SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1997 Commission File Number 0-15584
Alpine Lace Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2717823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Dunnell Road, Maplewood, New Jersey 07040
(Address of Principal Executive Offices)
(Registrant's telephone number, including area code): 973-378-8600
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 the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: As of July 28, 1997, there
were 5,092,172 shares of Common Stock, $.01 par value outstanding.
<PAGE>
ALPINE LACE BRANDS, INC.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 3
Consolidated Statements of Earnings for the Three
Months and Six Months Ended June 30, 1997 and 1996
(unaudited) 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 (unaudited) 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
2
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PART 1.
FINANCIAL INFORMATION
Item 1. Financial Statements
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 30, 1997 December 31, 1996
(unaudited)
ASSETS (substantially pledged)
Cash and cash equivalents $ 51,943 $ 393,173
Accounts receivable, net of
allowance for bad debts 14,084,542 13,431,641
Inventories 10,360,600 8,502,197
Prepaid expenses and deposits 446,029 389,385
Advances to suppliers 300,000 300,000
Deferred tax asset 29,583 29,583
Total current assets 25,272,697 23,045,979
Property, plant and equipment
Land, building and improvements 314,418 314,418
Equipment under capital lease 973,795 973,795
Leasehold improvements 121,115 121,115
Furniture, fixtures and equipment 2,858,974 2,731,754
4,268,302 4,141,082
Less accumulated depreciation and
amortization 2,118,410 1,890,996
2,149,892 2,250,086
OTHER ASSETS
Note Receivable - Mountain Farms, Inc. 1,675,948 1,675,948
Trademarks, tradenames and technology, less
accumulated amortization of $1,097,532 in
1997 and $1,019,739 in 1996 1,348,082 1,421,882
Other 262,293 177,440
3,286,323 3,275,270
$ 30,708,912 $28,571,335
</TABLE>
The accompanying notes are an integral part of these statements.
3
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ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 30, 1997 December 31, 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 9,447,386 $11,685,587
Accrued expenses 1,311,708 1,328,328
Income taxes 497,779 206,273
Current maturities of obligations under
capital leases 146,572 147,519
Total current liabilities 11,403,445 13,368,157
Long term obligations, less current maturities
Long-term debt 10,284,979 7,521,566
Obligations under capital leases 210,995 281,847
Deferred tax liability 100,465 100,465
10,596,439 7,903,878
Stockholders' equity
Preferred stock, par value $.01 per share;
authorized 1,000,000 shares;
issued and outstanding 45,000 shares at
liquidation amount of $50.00 per share 2,250,000 2,250,000
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued and
outstanding 5,198,772 at June 30, 1997
and 5,176,636 at December 31, 1996 51,988 51,767
Additional paid-in capital 3,647,871 3,602,141
Retained earnings 3,451,739 1,916,034
9,401,598 7,819,942
Less
Common stock in treasury-at cost 595,807 387,290
Unearned compensation 96,763 133,352
8,709,028 7,299,300
$30,708,912 $28,571,335
</TABLE>
The accompanying notes are an integral part of these statements.
4
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net Sales $ 40,047,298 $ 37,567,174 $73,786,601 $70,118,168
Cost of goods sold 28,575,699 28,778,201 52,466,194 53,681,630
Gross profit 11,471,599 8,788,973 21,320,407 16,436,538
Operating expenses
Selling 8,496,547 6,530,390 15,670,425 12,311,785
Administrative 1,409,025 1,260,732 2,674,047 2,300,912
9,905,572 7,791,122 18,344,472 14,612,697
Operating profit 1,566,027 997,851 2,975,935 1,823,841
Interest expense - net 232,140 194,389 475,804 381,755
Earnings before income taxes 1,333,887 803,462 2,500,131 1,442,086
Income taxes 473,554 305,316 880,051 547,993
Net earnings 860,333 498,146 1,620,080 894,093
Preferred stock dividends 42,188 42,188 84,375 84,375
MCT Dairies, Inc. option 1,411 2,000 6,289 1,800
Net earnings applicable to common shareholders $ 816,734 $ 453,958 $ 1,529,416 $ 807,918
Net earnings per share of common stock $ .16 $ .09 $ .30 $ .15
Weighted average number of
common and common equivalent
shares outstanding 5,184,920 5,248,845 5,184,421 5,271,888
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities
Net earnings $ 1,620,080 $ 894,093
Adjustments to reconcile net earnings
to net cash used in operating activities:
Depreciation and amortization 305,206 304,185
Provision for losses on accounts
receivable 19,654 13,296
Other 36,589 -
Change in assets and liabilities:
(Increase) Decrease in accounts receivable (672,555) 949,592
Increase in inventory (1,858,403) (898,631)
Increase in prepaid expenses (56,644) (19,937)
(Increase) Decrease in other assets (84,853) 20,835
Decrease in notes receivable - 7,800
Decrease in accounts payable (2,238,201) (3,517,496)
Decrease in accrued expenses (16,620) (771,939)
Increase in income taxes 291,056 61,138
Decrease in other long-term liabilities - (82,362)
(4,274,771) (3,933,519)
Net cash used in operating activities $ (2,654,691) $ (3,039,426)
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended
June 30,
1997 1996
Cash flows from investing activities:
Additions to property, plant and equipment $ (127,220) $ (261,936)
Payments for trademarks and tradenames and technology (3,992) -
Net cash used by investing activities (131,212) (261,936)
Cash flows from financing activities:
Net payments from obligation under capital lease (71,799) (49,709)
Net proceeds under long-term obligations 2,763,413 2,657,646
Purchase of treasury stock (208,517) (201,378)
Net proceeds from stock option exercises 45,951 585,370
Payment of dividends to preferred shareholders (84,375) (84,375)
Net cash provided by financing activities 2,444,673 2,907,554
Net (decrease) in cash and cash equivalents (341,230) (393,808)
Cash and cash equivalents at beginning of year 393,173 459,610
Cash and cash equivalents at end of quarter $ 51,943 $ 65,802
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 466,043 $ 390,776
Income taxes $ 506,795 $ 486,856
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
ALPINE LACE BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the financial
position of Alpine Lace Brands, Inc. as of June 30, 1997 and December 31, 1996
and the results of its operations for the three months and six months ended
June 30, 1997 and 1996 and cash flows for the six months ended June 30, 1997
and 1996. All material intercompany accounts and transactions have been
eliminated.
Certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, although the Company
believes that the disclosures are adequate to make the information presented
not misleading. It is suggested that these financial statements be read in
conjunction with the year-end financial statements and notes thereto included
in the Company's Annual Report on Form 10-K, as amended, filed with the
Securities Exchange Commission.
The accounting policies followed by the Company are set forth in the notes to
the Company's consolidated financial statements contained in its Annual Report
on Form 10-K.
2. The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal
year.
3. Inventories are summarized as follows:
June 30, 1997 December 31, 1996
Cheese inventory $ 9,828,766 $ 7,977,847
Packaging supplies 531,834 524,350
$ 10,360,600 $ 8,502,197
4. Earnings per share of common stock was computed by dividing net earnings,
after deducting preferred dividend requirements and earnings applicable to MCT
Dairies, Inc. option, by the weighted average number of common equivalent
shares outstanding during the period, including the incremental shares from
the dilutive effect of warrants and stock options, if applicable.
5. New Accounting Pronouncement - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements for both
interim and annual periods ending after December 15, 1997. The new standard
eliminates primary and fully diluted earnings per share and requires
presentation of basic and if applicable diluted earnings per share. Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for the period.
Diluted earnings per share reflects the weighted-average common shares
outstanding and dilutive potential common shares such as stock options. The
adoption of this new standard is not expected to have a material impact on the
disclosure of earnings per share in the financial statements.
6. The Company's operations consist of two segments: (1) the branded cheese
business which develops, markets, converts, packages and distributes branded
cheeses and deli meats; and (2) the Company's cheese and dairy products
trading business.
