UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
__X___ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1995.
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 1-1161
F O O D B R A N D S A M E R I C A , I N C .
(Formerly known as Doskocil Companies Incorporated)
(Exact name of registrant as specified in its charter)
Delaware 13-2535513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 NW Expressway, Suite 1700, Oklahoma City, Oklahoma 73118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405)879-4100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
____________________________ ________________________
Common Stock, par value $.01 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES__X__ NO_____
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (Section 229.405 of
this chapter) 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. [ ]
As of February 22, 1996, the aggregate market value
of the voting stock held by non-affiliates of the registrant was
$89,500,436.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: 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.
YES__X__ NO_____
On February 22, 1996, the number of shares
outstanding of the registrant's common stock, $.01 par value, was
12,454,965 shares.
DOCUMENTS INCORPORATED BY REFERENCE: The Proxy
Statement for the Annual Meeting of Stockholders is incorporated
herein by reference into Part III of this Form 10-K.
<PAGE>
FOODBRANDS AMERICA, INC.
(Formerly known as Doskocil Companies Incorporated)
_________________________
TABLE OF CONTENTS
FORM 10-K
Page
PART I
Item 1. Business ...................................... 1
Item 2. Properties .................................... 9
Item 3. Legal Proceedings ............................. 10
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters ................... 12
Item 6. Selected Financial Data ....................... 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........... 15
Item 8. Financial Statements and Supplementary Data ... 27
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........... 27
PART III
Item 10. Directors and Executive Officers of the
Registrant .................................... 27
Item 11. Executive Compensation ........................ 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................... 27
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ........................... 28
- i -
<PAGE>
PART I
Item 1. BUSINESS
General Development of Business
The registrant is a Delaware corporation whose
predecessor, Doskocil Companies Incorporated, was originally
incorporated in Delaware in 1964. In 1995, the registrant
reincorporated in Delaware and changed its name to Foodbrands
America, Inc. The registrant is referred to herein as
"Foodbrands America" and, collectively with its direct and
indirect subsidiaries, as the "Company."
The Company produces, markets and distributes frozen
and refrigerated products targeted to growth segments of the
foodservice industry, which encompasses all aspects of away-from-
home food preparation. The Company's products include pepperoni,
beef and pork toppings, as well as partially baked pizza crusts,
marketed to the pizza industry, appetizers, Mexican and Italian
foods, sauces, soups and side dishes and branded and processed
meat products. Customers include large multi-unit food chains,
major foodservice distributors, warehouse clubs and grocery store
delicatessens, principally in the United States.
Business Strategy. As a leading manufacturer and
marketer of frozen and refrigerated food products, Foodbrands
America's focus is to add value to products targeted to market
niches experiencing higher than industry growth in the
foodservice industry through distinct processes such as
developing, formulating, smoking, curing, cooking, portioning,
preserving, packaging and distributing. Concentration on market
niches coupled with differentiated food products made available
through an efficient distribution system are key elements to
building future revenue and earnings. These activities, plus
selective acquisitions of companies operating successfully in
such market niches, are designed to improve the level and
consistency of profitability, thereby increasing shareholder
value.
While historically a high proportion of the Company's
sales base was tied to commodity items having little value added,
recent changes in the Company's business mix have resulted in a
concentration of its sales base in higher growth and higher
margin food products. This represents a transformation of the
Company from a low value-added meat processor to a manufacturer
and marketer of diversified food products for foodservice
customers.
The foodservice industry is fragmented with many
companies manufacturing an extensive variety of food products
prepared away-from-home. Foodbrands America strives to
distinguish its products through product quality, solid
price/value relationships, high quality customer service, low
production costs and an ongoing new product development program.
Foodbrands America believes these characteristics are critical to
growing revenue and profits in the away-from-home dining and
foodservice industries.
Significant Transactions. On May 30, 1995, the Company
sold the assets of its Retail Division to Thorn Apple Valley,
Inc. The sales price was approximately $76.3 million. The sale
marked the exit of the Company from the volatile branded retail
refrigerated meat case business.
On December 11, 1995, the Company purchased KPR
Holdings, L.P., a Delaware limited partnership ("KPR"), and a
privately held producer and marketer of custom prepared foods
including soups, sauces and side dishes for multi-unit restaurant
chains and meat-based pizza toppings to major pizza operations.
The purchase price was $101.9 million, including transaction
related costs of the acquisition. In addition, the Company has
agreed to certain contingent payments payable in Common Stock of
the Company or cash, at the option of the sellers, aggregating up
to approximately $15.0 million, over the next three years based
on the attainment of specified earnings levels. The business,
while sometimes referred to as the KPR Foods Division, is a
separate limited partnership with distinct management.
On December 18, 1995, the Company purchased all
outstanding stock of TNT Crust, Inc. ("TNT") for $56.4 million,
including transaction related costs of the acquisition. In
addition, the Company has agreed to a contingent earnout payment
payable in Common Stock of the Company or cash, at the option of
the sellers, not to exceed $6.5 million, based on sales growth to
certain customers. TNT is a major producer of partially baked
and frozen self-rising crusts for use by pizza chains, frozen
pizza manufacturers, restaurants and independent pizzerias. TNT
was merged into and is operated as a segment of the Food Service
Division of the Company.
Narrative Description of Business
Products. The Company's principal products are
processed foods developed for sale to niche markets in the
foodservice industry in which the Company sees growth
opportunities focusing on providing customers with quality
products to replace "back-of-the-house" preparation. Lines
include frozen food products for the foodservice industry, pizza
toppings and pizza crusts known for quality and consistency and
top rated products for the expanding deli market. Management
believes the Company is one of the market leaders in sales to the
foodservice industry of frozen pasta, appetizers, pizza toppings
and pizza crusts, as well as sales of burritos to convenience
stores.
Processing techniques utilized by the Company to add
value to its products include developing, formulating, smoking,
curing, cooking, portioning, preserving, packaging and
distributing.
Operational Divisions. The Company's operations are
conducted through distinct legal entities which are grouped into
four operational divisions: (i) the Food Service Division, which
produces and markets processed meat products, pizza toppings and
pizza crusts to restaurant chains, foodservice distributors,
hospitals, school systems, warehouse clubs and others; (ii) the
KPR Foods Division, which produces and markets meat-based pizza
toppings and soups, sauces and side dishes principally to large
chain restaurants; (iii) the Specialty Brands Division, which
produces and markets frozen food products, including ethnic
foods, as well as appetizers, entrees and portioned meats
primarily to the foodservice industry; and (iv) the Deli
Division, which produces and markets processed food products to
grocery store service delicatessens.
Food Service Division. The Food Service Division
provides 600 products under the brand names of Doskocil Foods and
Wilson Food Service, as well as private labels. The division is
a leader in processed meats, pizza toppings and, since the TNT
acquisition, partially baked pizza crusts, and is recognized as
one of the largest suppliers of pepperoni, pizza toppings and
partially baked pizza crusts in the United States. Production
plants are based in Kansas and Wisconsin.
The division's primary responsibility includes the
marketing of pizza toppings, pepperoni, pizza crusts, ham and
sliced meat products through a broker network and direct sales
force to customers who re-market the products for
"food-away-from-home" preparation and consumption. Customers
include national and regional restaurant chains, institutional
foodservice customers, foodservice distributors (such as
Alliant/Kraft and Sysco Corporation), buying group associations
(such as ComSource), warehouse clubs (such as Sam's Club) and
large food processors (such as Tombstone Pizza Corporation and
Tony's Pizza).
KPR Foods Division. KPR is a producer and marketer of
meat-based pizza toppings and soups, sauces and side dishes to
large chain customers in the foodservice industry. The division
currently offers 184 products under private labels and operates
two production facilities in Texas. KPR is also currently
involved in a 50/50 joint venture to manufacture pizza toppings
in Dublin, Ireland for sale to pizza operators in Europe, the
Middle East, Northern Africa and Asia.
Products are marketed directly to a select group of
large chain customers in the foodservice industry that have
centralized buying and product requirements. As a result, the
division's research and development group is heavily involved in
new and existing customer sales. The business is focused on a
limited number of customers such as TGI Fridays and Brinker
International.
Specialty Brands Division. The Specialty Brands
Division holds major market positions in the foodservice ethnic
frozen prepared food categories and appetizers. The division
offers a wide variety of value-added products under trademarks
that include Fred's , Rotanelli's , Posada and DeliFest Gourmet
Salads. Production plants are in California, New Mexico,
Missouri and New York.
The Specialty Brands Division markets 722 products
through four market categories. Specialty Brands' brokered sales
force sells to major foodservice distributors (such as
Alliant/Kraft and Sysco Corporation), to buying group
associations (such as Emco) and to smaller distributors. These
distributors resell products to restaurants, hotels and school
systems. Consumer products are sold primarily through food
brokers to grocery stores, warehouse clubs and military stores.
Products are sold through an in-house sales force to such vending
operators and convenience store customers as VSA, McLane's and
NCS. Major national and regional restaurant chains (such as
Applebee's, Steak-N'-Shake and Shoney's) and foodservice
management firms (such as Daka and Marriott) purchase products
through the division's direct sales force and brokers.
Deli Division. The Deli Division, a leading provider
of deli meats, offers 130 products under the Wilson's Continental
Deli , American Favorite and Fresh Cut labels. Production is
based at a plant in Cherokee, Iowa.
The Deli Division markets products primarily to the in-
store service delicatessens located in many supermarkets through
a food broker network. The Deli Division is a leading provider
of full line deli meat to in-store service delicatessens with a
customer base consisting of national grocery chains (such as
Albertson's, Inc.), national and regional wholesale warehouse
groups (such as Super Valu Stores, Inc., Fleming Companies, Inc.
and Associated Wholesale Inc.), regional grocery chains (such as
Hy-Vee Food Stores, Inc.) and independent distributors to grocery
stores (such as CCS Distributors, Inc.).
Marketing. The Company's various products are marketed
and distributed as an integrated line, offering products at
several price points as well as providing "one-stop-shopping" for
its customers. The Company organizes its sales efforts to take
advantage of the operational segmentation of its customer's
buyers. Recognizing the unique requirements of separate buying
segments, the Company offers each a complete product line
designed to meet specific needs through a specially trained sales
organization. The Company believes this focused approach to
sales offers it a competitive advantage. Another competitive
advantage is the Company's high and consistent product quality,
brand loyalty, broad mix of premium, value-priced and private
label products and its centralized distribution system.
