<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 28, 1996
Commission File No. 34-025260
KASH N' KARRY FOOD STORES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 95-4161591
(State of Incorporation) (IRS Employer Identification Number)
6422 Harney Road, Tampa, Florida 33610
(Address of Registrant's Principal Executive Offices)
(813) 621-0200
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
Preferred Share Purchase Rights
-------------------------------
(Title of Class)
Indicate by check mark whether the registrant has (1) filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
(continues on following page)
<PAGE>
(continuation of cover page)
The aggregate market value of the voting stock held by non-
affiliates of the registrant based on the average low bid and
high ask prices of such stock as of October 11, 1996 was
$25,512,732. For purposes of this report and as used herein, the
term "non-affiliate" includes all shareholders of the registrant
other than Directors, executive officers, and persons holding
more than five percent of the outstanding voting stock of the
registrant.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. [x]
Yes [ ] No
As of October 11, 1996, there were 4,674,314 shares
outstanding of the registrant's common stock, $0.01 par value.
2<PAGE>
PART III
The undersigned registrant hereby amends its Annual Report
on Form 10-K for the fiscal year ended July 28, 1996 by deleting
Part III in its entirety, and substituting the following in lieu
thereof.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS OF THE COMPANY
Set forth below is certain information regarding each
Director (each, a "Director") of the Company as of October 31,
1996:
Name Age
---- ---
Everett L. Buckardt . . . . . . . . . . . . . . . 63
John G. Danhakl . . . . . . . . . . . . . . . . . 40
John J. Delucca . . . . . . . . . . . . . . . . . 53
Jennifer Holden Dunbar . . . . . . . . . . . . . 33
Ben Evans . . . . . . . . . . . . . . . . . . . . 67
Thomas W. Harberts . . . . . . . . . . . . . . . 52
Ronald E. Johnson . . . . . . . . . . . . . . . . 46
Robert Spiegel . . . . . . . . . . . . . . . . . 60
Peter Zurkow . . . . . . . . . . . . . . . . . . 42
Ms. Dunbar, Mr. Evans and Mr. Zurkow comprise the Company's
Compensation Committee, its Stock Option Committee, and its
Nominating Committee, and Mr. Buckardt, Ms. Dunbar, Mr. Evans and
Mr. Harberts comprise the Company's Audit Committee.
BIOGRAPHICAL INFORMATION
EVERETT L. BUCKARDT has been a Director of the Company since
December 29, 1994. Mr. Buckardt has been President and Chief
Executive Officer of BEKS Investments, Inc. since 1991. He also
served as Chairman and Chief Executive Officer of Warehouse Club,
Inc. from 1993 to 1995. On February 3, 1995, Warehouse Club, Inc.
filed a voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. In 1992, Mr. Buckardt retired from a 33
year career with Sears Roebuck and Company, where he served in
various capacities, most recently as President of Sears Catalog
and Direct Marketing Division.
JOHN G. DANHAKL has been a Director of the Company since
August 11, 1995. Mr. Danhakl has been a general partner of
Leonard Green & Associates, L.P. since March 1995. He served as a
Managing Director of Donaldson, Lufkin & Jenrette Securities
Corporation from 1990 to March 1995. Mr. Danhakl is a director of
The Arden Group.
JOHN J. DELUCCA has been a Director of the Company since
December 29, 1994. Mr. Delucca has been the Senior Vice President
3<PAGE>
and Treasurer of RJR Nabisco since October 1993. He served as
Managing Director and Chief Financial Officer of HASCO
Associates, Inc., a Greenwich, Connecticut-based private holding
company, from 1991 to 1993, as President and Chief Financial
Officer of the Lexington Group, a workout and restructuring
advisory group, from 1990 to 1991, and as Senior Vice President
of Finance and Managing Director of the Trump Group from 1988 to
1990. Mr. Delucca is a director of Edison Controls Corp. and Enzo
Biochem, Inc.
JENNIFER HOLDEN DUNBAR has been a Director of the Company
since November 1991. Ms. Dunbar has been a general partner of
Leonard Green & Associates, L.P. since 1994, and was a principal
of Leonard Green & Partners, L.P. from January 1992 to January
1994 and an associate of Leonard Green & Partners, L.P. from
November 1989. Prior to that time, Ms. Dunbar was an associate of
Gibbons, Green, van Amerongen, L.P. and a financial analyst with
Morgan Stanley & Co., Incorporated in its mergers and
acquisitions department. Ms. Dunbar is a director of Big 5
Holdings Inc., UMC Corporation, Thrifty Payless, Inc., and
Thrifty PayLess Holdings, Inc.
BEN EVANS has been a Director of the Company since December
29, 1994. Mr. Evans has been a consultant for the firm of Ernst &
Young in its financial advisory services group since 1989. He is
a director of Revco D.S., Inc., Jamesway Corporation and
Megafoods Stores, Inc.