7. In an action brought by the Company on March 7, 1995 in the United States
District Court for the District of New Jersey against Kraft Foods, Inc.,
Borden Inc., Beatrice Cheese, Inc., and Schreiber Foods, Inc. alleging
infringement of the Company's patent for the manufacture of low fat cheese,
8
<PAGE>
partial summary judgment was granted in favor of Beatrice Cheese on July 11,
1997. The Company filed a motion for reconsideration of this decision on July
21, 1997 and this motion is still pending. Earlier grants of summary judgment
in favor of Kraft and partial summary judgment in favor of Borden and
Schreiber have been appealed to the United States Court of Appeals for the
Federal Circuit. A decision on the appeals is not expected for some time. The
case will continue in the District Court as to certain claims against
Beatrice, Borden and Schreiber.
On July 15, 1997, the Company was served with a complaint in a class action
pending in the Wisconsin Circuit Court for Dane County. The complaint in this
action, which was brought by 5 individual Wisconsin dairy farmers on behalf of a
nationwide class of milk producers, contains 3 counts. In the second count,
which is the only count containing allegations against the Company, the
plaintiffs allege a conspiracy among the Company and co-defendants the National
Cheese Exchange, Inc. (the "NCE"), Kraft Foods, Inc. and Borden, Inc. to
manipulate, through their trading practices, prices of bulk cheese on the Cheese
Exchange in violation of the Wisconsin antitrust laws. This manipulation is
alleged to have artificially depressed the price at which cheese was sold on the
Cheese Exchange and, in turn, the price at which plaintiffs allege they were
able to sell their milk. The other 2 counts of the complaint contain allegations
against only Kraft and the NCE. The complaint seeks treble damages in an
unspecified amount. The Company intends to vigorously defend this action.
See the Alpine Lace Brands, Inc. Report on Form 10-Q for the Quarter ending
March 31, 1997 for a description of litigation pending in the Eastern District
of Wisconsin.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
a. Results of Operations.
Comparison of the Company's second quarter (April 1, 1997 - June 30, 1997) of
the current fiscal year ("1997") with the second quarter (April 1, 1996 - June
30, 1996) of the last fiscal year ("1996").
Net sales for the second quarter ending June 30, 1997 were $40,047,298 as
compared to $37,567,174 in the same period of 1996. The Company's Branded
Division had increased sales of $516,164 for the second quarter ending June
30, 1997 going from $29,695,024 in 1996 to $30,211,188 in the same period of
1997. The Company's Branded division sales increase was due to an increase in
selling prices and an increase in unit volume, but principally offset by the
decrease in sales of commodity cheddar cheese. The Company's Branded division
sales excluding commodity sales increased $3,388,010 or 12.7% from $26,767,543
in 1996 to $30,155,553 in 1997 as a result of a 5.2% increase in sales price
per unit and a 4.5% increase in unit volume. Sales for the Company's cheese
and dairy products trading business increased by 24.9% or $1,963,960 to
$9,836,110 in 1997 from $7,872,150 for 1996, due to greater unit volume sales
partially offset by lower sales price per unit.
As a percentage of sales, gross profit increased to 28.6% in the second
quarter of 1997 from 23.4% in 1996. Gross profit increased by $2,682,626 in
the quarter ending June 30, 1997 going from $8,788,973 in 1996 to $11,471,599
in 1997. The increase in both gross profit as a percent of sales and total
gross profit are the result of the lower cost to purchase cheese, resulting
from lower commodity prices, and increased volume in the Branded division.
As a percentage of sales, selling and administrative expenses increased from
20.7% in the second quarter of 1996 to 24.7% in 1997. Selling and
administrative expenses increased from $7,791,122 in the second quarter of
1996 to $9,905,572 in 1997. The major contributors to this increase were from
promotion, advertising and co-op advertising expenses.
The Company's operating profit increased by $568,176 from $997,851 in the
second quarter of 1996 to $1,566,027 in 1997. Operating profit as a percent of
net sales increased to 3.9% in the second quarter of 1997 compared to 2.7% in
the second quarter of 1996 due to the higher gross profit, partially offset by
higher selling and administrative expenses previously discussed.
Net interest expense in the second quarter of 1997 was $232,140, an increase
of $37,751 from the comparable period of 1996, as a result of the company's
increased use of its working capital credit line, partially offset by lower
interest rates.
The Company's income tax provision for the second quarter of 1997 was 35.5% or
$473,554 due to a tax benefit carryover from 1996. The Company's income tax
provision for the second quarter of 1996 was 38.0% or $305,316.
The Company's net earnings for the quarter ending June 30, 1997 was $860,333
compared to $498,146 for the same period of 1996 for the reasons discussed
above.
10
<PAGE>
b. Results of Operations.
Comparison of the Company's first six months (January 1, 1997 - June 30, 1997)
of the current fiscal year ("1997") with the first six months (January 1, 1996 -
June 30, 1996) of the last fiscal year ("1996")
Net sales for the six months ending June 30, 1997 were $73,786,601 as compared
to $70,118,168 in the same period of 1996. The Company's Branded division had
decreased sales of $498,535 for the first six months ending June 30, 1997
going from $55,751,596 in 1996 to $55,253,061 in 1997 primarily due to the
decrease in sales of commodity cheddar cheese, partially offset by an increase
in selling prices and an increase in unit volume. The Company's Branded
division sales excluding commodity sales increased $3,838,221 or 7.5% from
$51,076,768 in 1996 to $54,914,989 in 1997 primarily as a result of a 5.7%
increase in sales price per unit. Sales for the Company's cheese and dairy
products trading business increased by 29% or $4,166,968 to $18,533,540 in
1997 from $14,366,572 in 1996 due to greater unit volume sales partially
offset by lower sales price per unit.
As a percentage of sales, gross profit increased to 28.9% in the first six
months of 1997 from 23.4% in 1996. Gross profit increased by $4,883,869 in the
six months ending June 30, 1997 going from $16,436,538 in 1996 to $21,320,407
in 1997. The increase in both gross profit as a percent of sales and total
gross profit are primarily the result of the lower cost to purchase cheese
resulting from lower commodity prices.
As a percentage of sales, selling and administrative expenses increased from
20.8% in the first six months of 1996 to 24.9% in 1997. Selling and
administrative expenses increased from $14,612,697 in the first six months of
1996 to $18,344,472 in 1997. The major contributors to this increase were from
promotion, advertising and coupon expenses.
The Company's operating profit increased by $1,152,094 from $1,823,841 in the
first six months of 1996 to $2,975,935 in 1997. Operating profit as a percent
of net sales increased to 4.0% in the first six months of 1997 compared to
2.6% in 1996 due to the higher gross profit, partially offset by the higher
selling and administrative expenses previously discussed.
Net interest expense in the first six months of 1997 was $475,804, an increase
of $94,049 from the comparable period of 1996, as a result of the Company's
increased use of its working capital credit line, partially offset by lower
interest rates.
The Company's income tax provision for the first six months of 1997 was 35.2%
or $880,051 due to a tax benefit carry-over from 1996. The Company's effective
tax rate for the first six months of 1996 was 38.0% or $547,993.
The Company's net earnings for the six months ending June 30, 1997 was
$1,620,080 compared to $894,093 for 1996 for the reasons discussed above.
c. Financial Condition
The major source of cash for the six months ending June 30, 1997 came from net
earnings. The major uses of cash for the six months ending June 30, 1997 were
to fund decreases in accounts payable and increases in inventory and accounts
receivable. As of August 1, 1997, the Company had approximately $3,800,000
available on its revolving credit facility.
11
<PAGE>
PART II.
Other Information
Item 1. Legal Proceedings
In an action brought by the Company on March 7, 1995 in the United States
District Court for the District of New Jersey against Kraft Foods, Inc.,
Borden Inc., Beatrice Cheese, Inc., and Schreiber Foods, Inc. alleging
infringement of the Company's patent for the manufacture of low fat cheese,
partial summary judgment was granted in favor of Beatrice Cheese on July 11,
1997. The Company filed a motion for reconsideration of this decision on July
21, 1997 and this motion is still pending. Earlier grants of summary judgment
in favor of Kraft and partial summary judgment in favor of Borden and
Schreiber have been appealed to the United States Court of Appeals for the
Federal Circuit. A decision on the appeals is not expected for some time. The
case will continue in the District Court as to certain claims against
Beatrice, Borden and Schreiber.
