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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only
/X/ Definitive Proxy Statement as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
The Fresh Juice Company, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(4) Date Filed:
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THE FRESH JUICE COMPANY
35 WALNUT AVENUE, CLARK, NEW JERSEY 07066
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 8, 1996
NOTICE IS HEREBY given that the Annual Meeting of Stockholders (the
"Meeting") of The Fresh Juice Company, Inc., a Delaware corporation (the
"Company"), will be held at the Holiday Inn Select, located at 36 Valley Road,
Clark, New Jersey 07066, on August 29, 1996, at 9:15 A.M. Eastern Daylight Time,
for the following purposes:
1. To authorize the amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock
from 5,000,000 to 30,000,000.
2. To authorize the amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of Preferred
Stock from 200,000 to 7,000,000.
3. To elect four directors for a term expiring at the Annual Meeting
of Stockholders in 1997.
4. To authorize and approve the Company's 1996 Incentive Stock Option
Plan.
5. To ratify the action of the Board of Directors in the appointment
of KPMG Peat Marwick LLP as the Company's independent auditors for the
fiscal year ending November 30, 1996.
6. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on August 2, 1996 are
entitled to notice of, and to vote at, the Meeting.
A cordial invitation is extended to you to attend the Meeting.
Your attention is directed to the accompanying proxy statement and form of
proxy. Whether or not you plan to attend the Meeting in person, please sign,
date and return the enclosed proxy promptly in the envelope provided which
requires no United States postage.
By Order of The Board of Directors
STEVEN M. BOGEN
Secretary
This Proxy Statement and the accompanying Proxy will be mailed to
stockholders on or about August 9, 1996
<PAGE> 3
THE FRESH JUICE COMPANY
35 WALNUT AVENUE, CLARK, NEW JERSEY 07066
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 29, 1996
This Proxy Statement sets forth certain information with respect to the
accompanying Proxy proposed to be used at the Annual Meeting of Stockholders
(the "Meeting") of The Fresh Juice Company, Inc. (the "Company") to be held on
August 29, 1996, at 9:15 A.M. Eastern Daylight Time at the Holiday Inn Select,
located at 36 Valley Road, Clark, New Jersey 07066, or at any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting. The Board of Directors of the Company (the "Board") solicits this Proxy
and urges you to sign the Proxy, fill in the date, and return it immediately.
Proxies are being solicited by mail and, in addition, officers and employees of
the Company may solicit Proxies by telephone or personal interview. As is
customary, the expense of solicitation will be borne by the Company. Your prompt
cooperation is necessary in order to insure that a quorum is present at the
Meeting and to avoid unnecessary expense and delay.
A stockholder who has given a Proxy may revoke it at any time before it is
exercised at the Meeting by filing with the Secretary of the Company either a
written instrument of revocation signed in the same manner as the Proxy, or a
duly executed Proxy bearing a later date, or by appearing at the Meeting and
voting in person.
All properly executed Proxies returned to the Company, however marked, will
be included in tabulating the number of shares present at the Meeting for
purposes of determining a quorum and whether nominees for director have received
the vote of a plurality of shares present at the Meeting. Abstentions and
withheld votes are not counted as votes "for" or "against" a proposal, but where
the affirmative vote of a majority of the shares of Common Stock of the Company
present or represented on a proposal is required for approval, abstentions and
withheld votes are counted in determining the number of shares present or
represented.
It is anticipated that this Proxy Statement and the accompanying Proxy will
be mailed to stockholders on or about August 9, 1996.
VOTING SECURITIES AND RECORD DATE
Holders of Common Stock of the Company of record at the close of business
on August 2, 1996 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting. At the close of business on the Record Date, the Company had
outstanding 4,690,062 shares of Common Stock, each of which entitled the holder
thereof to one vote.
PROPOSAL 1
AUTHORIZE THE AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK OF THE COMPANY
On July 23, 1996, the Board unanimously approved an amendment to the
Company's Certificate of Incorporation to increase the Company's authorized
capital stock. This proposed amendment to Article Fourth of the Company's
Certificate of Incorporation would increase the number of authorized shares of
Common Stock of the Company from 5,000,000 shares to 30,000,000 shares. A copy
of the proposed amendment to Article Fourth of the Company's Certificate of
Incorporation is attached hereto as Appendix A.
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RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of a majority of those shares of Common Stock voting
on this proposal is required to adopt this proposed amendment to Article Fourth
of the Company's Certificate of Incorporation. THE BOARD UNANIMOUSLY RECOMMENDS
APPROVAL OF PROPOSAL 1.
PROPOSAL 2
AUTHORIZE THE AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES
OF PREFERRED STOCK OF THE COMPANY
On July 23, 1996, the Board unanimously approved an amendment to the
Company's Certificate of Incorporation to increase the Company's authorized
capital stock. This proposed amendment to Article Fourth of the Company's
Certificate of Incorporation would increase the number of authorized shares of
Preferred Stock from 200,000 to 7,000,000 shares. A copy of the proposed
amendment to Article Fourth of the Company's Certificate of Incorporation is
attached hereto as Appendix A.
RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of a majority of those shares of Common Stock voting
on this proposal is required to adopt this proposed amendment to Article Fourth
of the Company's Certificate of Incorporation. THE BOARD UNANIMOUSLY RECOMMENDS
APPROVAL OF PROPOSAL 2.
DISCUSSION OF PROPOSALS 1 AND 2
PURPOSE OF THE PROPOSALS
Approval of Proposals 1 and 2 would provide the Company with the ability to
meet future capital needs and provide shares both for the pending acquisition of
Clear Springs Citrus, Inc. ("Clear Springs") as well as for possible future
acquisitions, stock offerings or private placements.
On March 31, 1996, the Company entered into a Merger Agreement with Clear
Springs as amended on July 23, 1996 (the "Agreement"). The merger with Clear
Springs (the "Merger") (which is discussed more fully below) is contingent upon
the approval by the Company's stockholders of an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of the
Company's Common Stock from 5,000,000 to 20,000,000 shares and to increase the
number of authorized shares of the Company's Preferred Stock from 200,000 to
7,000,000 shares and cannot be consummated as presently structured without such
approval. However, the Merger and the Agreement are not subject to the approval
of the Company's stockholders.
The Company's Board of Directors has determined to increase the Company's
authorized shares of Common Stock to 30,000,000 shares to provide for additional
capital stock, to be used for various purposes including potential acquisitions,
offerings and private placements. The increase to 30,000,000 shares of Common
Stock represents an increase in authorized shares of Common Stock in excess of
that which is a condition to the Agreement. On June 19, 1996, the Company
engaged Ladenburg, Thalmann & Co., Inc. ("Ladenburg"), an investment banking
firm, to provide financial advisory services to the Company. In connection with
its retention of Ladenburg, the Company has agreed to grant Ladenburg warrants
to purchase up to 100,000 shares of the Company's Common Stock under certain
conditions at a price of $2.9563 per share as consideration for the services to
be performed for the Company by Ladenburg. The warrants granted to Ladenburg are
contingent upon the approval by the Company's stockholders of the proposed
amendment to the Company's Certificate of Incorporation to increase the number
of authorized shares of Common Stock.
The terms of the additional authorized shares of Common Stock of the
Company will be identical to the Company's Common Stock now issued and
outstanding. There are no preemptive rights associated with the
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Company's Common Stock. The Company's Common Stock ($.01 par value) is traded in
the over-the-counter market under the symbol "FRSH". Price quotations are
available through the NASDAQ system. The Company presently has 5,000,000
Authorized Shares of Common Stock, of which 4,690,062 shares were outstanding as
of the Record Date. The Company does not presently pay dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company plans to retain its future earnings, if any, to finance the
growth and development of its operations.
The Company presently has 200,000 authorized shares of Preferred Stock
($10.00 par value) of which no shares have been issued. The Board may, without
further action by the Company's stockholders from time to time direct the
issuance of Preferred Stock in one or more series and, at the time of issuance,
determine the rights, preferences and limitations of each series. Satisfaction
of any dividend preferences of outstanding Preferred Stock would reduce the
amount of funds available for the payment of dividends on the Company's Common
Stock. In addition, holders of Preferred Stock would normally be entitled to
receive a preference payment in the event of any liquidation, dissolution or
winding-up of the Company before any payment is made to holders of the Company's
Common Stock.
POSSIBLE ADVERSE EFFECTS OF THE PROPOSALS
The issuance of additional Common or Preferred Stock may have certain
effects upon the holders of the Company's Common Stock. Holders of the Company's
Common Stock will not have preemptive rights with respect to the additional
Common or Preferred Stock. The issuance of additional Common Stock of the
Company would increase the number of shares of Common Stock outstanding, thereby
diluting percentage ownership of existing stockholders. The issuance of further
Common or Preferred Stock of the Company could possibly dilute book value per
share or earnings per share for the then existing holders of the Company's
Common Stock.
POSSIBLE ANTI-TAKEOVER EFFECTS OF THE PROPOSALS
The authorization or issuance of Common Stock or Preferred Stock may be
viewed as being an anti-takeover device. In the event of a proposed merger,
tender offer or other attempt to gain control of the Company, which the Board
does not believe to be in the best interests of the Company or its stockholders,
the Board could issue additional Common or Preferred Stock that could make any
such attempt to gain control of the Company more difficult to complete. Except
for the issuance of shares to complete the Merger and the shares reserved for
issuance upon the exercise of the Ladenburg warrants, the Board has no specific
plans at the present time to issue any additional shares of Common or Preferred
Stock and any such future issuance will be on terms that the Board deems to be
in the best interests of the Company and its stockholders.
THE MERGER
The following information, insofar as it relates to matters contained in
the Agreement, is qualified in its entirety by reference to the Agreement, which
is attached hereto as Appendix B, and is incorporated herein by reference. The
Company's stockholders are urged to read the Agreement in its entirety.
THE PARTIES
The Company
The Company was incorporated in the State of New York on July 5, 1985.
Immediately prior to the closing of the Company's initial public offering on
November 19, 1986, the Company was merged into its wholly-owned Delaware
subsidiary so as to relocate its state of incorporation. The Company produces,
markets and sells fresh and frozen "fresh squeezed" orange juice, grapefruit
juice, pressed apple juice and other non-carbonated beverages under the brand
names "Just Pik't(C)", "Fresh Pik't(C)" and "Florida Pik't(C)". The majority of
the juice produced by the Company is orange juice.
The corporate headquarters of the Company were previously located in leased
facilities at 350 Northern Boulevard, Great Neck, New York, 11021, telephone no.
(516) 482-5190. The Company continues to lease
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the premises in Great Neck, however, the corporate headquarters of the Company
have been relocated to leased space at 35 Walnut Avenue, Clark, New Jersey
07066, telephone no. (908) 396-1112. The Company owns a plant in Winter Haven,
Florida constructed and equipped to produce and bottle juice beverages. In
April, 1986 the Company began to market frozen "fresh squeezed" orange juice
under the brand name "Just Pik't(C)" in the New York metropolitan area. That
product and the Company's other products are presently being sold in numerous
supermarket chains and to other food distributors throughout the United States.
The Company also markets its products internationally, principally in Canada.
Effective April 1, 1996, the Company acquired by merger The Ultimate Juice
Company, Inc. ("Ultimate"), which is now a wholly owned subsidiary of the
Company maintaining offices at 35 Walnut Avenue, Clark, New Jersey 07066.(1)
The Fresh Juice Company of Florida, Inc. is a Florida corporation and
wholly owned subsidiary of the Company ("Fresh Juice of Florida"), maintaining
corporate offices located at 1000 American Superior Boulevard, Winter Haven,
Florida, 33884, telephone no. (941) 299-6915. Fresh Juice of Florida owns the
machinery and equipment used in the Company's Winter Haven, Florida juice
production facility (the "Florida Plant") and is charged with the responsibility
of running and managing the Florida Plant.
Clear Springs
Clear Springs maintains its leased executive offices at 76 8th Street,
Winter Garden, Florida, 34787, telephone no. (407) 877-7765. In addition to its
corporate offices, Clear Springs leases and operates, at such location, a fresh
squeezed citrus juice production plant. From that location, Clear Springs
produces, markets and sells fresh squeezed Florida orange juice, grapefruit
juice, and other fresh squeezed citrus juices. In addition to producing and
marketing fresh squeezed juices under its own label, Clear Springs also produces
fresh squeezed juice products for Ultimate (a wholly owned subsidiary of the
Company) and Natural Juice Company (an Illinois corporation, controlled by Brian
Duffy, a current member of the Company's Board of Directors) pursuant to supply
and requirements agreements entered into with such companies.
COMPETITION
The Company and Clear Springs each face strong competition from a number of
sources. The market for orange juice is highly competitive and is dominated by
major companies such as The Coca-Cola Company ("Minute Maid") and Seagram of
Canada ("Tropicana"), although presently these major orange juice companies are
primarily involved in the production of chilled pasteurized juice and frozen
concentrate. Competition also comes from smaller companies competing directly
for their respective shares of the "fresh squeezed" juice market. The Company
has received a patent on its container and on the functional process of selling
a frozen container with frozen freshly squeezed juice. In addition, the Company,
its newest subsidiary, Ultimate, and Clear Springs have each established
reputations as reliable providers of quality fresh juice products. The Company
believes that the Company and its subsidiaries compete effectively with their
competitors on the basis of quality.
RECENT DEVELOPMENTS
The Company acquired Ultimate by merger effective April 1, 1996, as a
result of which Ultimate became a wholly-owned subsidiary of the Company. In
connection with that acquisition, all of the issued and outstanding common stock
of Ultimate was exchanged for 1,140,000 shares of the Company's Common Stock. In
connection with this transaction, Steven M. Bogen ("Bogen"), the President of
Ultimate, became Co-Chairman, Chief Executive Officer and Secretary of the
Company. Steven Smith continued as Co-Chairman and President and was also named
Assistant Secretary of the Company.
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(1)On or about July 19, 1996, the name of Ultimate was formally changed to
The Fresh Juice Company of New York, Inc.
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GENERAL DESCRIPTION OF THE MERGER
The Agreement provides that, at the Effective Time, Clear Springs will be
merged into Fresh Juice of Florida, and the two stockholders of Clear Springs,
Brian Duffy and The Bogen Group, L.L.C. (which is made up of Bogen, Daniel Petry
and Mark Feldman), will receive 300,000 and 860,000 shares of the Company's
Common Stock, respectively. Following the Merger, Fresh Juice of Florida will
succeed to all of Clear Springs' rights, liabilities, and activities in
producing and marketing fresh squeezed citrus products. Fresh Juice of Florida
will maintain operations at both the Company's Florida Plant in Winter Haven,
Florida, and Clear Springs' (leased) plant in Winter Garden, Florida, during a
transitional period, and will thereafter incorporate the assets of Clear
Springs, including its machinery, equipment and customer lists into Fresh Juice
of Florida's operations at the Company's Florida Plant.
REASONS FOR THE MERGER
Numerous factors were considered by the respective Boards of Directors of
the Company, Fresh Juice of Florida and Clear Springs in approving the terms of
the Agreement. Those factors included the comparative financial and capital
structures, results of operations, and prospects of Clear Springs as an
independent entity and as part of the Company; the composition and mix of the
businesses of the organizations and the expected economies of scale and
elimination of duplicative expenses; and the overall compatibility of their
respective managements and businesses in the rapidly evolving and changing fruit
juice industry.
ACCOUNTING TREATMENT
The Merger is expected to be (1) accounted for as a purchase as it did not
meet several of the criteria necessary to account for the transaction as a
pooling of interests, and (2) a "reorganization" under the Internal Revenue Code
of 1986, as amended.
CONSIDERATION TO BE RECEIVED BY CLEAR SPRINGS STOCKHOLDERS
On the Closing Date, the two stockholders of Clear Springs, Brian Duffy and
The Bogen Group, L.L.C., will receive 300,000 and 860,000 shares of the
Company's Common Stock, respectively.
EXCHANGE OF CERTIFICATES
At the Effective Time, holders of certificates representing shares of Clear
Springs stock will cease to have any rights as Clear Springs stockholders and
their sole rights will pertain to the shares of the Company's Common Stock, to
be delivered as Merger consideration.
Each share of the Company's Common Stock issued in connection with the
Merger will be deemed to be issued on the Closing Date. Accordingly, Clear
Springs stockholders will be entitled to receive any dividend or other
distribution which may be payable to holders of record of the Company's Common
Stock as of dates on or after the Closing Date. However, no dividend or other
distribution will actually be paid on any shares of the Company's Common Stock
until the certificate or certificates formerly representing the related shares
of the Clear Springs Stock have been surrendered, at which time any accrued
dividend or other distribution on such shares of the Company's Common Stock will
be paid, promptly but without interest.
INTERESTS OF CERTAIN PERSONS
Pursuant to the terms of the Agreement, Clear Springs and the Clear Springs
stockholders have agreed to defend, indemnify and hold the Company and Fresh
Juice of Florida, and their respective stockholders, subsidiaries,
representatives and affiliates, and persons serving as officers, directors,
employees or agents thereof, harmless from and against any damages, liabilities,
losses, taxes, fines, penalties, costs and expenses arising from the falsity or
material breach of any of the representations and warranties of Clear Springs
and the Clear Springs stockholders in the Agreement. Under certain
circumstances, the indemnification obligation of Clear Springs and the Clear
Springs stockholders for any breach of any representation, warranty or covenant
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of Clear Springs or the Clear Springs stockholders is limited to the value of
the consideration to be paid the Clear Springs stockholders, valued as of the
date of the Agreement.
The Company and Fresh Juice of Florida have agreed pursuant to the terms of
the Agreement to defend, indemnify and hold Clear Springs and the Clear Springs
stockholders, and their respective stockholders, subsidiaries, representatives
and affiliates, and persons serving as officers, directors, partners, employees
or agents thereof, harmless from and against any damages, liabilities, losses,
taxes, fines, penalties, costs, and expenses arising from the falsity or
material breach of any of the representations and warranties of the Company and
Fresh Juice of Florida in the Agreement. Under certain circumstances, the
indemnification obligation of the Company and Fresh Juice of Florida for any
breach of any representation, warranty or covenant of the Company or Fresh Juice
of Florida under the Agreement is limited to the value of the consideration to
be paid to Clear Springs stockholders valued as of the date of the Merger
Agreement.
It is also intended that each of the stockholders now involved in the
operation of Clear Springs shall continue to be involved in the operations of
the consolidated companies. In addition, Brian Duffy, a stockholder, director
and the President of Clear Springs, has been named as a member of the Board, and
is expected to remain actively involved in operating the Florida Plant.
The Agreement provides that the Company shall, as of the Effective Date,
and at all times subsequent thereto, indemnify and hold harmless Bogen and Brian
Duffy against any and all liabilities and obligations arising out of the
personal guarantees which each of them have executed in favor of South Trust
Bank in connection with a loan to Clear Springs in an aggregate original
principal amount of $250,000.00, which has an outstanding balance of
approximately $180,000 as of the date of this Proxy Statement.
REGULATORY APPROVALS
Except for the authorization of the amendments to the Company's Certificate
of Incorporation to increase the Company's authorized Common and Preferred Stock
and the filings with the Securities and Exchange Commission ("SEC") respecting
this Proxy Statement relating thereto, no federal or state regulatory
requirements or approvals must be complied with or obtained in connection with
the transactions contemplated by the Agreement.
CONDITIONS PRECEDENT
The consummation of the Merger is subject to the conditions precedent set
forth in the Agreement, including, among others: (i) that the stockholders of
the Company shall affirmatively vote to amend the Certificate of Incorporation
of the Company to increase the number of authorized shares of the Company's
stock from 5,000,000 shares of Common Stock and 200,000 shares of Preferred
Stock to 20,000,000 shares of Common Stock and 7,000,000 shares of Preferred
Stock; (ii) the accuracy in all material respects, on the Closing Date, of the
representations and warranties contained in the Agreement; (iii) the resignation
of Brian Duffy as President of Clear Springs; (iv) the resignation of Bogen as
Secretary and Treasurer of Clear Springs; (v) the delivery of the Merger
consideration to the stockholders of Clear Springs and the delivery by said
Clear Springs stockholders of their Clear Springs certificates evidencing their
ownership interest in Clear Springs, endorsed for cancellation; and (vi) the
retention of the respective parties to the Agreement of all consents, permits,
releases and waivers from third parties that may be required in connection with
the performance of their respective obligations under the Agreement.
EFFECTIVE TIME
Under the Agreement, the Effective Time will be the date on which the
required Articles of Merger and Plans of Merger have been filed with the
Secretary of State of Florida and shall take place as promptly as practicable
after the Closing Date, but not later than 7 days after the satisfaction or
waiver of all conditions precedent to the consummation of the Merger. The
Agreement originally provided for a scheduled Closing Date of June 30, 1996,
however, on July 23, 1996, the parties to the Agreement executed an Addendum to
Merger Agreement extending the scheduled Closing Date to September 15, 1996. A
copy of the Addendum to Merger Agreement is annexed hereto as part of Appendix
B.
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TERMINATION
The Agreement may be terminated prior to the Closing Date by any of the
parties to the Agreement if a court of competent jurisdiction or domestic
governmental regulatory or administrative agency or commission shall have issued
an order, decree or ruling or taken any other action enjoining, restraining or
otherwise prohibiting the transactions contemplated in the Agreement.
EXPENSES
The Company, Fresh Juice of Florida and Clear Springs will each bear their
own respective expenses incurred in connection with the Agreement and the
Merger.
LISTING OF STOCK
The Company's Stock is currently included for quotation on the NASDAQ
market. The Company's Common Stock to be received by Clear Springs stockholders
will be unregistered restricted stock. The Clear Springs stockholders have the
right under certain circumstances to require registration of a portion of the
Company's Common Stock received in the Merger pursuant to a Registration Rights
Agreement between the Company and the Clear Springs stockholders.
NO DISSENTERS' RIGHTS
The provisions of the Florida Business Corporation Act (Chapter 607,
Florida Statutes) ("FBCA") offer certain rights and remedies to stockholders of
Florida corporations who may desire to dissent from a merger, consolidation, or
certain other transactions. Stockholders of a Florida corporation may expressly
waive their right to dissent. Each of the stockholders of Clear Springs have
waived their respective dissenters' rights, in the following ways: (1) by
failing to deliver to Clear Springs written notice of dissent and intent to
demand payment for shares within the time limits imposed by Section 607.1320 of
the FBCA, thereby waiving their dissenters' rights; and (2) by executing a
Unanimous Written Consent of the Stockholders of Clear Springs Citrus, Inc.,
dated March 31, 1996.
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INFORMATION ABOUT THE COMPANY
DESCRIPTION OF BUSINESS.
PRODUCTS AND MARKET
As stated above, the Company produces, markets and sells fresh and frozen
"fresh squeezed" orange juice, grapefruit juice, pressed apple juice and other
non-carbonated beverages under the brand names "Just Pik't(R), "Fresh Pik't(R)",
"Florida Pik't(R)", and "Ultimate(R)". The majority of the juice produced by the
Company is orange juice. Processed orange juice generates sales in the United
States in excess of three billion dollars per year. The market is currently
divided principally between chilled pasteurized orange juice (which constitutes
a majority of the market) and frozen concentrate. A number of companies produce
chilled pasteurized orange juice, including "Tropicana(R)", which is marketed as
a premium product. Pasteurization is used to increase shelf life, since chilled
juices will ferment between seven to fourteen days after bottling. However,
because pasteurization involves cooking or heating the juice, the natural flavor
and aroma of the juice is adversely affected. Further, as a nutritional matter,
pasteurizing orange juice destroys valuable nutrients, and when sold in cartons,
the juice loses its Vitamin C value while it is awaiting sale and while it is
stored in the consumer's refrigerator. The production of frozen concentrate also
involves cooking or heating, resulting in an adverse effect on the natural
flavor and aroma of the juice. In addition, concentration involves the removal
of water, resulting in a product containing a large percentage of sugar, thereby
making it difficult to freeze completely. In order to eliminate this freezing
problem, a natural element in the juice, pectinesterase (an enzyme which
produces pectin), is eliminated, and when the concentrate is reconstituted there
is a watery texture.
The Company believed that a superpremium fresh squeezed juice could obtain
a profitable market share by virtue primarily of the taste of fresh squeezed
juice. The organization of the Company followed two years of research and
development on a molded plastic bottle with a tamper resistant safety seal, and
a process that would allow freshly squeezed juice to be frozen and sold inside
the bottle. Market research performed by the Company confirmed that the Company
was correct, that there was a market for "superpremium" orange juice and that
consumers preferred the taste of "Just Pik't(R)" compared to juice that has been
pasteurized or is sold in concentrate form.
As a result of the consumer demand for fresh squeezed orange juice
remaining unsatisfied, certain retail food stores attempt to squeeze and bottle
their own juice. Typically, such endeavors fail to produce a consistent result
as it is difficult for such stores either to obtain quality juice oranges or to
monitor the quality of the oranges they receive. In addition, the juice machines
often squeeze the rind, resulting in a bitter, oily taste.
By developing a patented container (as described below) and producing and
freezing product during the harvest season when fruit quality is at its highest,
the Company has overcome this problem. More recently, the Company has, as more
fully described on pages 22 through 23 of this Proxy Statement, substantially
expanded its fresh squeezed juice business base by virtue of the Ultimate Merger
(defined on page 22) and the acquisition and renovation of the Florida Plant.
Presently the Company has significant sales of both fresh squeezed juices and
fresh fresh frozen juices.
ADDITIONAL PRODUCTS
In addition, as a result of the acquisition of the Florida Plant, the
Company has recently created various new line extensions to its existing product
base. Various of the Company's existing customers have begun to request a line
of organic juices. As a result, the Company has begun to sell organic fresh
squeezed frozen juices produced at the Florida Plant under the "Florida
Pik't(R)" label. In addition, the Company is in the process of preparing to
market organic pasteurized juices under the "Florida Pik't(R)" label, which the
Company believes will be one of the few organic not from concentrate juices
currently being sold in the market place. The Company believes that the Florida
Plant is one of the few facilities capable of producing organic pasteurized
juices. For its food service and select retail customers for whom shelf life is
not a concern due to rapid turnover of product, the Company provides fresh
non-frozen juices under the "Fresh Pik't(R)" and
8
<PAGE> 11
"Ultimate(R)" labels as well as fresh squeezed lemon and lime juices. The
Company presently sells frozen fresh squeezed juice in the one liter size as
well as a single serve size citrus juice in 1/4 liter (8.45 fluid once) and 1/3
liter (11.26 fluid once) sizes. Non-frozen juices are sold in gallons, half
gallons, quarts, as well as 16, 12 and 8 ounce sizes. The Company has expanded
its product line to also include single serve containers of other non-carbonated
beverages.
In addition to its current product line, the Company is preparing to
produce and market antioxidant, vitamin enriched and banana-based 100% juice
products. The Company is also developing bar mix drinks such as daiquiri mix,
margarita mix and pina colada mix. No assurances can be given as to when or
which products the Company may ultimately choose to produce and market, if ever.
DISTRIBUTION
Prior to the acquisition of the Florida Plant, "Just Pik't(R)" was shipped
by the Company from its Florida processor using unaffiliated trucking companies
to independent distributors throughout the United States. As a result of the
Ultimate Merger and acquisition of the Florida Plant, more shipping will
originate out of the Florida Plant, thereby providing for increased control and
flexibility over the distribution process.
The Company sells its products directly or indirectly to supermarket-owned
and independent warehouse distributors that distribute to supermarkets,
institutions or retail outlets. No customer accounts for more than 10% of the
Company's total revenues.
In 1995, the Company ceased operations of its subsidiary, Fresh Pik't
Natural Foods, Inc., which, among other things, sold and distributed certain
organic produce.
PRODUCTION
Beginning December 1, 1995, the Company began production at the Florida
Plant. It is anticipated that following the completion of the scheduled Merger
transaction (described on pages 3 through 7 of this Proxy Statement) and a
transition period thereafter, the assets and production volume of Clear Springs
will be incorporated into the Florida Plant, and thereafter substantially all of
the Company's products will be produced at the Florida Plant.
GOVERNMENT REGULATIONS
The Company and its subsidiary in Florida are subject to certain
regulations of federal, state and local government authorities regarding
distribution and sale of food products. Although the Company believes that it
currently has all material government permits, licenses, qualifications and
approvals for its operations, there can be no assurance that the Company will be
able to continue to comply with or maintain the same.
The State of Florida and the United States Department of Agriculture
undertake an extensive inspection and sampling program of Florida citrus fruit
before and during processing in an effort to maintain the quality and good name
of Florida citrus products. The Company believes that this program provides it
with an excellent means of quality control for its product.
The Company believes that it is in compliance with all environmental
regulations affecting its operations.
COMPETITION
The market for orange juice is highly competitive and is dominated by major
companies such as The Coca-Cola Company ("Minute Maid(R)") and Seagram of Canada
("Tropicana(R)"), although presently the major orange juice companies are
primarily involved in the production of chilled pasteurized juice and frozen
concentrate. The Company has received a patent on its container and on the
functional process of selling a frozen container with frozen freshly squeezed
juice. The Company believes that it competes effectively with its competitors on
the basis of quality.
9
<PAGE> 12
PATENTS AND PROPRIETARY PROTECTION
The Company was granted U.S. Patent No. 4,816,273 on March 28, 1989 related
to a process for preparing a frozen whole juice product which upon defrosting
has the taste and nutritional content of freshly squeezed whole juice, the
process including filling a self-supporting bottle-like container with the whole
juice. The U.S. Patent and Trademark Office recently reissued this patent with a
broader claim coverage RE 35038. The trademarks "Just Pik't(R)", "Fresh
Pik't(R)", "Florida Pik't(R)" and "Ultimate(R)" have been registered by the
Company in the U.S. Patent and Trademark Office and with appropriate agencies in
various foreign countries.
RAW MATERIAL
The only ingredient used to produce "Just Pik't(R)", "Fresh Pik't(R)",
"Florida Pik't(R)" and "Ultimate(R)" orange and grapefruit juice is fresh citrus
fruit. A lack of availability of quality fruit and higher cost of citrus would
hamper the Company's ability to maintain its rate of growth and its gross
margin. The Company has expanded its product line to other non-carbonated
beverages which to some extent will provide the Company with flexibility in the
event that the price of a certain fruit should be dramatically increased.
Although it can give no assurances, in 1996 the Company expects to expand
its product line to other food products in order to lessen its reliance on
citrus fruits.
The Company's containers are made of plastic and are manufactured by a
major "blow molding" manufacturer. The Company owns the molds that are used to
make the 1/3 liter, 1/4 liter and 1 liter bottles for its frozen fresh squeezed
juice and the machines that fill the bottles and apply the tamper evident caps.
As there are several major independent plastic bottle manufacturers, the Company
does not believe that it is dependent upon this manufacturer for the production
of the bottles.
EMPLOYEES AND CONSULTANTS
The Company currently has forty-five full-time and two part-time employees
working at its headquarters in Clark, New Jersey and offices in Great Neck, New
York, and an additional sixty employees at the Florida Plant, some of whom are
seasonal workers. The Company believes that this number of employees is
sufficient to operate the Company, because the Company engages independent
contractors for production, distribution and marketing services. The Company's
employees are not represented by a labor union.
DESCRIPTION OF PROPERTY.
The Company leases approximately 2,000 square feet of office space for its
headquarters in Clark, New Jersey. The Company also leases approximately 1,000
square feet of office space located at 350 Northern Boulevard, Great Neck, New
York. The Great Neck lease terminates in November, 1997. Such lease may be
terminated by the Company on six months notice.
The Florida Plant, located at 1000 American Superior Boulevard, Winter
Haven, Florida, consists of a 70,000 square foot facility on four acres; 20,000
square feet of which consists of either chilled or freezer space. The Florida
Plant contains the first spiral quick freeze systems in the citrus industry. For
additional information regarding the Florida Plant, see page 4 of this Proxy
Statement.
LEGAL PROCEEDINGS.
In January 1996, Fresh Pik't Natural Foods, Inc., a wholly-owned
subsidiary, was named as a defendant in a legal matter which seeks damages in
excess of $250,000. Management of the Company believes that the ultimate
resolution of this matter will not have a material impact on the financial
position of the Company.
10
<PAGE> 13
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock, $.01 par value, is traded in the
over-the-counter market under the symbol "FRSH". Price quotations are available
through the NASDAQ system. The following tabulation sets forth the high and low
bid and ask price quotations by quarter as reported by the National Quotation
Bureau, Inc. The prices shown in the tabulation reflect inter-dealer prices, do
not include retail mark-up, mark-down or commission and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
-------------- ----------------
1996 HIGH LOW HIGH LOW
- ------------------------------------------------------------ ------ --- ----- ------
<S> <C> <C> <C> <C>
Second fiscal quarter....................................... $4 7/16 $2 3/8 $4 5/8 $2 11/16
First fiscal quarter........................................ $2 15/16 $1 3/8 $3 1/16 $1 5/8
</TABLE>
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
-------------- ----------------
1995 HIGH LOW HIGH LOW
- ------------------------------------------------------------ ------ --- ----- ------
<S> <C> <C> <C> <C>
Fourth fiscal quarter....................................... $2 3/4 $1 1/2 $3.00 $1 11/16
Third fiscal quarter........................................ $3 1/2 $2 3/8 $3 3/4 $2 3/4
Second fiscal quarter....................................... $2 7/16 $1 7/8 $2 3/4 $ 2.00
First fiscal quarter........................................ $ 2.00 $1 3/4 $2 1/8 $1 15/16
</TABLE>
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
-------------- ----------------
1994 HIGH LOW HIGH LOW
- ------------------------------------------------------------ ------ --- ----- ------
<S> <C> <C> <C> <C>
Fourth fiscal quarter....................................... $2 5/8 $1 1/8 $2 7/8 $1 13/16
Third fiscal quarter........................................ $3 3/16 $2 1/6 $3 7/16 $2 1/2
Second fiscal quarter....................................... $3 7/8 $2 1/2 $4 1/8 $3 1/4
First fiscal quarter........................................ $4 5/16 $3 3/8 $4 1/2 $3 5/8
</TABLE>
The Company does not pay any dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
plans to retain its future earnings, if any, to finance the growth and
development of its operations.