THOMAS W. HARBERTS has been a Director of the Company since
December 29, 1994. Mr. Harberts is the President and Chief
Executive Officer of Cub Foods, a single outlet retail food store
in Oshkosh, Wisconsin. From 1970 to 1994, he served in various
capacities for Byerly's, an upscale retail food chain based in
Minnesota, most recently as its Chief Executive Officer.
RONALD E. JOHNSON has been Chairman of the Board of the
Company since March 1995 and has been its President and Chief
Executive Officer since January 1995. Mr. Johnson served as Chief
Operating Officer of Farm Fresh from December 1993 to January
1995 and as its Senior Vice President of Store Operations from
1990 to 1993. Mr. Johnson is a Director of Farm Fresh, Inc. and
Jitney-Jungle Stores of America, Inc.
ROBERT SPIEGEL has been a Director of the Company since
December 29, 1994. Mr. Spiegel, now a private investor, served as
Chairman and Chief Executive Officer of RJR Drug Distributors, a
Louisville, Kentucky franchisee of Drug Emporium, from 1984 to
1995. Mr. Spiegel is a director of Graham Field Health Products,
Inc., Hoenig Group, Inc. and Drug Emporium, Inc.
PETER ZURKOW has been a Director of the Company since
December 29, 1994. Mr. Zurkow has been employed by PaineWebber
Incorporated since 1992, currently serving as Managing Director
of the Principal Transactions Group. He was an Associate Managing
4<PAGE>
Director and served as a portfolio manager in the risk arbitrage
department of Wertheim Schroder for more than six years prior to
joining PaineWebber Incorporated.
EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS
The following sets forth certain information as to each
Executive Officer of the Company who is not also a Director,
including age as of October 31, 1996.
RICHARD D. COLEMAN, 42, has been Senior Vice President,
Chief Financial Officer, and Secretary of the Company since
January 1996. Mr. Coleman previously served as Vice President and
Controller of the Company from 1988 through January 1996; and
from 1988 to 1995, he also served as Secretary of the Company.
CLIFFORD C. SMITH, JR., 37, has been Senior Vice President
of Marketing and Merchandising of the Company since March 1996,
and served as Senior Vice President of Perishables Marketing from
March 1995 to March 1996. Mr. Smith served as the Director of
Deli, Bakery and Food Service for Harris-Teeter from 1992 to
March 1995, and as the Vice President of Deli, Bakery and Food
Service for Mayfair Supermarkets, Inc. from 1981 to 1992.
BJ MEHAFFEY, 42, has been Senior Vice President, Operations,
of the Company since July 1995. Mr. Mehaffey served as District
Manager of the Grocery Stores Division of Farm Fresh, Inc. from
1992 to 1995, and in various capacities with Bi-Lo Incorporated
from 1972 to 1992.
MARVIN H. SNOW, JR., 40, has been Vice President and
Controller of the Company since March 1996. Mr. Snow was employed
by Eckerd Corporation in various capacities from 1977 to March
1996, most recently serving as Assistant Controller.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and
certain officers of the Company, as well as persons who own more
than 10% of a registered class of the Company's equity securities
("Reporting Persons") to file reports of ownership and changes of
ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission and NASDAQ.
Based solely upon a review of the copies of such forms
furnished to the Company, or written representations that no Form
5 filings were required, the Company believes that during the
period from July 31, 1995 through July 28, 1996 all Section 16(a)
filing requirements applicable to its Reporting Persons were
complied with.
5<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth compensation for the fiscal
years ended July 28, 1996, July 30, 1995 and July 31, 1994,
respectively, awarded to, earned by, or paid to the Chief
Executive Officer of the Company during the fiscal year ended July
28, 1996, the other executive officers of the Company who were
serving as such as of July 28, 1996 (excluding executive officers
whose total annual salary and bonus for the fiscal year ended July
28, 1996 did not exceed $100,000), and one individual who would
have been among that group but for the fact that he no longer
served as an executive officer of the Company as of July 28, 1996
(collectively, the "Named Executive Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-
TERM
COMPEN-
SATION
AWARDS
------
NO. OF
SECUR- ALL
ANNUAL COMPENSATION ITIES OTHER
-------------------- UNDER- COMPEN-
NAME AND PRINCIPAL SALARY BONUS LYING SATION
POSITION YEAR ($)(1) ($)(1) OPTIONS ($)(2)
- ------------------------ ---- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
RONALD E. JOHNSON 1996 $326,465 $121,875 25,378 $10,245
Chairman of the Board, 1995 167,691 84,144 50,773 49,355
President and Chief 1994 0 0 0 0
Executive Officer
RICHARD D. COLEMAN 1996 126,476 38,352 7,616 81,088
Senior Vice President, 1995 106,701 40,000 15,232 3,016
Administration and 1994 100,000 0 0 2,574
Secretary
CLIFFORD C. SMITH, JR. 1996 131,425 48,750 15,235 4,158
Senior Vice President, 1995 43,967 30,500 30,463 0
Marketing and 1994 0 0 0 0
Merchandising
BJ MEHAFFEY 1996 116,060 43,125 15,235 3,369
Senior Vice President, 1995 7,077 3,938 30,463 0
Operations 1994 0 0 0 0
RAYMOND P. SPRINGER(3) 1996 100,698 33,750 0 46,233
Former Senior Vice 1995 181,046 100,000 45,696 10,394
President, Administration 1994 177,298 0 0 11,910
and Secretary
</TABLE>
- ----------------------
(1) Includes amounts deferred at the election of the Named
Executive Officers under the Company's Retirement Estates
401(k) Plan (the "KKRE"), a trusteed defined contribution
plan, the Company's nonqualified unfunded supplemental
salary deferral plan (the "KESP"), and the Company's
nonqualified unfunded bonus deferral compensation plan.
