the Indenture provides that it may be amended with
the consent of owners of not less than a majority in aggregate
principal amount of outstanding Bonds and the Borrower; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Indenture to increase the interest rate on the Bonds and have directed
the Trustee to enter into, execute, and deliver an amendment to the
Indenture;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this First Amendment
to Indenture.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Indenture. The Indenture is amended as
follows:
(a) Section 2.01(d) of the Indenture is amended so that
the Interest Rate referred to therein is as follows: Initially, 7.75%.
Beginning July 1, 1997, the Interest Rate shall be 8.13%.
(b) Section 3.01 is amended so that the Interest Rate
set forth in the form of Bonds is as follows: Initially, 7.75%.
Beginning July 1, 1997, the Interest Rate shall be 8.13%.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Indenture
shall be a reference to the Indenture as amended by or pursuant to this
Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Indenture. Except as specifically
amended by this Amendment, the Indenture and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Iowa.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to Indenture as of the day and year first above
written.
CITY OF ACKLEY, IOWA
By:________________________________
Dale Brass, Mayor
By:________________________________
Carol Williams, City Clerk
NORWEST BANK MINNESOTA, N.A.
By:
Title:
Stokely USA, Inc. consents to the execution and delivery of
the foregoing Amendment.
STOKELY USA, INC.
By:
Stephen W. Theobald, President<PAGE>
10(ggg)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
March 31, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
WHEREAS, the City of Ackley, Iowa (the "Issuer") has
previously issued $3,000,000 City of Ackley, Iowa Industrial
Development Revenue Bonds (Stokely USA, Inc. Project) (the "Bonds")
pursuant to an Indenture of Trust dated as of July 1, 1989 (the
"Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
July 1, 1989 (as amended by a First Amendment to Loan Agreement dated
as of March 31, 1994, the "Loan Agreement") containing certain
covenants of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change the financial covenants therein; and
WHEREAS, the Indenture provides that the Loan Agreement may
be amended with the consent of owners of not less than a majority in
aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change the financial covenants therein and have
directed the Trustee to enter into, execute, and deliver an amendment
to the Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 7.12 (i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,816,000, which amount
shall be increased on the first day of each fiscal quarter, beginning
July 1, 1997, by an amount equal to 50% of consolidated net income (but
not less than zero) for the immediately preceding fiscal quarter";
(b) Section 7.12 (ii) is deleted in its entirety and
replaced with the following: "a ratio of consolidated current assets
to consolidated current liabilities of not less than 1.25 to 1"; and
(c) The following is added as Section 7.14:
Section 7.14. Notices. The Borrower agrees to provide the
Trustee with notice of any default under or amendment of the
Borrower's Amended and Restated Note Agreements dated as of
July 25, 1996.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Iowa.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement as of the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
NORWEST BANK MINNESOTA, N.A.
By:
Title:
<PAGE>
10(hhh)
FIRST AMENDMENT TO INDENTURE
This First Amendment to Indenture, dated as of March 31,
1997, is by and between the Village of Poynette, Wisconsin (the
"Issuer") and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the Issuer has previously issued $1,600,000 Village
of Poynette, Wisconsin Refunding Revenue Bonds (Stokely USA, Inc.
Project) (the "Bonds") pursuant to an Indenture of Trust dated as of
December 1, 1989 (the "Indenture"); and
WHEREAS, Stokely USA, Inc. (the "Borrower") has requested
that the Indenture be amended to increase the interest rate on the
Bonds; and
WHEREAS, the Indenture provides that it may be amended with
the consent of owners of not less than a majority in aggregate
principal amount of outstanding Bonds and the Borrower; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Indenture to increase the interest rate on the Bonds and have directed
the Trustee to enter into, execute, and deliver an amendment to the
Indenture;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this First Amendment
to Indenture.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Indenture. The Indenture is amended as
follows:
(a) Section 2.01(d) of the Indenture is amended so that
the Interest Rate referred to therein is as follows: Initially, 7.75%.
Beginning June 1, 1997, the Interest Rate shall be 8.13%.
(b) Section 3.01 is amended so that the Interest Rate
set forth in the form of Bonds is as follows: Initially, 7.75%.
Beginning June 1, 1997, the Interest Rate shall be 8.13%.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Indenture
shall be a reference to the Indenture as amended by or pursuant to this
Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Indenture. Except as specifically
amended by this Amendment, the Indenture and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to Indenture as of the day and year first above
written.
VILLAGE OF POYNETTE, WISCONSIN
By:________________________________
Jeffrey L. Kostichka,
Village President
Attest:
___________________________________
David C. Tebo,
Village Administrator
THE BANK OF NEW YORK
By:
Title:
Stokely USA, Inc. consents to the execution and delivery of
the foregoing Amendment.
STOKELY USA, INC.
By:
Stephen W. Theobald, President<PAGE>
10(iii)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
March 31, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the Village of Poynette, Wisconsin (the "Issuer")
has previously issued $1,600,000 Village of Poynette, Wisconsin
Refunding Revenue Bonds (Stokely USA, Inc. Project) (the "Bonds")
pursuant to an Indenture of Trust dated as of December 1, 1989 (the
"Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
December 1, 1989 (as amended by a First Amendment to Loan Agreement
dated as of March 31, 1994, the "Loan Agreement") containing certain
covenants of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change the financial covenants therein; and
WHEREAS, the Indenture provides that the Loan Agreement may
be amended with the consent of owners of not less than a majority in
aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change the financial covenants therein and have
directed the Trustee to enter into, execute, and deliver an amendment
to the Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 7.12 (i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,816,000, which amount
shall be increased on the first day of each fiscal quarter, beginning
July 1, 1997, by an amount equal to 50% of consolidated net income (but
not less than zero) for the immediately preceding fiscal quarter";
(b) Section 7.12 (ii) is deleted in its entirety and
replaced with the following: "a ratio of consolidated current assets
to consolidated current liabilities of not less than 1.25 to 1"; and
(c) The following is added as Section 7.13:
Section 7.13. Notices. The Borrower agrees to provide the
Trustee with notice of any default under or amendment of the
Borrower's Amended and Restated Note Agreements dated as of
July 25, 1996.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement on the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
THE BANK OF NEW YORK
By:
Title:
<PAGE>
10(jjj)
FIRST AMENDMENT TO INDENTURE
This First Amendment to Indenture, dated as of March 31,
1997, is by and between the Village of Waunakee, Wisconsin (the
"Issuer") and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the Issuer has previously issued $4,000,000 Village
of Waunakee, Wisconsin Industrial Revenue Bonds (Stokely USA, Inc.
Project) (the "Bonds") pursuant to an Indenture of Trust dated as of
June 1, 1989 (the "Indenture"); and
WHEREAS, Stokely USA, Inc. (the "Borrower") has requested
that the Indenture be amended to increase the interest rate on the
Bonds; and
WHEREAS, the Indenture provides that it may be amended with
the consent of owners of not less than a majority in aggregate
principal amount of outstanding Bonds and the Borrower; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Indenture to increase the interest rate on the Bonds and have directed
the Trustee to enter into, execute, and deliver an amendment to the
Indenture;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this First Amendment
to Indenture.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Indenture. The Indenture is amended as
follows:
(a) Section 2.01(d) of the Indenture is amended so that
the Interest Rate referred to therein is as follows: Initially, 8.0%.
Beginning June 1, 1997, the Interest Rate shall be 8.4%.
(b) Section 3.01 is amended so that the Interest Rate
set forth in the form of Bonds is as follows: Initially, 8.0%.
Beginning June 1, 1997, the Interest Rate shall be 8.4%.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Indenture
shall be a reference to the Indenture as amended by or pursuant to this
Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Indenture. Except as specifically
amended by this Amendment, the Indenture and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to Indenture as of the day and year first above
written.