Distribution System. The Company operates a
centralized distribution system that services its divisions. The
Company's products are shipped through its distribution/customer
service centers or are direct shipped from the production
facility based on the most efficient, cost effective method of
transportation to the customer. Customer requirements vary from
the need for large quantities of a limited number of products to
small quantities of a number of items, each requiring a different
distribution route. From the distribution centers, orders can be
filled and delivered in a single shipment regardless of the
variety of products ordered or the location of the manufacturing
facility at which they are produced. The Company can also
combine the orders of many smaller customers in the same
geographic region. Management believes this flexible
distribution system allows the Company to provide superior
service to its customers by reducing the time between the
placement of customer orders and delivery, by lowering customer
shipping costs through eliminating higher-cost fragmented
deliveries, and by allowing for "one-stop-shopping" of the
Company's broad product mix.
Government Regulation. The Company is subject to
various laws and regulations relating to the construction and
maintenance of facilities, production standards and pollution
control administered by federal, state and other government
entities, including the Environmental Protection Agency and
corresponding state agencies, the United States Department of
Agriculture ("USDA"), the Food and Drug Administration ("FDA")
and the Occupational Safety and Health Administration ("OSHA").
All of the Company's food processing plants are inspected by the
USDA or the FDA. The USDA-inspected plants have inspectors
present during some or all of their operations. Management
believes that the Company is currently in compliance in all
material respects with all applicable health, environmental and
other laws and regulations. Management does not believe that the
costs of continued compliance with existing laws and regulations
or of any other environmental liabilities will have a material
adverse effect on the Company's financial condition.
Seasonality. Sales of Food Service, KPR and Specialty
Brands Divisions' products do not fluctuate significantly due to
seasonality. Historically, however, the Company's deli business
has been seasonal. Sales of deli products generally are at their
lowest during the first quarter of the year and increase during
the second and third quarters. Net sales of Company products
historically have been higher in the fourth quarter than in any
other quarter of the year.
Employees. At December 30, 1995 the Company employed
approximately 3,193 persons, approximately 40% of whom are
covered by collective bargaining agreements. Six labor
agreements were approved in 1994 and 1995. Labor contracts
extend through various dates in 1997 for the remaining employees
covered by collective bargaining agreements. Substantially all
of the Company's employees covered by collective bargaining
agreements are members of the United Food and Commercial Workers
Union (the "UFCW").
Intellectual Property. The Company owns or has the
right to use more than 94 trademarks and 7 patents. Most of the
Company's trademarks are registered. The Company produces a
number of products which are marketed under numerous
Company-owned registered and unregistered trademarks, symbols,
emblems, logos and designs, including the following trademarks:
Foodbrands America , Fred's , Posada , Rotanelli's , Wilson's
Continental Deli , Continental Deli Lite , American Favorite ,
Wilson Foodservice , Butcher Boy , Poco Posada , Little Juan ,
Jefferson Meats , Marquez , Pizza Topper , Mr. Nuccio , Doskocil
and Pizzano . In addition, certain products are prepared
according to customer specifications and packaged under customer
trademarks and labels.
Raw Materials. The Company's primary raw materials are
meat, cheese, vegetables, milk products and flour. These raw
materials are obtained from a broad range of external sources.
Other processing materials, such as seasonings, smoking and
curing agents, sausage casings and packaging materials, are
purchased from a number of readily available sources. Severe
price swings in such raw materials, and the resultant impact on
the prices the Company charges for its products and the margins
it receives, at times have had, and may in the future have,
material adverse effects on the demand for the Company's products
and its profits. The Company utilizes several techniques for
reducing the risk of future raw materials price increases. These
techniques include purchasing and freezing raw materials during
seasonally low periods of the year, negotiating minimum purchase
commitments at set prices and entering into futures contracts.
Customers. The Company has a diverse customer base
located principally in the United States. Customers include
foodservice distributors, chain restaurants, quick service
restaurants, warehouse clubs, buying cooperatives, grocery
distributors, retail grocery chains, convenience stores and
institutions. No single customer represented 10% or more of the
Company's net sales in fiscal 1995.
Competition. The processed foods industry is highly
competitive with numerous companies of varying sizes.
Competition is encountered both in the procurement of raw
materials and in the sale of products. The Company's products
also compete with a large number of other food sources.
Management believes that the principal competitive factors in the
industry are price, product quality, service and brand loyalty.
Some of the Company's competitors are considerably larger, more
diversified and have correspondingly greater financial and other
resources.
Financial Information About Industry Segments
The Company is presently operating in one segment, the
processing and marketing of food products.
Item 2. PROPERTIES
The following table sets forth the location,
approximate size and description, and ownership status of each of
the Company's facilities.
Owned/
Location Approximate Size and Description Leased
________ ________________________________ ______
California:
Rialto 80,400 square feet distribution Owned
and warehouse facility on 6.0
acres
Riverside 134,300 square feet production Owned
and office facility on 7.3 acres
20,500 square feet office Leased
facility
Iowa:
Cherokee 173,900 square feet production Leased
facility on 46 acres
Kansas:
Edwardsville 114,800 square feet distribution Leased
and warehouse facility
South Hutchinson 325,600 square feet production, Owned
research, storage and office
facilities on 68 acres
Missouri:
Carthage 77,500 square feet production Owned/
facility on 15.0 acres Leased
Piedmont 87,575 square feet production Owned
facility and 2,652 square feet
power house on 6 acres
New Mexico:
Albuquerque 32,900 square feet production Owned
facility on 5.8 acres
New York:
New Rochelle 29,900 square feet production Owned
facility on 1.2 acres
Oklahoma:
Oklahoma City 29,575 square feet office Leased
facilities
Texas:
Dallas 132,000 square feet production Owned
facility on 7.1 acres
Ft. Worth 86,000 square feet production and Leased
office facility on 14.2 acres
Wisconsin:
Jefferson 345,000 square feet production Owned
facility on 11.4 acres
Green Bay 30,000 square feet production Owned
facility on 1.3 acres
75,000 square feet production Owned
facility on 3.7 acres
_________________________________
The production facility located at Cherokee, Iowa, is subject to
a long-term capital lease recorded as a liability at a net
present value of $1.0 million. The remaining leased facilities
are held under agreements which provide for fixed annual rental
payments. All properties owned by the Company as well as
leasehold and subleasehold interests of the Company are mortgaged
under the Company's credit agreement with certain financial
institutions. The Company believes its facilities are in good
repair and adequate to meet the Company's current needs.
Item 3. LEGAL PROCEEDINGS
The Company is involved in two related actions
concerning alleged infringement of two patents held by C&F
Packing Company, Inc. ("C&F") both in the U.S. District Court for
the Northern District of Texas, Ft. Worth Division. Prior to
Foodbrands America acquiring KPR, C&F had instituted a civil
action against KPR alleging that KPR, using equipment and a
process to make a particular sausage product, infringed the C&F
patents. KPR has denied these allegations and contends that
C&F's patents are invalid and that, even if valid, the process
and equipment used by KPR does not infringe the patents. C&F has
also alleged misappropriation of trade secrets and proprietary
information, as well as other claims, all of which KPR denies.
In 1988 and 1989, C&F filed actions against Doskocil
Companies Incorporated (Foodbrands America's predecessor)
alleging patent infringement and misappropriation of trade
secrets and proprietary information. In 1991, as part of
Doskocil's bankruptcy reorganization, and in settlement of the
litigation, Doskocil entered into a license agreement with C&F
and two consent decrees.
Immediately prior to closing the acquisition of KPR,
Foodbrands America and KPR instituted a declaratory judgment
action against C&F seeking a ruling that the equipment and
process used by KPR do not violate the C&F patents and that, in
any event, it is not a violation of the consent decrees for KPR
to continue to use the equipment and process being utilized by
KPR prior to Foodbrands America acquiring KPR. C&F has responded
to the declaratory judgment action with a Motion to Dismiss or to
Transfer the actions to the Court that entered the consent
decrees. These motions are pending and have not been ruled upon.
The Company and KPR intend to vigorously prosecute the
declaratory judgment action against C&F and KPR intends to
vigorously defend the suit by C&F.
In September 1992, United Refrigerated Services, Inc.
("URS") filed suit against Wilson Foods Company, a subsidiary of
the Company ("Wilson"), and unaffiliated parties Normac Foods,
Inc. ("Normac") and Thompson Builders of Marshall, Inc.
("Thompson") in the Circuit Court of Saline County, Missouri.
The URS lawsuit involves claims for property damage as a result
of a fire in a warehouse owned by URS in Marshall, Missouri, in
which Wilson was leasing space. The URS lawsuit is in discovery
stages. URS claims real and personal property damage of
approximately $9.8 million or, alternatively, for trebling of the
real property damage (currently estimated by the Company at
approximately $2.0 million, or $6.0 million in the aggregate).
In its answer, Wilson filed a counterclaim against URS
and a cross-claim against other codefendants for indemnity and/or
contribution. The fire occurred in a part of the URS warehouse
being leased by Wilson in which Wilson had produced sausage
patties under contract for Normac until the contract terminated
in September 1991. Normac's contractor, Thompson, was removing
Normac's equipment with a torch when fire broke out and destroyed
a large section of the URS warehouse and its contents.
In 1993, ConAgra, Inc. ("ConAgra") also filed suit
against Wilson, Normac and Thompson in Saline County, Missouri.
ConAgra seeks damages in the amount of $9.4 million from the
named defendants for frozen food that was stored in another part
of the Marshall warehouse at the time of the fire and allegedly
damaged. The ConAgra case also is in discovery.
The Company's insurer has retained counsel to defend
the Company in these matters. Wilson has substantial defenses to
these pending and threatened claims and the Company believes it
is not likely that Wilson will ultimately incur a loss in excess
of its insurance coverage.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by
this report, the Company has not solicited by proxy or otherwise
any vote of security holders on any matter.
Part II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock began trading on the New York Stock
Exchange on February 13, 1996, under the symbol "FDB." Prior to
that date, the Common Stock traded in the over-the-counter market
under the Nasdaq National Market under the symbol "FBAI."
Approximately 12,454,965 shares of the Common Stock were
outstanding as of February 22, 1996. The number of holders of
record of Common Stock at February 22, 1996 was approximately
4,202.
The following table sets forth the range of high and
low closing bid prices for the Common Stock for each full
quarterly period in fiscal 1995 and fiscal 1994, respectively, as
quoted by the Nasdaq National Market.