6<PAGE>
(2) Information provided for 1996 represents: (i) matching
contributions by the Company under its KKRE for the benefit
of Messrs. Coleman, Smith and Springer in the amounts of
$888, $150 and $1,256, respectively; (ii) matching
allocations by the Company under its KESP for the benefit of
Messrs. Johnson, Coleman, Smith, Mehaffey and Springer in
the amounts of $9,825, $3,649, $3,930, $3,302 and $3,572,
respectively; (iii) above-market interest recorded by the
Company under its KESP and bonus deferral compensation plan
for the benefit of Messrs. Johnson, Coleman, Smith, Mehaffey
and Springer in the amounts of $420, $1,552, $78, $67 and
$2,613, respectively; (iv) a special bonus allocation by the
Company under its KESP for the benefit of Mr. Coleman in the
amount of $75,000; and (v) severance payments to Mr.
Springer in the amount of $38,792.
(3) Raymond P. Springer's employment with the Company ended in
January 1996.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
In March 1995, the Board of Directors adopted a Key Employee
Stock Option Plan (the "Key Employee Plan"). See "Executive
Compensation; Employment Contracts and Termination of Employment
and Change of Control Arrangements; 1995 Key Employee Stock
Option Plan." The following table sets forth certain information
with respect to options granted pursuant to the Key Employee Plan
to the Named Executive Officers during the 1996 fiscal year:
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED POTENTIAL REALIZABLE
UNDER- TO EM- EXPIRA- VALUE AT ASSUMED
LYING PLOYEES EXER- TION ANNUAL RATES OF STOCK
OPTIONS IN CISE DATE PRICE APPRECIATION
GRANTED FISCAL PRICE IN FOR OPTION TERM
NAME (#) YEAR ($/Sh) 2006 5% 10%
- ---------------------- -------- ---- ------ ---- ---------------------
<S> <C> <C> <C> <C> <C> <C>
RONALD E. JOHNSON 25,378 32.3% $22.00 5/1 $336,228 $863,075
RICHARD D. COLEMAN 7,616 9.7 22.63 4/23 103,863 266,541
CLIFFORD C. SMITH, JR. 15,235 19.4 22.00 5/1 201,845 518,124
BJ MEHAFFEY 15,235 19.4 22.00 5/1 201,845 518,124
RAYMOND P. SPRINGER 0 0.0 0.00 -- 0 0
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR END OPTION VALUES
The following table sets forth information concerning each
exercise of stock options by the Named Executive Officers during
the 1996 fiscal year and the value of the unexercised options
granted under the Key Employee Plan held by the Named Executive
Officers as of July 28, 1996:
7<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR FISCAL YEAR
END (#) END(1)($)
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ----------------- -------- -------- ------------- -----------------
<S> <C> <C> <C> <C>
RONALD E. JOHNSON 0 $ 0 25,385/50,766 $389,672/$657,473
RICHARD D. COLEMAN 0 0 7,616/15,232 42,833/ 83,745
CLIFFORD C. SMITH, JR. 0 0 15,232/30,466 233,804/ 394,516
BJ MEHAFFEY 0 0 15,232/30,466 87,584/ 175,180
RAYMOND P. SPRINGER 18,278 205,628 0/ 0 0/ 0
- ------------------
</TABLE>
(1) As of July 28, 1996, the average of the high ask and low bid
prices of the underlying Common Stock was $27.75 per share,
as reported on the NASDAQ National Market.
DIRECTORS' COMPENSATION
Each Director receives $12,500 per year (payable quarterly),
plus $2,500 for each Board meeting, and $1,000 for each meeting
of a committee to which such Director is a member, not held on
the same day as a Board meeting. In addition, each Director is
reimbursed for reasonable and necessary out-of-pocket expenses
incurred in connection with attending such meetings in person.