VILLAGE OF WAUNAKEE, WISCONSIN
By:________________________________
Thomas J. Marx, Village President
Attest:
___________________________________
Kelly P. Frawley, Village Clerk
THE BANK OF NEW YORK
By:
Title:
Stokely USA, Inc. consents to the execution and delivery of
the foregoing Amendment.
STOKELY USA, INC.
By:
Stephen W. Theobald, President<PAGE>
10(kkk)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
March 31, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and The Bank of New York, as trustee (the "Trustee").
WHEREAS, the Village of Waunakee, Wisconsin (the "Issuer")
has previously issued $4,000,000 Village of Waunakee, Wisconsin
Industrial Revenue Bonds (Stokely USA, Inc. Project) (the "Bonds")
pursuant to an Indenture of Trust dated as of June 1, 1989 (the
"Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
December 1, 1989 (as amended by a First Amendment to Loan Agreement
dated as of March 31, 1994, the "Loan Agreement") containing certain
covenants of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change the financial covenants therein; and
WHEREAS, the Indenture provides that the Loan Agreement may
be amended with the consent of owners of not less than a majority in
aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change the financial covenants therein and have
directed the Trustee to enter into, execute, and deliver an amendment
to the Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 7.12 (i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,816,000, which amount
shall be increased on the first day of each fiscal quarter, beginning
July 1, 1997, by an amount equal to 50% of consolidated net income (but
not less than zero) for the immediately preceding fiscal quarter";
(b) Section 7.12 (ii) is deleted in its entirety and
replaced with the following: "a ratio of consolidated current assets
to consolidated current liabilities of not less than 1.25 to 1"; and
(c) The following is added as Section 7.13:
Section 7.13. Notices. The Borrower agrees to provide the
Trustee with notice of any default under or amendment of the
Borrower's Amended and Restated Note Agreements dated as of
July 25, 1996.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement on the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
THE BANK OF NEW YORK
By:
Title:
<PAGE>
10(lll)
FIRST AMENDMENT TO INDENTURE
This First Amendment to Indenture, dated as of March 31,
1997, is by and between the Village of Poynette, Wisconsin (the
"Issuer") and Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
WHEREAS, the Issuer has previously issued $6,000,000 Village
of Poynette, Wisconsin Industrial Revenue Bonds (Stokely USA, Inc.
Project) (the "Bonds") pursuant to an Indenture of Trust dated as of
August 1, 1988 (the "Indenture"); and
WHEREAS, Stokely USA, Inc. (the "Borrower") has requested
that the Indenture be amended to increase the interest rate on the Term
Bonds due August 1, 1998 and the Term Bonds due August 1, 2001; and
WHEREAS, the Indenture provides that it may be amended with
the consent of owners of not less than a majority in aggregate
principal amount of outstanding Bonds and the Borrower; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Indenture to increase the interest rate on the Term Bonds due August 1,
1998 and the Term Bonds due August 1, 2001 and have directed the
Trustee to enter into, execute, and deliver an amendment to the
Indenture;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this First Amendment
to Indenture.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
<PAGE>
ARTICLE II
AMENDMENTS
2.1 Amendment of Indenture. Section 2.01(d) of the
Indenture is amended as follows:
(a) "$1,065,000 Term Bonds due August 1, 1998, bearing
interest at the rate of 8.00%" shall be deleted and replaced with
"$1,065,000 Term Bonds due August 1, 1998, bearing interest initially
at the rate of 8.00%, and beginning August 1, 1997, at the rate of
8.4%"; and
(b) "$3,580,000 Term Bonds due August 1, 2001, bearing
interest at the rate of 8.50%" shall be deleted and replaced with
"$3,580,000 Term Bonds due August 1, 2001, bearing interest initially
at the rate of 8.50%, and beginning August 1, 1997, at the rate of
8.92%."
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Indenture
shall be a reference to the Indenture as amended by or pursuant to this
Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Indenture. Except as specifically
amended by this Amendment, the Indenture and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to Indenture as of the day and year first above
written.
VILLAGE OF POYNETTE, WISCONSIN
By:________________________________
Jeffrey L. Kostichka,
Village President
Attest:
___________________________________
David C. Tebo,
Village Administrator
NORWEST BANK MINNESOTA, N.A.
By:
Title:
Stokely USA, Inc. consents to the execution and delivery of
the foregoing Amendment.
STOKELY USA, INC.
By:
Stephen W. Theobald, President<PAGE>
10(mmm)
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement, dated as of
March 31, 1997, is by and between Stokely USA, Inc. (the "Borrower")
and Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
WHEREAS, the Village of Poynette, Wisconsin (the "Issuer")
has previously issued $6,000,000 Village of Poynette, Wisconsin
Industrial Revenue Bonds (Stokely USA, Inc. Project) (the "Bonds")
pursuant to an Indenture of Trust dated as of August 1, 1988 (the
"Indenture"); and
WHEREAS, in connection with the issuance of the Bonds, the
Borrower and the Issuer entered into a Loan Agreement dated as of
August 1, 1988 (as amended by a First Amendment to Loan Agreement dated
as of March 31, 1994, the "Loan Agreement") containing certain
covenants of the Borrower; and
WHEREAS, pursuant to the Indenture, the Issuer assigned its
rights under the Loan Agreement to the Trustee; and
WHEREAS, the Borrower has requested that the Loan Agreement
be amended to change certain covenants therein; and
WHEREAS, the Indenture provides that the Loan Agreement may
be amended with the consent of owners of not less than a majority in
aggregate principal amount of outstanding Bonds; and
WHEREAS, the owners of a majority in aggregate principal
amount of the outstanding Bonds have consented to the amendment of the
Loan Agreement to change certain covenants therein and have directed
the Trustee to enter into, execute, and deliver an amendment to the
Loan Agreement;
IN CONSIDERATION of the mutual covenants, conditions, and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
specified:
1.1 Amendment. "Amendment" shall mean this Second Amendment
to Loan Agreement.
1.2 Other Terms. The other capitalized terms used in this
Amendment shall have the definitions specified in the Indenture.
ARTICLE II
AMENDMENTS
2.1 Amendment of Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 5.03 is amended by deleting the second
sentence thereof in its entirety;
(b) Section 7.12 (i) is amended by deleting
"$20,000,000" therein and replacing it with "$4,816,000, which amount
shall be increased on the first day of each fiscal quarter, beginning
July 1, 1997, by an amount equal to 50% of consolidated net income (but
not less than zero) for the immediately preceding fiscal quarter";
(c) Section 7.12 (ii) is deleted in its entirety and
replaced with the following: "a ratio of consolidated current assets
to consolidated current liabilities of not less than 1.25 to 1"; and
(c) The following is added as Section 7.13:
Section 7.13. Notices. The Borrower agrees to provide the
Trustee with notice of any default under or amendment of the
Borrower's Amended and Restated Note Agreements dated as of
July 25, 1996.
2.2 Miscellaneous Amendments. The Loan Agreement, the
Indenture, and all other documents, instruments, and materials executed
and delivered heretofore or hereafter pursuant thereto are deemed
hereby to be amended so that any reference therein to the Loan
Agreement shall be a reference to the Loan Agreement as amended by or
pursuant to this Amendment.
ARTICLE III
MISCELLANEOUS
3.1 Ratification of Loan Agreement. Except as specifically
amended by this Amendment, the Loan Agreement and all other documents,
instruments, and materials executed or delivered pursuant thereto, or
to secure the same, shall remain in full force and effect.
3.2 Expenses and Attorneys' Fees. The Borrower shall pay
reasonable fees and expenses incurred by the Trustee in connection with
the preparation, execution, and delivery of this Amendment.