High Bid Low Bid
________ _______
Fiscal 1995
First Quarter $ 8 1/2 $ 7 1/4
Second Quarter $13 1/2 $ 7 5/8
Third Quarter $15 5/8 $12 1/2
Fourth Quarter $14 3/8 $10
Fiscal 1994
First Quarter $15 1/4 $10 3/8
Second Quarter $13 1/2 $ 8 1/4
Third Quarter $ 9 7/8 $ 7 7/8
Fourth Quarter $ 9 1/8 $ 6
The Company has not paid any cash dividends on its
Common Stock since the Company's reorganization in 1991. The
Company does not expect to pay any dividends in the foreseeable
future and intends to continue to retain any such earnings for
the Company's operations. Additionally, payment of such
dividends is limited by the terms of the Company's 1995 credit
agreement and the indenture for the Company's 9 3/4% Senior
Subordinated Redeemable Notes due 2000.
Item 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial
information and should be read in conjunction with the Financial
Statements and the Notes thereto and the related Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. On May 30, 1995, the
Company sold the assets of its Retail Division. The historical
financial data for the Retail Division for 1995 has been reported
as discontinued operations and accordingly the historical
financial data for all prior years presented has been restated.
Additionally, as a result of the adoption of Fresh Start
Reporting in 1991, historical financial data for the period ended
September 28, 1991 is that of a different reporting entity and is
not prepared on a basis comparable to financial data for periods
ending after that date.
<TABLE>
<CAPTION>
Post-Confirmation Pre-Confirmation
________________________________________________________________________________ ________________
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Three Months Nine Months
Ended Ended Ended Ended Ended Ended
December 30, December 31, January 1, January 2, December 28, September 28,
1995 1994 1994 1993 1991 1991
____________ ____________ __________ __________ ____________ _____________
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data |
|
Net sales $634,700 $512,352 $393,270 $365,950 $ 86,843 | $277,902
======== ======== ======== ======== ======== | ========
|
Gross profit $134,715 $102,234 $ 57,482 $ 58,104 $ 14,743 | $ 42,513
Total operating expenses 99,612 91,025 <F3> 54,054 49,088 12,294 | 34,477
________ ________ ________ ________ ________ | ________
|
Operating income (loss) $ 35,103 $ 11,209 $ 3,428 $ 9,016 $ 2,449 | $ 8,036
======== ======== ======== ======== ======== | ========
Income (loss) from |
continuing operations $ 9,601 $ (5,195) $ (4,374) $ 644 $ (1,756) | $(46,683)<F6>
======== ======== ======== ======== ======== | ========
|
Net income (loss) <F1> $(34,095) <F2> $(16,198) <F4> $(32,019) <F5> $(26,834) $ 3,943 | $ 65,370 <F7>
======== ======== ======== ======== ======== | ========
Earnings (loss) per share: |
Income (loss) |
from continuing |
operations $ 0.77 $ (0.59) $ (0.59) $ 0.11 $ 0.68 | $ (9.46)<F8>
======== ======== ======== ======== ======== | ========
Net income (loss) $ (2.73) $ (1.85) $ (4.32) $ (4.63) $ 0.68 | $ 12.78 <F8>
======== ======== ======== ======== ======== | ========
Balance Sheet Data |
|
Total assets $521,763 $442,267 $298,806 $249,162 $268,759 | $303,309
Long-term debt 305,407 224,260 122,377 134,409 135,627 | 148,160
|
Cash Flow Data |
|
Depreciation $ 11,509 $ 10,508 $ 7,806 $ 7,525 $ 1,859 | $ 5,557
Amortization <F9> 4,495 4,123 2,843 2,968 596 | 3,963
____________________
<FN>
<F1> Includes income (loss), net of applicable income taxes, from operations of the discontinued Retail Division of $(4.1) million,
$(8.5) million, $6.8 million, $(27.5) million, $5.7 million and $(1.7) million in the fiscal years ended December 30, 1995,
December 31, 1994, January 1, 1994, and January 2, 1993, respectively, the three months ended December 28, 1991, and the nine
months ended September 28, 1991.
<F2> Includes the loss on disposal of the Retail Division of $38.5 million and extraordinary loss on early extinguishment of debt of
$1.0 million.
<F3> Includes a $10.6 million provision for restructuring and integration. (See Note 4 to the Financial Statements.)
<F4> Includes an extraordinary loss of $2.5 million associated with the early extinguishment of debt. (See Note 8 to the Financial
Statements.)
<F5> Includes the cumulative effect on years prior to fiscal year ended January 1, 1994 for a change in accounting for
postretirement benefits other than pensions of a noncash charge against earnings of $34.4 million. (See Note 11 to the
Financial Statements.)
<F6> Includes reorganization expenses of $41.0 million for the nine months ended September 28, 1991.
<F7> Includes an extraordinary gain of $113.8 million for the forgiveness of debt as part of the Chapter 11 reorganization of the
Company which became effective on October 31, 1991.
<F8> The per share amounts for the period ended September 28, 1991 do not provide meaningful comparisons due to the Company's
Chapter 11 reorganization.
<F9> Amortization of intangible assets only. Does not include amortization of certain other items included in interest expense of
$1.2 million, $1.3 million and $0.4 million in the fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994,
respectively, and $4.1 million in the nine months ended September 28, 1991.
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The financial results of the Company's operations in
recent years have been significantly affected by certain events
and accounting changes. In addition to the items noted in Item
6, Selected Financial Data, the following is a general discussion
of the impact of certain factors on the Company's financial
statements.
Acquisitions. On December 11, 1995, the Company
purchased KPR Holdings, L.P. ("KPR") for approximately $101.9
million, including transaction related costs of the acquisition.
In addition, the Company has agreed to certain contingent
payments payable in Common Stock of the Company or cash, at the
option of the sellers, aggregating up to approximately $15.0
million, over the next three years based on the attainment of
specified earnings levels. These payments, if made, will
increase goodwill. KPR produces and markets custom prepared
foods and prepared meat items for multi-unit restaurant chains.
The acquisition has been accounted for by the purchase method of
accounting based on preliminary estimates. Final adjustments are
not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately
$65.8 million has been recognized as goodwill and is being
amortized over 40 years.
On December 18, 1995, the Company purchased all the
outstanding stock of TNT Crust, Inc. ("TNT") for approximately
$56.4 million, including transaction related costs of the
acquisition. In addition, the Company has agreed to a contingent
earnout payment payable in Common Stock of the Company or cash,
at the option of the sellers, not to exceed $6.5 million, based
on sales growth to certain customers. These payments, if made,
will increase goodwill. The business operates as a segment of
the Food Service Division. TNT produces and markets partially
baked and frozen self-rising crusts for use by pizza chains,
restaurants and frozen pizza manufacturers. The acquisition has
been accounted for by the purchase method of accounting based on
preliminary estimates. Final adjustments are not expected to be
material. The excess of the total purchase price over fair value
of net assets acquired of approximately $47.5 million has been
recognized as goodwill and is being amortized over 40 years.
On June 1, 1994, the Company purchased all of the
outstanding stock of International Multifoods Foodservice Corp.,
a division of International Multifoods Corporation, for
approximately $137.7 million, including transaction related costs
of the acquisition. The business, which has been renamed
Doskocil Specialty Brands Company, manufactures frozen food
products, including ethnic foods in the Mexican and Italian
categories, as well as appetizers, entrees and portioned meats.
The acquisition has been accounted for by the purchase method of
accounting. The excess of the aggregate purchase price over fair
value of net assets acquired of approximately $68.3 million and
trademarks at a fair value of $9.7 million were recognized as
intangible assets and are being amortized over 40 and 25 years,
respectively.
Discontinued Operations. On May 30, 1995, the Company
sold the assets of its Retail Division to Thorn Apple Valley,
Inc. The sales price approximated $65.8 million in cash payments
plus the assumption of long-term debt of approximately $6.0
million and certain current liabilities related to the division
of approximately $4.5 million. In connection with the sale the
Company wrote off approximately $64.3 million of intangible
assets and recorded a net loss on disposition of approximately
$38.5 million. The results of operations and cash flows of the
division have been reported as discontinued operations and prior
years have been restated to reflect this treatment. Accordingly,
the results of continuing operations do not include the
operations of the Retail Division.
Restructuring and Integration. In December 1994, the
Company announced a restructuring program that resulted in a
$10.6 million charge against operating income in 1994. The
restructuring program identified specific manufacturing
facilities and operations that related to excess capacity, as
well as duplication of activities after the acquisition of the
Specialty Brands Division.
As of December 30, 1995, the Company has consolidated
production operations, closed two production facilities and two
distribution facilities and discontinued a production operation.
The Company has also reduced employment at various other
locations as scheduled. Of the original $10.6 million provision,
the balance of the accrued liabilities remaining at December 30,
1995, is $1.2 million and $2.2 million remains as a reserve
against property, plant and equipment. Management believes that
the remainder of the reserve is adequate to complete the
restructuring and integration program.
Income Taxes. After considering utilization
restrictions, the Company has approximately $108.5 million of net
operating loss carryforwards ("NOLs") which will be available as
follows: $76.3 million in 1996, $13.3 million in each of the
years 1997 and 1998, $5.0 million in 1999 and $0.6 million in
2000. NOLs not utilized in the first year that they are
available may be carried over and utilized to reduce taxable
income earned in subsequent years, subject to their expiration
provisions. These carryforwards expire as follows: $10.9
million in 1996, $21.7 million in 1998, $6.0 million in 1999,
$0.9 million in 2000 and $69.0 million during the years 2001
through 2009. As a result, management anticipates that the
Company's cash income tax liability for the next four to five
years will not be material.
The amount of the Company's NOLs and the limitation of
their availability are subject to significant uncertainties. In
addition, a future change in stock ownership could result in the
Company's NOLs being substantially reduced or eliminated. The
Company has implemented certain stock transfer restrictions which
reduce this risk of loss. In accordance with Fresh Start
Reporting as prescribed by Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy
Code," issued by the American Institute of Certified Public
Accountants, the Company will not reflect the realized income tax
benefit of pre-reorganization NOLs and deductible temporary
differences in its statement of operations. Instead, such
benefit is reflected first as a reduction in the "Reorganization
Value in Excess of Amounts Allocable to Identifiable Assets"
("Reorganization Value") and then as a reduction in other
intangible assets arising from bankruptcy, thus reducing future
intangible amortization expense. Due to the non-deductibility of
amortization of certain intangible assets, the annual effective
tax rate in future years is expected to be in excess of the
statutory income tax rate.