On July 25, 1996, the closing bid quotation as reported on the NASDAQ
system was $2 3/8. As of August 2, 1996, there were approximately 166 holders of
record of the Company's common stock.
During fiscal year ended November 30, 1995, the Company purchased 4,800
shares of its common stock for its treasury. The Company may purchase additional
shares during the remainder of the 1996 fiscal year.
11
<PAGE> 14
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the Ultimate Merger, as defined and more fully
described on page 22 of this Proxy Statement, and the proposed Merger between
Clear Springs and Fresh Juice of Florida, a wholly owned subsidiary of the
Company under the purchase method of accounting. The pro forma condensed
consolidated financial statements are presented for illustrative purposes only,
and therefore, are not necessarily indicative of the operating results and
financial position that might have been achieved had the transactions occurred
as of an earlier date, nor are they necessarily indicative of the operating
results and financial position which may occur in the future.
The condensed consolidated historical statements of operations for periods
presented are derived from the historical consolidated financial statements of
the Company, Ultimate and Clear Springs, and should be read in conjunction with
their respective financial statements which are included elsewhere herein. The
historical consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and, in the opinions of the
respective managements of the Company, Ultimate and Clear Springs, include all
adjustments necessary for a fair presentation of financial information for such
periods.
A pro forma condensed consolidated balance sheet is provided as of May 31,
1996, giving effect to the Clear Springs transaction as though it had been
consummated on that date. The historical consolidated balance sheet of the
Company as of May 31, 1996 reflects the Ultimate Merger which was effective
April 1, 1996. Pro forma condensed consolidated statements of operations are
provided for the six months ended May 31, 1996 and twelve months ended November
30, 1995 giving effect to the Clear Springs and Ultimate transactions as though
they had occurred at the beginning of the earliest period presented. For
presentation purposes, the historical financial statements have been
consolidated as follows:
<TABLE>
<CAPTION>
PRO FORMA CONDENSED THE FRESH JUICE
CONSOLIDATED FINANCIAL COMPANY, INC. THE ULTIMATE JUICE CLEAR SPRINGS CITRUS,
STATEMENTS & SUBSIDIARIES COMPANY, INC. INC.
- ---------------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Consolidated Balance As of May 31, 1996 Not Applicable As of March 31, 1996
Sheet --
May 31, 1996
Consolidated Statement of Six months ended May Four months ended Six months ended
Operations -- 31, 1996 March 31, 1996 March 31, 1996
Six months ended May 31,
1996
Consolidated Statement of Year ended November Twelve months ended Year ended December
Operations -- 30, 1995 December 31, 1995 31, 1995
Twelve months ended
November 30, 1995
</TABLE>
12
<PAGE> 15
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 1996
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------
THE FRESH JUICE PRO FORMA
COMPANY, INC. CLEAR SPRINGS ----------------------------
AND SUBSIDIARIES CITRUS, INC. ADJUSTMENTS CONSOLIDATED
---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents......................... $ 901,989 $ 20,484 $ -- $ 922,473
Trade accounts receivable......................... 1,867,870 897,281 (251,878)d 2,513,273
Inventories....................................... 2,304,358 167,811 -- 2,472,169
Note receivable -- Clear Springs Citrus, Inc...... 150,000 -- (150,000)b --
Other............................................. 53,519 25,187 -- 78,706
---------------- ------------- ----------- ------------
Total Current Assets...................... 5,277,736 1,110,763 (401,878) 5,986,621
Property, Plant and Equipment -- Net of Accumulated
Depreciation...................................... 2,890,360 777,327 -- 3,667,687
Excess Cost Over Fair Value of Net Assets Acquired,
Net of Accumulated Amortization................... 3,258,866 -- 3,934,646a 7,193,512
Intangible Assets, Net of Accumulated
Amortization...................................... 121,423 112,370 -- 233,793
Other Assets........................................ 15,571 96,849 -- 112,420
---------------- ------------- ----------- ------------
TOTAL ASSETS.............................. $11,563,956 $2,097,309 $3,532,768 $17,194,033
============ ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Note payable to bank.............................. $ -- $ 250,000 $ -- $ 250,000
Current installments of long-term debt............ 186,347 75,078 -- 261,425
Current installments of obligations under capital
lease.......................................... -- 20,749 -- 20,749
Accounts payable and accrued expenses............. 1,231,308 1,002,259 (251,878)d 1,981,689
Income taxes payable 158,893...................... 41,600 -- 200,493
Note payable -- The Fresh Juice Company, Inc...... -- 150,000 (150,000)b --
Advances from stockholder......................... -- 14,000 -- 14,000
---------------- ------------- ----------- ------------
Total Current Liabilities................. 1,576,548 1,553,686 (401,878) 2,728,356
Deferred Taxes Payable.............................. -- 28,000 -- 28,000
Long-Term Debt, Net of Current Installments......... 1,388,653 524,868 -- 1,913,521
Obligations Under Capital Lease, Net of Current
Installments...................................... -- 10,401 -- 10,401
---------------- ------------- ----------- ------------
Total Liabilities......................... 2,965,201 2,116,955 (401,878) 4,680,278
Commitments and Contingency
Stockholders' Equity:
Common stock...................................... 49,020 140 11,460a 60,620
Additional paid-in capital........................ 6,232,590 544,918 3,358,482a 10,135,990
Retained earnings (accumulated deficit)........... 2,600,438 (89,856) 89,856a 2,600,438
---------------- ------------- ----------- ------------
8,882,048 455,202 3,459,798 12,797,048
Less cost of common shares held in treasury....... 283,293 474,848 (474,848)a 283,293
---------------- ------------- ----------- ------------
Total Stockholders' Equity (Deficit)...... 8,598,755 (19,646) 3,934,646a 12,513,755
---------------- ------------- ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)............................... $11,563,956 $2,097,309 $3,532,768 $17,194,033
============ ========== ========= ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements on
pages 17-18.
13
<PAGE> 16
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------
THE FRESH
JUICE
COMPANY, INC. THE ULTIMATE PRO FORMA
AND JUICE CLEAR SPRINGS ----------------------------
SUBSIDIARIES COMPANY, INC. CITRUS, INC. ADJUSTMENTS CONSOLIDATED
------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales............................. $ 9,219,184 $ 11,967,936 $ 12,775,884 $(4,442,854)c $ 29,520,150
Cost of Goods Sold.................... 6,035,483 8,311,211 11,420,358 (4,442,854)c 21,324,198
---------- ----------- ----------- ----------- -----------
3,183,701 3,656,725 1,355,526 -- 8,195,952
Selling, General and Administrative
Expenses............................ 2,820,356 3,326,684 1,367,525 245,065e,f 7,759,630
---------- ----------- ----------- ----------- -----------
Earnings (Loss) From
Operations................ 363,345 330,041 (11,999) (245,065) 436,322
Interest Income....................... 104,104 23,260 -- (19,096)b 108,268
Interest Expense...................... (24,355) (12,441) (88,024) 19,096b (105,724)
Gain on Sale of Assets................ -- 27,639 2,200 -- 29,839
Miscellaneous Income (Expense), Net... -- 93,511 6,425 (116,000)e (16,064)
---------- ----------- ----------- ----------- -----------
Income (Loss) Before Income
Taxes..................... 443,094 462,010 (91,398) (361,065) 452,641
Provision (Benefit) For Income
Taxes............................... 172,051 147,434 (17,000) -- 302,485
---------- ----------- ----------- ----------- -----------
Net Income (Loss)..................... $ 271,043 $ 314,576 $ (74,398) $ (361,065) $ 150,156
========== =========== =========== =========== ===========
Net Income (Loss) Per Share........... $ .07 $ 309.01 $ (74.40) $ -- $ .02
========== =========== =========== =========== ===========
Weighted Average Shares............... 3,889,740 1,018 1,000 -- 6,189,740
========== =========== =========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements on
pages 17-18.
14
<PAGE> 17
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
THE FRESH
JUICE
COMPANY, INC. THE ULTIMATE PRO FORMA
AND JUICE CLEAR SPRINGS ----------------------------
SUBSIDIARIES COMPANY, INC. CITRUS, INC. ADJUSTMENTS CONSOLIDATED
------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales..................... $7,779,639 $3,476,776 $6,549,799 $(1,931,712)c $15,874,502
Cost of Goods Sold............ 5,649,215 2,228,759 5,774,574 (1,931,712)c 11,720,836
---------- ---------- ---------- ----------- -----------
2,130,424 1,248,017 775,225 -- 4,153,666
Selling, General and
Administrative Expenses..... 1,906,123 1,318,618 804,206 73,144e,f 4,102,091
---------- ---------- ---------- ----------- -----------
Earnings (Loss) From
Operations........ 224,301 (70,601) (28,981) (73,144) 51,575
Interest Income............... 27,976 8,711 -- (7,387)b 29,300
Interest Expense.............. (65,285) (1,804) (43,990) 7,387b (103,692)
Gain on Sale of Assets........ 4,962 -- -- -- 4,962
Miscellaneous Income
(Expense), Net.............. -- 80,000 23,552 (80,000)e 23,552
---------- ---------- ---------- ----------- -----------
Income (Loss) Before
Income Taxes...... 191,954 16,306 (49,419) (153,144) 5,697
Provision (Benefit) For Income
Taxes....................... 81,000 2,449 (6,000) -- 77,449
---------- ---------- ---------- ----------- -----------
Net Income (Loss)............. $ 110,954 $ 13,857 $ (43,419) $ (153,144) $ (71,752)
========== ========== ========== =========== ===========
Net Income (Loss) Per Share... .03 12.46 (43.42) -- (.01)
========== ========== ========== =========== ===========
Weighted Average Shares....... 3,982,231 1,112 1,000 -- 5,902,231
========== ========== ========== =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements on
pages 17-18.
15
<PAGE> 18
UNAUDITED PRO FORMA PER SHARE DATA
<TABLE>
<CAPTION>
AS OF OR FOR THE
----------------------------------
SIX MONTHS TWELVE MONTHS
ENDED ENDED
MAY 31, 1996 NOVEMBER 30, 1995
------------ -----------------
<S> <C> <C>
The Fresh Juice Company, Inc. and Subsidiaries -- Historical:
Book value per share......................................... $ 1.83 $ 1.31
Dividends per share(A)....................................... -- --
Net income per share......................................... $ .03 $ .07
Clear Springs Citrus, Inc. -- Historical(B):
Book value (deficit) per share............................... $ (19.65) $(76.33)
Dividends per share(A)....................................... -- --
Net loss per share........................................... $ (43.42) $(74.40)
Pro Forma Consolidated:
Book value per share......................................... $ 2.14 $ --
Dividends per share(A)....................................... -- --
Net income (loss) per share.................................. $ (.01) $ .02
Clear Springs Citrus, Inc. -- Pro Forma Equivalents(C):
Book value per share......................................... $ 2,482.40 $ --
Dividends per share(A)....................................... -- --
Net income (loss) per share.................................. $ (14.10) $ 28.14
</TABLE>
- ---------------
(A) Pro forma dividends per share are assumed to be the same as the historical
dividends of Fresh Juice Company, Inc. and Subsidiaries (the "Company"). The
Company has historically paid no dividends and has no present intentions of
paying dividends in the foreseeable future.
(B) Calculated as of March 31, 1996 and December 31, 1995, respectively.
(C) The equivalent pro forma share amounts were calculated by multiplying the
pro forma net income (loss) per share and the pro forma book value of the
Company by the exchange ratio so that the per share amounts are equated to
the respective values for one share of Clear Springs. For example, the pro
forma equivalent book value per share and net income (loss) per share as of
or for the six months ended May 31, 1996 were calculated by multiplying the
pro forma book value of $2.14 by 1,160 (the exchange ratio) and the pro
forma net income (loss) of $(.012157) by the exchange ratio.
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements on
pages 17-18.
16
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- MERGER WITH ULTIMATE
Effective April 1, 1996, the Company acquired all of the outstanding
capital stock of Ultimate in exchange for 1,140,000 shares of the Company's
Common Stock. For additional information concerning the transaction see page 22
and pages F-17 to F-18 of this Proxy Statement.
NOTE 2 -- PROPOSED MERGER WITH CLEAR SPRINGS
On March 31, 1996, the Company entered into the Agreement providing for the
proposed Merger of Fresh Juice of Florida with Clear Springs, as a result of
which the Company will acquire all the outstanding capital stock of Clear
Springs in exchange for 1,160,000 shares of the Common Stock of the Company.
Consummation of the Clear Springs Merger is subject to the satisfaction of all
terms and conditions of the Agreement including, but not limited to stockholder
approval of an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company from 5,000,000 shares of
Common Stock and 200,000 shares of Preferred Stock to 20,000,000 shares of
Common Stock and 7,000,000 shares of Preferred Stock. This proposed Merger will
be accounted for as a purchase.
NOTE 3 -- BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only, giving effect to the consolidation of
the Company, Ultimate and Clear Springs as accounted for using the purchase
method.
The pro forma periods are dated in terms of the Company's historical
financial reporting periods. The unaudited pro forma condensed consolidated
statements of operations for the year ended November 30, 1995 include the
consolidated statement of earnings of the Company for the year ended November
30, 1995, the combined statement of operations of Ultimate for the twelve months
ended December 31, 1995 and the statement of operations of Clear Springs for the
year ended December 31, 1995. The unaudited pro forma consolidated statements of
operations for the six months ended May 31, 1996 include the consolidated
statement of operations of the Company for the six months ended May 31, 1996,
the results of operations of Ultimate for the four months ended March 31, 1996
(the applicable periods prior to its consolidation with the Company) and the
results of operations of Clear Springs for the six months ended March 31, 1996.
The unaudited pro forma condensed consolidated balance sheet as of May 31, 1996
includes the balance sheets of the Company as of May 31, 1996, and Clear Springs
as of March 31, 1996.
Because the Merger has not been consummated and transition plans are
currently being developed, transaction costs and other nonrecurring costs and
expenses expected to be incurred in connection with the integration of the
companies' business operations can only be estimated at this time and,
therefore, the following have been excluded from the pro forma condensed
consolidated statements of operations: (i) the positive effects of potential
cost savings which may be achieved upon combining the resources of the
companies; (ii) legal and miscellaneous costs relating to the Merger, currently
estimated to be $150,000 to $250,000 and (iii) other nonrecurring costs and
expenses expected to be incurred subsequent to the Merger, including $300,000 to
$500,000 in connection with the integration of the companies' operations, and
approximately $50,000 to $75,000 related to termination benefits which may be
paid to employees.
The results of operations of Ultimate for the month ended December 31, 1995
reflected net sales of $925,414 and net income of $303,304, which are included
in the pro forma condensed consolidated statements of operations for both the
six months ended May 31, 1996 and the twelve months ended November 30, 1995.
The results of operations of Clear Springs for the three months ended
December 31, 1995 reflected net sales of $3,142,678 and a net loss of $141,207,
which are included in the pro forma condensed consolidated
17
<PAGE> 20
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
statements of operations for both the six months ended May 31, 1996 and the
twelve months ended November 30, 1995.
NOTE 4 -- PRO FORMA ADJUSTMENTS
The pro forma condensed consolidated financial statements have been
adjusted for the items set forth below, the amounts of which are noted in the
adjustment column of the pro forma condensed consolidated financial statements:
(a) Adjustment to reflect the proposed merger of Clear Springs with
Fresh Juice of Florida, a wholly owned subsidiary of the Company. The
Merger involves the exchange of 1,160,000 shares of the Common Stock of the
Company valued at $3,915,000 in exchange for all of the outstanding capital
stock of Clear Springs. The $3,915,000 was calculated based on the average
price of the Company's Common Stock on or about March 31, 1996, the date of
the announcement of the Merger. The proposed Merger will result in excess
cost over fair value of net assets acquired of $3,934,646. Such amount
reflects preliminary estimates of the fair value of the proposed assets
acquired and liabilities to be assumed.
(b) Elimination of debt between the Company and Clear Springs in the
amount of $150,000 as of May 31, 1996 and the related interest income and
expense in the amount of $5,284 and $9,214 for the six months ended May 31,
1996 and the twelve months ended November 30, 1995, respectively. In
addition, interest income and expense between the Company and Ultimate,
prior to the Ultimate Merger (as defined on page 22), in the amount of
$2,103 and $9,882 have been eliminated for the six months ended May 31,
1996 and the twelve months ended November 30, 1995, respectively.
(c) Elimination of intercompany sales and related expenses between
Ultimate and Clear Springs in the amounts of $1,893,608 and $3,962,970 have
been eliminated for the six months ended May 31, 1996 and the twelve months
ended November 30, 1995, respectively. In addition, sales between Ultimate
and the Company, prior to the Ultimate Merger, in the amount of $38,104 and
$479,884 have been eliminated for the six months ended May 31, 1996, and
the twelve months ended November 30, 1995, respectively.
(d) Elimination of intercompany assets and liabilities resulting from
intercompany sales between Clear Springs and the Company as of May 31,
1996.
(e) Elimination of intercompany management fees between Ultimate and
Clear Springs.
(f) Amortization of excess cost over fair value of net assets acquired
over a twenty year life. These amounts are $54,778 and $98,366 for Ultimate
and Clear Springs, respectively, for the six months ended May 31, 1996.
These amounts are $164,333 and $196,732 for Ultimate and Clear Springs,
respectively, for the twelve months ended November 30, 1995.
(g) There is no tax benefit to be recognized from the pro forma
adjustment of recording the amortization of the excess cost over fair value
of net assets acquired resulting from the acquisition of Ultimate by the
Company and the proposed Merger with Clear Springs.
PROPOSAL 3
ELECTION OF DIRECTORS
A. NOMINEES FOR DIRECTOR
The Board is comprised of four persons all of whose current terms will
expire at the 1996 Annual Meeting and all of whom are nominees standing for
reelection for a one year term expiring at the 1997 Annual Meeting.
18
<PAGE> 21
Proxies are solicited in favor of the following four nominees, each of whom is
currently a Director of the Company: Steven M. Bogen, Steven Smith, Jeffrey
Smith and Brian Duffy. Election of directors is to be determined by a plurality
vote of the votes cast at the Meeting. In the event that any of the four
nominees should become unable or unwilling to serve as a director, it is
intended that the proxies voted in favor of such nominee(s) will be voted for
the election of such person, if any, as shall be designated by the Board. The
Company is unaware of any information which would indicate that any of the
nominees will be unable or unwilling to serve.
RECOMMENDATION AND VOTE REQUIRED
The election of Directors is to be determined by a plurality vote of those
shares of Common Stock voting on this proposal. THE BOARD UNANIMOUSLY RECOMMENDS
ELECTION OF THE NOMINEES IN ACCORDANCE WITH PROPOSAL 3
INFORMATION AS TO NOMINEES
DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the nominees/directors and executive officers is set
forth in the following table:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE DIRECTOR SINCE DURING THE PAST FIVE YEARS
- ---------------- --- -------------- ----------------------------------------------------------
<S> <C> <C> <C>
Steven M. Bogen 39 1996 Chief Executive Officer of The Ultimate Juice Company,
Inc. from 1988 through present; Chairman of the Board of
The Ultimate Juice Company, Inc. from 1989 through
present; Chairman of the Board of Clear Springs Citrus,
Inc. from July 27, 1993 through present; President of
Clear Springs Citrus, Inc. from July 27, 1993 through
March 11, 1994; Secretary of Clear Springs Citrus, Inc.
from January 28, 1992 through October 21, 1993 and from
March 11, 1994 through present; Co-Chairman of the Board,
Chief Executive Officer, and Secretary of the Company
since April 1, 1996
Steven Smith 49 1985 Chairman of the Board, President and Chief Executive
Officer of the Company from 1985 through March 31, 1996.
Presently Co-Chairman of the Board, President and
Assistant Secretary of the Company
Jeffrey Smith 24 1996 Student at the Wharton School at University of
Pennsylvania from September, 1990 through May 1994.
Investment Banking Analyst at LSG Advisors, a division of
Societe Generale Securities Corporation from August 1994
through December 1995. Vice President of Strategic
Development and Investor Relations of the Company since
February, 1996 (son of Steven Smith)
Brian Duffy 50 1996 President and Director of Natural Juice Company since
August, 1984; Director of Clear Springs Citrus, Inc. since
January 22, 1993; President of Clear Springs Citrus, Inc.
since March 11, 1994; Secretary of Clear Springs Citrus,
Inc. from October 21, 1993 through March 11, 1994;
Director of the Company since April 1, 1996
Mark Feldman 33 N/A Controller of The Ultimate Juice Company, Inc. from 1989
to present; Chief Financial Officer of The Ultimate Juice
Company, Inc. from February 1995 through March 31, 1996;
Treasurer and Controller of the Company since April 1,
1996
</TABLE>
B. MEETINGS AND COMMITTEES OF DIRECTORS
Since the Company does not have a standing audit, nominating or
compensation committee, these functions are handled by the Board as a whole. The
Board held one meeting during the fiscal year ended November 30, 1995. All
directors in office at November 30, 1995 attended that meeting.
C. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date information
concerning (a) the number and percentage of existing securities of the Company
beneficially owned by (i) each of the nominees for director, (ii) each executive
officer of the Company, (iii) each person or group known to the Company to be
the
19
<PAGE> 22
beneficial owner of more than 5% of the outstanding shares of Common Stock, and
(iv) the shares of Common Stock owned by all directors and executive officers as
a group. Each person named or included in a group has sole voting and investment
power with respect to his shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL
OWNER OR NUMBER OF PERSONS IN COMMON STOCK BENEFICIALLY OWNED PERCENT OF COMMON
GROUP AS OF AUGUST 2, 1996 STOCK OWNED
-------------------------------- ------------------------------- -----------------
<S> <C> <C>
Steven M. Bogen 619,508 13.2%
c/o The Fresh Juice Company,
Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Steven Smith 1,488,600(1) 31.7%
c/o The Fresh Juice Company,
Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Jeffrey Smith 14,300(2) 0.3%
c/o The Fresh Juice Company,
Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Brian Duffy -0- -0-
c/o The Fresh Juice Company,
Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Mark Feldman 37,050 0.8%
c/o The Fresh Juice Company,
Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Daniel Petry 288,648 6.2%
c/o The Fresh Juice Company,
Inc.
35 Walnut Avenue
Clark, New Jersey 07066
All directors and executive
officers as a group (5 in
number) 2,159,458 46.0%
</TABLE>
- ---------------
(1) Mr. Smith also owns options to purchase (i) 100,000 shares of Common Stock
which are exercisable until 1998 at $1.375 per share, and (ii) 60,000 shares
of Common Stock exercisable until 1998 at $3.50 per share.
(2) Jeffrey Smith also owns, subject to approval of the Company's 1996 Incentive
Stock Option Plan, options to purchase 50,000 shares of Common Stock which
are exercisable until July 22, 2001 at $3.125 per share.
D. EXECUTIVE COMPENSATION AND TRANSACTIONS
The following table sets forth the cash compensation in each of the last
three completed fiscal years of Steven Smith, who served as the Company's
Chairman, President and Chief Executive Officer during such fiscal years. The
table omits other executive officers employed by the Company on November 30,
1995
20
<PAGE> 23
because neither of those officers received total annual salary and bonus in
excess of $100,000 in the fiscal year ended November 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) SARS(#)(2) COMPENSATION($)(3)
- ----------------------- ---- ------------ -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Steven Smith,.......... 1995 369,500 -- -- -- 22,500
Chairman, President 1994 348,700 -- -- 60,000(4) 22,500
and Chief Executive 1993 348,398 -- -- -- 30,000
Officer
</TABLE>
- ---------------
(1) This amount does not include perquisites and other personal benefits,
securities or property because the aggregate amount thereof in each fiscal
year did not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus reported for the named executive officer.
(2) During the last three completed fiscal years, the Company granted no
restricted stock awards or stock appreciation rights (whether freestanding
or in tandem with stock options).
(3) Reflects Company contributions for the account of Mr. Smith under the
Company's employee pension plan.
(4) Reflects grant under Company's Stock Option Plan of presently exercisable
option to purchase 60,000 shares of the Company's Common Stock at $3.50 per
share.
STOCK OPTION GRANTS IN 1995
The Company granted no stock options during the fiscal year ended November
30, 1995.
AGGREGATE OPTION EXERCISES IN 1995 AND OPTION VALUES AT NOVEMBER 30, 1995
The following table shows stock options exercised by the Company's
executive officer named in the Summary Compensation Table during the fiscal year
ended November 30, 1995, including the aggregate value of any gains on the date
of exercise. In addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options as of November 30, 1995. Also
reported are values for "in-the-money" options which represent the positive
spread between the exercise price of outstanding stock options and the year-end
price of the Company's Common Stock. Values for "out-of-the-money" options are
not reported.
AGGREGATE STOCK OPTION/SAR EXERCISES IN 1995
AND OPTION/SAR VALUES AT NOVEMBER 30, 1995
<TABLE>
<CAPTION>
NO. OF SHARES COVERED BY VALUE OF IN-THE-MONEY($)
UNEXERCISED OPTIONS AT UNEXERCISED STOCK OPTIONS
11/30/95 AT 11/30/95
SHARES --------------------------- ---------------------------
ACQUIRED VALUE NOT NOT
NAME ON EXERCISE REALIZED EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
- ------------------------ ----------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Steven Smith............ 0 $0 160,000(1) -- 50,000(2) --
</TABLE>
- ---------------
(1) Includes options to purchase (i) 100,000 shares of Common Stock exercisable
at $1.375 per share and (ii) 60,000 shares of Common Stock exercisable at
$3.50 per share.
(2) Amount reflects value of option to purchase 100,000 shares of Common Stock
at $1.375 per share, calculated by determining the difference between
$1.875, the value of the Common Stock at November 30, 1995 (as quoted on the
NASDAQ System for such date), and the exercise price.
21
<PAGE> 24
EMPLOYMENT AGREEMENTS
On April 1, 1996, the Company entered into a new three-year agreement with
Steven Smith providing for an initial annual salary of $360,000, subject to
adjustments to reflect increases in the consumer price index. Such agreement
provides that the parties may extend the agreement for up to two additional
terms of three years each, for a total of six additional years.
On April 1, 1996, the Company also entered into a three-year agreement with
Steven M. Bogen providing for an initial annual salary of $360,000, subject to
adjustments to reflect increases in the consumer price index. Such agreement
provides that the parties may extend the agreement for up to two additional
terms of three years each, for a total of six additional years.
On April 1, 1996, the Company also entered into a two year agreement with
Daniel Petry, a member of the Company's sales and operations staff, providing
for a minimum annual salary of $110,000.
PENSION PLAN
During the 1988 fiscal year the Company instituted an employee pension plan
covering all of its employees. Only employees who have been employed by the
Company for three years are eligible to participate in the pension plan. Under
the pension plan, contributions may not exceed 15% of the covered employee's
salary. The amount of contributions for each employee is determined by a
committee of the Board. In fiscal 1995, Mr. Smith was allocated $22,500 and all
other eligible employees, as a group, were allocated $23,858.
DIRECTOR'S FEES
Directors do not receive any compensation for serving on the Board.
E. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. Loan Agreement with Ultimate.
On January 24, 1994, the Company and Ultimate entered into a loan agreement
pursuant to which the Company loaned to Ultimate the sum of $300,000 secured by
a lien on certain of the assets of Ultimate and certain of its affiliates
including, in particular, Ultimate's accounts receivable. The loan bears
interest at a rate of 5% per annum payable monthly commencing on July 24, 1994.
The terms of the loan agreement provided that the principal amount of the loan
would be repaid in 30 equal monthly installments of $10,000 commencing on August
24, 1994.
On January 24, 1994, in partial consideration of such loan, the Company
entered into an option agreement (the "Option Agreement") pursuant to which it
was granted an option to purchase 100% of the outstanding capital stock of
Ultimate and approximately 35% of the outstanding capital stock of Ultimate's
affiliate, Clear Springs. In addition, Steven Smith, the Company's then
Chairman, President and Chief Executive Officer, was granted an option to
purchase approximately 15% of the outstanding capital stock of Clear Springs. At
such time, Ultimate and Clear Springs were privately-owned companies engaged in
the production and distribution of orange juice products.
In August 1994, the Option Agreement expired by its terms and none of the
options granted thereunder had been exercised. As of March 31, 1996, Ultimate
had repaid $190,000 of the principal amount of such loan. The remaining balance
of the loan was cancelled in connection with the Company's acquisition of
Ultimate by merger described below.
2. Merger with Ultimate. On March 31, 1996, the Company entered into a
Merger Agreement (the "Merger Agreement") with and among Ultimate, the
stockholders of Ultimate (the "Selling Stockholders") and The Fresh Juice
Acquisition Company, Inc., a Delaware corporation and a wholly-owned subsidiary
of the Company ("Merger Sub"). The Merger Agreement provided for the merger of
Merger Sub with and into Ultimate (the "Ultimate Merger"), with all of the
issued and outstanding common stock of Ultimate being exchanged for 1,140,000
shares (the "Merger Shares") of the Company's Common Stock.
22
<PAGE> 25
The Ultimate Merger became effective on April 1, 1996 and was (1) accounted
for as a purchase and (2) a "reorganization" under the Internal Revenue Code.
Pursuant to the Merger Agreement, the Merger Shares were not registered
with the SEC and constitute restricted stock under Rule 144 of the SEC. However,
the Company and the Selling Stockholders have entered into a Registration Rights
Agreement (the "Registration Rights Agreement") dated March 31, 1996 which gives
the Selling Stockholders the right to demand registration of a portion of the
Merger Shares under certain circumstances.
Bogen, the President of Ultimate, became Co-Chairman, Chief Executive
Officer and Secretary of the Company. Steven Smith continued as Co-Chairman and
President and was also named Assistant Secretary of the Company. Jeffrey Smith,
the Company's Vice President of Strategic Development and Investor Relations was
elected as a director of the Company. Mark Feldman, a stockholder, Chief
Financial Officer, Controller and Director of Ultimate, was named Treasurer of
the Company.
In connection with the Merger Agreement, Bogen and Steven Smith have
entered into a Stockholder's Agreement (the "Stockholder's Agreement") whereby
each has agreed, among other things, to (a) keep the number of directors of the
Company at an even number, (b) nominate one-half of the number of directors
eligible for election each year, (c) vote for the other's nominees for director,
and (d) not sell their respective stock in the Company other than pursuant to
broker sales or an effective Registration Statement. Upon consummation of the
Ultimate Merger, Bogen and Steven Smith owned in the aggregate 2,218,108 shares
of the Company's Common Stock (approximately 47.3% of the issued and outstanding
Common Stock of the Company).
3. Merger Agreement With Clear Springs. On March 31, 1996, the Company
entered into the Agreement, pursuant to which Clear Springs will be merged with
and into Fresh Juice of Florida. (For further discussion see The Merger at pages
3 to 7 of this Proxy Statement.) Brian Duffy and The Bogen Group, L.L.C. own all
of the outstanding common stock of Clear Springs. The Bogen Group, L.L.C. is
controlled by Bogen who owns a 96.5% interest therein.
The Company, Steven Smith, and the Clear Springs stockholders have entered
into a Voting Agreement dated March 31, 1996 whereby Steven Smith and the
Selling Stockholders have agreed and authorized a nominee to vote their shares
in favor of the transactions contemplated by the Agreement including, but not
limited to, the related increase in the authorized Common Stock and Preferred
Stock of the Company.
4. Supply Agreement with Natural Juice Company. By agreement dated March
31, 1996, the Company entered into a supply, distribution and requirements
agreement (the "Supply Agreement") with Natural Juice Company, an Illinois
corporation controlled by Brian Duffy, a director of the Company and a
stockholder, President and Director of Clear Springs. The Supply Agreement has
an initial term of five (5) years with two (2) five (5) year renewals at Natural
Juice Company's option.
F. COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act of 1934 requires the Company's directors,
executive officers, and persons who own more than 10% of the Company's equity
securities to file with the SEC initial reports of ownership and reports of
changes in ownership of such securities. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to it, during the
fiscal year ending November 30, 1995, Section 16(a) filing requirements with
respect to the Company's equity securities were met, except that, through
inadvertence, a Form 3, Initial Statement of Beneficial Ownership, for Carol
Smith, a former director of the Company, was never filed. This omission has been
corrected.
23
<PAGE> 26
PROPOSAL 4
APPROVAL OF THE ADOPTION OF THE 1996
INCENTIVE STOCK OPTION PLAN
On July 23, 1996, the Board unanimously adopted, subject to stockholder
approval at the Annual Meeting and such regulatory approvals as may be required,
The Fresh Juice Company, Inc. Incentive Stock Option Plan (the "1996 Stock
Plan"). The 1996 Stock Plan is one of several initiatives undertaken by the
Company's Board in order to further align the interests of the Company's
management with the interests of stockholders. The 1996 Stock Plan will provide
for the granting of incentive stock options in order to facilitate the
attraction, retention and motivation of key employees through participation in
the long-term growth and financial success of the Company.
A. SHARES RESERVED UNDER THE 1996 STOCK PLAN
The number of shares of Common Stock with respect to which grants may be
made under the 1996 Stock Plan is 500,000, subject to adjustment in the event of
stock dividends, stock splits, combinations of shares, recapitalizations or
other changes in the outstanding Common Stock. The shares issuable under the
1996 Stock Plan may be drawn from either authorized but previously unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares purchased by the Company on the open market or held as treasury shares.