The cash compensation payable to directors affiliated with LGA is
credited against the annual management fee payable to LGA. See
"Certain Relationships and Related Transactions." As of October
31, 1996, Ms. Dunbar and Mr. Danhakl were the only directors
affiliated with LGA.
In March 1995, the Company adopted the 1995 Non-Employee
Director Stock Option Plan (the "Director Plan"). Pursuant to the
Director Plan, the Company may grant options to purchase up to
54,000 shares of Common Stock to eligible Directors. Directors
who are also employees of or consultants to the Company are not
eligible to participate in the Director Plan. The Director Plan
is administered by the Stock Option Committee of the Board of
Directors, and expires on March 8, 2005.
No options were granted pursuant to the Director Plan during
the 1996 fiscal year. However, on March 9, 1995, the Company
granted to each of the incumbent Directors, excluding John G.
Danhakl, Jennifer Holden Dunbar and Ronald E. Johnson, options to
purchase 4,500 shares of Common Stock for $10.00 per share,
vesting on July 30, 1995, and options to purchase an additional
4,500 shares of Common Stock for $13.33 per share, vesting on
July 28, 1996. All of such options expire on March 8, 2005, or
earlier upon the occurrence of certain events.
8<PAGE>
In lieu of granting options to Ms. Dunbar and Mr. Danhakl
under the Director Plan, on March 9, 1995, the Company granted to
Green Equity Investors, L.P. options to purchase 9,000 shares of
Common Stock for $10.00 per share, vesting on July 30, 1995, and
options to purchase an additional 9,000 shares of Common Stock
for $13.33 per share, vesting on July 28, 1996. The terms of the
options granted to Green Equity Investors, L.P. are substantially
the same as the terms of the options granted under the Director
Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS. The Company has entered into written
employment agreements with Ronald E. Johnson, Richard D. Coleman,
Clifford C. Smith, Jr. and BJ Mehaffey. The term of the
agreements terminates in January 1998 in the case of Messrs.
Johnson, Coleman and Mehaffey, and in March 1998 in the case of
Mr. Smith. In the event of a change in control with respect to
the Company (as defined in the agreements) that occurs prior to
such termination date, the term of the agreements will not expire
prior to the first anniversary of such change in control (the
second such anniversary in the case of Mr. Johnson). Each such
executive officer is entitled to a base salary (currently
$325,000 for Mr. Johnson, $150,000 for Mr. Coleman, $175,000 for
Mr. Smith and $130,000 for Mr. Mehaffey) and to participate
proportionally in all fringe benefit plans available to the most
senior executive officers of the Company from time to time during
the term. Except for the amount of base salary and term of
employment, the terms and conditions of the employment agreements
are substantially the same. Employment under the agreements may
be terminated for cause or without cause in certain circumstances
(as defined therein), including the death or disability of the
executive officer. Upon a termination without cause, the
executive officer is entitled to continuation of salary through
the term of the employment agreement, and a prorated bonus
through the termination date. Mr. Johnson's agreement also
provides that certain options granted to him under the Key
Employee Plan will become fully vested upon a termination of his
employment without cause and that certain other options granted
to him will become fully vested upon a termination of his
employment without cause following a change in control with
respect to the Company (as defined in his employment agreement).
The agreements contain certain requirements of noncompetition,
including a requirement of noncompetition for a period of one
year following a termination of employment, other than a
termination without cause.
SEPARATION, WAIVER AND RELEASE AGREEMENT. In January 1996,
the Company terminated Raymond P. Springer's employment. Pursuant
to a Separation, Waiver and Release Agreement dated as of January
31, 1996, Mr. Springer was entitled to his current base
compensation and current insurance benefits until he obtained
full-time employment or for 52 weeks, whichever first occurs; to
participate pro rata with other senior management in the bonus
9<PAGE>
plan for the 1996 fiscal year; and to accelerate the vesting of
20% of the options granted to him under the Key Employee Option
Plan. Mr. Springer also agreed to terminate his severance pay
agreement and to provide certain other obligations to the
Company.
SEVERANCE PAY AGREEMENTS. The Company has severance pay
agreements with certain key employees of the Company. The
severance pay agreements provide, among other things, that if the
employee is terminated without cause (as defined therein) in
connection with a change in control (as defined therein) then
such employee will be entitled to payment based on a certain
percentage of that employee's annual compensation.
KASH N' KARRY RETIREMENT ESTATES. The Company maintains the
Kash n' Karry Retirement Estates ("KKRE"), a trusteed defined
contribution retirement plan. KKRE is a tax savings/profit
sharing plan maintained for the purpose of providing retirement
income for eligible employees of the Company. KKRE is qualified
under Section 401(a) and Section 401(k) of the Internal Revenue
Code of 1986, as amended. Generally, all employees who have
attained the age of 21 years and complete one year of
participation service (as defined under KKRE) are eligible to
participate in KKRE. During the 1996 fiscal year, Messrs.