In 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Implementing the standard resulted in the
Company recording a deferred tax benefit of approximately $31.0
million for deductible temporary differences. The Company
provided a valuation allowance for the remaining net deductible
temporary differences and NOLs. In determining the valuation
allowance, the Company considers projected taxable income during
the next four years. The projected taxable income before NOLs is
expected to be higher than the financial pre-tax income due to
the non-deductible amortization of the intangible assets related
to Reorganization Value and other non-deductible intangible
assets and the fact that the tax basis of the assets was not
increased as a result of the reorganization in September 1991.
Accordingly, the Company expects to realize the net deferred tax
asset from future operations, which contemplates annual increases
in sales consistent with industry projections, and historical
operating margins but does not anticipate any material asset
sales or other unusual transactions. The acquisitions of KPR and
TNT are expected to increase the likelihood that the net deferred
tax asset will be realized. This analysis is performed on a
quarterly basis. The Company will adjust the valuation allowance
when it becomes more likely than not that the net deferred tax
benefits will be realized in the future. The Company anticipates
that this analysis will support the elimination of a significant
portion of the valuation allowance in 1996. Because a majority
of the deferred tax assets and NOLs are attributable to pre-
reorganization temporary differences, the majority of the
adjustment will be recorded as a reduction of Reorganization
Value and other intangible assets arising from bankruptcy and the
remainder will be recorded as a reduction of income tax expense.
Results of Operations
Comparability of Periods. For the year ended December
30, 1995, the operating results attributable to KPR and TNT since
their acquisitions in December 1995 are sales of $7.7 million,
gross profit of $1.6 million and operating income of $1.0
million. Because of the acquisition of the Specialty Brands
Division on June 1, 1994, the financial statements for the year
ended December 31, 1994, reflect the operating results
attributable to the Specialty Brands Division for the months of
June through December 1994 only. The operating results
attributable to the Specialty Brands Division for the first five
months of 1995 include net sales of $74.6 million, gross profit
of $22.9 million and operating income of $6.0 million.
The Fiscal Year Ended December 30, 1995 ("Fiscal 1995")
Compared to the Fiscal Year Ended December 31, 1994 ("Fiscal
1994"). Net sales for Fiscal 1995 of $634.7 million increased
over net sales for Fiscal 1994 of $512.4 million by $122.3
million, or 24%. The increase is due to (i) $82.3 million of
increased sales related to the addition of the Specialty Brands
Division, KPR and TNT and (ii) increased sales volumes in the
Food Service and Deli Divisions.
Gross profit for Fiscal 1995 of $134.7 million
increased over gross profit for 1994 of $102.2 million by $32.5
million, or 32%. Of this total increase, $24.5 million resulted
from the acquisitions. The remaining $8.0 million increase
resulted from improved manufacturing throughput, manufacturing
cost reductions, including those anticipated under the
restructuring/integration program announced in 1994 and changes
in sales mix. Gross profit as a percentage of sales for Fiscal
1995 and Fiscal 1994 is 21% and 20%, respectively.
Selling expenses for Fiscal 1995 of $69.5 million
increased 33%, or $17.3 million, over Fiscal 1994 selling
expenses of $52.2 million. The addition of Specialty Brands, KPR
and TNT accounts for $14.8 million of the increase. The
remaining increase of $2.5 million relates to increased costs
associated with the increased volumes noted above as well as
higher marketing costs in response to increased competition.
General and administrative expenses increased 6%, or
$1.4 million, from $24.2 million in Fiscal 1994 to $25.6 million
in Fiscal 1995. The increase resulting from the acquisitions
noted above was $1.7 million. The offsetting $0.3 million
reduction is attributable to overhead reduction efforts.
Amortization of intangibles, a noncash element of
operating expense, increased $0.4 million due to the
amortization of intangibles related to the acquisitions of
Specialty Brands, KPR and TNT partially offset by the reduction
of amortization of intangibles created by the utilization of net
operating losses which reduced the intangible asset
"Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets."
Interest and financing costs increased $2.2 million
because of the debt associated with the acquisitions partially
offset by the reduction in debt associated with the sale of the
Retail Division. Amortization of debt issue costs and debt
discount included in interest expense for Fiscal 1995 and Fiscal
1994 was $1.2 million and $1.3 million, respectively.
Income tax expense for Fiscal 1995 of $7.0 million is
based on the statutory (federal and state) tax rate applied to
income from continuing operations after adding back expenses with
no future tax deductibility. Income tax expense for Fiscal 1994
of $0.6 million consisted solely of state income taxes.
Fiscal 1994 Compared to the Fiscal Year Ended January
1, 1994 ("Fiscal 1993"). The Company's net sales for Fiscal 1994
increased $119.1 million, or 30%, over Fiscal 1993 sales of
$393.3 million. Net sales for Fiscal 1994 of $512.4 million
includes sales volume increases in the Food Service and Deli
Divisions along with the addition of the sales of the Specialty
Brands Division of $112.8 million. These increases were
partially offset by decreases in raw material costs which
resulted in decreases in sales dollars per pound.
Gross profit for Fiscal 1994 increased 78%, or $44.7
million, over Fiscal 1993 gross profit of $57.5 million. Fiscal
1994 gross profit of $102.2 million includes the Specialty Brands
Division gross profit contribution of $34.2 million. Increases
also were provided by increased sales volumes and improved
product mix and production efficiencies in the Food Service and
Deli Divisions. Gross profit as a percentage of sales for Fiscal
1994 and Fiscal 1993 is 20% and 15%, respectively.
Selling expenses of $52.2 million in Fiscal 1994
increased 80%, or $23.2 million, over Fiscal 1993 selling
expenses of $29.0 million. The primary component of the increase
is the addition of the Specialty Brands Division with $21.6
million of selling expenses. The remainder of the increase is
due to increased marketing and brokerage costs in the other
divisions. The increases in the Food Service and Deli Divisions
are due to improved sales volume.
General and administrative expenses in Fiscal 1994
increased $2.5 million over Fiscal 1993 expenses of $21.7
million, an increase of 12%. Included in the Fiscal 1994 total
of $24.2 million are general and administrative expenses relating
to the Specialty Brands Division of $2.6 million. The reduction
in general and administrative expenses in other divisions is due
primarily to the effect of cost reduction programs instituted in
1993 and 1994.
Amortization of intangible assets increased
approximately $1.3 million in Fiscal 1994 over Fiscal 1993 due to
the Specialty Brands acquisition.
Interest and financing costs for Fiscal 1994 of $15.1
million increased $5.9 million, or 64%, over Fiscal 1993 costs of
$9.2 million. The increase is due to increased interest costs of
$5.0 million as a result of increased borrowings, generally
higher interest rates and increased amortization of debt issue
costs of $0.9 million. Amortization of debt issue costs and debt
discount included in interest expense for Fiscal 1994 and Fiscal
1993 was $1.3 million and $0.4 million, respectively.
Income tax benefit for Fiscal 1993 of $1.2 million
represents the tax benefit of losses from continuing operations
offsetting income from discontinued operations.
Discontinued Operations
Discontinued operations includes the net sales and
related expenses associated with the Retail Division's
operations. Net sales for Fiscal 1995, 1994 and 1993 were $72.4
million, $238.3 million and $254.9 million, respectively. Gross
profit was $9.1 million, $44.2 million and $53.2 million,
respectively. Operating income (loss) was $(4.8) million, $(3.5)
million and $13.1 million for each year, respectively. Corporate
interest expense allocated to the Retail Division based on net
assets was $2.0 million, $4.4 million and $4.6 million for each
fiscal year, respectively. Net income (loss) attributable to the
Retail Division after allocated interest expense was $(4.1)
million, $(8.5) million and $6.8 million. The loss for Fiscal
1995 was net of income tax benefit of $2.9 million and income for
Fiscal 1993 was net of income tax expense of $1.6 million. No
income tax benefit or expense was recognized in Fiscal 1994.
Amortization of intangible assets included in operating
expense of the Retail Division was $1.6 million, $3.2 million and
$3.3 million for Fiscal 1995, 1994 and 1993, respectively.
Extraordinary Losses
During Fiscal 1995 and Fiscal 1994, the Company
incurred an extraordinary loss on early extinguishment of debt of
$1.0 million and $2.5 million, respectively. These losses
related to the write off of remaining unamortized deferred loan
costs associated with debt extinguished when the Company
consummated new bank financing in connection with the
acquisitions of KPR and TNT in 1995 and the Specialty Brands
Division in 1994. The loss in Fiscal 1994 included the
termination of a related interest rate swap agreement. The
Fiscal 1995 loss is net of income tax benefit of $0.7 million.
Cash Flows and Capital Expenditures
Fiscal 1995. Net cash provided by continuing
operations activities was $25.8 million for Fiscal 1995 compared
to $26.8 million in Fiscal 1994. The operations of the
discontinued Retail Division used $12.3 million of cash in Fiscal
1995. Cash of $33.9 million was provided by the results of
continuing operations after adding back noncash items. Increases
of cash were also provided by increases in accounts payable and
accrued liabilities and noncurrent liabilities. Decreases in
cash were due to increases in accounts receivable, inventories
and other assets as well as payments under the Fiscal 1994
restructuring/integration program.
The KPR acquisition costs of $101.9 million included
net accounts receivable of $6.8 million, inventory of $6.9
million, investment in foreign joint venture of $2.0 million,
intangible assets of $65.8 million and property, plant and
equipment of $23.9 million. The Company also assumed liabilities
of $3.5 million.
The TNT acquisition costs of $56.4 million included net
accounts receivable of $1.7 million, inventory of $0.3 million,
other assets of $0.1 million, intangible assets of $47.5 million
and property, plant and equipment of $8.5 million. The Company
also assumed liabilities of $1.7 million.
Assets sold with the disposal of the Retail Division
included net accounts receivable of $10.8 million, inventories of
$8.6 million, other current assets of $0.7 million, other assets
of $0.2 million and property, plant and equipment of $22.2
million. The purchaser also assumed liabilities of $10.5
million. Net cash proceeds to the Company were $65.8 million.
The Company reduced its debt under its term loan by $58.0 million
and used the remainder to pay expenses related to the sale.