3.3 Survival. All agreements, representations, and
warranties made in this Amendment or in any document delivered pursuant
to this Amendment shall survive the execution of this Amendment and the
delivery of any such document.
3.4 Governing Law. This Amendment shall be governed by the
laws of the State of Wisconsin.
3.5 Counterparts; Headings. This Amendment may be executed
in several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
agreement. The Article and Section headings of this Amendment are
inserted for convenience of reference only and shall not constitute a
part hereof.
3.6 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Loan Agreement as of the day and year first above
written.
STOKELY USA, INC.
By:
Stephen W. Theobald, President
NORWEST BANK MINNESOTA, N.A.
By:
Title:
<PAGE>
10(nnn)
CHANGE IN CONTROL CONTINGENT EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 17th day of March, 1997, by and
between STOKELY USA, INC., a Wisconsin corporation ("Company"), and
Peter P. Caputa, Controller of the Company, ("Employee"),
W I T N E S S E T H :
WHEREAS, sudden takeovers, acquisitions or changes of control
of domestic corporations have occurred frequently in recent years, and
current conditions may contribute to the continuation or acceleration
of this trend; and
WHEREAS, the possibility of a sudden takeover, acquisition or
change of control can create uncertainty of employment and may cause
the loss of valuable Company employees, to the detriment of the Company
and its shareholders; and
WHEREAS, it is believed that the detriment described can be
substantially reduced by an agreement on the terms hereinafter set
forth;
NOW THEREFORE, in consideration of the foregoing premises and
the mutual covenants hereinafter set forth, IT IS AGREED:
(1) Continued Employment. If a change of control of the
Company occurs when the Employee is employed by the Company, the
Company will continue thereafter to employ the Employee, and the
Employee will remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for a period of two (2)
years following the date of such change ("Employment Period"). As used
herein, the phrase "change of control of the Company" means the first
to occur of the following:
(a) The acquisition of more than twenty (20%) percent of
the outstanding shares of voting stock of the Company by any person or
entity or group thereof acting in concert, excluding affiliates of the
Company, by means of an offer made publicly to the holders of all or
substantially all of the outstanding shares of the voting stock of the
Company to acquire such shares for cash, securities, other property or
any combination thereof; or
(b) Any person or entity acquires, subsequent to the date
of this Agreement, beneficial ownership of twenty (20%) percent or more
of the then issued and outstanding voting common stock of the Company
in any manner other than a purchase of such stock directly from the
Company for cash; or
(c) The sale, assignment or transfer by the Company of
all or substantially all of its business or assets, in a transaction or
related series of transactions, except any such sales to affiliates of
the Company; or
(d) The Company merges or consolidates or reorganizes
with or into any other corporation or corporations other than its
affiliates or engages in any other similar business combination or
reorganization; or
(e) A Schedule 13D or its equivalent is filed under the
Securities Exchange Act of 1934 with respect to the voting common stock
of the Company, by or on behalf of any person (within the meaning of
that term as defined in the regulations governing such Schedules),
which states expressly or by implication that such person intends to
change the management, direction or control of the Company or its
policies; or
(f) A majority of the Board of Directors of the Company
does not consist of persons who were serving in that capacity on the
date of this Agreement, or who were appointed or nominated to serve as
a Director by such persons or by persons who were themselves so
appointed or nominated.
(2) Duties. Unless otherwise agreed by the Company and
Employee, during the Employment Period the Employee shall be employed
by the Company in the same position as that which the Employee held on
the date of the change of control of the Company. In such employment,
his duties and authority shall consist of and include all duties and
authority customarily performed and held by a person holding an
equivalent position with a corporation of similar nature and size, as
such duties and authority related to such position are reasonably
defined and delegated from time to time by the Board of Directors of
the Company. However, no change of the Employee's location of
employment to outside the Oconomowoc area, or in the Employee's title,
shall be made without the prior written consent of the Employee. The
Employee shall have the powers necessary to perform the duties assigned
and shall be provided such supporting services, staff, secretarial and
other assistance, office space and accouterments as shall be reasonably
necessary and appropriate in light of the duties assigned (but in no
event, in any case, smaller in size or lesser in quality than that
being furnished to the Employee on the date of the change of control of
the Company).
The Employee shall devote his entire business time, energy
and skills to such employment while so employed, but the Employee shall
not be required to devote more than an average of approximately 45
hours per calendar week to such employment. The Employee shall be
entitled to a minimum of three (3) weeks (fifteen [15] working days) of
paid vacation annually. The Employee shall have the sole discretion to
determine the time and intervals of such vacation.
(3) Compensation. During the Employment Period, the Employee
shall be compensated as follows:
(a) He shall receive a salary equal to his salary as in
effect as of the date of the change of control of the Company, subject
to adjustment as hereinafter provided.
(b) He shall be reimbursed for any and all monies
advanced in connection with his employment for reasonable and necessary
expenses incurred by him on behalf of the Company.
(c) He shall be included, to the extent eligible
thereunder, in any and all plans providing benefits for the Company's
employees, including, but not limited to, life, accidental death and
dismemberment, long term disability, hospitalization, medical and
retirement, and be provided any and all other benefits and perquisites
(including use of an automobile) made available to other employees of
comparable status, at the expense of the Company on a comparable basis;
and
(d) He shall be included in all profit sharing, bonus,
deferred compensation, split dollar life insurance, and similar or
comparable plans customarily extended by the Company to corporate
officers and key employees of the Company.
(4) Annual Compensation Adjustments. The Board of Directors
of the Company, or an appropriate committee thereof, will consider and
appraise the contributions of the Employee to the Company's operating
efficiency, growth, production and profits, at least annually during
the Employment Period, and in accordance with past practice, the
Employee's compensation rate shall be annually adjusted upward to be
commensurate with increases given to other employees of comparable
status generally and as the scope and success of the Company's
operations or the Employee's duties expand.
(5) Retirement. If, during the Employment Period, or during
the applicable period, if any, described in paragraph (7), the Employee
shall deliver to the Company a statement signed by him, stating that
the Employee voluntarily chooses to retire early from the Company, or
if the Employee shall reach the age of 65, or shall, with the mutual
agreement of the Company, agree in writing on early retirement, then
this Agreement shall terminate on the effective date of such event and
the terms of the Company's retirement policies or such mutual agreement
shall immediately become effective.
(6) Termination Other Than for Cause.
(a) If, during the Employment Period, the Company shall
terminate the employment of the Employee for any reason other than the
reasons set forth in paragraph (5) above or paragraph (7) below,
thereafter he or his personal representatives shall continue to be paid
monthly an amount equal to his then current monthly base salary plus
one-twelfth (1/12th) of the annual average of the executive incentive
program payments and all bonuses paid to the Employee in the preceding
five (5) years, and he shall be entitled to continue life, accidental
death and dismemberment, long term disability and hospitalization and
medical insurances in effect at the time of his termination and shall
receive the other employee benefits and perquisites described in
subparagraphs (3)(c) and (3)(d) hereof, for the remainder of the
Employment Period or as specified by Federal law, whichever time period
is longer.
(b) If, during the Employment Period, the Employee's
duties shall be changed substantially without his written consent from
those specified in paragraph (2) or he shall fail to be re-elected or
he shall be removed as a corporate officer of the Company, or if the
Company violates this Agreement, the Employee shall have the right to
elect to terminate his employment under this Agreement; and if he so
elects, he or his personal representatives shall continue to be paid
monthly an amount equal to his then current monthly base salary plus
one-twelfth (1/12th) of the average of incentive program payments and
all bonuses paid to the Employee in the preceding five (5) years, and
he shall be entitled to participate in group life, hospitalization and
medical insurance in effect at the time of his termination and shall
receive the other employee benefits and perquisites described in
subparagraphs (3)(c) and (3)(d) hereof, for the remainder of the
Employment Period.