Coleman, Smith and Springer were the only Named Executive
Officers who participated in KKRE.
KASH N' KARRY EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN.
Certain members of senior management and other key employees
participate in the Kash n' Karry Executive Supplemental
Retirement Plan ("KESP"), a non-qualified, unfunded salary
deferral plan. During the 1996 fiscal year, each of the Named
Executive Officers participated in KESP. Prior to the beginning
of each plan year, a participant may elect to defer an amount not
to exceed 15% of such participant's annual base compensation (as
defined under KESP). The Company matches a certain portion of the
amount deferred by the participant, but the amount of the match
may not exceed 6% of such participant's annual base compensation.
The Company records income to the participant's account at an
annual rate as determined by the Board of Directors, but the rate
of such income shall not be less than 8% per annum. The vested
percentage of the amounts recorded in the participant's account
will be paid to the participant upon the earlier of: (i) such
participant's death, disability, retirement or other separation
of service from the Company; (ii) the date the Plan is
terminated; or (iii) the date that a change in control occurs (as
defined under KESP).
BONUS DEFERRAL COMPENSATION PLAN. Certain members of senior
management and other key employees also participate in the
Company's Bonus Deferral Compensation Plan, a non-qualified,
unfunded salary deferral plan. With respect to bonuses earned
during the 1996 fiscal year, Mr. Coleman was the only Named
Executive Officer who participated in the Bonus Deferral
Compensation Plan. Prior to the end of each plan year, and at
least 30 days prior to the actual date of the ascertainment and
grant of bonus compensation to a participant, a participant may
10<PAGE>
elect to defer a portion of the bonus compensation payable to
such participant for the plan year. The Company records income to
the participant's account at an annual rate as determined by the
Board of Directors, but the rate of such income shall not be less
than 8% per annum. The amounts recorded in the participant's
account will be paid to the participant upon the earlier of: (i)
such participant's death, disability, retirement or other
separation of service from the Company; (ii) the date the plan is
terminated; or (iii) the occurrence of an unforeseeable emergency
(as defined therein) with respect to a participant.
1995 KEY EMPLOYEE STOCK OPTION PLAN. On March 9, 1995, the
Board of Directors adopted a Key Employee Stock Option Plan (the
"Key Employee Plan"), which is administered by the Stock Option
Committee of the Board of Directors. Pursuant to the Key Employee
Plan, the Company may grant options to purchase up to 331,048
shares of Common Stock to key employees of the Company designated
by the Stock Option Committee from time to time. The Stock Option
Committee has the discretion to determine the number of options
to be granted to an eligible participant, the exercise price per
share, whether the options will be non-qualified stock options or
incentive stock options, and the vesting schedule applicable to a
given option grant. The Key Employee Plan expires on March 9,
2005.
As of October 31, 1996, options to purchase a total of
258,938 shares of Common Stock had been granted pursuant to the
Key Employee Plan and were outstanding to certain of the Named
Executive Officers and other key employees of the Company. All of
the outstanding options vest in serial increments in the amount
of 20% per year, on the last day of each fiscal year of the
Company commencing with the fiscal year in which the applicable
option was granted. However, upon the occurrence of a merger
event or a change in control (as defined in the Key Employee
Plan), the outstanding options become 100% vested. In addition,
certain of Ronald E. Johnson's outstanding options become 100%
vested upon the termination of his employment without cause (as
defined in his employment agreement), and certain other options
granted to him become fully vested upon a termination of his
employment without cause following a change in control with
respect to the Company (as defined in his employment agreement).
The outstanding options expire, to the extent not exercised,
on the tenth anniversary of the date of grant. However, upon
termination of an optionee's employment with the Company, all
unvested options lapse, and all vested options expire 180 days
after the termination of employment, if such termination is due
to the death, disability or retirement of the optionee, or 45
days after the termination of employment, if such termination is
due to any other reason, other than a termination for cause. If a
termination for cause occurs, all vested and unvested options
expire immediately.
11<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has established a Compensation
Committee and a Stock Option Committee. The Compensation
Committee approves compensation payable to the executive officers
and the Stock Option Committee administers the Company's stock
option plans. Currently, Jennifer Holden Dunbar, Ben Evans and
Peter Zurkow comprise both such committees.
Peter Zurkow is a Managing Director of the Principal
Transactions Group of PaineWebber Incorporated ("PaineWebber").
As of October 31, 1996, PaineWebber owned approximately 11.9% of
the outstanding Common Stock of the Company. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT; Certain
Beneficial Owners."
On September 8, 1995, the Company engaged PaineWebber to act
as the Company's exclusive financial advisor in connection with
any proposed sale transaction involving the Company and another
party (the "Advisory Agreement"). On June 5, 1996, the Company
engaged PaineWebber to render a fairness opinion to the Company's
Board of Directors in connection with a proposed transaction with
Food Lion, Inc. (the "Fairness Opinion Agreement").