Expenditures for additions to property, plant and
equipment were $24.3 million for continuing operations and $0.8
for discontinued operations. Approximately $6.9 million of these
expenditures related to increased capacity in pepperoni
production, $6.2 million related to new equipment and fixtures to
accommodate the transfer of production to other facilities
resulting from the integration and restructuring program and the
sale of the Retail Division and the remainder was for
replacements and modifications of existing facilities. The
source of the funds for these expenditures was from cash provided
by operations.
Fiscal 1994. Operating activities provided net cash of
$27.4 million in Fiscal 1994 compared to $18.1 million in Fiscal
1993. The Specialty Brands Division provided $10.6 million of
the total for Fiscal 1994. The operations of the discontinued
Retail Division provided $0.6 million of cash flow in Fiscal
1994. The cash provided by the results of continuing operations
after adding back noncash items of depreciation and amortization,
post retirement medical benefits, provisions for restructuring,
integration and plant closings was $21.0 million in Fiscal 1994,
of which $11.8 million was provided by the Specialty Brands
Division. Additional increases in cash from operating activities
resulted primarily from decreases in accounts receivable,
inventories, deferred charges and other assets and increases in
accounts payable and accrued liabilities offset partially by
increases in other current assets.
The Company's Specialty Brands Division acquisition
costs of $137.7 million included net accounts receivable of $9.2
million, inventory of $21.8 million, other current assets of $0.4
million, intangible assets of $77.3 million and plant, property
and equipment of $39.5 million. The Company also assumed
liabilities of $10.5 million.
Cash expenditures for additions to property, plant and
equipment were approximately $10.1 million for continuing
operations and $4.5 million for discontinued operations during
Fiscal 1994. Of this total, approximately $5.3 million of these
expenditures were primarily attributable to construction of
additional capacity in ham and sausage production and the
remainder for replacements and modifications to existing
facilities. The source of the funds for these expenditures was
from cash generated from operations, the receipt of escrowed
funds related to construction in progress and borrowings under
existing credit facilities.
In October 1994, the Company announced the completion
of a stock rights offering. The rights offering provided current
stockholders the ability to purchase 0.68 shares for each share
currently owned. The offering also provided an over-subscription
privilege for those who exercised more rights. As a result of
the offering, 4,511,867 rights were exercised at $9.00 per share
for gross proceeds of $40.6 million. Net proceeds, after
expenses, were $38.6 million. The Company used $35.0 million of
the proceeds to reduce bank debt. As a result of the offering,
JLL Associates, L.P. ("JLL") increased its ownership in the
Company to approximately 44.3% from 27.4% at January 1, 1994.
Fiscal 1993. Operating activities provided net cash of
$18.1 million in Fiscal 1993. Operations of the discontinued
Retail Division provided $10.5 million of cash flow in Fiscal
1993. Investments in property, plant and equipment totaled $8.9
million for continuing operations and $10.8 million for
discontinued operations during Fiscal 1993. These expenditures
included construction of the new facility at Forrest City,
Arkansas, construction of additional drying room at the Company's
South Hutchinson, Kansas production facility to support growth in
the Food Service Division and $7.0 million of modifications and
replacements at existing facilities. The Company sold certain
assets which had been classified as Assets Held for Sale
resulting in net proceeds of $14.9 million offset by $16.9
million of net cash used by Assets Held for Sale, all of which
are included in net investment activities of discontinued
operations.
The Company reduced its net borrowings by $26.8 million
during Fiscal 1993. The Company issued $110.0 million in 9 3/4%
Senior Subordinated Redeemable Notes due in the year 2000 (the
"Senior Subordinated Notes") and entered into a new revolving
working capital facility (the "1993 Credit Agreement"). Proceeds
were used to retire the previous bank credit agreement.
On March 22, 1993, JLL purchased from the Company two
million newly-issued shares of Common Stock at $15.00 per share
pursuant to a stock purchase agreement. The Company used the net
proceeds from the sale, $26.7 million, to repay indebtedness. As
a result of this purchase, JLL owned approximately 25% of the
Common Stock. As of January 1, 1994, through subsequent open
market purchases, JLL increased its ownership by approximately
2.4%. The purchase agreement grants certain demand and piggyback
registration rights to JLL.
Financial Condition and Liquidity
On December 11, 1995, the Company consummated (i) a
term loan for $145.0 million ($95.0 million received on that
date), (ii) an acquisition revolving facility not to exceed
$100.0 million and (iii) a working capital revolving facility not
to exceed $75.0 million, of which $55.0 million can be used to
acquire other businesses, ("the Credit Agreement"). The proceeds
received on that date were net of $3.9 million of debt issuance
costs. The proceeds received were used to repay the existing
bank debt outstanding under the previous bank term loan totaling
$53.0 million and to fund the acquisition of KPR. The
acquisition revolving facility was subsequently drawn down to
finance the acquisition of TNT. The total debt outstanding under
all facilities at December 30, 1995, was $160.5 million including
$9.0 million under the working capital revolving facility. In
January 1996 the remaining $50.0 million under the term loan was
used to retire a promissory note to the sellers of KPR. The
Credit Agreement includes a subfacility for standby and
commercial letters of credit not to exceed $7.0 million. The
term loan requires quarterly payments beginning May 1996. The
acquisition revolving facility requires quarterly payments
beginning May 1997. To the extent not previously paid, all
borrowings under the Credit Agreement are due and payable January
15, 2000. Payments totaling $16.9 million will be required in
1996. At December 30, 1995, $50.9 million was available for
borrowing at that date based on current working capital and the
Company also has the ability to borrow an additional $43.5
million under the acquisition revolving facility in 1996 to fund
future acquisitions.
Management believes that cash flow from operations
combined with the borrowing capacity available under the
Company's Credit Agreement will be sufficient to meet the
Company's existing operating and debt service cash requirements
for the foreseeable future. Management also believes the
reduction of debt as a result of the sale of the Retail Division
along with the reduced working capital requirements has benefited
the Company's overall liquidity and capital resources and is
allowing the Company to more rapidly execute its strategy to
acquire higher margin food businesses such as the recently
completed acquisitions of KPR and TNT.
The Company's primary raw materials are fresh and
frozen meat, cheese, vegetables, milk products and flour. Severe
price swings in such raw materials, and the resultant impact on
the price the Company charges for its products, at times have
had, and may in the future have, material adverse effects on the
demand for the Company's products and its profits. The Company
utilizes several techniques for reducing the risk of future raw
materials price increases. These techniques include purchasing
and freezing raw materials during seasonally low cost periods of
the year, negotiating certain minimum purchase commitments at set
prices and periodically entering into futures contracts. Such
techniques are generally employed prior to an expected seasonal
price increase and in connection with fixed price sales
agreements to hedge the cost of raw materials for both firm and
forecasted sales commitments that will occur during a seasonal
sales peak.
Futures contracts as described above are accounted for
as hedges. Accordingly, resulting gains or losses are deferred
and recognized as part of the product cost. The Company's fiscal
year end is typically a seasonal low point in hedging activities
and deferred losses as of the end of Fiscal 1995, 1994 and 1993
were each less than $0.1 million.
Other. A subsidiary of the Company is a defendant in a
lawsuit filed prior to the Company's acquisition. The plaintiff
alleges liability based upon patent infringement,
misappropriation of proprietary information, unfair business
practices and breach of contract. Although the plaintiff has not
specified any amount of damages, liability for patent
infringement may include disgorgement of profits which the
Company believes could be material. The subsidiary has denied
these allegations and contends that the plaintiff's patents are
invalid and that, even if valid, the process and equipment used
by the subsidiary does not infringe the patents. The Company and
its subsidiary instituted a declaratory judgement action against
the plaintiff. See "Business - Legal Proceedings."
The litigation is complex and the ultimate outcome can
not be presently determined. Although the Company will
vigorously defend its interests, no assurance can be given that a
material adverse effect will not result from the litigation.
Impact of Changing Prices and Inflation
As previously discussed, the impact of changing prices
on the Company's operations is primarily a function of the
Company's raw material commodity prices. These prices are
subject to many forces including those of the marketplace and
inflation. The impact of changing prices on raw materials has
decreased since the Company exited the volatile retail
refrigerated processed meat case business. The Company does not
believe that inflation played a major role in either the cost of
raw materials or labor, or the selling price of its products
during Fiscal 1995, Fiscal 1994 or Fiscal 1993. Like many food
processors, the Company periodically adjusts selling prices of
its products, subject to competitive constraints and costs of raw
materials.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and
supplementary information are listed in Item 14 of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections titled "Proposal I. Election of
Directors," "Directors," "Directors Whose Terms Expire in 1996,"
"Continuing Directors," "Meetings of Board of Directors and
Committees," "Executive Officers" and "Principal Stockholders" of
the Proxy Statement for the Annual Meeting of Stockholders are
incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The sections titled "Compensation of Directors and
Executive Officers," "Report of the Compensation Committee of the
Board of Directors," "Stock Price Performance Graph" and
"Proposal III. Approval of the Company's Non-Employee Directors'
Deferred Stock Compensation Plan" of the Proxy Statement for the
Annual Meeting of Stockholders are incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The section titled "Principal Stockholders" of the
Proxy Statement for the Annual Meeting of Stockholders are
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section titled "Certain Relationships and Related
Transactions" of the Proxy Statement for the Annual Meeting of
Stockholders is incorporated herein by reference.
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) List of Documents filed as part of this Report:
1. Financial Statements:
Page
Consolidated Balance Sheet at
December 30, 1995 and December 31, 1994 . . F-1
Consolidated Statement of Operations
For the Years Ended December 30, 1995,
December 31, 1994 and January 1, 1994 . . . F-2
Consolidated Statement of Stockholders' Equity
For the Years Ended December 30, 1995,
December 31, 1994 and January 1, 1994 . . . F-4
Consolidated Statement of Cash Flows
For the Years Ended December 30, 1995,
December 31, 1994 and January 1, 1994 . . . F-5
Notes to Consolidated Financial Statements . . . F-8
Report of Independent Accountants. . . . . . . .F-30
Quarterly Results of Operations (Unaudited). . .F-31
2. Exhibits (numbered in accordance with Item 601
of Regulation S-K):
Exhibit Number Description
______________ ___________
3.1 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc.
3.2 Amended and Restated Bylaws of Foodbrands
America, Inc.