B. MATERIAL FEATURES OF THE 1996 STOCK PLAN
The following description of the material features of the 1996 Stock Plan
is qualified in its entirety by reference to the full text of the Plan that is
attached to this Proxy Statement as Appendix C.
The 1996 Stock Plan will be administered by a Committee designated by the
Board (the "Committee") and comprised of at least three members. Currently, the
Board serves as the Committee. The Committee shall have, among other powers, the
power to interpret, waive, amend, and establish rules and regulations for the
1996 Stock Plan.
The Committee shall have the sole and complete authority to grant to
eligible participants one or more grants of incentive stock options. The
Committee shall have the sole discretion to determine the amount of any such
grants. The Committee shall also have the sole authority to establish such
vesting periods and/or performance-based goals that must be attained in order
for the participant to be able to exercise any stock option.
All stock options shall be subject to agreements which shall be approved by
the Committee. The stock option agreements shall set forth the terms and
conditions of any such option grants and the conditions, if any, that must be
satisfied by participants in order to obtain the benefits of the grants. The
Committee may, in its discretion, provide in the stock option agreements that in
the event of a change in control of the Company, outstanding options will vest
and become immediately exercisable. All options are non-transferable.
C. ELIGIBLE PARTICIPANTS
Under the 1996 Stock Plan, key salaried employees, including officers, of
the Company, its divisions and subsidiaries are eligible to receive options. The
determination of those employees who shall receive grants and awards will be
made by the Committee, in its sole discretion.
D. AMENDMENTS PERMITTED TO THE 1996 STOCK PLAN WITHOUT SHAREHOLDER APPROVAL
The Board may amend, alter or discontinue the 1996 Stock Plan at any time,
provided that no amendment, alteration or discontinuation shall be made that
would impair the rights of any holder of a grant without the participant's
written consent, or which, without shareholder approval, would (i) increase the
maximum number of shares of Common Stock with respect to which grants may be
made (except for permitted adjustments applicable to changes in the outstanding
Common Stock), (ii) decrease the exercise
24
<PAGE> 27
price for options below 100% (or 110% in the case of stockholder(s) owning 10%
or more of the outstanding Common Stock of the Company) of the fair market value
of the Common Stock on the date of grant (except for permitted adjustments
arising as a result of changes in the outstanding Common Stock), (iii)
materially change the class of persons eligible to receive grants and awards,
(iv) extend the ten-year term of the 1996 Stock Plan, or (v) materially increase
in any other way the benefits accruing to participants.
E. DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a summary of the federal income tax consequences (under
current law) relating to option grants under the 1996 Stock Plan.
No taxable income is recognized by the optionee upon the grant or exercise
of an incentive stock option ("ISO") that meets the requirements of Section 422
of the Internal Revenue Code of 1986, as amended from time to time, (the
"Code"). However, the exercise of an ISO may result in alternative minimum tax
liability for the optionee. If no disposition of shares issued to an optionee
pursuant to the exercise of an ISO is made by the optionee within two years from
the date of grant or within one year after the date of exercise, then upon sale
of such shares, any amount realized in excess of the exercise price (the amount
paid for the shares) will be taxed to the optionee as a long-term capital gain
and any loss sustained will be a long-term capital loss, and no deduction will
be allowed to the Company for federal income tax purposes.
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition"), generally the optionee will
recognize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares on the date of exercise
(or, if less, the amount realized on the arm's length sale of such shares) over
the exercise price of the underlying options, and the Company will be entitled
to deduct such amount.
F. NEW PLAN BENEFITS UNDER THE 1996 STOCK PLAN
On July 23, 1996, the Company granted Jeffrey Smith, the Company's Vice
President of Strategic Development and Investor Relations, the fully vested
right and option to purchase all or any part of 50,000 shares of the Company's
Common Stock at the price of $3.125 per share. This option grant is subject to
approval of the 1996 Stock Plan by the Company's stockholders. The option grant
was made pursuant to the terms of a Stock Option Agreement dated July 23, 1996
and these stock options are exercisable from time to time, subject to the
provisions of the Stock Option Agreement, prior to the close of business on July
22, 2001. On July 23, 1996, the Company also granted Paul Ballentine, the
Company's Vice President of Production and Product Development, the right and
option to purchase 60,000 shares of the Company's Common Stock at $3.125 per
share. This option grant is subject to approval of the 1996 Stock Plan by the
Company's stockholders. The option grant was made pursuant to the terms of a
Stock Option Agreement dated July 23, 1996, and these stock options are
exercisable from time to time, subject to the provisions of the Stock Option
Agreement, prior to July 22, 2004. Mr. Ballentine's options vest as follows:
20,000 shares vested upon execution of the Stock Option Agreement (subject to
stockholder approval of the 1996 Stock Plan) and 8,000 of the remaining shares
of Common Stock vest on each of the first five (5) one (1) year anniversaries of
the Stock Option Agreement. The stock options granted to Jeffrey Smith and Paul
Ballentine pursuant to the Stock Option Agreements described above were made to
replace those stock options issued to Jeffrey Smith and Paul Ballentine on
February 12, 1996, which options were issued in error and not pursuant to a
stock option plan approved by the Board.
G. APPROVAL
The Board believes that the approval of the 1996 Stock Plan is in the best
interests of the Company since it will facilitate the attraction, retention and
motivation of key employees and is consistent with the Board's compensation
philosophy of aligning the interests of the Company's management with the
interests of stockholders.
25
<PAGE> 28
RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of a majority of those shares of Common Stock voting
on this proposal is required to approve the 1996 Stock Plan. THE BOARD
UNANIMOUSLY RECOMMENDS APPROVAL OF PROPOSAL 4.
PROPOSAL 5
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT
MARWICK LLP BY THE BOARD OF DIRECTORS AS
INDEPENDENT AUDITORS FOR THE 1996 FISCAL YEAR
KPMG Peat Marwick LLP was the independent auditor for the Company for the
fiscal year ended November 30, 1995. The Board has appointed KPMG Peat Marwick
LLP as the independent auditors for the Company for the fiscal year ending
November 30, 1996, and requests that such appointment be ratified by the
Company's stockholders at the Meeting. It is expected that a representative of
KPMG Peat Marwick LLP will be present at the Meeting. The representative from
KPMG Peat Marwick LLP will have the opportunity to make a statement if the
representative desires to do so, and will be available to respond to appropriate
questions.
RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of a majority of those shares of Common Stock voting
on this proposal is required to ratify the appointment of KPMG Peat Marwick LLP
as independent auditors for the Company for the 1996 fiscal year. THE BOARD
UNANIMOUSLY RECOMMENDS APPROVAL OF PROPOSAL 5.
STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal at the Company's next annual
meeting of stockholders, the proposal must be received by the Company by
December 9, 1996 for inclusion in the proxy statement and form of proxy relating
to that meeting.
OTHER BUSINESS
The management of the Company has no knowledge of any other matters that
may properly come before the meeting, or any adjournment thereof. In the event
any other matters are properly brought before the meeting, it is the intention
of the person named in the accompanying proxy to vote on such matters as he, in
his discretion, may determine.
INCORPORATION OF ADDITIONAL INFORMATION
All documents filed by the Company with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement and prior to the Meeting shall be deemed to be incorporated by
reference in this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statements contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
COPIES OF SEC FORM 10-KSB
A COPY OF THE COMPANY'S ANNUAL REPORT FOR 1995 ON SEC FORM 10-KSB WILL BE
FURNISHED WITHOUT CHARGE TO ANY PERSON MAKING A WRITTEN REQUEST FOR THE SAME TO:
STEVEN M. BOGEN, CORPORATE SECRETARY, THE FRESH JUICE COMPANY, INC., 35 WALNUT
AVENUE, CLARK, NEW JERSEY 07066.
By Order of the Board of Directors
STEVEN M. BOGEN
Secretary
Dated: August 8, 1996
26
<PAGE> 29
INDEX TO FINANCIAL STATEMENTS
THE FRESH JUICE COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Audited financial statements and related documents are contained in the Annual Report on
Form 10-KSB for the year ended November 30, 1995 mailed to stockholders with this Proxy
Statement and are presented herein on the following pages:
Independent Auditors' Report........................................................ F-1
Consolidated Balance Sheets as of November 30, 1995 and 1994........................ F-2
Consolidated Statements of Earnings for the years ended November 30, 1995, 1994 and
1993............................................................................. F-3
Consolidated Statements of Shareholders' Equity for the years ended November 30,
1995, 1994 and 1993.............................................................. F-4
Consolidated Statements of Cash Flows for the years ended November 30, 1995, 1994
and 1993......................................................................... F-5
Notes to Consolidated Financial Statements.......................................... F-6
Management's Discussion and Analysis or Plan of Operation........................... F-11
The following unaudited financial statements contained in the Quarterly Report on Form
10-QSB for the quarter ended May 31, 1996 are presented herein on the following pages:
Consolidated Balance Sheets as of May 31, 1996 (Unaudited) and November 30, 1995.... F-13
Consolidated Statements of Operations (Unaudited) for the Six Months Ended May 31,
1996 and 1995.................................................................... F-14
Consolidated Statements of Operations (Unaudited) for the Three Months Ended May 31,
1996 and 1995.................................................................... F-15
Consolidated Statements of Cash Flows (Unaudited) for the Six Months ended May 31,
1996 and 1995.................................................................... F-16
Notes to Consolidated Financial Statements (Unaudited).............................. F-17
Management's Discussion and Analysis or Plan of Operation........................... F-19
CLEAR SPRINGS CITRUS, INC.
The following audited and unaudited financial statements and related documents are presented
herein on the following pages:
Independent Auditors' Report........................................................ F-21
Balance Sheets as of March 31, 1996 (Unaudited) and December 31, 1995 and 1994...... F-22
Statements of Operations for the Three Months Ended March 31, 1996 and 1995
(Unaudited) and the Years Ended December 31, 1995 and 1994....................... F-23
Statements of Changes in Stockholders' Equity (Deficit) for the Three Months Ended
March 31, 1996 (Unaudited) and the Years Ended December 31, 1995 and 1994........ F-24
Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995
(Unaudited) and the Years Ended December 31, 1995 and 1994....................... F-25
Notes to Financial Statements....................................................... F-26
Management's Discussion and Analysis or Plan of Operation........................... F-34
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
The following audited and unaudited combined financial statements and related documents are
presented herein on the following pages:
Independent Auditors' Report........................................................ F-36
Combined Balance Sheets as of March 31, 1996 (Unaudited) and June 30, 1995 and
1994............................................................................. F-37
Combined Statements of Operations for the Nine Months Ended March 31, 1996 and 1995
(Unaudited) and the Years Ended June 30, 1995 and 1994........................... F-38
Combined Statements of Changes in Stockholders' Equity for the Nine Months Ended
March 31, 1996 (Unaudited) and the Years Ended June 30, 1995 and 1994............ F-39
Combined Statements of Cash Flows for the Nine Months Ended March 31, 1996 and 1995
(Unaudited) and the Years Ended June 30, 1995 and 1994........................... F-40
Notes to Combined Financial Statements.............................................. F-41
</TABLE>
27
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board Of Directors
The Fresh Juice Company, Inc.
and subsidiaries:
We have audited the accompanying consolidated balance sheets of The Fresh
Juice Company, Inc. and subsidiaries as of November 30, 1995 and 1994, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended November 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Fresh
Juice Company, Inc. and subsidiaries as of November 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended November 30, 1995 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Jericho, New York
January 12, 1996
F-1
<PAGE> 31
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................ $1,998,063 $1,542,584
Short-term investments (note 2)................................. -- 789,116
Trade accounts receivable....................................... 591,727 679,392
Inventories (note 3)............................................ 1,544,821 1,373,712
Current portion of note receivable (note 4)..................... 120,000 120,000
Income taxes receivable......................................... -- 70,494
Other........................................................... 3,747 16,521
---------- ----------
Total current assets.................................... 4,258,358 4,591,819
---------- ----------
Property, plant and equipment, at cost (note 6):
Land............................................................ 30,000 --
Building........................................................ 597,155 --
Equipment....................................................... 353,794 307,226
Molds........................................................... 196,338 169,048
Automobiles..................................................... 103,058 81,065
Construction-in-progress........................................ 1,437,887 --
---------- ----------
2,718,232 557,339
Less accumulated depreciation................................... 499,256 433,429
---------- ----------
Net property, plant and equipment....................... 2,218,976 123,910
Note receivable, net of current portion (note 4).................. 20,000 140,000
Trademarks and patents, net of accumulated amortization of $11,059
and $43,781 in 1995 and 1994, respectively...................... 10,903 3,070
---------- ----------
Total assets............................................ $6,508,237 $4,858,799
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 6)................. 45,832 --
Accounts payable and accrued expenses (note 5).................. 244,697 479,608
Income taxes payable............................................ 48,239 --
---------- ----------
Total current liabilities............................... 338,768 479,608
Long-term debt, net of current installments (note 6).............. 1,529,168 --
---------- ----------
Total liabilities....................................... 1,867,936 479,608
---------- ----------
Shareholders' equity (note 8):
Series preferred stock, par value $10. Authorized 200,000
shares; none issued (note 10)................................ -- --
Common stock, par value $.01. Authorized 5,000,000 shares;
issued 3,762,000 shares; outstanding 3,550,062 and 3,554,862
shares in 1995 and 1994, respectively........................ 37,620 37,620
Additional paid-in capital...................................... 2,396,490 2,396,490
Retained earnings............................................... 2,489,484 2,218,441
---------- ----------
4,923,594 4,652,551
Less cost of common shares held in treasury: 211,938 and 207,138
shares in 1995 and 1994, respectively........................ 283,293 273,360
---------- ----------
Total shareholders' equity.............................. 4,640,301 4,379,191
---------- ----------
Commitments and contingency (note 9)
Total liabilities and shareholders' equity.............. $6,508,237 4,858,799
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 32
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $9,219,184 $8,171,803 $8,265,588
Cost of goods sold..................................... 6,035,483 5,163,806 4,639,740
---------- ---------- ----------
3,183,701 3,007,997 3,625,848
Selling, general and administrative expenses........... 2,820,356 2,451,055 2,367,523
---------- ---------- ----------
Earnings from operations................ 363,345 556,942 1,258,325
Interest income........................................ 104,104 88,292 87,360
Interest expense....................................... (24,355) -- --
---------- ---------- ----------
Earnings before provision for income
taxes................................. 443,094 645,234 1,345,685
Provision for income taxes (note 7).................... 172,051 256,396 549,193
---------- ---------- ----------
Net earnings............................ $ 271,043 $ 388,838 $ 796,492
========= ========= =========
Net earnings per common share.......................... $ .07 $ .11 $ .22
========= ========= =========
Weighted average number of common and common equivalent
shares outstanding................................... 3,889,740 3,612,679 3,602,383
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 33
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
-------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30,
1992........................ 3,762,000 $37,620 $2,396,490 $1,033,111 $ (76,280) $3,390,941
Purchase of 106,988 shares of
treasury stock.............. -- -- -- -- (197,080) (197,080)
Net earnings for the year
ended November 30, 1993..... -- -- -- 796,492 -- 796,492
-------- ------- --------- --------- --------- ---------
Balance at November 30,
1993........................ 3,762,000 37,620 2,396,490 1,829,603 (273,360) 3,990,353
Net earnings for the year
ended November 30, 1994..... -- -- -- 388,838 -- 388,838
-------- ------- --------- --------- --------- ---------
Balance at November 30,
1994........................ 3,762,000 37,620 2,396,490 2,218,441 (273,360) 4,379,191
Purchase of 4,800 shares of
treasury stock.............. -- -- -- -- (9,933) (9,933)
Net earnings for the year
ended November 30, 1995..... -- -- -- 271,043 -- 271,043
-------- ------- --------- --------- --------- ---------
Balance at November 30,
1995........................ 3,762,000 $37,620 $2,396,490 $2,489,484 $(283,293) $4,640,301
======== ======= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 34
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings...................................... $ 271,043 $ 388,838 $ 796,492
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 68,101 52,727 60,048
Gain on sale of property and equipment....... -- -- (2,594)
Changes in assets and liabilities:
Decrease (increase) in trade accounts
receivable............................ 87,665 11,513 (243,418)
Increase in inventories................. (171,109) (140,359) (175,978)
Decrease (increase) in income taxes
receivable............................ 70,494 (70,494) --
Decrease (increase) in other current
assets................................ 12,774 (799) (11,901)
Increase in other assets................ (10,107) -- --
Increase (decrease) in accounts payable
and accrued expenses.................. (234,911) 77,290 237,015
Increase (decrease) in income taxes
payable............................... 48,239 (380,510) 294,037
---------- ---------- ----------
Net cash provided by (used In)
operating activities............. 142,189 (61,794) 953,701
---------- ---------- ----------
Cash flows from investing activities:
Increase in note receivable....................... -- (300,000) --
Installments from note receivable................. 120,000 40,000 --
Decrease in short-term investments................ 789,116 208,207 488,786
Proceeds on sale of assets........................ -- -- 5,137
Acquisitions of property, building and
equipment....................................... (2,160,893) (84,468) (43,635)
---------- ---------- ----------
Net cash provided by (used-in)
investing activities............. (1,251,777) (136,261) 450,288
---------- ---------- ----------
Cash flows from financing activities:
Purchase of treasury stock........................ (9,933) -- (197,080)
Proceeds from long-term debt...................... 1,575,000 -- --
---------- ---------- ----------
Net cash provided by (used in)
financing activities............. 1,565,067 -- (197,080)
---------- ---------- ----------
Net increase (decrease) in cash.... 455,479 (198,055) 1,206,909
Cash at beginning of year.............................. 1,542,584 1,740,639 533,730
---------- ---------- ----------
Cash at end of year.................................... $1,998,063 $1,542,584 $1,740,639
========= ========= =========
Supplemental cash flow information
Income taxes paid...................................... $ 53,318 $ 706,900 $ 255,155
========= ========= =========
Interest paid.......................................... $ 16,542 -- --
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 35
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
The Fresh Juice Company, Inc. and its subsidiaries, Fresh Pik't Natural Foods,
Inc. (Fresh Pik't), The Fresh Juice Company of Florida, Inc. and Minalba Foods
of North America, Inc. (Minalba), (collectively referred to as the Company). All
material intercompany accounts and transactions have been eliminated.
(b) Organization
The Fresh Juice Company, Inc. markets and distributes frozen fresh-squeezed
fruit juices through supermarket chains and other retail outlets throughout the
United States. The Company also markets its products internationally. In August
1995, the Company ceased the operations of Fresh Pik't, which sold and
distributed organic produce, and sold certain of its assets to an unrelated
party. The gain on sale of such assets was not material to the operations of the
Company in 1995. In 1995 and 1994, included in the Company's net sales were
$2,004,437 and $313,819 from the operations of Fresh Pik't, respectively.
Included in net earnings were ($66,278) and $4,227 representing the results of
operations for Fresh Pik't in 1995 and 1994, respectively.
In September 1995, the Company, through its wholly-owned subsidiary, The
Fresh Juice Company of Florida, Inc. began the renovation and refurbishment of a
plant (the Florida Plant) for the purpose of processing fruit juices. The Fresh
Juice company of Florida, Inc. will be responsible for the maintenance of the
plant and the operations of the fruit juice processing. The Company anticipates
total refurbishment costs to be $2,300,000 of which $1,437,887 has been expended
as of November 30, 1995.
For the three year period ended November 30, 1995, there were no operations
of Minalba.
(c) Short-Term Investments
Effective December 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 115. Accounting for Certain Investments in
Debt and Equity Securities (Statement 115), which was issued by the Financial
Accounting Standards Board (FASB) in May 1993. Statement 115 generally requires
that debt and equity securities that have readily determinable fair values be
carried at fair value unless they are classified as held-to-maturity. Securities
classified as held-to-maturity are carried at amortized cost only if the
reporting entity has the intent and ability to hold those securities to
maturity. Securities classified as trading are principally held for the purpose
of selling them in the near term. If not classified as held-to-maturity or
trading, such securities are classified as available-for-sale. There was no
material effect of adopting the provisions of Statement 115 on the consolidated
financial statements in 1995.
Prior to December 1, 1994, short-term investments were valued at the lower
of cost or market.
(d) Inventories
Inventories are stated at the lower of cost or market, with cost determined
by using the first-in, first-out (FIFO) method.
F-6
<PAGE> 36
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(e) Depreciation
Depreciation is provided over the estimated useful lives of the respective
assets: seven years for the equipment and molds and five years for the
automobiles using accelerated methods and thirty-nine years for the building
using the straight-line method.
(f) Net Earnings Per Common Share
Net earnings per common share is based on the weighted average number of
common and common equivalent shares outstanding, using the treasury stock
method. In 1995, 1994 and 1993 common share equivalents used in the computation
of earnings per share represent the options granted to key employees under the
Company's Incentive Stock Option Plan if their exercise would have had a
dilutive effect on net earnings per common share.
In 1995, 1994 and 1993, net earnings per common share assuming full
dilution has not been presented since the average market price for each period
exceeded the market price of the Company's stock at the end of each period.
(g) Income Taxes
Effective December 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(Statement 109). Under the asset and liability method of Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date. There was no material effect of applying Statement 109 on net
earnings for the year ended November 30, 1994 and there was no cumulative effect
of a change in accounting principles as of December 1, 1993.
Pursuant to the deferred method under APB Opinion No. 11, which was applied
in 1993, deferred income taxes were recognized for income and expense items that
are reported in different years for financial reporting purposes and income tax
purposes using the tax rate applicable for the year of the calculation. Under
the deferred method, deferred taxes are not adjusted for subsequent changes in
tax rates.
(h) Reclassifications
Certain reclassifications were made to the prior year balances to conform
to the presentation adopted in the current year.
(2) SHORT-TERM INVESTMENTS
At November 30, 1995, the Company has no short-term investments. Proceeds
from the sale of short-term investments were $804,051 and net realized gains
included in earnings were $14,935 in 1995.
At November 30, 1994, short-term investments were composed of certificates
of deposit, government bonds and equity securities.
F-7
<PAGE> 37
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) INVENTORIES
Inventories at November 30, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Packaging materials......................... $ 138,062 $ 50,755
Finished goods.............................. 1,406,759 1,322,957
---------- ----------
$1,544,821 $1,373,712
========= =========
</TABLE>
(4) NOTE RECEIVABLE
In January 1994, the Company and The Ultimate Juice Company, Inc.
(Ultimate) entered into a loan agreement pursuant to which the Company loaned
Ultimate $300,000. The loan bears interest at a rate of 5% per annum, payable
monthly, which commenced in July 1994. The principal amount of the loan shall be
repaid in 30 equal installments of $10,000 per month which commenced in August
1994. At November 30, 1995 and 1994, the amount receivable was $20,000 and
$140,000, each net of a current portion of $120,000.
In partial consideration for the loan, the Company was granted an option to
purchase outstanding capital stock of Ultimate and its affiliate, Clear Springs
Citrus, Inc., which are privately owned companies engaged in the production and
distribution of orange juice products. In 1994, the option agreement expired by
its terms without the Company exercising its option.
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at November
30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accounts payable............................... $ 82,859 $219,700
Compensation................................... 57,560 80,000
Sales and marketing............................ 65,703 74,000
Legal and accounting........................... 25,000 97,500
Other.......................................... 13,575 8,408
-------- --------
$244,697 $479,608
======== ========
</TABLE>
(6) LONG-TERM DEBT
Long-term debt at November 30, 1995 consists of a term loan for $1,054,168,
net of current installments of $45,832 and a mortgage note of $475,000. There
was no long-term debt outstanding at November 30, 1994.
On October 3, 1995, the Company entered into a term loan for $1,100,000
with a bank to finance certain leasehold improvements and to purchase machinery
and equipment. The loan bears interest, payable monthly, at the bank's prime
rate plus 1/2 of 1% (8.75% at November 30, 1995). Principal payments on the loan
are due monthly, commencing on October 31, 1996 through the maturity date of
September 30, 2000. The loan contains restrictions regarding the ability of the
Company and the Fresh Juice Company of Florida, Inc. to, among others, incur
additional indebtedness, grant liens, make capital expenditures in excess of
$200,000 in any year (other than with respect to the Florida Plant), sell or
transfer its assets, consolidate or merge with another corporation, and declare
or pay dividends. Additionally, this loan contains various financial covenants
including among others, the maintenance of debt coverage and leverage ratios and
a minimum level of tangible net worth. This loan is secured by all equipment of
the Company.
On August 3, 1995, the Company executed a mortgage note for $475,000 plus
interest at a rate of 7.0% per annum. The Company is required to make monthly
payments of interest of $2,771 from September 1, 1995 through February 1, 1997
and monthly payments of principal and interest of $3,683 from March 1, 1997
through maturity when the remaining outstanding principle is due. The proceeds
of the note plus $150,000 in cash were used to acquire the land and vacant
building to be used by The Fresh Juice Company of Florida, Inc. The seller holds
the mortgage note which is secured by the land and building.
F-8
<PAGE> 38
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At November 30, 1995 and 1994, the Company has available a line of credit
for $1,500,000 with a bank which expires on May 31, 1996. There were no
outstanding amounts under this line of credit at November 30, 1995 and 1994.
The aggregate annual maturities of long-term debt for each of the next five
years ended November 30 are as follows: 1996, $45,832; 1997, $283,199; 1998,
$741,785; 1999, $274,992; and 2000, $229,192.
(7) INCOME TAXES
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Federal.................................... $139,266 $184,721 $407,971
State...................................... 32,785 71,675 141,222
-------- -------- --------
$172,051 $256,396 $549,193
======== ======== ========
</TABLE>
The reconciliation of the Company's effective income tax rate and the
Federal statutory rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate........................ 34% 34% 34%
State taxes, net of Federal benefit........... 5 7 7
Other, net.................................... -- (1) --
---- ---- ----
39% 40% 41%
==== ==== ====
</TABLE>
(8) INCENTIVE STOCK OPTIONS
At November 30, 1995, there were stock options outstanding entitling key
employees to purchase 100,000 shares and 15,000 shares of common stock at $1.375
and $1.25, respectively, per share. These options are exercisable until October
15, 1998. Additionally, there were stock options, exercisable until December
1998, to purchase 60,000 shares of common stock at $3.50 per share. At November
30, 1995, no options have been exercised and the Company has reserved 175,000
shares of common stock for the potential exercise of such options.
In October 1995, Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (Statement 123), was issued. Under
Statement 123, the Company is required to choose either the new fair value
method or the current intrinsic value method of accounting for its stock-based
compensation arrangements. Using the fair value method, the Company would
measure the compensation cost recognized in the consolidated financial
statements based upon the estimated fair value of the stock-based compensation
arrangements as of the date they are granted. The intrinsic value method, under
APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), requires
the recognition of compensation cost only if the exercise price of options is
less than the market value of the underlying stock on the measurement date. The
Company will continue to account for all employee stock-based compensation plans
under APB 25 and adopt the provisions of Statement 123, as required, for all
stock-based arrangements issued to nonemployees. Even though the Company has
opted not to change its method of accounting, Statement 123 requires pro forma
disclosures of net earnings and earnings per share computed as if the fair value
method had been applied. The accounting requirements of Statement 123 are
effective for transactions entered into in fiscal years beginning after December
15, 1995 and the disclosure, including pro forma, requirements are effective for
financial statements for fiscal years beginning after December 15, 1995.
Accordingly, the provisions of Statement 123 must be implemented by the Company
no later than fiscal year 1997.
F-9
<PAGE> 39
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCY
The Company is obligated under various operating leases covering its office
space, warehouse and automobiles. Rent expense for the years ended November 30,
1995, 1994 and 1993 was $102,944, $79,449 and $80,597, respectively. The
aggregate future minimum lease commitments under these leases for the year
ending November 30, 1996 amounts to $12,745.
The Company has an employment agreement with an officer that called for
annual base payments of $240,000, subject to upward adjustment for increases in
the consumer price index. The agreement was renewed in 1994 increasing the
annual base payment to $350,000, subject to upward adjustment for increases in
the consumer price index through 2006. Additionally, the Company has an
employment agreement with a significant employee of The Fresh Juice Company of
Florida, Inc., which calls for annual compensation of $125,000.
In January 1996, Fresh Pik't was named as a defendant in a legal matter
which seeks damages in excess of $250,000. Management of the Company believes
that the ultimate resolution of this matter will not have a material impact on
financial position of the Company.
(10) SERIES PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's shareholders, from time to time direct the issuance of preferred stock
in series and, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding preferred stock would reduce the amount of funds available for the
payment of dividends on common stock. Also, holders of preferred stock would
normally be entitled to receive a preference payment in the event of any
liquidation, dissolution or winding-up of the Company before any payment is made
to the holders of common stock.
(11) PENSION PLAN
The Company maintains a simplified employee pension (S.E.P.) plan covering
all of its employees. Contributions to the plan, which are discretionary, cannot
exceed 15% of the covered employee's salary. Pension expense for the years ended
November 30, 1995, 1994 and 1993 was $46,358, $45,889 and $43,286, respectively.
(12) BUSINESS AND CREDIT CONCENTRATIONS
None of the Company's customers accounted for more than ten percent of the
net sales in 1995, 1994 and 1993. The Company estimates an allowance for
doubtful accounts based on the credit worthiness of its customers as well as
general economic conditions. The Company as a policy, does not require
collateral from its customers.
F-10
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
YEAR ENDED NOVEMBER 30, 1995 COMPARED TO YEAR ENDED NOVEMBER 30, 1994
Net sales increased from $8,171,803 in 1994 to $9,219,184 in 1995 primarily
as a result of the distribution of organic produce by the Company during 1995.
Gross profit increased from $3,007,997 in 1994 to $3,183,701 in 1995 as a
result of the increase in sales volume. The decrease in gross margin from 36.8%
in 1994 to 34.5% in 1995 is attributable to increases in cost of product, as
well as the distribution of organic produce by the Company during 1995, which
generates lower margins than the Company's juice products.
Selling, general and administrative expenses increased from $2,451,055 in
1994 to $2,820,356 in 1995 primarily due to salary and other operating expenses
associated with the sales of organic produce by the Company during 1995 offset
by a reduction in professional fees.
YEAR ENDED NOVEMBER 30, 1994 COMPARED TO YEAR ENDED NOVEMBER 30, 1993
Net sales decreased from $8,265,588 in 1993 to $8,171,803 in 1994, which
management believes is resultant from lower levels of promotional activities.
Gross profit decreased from $3,625,848 in 1993 to $3,007,997 in 1994 as a
result of the decrease in sales volume and decrease in gross margin. The margin
has decreased from 43.8% to 36.8% primarily due to an increase in the cost of
product.
Selling, general and administrative expenses increased from $2,367,523 in
1993 to $2,451,055 in 1994 primarily due to increased trucking, warehouse,
advertising and promotional costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $3,919,590 at November 30, 1995 as
compared to $4,112,211 at November 30, 1994. The Company requires capital to
support the level of inventory required to meet current demand as well as
expected future increases in demand for its product. The Company believes it
processed sufficient product to meet its current demand during the 1995
harvesting season, which ended August 1995. A lack of availability of quality
fruit and higher costs of citrus hamper the Company's ability to maintain its
rate of growth and its gross margin.
In August 1995, the Company purchased land and a vacant building in the
amount of $625,000 for the purpose of manufacturing juice products. The Company
financed $475,000 of the purchase through a mortgage note, secured by the land
and building comprising the Florida Plant, maturing in August 1998 and bearing
interest at 7% per annum. The remaining $150,000 was paid from available working
capital. The Company began refurbishment of the building with total contract
costs estimated at $2,300,000, of which $1,437,887 has been expended as of
November 30, 1995. The Company entered into a term loan for $1,100,000 with a
Bank to finance certain leasehold improvements and purchases of machinery and
equipment. The term loan bears interest at the bank's prime rate plus 1/2 of 1%
and matures on September 30, 2000. This term loan is secured by all equipment of
the Company.
In addition, the Company maintains a $1,500,000 line of credit with
Chemical Bank which expires on May 31, 1996. As of the date hereof, the Company
has not borrowed any amounts under such line of credit.
INFLATION
The Company believes that its business is not affected by inflation to any
extent greater than that of the general economy.
F-11
<PAGE> 41
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of (Statement 121), in March 1995. Under Statement 121,
the Company is required to assess the recoverability and carrying amount of
long-lived assets, certain identifiable intangible assets and goodwill related
to those assets, whenever events or changes in circumstances indicate
impairment. Statement 121 provides the methodology for the measurement of such
impairment to be recognized in the financial statements. The provisions of
Statement 121 are effective for financial statements for fiscal years beginning
after December 15, 1995 and earlier adoption is permitted. The provisions of
Statement 121 must be implemented by the Company no later than fiscal year 1997.
The effect of initially applying these provisions shall be reported in the
period in which the recognition criteria are first applied and met or in the
case of long-lived assets held for disposal, as the cumulative effect of a
change in accounting principle at the date of adoption. The Company believes
that the implementation will not have a material impact on the Company's
consolidated financial position.
The FASB has, also, issued Statement No. 123, Accounting for Stock-Based
Compensation (Statement 123), in October 1995. Under Statement 123, the Company
is required to choose either the new fair value method or the current intrinsic
value method of accounting for its stock-based compensation arrangements. Using
the fair value method, the Company would measure the compensation cost
recognized in the consolidated financial statements based upon the estimated
fair value of the stock-based compensation arrangements as of the date they are
granted. The intrinsic value method, under APB Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25), requires the recognition of compensation
cost only if the exercise price of options is less than the market value of the
underlying stock on the measurement date. The Company will continue to account
for all employee stock-based compensation plans under APB 25 and adopt the
provisions of Statement 123, as required, for all stock-based arrangements
issued to nonemployees. Even though the Company has opted not to change its
method of accounting, Statement 123 requires pro forma disclosures of net
earnings and earnings per share computed as if the fair value method had been
applied. The accounting requirements of Statement 123 are effective for
transactions entered into in fiscal years beginning after December 15, 1995 and
the disclosure, including pro forma, requirements are effective for financial
statements for fiscal years beginning after December 15, 1995. Accordingly, the
provisions of Statement 123 must be implemented by the Company no later than
fiscal year 1997.