(7) Termination for Cause. Employee agrees that this
Agreement may be terminated by the Company at any time for cause, which
shall mean only death, conviction for criminal fraud, the commission of
a felony, or becoming the subject of a final nonappealable judgement of
a court of competent jurisdiction holding that the Employee is liable
to the Company for damages for obtaining a personal benefit in a
transaction adverse to the interest of the Company. In the event this
Agreement is terminated for cause, the Employee shall forfeit his right
to any and all benefits he would otherwise have been entitled
thereafter to receive under the Agreement.
(8) Enforceability. The parties agree that nothing in this
Agreement shall in any way abrogate the right of the Company and the
Employee to enforce by injunction or otherwise the due and proper
performance and observance of the several covenants herein contained to
be performed by the Employee or the Company or to recover damages for
breach thereof.
(9) Successors and Assigns. If the Company sells, assigns or
transfers all or substantially all of its business and assets to any
person, excluding affiliates of the Company, or if the Company merges
into or consolidates or otherwise combines with any person which is a
continuing or successor entity, then the Company shall assign all of
its right, title and interest in this Agreement as of the date of such
event to the person which is either the acquiring or successor
corporation, and such person(s) shall assume and perform from and after
the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. In case of such assignment
by the Company and of assumption and agreement by such person(s), all
further rights as well as all other obligations of the Company under
this Agreement thenceforth shall cease and terminate and thereafter the
expression "the Company" wherever used herein shall be deemed to mean
such person(s).
(10) Affiliate. The term "affiliate" as used in this Agreement
means any corporation more than fifty (50%) percent of the outstanding
voting common stock of which is owned at the time by the Company or an
affiliate of the Company.
(11) Supplemental Agreement. This Agreement supplements, and
is not an amendment to or in derogation of, any other agreement between
the Company and the Employee relating to the employment or the terms
and conditions thereof. No person, other than such person as may be
designated by the Board of Directors of the Company, shall have any
authority on behalf of the Company to agree to modify or change this
Agreement. This Agreement supersedes and replaces any prior Change in
Control Contingent Employment Agreement or agreements between Company
and Employee.
(12) Severability. This Agreement is to be governed by and
construed under the laws of the State of Wisconsin. If any provision
of this Agreement shall be held invalid and unenforceable for any
reason, such provision shall be deemed deleted and the remainder of the
Agreement shall be valid and enforceable without such provision.
(13) Termination of Agreement. The Company has the right to
terminate the employment of the Employee except in contemplation of a
change in control of the Company, and the Employee may elect at his
discretion to terminate his employment, at any time prior to a change
in control of the Company, in either of which events this Agreement
shall terminate.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its corporate seal affixed and attested by its duly
authorized officers, and the Employee has hereunto set his hand and
seal as of the date first above written.
<PAGE>
STOKELY USA, INC.
By ______________________________
Stephen Theobald
(Corporate Seal) Its: President
EMPLOYEE: Peter P. Caputa
_________________________________
Peter P. Caputa
<PAGE>
10(ooo)
CHANGE IN CONTROL CONTINGENT EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 16th day of October, 1992, by and
between STOKELY USA, INC., a Wisconsin corporation ("Company"), and
John McCormick, Vice President of Oconomowoc Canning Company, Inc.,
("Employee"),
W I T N E S S E T H :
WHEREAS, sudden takeovers, acquisitions or changes of control
of domestic corporations have occurred frequently in recent years, and
current conditions may contribute to the continuation or acceleration
of this trend; and
WHEREAS, the possibility of a sudden takeover, acquisition or
change of control can create uncertainty of employment and may cause
the loss of valuable Company employees, to the detriment of the Company
and its shareholders; and
WHEREAS, it is believed that the detriment described can be
substantially reduced by an agreement on the terms hereinafter set
forth;
NOW THEREFORE, in consideration of the foregoing premises and
the mutual covenants hereinafter set forth, IT IS AGREED:
(1) Continued Employment. If a change of control of the
Company occurs when the Employee is employed by the Company, the
Company will continue thereafter to employ the Employee, and the
Employee will remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for a period of one (1)
year following the date of such change ("Employment Period"). As used
herein, the phrase "change of control of the Company" means the first
to occur of the following:
(a) The acquisition of more than twenty (20%) percent of
the outstanding shares of voting stock of the Company by any person or
entity or group thereof acting in concert, excluding affiliates of the
Company, by means of an offer made publicly to the holders of all or
substantially all of the outstanding shares of the voting stock of the
Company to acquire such shares for cash, securities, other property or
any combination thereof; or
(b) Any person or entity acquires, subsequent to the date
of this Agreement, beneficial ownership of twenty (20%) percent or more
of the then issued and outstanding voting common stock of the Company
in any manner other than a purchase of such stock directly from the
Company for cash; or
(c) The sale, assignment or transfer by the Company of
all or substantially all of its business or assets, in a transaction or
related series of transactions, except any such sales to affiliates of
the Company; or
(d) The Company merges or consolidates or reorganizes
with or into any other corporation or corporations other than its
affiliates or engages in any other similar business combination or
reorganization; or
(e) A Schedule 13D or its equivalent is filed under the
Securities Exchange Act of 1934 with respect to the voting common stock
of the Company, by or on behalf of any person (within the meaning of
that term as defined in the regulations governing such Schedules),
which states expressly or by implication that such person intends to
change the management, direction or control of the Company or its
policies; or
(f) A majority of the Board of Directors of the Company
does not consist of persons who were serving in that capacity on the
date of this Agreement, or who were appointed or nominated to serve as
a Director by such persons or by persons who were themselves so
appointed or nominated.
(2) Duties. Unless otherwise agreed by the Company and
Employee, during the Employment Period the Employee shall be employed
by the Company in the same position as that which the Employee held on
the date of the change of control of the Company. In such employment,
his duties and authority shall consist of and include all duties and
authority customarily performed and held by a person holding an
equivalent position with a corporation of similar nature and size, as
such duties and authority related to such position are reasonably
defined and delegated from time to time by the Board of Directors of
the Company. However, no change of the Employee's location of
employment to outside the Oconomowoc area, or in the Employee's title,
shall be made without the prior written consent of the Employee. The
Employee shall have the powers necessary to perform the duties assigned
and shall be provided such supporting services, staff, secretarial and
other assistance, office space and accouterments as shall be reasonably
necessary and appropriate in light of the duties assigned (but in no
event, in any case, smaller in size or lesser in quality than that
being furnished to the Employee on the date of the change of control of
the Company).
The Employee shall devote his entire business time, energy
and skills to such employment while so employed, but the Employee shall
not be required to devote more than an average of approximately 45
hours per calendar week to such employment. The Employee shall be
entitled to a minimum of three (3) weeks (fifteen [15] working days) of
paid vacation annually. The Employee shall have the sole discretion to
determine the time and intervals of such vacation.
(3) Compensation. During the Employment Period, the Employee
shall be compensated as follows:
(a) He shall receive a salary equal to his salary as in
effect as of the date of the change of control of the Company, subject
to adjustment as hereinafter provided.
(b) He shall be reimbursed for any and all monies
advanced in connection with his employment for reasonable and necessary
expenses incurred by him on behalf of the Company.
(c) He shall be included, to the extent eligible
thereunder, in any and all plans providing benefits for the Company's
employees, including, but not limited to, life, accidental death and
dismemberment, long term disability, hospitalization, medical and
retirement, and be provided any and all other benefits and perquisites
(including use of an automobile) made available to other employees of
comparable status, at the expense of the Company on a comparable basis;
and
(d) He shall be included in all profit sharing, bonus,
deferred compensation, split dollar life insurance, and similar or
comparable plans customarily extended by the Company to corporate
officers and key employees of the Company.