4.1 Specimen certificate for Foodbrands America,
Inc. Common Stock, par value $.01 per share
4.2 Credit Agreement among Foodbrands America,
Inc., the Lender parties hereto, Chemical
Bank and Citibank, N.A., dated as of December
11, 1995
4.3 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000
4.4 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee
4.5 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National
Association, New York, as Trustee dated as of
June 1, 1994
4.6 Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
4.7 Third Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
December 11, 1995
4.8 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory
banks thereto
4.9 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc.
(see Exhibit 3.1 above)
4.10 Amended and Restated Bylaws of Foodbrands
America, Inc. (see Exhibit 3.2 above)
4.11* Foodbrands America, Inc. 1992 Stock Incentive
Plan, as amended
4.12* Doskocil 1992 Stock Incentive Plan, as
amended
4.13* Doskocil 1992 Stock Incentive Plan, as
amended
10.1 Credit Agreement among Foodbrands America,
Inc., the Lender parties hereto, Chemical
Bank and Citibank, N.A., dated as of December
11, 1995 (see Exhibit 4.2 above)
10.2 Credit Agreement among Foodbrands America,
Inc., the Several Lenders from Time to Time
Parties Thereto and Chemical Bank, as Agent
dated as of May 25, 1994
10.3 First Amendment to Credit Agreement dated
November 2, 1994
10.4 Second Amendment to Credit Agreement dated
February 10, 1995
10.5 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (see Exhibit 4.3
above)
10.6 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (see Exhibit 4.4 above)
10.7 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National
Association, New York, as Trustee dated as of
June 1, 1994 (see Exhibit 4.5 above)
10.8 Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
(see Exhibit 4.6 above)
10.9 Third Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
December 11, 1995 (see Exhibit 4.7 above)
10.10 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory
banks thereto (see Exhibit 4.8 above)
10.11* Foodbrands America, Inc. Key Management Cash
Incentive Plan
10.12* Foodbrands America, Inc. 1992 Stock Incentive
Plan, as amended (see Exhibit 4.12 above)
10.13* Doskocil 1992 Stock Incentive Plan, as
amended
10.14* Doskocil 1992 Stock Incentive Plan, as
amended
10.15* Employment Agreement dated August 2, 1994,
between Doskocil and R. Randolph Devening
10.16* Employment Agreement dated January 30, 1995,
between Doskocil and Larry P. Swafford
10.17* General Release and Separation Agreement
between Foodbrands America and Larry P.
Swafford dated as of May 25, 1995.
10.18* Employment Agreement dated October 9, 1995,
between Patrick A. O'Ray and Foodbrands
America
10.19* Employment Agreement dated December 11, 1995,
between Foodbrands America and William E.
Rosenthal
10.20* Employment Agreement dated December 11, 1995,
between Foodbrands America and Howard S. Katz
10.21* Form of Transition Employment Agreement dated
on or after December 17, 1991, between
Doskocil and Thomas G. McCarley, William L.
Brady, David J. Clapp, Raymond J. Haefele,
Bryant P. Bynum, Horst O. Sieben, and Howard
C. Madsen
10.22* First Amendment to Transition Employment
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O.
Sieben
10.23* Non-Qualified Stock Option Agreement dated
September 29, 1994 between Doskocil and R.
Randolph Devening
10.24* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and R. Randolph
Devening
10.25* Form of Non-Qualified Stock Option Agreement
dated on or after September 29, 1994 between
Doskocil and William L. Brady, Bryant P.
Bynum, David J. Clapp, Horst O. Sieben,
Thomas G. McCarley, Raymond J. Haefele,
Howard C. Madsen, Patrick A. O'Ray, William
E. Rosenthal, and Howard S. Katz.
10.26* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O.
Sieben.
10.27* Separation Pay Plan dated April 1, 1995
10.28* Deferred Stock Compensation Plan between
Foodbrands America and its non-employee
Directors
10.29* Form of Indemnification Agreement between
Doskocil and its non-employee Directors
10.30 Lease Agreement dated April 4, 1992, between
Doskocil and Millard Refrigerated Services-
Atlanta, as amended
10.31 Equipment Lease Agreement between Wilson
Foods and MDFC Equipment Leasing Corporation,
dated May 20, 1992, and related unconditional
Guaranty executed by Doskocil dated June 11,
1992, and Equipment Lease Addendum to date
10.32 Stock Purchase Agreement by and between
Doskocil and JLL dated February 16, 1993
10.33 Agreement dated as of March 22, 1993, by and
between Joseph Littlejohn and Levy Fund,
L.P., The Airlie Group, L.P. and Doskocil
10.34 Stockholders Agreement dated as of March 22,
1993, by and between the Airlie Group, L.P.
and Doskocil
10.35 Stock Purchase Agreement between
International Multifoods Corporation and
Doskocil Companies Incorporated dated as of
March 17, 1994
10.36 Agreement, Acknowledgement and Waiver between
Foodbrands America, Inc. and Joseph
Littlejohn & Levy Fund, L.P. dated May 16,
1995
10.37 Doskocil/Airlie Agreement dated March 7, 1995
10.38 Asset Purchase Agreement by and among Thorn
Apple Valley, Inc. and Doskocil Companies
Incorporated, Wilson Foods Corporation,
Concordia Foods Corporation, Dixie Foods
Company and Shreveport Foods Company dated
April 29, 1995
10.39 First Amendment to Asset Purchase Agreement
between Thorn Apple Valley, Inc. and
Foodbrands America, Inc., Wilson Foods
Corporation, Concordia Foods Corporation,
Dixie Foods Company and Shreveport Foods
Company dated May 26, 1995
10.40 Noncompete Agreement by Foodbrands America,
Inc., Wilson Foods Corporation, Concordia
Foods Corporation, Dixie Foods Company and
Shreveport Foods Company in favor of Thorn
Apple Valley, Inc. dated May 30, 1995
10.41 Purchase Agreement by and among KPR Holdings,
Inc. and the Shareholders of RKR-GP, Inc. and
Foodbrands America, Inc. dated as of November
14, 1995
10.42 Stock Purchase Agreement by and among TNT
Crust, Inc. and the Shareholders of TNT
Crust, Inc. and Foodbrands America, Inc.
dated as of November 22, 1995
10.43 First Amendment to Stock Purchase Agreement
by and among TNT Crust, Inc. and the
Shareholders of TNT Crust, Inc. and
Foodbrands America, Inc. dated as of December
11, 1995
10.44 Second Amendment to Stock Purchase Agreement
by and among TNT Crust, Inc. and the
Shareholders of TNT Crust, Inc. and
Foodbrands America, Inc. dated as of December
14, 1995
10.45 Master Equipment Lease Agreement between
NationsBank Leasing Corporation of North
Carolina and Foodbrands America, Inc. dated
January 31, 1996
10.46 Lease Agreement between Bam Corporation and
KPR Holdings, L.P. dated December 11, 1995
11.1 Calculation of Earnings Per Share
20.1** Annual Report on Form 11-K with Respect to
Foodbrands America, Inc. Retirement and
Profit Sharing Plan
21.1 Subsidiaries of Foodbrands America, Inc.
22.1** Proxy Statement for Annual Meeting of
Stockholders
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
_______________________________
* Management contracts and compensatory plans or arrangements
** To be filed by amendment.
(b) Reports on Form 8-K.
Current Report on Form 8-K, dated December 11, 1995, of
Foodbrands America, Inc. was filed with the SEC on
December 26, 1995, with respect to the Company entering
into agreements for the acquisition of assets under
Item 2 (Acquisition or disposition of assets) and Item
7 (financial statements, pro forma financial
information and exhibits).