On July 15, 1997, the Company was served with a complaint in a class action
pending in the Wisconsin Circuit Court for Dane County. The complaint in this
action, which was brought by 5 individual Wisconsin dairy farmers on behalf of a
nationwide class of milk producers, contains 3 counts. In the second count,
which is the only count containing allegations against the Company, the
plaintiffs allege a conspiracy among the Company and co-defendants the National
Cheese Exchange, Inc. (the "NCE"), Kraft Foods, Inc. and Borden, Inc. to
manipulate, through their trading practices, prices of bulk cheese on the Cheese
Exchange in violation of the Wisconsin antitrust laws. This manipulation is
alleged to have artificially depressed the price at which cheese was sold on the
Cheese Exchange and, in turn, the price at which plaintiffs allege they were
able to sell their milk. The other 2 counts of the complaint contain allegations
against only Kraft and the NCE. The complaint seeks treble damages in an
unspecified amount. The Company intends to vigorously defend this action.
See the Alpine Lace Brands, Inc. Report on Form 10-Q for the Quarter ending
March 31, 1997 for a description of litigation pending in the Eastern District
of Wisconsin.
Item 2. Changes in Securities
The Company issued 200 shares of Common Stock, par value $.01 per share, upon
the exercise, in part, of a Stock Option held by one of the Company's food
brokers. The exercise occurred on June 20, 1997 and the exercise price per
share was $5.125. This transaction was exempt from registration pursuant to
Section 4(2) of Securities Act of 1933, as amended, because it did not involve
a public offering.
Item 4. Submission of Matters to a Vote of Security Holders
On June 20, 1997, the Company held its Annual Meeting of Stockholders (the
"Meeting"), whereby the stockholders elected Directors, approved adoption of
the Alpine Lace Brands, Inc. 1997 Stock Option Plan and ratified the selection
of Grant Thornton LLP as the Company's independent certified public
accountants for 1997. The vote on such matters was as follows:
12
<PAGE>
1. ELECTION OF DIRECTORS: For Withhold
Carl T. Wolf 4,817,405 154,292
Marion F. Wolf 4,817,105 154,592
Richard Cheney 4,817,305 154,392
Richard S. Hickok 4,817,305 154,392
Howard M. Lorber 4,817,105 154,592
Joseph R. Rosetti 4,817,105 154,292
Marvin Schiller 4,817,105 154,592
John M. Small 4,817,405 154,292
2. APPROVAL OF THE ADOPTION OF THE ALPINE LACE BRANDS, INC. 1997 STOCK OPTION
PLAN:
For Against Abstain Broker Non-Votes
2,499,717 806,215 12,750 1,653,015
3. RATIFICATION OF THE SELECTION OF GRANT THORNTON LLP AS THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS OF THE COMPANY FOR 1997.
For Against Abstain
4,950,387 14,470 6,840
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
Exhibit 10
(a) Alpine Lace Brands, Inc. 1997 Stock Option Plan
(b) Amendment, dated June 13, 1997, to Employment Agreement, dated January 4,
1993, between the Company and George Wenger
Exhibit 11 Computation of Earnings per Share of Common Stock
b. Form 8-K Reports.
On July 30, 1997, the Company filed a report on form 8-K, dated July 29, 1997,
stating that the Company had retained the investment banking firm of Merrill
Lynch & Co., to assist the Company in exploring strategic initiatives to
enhance shareholder value. The Company is exploring several alternatives,
including the possible sale of the Company.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALPINE LACE BRANDS, INC.
By: /s/ Kenneth E. Meyers
Kenneth E. Meyers, Secretary
Dated: August 8, 1997
By: /s/ Arthur Karmel
Arthur Karmel, Vice President - Finance
(Chief Accounting Officer)
Dated: August 8, 1997
14
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Exhibit 10 (a)
ALPINE LACE BRANDS, INC.
1997 STOCK OPTION PLAN
1 . PURPOSE
The purpose of the 1997 Stock Option Plan is to advance the interests of
Alpine Lace Brands, Inc. and its stockholders by enhancing the ability of
Alpine Lace Brands, Inc. and its subsidiaries to attract and retain employees
and directors and to furnish additional incentives to such persons by
encouraging them to become owners of Common Stock.
2 . DEFINITIONS
2.1 "Cause" means (a) conviction of any crime (whether or not involving
the Company) constituting a felony in the jurisdiction involved; (b) engaging
in any substantiated act involving moral turpitude; (c) engaging in any act
which subjects, or if generally known would subject, the Company to public
ridicule or embarrassment; (d) material violation of the Company's policies;
or (e) serious neglect or misconduct in the performance of the Optionee's
duties for the Company or a subsidiary or willful or repeated failure or
refusal to perform such duties.
2.2 "Change in Control" shall have the meaning set forth in Section 15.3
(c).
2.3 "Committee" shall have the meaning set forth in Section 5.
2.4 "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder. Any reference in this Plan to a
section of the Code or to any rule or regulation promulgated thereunder shall
include any amendment of such section, rule or regulation or any successor or
substituted section or regulation, as the case may be.
2.5 "Company" means Alpine Lace Brands, Inc., a Delaware corporation.
2.6 "Director" shall have the meaning set forth in Section 4.1.
2.7 "Fair Market Value", when used in connection with Shares on a certain
date, means the reported closing bid price per Share (if then traded in the
over-the-counter market other than on the National Market System of the
National Association of Securities Dealers Automated Quotations System
("NASDAQ")) or the reported closing price per Share (if then traded on
NASDAQ's National Market System or on a national securities exchange) on the
day prior to such date or, if there was no such price reported for such date,
on the next preceding date for which such price was reported. If Shares are
not traded so that a price can be determined in accordance with the preceding
sentence, the Committee may establish Fair Market Value by any fair and
equitable means.
2.8 "Incentive Stock Option" means a Stock Option that is intended to
qualify as an "incentive stock option" pursuant to Sections 421 and 422 of the
Code.
2.9 "Optionee" means a person to whom a Stock Option has been granted,
or, where applicable, such person's legal representative.
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2.10 "Permanent Disability" means the inability of the Optionee to
perform the duties performed just prior to the onset of the disability for a
period of six-months. In the case of an Incentive Stock Option, Permanent
Disability shall have the meaning set forth in Section 422 (c)(7) of the Code.
2.11 "Plan" means this 1997 Stock Option Plan.
2.12 "Reserved Shares" shall have the meaning set forth in Section 3.
2.13 "Shares" means shares of Common Stock of the Company, par value $.01
each, subject to adjustment authorized by Section 15 hereof.
2.14 "Stock Option" means an option for Shares granted under the Plan,
including an Incentive Stock Option.
2.15 "Stock Option Agreement" shall have the meaning set forth in
Section 8.
2.16 "1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder. Any reference in this
Plan to a section of the 1934 Act or to any rule or regulation promulgated
thereunder shall include any amendment of such section, rule or regulation or
any successor or substituted section or regulation, as the case may be.
3. SHARES SUBJECT TO THE PLAN
Subject to adjustments authorized by Section 15 hereof, no more than
1,500,000 Shares (the "Reserved Shares") may be issued pursuant to the Plan.
The number of Reserved Shares shall be reduced by the number of Shares subject
to outstanding Stock Options and the number of Shares issued upon the exercise
of Stock Options and shall be increased by the number of shares not purchased
under Stock Options which have expired or have been terminated or canceled.
Shares issued under the Plan may be authorized but unissued shares of the
Company's Common Stock or Shares held in treasury or a combination thereof.