(4) Annual Compensation Adjustments. The Board of Directors
of the Company, or an appropriate committee thereof, will consider and
appraise the contributions of the Employee to the Company's operating
efficiency, growth, production and profits, at least annually during
the Employment Period, and in accordance with past practice, the
Employee's compensation rate shall be annually adjusted upward to be
commensurate with increases given to other employees of comparable
status generally and as the scope and success of the Company's
operations or the Employee's duties expand.
(5) Retirement. If, during the Employment Period, or during
the applicable period, if any, described in paragraph (7), the Employee
shall deliver to the Company a statement signed by him, stating that
the Employee voluntarily chooses to retire early from the Company, or
if the Employee shall reach the age of 65, or shall, with the mutual
agreement of the Company, agree in writing on early retirement, then
this Agreement shall terminate on the effective date of such event and
the terms of the Company's retirement policies or such mutual agreement
shall immediately become effective.
(6) Termination Other Than for Cause.
(a) If, during the Employment Period, the Company shall
terminate the employment of the Employee for any reason other than the
reasons set forth in paragraph (5) above or paragraph (7) below,
thereafter he or his personal representatives shall continue to be paid
monthly an amount equal to his then current monthly base salary plus
one-twelfth (1/12th) of the annual average of the executive incentive
program payments and all bonuses paid to the Employee in the preceding
five (5) years, and he shall be entitled to continue life, accidental
death and dismemberment, long term disability and hospitalization and
medical insurances in effect at the time of his termination and shall
receive the other employee benefits and perquisites described in
subparagraphs (3)(c) and (3)(d) hereof, for the remainder of the
Employment Period or as specified by Federal law, whichever time period
is longer.
(b) If, during the Employment Period, the Employee's
duties shall be changed substantially without his written consent from
those specified in paragraph (2) or he shall fail to be re-elected or
he shall be removed as a corporate officer of the Company, or if the
Company violates this Agreement, the Employee shall have the right to
elect to terminate his employment under this Agreement; and if he so
elects, he or his personal representatives shall continue to be paid
monthly an amount equal to his then current monthly base salary plus
one-twelfth (1/12th) of the average of incentive program payments and
all bonuses paid to the Employee in the preceding five (5) years, and
he shall be entitled to participate in group life, hospitalization and
medical insurance in effect at the time of his termination and shall
receive the other employee benefits and perquisites described in
subparagraphs (3)(c) and (3)(d) hereof, for the remainder of the
Employment Period.
(7) Termination for Cause. Employee agrees that this
Agreement may be terminated by the Company at any time for cause, which
shall mean only death, conviction for criminal fraud, the commission of
a felony, or becoming the subject of a final nonappealable judgement of
a court of competent jurisdiction holding that the Employee is liable
to the Company for damages for obtaining a personal benefit in a
transaction adverse to the interest of the Company. In the event this
Agreement is terminated for cause, the Employee shall forfeit his right
to any and all benefits he would otherwise have been entitled
thereafter to receive under the Agreement.
(8) Enforceability. The parties agree that nothing in this
Agreement shall in any way abrogate the right of the Company and the
Employee to enforce by injunction or otherwise the due and proper
performance and observance of the several covenants herein contained to
be performed by the Employee or the Company or to recover damages for
breach thereof.
(9) Successors and Assigns. If the Company sells, assigns or
transfers all or substantially all of its business and assets to any
person, excluding affiliates of the Company, or if the Company merges
into or consolidates or otherwise combines with any person which is a
continuing or successor entity, then the Company shall assign all of
its right, title and interest in this Agreement as of the date of such
event to the person which is either the acquiring or successor
corporation, and such person(s) shall assume and perform from and after
the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. In case of such assignment
by the Company and of assumption and agreement by such person(s), all
further rights as well as all other obligations of the Company under
this Agreement thenceforth shall cease and terminate and thereafter the
expression "the Company" wherever used herein shall be deemed to mean
such person(s).
(10) Affiliate. The term "affiliate" as used in this Agreement
means any corporation more than fifty (50%) percent of the outstanding
voting common stock of which is owned at the time by the Company or an
affiliate of the Company.
(11) Supplemental Agreement. This Agreement supplements, and
is not an amendment to or in derogation of, any other agreement between
the Company and the Employee relating to the employment or the terms
and conditions thereof. No person, other than such person as may be
designated by the Board of Directors of the Company, shall have any
authority on behalf of the Company to agree to modify or change this
Agreement. This Agreement supersedes and replaces any prior Change in
Control Contingent Employment Agreement or agreements between Company
and Employee.
(12) Severability. This Agreement is to be governed by and
construed under the laws of the State of Wisconsin. If any provision
of this Agreement shall be held invalid and unenforceable for any
reason, such provision shall be deemed deleted and the remainder of the
Agreement shall be valid and enforceable without such provision.
(13) Termination of Agreement. The Company has the right to
terminate the employment of the Employee except in contemplation of a
change in control of the Company, and the Employee may elect at his
discretion to terminate his employment, at any time prior to a change
in control of the Company, in either of which events this Agreement
shall terminate.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its corporate seal affixed and attested by its duly
authorized officers, and the Employee has hereunto set his hand and
seal as of the date first above written.
<PAGE>
STOKELY USA, INC.
By ______________________________
Robert M. Brill
(Corporate Seal) Its: Secretary
EMPLOYEE: John McCormick
_________________________________
John McCormick
<PAGE>
10(ppp)
CHANGE IN CONTROL
CONTINGENT EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 11th day of February, 1997, by and
between STOKELY USA, INC., a Wisconsin corporation ("Company"), and
Jack McDowell, Vice President in charge of Manufacturing of the
Company, ("Employee"),
W I T N E S S E T H :
WHEREAS, sudden takeovers, acquisitions or changes of control
of domestic corporations have occurred frequently in recent years, and
current conditions may contribute to the continuation or acceleration
of this trend; and
WHEREAS, the possibility of a sudden takeover, acquisition or
change of control can create uncertainty of employment and may cause
the loss of valuable Company employees, to the detriment of the Company
and its shareholders; and
WHEREAS, it is believed that the detriment described can be
substantially reduced by an agreement on the terms hereinafter set
forth;
NOW THEREFORE, in consideration of the foregoing premises and
the mutual covenants hereinafter set forth, IT IS AGREED:
(1) Continued Employment. If a change of control of the
Company occurs when the Employee is employed by the Company, the
Company will continue thereafter to employ the Employee, and the
Employee will remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for a period of two (2)
years following the date of such change ("Employment Period"). As used
herein, the phrase "change of control of the Company" means the first
to occur of the following:
(a) The acquisition of more than twenty (20%) percent of
the outstanding shares of voting stock of the Company by any person or
entity or group thereof acting in concert, excluding affiliates of the
Company, by means of an offer made publicly to the holders of all or
substantially all of the outstanding shares of the voting stock of the
Company to acquire such shares for cash, securities, other property or
any combination thereof; or
(b) Any person or entity acquires, subsequent to the date
of this Agreement, beneficial ownership of twenty (20%) percent or more
of the then issued and outstanding voting common stock of the Company
in any manner other than a purchase of such stock directly from the
Company for cash; or
(c) The sale, assignment or transfer by the Company of
all or substantially all of its business or assets, in a transaction or
related series of transactions, except any such sales to affiliates of
the Company; or
(d) The Company merges or consolidates or reorganizes
with or into any other corporation or corporations other than its
affiliates or engages in any other similar business combination or
reorganization; or
(e) A Schedule 13D or its equivalent is filed under the
Securities Exchange Act of 1934 with respect to the voting common stock
of the Company, by or on behalf of any person (within the meaning of
that term as defined in the regulations governing such Schedules),
which states expressly or by implication that such person intends to
change the management, direction or control of the Company or its
policies; or
(f) A majority of the Board of Directors of the Company
does not consist of persons who were serving in that capacity on the
date of this Agreement, or who were appointed or nominated to serve as
a Director by such persons or by persons who were themselves so
appointed or nominated.