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands, except par value)
<CAPTION>
December 30, December 31,
1995 1994
____________ ____________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,398 $ 17,376
Receivables 46,166 29,472
Inventories 58,523 48,488
Other current assets 3,130 2,365
Net current assets of discontinued
operations - 12,145
________ ________
Total current assets 115,217 109,846
Property, plant and equipment - net of
accumulated depreciation and amortization
of $38,188 in 1995 and $31,685 in 1994 139,926 92,902
Intangible assets, net of accumulated
amortization of $5,375 in 1995 and
$2,654 in 1994 195,025 83,687
Deferred charges and other assets 46,284 43,419
Reorganization value in excess of amounts
allocable to identifiable assets, net
of accumulated amortization of $9,641 in
1995 and $7,867 in 1994 25,311 39,204
Net noncurrent assets of discontinued
operations - 73,209
________ ________
$521,763 $442,267
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 18,341 $ 1,654
Accounts payable 26,152 13,353
Accrued liabilities 50,294 44,182
________ ________
Total current liabilities 94,787 59,189
Long-term debt 305,407 224,260
Other long-term liabilities 78,340 80,331
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, 4,000,0000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 20,000,000
shares authorized, 12,467,738 and
12,447,914 shares issued and
outstanding, respectively 125 124
Capital in excess of par value 151,248 151,046
Retained earnings (deficit) (105,203) (71,108)
Minimum pension liability adjustment (2,941) (1,575)
________ ________
Total stockholders' equity 43,229 78,487
________ ________
$521,763 $442,267
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ ________
<S> <C> <C> <C>
Net sales $634,700 $512,352 $393,270
Cost of sales 499,985 410,118 335,788
________ ________ ________
Gross profit 134,715 102,234 57,482
Operating expenses:
Selling 69,483 52,165 28,979
General and administrative 25,634 24,151 21,732
Amortization of intangible assets 4,495 4,123 2,843
Provision for restructuring and
integration (Note 4) - 10,586 -
Provision for plant closings (Note 6) - - 500
________ ________ ________
Total 99,612 91,025 54,054
________ ________ ________
Operating income 35,103 11,209 3,428
Other income (expense):
Interest and financing costs (17,268) (15,102) (9,240)
Other, net (1,193) (702) 226
________ ________ ________
Total (18,461) (15,804) (9,014)
________ ________ ________
Income (loss) from continuing operations
before income taxes 16,642 (4,595) (5,586)
Income tax provision (benefit) 7,041 600 (1,212)
________ ________ ________
Income (loss) from continuing operations 9,601 (5,195) (4,374)
Discontinued operations (Notes 3 and 10):
Income (loss) from operations of the
Retail Division, net of income tax (4,121) (8,522) 6,781
Loss on disposal of the Retail Division
(plus applicable income tax expense
of $10,300) (38,526) - -
Extraordinary loss on early extinguishment
of debt (less income tax benefit of $673
in 1995)(Note 8) (1,049) (2,481) -
Cumulative effect on prior years (to
January 2, 1993) of change in
accounting for postretirement benefits
other than pensions (Note 11) - - (34,426)
________ ________ ________
Net income (loss) $(34,095) $(16,198) $(32,019)
======== ======== ========
(continued)
</TABLE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
<S> <C> <C> <C>
Earnings (loss) per share -
primary and fully diluted:
Income (loss) from continuing
operations $ 0.77 $ (0.59) $(0.59)
Income (loss) from discontinued
operations (0.33) (0.98) 0.91
Loss on disposal of discontinued
operations (3.09) - -
Extraordinary loss on early
extinguishment of debt (0.08) (0.28) -
Cumulative effect of a change
in accounting for post-
retirement benefits other
than pensions - - (4.64)
_______ _______ ______
Net income (loss) $ (2.73) $ (1.85) $(4.32)
======= ======= ======
Weighted average number of
common and common equivalent
shares outstanding - primary
and fully diluted 12,453 8,727 7,419
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Minimum
Common Stock Capital in Retained Pension Unearned
______________ Excess of Earnings Liability Compen-
Shares Amount Par Value (Deficit) Adjustment sation
______ ______ __________ _________ __________ ________
<S> <C> <C> <C> <C> <C> <C>
Balance, January 2, 1993 5,888 $ 59 $ 85,267 $ (22,891) $ - $ (796)
Net Loss - - - (32,019) - -
Issuance of new shares 2,000 20 26,702 - - -
Minimum pension liability
adjustment - - - - (1,575) -
Net activity under Stock
Incentive Plan 30 - 346 - - 456
______ ____ ________ _________ _______ _______
Balance, January 1, 1994 7,918 79 112,315 (54,910) (1,575) (340)
Net Loss - - - (16,198) - -
Issuance of new shares 4,512 45 38,581 - - -
Net activity under Stock
Incentive Plan 18 - 150 - - 340
______ ____ ________ _________ _______ _______
Balance, December 31, 1994 12,448 124 151,046 (71,108) (1,575) -
Net Loss - - - (34,095) - -
Issuance of new shares 20 1 202 - - -
Minimum pension liability
adjustment, net of deferred
tax - - - - (1,366) -
______ ____ ________ _________ _______ _______
Balance, December 30, 1995 12,468 $125 $151,248 $(105,203) $(2,941) $ -
====== ==== ======== ========= ======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
_______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing
operations $ 9,601 $ (5,195) $ (4,374)
Adjustments to reconcile income (loss)
from continuing operations to net
cash provided (used) by continuing
operating activities:
Depreciation and amortization 11,509 10,508 7,806
Amortization of intangible assets 4,495 4,123 2,843
Provision for restructuring and
integration - 10,586 -
Postretirement medical benefits 487 670 1,090
Provision for plant sale - - 500
Deferred compensation 460 - -
Amortization included in interest
expense 1,195 1,279 416
Deferred income taxes 6,138 - (1,631)
Payments for restructuring/
integration (3,240) (1,020) -
Changes in:
Receivables (8,413) 430 (2,181)
Inventories (2,844) 1,713 (6,126)
Other current assets (587) (354) 1,450
Deferred charges and other assets (219) 357 (609)
Accounts payable and accrued
liabilities 5,015 3,635 8,643
Noncurrent liabilities 2,250 - (159)
Other (51) 22 (18)
________ _______ _______
Net cash provided by continuing
operations 25,796 26,754 7,650
Net cash provided (used) by
discontinued operations including
changes in working capital (12,294) 627 10,488
________ _______ _______
Net cash provided (used) by operating
activities 13,502 27,381 18,138
________ _______ _______
(Continued)
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment (24,255) (10,063) (8,934)
Acquisition of KPR Holdings, Inc. (51,935) - -
Acquisition of TNT Crust, Inc. (56,379) - -
Acquisition of International Multifoods
Foodservice Corp. - (137,684) -
Payments received on notes receivable 358 672 517
Proceeds from sale of property,
plant and equipment 130 436 -
Proceeds from sale of Retail Division 65,786 - -
Net investing activities of
discontinued operations (838) (4,557) (12,770)
________ ________ _______
Net cash used by investing activities (67,133) (151,196) (21,187)
________ ________ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations, net
of issuance costs 147,636 141,154 105,953
Borrowings under revolving working
capital facility 30,000 195,500 99,233
Payments on revolving working capital
facility (21,000) (203,500) (157,011)
Payments on capital lease and
debt obligations (112,629) (36,720) (74,437)
Payment on early extinguishment of debt - (1,088) -
Issuance of common stock 195 38,626 26,722
Net financing activities of
discontinued operations (549) 1,016 (520)
________ ________ _______
Net cash provided (used) by
financing activities 43,653 134,988 (60)
________ ________ _______
Increase (decrease) in cash
and cash equivalents (9,978) 11,173 (3,109)
Cash and cash equivalents at beginning
of period 17,376 6,203 9,312
________ ________ _______
Cash and cash equivalents at end of
period $ 7,398 $ 17,376 $ 6,203
======== ======== =======
(Continued)
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
<S> <C> <C> <C>
Supplemental disclosure of noncash
operating activities:
Loss on early extinguishment of
debt, net of income taxes $ (1,049) $ (2,419) $ -
Cumulative effect on prior years of
change in accounting for post-
retirement benefits other than
pensions - - (34,426)
Supplemental disclosure of noncash
investing and financing activities:
Promissory note issued upon
acquisition $ 50,000 $ - $ -
Capital lease obligations-
Continuing operations 22 550 1,285
Discontinued operations - 2,853 331
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 19,944 $ 19,441 $ 8,406
Income taxes 727 442 815
Reorganization professional and
financing fees - - 319
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
(formerly known as Doskocil Companies Incorporated)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Description of Business and Summary of Significant
Accounting Policies
a. Description of Business:
The Company produces, markets and distributes
frozen and refrigerated products targeted to growth
segments of the foodservice industry, which
encompasses all aspects of away-from-home food
preparation. The Company's products include
pepperoni, beef and pork toppings, as well as
partially baked pizza crusts, marketed to the pizza
industry, appetizers, Mexican and Italian foods,
sauces, soups and side dishes and branded and
processed meat products. Customers include large
multi-unit food chains, major foodservice
distributors, warehouse clubs and grocery store
delicatessens, principally in the United States.
The Company's annual reporting period ends on the
Saturday nearest December 31. Accordingly, the
annual reporting periods ended December 30, 1995,
December 31, 1994 and January 1, 1994 contained 52
weeks.
b. Principles of Consolidation:
The consolidated financial statements include the
accounts of Foodbrands America, Inc. ("Foodbrands
America") and all of its subsidiaries. Prior year
balances have been restated to conform to the
current year's presentation for discontinued
operations (See Note 3).
c. Use of Estimates in the Preparation of Financial
Statements:
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.
Significant estimates made by the Company include
accrued pension costs, including a minimum pension
liability adjustment, accrued postretirement
medical benefits and a valuation allowance for
deferred tax assets. Accrued pension costs and
postretirement benefits involve the use of
actuarial assumptions, including selection of
discount rates (See Note 11). Determination of the
valuation allowance for deferred tax assets
considers estimates of projected taxable income
(See Note 10). It is reasonably possible that
the Company's estimates for such items could change
in the near term.
d. Cash and Cash Equivalents:
The Company considers cash equivalents to include
all investments with a maturity at date of purchase
of 90 days or less. Cash equivalents of $10.1
million and $18.8 million at December 30, 1995 and
December 31, 1994 represent investments primarily
in Commercial Paper and U.S. Government Securities,
carried at cost, which approximates market.
e. Concentrations of Credit Risk:
The concentrations of credit risk with respect to
trade receivables are, in management's opinion,
considered minimal due to the Company's diverse
customer base. Credit evaluations of its
customers' financial conditions are performed
periodically, and the Company generally does not
require collateral from its customers. As of
December 30, 1995, the Company had concentrations
of cash in bank balances totaling approximately
$4.2 million located at 6 banks which exposes the
Company to concentrations of credit risk. As of
December 31, 1994, the Company had concentrations
of cash in bank balances totaling approximately
$4.7 million located in 9 banks.
f. Inventories:
Inventories are valued at the lower of cost
(first-in, first-out) or market. The Company
periodically enters into futures contracts as
deemed appropriate to reduce the risk of future
price increases. These futures contracts are
accounted for as hedges. Accordingly, resulting
gains or losses are deferred and recognized as
part of the product cost and included in cash flows
from operating activities in the Consolidated
Statement of Cash Flows.
g. Property, Plant and Equipment:
Property, plant and equipment are stated at cost if
acquired after September 28, 1991, the date the
Company implemented Fresh Start Reporting as set
forth in Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), issued by the
American Institute of Certified Public Accountants.
When assets are sold or retired, the costs of the
assets and the related accumulated depreciation are
removed from the accounts and the resulting gains
or losses are recognized.
Depreciation and amortization are provided using
the straight-line method over either the estimated
useful lives of the related assets (3 to 40 years)
or, for capital leases, the terms of the related
leases.
h. Intangible Assets and Reorganization Value:
The excess of the aggregate purchase price over
fair value of net assets acquired ("Goodwill") is
being amortized over 40 years. Trademarks and
tradenames are amortized on the straight-line
method over 20 to 25 years.
Based on the allocation of reorganization value in
conformity with the procedures specified by SOP
90-7, the portion of the reorganization value which
cannot be attributed to specific tangible or
identifiable intangible assets of the reorganized
Company has been reported as "Reorganization Value
in Excess of Amounts Allocable to Identifiable
Assets" ("Reorganization Value") and is amortized
using the straight-line method over 20 years.
The Company continually reevaluates the carrying
amount of the Reorganization Value and other
intangibles as well as the amortization period to
determine whether current events and circumstances
warrant adjustments to the carrying value and/or
revised estimates of useful lives. The specific
methodology of future pre-interest cash flows (with
assets grouped by division which is the lowest
level for which there are identifiable cash flows)
is used for this evaluation. At this time, the
Company believes that no impairment of the
Reorganization Value and other intangibles has
occurred and that no reduction of the estimated
useful lives is warranted.
i. Deferred Charges and Other Assets:
Included in deferred charges and other assets are
net deferred tax assets of $32.7 million. Deferred
loan costs associated with various debt instruments
are being amortized over the terms of the related
debt using the interest method. At December 30,
1995 and December 31, 1994, $6.1 million and $7.0
million, respectively, remained to be amortized
over future periods.