4. ELIGIBILITY AND LIMITATIONS
4.1 Eligible Participants. Subject to the other terms and conditions of
the Plan, any employee of the Company or any subsidiary thereof, including
officers, selected by the Committee in its sole discretion, and any director,
whether or not an employee, of the Company or any subsidiary thereof (a
"Director") shall be eligible to receive Stock Options.
4.2 No Right of Employment. Nothing in the Plan or in any Stock Option
Agreement shall confer any right on an employee or Director to continue as an
employee or Director of the Company or any subsidiary or shall interfere in
any way with any right of the Company or any subsidiary to terminate such
employee's or Director's status as such at any time.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee of the Board of Directors
(the "Committee") consisting of not less than three directors who are both (i)
"non-employee directors" as specified by Rule 16b-3 (b)(3)(i) promulgated
under the 1934 Act and (ii) "outside directors" as required by the Internal
Revenue Service regulations promulgated under Section 162 (m) of the Code. The
Committee shall have full power to construe and interpret the Plan, to
establish rules and regulations for its administration and, subject to
Sections 6 and 7, to grant Stock Options. The Committee's determinations under
the Plan need not be uniform and may be made by it selectively among persons
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who receive, or are eligible to receive, awards under the Plan (whether or not
such persons are similarly situated). The Board of Director may, at any time,
take any action under the Plan that the Committee is authorized to take. All
actions taken and decisions made by the Committee or by the Board of Directors
pursuant to the Plan shall be binding and conclusive on all persons.
6. GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
6.1 Grant on Becoming a Director. Each person who is not an employee of
the Company or any subsidiary and who becomes a Director of the Company after
the effective date of the Plan shall automatically receive a Stock Option to
purchase 6,600 Shares at an option price per Share equal to the Fair Market
Value on the day such Director is elected to the Board of Directors of the
Company.
6.2 Annual Grant. Each Director of the Company who is not also an
employee of the Company or any subsidiary thereof shall automatically receive,
on the first business day of November in each year after the effective date of
the Plan, a Stock Option to purchase 6,600 Shares at an option price per Share
equal to the then Fair Market Value.
6.3 Vesting. All of the Stock Options granted under Sections 6.1 and 6.2
shall vest one third per year for three years so that one third vest on the
first anniversary of the date of grant, the second one third vest on the
second anniversary of the date of grant, and the last one third vest on the
third anniversary of the date of grant. All such Stock Options shall expire on
the date 10 years after the date of grant.
6.4 Additional Grants. Nothing contained in this Section 6 shall preclude
grants of additional Stock Options to any Director who is not an employee of
the Company or any subsidiary by the Board of Directors pursuant to the Plan
or grants of stock options or any other benefit under any other plan or
program of the Company.
6.5 Other Terms Applicable. All of the Stock Options granted under this
Section 6 will be subject to the other terms and conditions of the Plan
including the provisions regarding termination and the provisions for
adjusting the number of Shares subject to a Stock Option grant in accordance
with Section 15. In the event that an adjustment is made pursuant to Section
15, the adjustment made in regards to any grant of Stock Options to a Director
under this Section 6 shall be of the same kind and in the same proportion as
adjustments made in regards to any grants of Stock Options to employees.
7. GRANTS OF STOCK OPTIONS TO EMPLOYEES
Stock Options may be granted to eligible employees at such times, in such
amounts and on such terms and conditions and may or may not be Incentive Stock
Options, all as the Committee may determine, in its sole discretion, subject
to the terms and conditions of the Plan and to the following:
7.1 Time of Exercise. A Stock Option grant may contain such waiting
periods, vesting provisions, restrictions on exercise and term as may be
determined by the Committee at the time of grant; provided, however, that in
no case shall any Incentive Stock Option be exercisable for a period exceeding
ten years.
7.2 Purchase Price. The option price per share of Shares deliverable upon
the exercise of a Stock Option shall be determined by the Committee at the
time of grant; provided, however, that the option price for any Incentive
Stock Option shall not be less than 100% of the Fair Market Value on the date
the Stock Option is granted.
7.3 Number of Shares. The maximum number of Shares that may be subject to
Stock Options granted under the Plan to any individual in any calendar year
shall not exceed 75, 000, and the method of counting such Shares shall conform
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to any requirements applicable to performance- based compensation under
Section 162 (m) of the Code.
7.4 Special Limitation on Incentive Stock Options. The aggregate fair
market value (determined at the time the Option is granted) of all Shares with
respect to which Incentive Stock Options granted to an Optionee are
exercisable for the first time by such Optionee during any calendar year shall
not exceed $100,000.
7.5 Special Limitations on Incentive Stock Options Granted to 10%
Stockholders. In the event that an Optionee also owns 10% or more of the
outstanding Shares, an Incentive Stock Option may be granted to such Optionee
only if the exercise price for such options is equal to 110% of the Fair
Market Value on the date the Stock Option is granted and such Option expires 5
years after the date of grant. Share ownership shall be determined in
accordance with Section 424 (d) of the Code.
8. STOCK OPTION AGREEMENTS
Every grant of a Stock Option under the Plan, whether made to an employee
or to a non-employee Director, shall be evidenced by a written agreement
containing the terms and conditions of the grant and having such other terms
and in such form as shall be determined from time to time by the Committee (a
"Stock Option Agreement").
9. EXERCISE OF STOCK OPTIONS AND METHOD OF PAYMENT
Stock Options shall be exercised by (i) giving written notice thereof to
the Company's Secretary or its Vice President - Finance, or their functional
successors in the Company's plan of organization and (ii) paying the exercise
price. Payment shall be made in cash or, if approved by the Committee, by the
surrender to the Company of outstanding Shares or a combination of cash and
Shares. Any Shares so surrendered shall be valued at the Fair Market Value on
the date on which such Shares are surrendered and, if acquired pursuant to the
exercise of a stock option, must have been held by the Optionee for a period
of not less than 6 months. In addition to the foregoing, payment may be made
by such other method as the Committee may, in its sole discretion, determine
from time to time.
10. TERMINATION OF EMPLOYMENT OR STATUS AS A DIRECTOR.
10.1 General. Subject to the other provision of this Section 10, any
Stock Option granted under the Plan will terminate and all rights in relation
thereto will cease upon the termination of an Optionee's employment or status
as a Director.
10.2 Involuntary Termination. If an Optionee's employment or status as a
Director is terminated by the Company without Cause and involuntarily on the
part of the Optionee, then any Stock Option granted under the Plan will no
longer vest, but the right to exercise the vested portion of the Stock Option
will terminate and all rights in relation thereto will cease 180 days after
the date of termination or, in the case of an Incentive Stock Option 90 days
after the date of termination.
10.3 Retirement. If an Optionee's employment or status as a Director
terminates as a result of retirement at age 65 or early retirement prior to
age 65 with the approval of the Committee, then any Stock Option granted under
the Plan will no longer vest, but the right to exercise the vested portion of
the Stock Option will terminate and all rights in relation thereto will cease
180 days after the date of retirement or, in the case of an Incentive Stock
Option 90 days after the date of termination.
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10.4 Disability. If an Optionee's employment or status as a Director
terminates as a result of a Permanent Disability, then any Stock Option
granted under the Plan will no longer vest, but the right to exercise the
vested portion of the Stock Option will terminate and all rights in relation
thereto will cease 180 days after the date of termination.
10.5 Death. If an Optionee dies while an employee or Director or during
any 180 day or 90 day period provided for in Sections 10.2, 10.3 or 10.4, then
any Stock Option granted under the Plan will no longer vest, but the right to
exercise the vested portion of the Stock Option will terminate and all rights
in relation thereto will cease one (1) year after the date of death.