Pursuant to the Advisory Agreement, if, during the period of
the engagement, the Company enters into a definitive agreement
with a purchaser, the Company has agreed to pay PaineWebber a
transaction fee of 0.69% of the purchase price of the
transaction, payable in cash upon the closing of such
transaction. The Company also has agreed, in the event a sale
transaction is consummated with a purchaser within eighteen (18)
months after the term of PaineWebber's engagement with the
Company, to pay the same transaction fee of 0.69% upon closing of
such transaction, provided PaineWebber identified such purchaser,
advised the Company respecting such purchaser or discussed with
the Company a sale transaction with such purchaser (in any such
case during the term of the engagement). Such fee will be payable
upon consummation of the transaction (the "Merger") contemplated
under that certain Agreement and Plan of Merger dated October 31,
1996 among the Company, Food Lion, Inc. (the "Parent"), and KK
Acquisition Corp. (the "Purchaser") (the "Merger Agreement").
Pursuant to the Fairness Opinion Agreement, the Company has
agreed to pay PaineWebber a fee of $250,000, payable in cash on
the date PaineWebber delivers its fairness opinion with respect
to the transactions contemplated by the Merger Agreement,
regardless of the conclusion set forth in such opinion. Such fee
was paid upon delivery of PaineWebber's fairness opinion to the
Company's Board of Directors. Pursuant to the Advisory Agreement,
the fee paid with respect to the fairness opinion will be
deducted from any transaction fee to which PaineWebber becomes
entitled under the Advisory Agreement in connection with the
Merger.
12<PAGE>
The Company also has agreed in the Advisory Agreement and
the Fairness Opinion Agreement to reimburse PaineWebber for its
reasonable out-of-pocket expenses, including reasonable fees and
disbursements of legal counsel, and to indemnify PaineWebber and
certain related persons against certain liabilities in connection
with PaineWebber's engagement thereunder.
PaineWebber, along with certain other institutional
investors, entered into a Stockholders Agreement dated
October 31, 1996 among the Company, the Parent and the Purchaser
(the "Stockholders Agreement"). Pursuant to the Stockholders
Agreement, PaineWebber and the other stockholders party thereto
agreed to vote their shares of Common Stock of the Company to
approve the Merger Agreement and in favor of the Merger, granted
to the Purchaser an irrevocable option to purchase the Common
Stock owned by such stockholder, and agreed to tender to the
Parent their Common Stock pursuant to the tender offer to be
initiated by the Parent on or about November 15, 1996.
Jennifer Holden Dunbar is the controlling shareholder of a
general partner of LGA, and LGA is the general partner of GEI.
Prior to October 25, 1996, GEI owned approximately 27.8% of the
outstanding Common Stock of the Company.
On December 29, 1994 the Company entered into a Management
Services Agreement with LGA. Pursuant to the Management Services
Agreement, LGA agreed to provide to the Company management,
consulting, financial planning and financial advisory services
for a two year term, in consideration for an annual fee of
$200,000. The amount of such fee was determined in the course of
negotiations among LGA, the Company and an unofficial
bondholders' committee during the Company's 1994 financial
restructuring. LGA is not required to spend a fixed number of
hours of service to the Company pursuant to the Management
Services Agreement. During fiscal 1996, the Company paid a total
of $200,000 to LGA, and LGA expended approximately fifty hours of
service to the Company, in fulfillment of their respective
obligations under the Management Services Agreement.
On March 9, 1995, in lieu of granting options under the 1995
Non-Employee Director Stock Option Plan to Jennifer Holden Dunbar
and John G. Danhakl, Directors of the Company affiliated with
GEI, the Company granted to GEI options to purchase 9,000 shares
of Common Stock for $10.00 per share, vesting on July 30, 1995,
and options to purchase an additional 9,000 shares of Common
Stock for $13.33 per share, vesting on July 28, 1996. The terms
of the options granted to GEI are substantially the same as the
terms of the options granted under the Company's 1995 Non-
Employee Director Stock Option Plan.
13<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of October 31, 1996, the
name and address of each person known by the Company to be the
beneficial owner of more than five percent of the outstanding
Common Stock, and, based on information supplied to the Company
by such persons, the approximate number of shares and percentage
owned by each:
NUMBER OF
SHARES PERCENT
NAME AND ADDRESS OWNED OWNED
- -------------------------------------- ----------- -------
AMERICAN EXPRESS COMPANY
American Express Tower
World Financial Center
New York, NY 10285 . . . . . . . . . . 992,000(1) 21.2%
AMERICAN EXPRESS FINANCIAL CORPORATION
IDS Tower 10
Minneapolis, MN 55440 . . . . . . . . 992,000(1) 21.2
IDS EXTRA INCOME FUND, INC.