F-12
<PAGE> 42
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1996 AND NOVEMBER 30, 1995
ASSETS
<TABLE>
<CAPTION>
1995
1996 ----------
-----------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................................. $ 901,989 $1,998,063
Trade accounts receivable................................................. 1,867,870 591,727
Inventories............................................................... 2,304,358 1,544,821
Note receivable -- Ultimate Juice......................................... -- 120,000
Note receivable -- Clear Springs Citrus................................... 150,000 --
Other..................................................................... 53,519 3,747
----------- ----------
Total Current Assets.............................................. 5,277,736 4,258,358
Property, Plant and Equipment, at Cost:
Land...................................................................... 30,000 30,000
Building.................................................................. 1,413,926 597,155
Leasehold improvements.................................................... 33,195 --
Equipment................................................................. 1,743,475 353,794
Molds..................................................................... 224,333 196,338
Automobiles............................................................... 112,446 103,058
Construction in progress.................................................. -- 1,437,887
----------- ----------
3,557,375 2,718,232
Less accumulated depreciation............................................. 667,015 499,256
----------- ----------
Net Property, Plant and Equipment................................. 2,890,360 2,218,976
Goodwill, Net of Accumulated Amortization of $27,790 at May 31, 1996........ 3,258,866 --
Note Receivable -- Ultimate Juice........................................... -- 20,000
Intangible Assets, Net of Accumulated Amortization of $27,311 at May 31,
1996 and $11,059 at November 30, 1995..................................... 121,423 10,903
Other Assets................................................................ 15,571 --
----------- ----------
TOTAL ASSETS...................................................... $11,563,956 $6,508,237
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................................... $ 186,347 $ 45,832
Accounts payable and accrued expenses..................................... 1,231,308 244,697
Income taxes payable...................................................... 158,893 48,239
----------- ----------
Total Current Liabilities......................................... 1,576,548 338,768
Long-Term Debt, Net of Current Installments................................. 1,388,653 1,529,168
Commitments and Contingency
Shareholders' Equity:
Series preferred stock, par value $10; authorized 200,000 shares; none
issued................................................................. -- --
Common stock, par value $.01; authorized 5,000,000 shares; issued
4,902,000 shares at May 31, 1996 and 3,762,000 shares at November 30,
1995; outstanding 4,690,062 shares at May 31, 1996 and 3,550,062 shares
at November 30, 1995................................................... 49,020 37,620
Additional paid-in capital................................................ 6,232,590 2,396,490
Retained earnings......................................................... 2,600,438 2,489,484
----------- ----------
8,882,048 4,923,594
Less cost of common shares held in treasury:
211,938 shares at May 31, 1996 and November 30, 1995................... 283,293 283,293
----------- ----------
Total Shareholders' Equity........................................ 8,598,755 4,640,301
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................ $11,563,956 $6,508,237
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE> 43
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net Sales.................................................................... $7,779,639 $5,143,835
Cost of Goods Sold........................................................... 5,649,215 3,376,647
---------- ----------
2,130,424 1,767,188
Selling, General and Administrative Expenses................................. 1,906,123 1,460,823
---------- ----------
Earnings From Operations........................................... 224,301 306,365
Interest Income.............................................................. 27,976 53,486
Interest Expense............................................................. (65,285) --
Other........................................................................ 4,962 25,113
---------- ----------
Earnings Before Income Taxes....................................... 191,954 384,964
Income Taxes................................................................. 81,000 159,844
---------- ----------
Net Earnings....................................................... 110,954 225,120
Retained Earnings, Beginning of Period....................................... 2,489,484 2,218,441
---------- ----------
Retained Earnings, End of Period............................................. $2,600,438 $2,443,561
========== ==========
Net Earnings Per Common Share................................................ $ .03 $ .06
========== ==========
Weighted Average Number of Shares Outstanding................................ 3,982,231 3,606,896
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE> 44
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net Sales.................................................................... $5,566,796 $2,671,539
Cost of Goods Sold........................................................... 4,383,700 1,784,764
---------- ----------
1,183,096 886,775
Selling, General and Administrative Expenses................................. 829,167 765,363
---------- ----------
Earnings From Operations........................................... 353,929 121,412
Interest Income.............................................................. 14,218 32,691
Interest Expense............................................................. (32,643) --
Other........................................................................ (459) 29,035
---------- ----------
Earnings Before Income Taxes....................................... 335,045 183,138
Income Taxes................................................................. 80,336 78,309
---------- ----------
Net Earnings....................................................... 254,709 104,829
Retained Earnings, Beginning of Period....................................... 2,345,729 2,338,732
---------- ----------
Retained Earnings, End of Period............................................. $2,600,438 $2,443,561
========== ==========
Net Earnings Per Common Share................................................ $ .06 $ .03
========== ==========
Weighted Average Number of Shares Outstanding................................ 4,373,990 3,609,174
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE> 45
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings............................................................. $ 110,954 $ 225,120
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization......................................... 214,339 25,050
Changes in assets and liabilities, net of assets acquired and
liabilities assumed:
Increase in trade accounts receivable............................... (496,964) (79,074)
Increase in inventories............................................. (623,877) (1,716,136)
Increase in other current assets.................................... (48,623) (4,491)
Increase in other assets............................................ (1,830) --
Increase in accounts payable and accrued expenses................... 449,247 2,001,579
Increase in income taxes payable.................................... 79,983 155,844
Increase in other current liabilities............................... -- 6,354
----------- -----------
Net Cash (Used In) Provided By Operating Activities.............. (316,771) 614,246
Cash Flows From Investing Activities:
Installments from note receivable........................................ 30,000 60,000
Decrease in investments.................................................. -- (27,786)
Acquisitions of property, plant and equipment............................ (856,994) (108,131)
Acquisitions of trademarks and patents................................... (1,245) --
Cash acquired in Ultimate Juice merger................................... 70,936 --
----------- -----------
Net Cash Used In Investing Activities............................ (757,303) (75,917)
Cash Flows From Financing Activities:
Purchase of treasury stock............................................... -- (9,933)
Payments of note payable to related party................................ (22,000) --
----------- -----------
Net Cash Used In Financing Activities............................ (22,000) (9,933)
----------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents....................... (1,096,074) 528,396
Cash and Cash Equivalents at Beginning of Period........................... 1,998,063 1,739,584
----------- -----------
Cash and Cash Equivalents at End of Period................................. $ 901,989 $ 2,267,980
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE> 46
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996 AND NOVEMBER 30, 1995
(UNAUDITED)
(1) The consolidated financial information of The Fresh Juice Company, Inc. and
Subsidiaries (the Company), included herein has been prepared by the Company
and is unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of the financial
position, results of operations, and cash flows for the interim periods to
which the report relates. The results of operations for the period ended May
31, 1996 are not necessarily indicative of the operating results which may
be achieved for the full year. All material intercompany accounts and
transactions have been eliminated in consolidation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's November 30, 1995 consolidated financial statements.
(2) Inventories at May 31, 1996 and November 30, 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw Materials....................................... $ 36,106 $ --
Packaging materials................................. 167,076 138,062
Finished goods...................................... 2,101,176 1,406,759
---------- ----------
$2,304,358 $1,544,821
========== ==========
</TABLE>
(3) In January 1996, Fresh Pik't Natural Foods, Inc., a wholly-owned subsidiary,
was named as a defendant in a legal matter which seeks damages in excess of
$250,000. Management of the company believes that the ultimate resolution of
this matter will not have a material impact on financial position or
earnings of the Company.
(4) Effective April 1, 1996, the Company merged a newly formed wholly-owned
subsidiary with and into The Ultimate Juice Company, Inc. (Ultimate), a
privately-held Company which markets and distributes fresh squeezed juice
primarily on the east coast. In exchange for all of the outstanding shares
of Ultimate, the Company issued to the Ultimate stockholders 1,140,000 of
previously unissued shares of its common stock. The merger has been
accounted for as a purchase.
The following table presents selected financial information (unaudited) for
the Company and Ultimate on a proforma basis assuming the two companies had
been combined for the six months ended May 31, 1996 and 1995. Proforma
results for the six months ended May 31, 1996 include the results of the
Company and Ultimate for the six months ended May 31, 1996. Pro-forma
results for the six months ended May 31, 1995 include the results of the
Company for the six months ended May 31, 1995 combined with the results of
Ultimate for the six months ended December 31, 1994. Pro-forma results in
each period include necessary pro-forma adjustments:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net Sales......................................... $11,256,414 $10,492,304
Net Earnings...................................... $ 70,033 $ 181,594
Net Earnings Per Common Share..................... $ .01 $ .04
</TABLE>
Such pro-forma data reflects preliminary adjustments to the fair value of
the assets purchased as the Company has not had an opportunity to obtain
appraisals or other independent verifications of the fair
F-17
<PAGE> 47
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
May 31, 1996 and November 30, 1995
(Unaudited)
value of the assets purchased. When such information is obtained, the
Company will make appropriate adjustments to the fair value of the assets
purchased as necessary.
In connection with the merger noted above, the Company entered into
employment agreements with two of its executive officers which generally
provide for, among other things, annual compensation aggregating a minimum
of $720,000, subject to annual increases, as defined, for a term of 3
years.
(5) On March 31, 1996, the Company entered into a merger agreement to merge
Clear Springs Citrus, Inc. (Clear Springs), the primary producer of fresh
squeezed juice for Ultimate, with and into The Fresh Juice Company of
Florida, Inc., a wholly-owned subsidiary of the Company. Under terms of the
merger agreement, the company will exchange 1,160,000 shares of its common
stock for all of the outstanding common stock of Clear Springs, subject to
the approval by the Company's stockholders to increase the number of
authorized shares of common stock to 20,000,000. The Company, the Company's
President and the shareholders of Ultimate (as of March 31, 1996) have
entered into a Voting Agreement, dated March 31, 1996, whereby each shall
vote their respective shares in favor of the increase in authorized shares
and the merger with Clear Springs. This merger is expected to be accounted
for under the purchase method.
(6) The following is supplemental noncash disclosures:
Supplemental disclosure of cash flow information
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Cash paid during the six months for:
Interest......................................................... $65,285
Income Taxes..................................................... $36,721
</TABLE>
Supplemental disclosure of noncash financing activity:
During the six month period ended May 31, 1996, the Company purchased all
of the outstanding common stock of Ultimate in exchange for 1,140,000
shares of its common stock. The fair value of Ultimate's assets and
liabilities at the date of acquisition are presented below:
<TABLE>
<S> <C>
Cash........................................................... $ 70,936
Trade accounts receivable...................................... 779,179
Inventory...................................................... 135,660
Other assets................................................... 54,890
Property, plant and equipment.................................. 44,657
Goodwill....................................................... 3,286,656
Intangible assets.............................................. 65,557
Accounts payable and accrued expenses.......................... (503,061)
Income taxes payable........................................... (64,974)
Note payable -- related party.................................. (22,000)
----------
Total purchase price................................... $3,847,500
==========
</TABLE>
F-18
<PAGE> 48
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
As set forth in the Company's Notes to Consolidated Financial Statements
(Note 4) and the Quarterly Report on Form 10-QSB filed by the Company for the
quarter ending February 29, 1996, effective April 1, 1996, the Company merged a
newly formed wholly-owned subsidiary with and into The Ultimate Juice Company,
Inc. ("Ultimate"), a privately-held company which markets and distributes fresh
squeezed juice primarily on the east coast. Since the merger transaction with
Ultimate became effective on April 1, 1996, Ultimate closed its previous fiscal
year on March 31, 1996 and began its new fiscal year on April 1, 1996.
Accordingly, the Consolidated Statements of Operations for the three months
ended May 31, 1996 consist of a consolidation of two months of operations (April
and May) for Ultimate and three months (March-May) for the Company.
The consolidation of this additional wholly-owned subsidiary has increased
the Company's net sales for the quarter ended May 31, 1996 to $5,566,796 or 108%
more than net sales of $2,671,539 in the corresponding quarter of the preceding
year. For the six months ended May 31, 1996, net sales have increased to
$7,779,639 or 51% over net sales of $5,143,835 for the corresponding six month
period in the preceding year. As a result of the acquisition of Ultimate, a
reclassification of freight costs from selling, general and administrative
expenses to costs of goods sold and an increase in the cost of fruit, costs of
goods sold have increased (a) to $4,383,700 for the quarter ending May 31, 1996,
an increase of 146% from $1,784,764 for the quarter ending May 31, 1995, and (b)
to $5,649,215 for the six months ending May 31, 1996, an increase of 67% from
$3,376,647 for the six months ending May 31, 1995.
The acquisition of Ultimate and the Winter Haven Plant have also caused
selling, general and administrative expenses to increase (a) to $829,167 for the
quarter ending May 31, 1996, an increase of 8% from $765,363 for the quarter
ending May 31, 1995, and (b) to $1,906,123 for the six months ending May 31,
1996, an increase of 30% from $1,460,823 for the six months ending May 31, 1995.
In addition, the interest paid on the outside financing obtained in connection
with purchasing and equipping the Winter Haven Plant has caused interest expense
for the quarter and six months ending May 31, 1996 to increase to $32,643 and
$65,285, respectively. The Company reported no interest expense in the
corresponding periods in the preceding year.
Although fruit prices have increased during the three months ending May 31,
1996, the Company and Ultimate have been able to maintain margins while
increasing sales volume during a quarter in which demand for the Company's
products is typically strong. This has resulted in an increase in earnings from
operations to $353,929 for the quarter ended May 31, 1996, an increase of 192%
over the $121,412 of earnings from operations for the corresponding quarter in
the preceding year. However, as a result of the loss sustained by the Company in
the first quarter of 1996 ($129,628), earnings from operations for the six
months ended May 31, 1996 were $224,301, a 27% decrease as compared to the
$306,365 earned in the corresponding six month period in the preceding year.
Similarly, while the earnings per share for the quarter ended May 31, 1996 have
increased to $.06 per share as compared $.03 per share for the corresponding
quarter in the preceding year, the loss sustained in the first quarter has
resulted in an overall decrease in earnings per share of $.03 per share for the
six month period ended May 31, 1996 as compared to $.06 per share for the
corresponding six month period in the preceding year. Net earnings per common
share for the period ended May 31, 1996 were impacted by the higher number of
shares outstanding resulting from the Ultimate transaction as well as the
earnings from Ultimate's operations.
FINANCIAL CONDITION
As set forth in the Company's Annual Report on Form 10-KSB for the
Company's fiscal year ended November 30, 1995, on August 3, 1995, the Company
acquired a vacant 70,000 square foot warehouse building in Winter Haven, Florida
for the purpose of constructing a state of the art juice processing plant. In
connection therewith, the Company, through its wholly-owned subsidiary The Fresh
Juice Company of Florida, Inc., purchased approximately $2,300,000 of fixtures
and equipment which have been installed in the
F-19
<PAGE> 49
Winter Haven Plant. Approximately $1,200,000 of such costs have been financed
from the Company's working capital, and the balance was financed through a bank
loan. Primarily as a result of these construction and equipment costs, the
Company's cash balance as of May 31, 1996 has decreased to $901,989 as compared
to $1,998,063 as of November 30, 1995.
As a result of the consolidation of the Company's additional wholly-owned
subsidiary, both the current and total assets of the Company have increased to
$5,277,736 and $11,563,956, respectively, as of May 31, 1996, as compared to
$4,258,358 and $6,508,237, respectively, as of November 30, 1995. Specifically,
the Company's trade accounts receivable as of May 31, 1996 increased to
$1,867,870 as compared to $591,727 as of November 30, 1995. In addition, as is
consistent with the Company's past practices, during the six months ended May
31, 1996, the Company has increased its level of "fresh-frozen" juice inventory
to take advantage of the high quality of fruit available during the harvest
season and to meet expected future demand for such products. As a result, the
Company's inventory has increased to $2,304,358 as of May 31, 1996 as compared
to $1,544,821 as of November 30, 1995. The completion of construction of the
Winter Haven Plant and the installation of the additional equipment have
increased the Company's balances for building and equipment, while reducing
construction in progress from $1,437,887 as of November 30, 1995 to $0 as of May
31, 1996. As a result, the Company's combined balance for building, leasehold
improvements and equipment as of May 31, 1996 has increased to $3,190,596 as
compared to $950,949 as of November 30, 1995. Even after taking into
consideration the $1,437,887 reduction in construction in progress, this
represents a net increase in building, leasehold improvements and equipment of
$801,760, representing over ninety-five percent (95%) of the increase in the
gross property plant and equipment balance as of May 31, 1996 ($3,557,375) as
compared to the balance as of November 30, 1995 ($2,718,232). Accounts payable
and accrued expenses increased to $1,231,308 for the six months ended May 31,
1996 as compared to $244,697 as of November 30, 1995. This increase results
primarily from the consolidation of Ultimate's accounts payable into the
Company's financial statements (approximately $500,000) and increased accounts
payable relating to the increased inventory levels as described above.
The merger transaction with Ultimate has been accounted for as a purchase
transaction resulting in goodwill net of accumulated amortization as of May 31,
1996 of $3,258,866. The Company reported no goodwill as of November 30, 1995. As
described in Note 4 and Note 6 to Consolidated Financial Statements, the merger
transaction required the Company to issue 1,140,000 shares of its common stock,
par value $.01, resulting in a substantial increase in paid-in capital, which
increased to $6,232,590 as of May 31, 1996 as compared to $2,396,490 as of
November 30, 1995.
MATERIAL COMMITMENTS
In connection with the anticipated merger between The Fresh Juice Company
of Florida, Inc. and Clear Springs Citrus, Inc., described in Note 5 to the
Consolidated Financial Statements, the Company has arranged for additional
renovations to the Winter Haven Plant so that the plant can properly accommodate
the Company's anticipated increased volume and the equipment and production
requirements that will be transferred from Clear Springs Citrus, Inc.'s Winter
Garden facility to the Winter Haven Plant following consummation of the merger.
The anticipated costs of the labor and equipment purchased for these renovations
is approximately $600,000 and is expected to be paid from the Company's cash
flow. It is anticipated that the cost-savings associated with the consolidation
of the production plants will serve to offset a substantial portion of this
expense over time.
LIQUIDITY
The Company had working capital of $3,701,188 at May 31, 1996 compared to
$3,919,590 at November 30, 1995. The Company requires capital to support its
capital improvements and the level of inventory required to meet current demand
as well as expected future increases in demand for its product. Additional
financing may be required to support the capital improvements and levels of
inventory. During the 1996 harvesting season, which ends in August 1996, the
Company believes it is processing sufficient product to meet its current demand.
A lack of availability of quality fruit and higher cost of citrus would hamper
the Company's ability to maintain its rate of growth and its current gross
profit level.
F-20
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
Clear Springs Citrus, Inc.:
We have audited the accompanying balance sheets of Clear Springs Citrus,
Inc. as of December 31, 1995 and 1994, and the related statements of operations,
changes in stockholders' equity (deficit) and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Clear Springs Citrus, Inc.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
WITHUM, SMITH & BROWN
New Brunswick, New Jersey
May 17, 1996
F-21
<PAGE> 51
CLEAR SPRINGS CITRUS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
MARCH 31, ---------- ----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 20,484 $ 80,790 $ 22,627
Accounts receivable, less allowance for doubtful accounts of
$-0- for March 31, 1996 and December 31, 1995 and 1994..... 897,281 1,037,003 600,178
Inventory..................................................... 167,811 150,293 134,118
Advances to stockholders...................................... -- -- 3,000
Prepaid expenses and other current assets..................... 25,187 32,479 45,440
---------- ---------- ----------
Total Current Assets.................................. 1,110,763 1,300,565 805,363
Property and Equipment -- Net................................... 777,327 818,049 860,125
Intangible Asset -- Net......................................... 112,370 115,111 147,995
Other Assets:
Deposits...................................................... 31,849 31,849 16,159
Trustee held funds............................................ 65,000 65,000 --
---------- ---------- ----------
Total Other Assets.................................... 96,849 96,849 16,159
---------- ---------- ----------
TOTAL ASSETS.......................................... $ 2,097,309 $2,330,574 $1,829,642
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Note payable to bank.......................................... $ 250,000 $ 250,000 $ 125,000
Current maturities of long-term debt.......................... 75,078 69,665 155,568
Current maturities of obligations under capital lease......... 20,749 25,108 41,245
Accounts payable.............................................. 712,644 989,153 666,771
Accrued expenses.............................................. 289,615 315,138 15,418
Note payable to related party................................. 150,000 150,000 140,000
Advances from stockholders.................................... 14,000 14,000 --
Corporate income taxes payable................................ 41,600 -- --
---------- ---------- ----------
Total Current Liabilities............................. 1,553,686 1,813,064 1,144,002
Deferred Income Taxes Payable................................... 28,000 34,000 51,000
Long-Term Debt.................................................. 524,868 544,939 610,310
Obligations Under Capital Lease................................. 10,401 14,905 26,266
Stockholders' Equity (Deficit):
Common stock, $.10 par value, 75,000 shares authorized, 1,400,
1,400 and 941.176 issued for 1996, 1995 and 1994,
respectively; 1,000, 1,000 and 541.176 outstanding in 1996,
1995 and 1994, respectively................................ 140 140 94
Additional paid-in capital...................................... 544,918 544,918 544,964
Accumulated deficit............................................. (89,856) (146,544) (72,146)
---------- ---------- ----------
455,202 398,514 472,912
Less treasury stock, 400 shares at cost......................... (474,848) (474,848) (474,848)
---------- ---------- ----------
Total Stockholders' Equity (Deficit).................. (19,646) (76,334) (1,936)
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)........................................... $ 2,097,309 $2,330,574 $1,829,642
========== ========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-22
<PAGE> 52
CLEAR SPRINGS CITRUS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------------------- ---------------------------
1996 1995 1995 1994
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales -- Net............................ $3,407,121 $3,474,406 $12,775,884 $10,148,356
Cost of Goods Sold...................... 3,035,480 2,782,440 11,420,358 9,215,602
---------- ---------- ----------- -----------
Gross Profit............................ 371,641 691,966 1,355,526 932,754
Selling, General and Administrative
Expenses.............................. 247,352 271,571 1,367,525 981,554
---------- ---------- ----------- -----------
Income (Loss) From Operations........... 124,289 420,395 (11,999) (48,800)
Other (Income) Expense:
Interest expense...................... 19,785 26,305 88,024 74,059
Gain on sale of property and
equipment.......................... -- (400) (2,200) (500)
Miscellaneous (income) expense........ 716 (3,029) (6,425) 1,016
---------- ---------- ----------- -----------
Total Other (Income)
Expense -- Net.............. 20,501 22,876 79,399 74,575
Income (Loss) Before Provision for
Income Taxes.......................... 103,788 397,519 (91,398) (123,375)
Provision (Benefit) for Income Taxes.... 47,100 170,800 (17,000) 51,000
---------- ---------- ----------- -----------
Net Income (Loss)............. $ 56,688 $ 226,719 $ (74,398) $ (174,375)
========== ========== =========== ===========
Net Income (Loss) Per Share............. $ 56.69 $ 226.72 $ (74.40) $ (163.43)
========== ========== =========== ===========
Weighted Average Shares................. 1,000 1,000 1,000 1,067
========== ========== =========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements
F-23
<PAGE> 53
CLEAR SPRINGS CITRUS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TREASURY STOCK
----------------- PAID-IN (ACCUMULATED ------------------
SHARES AMOUNT CAPITAL DEFICIT) SHARES AMOUNT TOTAL
-------- ------ ---------- ------------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994......... 941.176 $ 94 $ 544,964 $ 102,229 -- $ -- $ 647,287
Purchase of 400 Shares of Treasury
Stock on March 10, 1994.......... -- -- -- -- 400.00 (474,848) (474,848)
Net Loss for the Year Ended
December 31, 1994................ -- -- -- (174,375) -- -- (174,375)
-------- ---- -------- --------- ------ --------- ---------
Balance at December 31, 1994....... 941.176 94 544,964 (72,146) 400.00 (474,848) (1,936)
Recapitalization -- On August 2,
1995, the Company converted the
541.176 outstanding shares to
1,000.00 shares.................. 458.824 46 (46) -- -- -- --
Net Loss for the Year Ended
December 31, 1995................ -- -- -- (74,398) -- -- (74,398)
-------- ---- -------- --------- ------ --------- ---------
Balance at December 31, 1995....... 1,400.00 140 544,918 (146,544) 400.00 (474,848) (76,334)
Net Income for the Period Ended
March 31, 1996 (Unaudited)....... -- -- -- 56,688 -- -- 56,688
-------- ---- -------- --------- ------ --------- ---------
Balance at March 31, 1996
(Unaudited)...................... 1,400.00 $140 $ 544,918 $ (89,856) 400.00 $(474,848) $ (19,646)
======== ==== ======== ========= ====== ========= =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
F-24
<PAGE> 54
CLEAR SPRINGS CITRUS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
----------------------- -----------------------
1996 1995 1995 1994
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ 56,688 $ 226,719 $ (74,398) $(174,375)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Gain on sale of property and equipment........ -- (400) (2,200) (500)
Depreciation and amortization................. 62,763 43,500 262,810 231,184
Deferred income taxes......................... (6,000) (5,000) (17,000) 51,000
Changes in:
Accounts receivable......................... 139,722 (456,904) (436,825) 80,941
Inventory................................... (17,518) (55,227) (16,175) (68,227)
Prepaid expenses and other current assets... 7,292 39,760 12,961 (15,440)
Deposits.................................... -- (282) (15,690) (1,276)
Accounts payable............................ (276,509) 10,737 322,382 (64,527)
Accrued expenses............................ (25,523) 26,160 299,720 5,337
Corporate income taxes payable.............. 41,600 175,800 -- --
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities............................. (17,485) 4,863 335,585 44,117
Cash flows from investing activities:
Proceeds from sale of property and equipment..... -- 400 4,200 500
Purchases of property and equipment.............. (19,300) (2,076) (189,850) (62,617)
Increase in trustee held funds................... -- -- (65,000) --
--------- --------- --------- ---------
Net cash used in investing activities.... (19,300) (1,676) (250,650) (62,117)
Cash flows from financing activities:
Change in note payable to bank - net............. -- (25,000) 125,000 125,000
Proceeds from long-term debt..................... -- -- -- 152,841
Repayment of long-term debt...................... (14,658) (46,054) (151,274) (109,270)
Repayment of obligations under capital lease..... (8,863) (9,774) (27,498) (171,062)
Change in note payable to related party.......... -- -- 10,000 40,000
Change in stockholders' loan -- net.............. -- (16,000) 17,000 (12,000)
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities............................. (23,521) (96,828) (26,772) 25,509
--------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents...................................... (60,306) (93,641) 58,163 7,509
Cash and cash equivalents at beginning of period... 80,790 22,627 22,627 15,118
--------- --------- --------- ---------
Cash and cash equivalents at end of period......... $ 20,484 $ (71,014) $ 80,790 $ 22,627
========= ========= ========= =========
</TABLE>
The notes to financial statements are an integral part of these statements.
F-25
<PAGE> 55
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Significant accounting policies followed by the Company in the preparation
of the accompanying financial statements are summarized below:
Nature of Business Operation
Clear Springs Citrus, Inc. was incorporated on July 22, 1985. Its business
operations include the production and distribution of juice products to
customers throughout the United States.
Unaudited Interim Financial Statements
The financial statements at March 31, 1996 and for the three months ended
March 31, 1996 and 1995 are unaudited. In the opinion of the management of the
company, the unaudited financial statements at March 31, 1996 and for the three
months ended March 31, 1996 and 1995, include all adjustments consisting only of
normal recurring accruals, necessary for a fair presentation. The results of
operations for the three months ended March 31, 1996 and 1995 are not
necessarily indicative of the results to be expected for the year.
Inventory
Inventory, which consists of juice and packing products, is stated at the
lower of cost or market. Cost is determined by the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
charges have been made by the Company using the straight-line or declining
balance methods over the following estimated useful lives of the assets:
<TABLE>
<CAPTION>
ESTIMATED
DESCRIPTION LIFE (YEARS)
----------------------------------------------------------------- ------------
<S> <C>
Production equipment............................................. 7
Office furniture and fixtures.................................... 5-7
Transportation equipment......................................... 5
Leasehold improvements........................................... 3-11
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred. Expenditures for betterments and major renewals are capitalized and,
therefore, are included in property and equipment.
For physical properties not fully depreciated, the cost of the assets
retired or sold is credited to the asset accounts, and the related accumulated
depreciation is charged to the accumulated depreciation accounts. The resulting
gain or loss from sale or retirement of property is reflected in income.
Equipment Under Capital Lease
Certain equipment is leased from third parties through lease agreements
treated as capital leases in accordance with Financial Accounting Standards
Board Statement No. 13 (see Notes 3 and 7). The Company anticipates acquiring
the equipment at the stated option prices at the end of the respective lease
terms.
F-26
<PAGE> 56
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
Intangible Asset
The Company's intangible asset is being amortized on a straight-line basis
over a period of five years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
Deferred income tax assets and liabilities are recognized for the
differences between financial and income tax reporting basis of assets and
liabilities based on enacted tax rates and laws. The deferred income tax
provision or benefit generally reflects the net change in deferred income tax
assets and liabilities during the year. The current income tax provision
reflects the tax consequences of revenues and expenses currently taxable or
deductible on the Company's various income tax returns for the year reported.
The primary deferred income tax items are the result of timing differences in
the recognition of depreciation for financial and tax reporting purposes and net
operating loss carryforwards.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in the bank as well as
all short-term securities held for the primary purpose of general liquidity.
Such securities normally mature within three months from the date of
acquisition.
Earnings Per Share
Earnings per share on common stock is computed on the basis of the weighted
average number of common shares outstanding during each year. The effect of the
recapitalization was retroactively applied as if it had occurred on January 1,
1994.
Concentration of Credit Risk
At times, the Company maintains cash balances at one financial institution
in excess of amounts insured by the Federal Deposit Insurance Corporation.
Management monitors the soundness of this institution and considers the
Company's risk negligible.
The Company's concentration of credit risk with respect to accounts
receivable is largely dependent on its customer mix which are distributors and
retailers throughout the United States. The Company had 34 and 44 percent of its
accounts receivable due from two related parties as of March 31, 1996 and 1995,
respectively, and 34 and 44 percent as of December 31, 1995 and 1994,
respectively (see Note 11).
F-27
<PAGE> 57
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 2 -- INVENTORY:
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Packaging materials....................... $ 67,745 $ 36,817 $ 59,997
Juice products............................ 100,066 113,476 74,121
-------- -------- --------
Total Inventory...................... $ 167,811 $150,293 $134,118
======== ======== ========
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
MARCH 31, ---------- ----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Property and Equipment:
Production equipment................. $ 1,329,887 $1,310,587 $1,158,098
Office furniture and fixtures........ 75,450 75,450 55,904
Transportation equipment............. 70,292 70,292 61,915
Leasehold improvements............... 279,052 279,052 271,615
---------- ---------- ----------
1,754,681 1,735,381 1,547,532
Less Accumulated Depreciation and
Amortization......................... 977,354 917,332 687,407
---------- ---------- ----------
Property and Equipment -- Net.......... $ 777,327 $ 818,049 $ 860,125
========== ========== ==========
</TABLE>
Assets capitalized under lease obligations and included in property and
equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Production Equipment...................... $ 97,854 $ 97,854 $ 97,854
Office Furniture and Fixtures............. 26,543 26,543 13,257
Transportation Equipment.................. 29,394 29,394 29,394
-------- -------- --------
153,791 153,791 140,505
Less Accumulated Amortization............. 61,328 55,038 31,200
-------- -------- --------
Assets Under Capital Lease
Obligations -- Net...................... $ 92,463 $ 98,753 $109,305
======== ======== ========
</TABLE>
Depreciation and amortization expense of property and equipment and assets
under capital lease obligation included as a charge to operations amounted to
$60,022, $43,500, $229,930 and $214,740 for the three months ended March 31,
1996 and 1995 and the years ended December 31, 1995 and 1994, respectively.
Certain property and equipment is pledged as collateral on various corporate
obligations (see Notes 6 and 7).
F-28
<PAGE> 58
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 4 -- INTANGIBLE ASSET:
The Company's intangible asset at cost is as follows:
<TABLE>
<CAPTION>
MARCH DECEMBER 31,
31, ---------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Covenant not to Compete.................... $164,439 $164,439 $164,439
Less Accumulated Amortization.............. 52,069 49,328 16,444
-------- -------- --------
Intangible Asset -- Net.................... $112,370 $115,111 $147,995
======== ======== ========
</TABLE>
Amortization expense included as a charge to operations amounted to $2,741,
$-0-, $32,884 and $16,444 for the three months ended March 31, 1996 and 1995 and
the years ended December 31, 1995 and 1994, respectively.
NOTE 5 -- NOTE PAYABLE TO BANK:
Note payable to bank consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable -- South Trust Bank, maximum
available $250,000, expiration date July
26, 1996, interest at the bank's prime
rate plus 1.5 percent per annum, secured
by accounts receivable of the Company... $ 250,000 $250,000 $125,000
======== ======== ========
</TABLE>
The bank's prime rate at March 31, 1996 was 8.25 percent.