10.6 Other. The Committee, at any time, may establish such other periods
during which an Optionee whose status as an employee or Director terminates
for any reason (including those set forth above) may exercise a Stock Option
granted under the Plan; provided, however, that any such period shall be
subject to the regulations promulgated under the Code to the extent
applicable; any period so established by the Committee shall not exceed twelve
months; and the Committee may not shorten any period established in relation
to a Stock Option after the date of grant of such Stock Option. Subject to the
regulations promulgated under the Code, the Committee may provide for the
tolling of an exercise period after termination if the Optionee, after such
termination, provides services to the Company or any of its subsidiaries as an
employee, officer, director or independent contractor. The Committee, at any
time, may also determine whether and to what extent a Stock Option will
continue to vest during any period set forth in Sections 10.2 through 10.5 or
during any other period established under this Section 10.6.
10.7 Limitation on Extended Exercise Periods. Notwithstanding anything in
the Plan or this Section 10 to the contrary, no Stock Option shall be
exercisable after the date it expires by its terms.
11. REPURCHASE OF STOCK OPTIONS
At the discretion of the Committee, the Company may repurchase a
previously granted Stock Option, in whole or in part, from an Optionee by
mutual agreement with such Optionee before said Stock Option has been
exercised; provided, however, that the amount paid to the Optionee shall not
exceed the amount by which the Fair Market Value of the Shares subject to the
Stock Option to be repurchased at the time of such repurchase exceeds the
exercise price of such Shares.
12. LISTING AND REGISTRATION
Each Stock Option granted under the Plan shall be subject to the
requirement that, if at any time the Board of Directors of the Company shall
determine, in its sole discretion, that the listing, registration or
qualification of Shares subject to such Stock Option upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such Stock Option or the issue or purchase
of Shares thereunder, no such Stock Option may be exercised in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Board of Directors.
13. WITHHOLDING
Prior to the delivery of any Shares upon exercise of a Stock Option, the
Company shall have the right to deduct from any amount payable in cash, to
withhold Shares having a Fair Market Value equal to, or to require the
Optionee to pay, any taxes required by law to be withheld (or to allow the
Company to claim an income tax deduction) with respect to the delivery of such
Shares.
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14. NON-TRANSFERABILITY OF STOCK OPTIONS
Stock Options granted under the Plan may not be transferred, assigned or
hypothecated by an Optionee other than by will, by the laws of descent and
distribution. During the Optionee's lifetime, Stock Options shall be exercised
only by such Optionee or such Optionee's guardian or legal representative.
15. ADJUSTMENTS IN THE EVENT OF CHANGES IN CAPITAL STRUCTURE, REORGANIZATION
OR CHANGE IN CONTROL
15.1 Changes in Capital Structure. In the event of a change in the
corporate structure or Shares of the Company, the Board of Directors (subject
to any required action by the stockholders and upon the recommendation of the
Committee) shall make such equitable adjustments, so long as it protects
Optionees against dilution, as it may deem appropriate in the number and kind
of Reserved Shares and, with respect to outstanding Stock Options, in the
number and kind of Shares subject thereto and in the exercise price of such
Stock Options. For the purpose of this Section, a change in the corporate
structure or Shares of the Company shall include, but is not limited to,
changes resulting from a recapitalization, stock split, reverse stock split,
stock dividend or rights offering.
15.2 Reorganization, etc. At the time of the dissolution or liquidation
of the Company or of a reorganization, merger or consolidation of the Company
with one or more corporations or of a transfer of substantially all of the
property or assets of the Company to another person or entity not controlled
by the Company's stockholders just prior to such transfer (referred to for
purposes of this Section 15.2 as a "Corporate Transfer"), (i) all Stock
Options outstanding under the Plan will vest; (ii) each Optionee may exercise
any or all such vested Stock Options and receive upon exercise (and payment of
the exercise price) such securities, notes or other property (including cash
or cash net of the exercise price) that would have been received had the
Optionee held the equivalent number of Shares at the time of the Corporate
Transfer; and (iii) any Stock Options that the Optionee elects not to exercise
will terminate; provided, however, that the Committee may, in its sole
discretion, determine that adequate provision has been made in connection with
such Corporate Transaction for the continuation or assumption of the Stock
Options or for the substitution of new options covering the shares of a
successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and price per
share, in which event the Stock Options previously granted or new options
substituted therefore shall continue in the manner and under the terms so
provided.
15.3 Change in Control. (a) Unless provided by the Committee in any Stock
Option Agreement, in the event of a Change in Control, as defined below, of
the Company and, within 1 year thereafter, the termination of an Optionee's
employment or status as a Director by the Company for any reason other than
Cause, retirement, Permanent Disability or death or the termination of
employment or status as a Director by the Optionee due to a detrimental change
in responsibilities or a reduction in compensation or benefits, (i) all Stock
Options granted to the Optionee under the Plan and outstanding at the time of
termination will vest upon termination; (ii) such Optionee may exercise any or
all such vested Stock Options within 30 days of termination; and (iii) any
Stock Options that the Optionee elects not to exercise will terminate at the
end of such 30-day period.
(b) In the event of a Change in Control, as defined below, of the
Company, the Committee may, in its sole discretion, amend any outstanding
Stock Option Agreement in such manner as it may deem appropriate, including,
without limitation, an amendment that advances the dates upon which any or all
outstanding Stock Options vest, and may make any such amendment conditional
upon the consummation of the applicable Change in Control transaction.
(c) For purposes of this Section 15.3, a "Change in Control" shall mean
that:
(i) any "person," as such term is used in Sections 13(d) and 14 (d) of
the 1934 Act (other than the Company or any 80% owned subsidiary of the
Company; any trustee or other fiduciary holding securities under an employee
benefit
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plan of the Company; any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company; or any stockholder of the Company who, just
prior to the effective date of the Plan, owned 25% or more of the stock of the
Company or any company or other entity owned, directly or indirectly, in whole
or substantial part, by such stockholder) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting
power of the Company's then outstanding securities; or
(ii) during any period of 24 consecutive months, individuals who at the
effective date of this Plan constitute the Board of Directors of the Company
and any new director (other than a director designated by a person who has
entered or subsequently enters into an agreement with the Company to effect a
transaction described in clause (i) of this Section 15.3 (c)) whose election
by the Board of Directors or nomination for election by the Company
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the effective date of the
Plan or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board of
Directors.
15.4 Other. Notwithstanding anything to the contrary contained in this
Section 15, no Stock Option shall be exercisable after the date it expires by
its terms.
16. RIGHTS AS STOCKHOLDERS
An Optionee shall have no rights whatsoever as a stockholder of the
Company with respect to any Shares subject to a Stock Option until such Stock
Option has been exercised, the exercise price and any required withholding has
been paid in full and the Shares subject to such Stock Option have been
issued.
17. AMENDMENT
The Company's Board of Directors, upon recommendation of the Committee,
shall have the power to amend or revise the terms of the Plan or any part
thereof (including, but not limited to, amending or revising the Plan to
conform to the requirements of the Code governing the tax treatment of stock
options now or hereafter in effect), without further action of the
stockholders; provided, however, that no such amendment or revision shall
materially impair or restrict any rights under any outstanding unexercised
Stock Option without the written consent of the holder of such Stock Option;
and provided, further, that no such amendment or revision shall, without
stockholder approval, increase the total number of the Reserved Shares.
18. EFFECTIVE DATE AND TERMINATION OF PLAN
18.1 Effective Date. The effective date of the Plan shall be
June 20, 1997.
18.2 Termination. The Board of Directors may terminate the Plan at any
time with respect to any Shares that are not subject to Stock Options. Unless
terminated earlier by the Board of Directors, the Plan shall terminate ten
years after the effective date and no Stock Options shall be granted under the
Plan after such date. Termination of the Plan under this Section 18 will not
affect the rights and obligations of any Optionee with respect to Stock
Options granted prior to termination.
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Exhibit 10 (b)
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT to the Agreement (as defined below) made as of the 13th day
of June, 1997 by and between ALPINE LACE BRANDS, INC., a Delaware corporation
having its principal offices located at 111 Dunnell Road, Maplewood, New Jersey
07040, (hereinafter referred to as the "Company") and GEORGE S. WENGER, residing
at 33 Rynda Road, South Orange, New Jersey 07079 (hereinafter referred to as the
"Executive").