(2) Duties. Unless otherwise agreed by the Company and
Employee, during the Employment Period the Employee shall be employed
by the Company in the same position as that which the Employee held on
the date of the change of control of the Company. In such employment,
his duties and authority shall consist of and include all duties and
authority customarily performed and held by a person holding an
equivalent position with a corporation of similar nature and size, as
such duties and authority related to such position are reasonably
defined and delegated from time to time by the Board of Directors of
the Company. However, no change of the Employee's location of
employment to outside the Oconomowoc area, or in the Employee's title,
shall be made without the prior written consent of the Employee. The
Employee shall have the powers necessary to perform the duties assigned
and shall be provided such supporting services, staff, secretarial and
other assistance, office space and accouterments as shall be reasonably
necessary and appropriate in light of the duties assigned (but in no
event, in any case, smaller in size or lesser in quality than that
being furnished to the Employee on the date of the change of control of
the Company).
The Employee shall devote his entire business time, energy
and skills to such employment while so employed, but the Employee shall
not be required to devote more than an average of approximately 45
hours per calendar week to such employment. The Employee shall be
entitled to a minimum of three (3) weeks (fifteen [15] working days) of
paid vacation annually. The Employee shall have the sole discretion to
determine the time and intervals of such vacation.
(3) Compensation. During the Employment Period, the Employee
shall be compensated as follows:
(a) He shall receive a salary equal to his salary as in
effect as of the date of the change of control of the Company, subject
to adjustment as hereinafter provided.
(b) He shall be reimbursed for any and all monies
advanced in connection with his employment for reasonable and necessary
expenses incurred by him on behalf of the Company.
(c) He shall be included, to the extent eligible
thereunder, in any and all plans providing benefits for the Company's
employees, including, but not limited to, life, accidental death and
dismemberment, long term disability, hospitalization, medical and
retirement, and be provided any and all other benefits and perquisites
(including use of an automobile) made available to other employees of
comparable status, at the expense of the Company on a comparable basis;
and
(d) He shall be included in all profit sharing, bonus,
deferred compensation, split dollar life insurance, and similar or
comparable plans customarily extended by the Company to corporate
officers and key employees of the Company.
(4) Annual Compensation Adjustments. The Board of Directors
of the Company, or an appropriate committee thereof, will consider and
appraise the contributions of the Employee to the Company's operating
efficiency, growth, production and profits, at least annually during
the Employment Period, and in accordance with past practice, the
Employee's compensation rate shall be annually adjusted upward to be
commensurate with increases given to other employees of comparable
status generally and as the scope and success of the Company's
operations or the Employee's duties expand.
(5) Retirement. If, during the Employment Period, or during
the applicable period, if any, described in paragraph (7), the Employee
shall deliver to the Company a statement signed by him, stating that
the Employee voluntarily chooses to retire early from the Company, or
if the Employee shall reach the age of 65, or shall, with the mutual
agreement of the Company, agree in writing on early retirement, then
this Agreement shall terminate on the effective date of such event and
the terms of the Company's retirement policies or such mutual agreement
shall immediately become effective.
(6) Termination Other Than for Cause.
(a) If, during the Employment Period, the Company shall
terminate the employment of the Employee for any reason other than the
reasons set forth in paragraph (5) above or paragraph (7) below,
thereafter he or his personal representatives shall continue to be paid
monthly an amount equal to his then current monthly base salary plus
one-twelfth (1/12th) of the annual average of the executive incentive
program payments and all bonuses paid to the Employee in the preceding
five (5) years, and he shall be entitled to continue life, accidental
death and dismemberment, long term disability and hospitalization and
medical insurances in effect at the time of his termination and shall
receive the other employee benefits and perquisites described in
subparagraphs (3)(c) and (3)(d) hereof, for the remainder of the
Employment Period or as specified by Federal law, whichever time period
is longer.
(b) If, during the Employment Period, the Employee's
duties shall be changed substantially without his written consent from
those specified in paragraph (2) or he shall fail to be re-elected or
he shall be removed as a corporate officer of the Company, or if the
Company violates this Agreement, the Employee shall have the right to
elect to terminate his employment under this Agreement; and if he so
elects, he or his personal representatives shall continue to be paid
monthly an amount equal to his then current monthly base salary plus
one-twelfth (1/12th) of the average of incentive program payments and
all bonuses paid to the Employee in the preceding five (5) years, and
he shall be entitled to participate in group life, hospitalization and
medical insurance in effect at the time of his termination and shall
receive the other employee benefits and perquisites described in
subparagraphs (3)(c) and (3)(d) hereof, for the remainder of the
Employment Period.
(7) Termination for Cause. Employee agrees that this
Agreement may be terminated by the Company at any time for cause, which
shall mean only death, conviction for criminal fraud, the commission of
a felony, or becoming the subject of a final nonappealable judgement of
a court of competent jurisdiction holding that the Employee is liable
to the Company for damages for obtaining a personal benefit in a
transaction adverse to the interest of the Company. In the event this
Agreement is terminated for cause, the Employee shall forfeit his right
to any and all benefits he would otherwise have been entitled
thereafter to receive under the Agreement.
(8) Enforceability. The parties agree that nothing in this
Agreement shall in any way abrogate the right of the Company and the
Employee to enforce by injunction or otherwise the due and proper
performance and observance of the several covenants herein contained to
be performed by the Employee or the Company or to recover damages for
breach thereof.
(9) Successors and Assigns. If the Company sells, assigns or
transfers all or substantially all of its business and assets to any
person, excluding affiliates of the Company, or if the Company merges
into or consolidates or otherwise combines with any person which is a
continuing or successor entity, then the Company shall assign all of
its right, title and interest in this Agreement as of the date of such
event to the person which is either the acquiring or successor
corporation, and such person(s) shall assume and perform from and after
the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. In case of such assignment
by the Company and of assumption and agreement by such person(s), all
further rights as well as all other obligations of the Company under
this Agreement thenceforth shall cease and terminate and thereafter the
expression "the Company" wherever used herein shall be deemed to mean
such person(s).
(10) Affiliate. The term "affiliate" as used in this Agreement
means any corporation more than fifty (50%) percent of the outstanding
voting common stock of which is owned at the time by the Company or an
affiliate of the Company.
(11) Supplemental Agreement. This Agreement supplements, and
is not an amendment to or in derogation of, any other agreement between
the Company and the Employee relating to the employment or the terms
and conditions thereof. No person, other than such person as may be
designated by the Board of Directors of the Company, shall have any
authority on behalf of the Company to agree to modify or change this
Agreement. This Agreement supersedes and replaces any prior Change in
Control Contingent Employment Agreement or agreements between Company
and Employee.
(12) Severability. This Agreement is to be governed by and
construed under the laws of the State of Wisconsin. If any provision
of this Agreement shall be held invalid and unenforceable for any
reason, such provision shall be deemed deleted and the remainder of the
Agreement shall be valid and enforceable without such provision.
(13) Termination of Agreement. The Company has the right to
terminate the employment of the Employee except in contemplation of a
change in control of the Company, and the Employee may elect at his
discretion to terminate his employment, at any time prior to a change
in control of the Company, in either of which events this Agreement
shall terminate.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its corporate seal affixed and attested by its duly
authorized officers, and the Employee has hereunto set his hand and
seal as of the date first above written.
STOKELY USA, INC.