NOTE 6 -- LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable -- Former stockholder,
interest at 7 percent per annum,
unsecured, due March 1999 through 2003,
$350,000 is subordinated to South Trust
Bank (see Note 5)....................... $ 596,061 $608,865 $658,336
Note payable -- South Trust Bank, secured
by all furniture, fixtures, equipment
and leasehold improvements, interest at
7.5 percent per annum, fully paid-off in
September 1995.......................... -- -- 94,937
-------- -------- --------
Subtotal.................................. $ 596,061 $608,865 $753,273
</TABLE>
F-29
<PAGE> 59
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Subtotal, Carried Forward................. $ 596,061 $608,865 $753,273
Note payable -- Heintzelman's Truck
Center, Inc., secured by a vehicle, with
a net book value of $14,596, interest at
12.5 percent per annum, due October
1996.................................... 3,885 5,739 12,605
-------- -------- --------
Total Long-Term Debt...................... 599,946 614,604 765,878
Less Current Maturities................... 75,078 69,665 155,568
-------- -------- --------
Long-Term Debt............................ $ 524,868 $544,939 $610,310
======== ======== ========
</TABLE>
Aggregate maturities of long-term debt of the Company due within the next
five years ending March 31, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------------- --------
<S> <C>
1997.............................................. $ 75,078
1998.............................................. 69,621
1999.............................................. 73,915
2000.............................................. 29,403
2001 and thereafter............................... 351,929
--------
Total................................... $599,946
========
</TABLE>
NOTE 7 -- OBLIGATIONS UNDER CAPITAL LEASE:
Obligations under capital lease consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
MARCH 31, ------- -------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Capital leases -- various finance companies,
secured by leased equipment, final
payments due February 1996 through
December 1999, effective rates of interest
at 6 to 16.8 percent per annum............ $31,150 $40,013 $67,511
Less Current Maturities..................... 20,749 25,108 41,245
------- ------- -------
Obligations Under Capital Lease............. $10,401 $14,905 $26,266
======= ======= =======
</TABLE>
F-30
<PAGE> 60
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
Future minimum lease payments for the next five years ending March 31, are
as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
----------------------------------------------------------- -------
<S> <C>
1997....................................................... $23,273
1998....................................................... 5,727
1999....................................................... 3,826
2000....................................................... 2,870
2001 and thereafter........................................ --
-------
Total Minimum Lease Payments............................... 35,696
Less Imputed Interest...................................... 4,546
-------
Present Value of Minimum Lease Payments.................... $31,150
=======
</TABLE>
NOTE 8 -- INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------ --------------------
1996 1995 1995 1994
----------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
State Corporate Income Tax Expense...... $ 6,900 $ 22,800 $ -- $ --
Federal Corporate Income Tax Expense.... 46,200 153,000 -- --
Deferred Income Taxes Expense
(Benefit)............................. (6,000) (5,000) (17,000) 51,000
------- -------- -------- -------
Provision (Benefit) for Income Taxes.... $47,100 $170,800 $(17,000) $51,000
======= ======== ======== =======
Deferred income tax assets and
liabilities are summarized as follows:
Deferred Income Tax Asset............... $ -- $ -- $ -- $ --
Valuation Allowance..................... -- -- -- --
------- -------- -------- -------
Deferred Income Tax Liability........... 28,000 46,000 34,000 51,000
------- -------- -------- -------
Net Deferred Income Tax Liabilities..... $28,000 $ 46,000 $ 34,000 $51,000
======= ======== ======== =======
</TABLE>
NOTE 9 -- LEASE COMMITMENTS:
The principle types of property leased under noncancelable agreements are
premises for manufacturing, storage and office use, and manufacturing and
transportation equipment. The most significant obligations under the lease terms
are the maintenance, utilities, insurance and real estate taxes.
Total rent relating to these lease expenses for the Company amounted to
$59,749, $64,328, $282,589 and $235,051 for the three months ended March 31,
1996 and 1995 and the years ended December 31, 1995 and 1994, respectively.
F-31
<PAGE> 61
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
The total aggregate minimum annual rental commitments, under all
noncancelable leases with terms of one year or more ending March 31, amounts to:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------------------------------- --------
<S> <C>
1997.............................. $108,869
1998.............................. $ 91,829
1999.............................. $ 71,677
2000.............................. $ 31,244
2001 and thereafter............... $ 18,465
</TABLE>
NOTE 10 -- REVENUE FROM MAJOR CUSTOMERS:
Sales to two major customers (see Note 11) amounted to 33 and 39 percent
for the three months ended March 31, 1996 and 1995 and 42 and 54 percent of
total sales for the years ended December 31, 1995 and 1994, respectively. No
other single customer accounted for more than 10 percent of total sales.
NOTE 11 -- RELATED PARTY TRANSACTIONS:
The Company is obligated to the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH -------- --------
31,
1996
--------
(UNAUDITED)
<S> <C> <C> <C>
Note payable -- The Ultimate Juice Company,
Inc., interest at 7 percent per annum,
unsecured, due on demand................. $150,000 $150,000 $140,000
======== ======== ========
</TABLE>
Interest expense relating to the above notes included as a charge to
operations amounted to $2,993 and $-0- for the three months ended March 31, 1996
and 1995 and $9,214 and $8,847 for the years ended December 31, 1995 and 1994,
respectively.
The Company's material financial transactions entered in the ordinary
course of business with related parties were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------------------- -----------------------
1996 1995 1995 1994
-------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
The Ultimate Juice Company, Inc.(A):
Sales -- net of volume discounts of $-0-,
$247,000 and $-0- for the three months ended
March 31, 1996, and the years ended December
31, 1995 and 1994, respectively............. $818,228 $1,037,451 $3,962,970 $4,094,935
Accounts receivable at December 31............. $251,878 $ 269,128 $ 175,147 $ 204,875
Management fees expense........................ $ 21,000 $ -- $ 116,000 $ --
Natural Juice Company, Inc.(A):
Sales -- net of volume discounts of $-0- for
1995 and 1994............................... $303,751 $ 328,346 $1,438,748 $1,427,526
Accounts receivable at December 31............. $110,110 $ 129,807 $ 105,019 $ 57,202
</TABLE>
- ---------------
(A) The majority stockholders of these companies are 50% stockholders of the
Company.
F-32
<PAGE> 62
CLEAR SPRINGS CITRUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 12 -- TRUSTEE HELD FUNDS:
The Company maintains trustee held funds with South Trust Bank of Orlando
guaranteeing the payment of citrus taxes to the State of Florida in the amount
of $65,000, $65,000 and $-0- at March 31, 1996 and December 31, 1995 and 1994,
respectively.
NOTE 13 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash and cash equivalents, trustee held funds,
accounts receivable, accounts payable and accrued expenses approximate fair
value because of the short maturity of these items. The carrying value of notes
payable and long-term debt approximate fair value because the long-term debt is
at interest rates currently available to the Company for debt with similar terms
and remaining maturities.
NOTE 14 -- SUPPLEMENTAL CASH FLOW DISCLOSURES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- --------------------
1996 1995 1995 1994
------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for:
Interest...................... $16,792 $ -- $88,024 $ 74,059
Income taxes.................. $11,500 $ -- $ -- $ --
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Long-term debt and capitalized
lease obligations were
incurred when the Company
acquired the following:
Fixed assets.................. $ -- $13,286 $13,286 $ 44,285
Covenant not to complete...... $ -- $ -- $ -- $164,439
Treasury stock................ $ -- $ -- $ -- $474,848
</TABLE>
NOTE 15 -- CONTINGENCIES AND COMMITMENTS:
At December 31, 1995, the Company has certain litigation pending against it
which occurred in the ordinary course of business. In the opinion of management,
settlement of such claims and litigation will not have a material adverse effect
on the Company's financial position.
NOTE 16 -- SUBSEQUENT EVENT:
On March 31, 1996, the Company entered into an agreement to be merged into
The Fresh Juice Company of Florida, Inc. Under the terms of the Clear Springs
Merger Agreement, the stockholders of Clear Springs will receive an aggregate of
1,160,000 shares of The Fresh Juice Company, Inc.'s common stock, $.01 par
value, in exchange for all of the issued and outstanding common stock of Clear
Springs. Consummation of the Clear Springs Merger is subject to the satisfaction
of all terms and conditions set forth in the Clear Springs Merger Agreement,
including, but not limited to, shareholder approval of an amendment to The Fresh
Juice Company, Inc.'s Certificate of Incorporation to increase the number of
authorized shares of The Fresh Juice Company, Inc. from 5,000,000 shares of
common stock and 200,000 shares of preferred stock to 20,000,000 shares of
common stock and 7,000,000 shares of preferred stock.
F-33
<PAGE> 63
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
Clear Springs' financial statements and notes to financial statements provided
elsewhere herein. The results of operations for the three months ended March 31,
1996 and 1995 are unaudited, and are not necessarily indicative of the results
to be expected for the full year.
RESULTS OF OPERATIONS
During 1995, Clear Springs experienced a steady increase in net sales.
Clear Springs' net sales for the year ended December 31, 1995 were $12,775,884,
or 26% higher than net sales of $10,148,356 for the year ended December 31,
1994. This trend appears to be continuing as Clear Springs' net sales for the
quarter ended March 31, 1996 were $3,407,121, which, on an annualized basis,
would represent a 7% increase over the net sales for the entire year of 1995. On
a quarter to quarter comparative basis, however, Clear Springs' net sales for
the quarter ended March 31, 1996 have decreased to $3,407,121, or 2% less than
net sales of $3,474,406 for the corresponding quarter in the preceding year. The
overall increase in net sales has been accompanied by an overall increase in the
cost of goods sold. Cost of goods sold for the year ended December 31, 1995
increased to $11,420,358, or 24% more than the cost of good sold of $9,215,602
for the year ended December 31, 1994. Cost of goods sold for the quarter ending
March 31, 1996 have increased to $3,035,480, or 9% more than the cost of goods
sold of $2,782,440 for the corresponding quarter in the preceding year. The
increase in cost of goods sold during the quarter ended March 31, 1996 resulted
from an increase in the cost of fruit during that time period.
As a consequence of the increased net sales during 1995, Clear Springs'
gross profit increased to $1,355,526, or 45% more than the gross profit of
$932,754 for the year ended December 31, 1994. However, gross profit for the
quarter ended March 31, 1996 was $371,641, or 46% less than the gross profit of
$691,966 for the corresponding quarter in the preceding year, primarily as a
result of the increase in the cost of fruit. Increased sales have also been
accompanied by an increase in selling, general and administrative expenses,
which increased to $1,367,525 for the year ended December 31, 1995, or 39% more
than the selling, general and administrative expenses of $981,554 for the year
ended December 31, 1994. In addition to the increase related to increased sales
volume, selling, general and administrative expenses during 1995 included a
management fee paid to Ultimate of $116,000, as well as an increase in the
salary and bonuses paid to Clear Springs' President, Brian Duffy. Since no such
management fee or bonuses have been paid in the three months ending March 31,
1996, selling, general and administrative expenses for the quarter ended March
31, 1996 were $247,352, or 9% less than selling, general and administrative
expenses of $271,571 for the corresponding quarter in the preceding year.
As a result of increased sales, Clear Springs has improved its income from
operations since December 31, 1994. Specifically, the loss from operations for
the year ended December 31, 1995 has decreased to $11,999, or 75% less than the
loss from operations of $48,800 for the year ended December 31, 1994. Similarly,
Clear Springs' net loss decreased to $74,358 for the year ended December 31,
1995 as compared to its net loss of $174,375 for the year ended December 31,
1994. This improvement continued into 1996. For the quarter ended March 31,
1996, Clear Springs had income from operations of $124,289 and net income of
$56,688 as compared to its loss from operations of $11,999 and net loss of
$74,358 for the year ended December 31, 1995. However, profitability in the
first quarter of 1996 has been affected by higher fruit prices. As a result,
income from operations for the three months ended March 31, 1996 has decreased
to $124,289, or 70% less than the income from operations of $420,395 for the
corresponding quarter in the preceding year. Similarly, net income has decreased
to $56,688 as compared to $226,719 for the corresponding quarter in the
preceeding year. A lack of availability of quality fruit and higher cost of
citrus could adversely impact Clear Springs' ability to maintain its rate of
growth and its current gross profit level.
FINANCIAL CONDITION
As a result of increased sales and improved results of operations between
December 31, 1994 and December 31, 1995, Clear Springs' cash and cash
equivalents balance increased to $80,790, as compared to
F-34
<PAGE> 64
the $22,627 balance as of December 31, 1994. In addition, accounts receivable
increased to $1,037,003, or 73% more than the accounts receivable balance of
$600,178 for the year ended December 31, 1994. The increase in cash and accounts
receivable caused a corresponding increase in total current assets, which
increased to $1,300,565 as of December 31, 1995, or 61% more than the total
current assets of $805,363 as of December 31, 1994. Between December 31, 1995
and March 31, 1996, the Company used the proceeds of collected accounts
receivable along with a portion of its cash and the income from operations to
pay down its accounts payable. As a result, as of the quarter ended March 31,
1996, cash and cash equivalents decreased to $20,484 as compared to a cash and
cash equivalents balance of $80,790 carried as of December 31, 1995. Similarly,
the accounts receivable decreased to $897,281, or 13% less than the accounts
receivable of $1,037,003 as of December 31, 1995. The decrease in accounts
receivable and cash have resulted in a corresponding decrease in total current
assets, which were $1,110,763 at March 31, 1996, or 15% less than total current
assets as of December 31, 1995 of $1,300,565. During 1995, Clear Springs
borrowed an additional $125,000 under its credit line with South Trust Bank. As
a result, the balance of the Note payable to bank as of December 31, 1995
increased to $250,000, or 100% more than the balance of Note payable to bank of
$125,000 as of December 31, 1994. However, during this same time period, Clear
Springs satisfied its term note with South Trust Bank. As a result, current
maturities of long term debt decreased to $69,665 as of December 31, 1995, or
55% less than current maturities of long term debt of $155,568 as of December
31, 1994.
Due to increased purchases of fruit to support the increased sales volume,
Clear Springs' accounts payable as of December 31, 1995 increased to $989,153,
or 48% more than the accounts payable balance of $666,771 as of December 31,
1994. Accrued expenses increased to $315,138 as of December 31, 1995, as
compared to accrued expenses of $15,418 as of December 31, 1994. This increase
resulted primarily from a $247,000 volume discount credit being taken by Clear
Springs' largest customer, Ultimate. The additional increase in accrued expenses
represents other normal year end accruals.
As a result of the repayment of the term note with South Trust Bank in
September, 1995, Clear Springs' long term debt as of December 31, 1995 decreased
to $544,939, or 11% less than the long term debt of $610,310 as of December 31,
1994. As discussed above, Clear Springs has reduced its accounts payable balance
by collecting accounts receivable and using the proceeds therefrom along with
some of its cash and income from operations to reduce its outstanding accounts
payable balance. As a result, as of March 31, 1996, the accounts payable balance
has decreased to $712,644, or 28% less than the $989,153 accounts payable
balance as of December 31, 1995. This decrease in accounts payable has resulted
in a decrease in total current liabilities to $1,553,686 as of March 31, 1996,
or 14% less than total current liabilities of $1,813,064 as of December 31,
1995.
MATERIAL COMMITMENTS
As described in Note 15 to Clear Springs' Financial Statements and in the
accompanying Proxy Statement, on March 31, 1996, Clear Springs entered into an
agreement to be merged with and into The Fresh Juice of Florida, Inc., a wholly
owned subsidiary of the Company.
LIQUIDITY
Between December 31, 1996 and March 31, 1996, Clear Springs liquidity has
improved. Clear Springs reduced its working capital deficit to $442,923 as of
March 31, 1996 as compared to its working capital deficit of $512,499 as of
December 31, 1995. The $442,923 working capital deficit as of March 31, 1996
includes a note payable of $150,000 to Ultimate and a $250,000 Note payable to
South Trust Bank. Clear Springs' loan with South Trust Bank matured on July 26,
1996. The current balance of the South Trust Bank loan is approximately
$180,000, and Clear Springs is seeking an extension of the maturity date. It is
anticipated that upon completion of the merger with The Fresh Juice of Florida,
Inc., a wholly owned subsidiary of the Company, the Company will either pay off
the South Trust Bank loan or obtain replacement financing. In the event Clear
Springs is unable to secure an extension of the maturity date of the South Trust
loan, the Company will advance to Clear Springs the funds necessary to repay the
South Trust Bank loan. Clear Springs has been assured that the $150,000 Note to
Ultimate will not have to be paid until Clear Springs liquidity improves
further.
F-35
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
The Ultimate Juice Company, Inc.:
We have audited the accompanying combined balance sheets of The Ultimate
Juice Company, Inc. and Affiliated Company as of June 30, 1995 and 1994, and the
related combined statements of operations, changes in stockholders' equity and
cash flows for the years then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Ultimate Juice
Company, Inc. and Affiliated Company as of June 30, 1995 and 1994, and the
results of their combined operations and their combined cash flows for the years
then ended in conformity with generally accepted accounting principles.
WITHUM, SMITH & BROWN
New Brunswick, New Jersey
August 31, 1995, except for Note 14
which is dated March 31, 1996
F-36
<PAGE> 66
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1995 1994
MARCH 31, ---------- ----------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash................................................. $ 70,936 $ 315,861 $ 282,641
Accounts receivable.................................. 779,179 1,016,232 957,031
Inventory............................................ 135,660 109,058 140,552
Prepaid corporate income taxes....................... -- 12,656 --
Prepaid expenses and other assets.................... 1,149 10,878 --
Advances to stockholders............................. -- -- 17,226
Notes receivable..................................... 150,000 100,000 100,000
---------- ---------- ----------
Total Current Assets......................... 1,136,924 1,564,685 1,497,450
Property and Equipment -- Net.......................... 44,657 44,246 90,584
Intangible Assets -- Net............................... 65,557 104,434 118,386
Other Assets:
Security deposits.................................... 13,741 10,741 13,141
Advances to related company.......................... -- -- 502
---------- ---------- ----------
Total Other Assets................................ 13,741 10,741 13,643
---------- ---------- ----------
TOTAL ASSETS................................. $ 1,260,879 $1,724,106 $1,720,063
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable........................................ $ -- $ -- $ 42,206
Current maturities of long-term debt................. 110,000 120,000 110,000
Accounts payable and accrued expenses................ 537,364 823,693 967,068
Advances from stockholders........................... 22,000 250,241 --
Corporate income taxes payable....................... 30,671 18,693 22,468
---------- ---------- ----------
Total Current Liabilities.................... 700,035 1,212,627 1,141,742
Long-Term Debt......................................... -- 70,000 190,000
Stockholders' Equity:
Ultimate Juice Co., Inc. -- common stock, no par;
2,500 shares authorized; 1,112, 1,000 and 1,000
shares issued and outstanding as of March 31, 1996
and June 30, 1995 and 1994, respectively.......... 33,000 1,000 1,000
Connecticut Juice Co., Inc. -- common stock, no par;
10,000 shares authorized; 1,000 shares issued and
outstanding....................................... -- -- 1,000
Additional paid in capital........................... 15,000 15,000 40,224
Retained earnings.................................... 512,844 425,479 346,097
---------- ---------- ----------
Total Stockholders' Equity................... 560,844 441,479 388,321
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 1,260,879 $1,724,106 $1,720,063
========== ========== ==========
</TABLE>
The Accompanying Notes to Combined Financial Statements are an integral part of
these statements
F-37
<PAGE> 67
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
NINE MONTHS ENDED JUNE 30,
MARCH 31, 1994
------------------------- ---------------------------
1996 1995 1995 1994
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues -- Net......................... $8,581,097 $8,058,449 $11,286,669 $11,114,608
Cost of Goods Sold...................... 6,055,236 5,638,863 7,887,208 8,317,661
---------- ---------- ----------- -----------
Gross Profit............................ 2,525,861 2,419,586 3,399,461 2,796,947
Operating Expenses:
Delivery.............................. 408,810 368,768 547,833 751,141
Selling............................... 268,277 101,655 129,382 101,247
Warehouse............................. 235,279 288,858 364,163 357,182
General and administrative............ 1,585,508 1,429,226 2,287,509 1,709,533
---------- ---------- ----------- -----------
Total Operating Expenses...... 2,497,874 2,188,507 3,328,887 2,919,103
---------- ---------- ----------- -----------
Income (Loss) From Operations........... 27,987 231,079 70,574 (122,156)
Other (Income) Expenses:
Interest expense...................... 7,023 11,580 14,670 13,273
Interest income....................... (15,898) (10,604) (19,329) (7,813)
Other (income) expenses............... (115,763) (2,253) -- 14,600
Gain on sale of assets................ -- (27,639) (27,639) --
---------- ---------- ----------- -----------
Total Other (Income)
Expenses.................... (124,638) (28,916) (32,298) 20,060
---------- ---------- ----------- -----------
Income (Loss) Before Provision For
Income Taxes.......................... 152,625 259,995 102,872 (142,216)
Provision for Income Taxes.............. 65,260 121,925 43,908 (30,609)
---------- ---------- ----------- -----------
Net Income (Loss)............. $ 87,365 $ 138,070 $ 58,964 $ (111,607)
========== ========== =========== ===========
Net Income (Loss) Per Share............. $ 82.26 $ 138.07 $ 58.96 $ (111.61)
========== ========== =========== ===========
Weighted Average Shares................. 1,062 1,000 1,000 1,000
========== ========== =========== ===========
</TABLE>
The Accompanying Notes to Combined Financial Statements are an integral part of
these statements
F-38
<PAGE> 68
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONNECTICUT
JUICE ULTIMATE JUICE
COMMON STOCK COMMON STOCK ADDITIONAL
---------------- ---------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------- ------ ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1993................. 1,000 $ 1,000 1,000 $ 1,000 $ 40,224 $ 457,704 $ 499,928
Net Loss for the Year Ended June 30,
1994.................................. -- -- -- -- -- (111,607) (111,607)
------ ------- ----- ------- -------- --------- ---------
Balance at June 30, 1994................ 1,000 1,000 1,000 1,000 40,224 346,097 388,321
Purchase of Connecticut Juice Company,
Inc. Assets by Ultimate Juice, Inc. on
November 30, 1994..................... (1,000) (1,000) -- -- (25,224) 20,418 (5,806)
Net Income for the Year Ended June 30,
1995.................................. -- -- -- -- -- 58,964 58,964
------ ------- ----- ------- -------- --------- ---------
Balance at June 30, 1995................ -- -- 1,000 1,000 15,000 425,479 441,479
Sale of 112 Shares of Common Stock on
October 23, 1995 (Unaudited).......... -- -- 112 32,000 -- -- 32,000
Net Income for the Period Ended March
31, 1996 (Unaudited).................. -- -- -- -- -- 87,365 87,365
------ ------- ----- ------- -------- --------- ---------
Balance at March 31, 1996 (Unaudited)... -- $ -- 1,112 $33,000 $ 15,000 $ 512,844 $ 560,844
====== ======= ===== ======= ======== ========= =========
</TABLE>
The Accompanying Notes to Combined Financial Statements are an integral part of
these statements
F-39
<PAGE> 69
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEARS ENDED JUNE 30,
----------------------- -----------------------
1996 1995 1995 1994
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................ $ 87,365 $ 138,070 $ 58,964 $(111,607)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization................. 50,482 52,057 67,701 94,049
Deferred taxes................................ -- -- -- (22,700)
Gain on sale of assets........................ -- (27,639) (27,639) --
Change in:
Accounts receivable......................... 237,053 77,320 (59,201) (96,724)
Inventory................................... (26,602) 33,759 31,494 (37,728)
Prepaid corporate income taxes.............. 12,656 -- (12,656) 3,989
Prepaid expenses and other current assets... 9,729 (7,877) (10,878) --
Security deposits........................... (3,000) 2,400 2,400 (286)
Accounts payable and accrued expenses....... (286,329) (334,725) (128,953) 263,062
Corporate income taxes payable.............. 11,978 54,114 (3,775) (36,575)
--------- --------- --------- ---------
Net cash provided by (used in) operating
activities............................. 93,332 (12,521) (82,543) 55,480
Cash flows from investing activities:
Change in advances to (from) stockholders........ (228,241) (19,576) 267,467 (57,305)
Change in advances from related companies........ -- 502 502 (58,999)
Purchases of property and equipment.............. (12,016) -- -- (18,046)
Change in note receivable........................ (50,000) (40,000) -- (100,000)
--------- --------- --------- ---------
Net cash provided by (used in) investing
activities............................. (290,257) (59,074) 267,969 (234,350)
Cash flows from financing activities:
Repayment of note payable........................ -- (32,869) (42,206) (128,000)
Repayment of long-term debt...................... (80,000) (80,000) (110,000) (152,000)
Proceeds from issuance of long-term debt......... -- -- -- 400,000
Proceeds from issuance of common stock........... 32,000 -- -- --
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities............................. (48,000) (112,869) (152,206) 120,000
--------- --------- --------- ---------
Net (decrease) increase in cash.................... (244,925) (184,464) 33,220 (58,870)
Cash at beginning of period........................ 315,861 282,641 282,641 341,511
--------- --------- --------- ---------
Cash at end of period.............................. $ 70,936 $ 98,177 $ 315,861 $ 282,641
========= ========= ========= =========
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these statements.
F-40
<PAGE> 70
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business Operations
The Ultimate Juice Company, Inc. was incorporated on July 1, 1987 and
operates as a broker and wholesale distributor of juice products within the
Northeastern United States.
The Connecticut Juice Company, Inc. was incorporated in April 1993 and
operates solely as a wholesale distributor of juice products.
On June 30, 1994, the Company acquired the assets of Ultimate Too, Inc., a
company owned by the companies three principal stockholders, for the assumption
of $42,207 of liabilities and $18,731 of forgiveness of debt. Assets acquired in
the agreement included security deposits, customer lists, distributor agreements
and property and equipment. In addition, the Company forgave $110,251 in
indebtedness due from Ultimate Too, Inc. which is included in bad debts for the
year ending June 30, 1994.
On November 30, 1994, the Ultimate Juice Company, Inc. acquired the assets
of its affiliate The Connecticut Juice Company, Inc. for the assumption of
$78,642 of liabilities. Assets acquired in the agreement included customers
lists, distributor agreements and property and equipment.
Principles of Combination
The combined financial statements include the accounts of The Ultimate
Juice Company, Inc., and its affiliate The Connecticut Juice Company, Inc. The
outstanding common stock of each company is owned by the same stockholders, and
while their statements have been combined, the financial statements do not
represent those of a single legal entity. All significant affiliated accounts
have been eliminated.
Unaudited Interim Financial Statements
The financial statements at March 31, 1996 and for the nine months ended
March 31, 1996 and 1995 are unaudited. In the opinion of the management of the
Company, the unaudited financial statements at March 31, 1996 and for the nine
months ended March 31, 1996 and 1995, include all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation. The results of
operations for the nine months ended March 31, 1996 and 1995 are not necessarily
indicative of the results to be expected for the year.
Inventory
Inventory, which consists of juice products, is stated at the lower of cost
or market. Cost is determined by the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment have been made by the Companies on the straight-line basis over the
estimated useful lives of the assets, generally five to seven years.
Intangible Assets
Intangible assets are stated at cost and are amortized on a straight-line
basis over periods from 18 months to 40 years.
F-41
<PAGE> 71
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
Connecticut Juice Company, Inc. has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under those provisions,
the Company does not pay the federal corporate income taxes on its taxable
income. Instead, the stockholders are liable for individual federal income taxes
on the Company's taxable income.
The Company adopted Statement of Financial Accounting Standard No. 109,
Accounting for Income Taxes effective July 1, 1993, which requires a change from
the deferred method to the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities. The primary deferred income tax items are the result of the
timing difference in depreciation using accelerated methods for tax purposes and
the forgiveness of debt reported in 1994. The change to FAS No. 109 had no
material effect on the financial statements.
Earnings Per Share
Earnings per share on common stock is computed on the basis of the weighted
average number of common shares outstanding during each year. The effect of the
purchases of the affiliate and related company were retroactively applied as if
they had occurred on July 1, 1993.
Concentration of Credit Risk
At times, the Company maintains cash balances at one financial institution
in excess of amounts insured by the Federal Deposit Insurance Corporation.
Management monitors the soundness of this institution and considers the
Company's risk negligible.
The Company's concentration of credit risk with respect to accounts
receivable is largely dependent on its customer mix which are distributors and
retailers throughout the Northeast United States.
Pension Plan
On January 1, 1994, the Company started a contributory thrift and savings
plan for salaried employees meeting certain service requirements, which
qualifies under Section 401(k) of the Internal Revenue Service Code.
Contributions into the plans are made at the discretion of management. For the
nine months ended March 31, 1996 and 1995 and the years ended June 30, 1995 and
1994 total pension expense amounted to $13,043, $11,566, $15,596 and $7,955,
respectively.
F-42
<PAGE> 72
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 2 -- INVENTORY:
Inventory consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Juice Products............................ $ 135,660 $109,058 $140,552
======== ======== ========
</TABLE>
NOTE 3 -- NOTE RECEIVABLE
Note receivable consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Note receivable -- Clear Spring Citrus,
Inc.
(see Note 11), interest at 7% per annum,
due on demand, unsecured.................. $ 150,000 $100,000 $100,000
======== ======== ========
</TABLE>
NOTE 4 -- PROPERTY AND EQUIPMENT:
The major classifications of property and equipment at cost are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Transportation Equipment.................. $ 23,152 $ 23,152 $ 30,752
Machinery and Equipment................... 117,589 105,573 135,085
Computer and Office Equipment............. 61,201 61,201 61,669
-------- -------- --------
201,942 189,926 227,506
Less Accumulated Depreciation and
Amortization............................ (157,285) (145,680) (136,922)
-------- -------- --------
Property and Equipment, Net............... $ 44,657 $ 44,246 $ 90,584
======== ======== ========
</TABLE>
Depreciation included as a charge to income amounted to $11,605, $14,113,
$16,836 and $30,661 for the nine months ended March 31, 1996 and 1995 and for
the years ended June 30, 1995 and 1994, respectively.
F-43
<PAGE> 73
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 5 -- INTANGIBLE ASSETS -- NET:
The major classifications of intangible assets at cost are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Covenant Not to Compete................... $ 170,000 $170,000 $170,000
Customer Lists............................ 64,413 64,413 27,500
Distributorship Agreement................. 30,000 30,000 30,000
Goodwill.................................. 9,500 9,500 9,500
-------- -------- --------
273,913 273,913 237,000
Less Accumulated Amortization............. (208,356) (169,479) (118,614)
-------- -------- --------
Intangible Assets -- Net.................. $ 65,557 $104,434 $118,386
======== ======== ========
</TABLE>
Amortization included as a charge to income amounted to $38,877, $37,944,
$50,865 and $63,388 for the nine months ended March 31, 1996 and 1995 and the
years ended June 30, 1995 and 1994, respectively.
NOTE 6 -- NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1995 1994
MARCH 31, -------- -------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable -- Various entities, interest
ranging from -0- to 15 percent per annum,
final payments due January 1995 through
March 1995............................... $ -- $ -- $42,206
======== ======== =======
</TABLE>
NOTE 7 -- LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable -- The Fresh Juice Company,
Inc., interest at 5 percent per annum,
principal payments of $10,000 per month
commencing August 1994, secured by
accounts receivable and inventory of the
Company(A).............................. $ 110,000 $190,000 $300,000
Less Current Maturities................... 110,000 120,000 110,000
-------- -------- --------
Long-Term Debt............................ $ -- $ 70,000 $190,000
======== ======== ========
</TABLE>
- ---------------
(A) The loan was executed in connection with an option agreement dated January
24, 1994. Under the terms of the option agreement, the Fresh Juice Company
obtained the right to purchase the stock of the Company from the individual
stockholders. The option expired in September 1994.
The loan contains certain covenants restricting additional indebtedness,
sale of assets, acquisitions, capital expenditures, dividends, subordinated
debt transactions with related parties and executive compensation.
F-44
<PAGE> 74
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
Aggregate maturities of long-term debt due within the next five years
ending March 31, are as follows:
<TABLE>
<S> <C> <C> <C>
1997 and thereafter....................... $ 110,000
=========
</TABLE>
NOTE 8 -- INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
-------------------- --------------------
1996 1995 1995 1994
------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
State Corporate Income Tax........ $17,198 $ 28,328 $16,526 $ 275
Federal Corporate Income Tax
(Benefit)....................... 48,062 93,597 27,382 (8,184)
Deferred Corporate Taxes
(Benefit)....................... -- -- -- (22,700)
------- -------- ------- --------
Total............................. $65,260 $121,925 $43,908 $(30,609)
======= ======== ======= ========
</TABLE>
For the nine months ended March 31, 1996 and 1995 and the year ended June
30, 1995, income taxes were more than the statutory tax determined by applying
the federal income tax rate to earnings before income taxes due to nondeductible
expenses.
For the year ended June 30, 1994, income taxes were less than the statutory
tax determined by applying the federal income tax rate to earnings before income
taxes due to the surtax exemption, nondeductible expenses and Connecticut Juice
Company's federal S election.
NOTE 9 -- ADVANCES FROM STOCKHOLDERS:
The Company had advances due to the stockholders of the Company in the
amount of $22,000 and $250,241 at March 31, 1996 and June 30, 1995,
respectively. The advances are non-interest bearing and unsecured. There is no
formal repayment schedule; however, the amount is anticipated to be paid within
one year, and therefore, has been classified as a current liability.
The Companies had advances due from the principal stockholders of the
Companies in the amount of $17,226 at June 30, 1994. The advances are
non-interest bearing and unsecured. There is no formal repayment schedule;
however, the amounts were anticipated to be paid within one year, and, therefore
were classified as current liabilities.
NOTE 10 -- LEASE COMMITMENTS:
The principal type of property leased by the Companies is transportation
equipment.
Total rent expense for the Companies relating to these leases amounted to
$73,257 and $74,005 for the nine months ended March 31, 1996 and 1995,
respectively and $98,672 and $107,481 for the years ended June 30, 1995 and
1994, respectively. The significant obligations under the terms of the leases
require the Companies to provide all required maintenance and mileage charges.