WHEREAS, the Company and the Executive entered into an Employment
Agreement, dated January 4, 1993, (the "Agreement");
WHEREAS, the term of employment under the Agreement was for one year and
the term was automatically renewed for successive one year renewal terms so that
the Agreement continues in full force and effect; and
WHEREAS, the Company and the Executive wish to amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. Employment Agreement. Except to the extent specifically changed herein,
the Agreement shall remain in full force and effect, and all of the terms and
conditions of the Employee's employment shall be governed by the terms of the
Agreement including, without limitation, the provisions as to expenses,
vacation, benefits, non-disclosure, non-compete, non-interference, covenant to
report and ownership of trade secrets. The Executive's annual compensation shall
remain at its current level of $166,000 per year. The Executive shall continue
continue to receive a non-accountable expense allowance of $140.00 per week.
2. Term.
(a) Subject to the provisions of Paragraph 8 of the Agreement, the term of
the Executive's employment by the Company will cease on August 1, 1998. The
Executive hereby waives the notice required to be given by the Company pursuant
to Paragraph 2 of the Agreement.
(b) In lieu of the notice required to by given by the Executive pursuant to
Paragraph 2 of the Agreement, the Executive may terminate his employment under
<PAGE>
the Agreement by giving the Company a minimum of sixty (60) days notice;
provided, however, that such notice may not be given until after three months
after the effective date ot this Amendment. In the event that the Executive
elects to terminate his employment under the Agreement, all of the Executive's
rights and benefits under the Agreement will terminate on the date of
termination including, but not limited to, the rights and benefits set forth in
Paragraphs 2(c), 3(d), 4 and 5 of this Amendment.
(c) Notwithstanding anything to the contrary in the Agreement or this
Amendment, in the event that there is a Change in Control (as defined below) of
the Company on or before August 1, 1998, the term of the Executive's employment
shall continue in effect as if Paragraph 2(a) of this Amendment had not been
adopted.
3. Duties.
(a) Paragraph 4 of the Agreement shall no longer have any force and effect
and the Executive shall no longer have the duties and responsibilities set forth
therein, except that the Executive shall cooperate fully with the President of
the Company in the advancement of the best interests of the Company and its
Affiliates.
(b) During the remainder of his employment by the Company, the Executive
shall continue to solicit sales from and develop the Company's business with
club stores and mass merchandisers and within Canada. "Club stores and mass
merchandisers" means Sam's, Costco, BJ's, Smart & Final, Cost-U-Less, Trader
Joe's, Aldi, Save-A-Lot, Wal-Mart and such other accounts as may be mutually
agreed upon by the parties.
(c) In addition to the foregoing, through September 1997, the Executive
will supervise the Company's efforts to develop home meal replacement products.
From September 1997 through the end of his employment, the Executive will be
available to advise the Company, in such manner as the Company may request, on
developing such products; any such request by the Company shall be reasonably
limited as to time and effort so as not to materially impinge on the Executive's
ability to develop his own business as set forth in Paragraph 5 hereof.
(d) The Company shall calculate commissions on all sales made by the
Executive under Paragraph 3(b) for the period from August 1, 1997 through July
31,1998 at a rate of $.03 per pound for branded products and at a rate to be
mutually agreed upon for non-branded products. On or before August 31, 1998, the
Company shall pay the Executive the amount, if any, by which commissions
calculated pursuant to the preceding sentence exceeds the "Base Amount." The
Base Amount shall equal pro forma commissions, calculated at the rate set forth
above, for the accounts set forth in Paragraph 3(b) for the period July 1, 1996
to June 30, 1997.
(e) The Executive shall retain his title as Senior Vice President in order
to perform his duties hereunder unless and until such time as the President of
<PAGE>
the Company shall determine, in his sole discretion, that the Executive should
no longer use such title. The Executive will not be an elected officer of the
Company.
4. Stock Options.
(a) The Executive has been granted Stock Options under the Company's 1987
Stock Option Plan (the "Plan") which may or may not be vested, by their
respective terms, by August 1, 1998. The Executive may exercise the vested Stock
Options or not, at his own discretion, in accordance with the terms of the Plan.
The termination of the Executive's employment under the Agreement, as amended,
will be deemed an involuntary termination such that the then vested Stock
Options will terminate in accordance with their terms six (6) months after the
Executive's termination of employment.
(b) At the time of the Executive's termination, the Company will pay the
Executive an amount equal to the excess, if any, of (i) the Fair Market Value
(as defined in the Plan) on the day of termination of the number of shares of
the Company's Common Stock equal to the number of shares subject to the
Executive's unvested Stock Options over (ii) the aggregate exercise prices of
the unvested Stock Options.
(c) If at any time prior to the Executive's termination of employment, the
Company makes any adjustment in the exercise price of any outstanding Stock
Options or makes any other arrangement for the benefit of employees in relation
to outstanding Stock Options, such arrangement will be equally applicable to the
Executive's Stock Options, including the Executive's unvested Stock Options and
the calculation of the payment to be made to the Executive under Paragraph 4(b).
(d) Paragraph 4(a) and (b) will become null and void in the event that the
Executive's term of employment is extended under Paragraph 2(b) hereof.
5. Executive's Business.
(a) During the term of his employment hereunder, the Executive will be
developing his own business in food sales, marketing and consulting and as a
master food broker (such business, whatever its form of organization so long as
it is owned or controlled by the Executive, referred to hereinafter as the
"Executive's Business"). The Executive will not allow the Executive's Business
to advise or consult on or to represent products that are in competition with
the Company's products.
(b) During the term of his employment, the Executive will have reasonable
access to the Company's facilities and personnel to assist him in developing the
Executive's Business. This includes, but is not limited to, use of office space,
a computer, a laptop computer, the scanner, and copiers. Company personnel may
<PAGE>
assist the Executive only to the extent that such assistance does not interfere
with such persons duties for the Company.
(c) During the term of his employment, the Company will pay the Executive's
reasonable expenses incurred in developing the Executive's Business as follows:
the Company will reimburse expenses of the type that would have been reimbursed
to an employee such as travel and entertainment; the Company will not reimburse
additional expenses related to the development of the Executive's Business such
as stationery and attorneys' fees. In order to be reimbursed, all such expenses
must be within the Company's guidelines (for example, travel must be at coach
rates) or approved in advance and must be submitted in accordance with standard
Company procedures.
(d) At the end of the Executive's employment hereunder, the Company will
enter into a brokerage agreement (substantially in the form of Exhibit A
attached hereto) with the Executive's Business whereby the Executive's Business
will continue to represent the Company with club stores and mass merchandisers
and within Canada.
(e) The Company agrees that the development of the Executive's Business by
the Executive is not, per se, a violation of the non-competition provision set
forth in Paragraph 10(a) of the Agreement.
6. Definitions. Paragraph 13 of the Agreement is amended by adding the
following definition:
(c) The term "Change in Control" shall mean that:
(i) any "person," as such term is used in Sections 13(d) and 14 (d) of the
Securities Exchange Act of 1934 (other than the Company or any 80% owned
subsidiary of the Company; any trustee or other fiduciary holding securities
under an employee benefit plan of the Company; any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company; or any stockholder of
the Company who, on the date of this Amendment, owned 25% or more of the stock
of the Company or any company or other entity owned, directly or indirectly, in
whole or substantial part, by such stockholder) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
(ii) during any period of 24 consecutive months, individuals who at the
date of this Amendment constitute the Board of Directors of the Company and any
new director (other than a director designated by a person who has entered or
subsequently enters into an agreement with the Company to effect a transaction
described in Paragraph 4(c)(i)) whose election by the Board of Directors or
nomination for election by the Company stockholders was approved by a vote of at
least two-thirds of the directors then still in office who either were directors
at the date of the Amendment or whose election or nomination for election was
<PAGE>
previously so approved, cease for any reason to constitute at least a majority
of the Board of Directors; or
(iii) there is a dissolution or liquidation of the Company or a
reorganization, merger or consolidation of the Company with one or more
corporations (in which the Company is not the surviving corporation) or a
transfer of substantially all of the property or assets of the Company to
another person or entity not controlled by the persons who are the Company's
stockholders just prior to such transfer
7. Additional Amendment. In the event that all of the Company's existing
employment agreements with other executives are amended prior to December 31,
1998 to provide such executives with additional protections in the event of a
Change in Control, then the Agreement shall be further amended to provide the
Executive with such additional protections.