By ______________________________
Stephen Theobald, (Corporate Seal)
Its: President
EMPLOYEE:
_________________________________
<PAGE>
10(qqq)
May 29, 1996
Mr. Vernon L. Wiersma
38080 Lakeland Drive
Oconomowoc, Wisconsin 53066
Dear Vern:
The following will serve to set forth the terms and conditions
of your resignation as President and a Director of Stokely USA, Inc.
("Stokely"):
(l) Compensation. Your resignation as President and a
Director of Stokely was effective as of the close of business on April
16, 1996. You also agree to resign as a member of the Advisory
Committee under the Stokely Employee Profit Sharing Retirement Plan,
(the "Plan").
You shall continue to be paid by Stokely at your present
aggregate base salary of $220,000 per year from the date of your
resignation through May 30, 1998 at a rate of $18,333.33 per month.
These payments shall also constitute compensation for any accrued
vacation to which you may be entitled. In the event of a change of
control of Stokely as defined in paragraph (5) hereof, you shall be
paid the then present value of such monthly payments in a single sum.
Stokely shall also pay to you in a single lump sum any amounts
in your Deferred Account under the Deferred Compensation Agreement for
Highly Compensated Employees entered into with you as of January 1,
1995.
Stokely will no longer make any contributions to any Stokely
retirement, profit-sharing or similar plan under which you are a
participant nor will any incentive compensation be paid to or accrued
for you under any incentive compensation plan provided for the officers
or employees of Stokely as of this date or as may be established at a
future date.
You are currently insured under a CIGNA split-dollar life
insurance contract with a current surrender value of $92,377.32. To
date Stokely has paid premiums for the maintenance of this contract of
$88,851.00. Under the terms of the agreement with respect to the
contract between Stokely and you, you are entitled to the difference
between the surrender value and the premium paid by Stokely for the
maintenance of the contract. The semi-annual premium for the contract
is $14,523. Stokely agrees to continue to pay the premiums on this
split-dollar contract through May 30, 1998 under the present agreement
whereby premiums paid by Stokely are appropriately repaid upon transfer
of the policy or upon your demise. You will be entitled to acquire the
contract as of May 30, 1998 by paying to Stokely the aggregate premiums
paid by Stokely with respect to the policy to such date.
(2) Benefits Plans. For the period through May 30, 1998
Stokely will continue participation in the group health and disability
insurance programs at your current participation level for you and your
eligible dependents at the same cost to you as at the date of your
resignation. Your rights (or those of your wife in the event of your
death prior to May 30, 1998) with respect to continued insurance
coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and Wisconsin law will begin May 30, 1998, and
continue for a period of 18 months thereafter. Notwithstanding the
foregoing, if you obtain other full-time employment prior to May 30,
1998, participation in such program shall terminate as of the effective
date of your new employer's health insurance program, but not later
than May 30, 1998. You agree to notify Stokely if you obtain new
full-time employment prior to May 30,1998.
(3) Prior Death. In the event of your death prior to May 30,
1998, the salary continuation payable to you in accordance with
paragraph (l) hereof shall be paid to your widow if she is then
surviving or to the personal representative of your estate if she is
then deceased. The payment of such amount shall also be made whether
or not you obtain other employment prior to May 30, 1998.
In the event of your death prior to May 30,1998 and prior to
the effective date of a new employer's health insurance program, the
coverage provided in paragraph (2) hereof shall continue for your widow
until May 30, 1998.
(4) Restricted Stock Grant. Under date of June 16, 1995
Stokely granted to you Fifty Thousand (50,000) shares of Common Stock
under certain terms and conditions. The grant provided the shares
would be issued in your name, but would be subject to certain
restrictions which would be released only as provided in the grant.
The grant provided for the vesting of Twelve Thousand Five Hundred
(12,500) shares annually for four years commencing on June 1, 1996. In
recognition that a portion of this grant reflected compensation for
prior services, Stokely agrees to fully vest one-half (1/2) of the
total grant or Twenty-Five Thousand (25,000) shares and to deliver two
certificates for Twelve Thousand Five Hundred (12,500) shares each to
you without further restriction. Stokely also acknowledges it is
obligated under the grant to pay to you as additional compensation an
amount equal to your income tax payable upon the release of such shares
and the receipt of such cash payment. Appropriate calculation of this
tax indemnification amount shall be mutually agreed upon between you
and Stokely. The delivery of the certificates free of such
restrictions, and the payment of the additional compensation, will be
accomplished promptly after expiration of the seven-day period
specified below, but no later than June 30, 1996. You recognize such
shares may constitute restricted securities under Rule 144 issued under
the Securities Act of 1933 and that you may be required to retain
ownership for a period of up to two years (possibly to be reduced to
one year) following date of the grant of the shares to you. Stokely
will arrange for the free transferability of the shares promptly
following expiration of such period.
All rights you had as of April 16, 1996, under agreements
and/or plans with respect to options to purchase Stokely stock will
remain in effect in accordance with the terms of such agreements and/or
plans.
(5) Supplemental Employee Retirement Plan. You are a class
one participant in the Supplemental Employee Retirement Plan ("SERP")
adopted by Stokely under date of March 8, 1995, and under the
provisions of the SERP, are to receive a monthly benefit for a period
of ten (10) years following retirement equivalent to one-twelfth
(1/12th) of forty percent (40%) of the salary and wages, excluding
bonuses paid by Stokely to you for the preceding twelve (12) month
period. Benefits in the SERP vest at the rate of four percent (4%) per
year from the date of employment. Since you joined Stokely in 1973,
you are ninety-two percent (92%) vested in the SERP benefits. Based
upon your salary as of the date of your resignation and ninety-two
percent (92%) vesting, you will be entitled to a monthly benefit of
$6,756.67 payable at the date you reach age 65 for a period of ten (10)
years. Stokely agrees to provide this benefit to you at such time,
under the terms and conditions of the SERP.
In the event of a change of control of Stokely, Stokely agrees
to cause to be paid to you the then present value of such benefits,
discounted at the rate of 7% per annum, in a single sum. "Change of
control" shall mean the first to occur of any of the events specified
in paragraph (1) of that certain Change of Control Contingent
Employment Agreement between Stokely and you dated October 16, 1992
(this reference to continue to apply despite the termination of such
agreement).
(6) Outplacement and Legal Fees. In lieu of providing you
with outplacement services, Stokely will pay you a lump sum of $20,000
promptly after expiration of the seven-day period specified below, but
no later than June 30, 1996.
Stokely will also will pay to Godfrey & Kahn S.C. $5,000 as an
allowance toward payment of the fees of that firm who assisted you in
negotiating this agreement. The parties agree that such amount does
not constitute wages for income tax purposes.
(7) Releases. In consideration of the above described
compensation and benefits, you agree to release Stokely and its
officers, directors, employees, agents and representatives from any and
all claims and causes of action, past, present and future, known or
unknown, in law or equity arising out of or in any way concerned with
or relating to your employment by or your separation from Stokely
(except for claims and causes of action arising out of this agreement
and arising under plans or agreements which are indicated under this
agreement to have continuing applicability, including, but not limited
to: breach of contract, impairment of economic opportunity, infliction
of emotional distress, defamation of reputation, any intentional or
negligent tort, and any alleged violations arising under any federal,
state or equal employment law, ordinance, regulation or order,
including, but not limited to, Title VII of the Civil Rights Act of
l964, as amended, the Age Discrimination Act of l967, as amended, or
any Wisconsin human rights laws.
Stokely does hereby release and forever discharge and agrees to
hold harmless you and your heirs and personal representatives from any
and all actions, claims and demands of whatever nature now existing or
which may hereafter arise out of your employment by Stokely through the
date hereof or arise out of your service as a director or officer of
Stokely, except for willful misconduct. In the event of a third party
claim against you arising out of your employment or service as a
director or officer of Stokely, Stokely shall indemnify you to the
extent provided in the Wisconsin Business Corporation Law and the By-
Laws of Stokely. Your rights under Article III of the Stokely By-Laws
as in effect on April 16, 1996, will remain in full force and effect
regardless of your resignation or future amendments of such By-Laws.