F-45
<PAGE> 75
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
The minimum rental commitments of the companies relating to noncancelable
leases for the years ended March 31, are set forth below:
<TABLE>
<S> <C>
1997.............................................. $ 97,915
1998.............................................. 8,523
1999 and subsequent............................... --
--------
Total................................... $106,438
========
</TABLE>
The preceding data reflects existing leases and does not include future
replacement upon expiration.
NOTE 11 -- RELATED PARTY TRANSACTIONS:
For the nine months ended March 31, 1996 and 1995 and for the years ended
June 30, 1995 and 1994, the companies made purchases from Clear Springs Citrus
Inc., which was 76% beneficially owned at June 30, 1995 by the principal
stockholders amounting to approximately $3,065,000 net of a $247,000 volume
discount, $2,717,000, $4,400,000 and $4,200,000, respectively. At March 31, 1996
and June 30, 1995 and 1994 the companies had payables in the amount of $251,878,
$212,251 and $276,205, respectively, due to Clear Springs Citrus, Inc.
For the nine months ended March 31, 1996 and 1995, and the years June 30,
1995 and 1994, the Company received management fee income from Clear Springs
Citrus, Inc. in the amount of $115,000, $-0-, $22,000 and $-0-, respectively.
In addition, the company issued a note receivable to Clear Springs Citrus
Inc. in the amount of $150,000 at March 31, 1996 and $100,000 at June 30, 1995
and 1994 (see Note 3).
For the nine months ended March 31, 1996 and 1995, and the years ended June
30, 1995 and 1994, the companies had sales of approximately $-0-, $77,000,
$77,000 and $987,000, respectively to corporations which are 100 percent owned
by the three principal stockholders.
For the year ended June 30, 1994, the companies allocated $67,000 in
general and administrative expenses to an affiliated corporation which is 100
percent owned by the principal stockholders.
For the year ended June 30, 1994, the companies had advances due to a
company owned by principal stockholders in the amount of $502. The advance was
unsecured and non-interest bearing. The advance was not subjected to a
definitive pay-out schedule for which reason the advance had been classified as
long-term.
On October 23, 1995, the principal stockholder of the Company purchased an
additional 112 shares of common stock for $32,000.
F-46
<PAGE> 76
THE ULTIMATE JUICE COMPANY, INC. AND AFFILIATED COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AT MARCH 31, 1996 AND FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 IS UNAUDITED)
NOTE 12 -- SUPPLEMENTAL CASH FLOW DISCLOSURES:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
----------------- -----------------
1996 1995 1995 1994
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year for:
Interest..................................... $ 7,023 $11,580 $14,670 $ 2,733
Income taxes................................. $13,714.. $31,035 $53,213 $47,250
Supplemental Disclosure of Noncash Financing
Activities:
The Company incurred notes payable in
conjunction with the acquisition of assets
of various companies....................... $ -- $ -- $ -- $42,207
The Company acquired intangible assets and
property and equipment for the assumption
of liabilities............................. $ -- $38,190 $38,190 $ --
</TABLE>
NOTE 13 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash, accounts receivable, prepaid expenses and
other assets, accounts payable and accrued expenses approximate fair value
because of the short maturity of these items. The carrying value of notes
payable and long-term debt, approximate fair value, because the long-term debt
is at interest rates comparable to rates currently available to the Company for
debt with similar terms and remaining maturities.
NOTE 14 -- SUBSEQUENT EVENT:
On March 31, 1996, the Company entered into an agreement to be merged into
The Fresh Juice Company, Inc. and Subsidiaries. Under the terms of The Ultimate
Juice Merger Agreement, the stockholders of Ultimate Juice will receive an
aggregate of 1,140,000 shares of The Fresh Juice Company Inc. and Subsidiaries
common stock, $.01 par value, in exchange for all of the issued and outstanding
common stock of Ultimate Juice.
F-47
<PAGE> 77
APPENDIX A
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF THE FRESH JUICE COMPANY, INC.
TO INCREASE ITS AUTHORIZED COMMON AND PREFERRED STOCK
The following is proposed to become Article FOURTH of the Certificate of
Incorporation of The Fresh Juice Company, Inc. The language to be deleted is
shown [in brackets].
"FOURTH: The total number of shares of all classes of stock which the
corporation is authorized to issue is thirty-seven million (37,000,000)
[five million two hundred thousand (5,200,000)]. All such shares are to
have a par value and are classified as seven million (7,000,000) [two
hundred thousand (200,000)] shares of Preferred stock and the par value of
each share of such class is ten dollars ($10.00) and thirty million
(30,000,000) [five million (5,000,000)] shares of Common stock and the par
value of each share of such class is one cent ($.01)."
A-1
<PAGE> 78
APPENDIX B
MERGER AGREEMENT,
DATED AS OF MARCH 31, 1996,
AMONG
THE FRESH JUICE COMPANY, INC.,
THE FRESH JUICE COMPANY OF FLORIDA, INC.
CLEAR SPRINGS CITRUS, INC.,
BRIAN DUFFY,
AND
THE BOGEN GROUP, L.L.C.
B-1
<PAGE> 79
MERGER AGREEMENT
AGREEMENT, dated as of March 31, 1996, among The Fresh Juice Company, Inc.,
a Delaware corporation ("Fresh Juice"), The Fresh Juice Company of Florida,
Inc., a Florida corporation and wholly-owned subsidiary of Fresh Juice ("Merger
Sub"), Brian Duffy ("Duffy") and The Bogen Group, L.L.C. ("Bogen Group" and
together with Duffy each a "Selling Stockholder", and collectively, the Selling
Stockholders"), and Clear Springs Citrus, Inc. a Florida corporation ("Clear
Springs").
The Boards of Directors of Fresh Juice, Merger Sub and Clear Springs have
each determined that it is in the best interest of their respective stockholders
to effect a merger of Merger Sub with Clear Springs (the "Merger") whereby all
of the issued and outstanding shares of common stock, .01 par value, of Clear
Springs (the "Clear Springs Stock") will be exchanged for 1,160,000 shares of
common stock, $.01 par value, of Fresh Juice ("Fresh Juice Common"); and
Each of the Board of Directors of Fresh Juice, Merger Sub and Clear Springs
have approved the Merger in accordance with the Florida Business Corporation Act
(the "BCA") and upon the terms and subject to the conditions set forth herein;
and
The parties hereto desire to enter into the Merger in accordance with the
terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. The Merger will occur upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the BCA, on
the Closing Date. Following the Merger, Merger Sub shall continue as the
surviving corporation (the "Surviving Corporation") under the name "Clear
Springs Citrus, Inc." and shall continue its existence under the laws of the
State of Florida, and the separate corporate existence of Clear Springs shall
cease.
1.2 Closing Date and Effective Time. The Closing for this transaction
shall occur on or before June 30, 1996 (the "Closing Date"). As promptly as
practicable after the Closing Date but not later than seven (7) business days
after the satisfaction or waiver of the conditions set forth in Article 6, Clear
Springs and Merger Sub shall cause the Merger to be consummated by each of them
filing Articles of Merger and the Plan of Merger with the Secretary of the State
of Florida, each in the form annexed hereto as Exhibit A and B and executed in
accordance with the relevant provisions of, the BCA (the time of such filing
being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided for in the applicable provisions of the BCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the properties, rights, privileges, powers and franchises of Clear
Springs and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Clear Springs and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either Clear Springs or Merger Sub acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either Clear Springs or Merger Sub, all such deeds, bills
of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or
B-2
<PAGE> 80
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
1.5 Articles of Incorporation: By-laws: Directors and Officers. (a) At the
Effective Time, the Articles of Incorporation of the Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended as provided by law and
such certificate of incorporation.
(b) At the Effective Time, the By-laws of the Merger Sub, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such by-laws.
(c) At the Effective Time, Steven Bogen, Steven Smith, Brian Duffy and
Jeffrey Smith will be the initial directors of the Surviving Corporation. The
officers listed on Schedule 1.5(c) hereto immediately prior to the Effective
Time shall deliver their resignations prior to or after the Closing Date, and as
of the Effective Date the officers of the Surviving Corporation shall be Steven
Smith (President and Assistant Secretary), Steven Bogen (Chief Executive Officer
and Secretary), and Mark Feldman (Treasurer). If, at the Effective Time, a
vacancy shall exist on the Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
law, the Articles of Incorporation of the Surviving Corporation and the By-laws
of the Surviving Corporation.
1.6 Conversion of Securities; Piggy-Back Registration Rights.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of any of Merger Sub, Clear Springs or the holder of any of the
securities of Clear Springs or Merger Sub the following shall occur:
(i) each share of Clear Springs Stock issued and outstanding
immediately prior to the Effective Time shall be canceled and extinguished
and be converted into the right to receive the Merger Consideration (as
defined below) upon surrender of the certificate representing such share of
Clear Springs Stock; and
(ii) each share of Merger Sub common stock, par value $.01 per share,
issued and outstanding immediately prior to the Effective Time shall
hereafter represent one validly issued, fully paid and nonassessable share
of common stock, par value $.01 per share, of the Surviving Corporation.
(b) The "Merger Consideration" to be paid by Fresh Juice for the shares of
Clear Springs Stock in accordance with the Merger shall, subject solely to the
adjustments as hereinafter provided for, be paid as follows:
(i) delivery to the Selling Stockholders of an aggregate of 1,160,000
validly issued, duly authorized and non-assessable shares of common stock,
par value $.01 per share, of Fresh Juice Common, as set forth in
subparagraph (b)(ii) below;
(ii) delivery to the Selling Stockholders of the following number of
validly issued, duly authorized and non-assessable shares of Fresh Juice
Common:
Duffy -- 300,000 shares of Fresh Juice Common; and
Bogen Group -- 860,000 shares of Fresh Juice Common, to be issued
directly as follows:
8,600 shares to Daniel Petry
21,500 shares to Mark Feldman
829,900 shares to Steven Bogen
provided, however, that the above-referenced proration may be adjusted among the
Selling Stockholders with the consent of the affected Selling Stockholder(s), so
long as it is done so without affecting the rights of the parties not
participating in such adjustment; and
B-3
<PAGE> 81
(iii) each of the Selling Stockholders acknowledges that the shares of
Fresh Juice Common being issued and delivered pursuant to the Merger will
not be registered pursuant to the Securities Act of 1933, as amended, and
must be held unless and until such shares are subsequently registered under
the 1933 Act or an exemption from registration is available; accordingly a
legend shall be placed on the stock certificates evidencing such shares of
common stock to reflect certain transfer restrictions.
(c) The Selling Stockholders shall have "piggy back" registration rights as
set forth in the Registration Rights Agreement among Fresh Juice and the Selling
Stockholders attached hereto as Exhibit "C" (the "Registration Agreement").
1.7 Surrender of Shares: Stock Transfer Books.
(a) If delivery of the Merger Consideration in respect of canceled shares
of Clear Springs Stock is to be made to a person other than the person in whose
name a surrendered certificate or instrument is registered, it shall be a
condition to such delivery that the certificate or instrument so surrendered
shall be properly endorsed or shall be otherwise in proper form for transfer and
that the person requesting such payment shall have paid any transfer and other
taxes required by reason of such payment in a name other than that of the
registered holder of the certificate or instrument surrendered or shall have
established to the satisfaction of Merger Sub that such tax either has been paid
or is not payable.
(b) If, after the Effective Time, certificates for Clear Springs Stock are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the Merger Consideration as provided in Section 1.6 hereof.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
Each of the Selling Stockholders hereby jointly and severally represents
and warrants to each of Fresh Juice and Merger Sub as follows:
2.1 Authorization: No Conflict. (a) Each Selling Stockholder has the legal
right and capacity to execute and deliver this Agreement and to perform the
transactions contemplated to be performed by him hereunder. This Agreement
constitutes the legal, valid and binding agreement of each Selling Stockholder
and is enforceable against him in accordance with its terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency, moratorium
or other laws affecting the enforceability of creditors' rights generally and
that equitable remedies may be granted in the discretion of a court.
(b) Except as set forth on Schedule 2.1(b) hereto, the execution,
delivery and performance of this Agreement and the documents, transactions and
instruments contemplated hereby by each Selling Stockholder does not and will
not violate, conflict with, result in a breach of any provisions of, constitute
a default (or an event which, with or without due notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any liens,
security interest, charge or other encumbrance upon any of the properties or
assets of Clear Springs under any of the terms, conditions or provisions of, any
contract, note, bond, mortgage, indenture, deed of trust, license, lease, loan
agreement, judgment, order, decree, statute, rule, regulation or other
agreement, instrument or obligation to which Clear Springs or any of the Selling
Stockholders are a party, or by which either or any of their respective
properties or assets may be bound or affected.
2.2 Approvals. All consents, approvals, permits, authorizations and
orders, if any, necessary for the due authorization, execution and delivery by
and on behalf of each Selling Stockholder of this Agreement and any other
transaction or obligation contemplated by this Agreement have been obtained.
2.3 Litigation. There are no actions, suits, proceedings or investigations
pending or, to the knowledge of each Selling Stockholder, threatened against any
Selling Stockholder, which question or challenge the validity of this Agreement,
the transactions contemplated thereto, or any action to be taken hereunder.
B-4
<PAGE> 82
2.4 Certain Contracts. Except as set forth in Schedule 2.4 hereto, there
are no outstanding contracts or agreements between any Selling Stockholder, or
any of his "affiliates," (as such term is defined in the Securities and Exchange
Act of 1934) on the one hand, and Clear Springs or any of its subsidiaries, on
the other hand, whether written or oral, including without limitation, contracts
or agreements for executive compensation, severance, employment or retirement.
2.5 Outstanding Options, Warrants or Other Rights. Except as set forth in
Schedule 2.5 hereto, none of the Selling Stockholders has outstanding any
option, warrant or other right permitting or requiring him or others to purchase
or convert any obligation into shares of Clear Springs Stock. There are no
voting trusts or other agreements or understandings with respect to the voting
of the shares of capital stock of Clear Springs and the shares of the capital
stock of Clear Springs are not subject to any preemptive rights, rights of first
refusal or similar rights.
2.6 No Liquidation of the Selling Stockholders. The Selling Stockholders
each represent that they have no present plan or intention to liquidate, or
cause the liquidation of, the Selling Stockholders or to dispose of or cause the
disposition of substantially all of its assets prior to the merger, or to
dispose of or cause the disposition of substantially all of the assets formerly
owned by the Selling Stockholders after the Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
CLEAR SPRINGS AND SELLING STOCKHOLDERS
Each of the Selling Stockholders (with respect to matters relating to
themselves and Clear Springs), and Clear Springs (with respect to matters
relating to Clear Springs) represents and warrants to Fresh Juice and Merger Sub
as follows:
3.1 Organization Standing, etc. Clear Springs is a duly organized and
validly existing corporation in good standing under the laws of the State of
Florida, and has all requisite corporate power and authority to own, lease and
operate its respective properties and assets and to carry on its respective
business as now conducted and as proposed to be conducted. Clear Springs is duly
qualified to do business in good standing as a foreign corporation in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business now conducted or proposed to be conducted by it makes such
qualification necessary. Except as set forth on Schedule 3.1 hereto, Clear
Springs has no subsidiaries or affiliates.
3.2 Capitalization. Clear Springs has an authorized capitalization of
7,500 shares of common stock, .01 par value, of which 1,000 shares of common
stock are issued and outstanding. There are 178.49848 treasury shares of Clear
Springs common stock.
3.3 Authorization. Clear Springs has all requisite corporate power and
authority to execute and deliver this Agreement and to perform the transactions
contemplated hereby. Clear Springs has taken all requisite corporate action to
authorize the execution; delivery and performance of this Agreement and the
transactions contemplated hereby. This Agreement is the legal, valid and binding
obligation of Clear Springs, enforceable against it in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws affecting the enforceability of creditors
rights generally and that equitable remedies may be granted in the discretion of
a court.
3.4 Status of Securities. The shares of Clear Springs Stock presently
issued and outstanding are duly authorized, validly issued, fully paid and
nonassessable and free and clear of all liens, security interests, pledges,
charges, claims and encumbrances of any kind.
3.5 Articles of Incorporation and By-laws. Clear Springs has delivered to
Fresh Juice a true, correct and complete copy of its Articles of Incorporation
and a true, correct and complete copy of its By-laws, each of which contains all
amendments thereto and have been certified by the Secretary of Clear Springs.
3.6 Outstanding Options, Warrants and Other Rights. Except as set forth on
Schedule 3.6 hereto, Clear Springs does not have outstanding any option, warrant
or other right permitting or requiring it or others
B-5
<PAGE> 83
to purchase or convert any obligation into shares of its capital stock and has
not agreed to issue or sell any shares of such capital stock, except to Fresh
Juice hereunder. Except as set forth on Schedule 3.6 hereto, there are no voting
trusts or other agreements or understandings with respect to the voting of the
shares of capital stock of Clear Springs, and the shares of the capital stock of
Clear Springs are not subject to any preemptive rights, rights of first refusal
or similar rights.
3.7 Record Ownership.
The Selling Stockholders are the sole record owners of all of the shares of
Clear Springs Stock issued and outstanding. Duffy currently owns 212.457544
shares and the Bogen Group L.L.C. owns 609.0439754 shares. The Clear Springs
Stock owned by the Selling Stockholders is owned free and clear of all liens,
claims, charges and encumbrances of every kind.
3.8 Financial Statements. Clear Springs has delivered to Fresh Juice (i)
financial statements including the related notes thereto for its fiscal year
ended December 31, 1995, (unaudited) containing the balance sheets of Clear
Springs as of the end of such fiscal year, and the related statement of
operations and retained earning; and (ii) (unaudited) internal financial
statements for the months of January and February 1996, containing the
corresponding balance sheets and related statements of operations and retained
earnings. The foregoing financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods indicated, are complete and correct, and fairly present the
financial position and stockholders' equity of Clear Springs as of the date and
for the respective periods indicated. Except as set forth on Schedule 3.8(a)
hereto, the balance sheet as of February 29, 1996, makes full and adequate
provision for all fixed and contingent obligations and liabilities of Clear
Springs as of the date and for the periods indicated, and as of February 29,
1996, Clear Springs does not have any fixed obligations or liabilities not
reflected in or adequately reserved against on such balance sheet as of February
29, 1996, or set forth in the Schedules to this Agreement. To the knowledge of
Clear Springs and the Selling Stockholders, there is no basis for the assertion
against Clear Springs of any liability or obligation not adequately reflected or
reserved against in such financial statement or set forth in the Schedules to
this Agreement; Clear Springs has no liabilities, fixed or contingent, which
would adversely affect the conduct of the business of Clear Springs other than
as reflected or reserved against in the balance sheet of Clear Springs as of
February 29, 1996, or set forth in the Schedules to this Agreement.
3.9 Certain Changes or Events. Except as set forth on Schedule 3.9 hereto,
since February 29, 1996, Clear Springs has not:
(i) experienced any change in its condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects other
than changes in the ordinary course of business which have not,
individually or in the aggregate, had a material adverse effect on its
properties, assets, business, operations or financial condition; provided,
however, that Clear Springs has been unable to raise pricing on all
accounts due to strong competition which has recently emerged for the same
customer base.
(ii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or purchased or redeemed,
directly or indirectly, any shares of its capital stock;
(iii) issued or sold any shares of its capital stock of any class, or
any options, warrants, conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such shares;
(iv) incurred any indebtedness for borrowed money (except borrowings
in the ordinary course of business not exceeding $10,000 in the aggregate)
or issued or sold any debt securities;
(v) mortgaged, pledged, or subjected to any lien, lease, security
interest or other charge or encumbrance any of its properties or assets,
tangible or intangible, except (i) liens for current taxes not due and
payable or being contested in good faith by appropriate proceedings; (ii)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materialmen
and the like; and (iii) encumbrances, easements and security interests
which do not detract from the value or interfere with the use of the
properties affected thereby;
B-6
<PAGE> 84
(vi) acquired or disposed of any assets or properties of material
value except in the ordinary course of business;
(vii) forgiven or canceled any debts or claims, or waived any rights,
except in the ordinary course of business,
(viii) entered into any material transaction other than in the
ordinary course of business;
(ix) granted to any officer or salaried employee or any class of other
employees any increase in compensation in any form in excess of the amount
thereof in effect as of December 31, 1995, or any severance or termination
pay (other than in amounts consistent with past practices), or entered into
any written employment agreement or arrangement with any person;
(x) entered into, adopted or amended in any respect any collective
bargaining agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
insurance or other similar plan, agreement, trust, fund or arrangement for
the benefit of employees;
(xi) suffered any damage, destruction or loss (whether or not covered
by insurance) which materially adversely affects its condition (financial
or otherwise), properties, assets, business, operations or prospects;
(xii) suffered any strike or other labor trouble materially adversely
affecting its business, operations or prospects;
(xiii) suffered any loss of employees or customers that materially
adversely affects or could materially adversely affect its business,
operations or prospects; or
(xiv) incurred any liability or obligation (fixed or contingent)
except (A) liabilities and obligations in the ordinary course of business
and (B) other liabilities and obligations not exceeding $10,000 in the
aggregate.
3.10 Title to Properties: Liens. Except as set forth on Schedule 3.10
hereto, Clear Springs has good and marketable title to, or valid and subsisting
leasehold interests in, all of its properties and assets, real and personal, in
each case free and clear of any mortgage, pledge, lien, lease, charge,
encumbrance, conditional sale or other title retention agreement, except for the
lien of taxes not yet due and payable or being contested in good faith by
appropriate proceedings, and except for such imperfections of title and
encumbrances, if any, as do not detract from the value, or interfere with the
present use, its properties or assets subject thereto or affected thereby, or
otherwise impair its business operations. Except as set forth on Schedule 3.10
hereto, there is not under any lease of real or personal property to which Clear
Springs is a party any existing default or event of default or event which with
notice or lapse of time or both would constitute a default or event of default.
3.11 Adequacy of Patents and Other Rights. Except as set forth on Schedule
3.11 hereto, Clear Springs has all necessary patents, licenses, trademark, trade
names, copyrights and other rights that are required to conduct its respective
business substantially as now being conducted and as proposed to be conducted,
and no other right, license or authorization of any kind whatsoever is required
to so carry on its respective business. There is no infringement or claim of any
adverse nature with respect to any patent, patent application, license,
trademark, trade name, copyright or right in any thereof.
3.12 Litigation. Except as set forth on Schedule 3.12 hereof, there are no
actions, suits, proceedings or investigations pending or, to the knowledge of
Clear Springs or the Selling Stockholders, threatened against or affecting Clear
Springs, or the Selling Stockholders, at law or in equity, before any court,
commission, board, bureau, agency, instrumentality or other governmental
authority that may result in any material adverse effect upon the business,
assets, liabilities, prospects or condition (financial or otherwise) of Clear
Springs or which seems to prevent the consummation of any of the transactions
contemplated by this Agreement. To the knowledge of Clear Springs or the Selling
Stockholders, there are no claims that have not been asserted against Clear
Springs or the Selling Stockholders that are probable of assertion.
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3.13 Accounts Receivable. Except as set forth on Schedule 3.13 hereto, the
accounts receivable of Clear Springs as shown on its balance sheet at February
29, 1996, or thereafter acquired by them, are usual and normal receivables and,
through the continuation of existing collection procedures, are collectible in
the aggregate amounts thereof, after allowance for doubtful accounts in the
amount of the reserve established therefor. To the knowledge of Clear Springs or
the Selling Stockholders, such accounts receivable are subject to no valid
defenses or offsets except routine customer complaints or warranty demands of an
immaterial nature. An adequate reserve for doubtful accounts in the ordinary
course of business has been established.
3.14 Inventories. Except as set forth on Schedule 3.14 hereto, the
inventories of Clear Springs, shown on its balance sheet at February 29, 1996,
or thereafter acquired by it, consist of items of a quality and quantity usable
or salable in the normal course of its business; the value of all items of
obsolete materials and of materials of below standard quality has been written
down to realizable market value or adequate reserves have been provided
therefor; and the values at which such inventories are carried reflect the
normal inventory valuation policies of Clear Springs.
3.15 Consents, etc. Except as set forth on Schedule 3.15 hereto, Clear
Springs is not required to obtain any consent, approval, permit or authorization
of any person, including, without limitation, any governmental agency or
regulatory authority, in connection with execution, delivery, lawful
consummation and performance of this Agreement and the transactions contemplated
thereby.
3.16 Compliance with Other Instruments, etc. Except as set forth on
Schedule 3.16 hereto, the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby by Clear Springs or any of
the Selling Stockholders does not and will not violate, conflict with, result in
a breach of any provisions of, constitute a default (or an event which, with or
without due notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of Clear Springs, under any provision of its
Articles of Incorporation or by-laws, or any contract, mortgage, indenture,
lien, license, permit, lease or other agreement or instrument, judgment, decree,
ordinance, regulation or order or any other restriction of any other kind or
character to which Clear Springs is a party or by which Clear Springs, or any of
its properties, is bound or affected.
3.17 Existing Contracts. Except as set forth on Schedule 3.17(a), all
material contracts, agreements, leases, licenses and understandings to which
Clear Springs is a party are in full force and effect and no default, or event
which with notice or lapse of time or both would constitute a default, exists in
respect thereof on the part of Clear Springs, or the other parties thereto.
Except as set forth on Schedule 3.17(b) hereto, Clear Springs is not a party to
and does not have any obligation, contingent or otherwise, under any (i) written
or oral contract not made in the ordinary course of business in excess of
$50,000; (ii) employment contract or contract with or for the benefit, directly
or indirectly, of any officer, director, shareholder or partner other than
Duffy; (iii) collective bargaining agreement with employees; (iv) bonus,
pension, profit-sharing, retirement, stock purchase, hospitalization, insurance
or other plan providing employee benefits; (v) lease with respect to any
property, real or personal, whether as lessor or lessee other than its current
corporate headquarters and warehouse; (vi) contract for the purchase of
materials, supplies or equipment, or the provision by Clear Springs of goods or
services, for an aggregate price in excess of $25,000; (vii) contract or
commitment for capital expenditures in excess of $25,000 in the aggregate;
(viii) contract continuing over a period of more than one year from its date in
excess of $50,000; (ix) mortgage, loan or credit agreement; (x) contract
requiring consent to the transactions contemplated by this Agreement; (xi)
guaranty of the obligations of any other person; or (xii) any other material
contact, agreement or understanding.
3.18 Undocumented Liabilities. Except as set forth in the financial
statements referred to in Section 3.8 hereof and except for property owned by
customers and stored upon the premises of Clear Springs for use in future orders
of such customers, of which Clear Springs or the Selling Stockholders are aware,
Clear Springs does not have any material liabilities, contingent or otherwise,
that are not disclosed in such financial statements or set forth in the
Schedules to this Agreement, including, without limitation, tax liabilities due
or to become due, whether disputed or not, except such liabilities as have been
incurred in the ordinary course of business.
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3.19 Taxes. Clear Springs has filed all tax returns which are required to
be filed, and has paid all taxes which have become due, pursuant to such returns
or pursuant to any assessment received by Clear Springs. Clear Springs has made
adequate provision for all taxes due with respect to all periods as to which a
return has not yet been filed. Except as provided in Schedule 3.19, there is no
tax deficiency proposed or threatened against Clear Springs and no tax returns
of Clear Springs are under examination or audit.
3.20 Employee Matters. Clear Springs has withheld all amounts required by
law or contract to be withheld from the wages or salaries of its employees and
is not liable for any arrears or wages or any taxes or penalties for failure to
comply with any of the foregoing or for payment to any trust or other fund
compensation, social security or other benefits for employees. To its knowledge,
Clear Springs has not engaged in any unfair labor practice or discriminated on
the basis of race, age, sex or otherwise in its employment conditions or
practices with respect to its employees. There are no unfair labor practice or
race, age, sex or other discrimination complaints pending, or, to the knowledge
of Clear Springs or the Selling Stockholders, threatened against Clear Springs
by any employee, former or current, before any domestic (federal, state or
local) or foreign board, department, commission or agency nor, to the knowledge
of Clear Springs or the Selling Stockholders, does any basis therefore exists.
Except as set forth on Schedule 3.20 hereto, there are no existing or, to the
knowledge of Clear Springs or the Selling Stockholders, threatened, labor
strike, disputes, grievances, controversies or other labor troubles affecting
the business of Clear Springs. There are not pending or, to the knowledge of
Clear Springs or the Selling Stockholders, threatened representation questions
respecting any employees.
3.21 Financial Statements. Clear Springs shall provide to Fresh Juice,
when requested by Fresh Juice, such financial statements and information
pertaining to Clear Springs as shall be necessary for Fresh Juice to satisfy any
and all United State Securities and Exchange Commission disclosure requirements,
such as filing of a Form 8-K, as may arise in connection with this Agreement and
transactions contemplated thereby.
3.22 Accounts Receivable. The accounts receivable of Clear Springs Juice
Company, Inc. as shown on its balance sheet at February 29, 1996, or thereafter
acquired by it, are usual and normal receivables and, through the continuation
of existing collection procedures, are collectible in the aggregate amounts
thereof. To the knowledge of Clear Springs, such accounts receivable are subject
to no valid defenses or offsets except routine customer complaints of warranty
demands of an immaterial nature. An adequate reserve for doubtful accounts in
the ordinary course of business has been established.
3.23 Miscellaneous. Clear Springs:
(i) is in substantial compliance with all applicable federal, state
and local statues, codes, ordinances, rules or regulation; has not received
any notice of a material violation of any law, order, regulation or
requirement relating to the operation of the business or the ownership of
property;
(ii) does not have, as of February 29, 1996, any unfunded costs or
obligations in respect of employee benefit plans and does not have
delinquent premiums on health, accident, disability or any other insured
employee benefits;
(iii) has not, since February 29, 1996, permitted any option to renew
any lease or any option to purchase any property to expire unexercised, in
whole or in part;
(iv) does not have any safe deposit boxes, vault boxes or similar
arrangements for the safekeeping of property or outstanding powers of
attorney (other than appointments of statutory agents to receive service of
process); and
(v) except as set forth on Exhibit 3.23(v), has made no express
warranty to any person or entity with respect to any product it
manufactures or sells or has manufactured or sold and has not made or
agreed to make any indemnification payment, or replacement with respect to
any product warranty claim, except for the warranties and/or agreement(s)
to indemnify or replace product of which true and correct copies have been
delivered to Fresh Juice, the warranties applicable under the Uniform
Commercial Code as in effect from time to time in the State of Florida or
in any other state in which its products are sold and any other warranties
under other state or federal laws.
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3.24 Accounting and Tax Matters. Neither Clear Springs nor any of its
subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended.
3.25 Insurance. Clear Springs maintains such policies of insurance in such
coverage amounts and for such rights as are generally maintained by companies in
the same industry with a similar sales and production volume. As of the date
hereof, Clear Springs has not received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default under
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion. All pending material
claims under such policies or bonds are disclosed in this Agreement or the
Schedules hereto.
3.26 Environmental Matters. Except as disclosed on Schedule 3.26 hereto,
Clear Springs has not received any written notice, citation, claim, assessment,
proposed assessment or demand for abatement alleging that Clear Springs (either
directly or as a successor-in-interest in connection with the enforcement of
remedies to realize the value of properties serving as collateral for
outstanding loans) is responsible for the correction or clean-up of any
condition material to the business, operations, assets or financial condition of
Clear Springs. Except as disclosed on Schedule 3.26, Clear Springs have no
knowledge that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored on any property owned or leased by Clear
Springs in any manner that violates or, after the lapse of time may violate, any
presently existing federal, state or local law or regulation governing or
pertaining to such substances and materials.
3.27 Collective Bargaining Agreement. Clear Springs is not now nor ever
has been a party to or bound by any collective bargaining agreement or union
contract which covers or covered its employees.
3.28 No Right of Setoff. As of the date hereof, none of the Selling
Stockholders is indebted to Clear Springs for any monies and Clear Springs has
no right of setoff with respect to any amounts due to the Selling Stockholders
from Clear Springs with the exception of that certain Promissory Note dated
March 11, 1996, made by Clear Springs in favor of Duffy, a copy of which has
been provided to Fresh Juice.
3.29 No Liquidation of Clear Springs. Clear Springs, represents that it
has no present plan or intention to liquidate, or cause the liquidation of,
Clear Springs or to dispose of or cause the disposition of substantially all of
its assets prior to the merger, or to dispose of or cause the disposition of
substantially all of the assets formerly owned by Clear Springs after the
merger.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub hereby represents and warrants to Clear Springs as follows;
4.1 Organization Standing, etc. Merger Sub is a duly organized and validly
existing corporation in good standing under the laws of the State of Florida and
has all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted. Merger Sub is duly qualified to do business in good
standing as a foreign corporation in each jurisdiction in which the property is
owned, leased or operated by it or the nature of the business now conducted or
proposed to be conducted by it makes such qualification necessary. Merger Sub
has no subsidiaries.
4.2 Capitalization. Merger Sub has an authorized capitalization of 1,000
shares of common stock, par value $.01 per share, of which 100 shares are issued
and outstanding ("Merger Sub Stock"). There are no treasury shares of Merger Sub
capital stock.
4.3 Authorization: No Conflict.
(a) Merger Sub has all requisite corporate power and authority to execute
and deliver this Agreement and to perform the transactions contemplated hereby.
Merger Sub has taken all requisite corporate action to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
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hereby. This Agreement is the legal, valid and binding obligations of Merger
Sub, enforceable against it in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws affecting the enforceability of creditors rights generally and that
equitable remedies may be granted in the discretion of a court.