IN WITNESS WHEREOF, the parties have caused this Amendment to the Agreement
to be executed on the date first written above.
ALPINE LACE BRANDS, INC.
BY: /s/Carl T. Wolf /s/George S. Wenger
Carl T. Wolf, President George S. Wenger
<PAGE>
EXHIBIT A
BROKER AGREEMENT
THIS AGREEMENT, made as of the ______ day of ________, 1997 between ALPINE
LACE BRANDS, INC., a Delaware corporation, with its principal place of business
at 111 Dunnell Road, Maplewood, New Jersey 07040, (hereinafter referred to as
"Seller") and _____________________, a ____________ corporation, with its
principal place of business at ____________________________________,
(hereinafter referred to as the "Broker").
WHEREAS, the Seller develops and markets Fat Free, Reduced Fat and/or
Reduced Sodium cheese and delicatessen meat products under the Alpine Lace
brand name and, through a wholly owned subsidiary, engages in the cheese and
dairy products commodity trading business;
WHEREAS, the Broker is in the food sales, marketing and consulting and
master brokerage business and desires to be a master broker for certain of the
Seller's products in selected territories and/or for selected accounts;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the Seller and Broker hereby agree as follows:
1. Appointment of Broker. Effective as of August 1, 1998, the Seller hereby
appoints the Broker, and the Broker hereby agrees, to act as Seller's exclusive
broker for the purpose of marketing the Seller's branded products (the
"Products") in the territory and/or for the accounts listed on the
Territory/Chain Account List, attached hereto as Schedule A, (the "Accounts").
Schedules A is made a part of this Agreement; it may be amended upon the mutual,
written consent of both parties. In addition to Seller's branded products, other
of the Seller's products, if any, may be added to this agreement by the mutual,
written consent of both parties.
2. Duties of the Broker.
(a) The Broker agrees to act as an independent sales representative and
broker of the Seller and to use its best efforts to achieve the maximum
promotion and sales of the Products by servicing the Accounts.
(b) The Broker may service the Accounts directly or may use other brokers
to service the Accounts directly with the Broker managing and overseeing the
work of such other brokers. If other brokers are used to service the Accounts
directly, then (i) all such brokers must be approved in advance by the Seller,
(ii) the Seller will enter into a brokerage agreement with such other brokers,
<PAGE>
and (iii) the Seller would deal directly with the other brokers as to items such
as shipments, invoicing, commission calculation and the like.
(c) Specific immediate and long-range goals for the Broker and market
development plans will be set by the Seller's management in consultation with
the Broker. The Broker shall keep the Seller informed of its activities
hereunder and shall submit such oral or written reports as the Seller may from
time to time reasonably request.
(d) The Seller and the Broker will establish a budget for the work to be
performed by the Broker. The Broker shall not commit the Seller to any
expenditures not reflected in the budget without the Seller's written approval.
All bills or invoices presented to the Seller by the Broker for expenditures,
whether within the agreed budget or separately approved, shall be paid by Seller
promptly in the normal course of business.
3. Seller's Terms and Conditions. The Seller has provided the Broker with
it current price list and has informed the Broker of its other terms and
conditions of sale. The Broker and other brokers under the Broker's supervision
shall service and promote the sale of the Products to the Accounts only at
prices and upon the terms and conditions of sale specified by the Seller.
Prices, terms and conditions are subject to change at the Seller's sole
discretion from time to time without notice; the Seller shall keep the Broker
and other brokers under the Broker's supervision apprised of any such changes.
Seller may, in its sole discretion, at any time and for any reason discontinue
the sale of any of the Products, discontinue any brand name, change any brand
name, add other products for sale under any brand name, or take any similar
action in regards to its products. The Seller may refuse, at any time and for
any reason, or for no reason, to accept orders solicited by the Broker or by
other brokers under the Broker's supervision, and such orders shall not obligate
the Seller either to the Broker or other brokers under the Broker's supervision
or to the prospective customer until they are accepted by the Seller. The Seller
shall, at its expense, provide the Broker or other brokers under the Broker's
supervision with such samples and promotional materials as the Seller, in its
sole discretion, deems necessary. The Seller shall treat the Broker and other
brokers under the Broker's supervision substantially like other brokers or
employees in a like position; provided, however, nothing contained herein shall
preclude the Seller from lawfully establishing different prices, terms and
conditions or the like applicable to the Broker only (or to a limited group of
brokers including the Broker or to the Broker and other brokers under the
Broker's supervision) if good reasons exist for such different treatment.
4. Exclusive Representation. The Broker agrees that for the duration of
this Agreement it will not act as representative for products that compete with
any of the Products covered herein. If a question arises regarding competitive
products, the Broker shall notify the Seller in advance and the Seller shall
decide, in its sole discretion, whether the products in question are
competitive.
5. Independent Contractor. The Broker is an independent contractor, and
shall have entire charge of the management and operation of its business. All
<PAGE>
expenses, including entertainment, office, clerical and general selling expenses
that may be incurred by the Broker in connection with this Agreement shall be
borne wholly and completely by the Broker, and the Seller shall not be in any
way be responsible or liable therefor. Neither the Broker nor any person whose
wages are paid by the Broker shall be deemed a servant, agent or employee of
Seller for any purpose whatsoever.
6. Commissions.
(a) Except as otherwise provided herein, the Broker shall receive from the
Seller for its services under this Agreement a commission on all sales of the
Products to the Accounts at a rate of $.03 per pound for Products and at a rate
to be mutually agreed upon for other products. Commissions shall be calculated
at the beginning of each month on applicable Products that have been invoiced
and shipped during the previous month and shall be paid as soon as practicable
thereafter. Commissions shall be subject to adjustment for returns and the like
in accordance with the Seller's policy applicable to all brokers; provided,
however, that the Broker will not be charged for items that should be charged to
other brokers even if the Broker is supervising such other broker pursuant to
Section 2.
(b) The Seller's computations of commissions due and owing shall be
considered accurate and controlling unless the Broker requests additional
information or clarification from Seller, or notifies Seller of an inaccuracy in
such calculations; in which event Seller shall pay the Broker any undisputed
amount of such commissions and shall make a good faith response to Broker within
fifteen (15) days of the Broker's inquiry. If such reponse is not satisfactory
to Broker, Broker shall have the right to demand an audit of any commission
payments for the period that is the subject of such calculations and for the
prior twelve (12) month period. Any such audit shall be performed by the
Seller's independent auditors and the Seller shall cooperate fully. The
independent auditors will provide a written report of their findings to both the
Broker and the Seller. The report shall be limited to a certification of the
commissions without disclosing the Seller's financial records. The Broker
acknowledges that the Seller's business records are highly confidential and that
neither the Broker nor any of its employees or agents has any right to inspect
such records for any purpose. The Broker may demand only one audit in any 12
month period. The cost of the audit will be paid by the Broker unless the
independent auditor finds that additional commissions are due and owing to the
Broker, in which case the Seller will pay the cost of the audit.
7. Special Compensation Programs. In addition to regular commissions
payable under Section 6(a) above, the Seller may from time to time in its sole
discretion institute programs providing for special or additional compensation,
such as programs during the introduction of new products. Any special duties of
the Broker and the amount of any special compensation payable to the Broker
under any such special compensation program shall be governed by the terms of
the special program promulgated by the Seller. All other terms and conditions of
this agreement shall continue in full force and effect.