(8) Confidential Information. You agree that you will not,
for a period of two years following the date of this agreement, without
the prior written consent of the President of Stokely, (i) utilize or
divulge any confidential information you have at any time received or
obtained in connection with your employment by Stokely or, (ii) solicit
or otherwise attempt to entice away any employee of Stokely from his or
her employment with Stokely or, (iii) engage in any personal activity
to disparage or otherwise adversely affect the business reputation of
Stokely or any of its directors, officers or employees; provided,
however, that the foregoing shall not be construed to prohibit you from
obtaining employment with a competitor of Stokely or utilizing your
personal experience and knowledge in such employment. You also agree
that any breach of the foregoing agreements on your part shall
constitute a basis for Stokely to seek to have a Court terminate any
further payments and benefits provided for you herein.
It is specifically understood that the burden of establishing
any breach by you of the this restriction and the extent of damages, if
any, to Stokely as a result of such breach shall be on Stokely and that
any such breach may be established only by clear and convincing
evidence that you specifically engaged in the conduct or activity
prohibited by the foregoing.
"Confidential information" shall not include any information
(i) which is in the public domain, or (ii) which is not acquired
directly or indirectly from you, or (iii) which you may be required to
provide by the order of a court of competent jurisdiction or other
lawful legal process. Both parties agree to keep the terms of this
agreement confidential, except as required by law.
Stokely also agrees not to disparage or otherwise adversely
affect your reputation following the execution hereof. Stokely will
respond to any inquiries from prospective employers by or on behalf of
Stokely, regarding your employment and resignation substantially to the
effect of the Reason for Leaving Statement attached to this letter.
Explanations by you of the difference in direction referred to in such
statement will not constitute a violation of this paragraph.
(9) Withholding and Assignment. All payments under this
Agreement shall be subject to deduction on account of federal income
tax, social security, state income and other withholding which may be
applicable.
You shall have no right of assignment or transfer of any rights
or any sums that may accrue to you hereunder except upon your death,
nor shall any creditor or other claimant have any right to assert any
interest in or right to receive such sums, either by voluntary or
involuntary act on your part or by writ of garnishment or attachment or
otherwise.
(10) Litigation Assistance. You agree to cooperate with
Stokely and its counsel in regard to any litigation presently pending
or subsequently initiated involving matters of which you have
particular knowledge as a result of your employment with Stokely. Such
cooperation shall consist of making yourself available at reasonable
times for consultation with officers of Stokely and its counsel and
your availability for depositions or other similar activity should the
occasion arise. Stokely will pay you at the rate of $175 per hour for
any such assistance. In addition, reasonable travel costs and out-of-
pocket expenses in connection with such cooperation shall be reimbursed
to you by Stokely.
(11) Binding Effect. This letter shall be binding upon
Stokely and its successors and assigns in accordance with the terms and
provisions hereof. This agreement shall also be binding upon you and
your heirs and personal representatives and, other than as specifically
provided herein, your rights hereunder shall not be assignable to any
other person or entity.
This letter represents the full agreement between Stokely and
you and you acknowledge that there are no other obligations of any kind
or type owed to you and that you have no claims of any type against
Stokely arising out of your employment other than as specifically
provided herein. You have acknowledged that you have read this letter
and particularly the release contained in paragraph (7) hereof and
understand its contents and agree to its terms and conditions of your
own free will; you have been advised to consult with legal counsel
prior to signing this letter; the consideration you will receive in
exchange for signing this letter is in excess of any amount or benefits
to which you would otherwise be entitled under the severance program of
Stokely; you have twenty-one (21) days from the date of this letter in
which to consider whether to accept it; and, you will have seven (7)
days after the execution of this letter in which to revoke your
acceptance. Stokely acknowledges that it has no claims of any type
against you other than as specifically provided herein.
We believe the foregoing completely sets forth the terms and
conditions of our agreement with you on the subjects described above.
If you acquiesce in the foregoing, we ask that, after review with
counsel should you so choose and with the time noted above, you execute
a copy of this letter provided for that purpose, where indicated, and
return it to the undersigned, at which time (after the seven (7) day
revocation period noted above) this letter shall constitute a binding
agreement between Stokely and you.
Please signify in the space indicated and on your copy hereof,
your agreement with and acceptance of the foregoing terms and
conditions.
Very truly yours,
STOKELY USA, INC.
By
Frank J. Pelisek
Chairman of the Board
The foregoing is agreed and
accepted this _____ day of
May, 1996.
______________________________
Vernon L. Wiersma
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF STOKELY USA, INC.
OCONOMOWOC CANNING COMPANY, INC., incorporated in Wisconsin January 16,
1985.
President Stephen W. Theobald
Vice President John R. McCormick
Secretary Robert M. Brill
Treasurer Stephen W. Theobald
Directors Frank J. Pelisek
Stephen W. Theobald
D & K FROZEN FOODS, INC., incorporated in Washington, August 22, 1977.
President Stephen W. Theobald
Treasurer Stephen W. Theobald
Secretary Robert M. Brill
Director Stephen W. Theobald
STOKELY U.K. LIMITED, incorporated in England on May 17, 1991.
President Stephen W. Theobald
Treasurer Stephen W. Theobald
Secretary Stephen W. Theobald
Directors Stephen W. Theobald
Peter P. Caputa
Robert M. Brill
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-18801 and Registration Statement No. 33-60911 of Stokely USA,
Inc. and subsidiaries, on Form S-8 of our report dated June 19, 1997
appearing in the Annual Report on Form 10-K of Stokely USA, Inc. and
subsidiaries for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
June 19, 1997
<PAGE>
EXHIBIT 27.1
Period Type 12 Mos
Period Year end 3/31/97
Period End 3/31/97
Cash 1,660
Securities 0
Receivables 11,142
Allowances 508
Inventory 73,785
Current Assets 87,344
PP&E 73,112
Depreciation 32,643
Total Assets 130,742
Current Liabilities 50,912
Bonds 68,041
Common 572
Preferred Mandatory 0
Preferred 0
Other Stockholders Equity 43,593
Total Liability and Equity 130,742
Sales 184,850
Total Revenues 184,941
Cost of Good Sold 153,139
Total Costs 153,139
Other Expenses 13,529
Loss Provision 0
Interest Expense 10,750
Income Pretax (20,923)
Income Tax Expense 0
Income Continuing Operations (20,923)
Discontinued Operations 0
Extraordinary Items 0
Changes 0
Net Income (20,923)
EPS - Primary (1.84)
EPS - Diluted (1.84)
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-1997
[PERIOD-END] MAR-31-1997
[CASH] 1660
[SECURITIES] 0
[RECEIVABLES] 11142
[ALLOWANCES] 508
[INVENTORY] 73785
[CURRENT-ASSETS] 87344
[PP&E] 73112
[DEPRECIATION] 32643
[TOTAL-ASSETS] 130742
[CURRENT-LIABILITIES] 50912
[BONDS] 68041
[COMMON] 572
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 43593
[TOTAL-LIABILITY-AND-EQUITY] 130742
[SALES] 184850
[TOTAL-REVENUES] 184941
[CGS] 153139
[TOTAL-COSTS] 153139
[OTHER-EXPENSES] 13529
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 10750
[INCOME-PRETAX] (20923)
[INCOME-TAX] 0
[INCOME-CONTINUING] (20923)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (20923)
[EPS-PRIMARY] (1.84)
[EPS-DILUTED] (1.84)
</TABLE>