(b) Except as set forth in Schedule 4.3(b) hereto, the execution, delivery
and performance of this Agreement and the documents, transactions and
instruments contemplated hereby by Merger Sub do not and will not violate,
conflict with, result in a breach of any provisions of, constitute a default (or
an event which, with or without due notice or lapse of time or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
Merger Sub under any provision of its charter, by-laws or other corporate
documents, or under any of the terms, conditions or provisions of any contract,
note, bond, mortgage, indenture, deed of trust, license, lease, loan agreement,
judgment, order, decree, statute, rule, regulation or other agreement,
instrument or obligation to which Merger Sub is a party, or by which it or any
of its properties or assets is bound or affected.
4.4 Status of Securities. The shares of Merger Sub Stock outstanding are
duly authorized, validly issued, fully paid and nonassessable and free and clear
of all liens, security interests, pledges, charges, claims and encumbrances of
any kind.
4.5 Articles of Incorporation and By-laws. Merger Sub has delivered to
Clear Springs a true, correct and complete copy of its Articles of Incorporation
and a true, correct and complete copy of its By-laws, each of which contains all
amendments thereto and has been certified by the Secretary of Merger Sub.
4.6 Outstanding Options, Warrants or Other Rights. Merger Sub does not
have outstanding any option, warrant or other right permitting or requiring it
or others to purchase or convert any obligation into shares of capital stock of
Merger Sub and has not agreed to issue or sell any shares of capital stock of
Merger Sub. There are no voting trusts or other agreements or understandings
with respect to the voting of the shares of capital stock of Merger Sub, and the
shares of the capital stock of Merger Sub are not subject to any preemptive
rights, rights of first refusal or similar rights.
4.7 Record Ownership. Fresh Juice is the sole record owner of all of the
shares of Merger Sub Stock issued and outstanding. The Merger Sub Stock owned by
Fresh Juice is owned free and clear of all liens, claims, charges and
encumbrances of every kind.
4.8 Certain Changes or Events. Except as set forth in Schedule 4.8 or in
the Fresh Juice Financial Statements (as defined in Section 5.7 hereof) since
February 29, 1996, Merger Sub has not:
(i) experienced any change in its condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects other
than changes in the ordinary course of business which have not,
individually or in the aggregate, had a material adverse effect on its
properties, assets, business, operations or financial condition;
(ii) declared, set aside made or paid any dividend or other
distribution in respect of its capital stock or purchased or redeemed,
directly or indirectly, any shares of its capital stock; or
(iii) issued or sold any shares of its capital stock of any class, or
any options, warrants conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such shares.
(iv) incurred any indebtedness for borrowed money (except borrowings
in the ordinary course of business not exceeding $10,000 in the aggregate)
or issued or sold any debt securities;
(v) mortgaged, pledged, or subjected to any lien, lease, security
interest or other charge or encumbrance any of its properties or assets,
tangible or intangible, except (i) liens for current taxes not due and
payable or being contested in good faith by appropriate proceedings; (ii)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen,
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laborers, materialmen and the like; and (iii) encumbrances, easements and
security interests which do not detract from the value or interfere with
the use of the properties affected thereby;
(vi) acquired or disposed of any assets or properties of material
value except in the ordinary course of business;
(vii) forgiven or canceled any debts or claims, or waived any rights,
except in the ordinary course of business,
(viii) entered into any material transaction other than in the
ordinary course of business;
(ix) granted to any officer or salaried employee or any class of other
employees any increase in compensation in any form in excess of the amount
thereof in effect as of February 29, 1996, or any severance or termination
pay (other than in amounts consistent with past practices), or entered into
any written employment agreement or arrangement with any person;
(x) entered into, adopted or amended in any respect any collective
bargaining agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
insurance or other similar plan, agreement, trust, fund or arrangement for
the benefit of employees (whether or not legally binding);
(xi) suffered any damage, destruction or loss (whether or not covered
by insurance) which materially adversely affects its condition (financial
or otherwise), properties, assets, business, operations or prospects;
(xii) suffered any strike or other labor trouble materially adversely
affecting its business, operations or prospects;
(xiii) suffered any loss of employees or customers that materially
adversely affects or could materially adversely affect its business,
operations or prospects; or
(xiv) incurred any liability or obligation (fixed or contingent)
except (A) liabilities and obligations in the ordinary course of business
and (B) other liabilities and obligations not exceeding $10,000 in the
aggregate.
4.9 Title to Properties; Liens. Except as set forth in Schedule 4.9
attached hereto, Merger Sub has good and marketable title to, or valid and
subsisting leasehold interests in, all of its properties and assets, real and
personal, in each case free and clear of any mortgage, pledge, lien, lease,
charge, encumbrance, conditional sale or other title retention agreement, except
for the lien of taxes not yet due and payable or being contested in good faith
by appropriate proceedings, and except for such imperfections of title and
encumbrances, if any, as do not detract from the value, or interfere with the
present use, of its properties or assets subject thereto or affected thereby, or
otherwise impair their respective business operations. There is not under any
lease of real or personal property to which Merger Sub is a party any existing
default or event of default or event which with notice or lapse of time or both
would constitute a default or event of default.
4.10 Adequacy of Patents and Other Rights. Merger Sub has all necessary
patents, licenses, trademarks, trade names, copyrights and other rights that are
required to conduct business substantially as now being conducted and as
proposed to be conducted, and no other right, license or authorization of any
kind whatsoever is required to so carry on its business. There is no
infringement or claim of any adverse nature with respect to any patent, patent
application, license trademark, trade name, copyright or right in any thereof.
4.11 Accounts Receivable. Except as set forth on Schedule 4.11 hereto, the
accounts receivable of Merger Sub as shown on its balance sheet at February 29,
1996, or thereafter acquired by it, are usual and normal receivables and,
through the continuation of existing collection procedures, are collectible in
the aggregate amounts thereof, after allowance for doubtful accounts in the
amount of the reserve established therefor. To the knowledge of Merger Sub, such
accounts receivable are subject to no valid defenses or offsets except routine
customer complaints or warranty demands of an immaterial nature. An adequate
reserve for doubtful accounts in the ordinary course of business has been
established.
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4.12 Inventories. Except as set forth on Schedule 4.12 hereto, the
inventories of Merger Sub, shown on its balance sheet at February 29, 1996, or
thereafter acquired by them, consist of items of a quality and quantity usable
or salable in the normal course of its business; the value of all items of
obsolete materials and of materials of below standard quality has been written
down to realizable market value or adequate reserves have been provided
therefor; and the values at which such inventories are carried reflect the
normal inventory valuation policies of Merger Sub.
4.13 Litigation, etc. Except as set forth in Schedule 4.13 or as disclosed
in the Fresh Juice Financial Statements, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of Merger Sub,
threatened against or affecting Merger Sub, at law or in equity before any
court, commission, board, bureau, agency, instrumentality or other governmental
authority that may result in any material adverse effect upon the business,
assets, liabilities, prospects or condition (financial or otherwise) of Merger
Sub or which seems to prevent the consummation of any of the transactions
contemplated by this Agreement. To the knowledge of Merger Sub, there are no
claims that have not been asserted against it that are probable of assertion.
4.14 Consents, etc. Except as set forth in Schedule 4.14 hereof, Merger Sub
is not required to obtain any consent, approval, permit or authorization of any
person, including, without limitation, any governmental agency or regulatory
authority, in connection with the execution, delivery, lawful consummation and
performance of this Agreement and the transactions contemplated thereby, or the
consummation of the transactions contemplated hereby or thereby.
4.15 Existing Contracts. Except as set forth in the Fresh Juice Financial
Statement and in Schedule 4.15 hereof, all material contracts, agreements,
leases, licenses and understandings to which Merger Sub is a party are in full
force and effect and no default, or event which with notice or lapse of time or
both would constitute a default, exists in respect thereof on the part of Merger
Sub, or the other parties thereto. Except as set forth on Schedule 4.15 hereto,
Merger Sub is not a party to and does not have any obligation, contingent or
otherwise, under any (i) written or oral contract not made in the ordinary
course of business in excess of $50,000; (ii) employment contract or contract
with or for the benefit, directly or indirectly, of any officer, director,
shareholder or partner; (iii) collective bargaining agreement with employees;
(iv) bonus, pension, profit-sharing, retirement, stock purchase,
hospitalization, insurance or other plan providing employee benefits; (v) lease
with respect to any property, real or personal, whether as lessor or lessee
other than its current corporate headquarters and warehouse; (vi) contract for
the purchase of materials, supplies or equipment, or the provision by Merger Sub
of goods or services, for an aggregate price in excess of $25,000; (vii)
contract or commitment for capital expenditures in excess of $25,000 in the
aggregate; (viii) contract continuing over a period of more than one year from
its date in excess of $50,000; (ix) mortgage, loan or credit agreement; (x)
contract requiring consent to the transactions contemplated by this Agreement;
(xi) guaranty of the obligations of any other person; or (xii) any other
material contact, agreement or understanding.
4.16 Undocumented Liabilities. Except as set forth in the Fresh Juice
Financial Statements and except for property owned by customers and stored upon
the premises of Merger Sub for use in future orders of such customers, of which
Merger Sub is aware, Merger Sub does not have any liabilities, contingent or
otherwise, that are not disclosed in the Merger Sub Financial Statements,
including, without limitation, tax liabilities due or to become due, whether
disputed or not, except such liabilities as have been incurred in the ordinary
course of business.
4.17 Taxes. Merger Sub has filed all tax returns which are required to be
filed, and has paid all taxes which have become due, pursuant to such returns or
pursuant to any assessment received by Merger Sub. Merger Sub has made adequate
provision for all taxes due with respect to all periods as to which a return has
not yet been filed. There is no tax deficiency proposed or threatened against
Merger Sub and no tax returns of Merger Sub are under examination or audit.
4.18 Employee Matters. Merger Sub has withheld all amounts required by law
or contract to be withheld from the wages or salaries of its employees and is
not liable for any arrears or wages or any taxes or penalties for failure to
comply with any of the foregoing or for payment to any trust or other fund
compensation, social security or other benefits for employees. To its knowledge,
Merger Sub has not engaged
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in any unfair labor practice or discriminated on the basis of race, age, sex or
otherwise in its employment conditions or practices with respect to its
employees. There are no unfair labor practice or race, age, sex or other
discrimination complaints pending, or, to the knowledge of Merger Sub,
threatened against Merger Sub Springs by any employee before any domestic
(federal, state or local) or foreign board, department, commission or agency
nor, to the knowledge of Merger Sub, does any basis therefore exist. There are
no existing or, to the knowledge of Merger Sub threatened, labor strikes,
disputes, grievances, controversies or other labor troubles affecting the
business of Merger Sub. There are not pending or, to the knowledge of Merger
Sub, threatened representation questions respecting any employees.
4.19 Miscellaneous. Except as set forth in Schedule 4.19 and in the Fresh
Juice Financial Statements, Merger Sub:
(i) is in substantial compliance with all applicable federal, state
and local statutes, codes, ordinances, rules or regulations; Merger Sub has
not received any notice of violation of any law, order, regulation or
requirements relating to the operation of its business or the ownership of
its property;
(ii) does not have, as of February 29, 1996, any unfunded costs or
obligations in respect of employee benefit plans and does not have unpaid
premiums on health, accident, disability or any other insured employee
benefits;
(iii) has not, since February 29, 1996, permitted any option to renew
any lease or any option to purchase any property to expire unexercised, in
whole or in part;
(iv) has made no express warranty to any person or entity with respect
to any product it manufactures or sells or has manufactured or sold and has
not made or agreed to make any indemnification payment, or replacement with
respect to any product warranty claim, except for the warranties of which
true and correct copies have been delivered to Clear Springs and the
warranties applicable under the Uniform Commercial Code as in effect from
time to time in the State of Florida.
4.20 Collective Bargaining Agreement. Merger Sub is not now nor ever has
been a party to or bound by any collective bargaining agreement or union contact
which covers or covered its employees.
4.21 Accounts Receivable. Except as set forth on Schedule 4.21 hereto, the
accounts receivable of Merger Sub as shown on its balance sheet at February 29,
1996, or thereafter acquired by it, are usual and normal receivables and,
through the continuation of existing collection procedures, are collectible in
the aggregate amounts thereof, after allowance for doubtful accounts in the
amount of the reserve established therefor. To the knowledge of Merger Sub, such
accounts receivable are subject to no valid defenses or offsets except routine
customer complaints of warranty demands of an immaterial nature. An adequate
reserve for doubtful accounts in the ordinary course of business has been
established.
4.22 Tax-Free Reorganization. Merger Sub has not taken nor agreed to take
any action nor has knowledge of any fact or circumstance that would prevent the
Merger transaction contemplated herein from qualifying as a tax-free
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended.
4.23 No Right of Setoff. As of the date hereof, none of the Selling
Stockholders is indebted to Merger Sub for any monies and Merger Sub has no
right of setoff with respect to any amounts due to the Selling Stockholders from
Merger Sub.
4.24 Insurance. Merger Sub maintains such policies of insurance in such
coverage amounts and for such risks as are generally maintained by companies in
the same industry with similar sales volume. As of the date hereof, Merger Sub
has not received any notice of cancellation or notice of a material amendment of
any such insurance policy or bond or is in default under such policy or bond, no
coverage thereunder is being disputed and all material claims thereunder have
been filed in a timely fashion. All pending material claims under such policies
or bonds are disclosed in this Agreement or the Schedules hereto.
4.25 Environmental Matters. Except as disclosed on Schedule 4.25 hereto,
Merger Sub has not received any written notice, citation, claim, assessment,
proposed assessment or demand for abatement alleging that
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Merger Sub (either directly or as a successor-in-interest in connection with the
enforcement of remedies to realize the value of properties serving as collateral
for outstanding loans) is responsible for the correction or clean-up of any
condition material to the business, operations, assets or financial condition of
Merger Sub. Except as disclosed on Schedule 4.25, Merger Sub has no knowledge
that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored on any property owned or leased by Merger Sub
in any manner that violates or, after the lapse of time may violate, any
presently existing federal, state or local law or regulation governing or
pertaining to such substances and materials.
4.26 No Liquidation of Assets. Merger Sub, represents that it has no
present plan or intention to liquidate, or cause the liquidation of, Clear
Springs or to dispose of or cause the disposition of substantially all of its
assets prior to the merger, or to dispose of or cause the disposition of
substantially all of the assets formerly owned by Clear Springs after the
merger.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FRESH JUICE
Fresh Juice represents and warrants to each of the Selling Stockholders and
Clear Springs as follows:
5.1 Organization Standing, etc. Fresh Juice is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as now conducted and as
proposed to be conducted and to execute and deliver this Agreement and to
perform the transactions contemplated hereby and its obligations hereunder.
Fresh Juice is duly qualified to do business in good standing as a foreign
corporation in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business now conducted or proposed to be conducted by
it makes such qualification necessary. Except as set forth on Schedule 5.1
hereto, Fresh Juice has no subsidiaries or affiliates.
5.2 Capitalization. Fresh Juice has an authorized capitalization of
5,200,000 shares of capital stock, consisting of 5,000,000 shares of Fresh Juice
Common and 200,000 shares of series preferred stock, par value $10 per share;
there are 3,550,062 shares of Fresh Juice Common issued and outstanding and
there are no shares of such preferred stock issued and outstanding. All such
shares of issued and outstanding Fresh Juice Common have been duly authorized,
validly issued and are fully paid and non-assessable. There are 200,000 treasury
shares of Fresh Juice Common.
5.3 Authorization. Fresh Juice has all requisite corporate power and
authority to execute and deliver this Agreement and to perform the transactions
contemplated hereby. Fresh Juice has taken all requisite corporate action to
authorize the execution, delivery and performance of this Agreement and the
transactions contemplated hereby. This Agreement is the legal, valid and binding
obligations of Fresh Juice, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws affecting the enforceability of creditors
rights generally and that equitable remedies may be granted in the discretion of
a court.
5.4 Status of Securities. The shares of Fresh Juice Common to be issued and
delivered to the Selling Stockholders pursuant to this Agreement shall be, as of
the Effective Time, duly authorized, validly issued, fully paid and
nonassessable and free and clear of all liens, security interests, pledges,
charges, claims and encumbrances of any kind.
5.5 Articles of Incorporation and By-laws. Fresh Juice has delivered to
Clear Springs a true, correct and complete copy of its Articles of Incorporation
and a true, correct and complete copy of its By-laws, each of which contains all
amendments thereto and have been certified by the Secretary of Fresh Juice.
5.6 Outstanding Options, Warrants or Other Rights. Except as set forth in
Schedule 5.6 hereto, Fresh Juice does not have outstanding any option, warrant
of other right permitting or requiring it or others to purchase or convert any
obligation into shares of its capital stock and has not agreed to issue or sell
any shares of such capital stock; except as provided for herein other than the
Stockholders Agreement between Steve Smith and Steven Bogen dated as of the date
hereof. Other than the Voting Agreement, dated as of the date
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hereof, among Craig Lessner, Fresh Juice and the Stockholders named herein.
There are no voting trusts or other agreements or understandings with respect to
the voting of the shares of capital stock of Fresh Juice, and the shares of the
capital stock of Fresh Juice are not subject to any preemptive rights, rights of
first refusal or similar rights.
5.7 Fresh Juice Financial Statements. Fresh Juice has delivered to Clear
Springs and the Selling Stockholders (i) its Annual Report on Form 10-KSB for
the fiscal year ended November 30, 1995, as filed with the Securities Exchange
Commission ("Fresh Juice Form 10-KSB"); and (ii) its internal monthly financial
statements for the quarter ended February 27, 1996 (collectively, the "Fresh
Juice Financial Statements"). The foregoing financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, are complete and correct,
and fairly present the financial position and stockholder's equity of Fresh
Juice as of the date and for the respective periods indicated. Except as set
forth on Schedule 5.7 hereto, the balance sheet as of November 30, 1995 and
February 29, 1996, makes full and adequate provision for all fixed and
contingent obligations and liabilities of Fresh Juice as of the date and for the
periods indicated, and as of February 29, 1996, Fresh Juice does not have any
fixed obligations or liabilities not reflected in or adequately reserved against
on such balance sheet as of February 29, 1996, or set forth in the Schedules to
this Agreement. To the knowledge of Fresh Juice, there is no basis for the
assertion against Fresh Juice of any liability or obligation not adequately
reflected or reserved against in such financial statements or set forth in the
Schedules to this Agreement; Fresh Juice has no liabilities, fixed or
contingent, which would adversely affect the conduct of the business of Fresh
Juice other than as reflected or reserved against in the balance sheet of Fresh
Juice as of February 29, 1996, or set forth in the Schedules to this Agreement.
5.8 Certain Changes or Events. Except as set forth in Schedule 5.8 hereto
or in the Fresh Juice Financial Statements since February 29, 1996, Fresh Juice
has not:
(i) experienced any change in its condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects other
than changes in the ordinary course of business which have not,
individually or in the aggregate, had a material adverse effect on its
properties, assets, business, operations or financial condition;
(ii) declared, set aside made or paid any dividend or other
distribution in respect of its capital stock or purchased or redeemed,
directly or indirectly, any shares of its capital stock; or
(iii) issued or sold any shares of its capital stock of any class, or
any options, warrants conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such shares.
(iv) incurred any indebtedness for borrowed money (except borrowings
in the ordinary course of business not exceeding $10,000 in the aggregate)
or issued or sold any debt securities;
(v) mortgaged, pledged, or subjected to any lien, lease, security
interest or other charge or encumbrance any of its properties or assets,
tangible or intangible, except (i) liens for current taxes not due and
payable or being contested in good faith by appropriate proceedings; (ii)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers, materialmen
and the like; and (iii) encumbrances, easements and security interests
which do not detract from the value or interfere with the use of the
properties affected thereby;
(vi) acquired or disposed of any assets or properties of material
value except in the ordinary course of business;
(vii) forgiven or canceled any debts or claims, or waived any rights,
except in the ordinary course of business,
(viii) entered into any material transaction other than in the
ordinary course of business;
(ix) granted to any officer or salaried employee or any class of other
employees any increase in compensation in any form in excess of the amount
thereof in effect as of February 29, 1996, or any
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severance or termination pay (other than in amounts consistent with past
practices), or entered into any written employment agreement or arrangement
with any person;
(x) entered into, adopted or amended in any respect any collective
bargaining agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
insurance or other similar plan, agreement, trust, fund or arrangement for
the benefit of employees (whether or not legally binding);
(xi) suffered any damage, destruction or loss (whether or not covered
by insurance) which materially adversely affects its condition (financial
or otherwise), properties, assets, business, operations or prospects;
(xii) suffered any strike or other labor trouble materially adversely
affecting its business, operations or prospects;
(xiii) suffered any loss of employees or customers that materially
adversely affects or could materially adversely affect its business,
operations or prospects; or
(xiv) incurred any liability or obligation (fixed or contingent)
except (A) liabilities and obligations in the ordinary course of business
and (B) other liabilities and obligations not exceeding $10,000 in the
aggregate.
5.9 Title to Properties; Liens. Except as set forth in Schedule 5.9
attached hereto, Fresh Juice has good and marketable title to, or valid and
subsisting leasehold interests in, all of its properties and assets, real and
personal, in each case free and clear of any mortgage, pledge, lien, lease,
charge, encumbrance, conditional sale or other title retention agreement, except
for the lien of taxes not yet due and payable or being contested in good faith
by appropriate proceedings, and except for such imperfections of title and
encumbrances, if any, as do not detract from the value, or interfere with the
present use, of its properties or assets subject thereto or affected thereby, or
otherwise impair their respective business operations. There is not under any
lease of real or personal property to which Fresh Juice is a party any existing
default or event of default or event which with notice or lapse of time or both
would constitute a default or event of default.
5.10 Adequacy of Patents and Other Rights. Fresh Juice has all necessary
patents, licenses, trademarks, trade names, copyrights and other rights that are
required to conduct business substantially as now being conducted and as
proposed to be conducted, and no other right, license or authorization of any
kind whatsoever is required to so carry on its business. There is no
infringement or claim of any adverse nature with respect to any patent, patent
application, license trademark, trade name, copyright or right in any thereof.
5.11 Accounts Receivable. Except as set forth on Schedule 5.11 hereto, the
accounts receivable of Fresh Juice as shown on its balance sheet at February 29,
1996, or thereafter acquired by it, are usual and normal receivables and,
through the continuation of existing collection procedures, are collectible in
the aggregate amounts thereof, after allowance for doubtful accounts in the
amount of the reserve established therefor. To the knowledge of Fresh Juice,
such accounts receivable are subject to no valid defenses or offsets except
routine customer complaints or warranty demands of an immaterial nature. An
adequate reserve for doubtful accounts in the ordinary course of business has
been established.
5.12 Inventories. Except as set forth on Schedule 5.12 hereto or in the
Fresh Juice Financial Statements, the inventories of Fresh Juice, shown on its
balance sheet at February 29, 1996, or thereafter acquired by them, consist of
items of a quality and quantity usable or salable in the normal course of its
business; the value of all items of obsolete materials and of materials of below
standard quality has been written down to realizable market value or adequate
reserves have been provided therefor; and the values at which such inventories
are carried reflect the normal inventory valuation policies of Fresh Juice.
5.13 Litigation, etc. Except as set forth in Schedule 5.13 or as disclosed
in the Fresh Juice Financial Statements, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of Fresh Juice,
threatened against or affecting Fresh Juice, at law or in equity before any
court, commission, board, bureau, agency, instrumentality or other governmental
authority that may result in any material adverse effect upon the business,
assets, liabilities, prospects or condition (financial or otherwise) of Fresh
Juice or which
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seems to prevent the consummation of any of the transactions contemplated by
this Agreement. To the knowledge of Fresh Juice, there are no claims that have
not been asserted against it that are probable of assertion.
5.14 Consents, etc. Except as set forth in Schedule 5.14 hereto, Fresh
Juice is not required to obtain any consent, approval, permit or authorization
of any person, including, without limitation, any governmental agency or
regulatory authority, in connection with the execution, delivery, lawful
consummation and performance of this Agreement and the transactions contemplated
thereby, or the consummation of the transactions contemplated hereby or thereby.
5.15 Compliance with Other Instruments, etc. Except as set forth in
Schedule 5.15 hereto, the execution, delivery and performance of this Agreement
by Fresh Juice does not and will not violate, conflict with, result in a breach
of any provisions of, constitute a default (or an event which, with or without
due notice or lapse of time, or both, would constitute a default) under, result
in the termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any of
the properties or assets of Fresh Juice, under any provision of its charter or
by-laws, or any contract, mortgage, indenture, lien, license, permit, lease or
other agreement or instrument, judgment, decree, ordinance, regulation or order
or any other restriction of any other kind or character to which Fresh Juice is
a party or by which Fresh Juice or any of its properties, is bound or affected.
5.16 Existing Contracts. Except as set forth in the Fresh Juice Form
10-KSB and on Schedule 5.16(a), all material contracts, agreements, leases,
licenses and understandings to which Fresh Juice is a party are in full force
and effect and no default, or event which with notice or lapse of time or both
would constitute a default, exists in respect thereof on the part of Fresh
Juice, or the other parties thereto. Except as set forth on Schedule 5.16(b)
hereto, Fresh Juice is not a party to and does not have any obligation,
contingent or otherwise, under any (i) written or oral contract not made in the
ordinary course of business in excess of $50,000; (ii) employment contract or
contract with or for the benefit, directly or indirectly, of any officer,
director, shareholder or partner other than Smith; (iii) collective bargaining
agreement with employees; (iv) bonus, pension, profit-sharing, retirement, stock
purchase, hospitalization, insurance or other plan providing employee benefits;
(v) lease with respect to any property, real or personal, whether as lessor or
lessee other than its current corporate headquarters and warehouse; (vi)
contract for the purchase of materials, supplies or equipment, or the provision
by Fresh Juice of goods or services, for an aggregate price in excess of
$25,000; (vii) contract or commitment for capital expenditures in excess of
$25,000 in the aggregate; (viii) contract continuing over a period of more than
one year from its date in excess of $50,000; (ix) mortgage, loan or credit
agreement; (x) contract requiring consent to the transactions contemplated by
this Agreement; (xi) guaranty of the obligations of any other person; or (xii)
any other material contact, agreement or understanding.
5.17 Undocumented Liabilities. Except as set forth in the financial
statements referred to in Section 5.7 hereof and except for property owned by
customers and stored upon the premises of Fresh Juice for use in future orders
of such customers, of which Fresh Juice is aware, Fresh Juice does not have any
liabilities, contingent or otherwise, that are not disclosed in the Fresh Juice
Financial Statements, including, without limitation, tax liabilities due or to
become due, whether disputed or not, except such liabilities as have been
incurred in the ordinary course of business.
5.18 Taxes. Fresh Juice has filed all tax returns which are required to be
filed, and has paid all taxes which have become due, pursuant to such returns or
pursuant to any assessment received by Fresh Juice. Fresh Juice has made
adequate provision for all taxes due with respect to all periods as to which a
return has not yet been filed. There is no tax deficiency proposed or threatened
against Fresh Juice and no tax returns of Fresh Juice are under examination or
audit.
5.19 Employee Matters. Fresh Juice has withheld all amounts required by
law or contract to be withheld from the wages or salaries of its employees and
is not liable for any arrears or wages or any taxes or penalties for failure to
comply with any of the foregoing or for payment to any trust or other fund
compensation, social security or other benefits for employees. To its knowledge,
Fresh Juice has not engaged in any unfair labor practice or discriminated on the
basis of race, age, sex or otherwise in its employment
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conditions or practices with respect to its employees. There are no unfair labor
practice or race, age, sex or other discrimination complaints pending, or, to
the knowledge of Fresh Juice, threatened against Fresh Juice by any employee
before any domestic (federal, state or local) or foreign board, department,
commission or agency nor, to the knowledge of Fresh Juice, does any basis
therefore exist. There are no existing or, to the knowledge of Fresh Juice
threatened, labor strikes, disputes, grievances, controversies or other labor
troubles affecting the business of Fresh Juice. There are not pending or, to the
knowledge of Fresh Juice, threatened representation questions respecting any
employees.
5.20 Miscellaneous. Fresh Juice:
(i) is in substantial compliance with all applicable federal, state
and local statutes, codes, ordinances, rules or regulations; Fresh Juice
has not received any notice of violation of any law, order, regulation or
requirements relating to the operation of its business or the ownership of
its property;
(ii) does not have, as of February 29, 1996, any unfunded costs or
obligations in respect of employee benefit plans and does not have unpaid
premiums on health, accident, disability or any other insured employee
benefits;
(iii) has not, since February 29, 1996, permitted any option to renew
any lease or any option to purchase any property to expire unexercised, in
whole or in part;
(iv) has made no express warranty to any person or entity with respect
to any product it manufactures or sells or has manufactured or sold and has
not made or agreed to make any indemnification payment, or replacement with
respect to any product warranty claim, except for the warranties of which
true and correct copies have been delivered to Clear Springs and the
warranties applicable under the Uniform Commercial Code as in effect from
time to time in the State of New York.
5.21 Collective Bargaining Agreement. Fresh Juice is not now nor ever has
been a party to or bound by any collective bargaining agreement or union contact
which covers or covered its employees.
5.22 Tax-Free Reorganization. Neither Fresh Juice or any of its
subsidiaries has taken or agreed to take any action or has knowledge of any fact
or circumstance that would prevent the Merger transaction contemplated herein
from qualifying as a tax-free reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended.
5.23 No Right of Setoff. As of the date hereof, none of the Selling
Stockholders is indebted to Fresh Juice for any monies and Fresh Juice has no
right of setoff with respect to any amounts due to the Selling Stockholders from
Fresh Juice.
5.24 SEC Documents. Fresh Juice has made available to Clear Springs (or,
with respect to documents filed subsequent to the date of this Agreement, will
make available to Clear Springs) a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed by Fresh
Juice with the SEC since January 1, 1993 (such documents, as amended since the
time of their filing, being referred to herein as the "Fresh Juice SEC
Documents"), which are all the documents (other than preliminary material) that
Fresh Juice was required to file with the SEC since such date. As of their
respective dates, the Fresh Juice SEC Documents complied or will comply in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Fresh Juice SEC Documents, and none of
the Fresh Juice SEC Documents contained or will contain any untrue statement of
a material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that
disclosures as of a later date shall be deemed to modify disclosures of an
earlier date. The financial statements of Fresh Juice included in the Fresh
Juice SEC Documents filed and to be filed subsequent to November 30, 1995,
comply and will comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC and with
respect thereto, have been and will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited
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statements, as permitted by Form 10-Q of the SEC) and fairly present and will
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount) the consolidated financial
position of Fresh Juice as at the dates thereof and the consolidated results of
its operations and cash flows or changes in financial position for the periods
then ended.
5.25 Insurance. Fresh Juice maintains such policies of insurance in such
coverage amounts and for such risks as are generally maintained by companies in
the same industry with similar sales volume. As of the date hereof, neither
Fresh Juice nor any of its Subsidiaries has received any notice of cancellation
or notice of a material amendment of any such insurance policy or bond or is in
default under such policy or bond, no coverage thereunder is being disputed and
all material claims thereunder have been filed in a timely fashion. All pending
material claims under such policies or bonds are disclosed in this Agreement or
the Schedules hereto.
5.26 Environmental Matters. Except as disclosed on Schedule 5.26 hereto
neither Fresh Juice nor any of its Subsidiaries has received any written notice,
citation, claim, assessment, proposed assessment or demand for abatement
alleging that Fresh Juice or any of its Subsidiaries (either directly or as a
successor-in-interest in connection with the enforcement of remedies to realize
the value of properties serving as collateral for outstanding loans) is
responsible for the correction or clean-up of any condition material to the
business, operations, assets or financial condition of Fresh Juice or its
Subsidiaries. Except as disclosed on Schedule 5.26, Fresh Juice has no knowledge
that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored on any property owned or leased by Fresh Juice
or any of its Subsidiaries in any manner that violates or, after the lapse of
time may violate, any presently existing federal, state or local law or
regulation governing or pertaining to such substances and materials.
5.27 No Liquidation of Assets. Fresh Juice, represents that it has no
present plan or intention to liquidate, or cause the liquidation of, Clear
Springs or to dispose of or cause the disposition of substantially all of its
assets prior to the merger, or to dispose of or cause the disposition of
substantially all of the assets formerly owned by Clear Springs after the
Merger.
ARTICLE 6
CONDITIONS TO BE SATISFIED AT OR PRIOR TO CLOSING
6.1 Unless otherwise waived by Fresh Juice and Merger Sub, the following
conditions shall be fulfilled by Clear Springs and/or the Selling Stockholders
on or before the Closing Date:
(a) Resignation of Officers of Clear Springs. Fresh Juice shall have
received, in writing, the resignations, effective as of the Closing Date,
of the following directors or officers of Clear Springs which individuals
constitute all of Clear Spring's directors and officers:
(i) President, Brian Duffy
(ii) Secretary and Treasurer, Steven Bogen
(b) Permits, Approvals, Litigation, etc. Clear Springs and the
Selling Stockholders shall have obtained, in form and substance reasonably
satisfactory to Fresh Juice and its counsel, all consents, permits,
releases and waivers from third parties that may be required in connection
with the performance of their respective obligations under this Agreement
and the consummation of the transactions contemplated hereby.
(c) Accuracy of Representations and Warranties and Performance of
Obligations. Clear Springs and the Selling Stockholders shall have each
executed and delivered to Fresh Juice and Merger Sub a certificate in which
they certify that (i) all representations and warranties of Clear Springs
and the Selling Stockholders contained in this Agreement are true and
accurate as of the Closing Date; and (ii) the Selling Stockholders and
Clear Springs have duly observed all covenants and duly performed all
obligations to be observed or performed by them under the Agreement on or
before the Closing Date.
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(d) Merger. All requirements of law necessary to effect the Merger
shall have been completed, other than the filing of the appropriate
Certificates of Merger with the Secretary of State's office for each of the
State of Delaware and Florida.