<PAGE>
8. Confidentiality. The Broker agrees it will not, during the term of its
relationship with the Seller (whether under this Agreement or otherwise), except
in the performance of its duties hereunder, or at any time after the termination
of its relationship with the Seller, disclose to any person or use for its own
account or for the benefit of any other person, without the prior written
consent of the Seller, any Confidential Information (as hereinafter defined)
that was obtained by the Broker during the term of its relationship with the
Seller. The Broker further covenants and agrees that it shall retain all such
Confidential Information in trust for the sole benefit of the Seller and its
successors and assigns. For purposes of this Agreement "Confidential
Information" shall mean and all knowledge and information relating to the
business and affairs of the Seller or any of its affiliates, its products,
processes and/or services, and its customers, suppliers, creditors, contractors,
agents, consultants and employees, that is or is intended by any of them to be
of a confidential nature. Confidential Information includes, but is not limited
to, any and all knowledge and information relating to research and development,
purchasing, finances, costs, profit margins, patents, copyrights, trademarks,
trade names, marketing, customer lists, customer requirements and personnel,
pricing, pricing methods, and data processing. Confidential Information shall
not include any information that is in the public domain or comes into the
public domain not as a result of a breach by the Broker of any of the terms or
provisions of this Agreement.
9. Property Rights. The Broker acknowledges that the Seller's trademarks,
service marks, trade names, displays, symbols, color arrangements or other words
and devices that identify the Seller, its products, services and goodwill, are
valuable property rights of the Seller, and agrees that it will do nothing to
alter or jeopardize said property rights. Any use of such property by the
Broker, including use of stationery, invoices, delivery tickets, equipment,
advertising and the like, is solely for the benefit of the Seller and shall not
create any property right in the Broker whatsoever.
10. Return of Documents. All promotional materials and all records and
documents, in whatever form, made by the Broker or coming into its possession
during the term of its relationship with the Seller (whether under this
Agreement or otherwise) concerning the business or affairs of the Seller of any
of its affiliates shall be the sole property of the Seller and upon the
termination of the relationship or upon the earlier request of the Seller, the
Broker shall promptly deliver the same to the Seller or its designee.
11. Term and Termination.
(a) This Agreement shall continue until August 1, 1999 and thereafter
indefinitely until either party gives the other party ninety (90) days advanced
written notice of termination. In the event of such termination, the Broker
shall receive commissions at the rate set forth in Section 5 on all sales of the
Products to the Accounts through the date of termination.
<PAGE>
(b) The Seller may terminate this Agreement immediately for a substantial,
material breach or nonperformance by the Broker of the terms and conditions of
this Agreement or for any action by the Broker materially and adversely
affecting the best interests of the Seller such as to make it unreasonable to
expect the Seller of continue to do business with the Broker, including, without
limitation, the commission or attempted commission by the Broker or any of its
of its officers or key employees of any act of willful misconduct or dishonesty,
malfeasance or gross negligence. In the event this Agreement is terminated under
this Section (b), the Seller will be entitled to withhold or offset any amount
determined by the Seller in its sole discretion to have been lost by Seller as a
result of such willful misconduct, dishonesty, malfeasance or gross negligence,
but shall otherwise be obligated to make any payments due to Broker,
notwithstanding the termination of the Agreement pursuant to this provision.
(c) In the event of the termination, the Broker shall faithfully represent
the Seller during any period after notice is given and before the effective date
and shall take such steps as the Seller may reasonably request to assure an
orderly transition to a new broker and in order to minimize the disruption of
services to the Accounts, including, without limitation, notifying customers and
providing the Seller with such records and reports as the Seller may reasonably
request.
12. Indemnification. The Broker agrees to indemnify and hold harmless
Seller from any claim, loss or liability for bodily injury (including death) or
property damage, and defend the Seller in any suit, arising directly or
indirectly out of the Broker's performance of this Agreement. The Seller agrees
to indemnify and hold the Broker harmless from any claim, loss or liability for
bodily injury (including death) or property damage, and defend the Broker in any
suit, arising directly or indirectly out of defects in the Products present at
the time the Products left the Seller's control. Each party presently has and
will keep in full force and effect, at its expense, during the term of this
Agreement adequate insurance in light of its obligations hereunder. Within 30
days following the execution of this Agreement, each party will provide the
other with an endorsement to such insurance specifically naming the other party
as an additional insured. In the event of any change in the insurance, each
party will immediately notify the other party and will provide the other party
with an additional endorsement specifically naming the other party as an
additional insured.
13. Notices. Any notice that may be given hereunder shall be deemed to have
been sufficiently given by one party when sent by certified or registered mail
in a postpaid envelope to the other at the address set forth above or at such
other address as the party may have designated in writing to the other party.
14. Assignment. This Agreement may not be assigned by either party without
the prior or written consent of the other party. Notwithstanding the foregoing,
the Seller may, without such consent, assign this Agreement to any subsidiary or
affiliate of Seller.
<PAGE>
15. Entire Agreement; Amendment. This Agreement constitutes the entire
understanding of the parties as to the subject matter hereof and can be changed
or modified only by an instrument in writing signed by the parties. This
Agreement replaces, supersedes and nullifies any prior agreement, whether oral
or written, that the parties may have had.
16. Severability. If any provision of this Agreement shall be construed to
be illegal or invalid, it shall not affect the legality or validity of the other
provisions of this Agreement. If any provision of the Agreement is so broad as
to be unenforceable, such provision shall be interpreted to be only so broad as
is enforceable.
17. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on
the day and year first above written.
ALPINE LACE BRANDS, INC.
BY:________________________ BY:_______________________________
(Name, Title) (Name, Title)
<PAGE>
APPENDIX A
(to an Agreement dated ______________ between
Alpine Lace Brands, Inc.
and
_________________________)
TERRITORY/CHAIN ACCOUNT LIST
I. The following accounts in the United States (and including any immediate
successor to any of the following accounts):
Sam's
Costco
BJ's
Smart & Final
Cost-U-Less
Trader Joe's
Aldi
Save-A-Lot
Wal-Mart
II. All accounts in Canada.
<PAGE>
Exhibit 11.
ALPINE LACE BRANDS, INC.
Computation of Earnings Per Share of Common Stock
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net earnings for the Period $ 860,333 $498,146 $1,620,080 $894,093
Preferred Stock Dividends 42,188 42,188 84,375 84,375
MCT Dairies, Inc. option 1,411 2,000 6,289 1,800
Net Earnings for Computation
of Earnings Per Share 816,734 (A) 453,958 (A) 1,529,416 (A) 807,918 (A)
Weighted Average Number
of Common Shares Outstanding:
Weighted Average Number of Issued
and Outstanding Common Shares 5,103,186 5,164,962 5,103,189 5,150,691
Incremental Shares Attributable to
Assumed Exercise of Stock Options
and Warrants 81,734 83,883 81,232 121,197
Weighted Average
Number of Common Shares 5,184,920 (B) 5,248,845 (B) 5,184,421 (B) 5,271,888 (B)
Earnings Per Common
and Common Equivalent Share $.16 (A)/(B) $.09 (A)/(B) $.30 (A)/(B) $.15 (A)/(B)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 51,943
<SECURITIES> 0
<RECEIVABLES> 14,040,564
<ALLOWANCES> 43,978
<INVENTORY> 10,360,600
<CURRENT-ASSETS> 25,272,697
<PP&E> 4,268,302
<DEPRECIATION> 2,118,410
<TOTAL-ASSETS> 30,708,912
<CURRENT-LIABILITIES> 11,403,445
<BONDS> 10,596,439
<COMMON> 51,988
0
2,250,000
<OTHER-SE> 6,407,040
<TOTAL-LIABILITY-AND-EQUITY> 30,708,912
<SALES> 73,786,601
<TOTAL-REVENUES> 73,786,601
<CGS> 52,466,194
<TOTAL-COSTS> 70,810,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 475,804
<INCOME-PRETAX> 2,500,131
<INCOME-TAX> 880,051
<INCOME-CONTINUING> 1,620,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,620,080
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