IDS Tower 10
Minneapolis, MN 55440 . . . . . . . . 822,430(1) 17.6
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Two Gateway Center
Floor 7
100 Mullberry Street
Newark, NJ 07102-3777 . . . . . . . . 860,749(2) 18.4
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, NY 10019 . . . . . . . . . . 553,601 11.9
- ------------------------------
(1) American Express Company, American Express Financial
Corporation and IDS Extra Income Fund, Inc. share
dispositive power over 822,430 shares, over which IDS Extra
Income Fund, Inc. has sole voting power. American Express
Company and American Express Financial Corporation also
share dispositive power with IDS Bond Fund, Inc. over an
additional 149,570 shares, over which IDS Bond Fund, Inc.
has sole voting power, and with IDS Life Advantage Fund over
an additional 20,000 shares, over which IDS Life Advantage
Fund has sole voting power. American Express Company has
advised the Company that it disclaims beneficial ownership
with respect to all 992,000 shares.
(2) Includes 27,855 shares beneficially owned by Prudential
Property & Casualty Company, 14,869 shares beneficially
owned by The Prudential Life Insurance Company of Arizona,
and 11,606 shares beneficially owned by Pruco Life Insurance
Company.
14<PAGE>
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table reflects, as of October 31, 1996, the
Common Stock ownership of each Director, and each executive
officer and former executive officer listed in the Summary
Compensation Table, and all Directors and officers as a group.
SHARES PERCENT
NAME OWNED OF CLASS
- ------------------------------------------- --------- --------
EVERETT L. BUCKARDT . . . . . . . . . . . . 9,000(1) *
RICHARD D. COLEMAN . . . . . . . . . . . . 7,616(2) *
JOHN G. DANHAKL . . . . . . . . . . . . . 18,000(1) *
JENNIFER HOLDEN DUNBAR . . . . . . . . . . 18,376(3) *
JOHN J. DELUCCA . . . . . . . . . . . . . . 9,000(1) *
BEN EVANS . . . . . . . . . . . . . . . . . 12,750(3) *
THOMAS W. HARBERTS . . . . . . . . . . . . 9,000(1) *
RONALD E. JOHNSON . . . . . . . . . . . . . 25,385(2) *
BJ MEHAFFEY . . . . . . . . . . . . . . . . 15,232(2) *
CLIFFORD C. SMITH, JR. . . . . . . . . . . 15,232(2) *
ROBERT SPIEGEL . . . . . . . . . . . . . . 24,000(3) *
RAYMOND P. SPRINGER . . . . . . . . . . . . 0(4) 0
PETER ZURKOW . . . . . . . . . . . . . . . 9,000(1) *
ALL DIRECTORS AND OFFICERS AS A GROUP
(14 PERSONS) (1)-(3) . . . . . . . . . . . 154,591 *
- ------------------------------
* Less than 1%.
(1) The number of shares owned by Messrs. Buckardt, Delucca,
Harberts and Zurkow consists of shares that are subject to
exercisable options granted under the Company's 1995 Non-
Employee Director Stock Option Plan. The number of shares
owned by Mr. Danhakl consists of shares that are subject to
exercisable options granted to Green Equity Investors, L.P.,
of which Leonard Green & Associates, L.P. ("LGA"), is the
sole general partner. Mr. Danhakl may be deemed to be the
beneficial owner of such shares by reason of his being a
general partner of LGA.
(2) The number of shares owned by Messrs. Coleman, Johnson,
Mehaffey and Smith consists of shares that are subject to
exercisable options granted under the Company's 1995 Key
Employee Stock Option Plan. Pursuant to the Merger
Agreement, all of the outstanding options held by key
employees of the Company, including Messrs. Coleman,
Johnson, Mehaffey and Smith, whether or not exercisable,
will be cancelled in exchange for a cash payment equal to
the difference between the Merger Price and the exercise
price. The total number of options (exercisable and
unexercisable) held by such individuals as of October 31,
1996 is 30,460 in the case of Mr. Coleman, 76,151 in the
case of Mr. Johnson, 45,698 in the case of Mr. Mehaffey, and
45,698 in the case of Mr. Smith.
15<PAGE>
(3) The number of shares owned by Messrs. Evans and Spiegel
includes 9,000 shares each that are subject to exercisable
options granted under the Company's 1995 Non-Employee
Director Stock Option Plan. The number of shares owned by
Ms. Dunbar includes 18,000 shares that are subject to
exercisable options granted to Green Equity Investors, L.P.,
of which LGA is the sole general partner. Ms. Dunbar may be
deemed to be the beneficial owner of such shares by reason
of her being the controlling shareholder of a general
partner of LGA.