(e) No Violation of Law, etc. There shall be no law and no order
shall have been entered and not vacated by a court of competent
jurisdiction which enjoins, restrains, makes illegal or otherwise prohibits
consummation of the transactions contemplated by this Agreement.
(f) Delivery of Clear Springs Stock/ or Cancellation. The Selling
Stockholders shall deliver to Fresh Juice certificates representing the
shares of Clear Springs Stock set forth in Schedule 3.7 marked for
cancellation.
6.2 Unless otherwise waived by Clear Springs and the Selling Stockholders,
the following conditions shall be fulfilled by Fresh Juice and/or Merger Sub on
or before the Closing Date:
(a) Permits, Approvals, Litigation, etc. Fresh Juice and Merger Sub
shall have obtained, in form and substance reasonably satisfactory to Clear
Springs and its counsel, all consents, permits, releases and waivers from
third parties that may be required in connection with the performance of
their respective obligations under this Agreement.
(b) Accuracy of Representations and Warranties and Performance of
Obligations. Fresh Juice and Merger Sub shall each have executed and
delivered to Clear Springs and the Selling Stockholders a certificate in
which they each certify that (i) all the representations and warranties of
Fresh Juice and Merger Sub contained in this Agreement are true and
accurate as of the Closing Date; and (ii) Fresh Juice and Merger Sub have
duly observed all covenants and duly performed all obligations to be
observed or performed by them hereunder on or before the Closing Date.
(c) Increase of Authorized Shares of Fresh Juice Common. The
Stockholders of Fresh Juice shall affirmatively vote to amend the
Certificate of Incorporation of Fresh Juice to increase the number of
authorized shares of Fresh Juice from 5,000,000 Fresh Juice Common and
200,000 preferred to 20,000,000 shares of common stock and 7,000,000 shares
of preferred stock.
(d) Delivery of Fresh Juice Common Certificates. MacromediaFresh Juice
shall have delivered to the Selling Stockholders the stock certificates
evidencing The Fresh Juice Common described in Section 1.6(b)(ii).
ARTICLE 7
COVENANTS
7.1 Covenants of Fresh Juice. If permitted by applicable federal and state
law, Fresh Juice shall account for and treat the Merger for tax purposes as a
tax-free reorganization pursuant to Section 368(a)(2)(E) of the Internal Revenue
Code of 1986, as amended.
7.2 Interim Period Covenants of Clear Springs. Except as expressly
contemplated by this Agreement or except as set forth on Schedule 7.2 or except
with the express prior written approval of Fresh Juice and Merger Sub, which
shall not be unreasonably withheld, Clear Springs shall not:
(i) amend its charter or by-laws;
(ii) issue or agree to issue (by the issuance or granting of options,
warrants or rights to purchase stock or otherwise) any shares of capital
stock, any securities exchangeable for or convertible into its capital
stock, or any other securities;
(iii) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividends or make any other distributions
(whether in cash, stock or other property) in respect of its capital stock
or purchase or redeem any of its capital stock;
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(iv) except as contemplated by Schedule 7.2, enter into any contract,
agreement, undertaking or commitment, or take any other action which would
have been required to be set forth in Schedule 7.2 if taken or in effect on
the date hereof;
(v) delay payment of any account payable or other liability in excess
of $15,000 individually, or $40,000 in the aggregate, beyond its due date
or the date when such liability would have been paid in the ordinary course
of business consistent with past practice;
(vi) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof, or make any investment, either by purchase of stock or
securities or contribution of capital in an other entity or person;
(vii) except for prior obligations disclosed on any Schedule hereto,
increase the compensation or benefits, payable or to become payable to any
directors, officers or employees after the date hereof or take any action
with respect to the grant or increase of severance or termination pay
payable after the date hereof;
(viii) except as required by law or the terms thereof, institute any
increase in or otherwise amend any profit sharing, incentive, deferred
compensation, insurance, retirement, medical, disability, welfare or other
employee benefit plan, agreement, trust or fund;
(ix) enter into any contract for the purchase or sale of real estate;
(x) enter into any lease that involves payment by Clear Springs in
excess of $25,000 individually, or $75,000 in the aggregate, in any year or
that has a duration in excess of three years;
(xi) enter into any negotiation or transaction relating to the merger
or consolidation of, the sale of any shares of capital stock of, Clear
Springs, or the sale, lease or other disposition of any substantial portion
of the properties or business of Clear Springs;
(xii) make any material changes in the commissions or other incentives
payable to its sales staff;
(xiii) pay any salary to Steven Bogen or Daniel Petry without the
approval of the Fresh Juice Board of Directors.
(xiv) agree or commit to do or authorize any of the foregoing.
7.3 Interim Period Covenants of Fresh Juice and Merger Sub. Except as
expressly contemplated by this Agreement or except as set forth on Schedule 7.3
or except with the express prior written approval of Clear Springs, which shall
not be unreasonably withheld, Fresh Juice and Merger Sub each shall not:
(i) amend its charter or by-laws;
(ii) issue or agree to issue (by the issuance or granting of options,
warrants or rights to purchase stock or otherwise) any shares of capital
stock, any securities exchangeable for or convertible into its capital
stock, or any other securities;
(iii) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividends or make any other distributions
(whether in cash, stock or other property) in respect of its capital stock
or purchase or redeem any of its capital stock;
(iv) enter into any contract, agreement, undertaking or commitment, or
take any other action which would have been required to be set forth in
Schedule 7.3 if taken or in effect on the date hereof;
(v) delay payment of any account payable or other liability in excess
of $15,000 individually, or $40,000 in the aggregate, beyond its due date
or the date when such liability would have been paid in the ordinary course
of business consistent with past practice;
(vi) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof, or make any investment, either by purchase of stock or
securities or contribution of capital in an other entity or person;
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(vii) except for prior obligations disclosed on any Schedule hereto,
increase the compensation or benefits, payable or to become payable to any
directors, officers or employees after the date hereof or take any action
with respect to the grant or increase of severance or termination pay
payable after the date hereof;
(viii) except as required by law or the terms thereof, institute any
increase in or otherwise amend any profit sharing, incentive, deferred
compensation, insurance, retirement, medical, disability, welfare or other
employee benefit plan, agreement, trust or fund;
(ix) enter into any contract for the purchase or sale of real estate;
(x) enter into any lease that involves payment by Fresh Juice or
Merger Sub in excess of $25,000 individually, or $75,000 in the aggregate,
in any year or that has a duration in excess of three years;
(xi) enter into any negotiation or transaction relating to the merger
or consolidation of, the sale of any shares of capital stock of, Fresh
Juice or Merger Sub, or the sale, lease or other disposition of any
substantial portion of the properties or business of Fresh Juice or Merger
Sub;
(xii) make any material changes in the commissions or other incentives
payable to its sales staff;
(xiii) agree or commit to do or authorize any of the foregoing.
7.4 Mutual Covenants.
(a) Prior to the Closing Date, except as otherwise provided for herein,
each of Clear Springs, Fresh Juice and Merger Sub covenants to the other parties
that it will (A) operate its business only in the usual, regular and ordinary
manner and, to the extent consistent with such operation, will use its best
efforts to (i) preserve its present business organization intact, (ii) keep
available the services of its officers and employees, and (iii) preserve its
present relationships with persons having business dealings with it, and (B)
maintain its properties in customary repair, order and condition, reasonable
wear and use and damage by fire or unavoidable casualty except and to maintain
adequate insurance upon all of its properties, at least in such amounts and of
such kinds comparable to that in effect as of the date hereof.
(b) After the Closing Date, Clear Springs, the Selling Stockholders, Fresh
Juice and Fresh Juice Florida, shall not (1) liquidate, or cause a liquidation
of, Clear Springs, or dispose of, or cause the disposition of, substantially all
of its assets prior to the merger; or (2) dispose of, or cause the disposition
of, substantially all of the assets formerly owned by Clear Springs after the
merger in any manner which would adversely affect the tax-free nature of the
Merger.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Selling Stockholders and Clear Springs.
(a) Each of the Selling Stockholders and Clear Springs agrees subsequent to
the Closing to indemnify and hold each of Fresh Juice and Merger Sub and their
respective stockholders, subsidiaries, representatives and affiliates and
persons serving as officers, directors, partners, employees or agents thereof
harmless from and against any damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing pursuant to this Section 8.1) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(i) fraud, intentional misrepresentation or a deliberate or willful
breach by any of the Selling Stockholders or Clear Springs of any of their
respective representations, warranties or covenants under this Agreement;
or
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(ii) any other material breach of any representation, warranty or
covenant of the Selling Stockholders or Clear Springs under this Agreement
or in any certificate delivered by any of the Selling Stockholders or Clear
Springs hereunder, or by reason of any material claim, action or proceeding
asserted or instituted growing out of any matter or thing constituting a
material breach of such representations, warranties or covenants, provided,
however, that any claims for indemnification pursuant to this subsection
(ii) shall be limited to the sum of the dollar value of the Merger
Consideration as of the date hereof (with such indemnification to be paid
in shares of Fresh Juice Common with a per share credit equal to the
greater of the per share price on the date of the receipt by the
indemnifying party of a notice of the claim or the Closing Date); provided,
further, however, that there shall be no limitation in claims for
indemnification related to Sections 3.4, 3.6, 3.7, 3.19 and 3.26 hereof.
(b) Other than as provided by law, this Section 9 contains the sole
remedies of the parties hereto with respect to claims arising from the subject
matter of this Section 9.
8.2 Indemnification by Fresh Juice and Merger Sub. (a) Fresh Juice and
Merger Sub agree to indemnify and hold Clear Springs and each of the Selling
Stockholders and their respective stockholders, subsidiaries, representatives
and affiliates and persons serving as officers, directors, partners, employees
or agents thereof harmless from and against any damages, liabilities, losses,
taxes, fines, penalties, costs, and expenses (including, without limitation,
reasonable fees of counsel) of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing pursuant to this Section
8.2) which may be sustained or suffered by any of them arising out of or based
upon any of the following matters:
(i) fraud, intentional misrepresentation or a deliberate or willful
breach by Fresh Juice or Merger Sub of any of their representations,
warranties or covenants under this Agreement; or
(ii) any other breach of any representation, warrant or covenant of
Fresh Juice or Merger Sub under this Agreement or in any certificate
delivered by Fresh Juice or Merger Sub hereunder, or by reason of any
claim, action or proceeding asserted or instituted growing out of any
matter or thing constituting a breach of such representations, warranties
or covenants; provided, however, that any claims for indemnification
pursuant to this subsection (b) shall be limited to the sum of the dollar
value of the Merger Consideration as of the date hereof, provided, further,
however, that there shall be no limitation in claims for indemnification
related to Sections 5.4, 5.6, 5.18 and 5.26 hereof.
(b) Other than as provided by law, this Section 9 contains the sole
remedies of the parties hereto with respect to claims arising from the subject
matter of this Section 8.
(c) Notwithstanding anything to the contrary contained in this Section 8.2
neither Fresh Juice nor Merger Sub shall be required to indemnify, or shall be
held liable for any damages, liabilities, losses, taxes, penalties, costs or
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever to any of the Selling Stockholders in the event the Merger
is not accounted for, and so treated, as a tax-free reorganization pursuant to
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, if Fresh
Juice determines in good faith that it is unable in accordance with applicable
federal or state law to so account for, and so treat, the Merger for tax
purposes as provided for in Section 9.1 hereof.
8.3 Notice; Defense of Claims. Promptly after receipt by an indemnified
party of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the Liability or obligation is
asserted. If within twenty (20) days after receiving such notice the
indemnifying party gives written notice to the indemnified party stating that it
disputes and intends to defend against such claim, liability or expense at its
own cost and expense, then counsel for the defense shall be selected by the
indemnifying party (subject to the consent of the indemnified party which
consent shall not be unreasonably withheld) and the indemnified
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party, shall make no payment on such claim, liability or expense as long as the
indemnifying party is conducting a good faith and diligent defense.
Notwithstanding anything herein stated, the indemnified party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying party, and the indemnified party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of separate counsel
for the indemnified party shall be paid by the indemnifying party. If no such
notice of intent to dispute and defend is given by the indemnifying party, or if
such diligent good faith defense is not being or ceases to be conducted, the
indemnified party, shall, at the expense of the indemnifying party, undertake
the defense of such claim, liability or expense (with counsel selected by the
indemnified party), and shall have the right to compromise or settle the same
(exercising reasonable business judgment). If such claim, liability or expense
is one that by its nature cannot be defended solely by the indemnifying party,
then the indemnified party shall make available all information and assistance
that the indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, provided that the indemnifying party
reimburses the indemnified party for its reasonable cost and expenses incurred
in connection therewith.
8.4 Indemnification of Bogen and Duffy Guarantees. Fresh Juice shall, as
of the Effective Date and at all times subsequent thereto, indemnify and hold
harmless Steven Bogen and Brian Duffy against any and all liabilities and
obligations arising out of the personal guarantees which Bogen and Duffy have
executed in favor of SouthTrust Bank.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of the parties hereto;
(b) by any of the parties hereto, if a foreign or domestic court of
competent jurisdiction or domestic governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling (other than an ex-parte order or temporary restraining order) or
taken any other action, in each case restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Agreement; provided,
however, that if Clear Springs, Fresh Juice, Merger Sub or Steven Smith are
the plaintiff in the action resulting in such order, decree or ruling or
are the entity which instigated or initiated the action resulting in such
order, decree or ruling, such order, decree or ruling shall not serve as a
basis for such party or its subsidiary or affiliate(s) to terminate this
Agreement;
ARTICLE 10
GENERAL
10.1 Expenses. Whether or not the Closing occurs, all costs and expenses
in connection with the negotiations and preparations with respect to this
Agreement and the transactions contemplated thereby will be borne by the party
incurring such cost or expense.
10.2 Publicity. So long as this Agreement is in effect, none of the
parties hereto shall, or permit any of their representatives or affiliates to,
issue or cause the publication or dissemination of any press release with
respect to this Agreement or any of the transactions contemplated hereby, except
with the agreement of the other parties hereto; provided that any party hereto
or any affiliate thereof may make such an announcement without the agreement of
the other parties if required by law or by the rules of any exchange on which
their securities are traded.
10.3 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
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10.4 Notices. All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when (i) delivered in person, (ii) by facsimile
transmission, upon receipt, (iii) one business day after having been sent by
overnight courier, or (iv) five (5) days after being mailed by registered or
certified first class mail, postage prepaid, return receipt requested, to the
parties hereto at the following addresses:
If to Fresh Juice or Merger Sub, addressed to such party, care of:
The Fresh Juice Company, Inc.
350 Northern Boulevard
Great Neck, New York 11021
Attention: Steven Smith
Facsimile No.: (516-482-5453)
If to any Selling Stockholder or Clear Springs, addressed to such party,
care of:
Clear Springs Citrus, Inc.
35 Walnut Avenue
Clark, New Jersey 07066
Attention: Steven M. Bogen
Facsimile No. (908) 388-2954
with a copy to: Bourne, Noll & Kenyon
382 Springfield Avenue
Summit, New Jersey 07901
Attn: Craig M. Lessner, Esq.
Facsimile No. (908) 277-6808
and a copy to: Honigman Miller Schwartz and Cohn
390 N. Orange Avenue, Suite 1300
Orlando, Florida 32801
Attention: David S. Oliver, Esq.
Facsimile No. (407) 648-1155
and a copy to: Carmen Catino, Esq.
Law Office of Carmen A. Catino
5801 North Northwest Highway
Chicago, Illinois 60631
Facsimile No. 1-312-792-5411
10.5 Waivers. No waiver of any term, covenant or condition of this
Agreement shall be effective unless made in a written instrument duly executed
by or on behalf of the party entitled to the benefits thereof.
10.6 Amendments. The parties may agree to the amendment or modification of
this Agreement solely by an agreement in writing executed by or on behalf of
each of the parties hereto.
10.7 Successors and Assigns. This Agreement binds, inures to the benefit
of, and is enforceable by the successors and assigns of the parties hereto, and
does not confer any right on any other persons or entities.
10.8 GOVERNING LAW. THE EXECUTION, VALIDITY, CONSTRUCTION AND PERFORMANCE
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF FLORIDA, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF.
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10.9 Submission to Jurisdiction.
(a) In the event Clear Springs or any of the Selling Stockholders shall
commence any legal proceeding with respect to this Agreement, each of them
agrees to submit themselves to the jurisdiction of the courts of the Florida and
the United States District Court for the Middle District of Florida for the
resolution of any dispute in connection with or arising out of this Agreement
and the transactions contemplated hereunder.
(b) In the event any of Fresh Juice or Merger Sub shall commence any legal
proceeding with respect to this Agreement, each of them agrees to submit
themselves to the jurisdiction of the courts of the State of Florida and the
United States District Court for the jurisdiction covering the Middle District
of Florida for the resolution of any dispute in connection with or arising out
of this Agreement and the transactions contemplated hereunder.
10.10 No Broker. Each of the parties hereto represents and warrants to
each of the other parties that all negotiations with respect to this Agreement
and the transactions contemplated hereby have been conducted by the parties
directly with each other without the intervention or aid of any person in such
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission or other like payment.
10.11 No Other Inducement. No representation, promise or inducement has
been made by either party that is not embodied in this Agreement, and neither
party shall be bound by or liable for any alleged representation, promise or
inducement not so set forth.
10.12 Captions. The captions of this Agreement are for convenience of
reference only and shall not affect in any manner any of the terms, covenants or
conditions hereof.
10.13 Survival of Representations, Warranties and Agreements. The
representations, warranties, agreements, covenants and obligations set forth in
this Agreement or in any schedule, exhibit or certificate delivered by any party
hereto to any other party hereto in connection with this Agreement or the
transactions contemplated hereby shall survive until June 30, 1996; provided,
however, that the representations and warranties contained in Sections 3.4, 3.6,
3.7, 3.19, 3.26, 5.4, 5.6, 5.18 & 5.26 hereof shall survive for a period of one
(1) year from the date hereof and any party aggrieved by such breach of any
representation or warranty shall institute suit not later than two (2) years
from the Effective Time and their claim shall be waived if suit is not
instituted by such date.
10.14 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force ant effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
10.15 Entire Agreement. This Agreement is complete and constitutes the
entire agreement and supersedes any and all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein, is not intended to confer upon any other person any rights or remedies
hereunder.
10.16 Assignment. This Agreement and the right and obligations hereunder
shall not be assigned or otherwise transferred, except that Merger Sub may
assign all or any of its rights and obligations hereunder to any wholly-owned
subsidiary of Fresh Juice.
10.17 No Third Party Beneficiary. Nothing in this Agreement shall confer
upon any person or entity not a party hereto, or the legal representatives of
such person or entity, any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement.
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IN WITNESS WHEREOF, the partes hereto have caused this Agreement to be duly
executed pursuant to due authorization on the date first above written.
THE FRESH JUICE COMPANY, INC.
By: /s/ Steven Smith
---------------------------------------
Steven Smith, Chief Executive Officer
THE FRESH JUICE COMPANY OF FLORIDA, INC.
By: /s/ Steven Smith
---------------------------------------
Steven Smith, Chief Executive Officer
CLEAR SPRINGS CITRUS, INC.
By: /s/ Brian Duffy
---------------------------------------
Brian Duffy, President
THE BOGEN GROUP, L.L.C.
By: /s/ Steven M. Bogen
---------------------------------------
Steven M. Bogen, Managing Member
/s/ Brian Duffy
------------------------------------------
Brian Duffy, individually
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ADDENDUM TO MERGER AGREEMENT
This addendum to Merger Agreement is entered into on this 23rd day of July,
1996, among The Fresh Juice Company, Inc., The Fresh Juice Company of Florida,
Inc., Clear Springs Citrus Inc., Brian Duffy, and The Bogen Group, L.L.C., and
is binding upon the parties hereto, their heirs, successors and assigns.
WHEREAS, all parties hereto executed that certain Merger Agreement, dated
as of March 31, 1996; and
WHEREAS, Article 1.2 of the Merger Agreement calls for the Closing
contemplated therein to occur on or before June 30, 1996 (the "Closing Date");
and
WHEREAS, all parties hereto desire to extend the Closing Date;
NOW THEREFORE, in exchange for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The Closing Date under the Merger Agreement, dated as of March 31,
1996, is hereby extended through to and including September 15, 1996.
2. Should any other provision of the Merger Agreement in any way
conflict with an extended Closing Date through September 15, 1996, then
such inconsistent provision of the Merger Agreement shall be deemed
superseded, so as to effectuate the intent of the parties to this Addendum.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed pursuant due authorization on the date first above written.
THE FRESH JUICE COMPANY, INC.
By: /s/ Steve Bogen
---------------------------------------
Its: Chief Executive Officer
THE FRESH JUICE COMPANY OF FLORIDA, INC.
By: /s/ Steven Smith
---------------------------------------
Its: Chief Executive Officer
CLEAR SPRINGS CITRUS, INC.
By: /s/ Brian Duffy
---------------------------------------
Brian Duffy, President
THE BOGEN GROUP, L.L.C.
By: /s/ Steven M. Bogen
---------------------------------------
Steven M. Bogen
Managing Member
/s/ Brian Duffy
---------------------------------------
Brian Duffy, Individually
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APPENDIX C
THE FRESH JUICE COMPANY, INC.
INCENTIVE STOCK OPTION PLAN
The purpose of this Incentive Stock Option Plan (the "Plan") is to assist
The Fresh Juice Company, Inc. (the "Company") in retaining and attracting key
employees by enabling them to acquire Common Stock of the Company and thus
providing incentive for them to expend maximum effort for the success of the
Company's business.
1. Amount and Source of Stock. The aggregate number and class of shares
which may be subject to options granted pursuant to the Plan is Five Hundred
Thousand (500,000) shares of Common Stock of the Company of the par value of
$.01 per share, subject to adjustment as provided in Section 9 of the Plan. Such
shares may be authorized but unissued shares of Common Stock of the Company or
may be shares held in or acquired for the treasury of the Company. Any shares of
stock reserved for issuance or transfer under an option which for any reason
terminates unexercised as to such shares may be reserved for issuance or
transfer under another option granted under the Plan. The aggregate fair market
value (determined at the time options are granted) of shares of Common Stock
with respect to which incentive stock options are exercisable for the first time
by an employee during a calendar year (under the Plan or any other incentive
stock option plan of the Company or any parent or subsidiary of the Company)
shall not exceed $100,000.
2. Administration of the Plan.
(a) The Board of Directors of the Company shall appoint a Stock Option Plan
Committee (the "Committee") consisting of not less than three members. The
Committee shall recommend to the Board of Directors the names of those key
employees who are to receive options under the Plan and the number of shares of
Common Stock to be subject to such options. Options granted under the Plan
shall, subject to the provisions of Section 5 hereof, be in such form as
determined by the Committee and approved by the Board of Directors. The
Committee shall interpret the Plan, prescribe amend and rescind rules and
regulations, forms, notices and agreements relating to it and make all
determinations necessary or advisable for its administration in a manner
consistent with the intention that all options granted pursuant to the Plan
qualify as Incentive Stock Options pursuant to Section 422(b) of the Internal
Revenue Code of 1986, all such actions as approved by the Board of Directors to
be final and conclusive.
(b) The Board of Directors may from time to time appoint members of the
Committee in addition to or in substitution for members previously appointed and
may fill any vacancies in the Committee. The Committee shall elect one of its
members as Chairman, and may appoint a secretary, who need not be a member of
the Committee, to keep minutes of its meetings. Meetings of the Committee shall
be held at such times and places as it shall deem advisable. A majority of the
members of the Committee shall constitute a quorum. All action of the Committee
shall be by a majority of its members. Any action may be taken by unanimous
written consent setting forth the action taken, signed by all of the members of
the Committee, and action so taken shall have the same effect as if it had been
taken by unanimous vote at a meeting duly held and called. The Committee shall
report its action at meetings or by unanimous written consent to the Board of
Directors.
(c) At any time prior to the appointment of the Committee and at any time
thereafter when the Committee shall not be duly constituted, the Board of
Directors shall exercise all the functions of the Committee under the Plan.
3. Effective Date and Term of Plan. The Plan shall become effective when
adopted by the Board of Directors of the Company, except that unless the Plan is
authorized by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock within 12 months after its adoption by the
Board of Directors, the Plan and all options outstanding under the Plan shall
terminate at the expiration of that 12
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month period. Options may be granted under the Plan within 10 years from the
date of its adoption by the Board of Directors, but not thereafter.
4. Eligible Participants. Only the key employees of the Company and any
subsidiaries of the Company shall be eligible to receive options under the Plan.
A key employee who is also a director of the Company or of one of its
subsidiaries shall be eligible to participate under the Plan. Except as provided
in Section 5(e), no option shall be granted to an individual who, immediately
before the granting of the option, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
subsidiaries.
5. Grant and Terms of Options. The Board of Directors may grant options at
any time or from time to time prior to the termination of the Plan, and except
as hereinafter provided, such options shall be subject to the following terms
and conditions and shall in all respects qualify as Incentive Stock Options
pursuant to Section 422(b) of the Internal Revenue Code of 1986.
(a) Purchase Price. The purchase price provided for in each option
granted pursuant to the Plan shall be determined by the Board of Directors,
provided that in no instance shall such price be less than the fair market
value of the shares subject to the option on the date on which the option
is granted.
(b) Duration of Option. Each option granted pursuant to the Plan will
terminate no later than ten years from the date on which it is granted,
unless it is terminated earlier under Section 7 or 8.
(c) Transferability of Option. No option shall be transferable by the
employee in whole or in part other than by will or the laws of descent and
distribution, and each option shall be exercisable, during the lifetime of
the employee, only by him or her.
(d) Exercise of Option. Subject to the provisions of this Section 5,
the Board of Directors shall have absolute discretion in determining
whether any option granted hereunder shall be exercisable in whole at one
time or in part from time to time and, if in part from time to time, the
rate at which such option shall be exercisable on a cumulative or
non-cumulative basis. Except, as provided in Sections 7 and 8 or unless the
Board of Directors shall otherwise determine, no option may be exercised at
a time when the optionee is not an employee of the Company or one of its
subsidiaries.
(e) Special Ten Percent Shareholder Rule. Sections 4, 5(a) and (b)
notwithstanding, an option may be granted to an individual, who immediately
before the granting of the option owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or
any of its subsidiaries, if at the time such option is granted, (i) the
option price is at least 110% of the fair market value of the stock subject
to the option, and (ii) such option by its terms may not be exercised after
the expiration of five years from the date on which it was granted.
6. Manner of Exercise of Options. Unless the Board of Directors shall
otherwise determine, an option, to the extent exercisable under the Plan, may be
exercised by delivery to the Secretary of the Company, at its principal office,
of a written notice, signed by the person entitled to exercise the option,
specifying the number of shares purchasable under the option which the optionee
then wishes to purchase, together with a certified or bank cashier's check
payable to the order of the Company, in the amount of the aggregate option price
for such number of shares. Unless the shares to be acquired upon exercise of an
option may, at the time of such acquisition, be lawfully resold in accordance
with a then currently effective registration statement or post-effective
amendment under the Securities Act of 1933, the Board of Directors may provide,
as a condition to the delivery of any shares to be purchased upon exercise of
the option, that the Company receive appropriate evidence that the optionee is
acquiring the shares for investment and not with a view to the distribution or
public offering of the shares, or any interest in the shares, and a
representation to the effect that the optionee shall make no sale or other
disposition of the shares unless (a) the Company shall have received an opinion
of counsel satisfactory to it in form and substance that the sale or other
disposition may be made without registration under the then applicable
provisions of the Securities Act of 1933 and the related rules and regulations
of the Securities and Exchange Commission, or (b) the shares shall be included
in a currently effective registration statement or post-effective amendment
under the Securities Act of 1933. In no event
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shall stock be issued or certificates be delivered until full payment shall have
been received by the Company, nor shall the optionee have any right or status as
a stockholder prior to such payment.
7. Termination of Employment. Unless the Board of Directors shall otherwise
determine, in the event that the employment of an optionee by the Company or one
of its subsidiaries shall be terminated other than for cause or by reason of the
death or permanent disability of the optionee, the option may be exercised by
the optionee to the extent that he or she was entitled to do so at the
termination of his or her employment, at any time within three months after such
termination, but in no event may an option be exercised after its stated
expiration date. In the event that the employment of an employee shall be
terminated for cause, any option held by the employee under the Plan, to the
extent not previously exercised, shall forthwith terminate. Normal retirement or
early retirement with the consent of the Company pursuant to any retirement plan
shall not constitute a termination of employment for cause, but shall be
considered for this purpose to be a termination other than for cause. Nothing in
the Plan or in any option granted pursuant to the Plan shall confer on any
individual any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with the right of the Company or any of its
subsidiaries to terminate his or her employment at any time.
8. Death or Disability of an Optionee. Unless the Board of Directors shall
otherwise determine, if an optionee shall die while employed by the Company, the
option may be exercised (a) to the extent that the employee was entitled to do
so at the date of his or her death, and (b) to the additional extent that the
employee would have been entitled to do so had the option been exercisable with
respect to the full number of shares covered by the option, by a legatee or
legatees of the optionee under his or her last will or by his or her personal
representative or distributees at any time within one year after the date of
death, but in no event may the option be exercised after its stated expiration
date.
Unless the Board of Directors shall otherwise determine, if an optionee
shall die within three months after the involuntary termination, other than for
cause, of his or her employment by the Company or any of its subsidiaries, the
option may be exercised, to the extent that the employee was entitled to do so
at the date of his or her death, by a legatee or legatees of the optionee under
his or her last will or by his or her personal representatives or distributees
at any time within one year after the date of death, but in no event may the
option be exercised after its stated expiration date.
Unless the Board of Directors shall otherwise determine, if an optionee
shall become permanently disabled (within the meaning of section 105(d)(4) of
the Internal Revenue Code of 1986) while employed by the Company, the option may
be exercised by the optionee to the extent that he or she was entitled to do so
at the termination of his or her employment, at any time within one year after
such termination, but in no event may an option be exercised after its stated
expiration date.
9. Adjustment of Number and Price of Shares Subject to Options. If the
outstanding shares of the Common Stock of the Company are subdivided,
consolidated, increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, capital adjustment or otherwise, or
if the Company shall issue Common Stock as a dividend or upon a stock split,
then the number and kind of shares available for purposes of the Plan and all
shares subject to the unexercised portion of any options previously granted and
the exercise price of those options shall be appropriately adjusted. However, no
such adjustment shall change the total exercise price applicable to the
unexercised portion of any outstanding option.
Adjustments under this Section 9 shall be made by the Board of Directors,
whose determination as to what adjustments shall be made shall be final and
binding. In computing any adjustment under this Section 9, any fractional share
which might otherwise become subject to an option shall be eliminated.
10. Amendment or Discontinuance of Plan. The Board of Directors may alter,
suspend or discontinue the Plan at any time, except that no action of the Board
may, without appropriate stockholder action, increase the maximum number of
shares subject to the Plan, alter the class of employees eligible for the grant
of options, or change the manner of determining the price of options granted
under the Plan; and, without the consent of the optionee, no such action shall
alter the terms of, or impair the rights of the optionee under, any option
previously granted pursuant to the Plan.
C-3
<PAGE> 110
11. (a) Subsidiary. As used herein the term "subsidiary" means any
"subsidiary corporation" within the meaning of Section 424(f) of the Internal
Revenue Code of 1986.
(b) Governing Law. The Plan shall be governed by the laws of the State of
Delaware.
(c) Regulatory Approvals. If at any time the Committee shall determine in
its discretion that the listing, registration or qualification of shares of
Common Stock 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 sale or purchase of
shares of Common Stock under the Plan, no option may be exercised unless and
until such listing registration, qualification, consent, or approval shall have
been effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Committee.
12. Option Agreement Required. Each grant made pursuant to the Plan shall
be evidenced by an Option Agreement (the "Agreement"). No person shall have any
rights under any option granted under the Plan unless and until the person to
whom such option shall be granted shall have executed and delivered an Agreement
to the Company. The Committee shall prescribe the form of all Agreements. A
fully executed counterpart of the Agreement shall be provided to both the
Company and the recipient of the grant.
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<PAGE> 111
PROXY
THE FRESH JUICE COMPANY
35 Walnut Avenue, Clark, New Jersey 07066
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholders of The Fresh Juice Company, Inc., a Delaware
corporation, hereby make, constitute and appoint Steven M. Bogen, with the
full power of substitution, the true and lawful attorney and proxy to vote
at the Annual Meeting of the Stockholders to be held August 29, 1996 and any
adjournment thereof.
(1) To approve the amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 5,000,000 to
30,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
(2) To approve the amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Preferred Stock from 200,000 to
7,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
(3) ELECTION OF DIRECTORS
/ /FOR all nominees listed below / /WITHHELD for all nominees listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Steven M. Bogen Steven Smith Jeffrey Smith Brian Duffy
(4) To approve the adoption of the Company's 1996 Incentive Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(5) To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending November 30, 1996.
/ / FOR / / AGAINST / / ABSTAIN
(6) TO ACT UPON ANY AND ALL OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
(Continued and to be signed and dated on the reverse side)
<PAGE> 112
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ITEMS (1), (2),
(3), (4), (5) AND (6) ABOVE.
Please indicate any correction or change in address here:
- -------------------------------------------------------------------------------
Receipt of the notice of said
meeting and of the Proxy Statement
is hereby acknowledged.
DATE: _____________________, 1996
-----------------------------------
Signature
-----------------------------------
Signature
IMPORTANT: Joint Owners must EACH
sign. When signing at attorney,
trustee, executor, administrator,
guardian or corporate officer,
please give your FULL title.
PLEASE SIGN AND MAIL PROMPTLY.