(4) Mr. Springer's employment with the Company ended in January
1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On September 8, 1995, the Company engaged PaineWebber to act
as the Company's exclusive financial advisor in connection with
any proposed sale transaction involving the Company and another
party (the "Advisory Agreement"). On June 5, 1996, the Company
engaged PaineWebber to render a fairness opinion to the Company's
Board of Directors in connection with a proposed transaction with
Food Lion, Inc. (the "Fairness Opinion Agreement").
Pursuant to the Advisory Agreement, if, during the period of
the engagement, the Company enters into a definitive agreement
with a purchaser, the Company has agreed to pay PaineWebber a
transaction fee of 0.69% of the purchase price of the
transaction, payable in cash upon the closing of such
transaction. The Company also has agreed, in the event a sale
transaction is consummated with a purchaser within eighteen (18)
months after the term of PaineWebber's engagement with the
Company, to pay the same transaction fee of 0.69% upon closing of
such transaction, provided PaineWebber identified such purchaser,
advised the Company respecting such purchaser or discussed with
the Company a sale transaction with such purchaser (in any such
case during the term of the engagement). Such fee will be payable
upon consummation of the Merger.
Pursuant to the Fairness Opinion Agreement, the Company has
agreed to pay PaineWebber a fee of $250,000, payable in cash on
the date PaineWebber delivers its fairness opinion with respect
to the transactions contemplated by the Merger Agreement,
regardless of the conclusion set forth in such opinion. Such fee
was paid upon delivery of PaineWebber's fairness opinion to the
Company's Board of Directors. Pursuant to the Advisory Agreement,
the fee paid with respect to the fairness opinion will be
deducted from any transaction fee to which PaineWebber becomes
entitled under the Advisory Agreement in connection with the
Merger.
The Company also has agreed in the Advisory Agreement and
the Fairness Opinion Agreement to reimburse PaineWebber for its
reasonable out-of-pocket expenses, including reasonable fees and
disbursements of legal counsel, and to indemnify PaineWebber and
16<PAGE>
certain related persons against certain liabilities in connection
with PaineWebber's engagement thereunder.
As of October 31, 1996, PaineWebber owned approximately
11.9% of the outstanding Common Stock of the Company. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT;
Certain Beneficial Owners." On October 31, 1996, PaineWebber,
along with certain other institutional investors, entered into
the Stockholders Agreement pursuant to which each of the
stockholders party thereto agreed to vote their Common Stock of
the Company to approve the Merger Agreement and in favor of the
Merger, granted to the Purchaser an irrevocable option to
purchase the Common Stock owned by such stockholder, and agreed
to tender to the Parent their Common Stock pursuant to the tender
offer to be initiated by the Parent on or about November 15,
1996.
Peter Zurkow, who is a director of the Company and a member
of the Compensation and Nominating Committees of the Company's
Board of Directors, is the Managing Director of the Principal
Transactions Group of PaineWebber.
Leonard Green & Associates, L.P. ("LGA") is the general
partner of Green Equity Investors, L.P. Prior to October 25,
1996, GEI owned approximately 27.8% of the outstanding Common
Stock of the Company. On December 29, 1994 the Company entered
into a Management Services Agreement with LGA. Pursuant to the
Management Services Agreement, LGA agreed to provide to the
Company management, consulting, financial planning and financial
advisory services for a two year term, in consideration for an
annual fee of $200,000. The amount of such fee was determined in
the course of negotiations among LGA, the Company and an
unofficial bondholders' committee during the Company's 1994
financial restructuring. LGA is not required to spend a fixed
number of hours of service to the Company pursuant to the
Management Services Agreement. During fiscal 1996, the Company
paid a total of $200,000 to LGA, and LGA expended approximately
fifty hours of service to the Company, in fulfillment of their
respective obligations under the Management Services Agreement.
On March 9, 1995, in lieu of granting options under the 1995
Non-Employee Director Stock Option Plan to Jennifer Holden Dunbar
and John G. Danhakl, Directors of the Company affiliated with
GEI, the Company granted to GEI options to purchase 9,000 shares
of Common Stock for $10.00 per share, vesting on July 30, 1995,
and options to purchase an additional 9,000 shares of Common
Stock for $13.33 per share, vesting on July 28, 1996. The terms
of the options granted to GEI are substantially the same as the
terms of the options granted under the Company's 1995 Non-
Employee Director Stock Option Plan. Prior to October 25, 1996,
GEI owned approximately 27.8% of the outstanding Common Stock of
the Company.
17<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Amendment No. 1 to the Annual
Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa,
State of Florida, on November 15, 1996.
KASH N' KARRY FOOD STORES, INC.
By:/s/ Richard D. Coleman
------------------------------
Richard D. Coleman
Senior Vice President,
Administration and Chief
Financial Officer
Supplemental information to be furnished with reports filed
pursuant to Section 15(d) of the Act by registrants which have
not registered securities pursuant to Section 12 of the Act:
Not applicable