Amortization expense for these loans included in
interest expense for fiscal 1995, 1994 and 1993 was
approximately $1.1 million, $1.2 million and $0.3
million, respectively. Deferred loan costs of $1.7
million and $2.5 million were written off in Fiscal
1995 and 1994, respectively, due to early
extinguishment of debt.
j. Income Taxes:
The Company utilizes the asset and liability
approach for financial accounting and reporting for
income taxes as set forth in Statement of Financial
Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." SFAS 109 utilizes
the liability method and deferred income taxes are
recorded to reflect the expected tax consequences
in future years of differences between the tax
basis of assets and liabilities and their financial
reporting amounts and net operating loss
carryforwards ("NOLs") at each year-end.
Valuation allowances are established when necessary
to reduce deferred tax assets to the amount
expected to be realized. This analysis is
performed quarterly based on the best information
available. The Company will make adjustments as
necessary to the valuation allowance when it
becomes more likely than not that the net deferred
tax benefits will be realized in the future.
k. Earnings (Loss) Per Common Share:
Primary and fully diluted earnings (loss) per share
are computed by dividing net income (loss) by the
weighted average number of common and common
equivalent shares outstanding during each period.
Options and warrants which have a dilutive effect
are considered in the per share computations.
l. Recently Issued Accounting Pronouncements:
Impairment of Long-Lived Assets. Statement of
Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," requires that
long-lived assets and certain identifiable
intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount
of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows
(undiscounted and without interest charges)
expected to result from the use of the asset and
its eventual disposition to the carrying amount of
the asset. This new accounting principle is
effective for the Company's fiscal year ending
December 28, 1996. The Company believes that
adoption will not have a material impact on its
financial position.
Stock-Based Compensation. Statement of Financial
Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not
require, companies to recognize compensation
expense for grants of stock, stock options and
other equity instruments to employees based on new
fair value accounting rules. Although expense
recognition for employee stock based compensation
is not mandatory, SFAS 123 requires companies that
choose not to adopt the new fair value accounting
to disclose pro-forma net income and earnings
per share under the new method. This new
accounting principle is effective for the Company's
fiscal year ending December 28, 1996. The Company
believes that adoption will not have a material
impact on its financial condition as the Company
will not adopt the fair value accounting, but will
instead comply with the disclosure requirements.
Note 2 Acquisitions
On December 11, 1995, the Company purchased KPR Holdings,
L.P. ("KPR") for approximately $101.9 million, including
transaction related costs of the acquisition. In addition, the
Company has agreed to certain contingent payments payable in
Common Stock of the Company or cash, at the option of the
sellers, aggregating up to approximately $15.0 million, over the
next three years based on the attainment of specified earnings
levels. These payments, if made, will increase goodwill. KPR
produces and markets custom prepared foods and prepared meat
items for multi-unit restaurant chains. The acquisition has been
accounted for by the purchase method of accounting based on
preliminary estimates. Final adjustments are not expected to be
material. The excess of the total purchase price over fair value
of net assets acquired of approximately $65.8 million has been
recognized as goodwill and is being amortized over 40 years.
On December 18, 1995, the Company purchased all the
outstanding stock of TNT Crust, Inc. ("TNT") for approximately
$56.4 million, including transaction related costs of the
acquisition. In addition, the Company has agreed to a contingent
earnout payment payable in Common Stock of the Company or cash,
at the option of the sellers, not to exceed $6.5 million, based
on sales growth to certain customers. These payments, if made,
will increase goodwill. The business operates as a segment of
the Food Service Division. TNT produces and markets partially
baked and frozen self-rising crusts for use by pizza chains,
restaurants and frozen pizza manufacturers. The acquisition
has been accounted for by the purchase method of accounting based
on preliminary estimates. Final adjustments are not expected to
be material. The excess of the total purchase price over fair
value of net assets acquired of approximately $47.5 million has
been recognized as goodwill and is being amortized over 40 years.
On June 1, 1994, the Company purchased all of the
outstanding stock of International Multifoods Foodservice Corp.,
a division of International Multifoods Corporation, for
approximately $137.7 million, including transaction related costs
of the acquisition. The business, which has been renamed
Doskocil Specialty Brands Company, manufactures frozen food
products, including ethnic foods in the Mexican and Italian
categories, as well as appetizers, entrees and portioned meats.
The acquisition has been accounted for by the purchase method of
accounting. The excess of the aggregate purchase price over fair
value of net assets acquired of approximately $68.3 million and
trademarks at a fair value of $9.7 million were recognized
as intangible assets and are being amortized over 40 and 25
years, respectively.
The operating results of the acquisitions are included in
the Company's consolidated results of operations from the dates
of acquisition. The following unaudited pro forma consolidated
financial information assumes the acquisitions of KPR and TNT
occurred at the beginning of 1994 and the acquisition of
Specialty Brands occurred at the beginning of 1993. These
results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the
acquisition been made at the beginning of the periods presented,
or of the results which may occur in the future.
<TABLE>
<CAPTION>
Year Ended
____________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
(in thousands, except
per share)
<S> <C> <C> <C>
Net sales $751,008 $689,577 $576,600
Operating income 50,418 28,457 17,188
Income (loss) from continuing
operations 10,385 (5,349) (703)
Net income (loss) (33,311) (16,352) (28,348)
Earnings (loss) per share -
primary and fully diluted:
Income (loss) from continuing
operations $0.83 $(0.61) $(0.09)
Net income (loss) (2.67) (1.87) (3.82)
</TABLE>
Note 3 Discontinued Operations
On May 30, 1995, the Company sold the assets of its Retail
Division to Thorn Apple Valley, Inc. The sales price
approximated $65.8 million in cash payments plus the assumption
of long-term debt of approximately $6.0 million and certain
current liabilities related to the division of approximately $4.5
million. In connection with this sale the Company wrote off
approximately $64.3 million of post-bankruptcy intangible assets
and recorded a net loss on disposition of approximately $38.5
million. The agreement also includes potential consideration of
an additional $10 million based upon an increase in the market
value of the purchaser's common stock. Proceeds of the sale were
used to reduce the Company's debt under its term loan by $58
million. The remainder of the proceeds have been or will be used
to pay expenses related to the sale. The results of operations
and cash flows attributable to the Retail Division are reported
as discontinued operations and accordingly the balance sheet at
December 31, 1994 and the results of operations for years prior
to fiscal 1995 have been restated. Corporate interest expense
was allocated to the Retail Division based on its net assets in
proportion to the Company's consolidated net assets.
The results of discontinued operations are (in thousands):
Fiscal Year Ended
________________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ ________
Net sales $72,357 $238,308 $254,937
======= ======== ========
Income (loss) before taxes $(7,020) $ (8,522) $ 8,412
Tax expense (benefit) (2,899) - 1,631
_______ ________ ________
Net income (loss) $(4,121) $ (8,522) $ 6,781
======= ======== ========
The assets and liabilities of discontinued operations
included in the December 31, 1994 balance sheet are (in
thousands):
Working capital $12,145
Net property, plant and
equipment 22,822
Intangible and other assets 57,013
Long-term debt 6,626
Included in accounts payable and accrued liabilities at
December 30, 1995, are certain amounts, totalling $2.1 million,
relating to the sale of the Retail Division. The payments
associated with these accruals will be reflected in future
consolidated statements of cash flows as net cash flows used by
discontinued operations.
The assets included in the sale of the Retail Division had
significantly different financial and tax basis. Therefore, for
income tax purposes this transaction generated taxable income of
approximately $25.1 million requiring the utilization of net
operating loss carryforwards. The tax affect of this utilization
is approximately $9.6 million. As a direct result of the sale
and the related tax affect, the Company reduced the
Reorganization Value and other post-bankruptcy intangible assets
by $64.3 million, which will in turn reduce the amortization of
that asset in the future, in accordance with Fresh Start
Reporting.
Note 4 Restructuring and Integration
In December 1994, the Company announced a restructuring
program that resulted in a $10.6 million charge against operating
income in 1994. The restructuring program identified specific
manufacturing facilities and operations. The charge also
included costs incurred prior to year-end associated with the
corporate legal restructuring to preserve the Company's income
tax NOLs and to change the Company's name to Foodbrands America,
Inc.
As of December 30, 1995, the Company has consolidated
production operations, closed two production facilities and two
distribution facilities and discontinued a production operation.
The Company has also reduced employment at various other
locations as scheduled. Of the original $10.6 million provision,
the balance of the accrued liabilities remaining at December 30,
1995, is $1.2 million and $2.2 million remains as a reserve
against property, plant and equipment. Management believes that
the remainder of the reserve is adequate to complete the
restructuring and integration program.
Note 5 Inventories
Inventories at December 30, 1995 and December 31, 1994 are
summarized as follows (in thousands):
1995 1994
_______ _______
Raw materials and supplies $20,147 $16,077
Work in process 7,365 4,310
Finished goods 31,011 28,101
_______ _______
$58,523 $48,488
======= =======
Note 6 Property, Plant and Equipment
Property, plant and equipment at December 30, 1995 and
December 31, 1994 is summarized as follows (in thousands):
1995 1994
________ ________
Land $ 3,053 $ 2,283
Buildings and improvements 68,461 47,971
Machinery and equipment 97,705 66,347
Construction in progress 5,621 4,663
________ ________
174,840 121,264
Less accumulated depreciation and
amortization 38,188 31,685
________ ________
136,652 89,579
Assets to be disposed of, net 3,274 3,323
________ ________
$139,926 $ 92,902
======== ========
In January 1994, the Company sold all the assets of its
processed food equipment manufacturing division at South
Hutchinson, Kansas. A provision for loss was recorded in 1993
for $0.5 million in connection with the decision to sell the
unit.
Note 7 Accrued Liabilities
Accrued liabilities at December 30, 1995 and December 31,
1994 are summarized as follows (in thousands):
1995 1994
_______ _______
Interest $ 5,883 $ 6,368
Salaries, wages and payroll taxes 9,285 7,966
Employee medical benefits 11,361 8,890
Workers' compensation benefits 2,404 1,374
Pension and retirement benefits 2,098 1,797
Marketing expenses 5,360 5,301
Provisions for facility restructuring
and integration 1,240 4,500
Provisions for discontinued operations,
closed and sold facilities 2,968 506
Other 9,695 7,480
_______ _______
$50,294 $44,182
======= =======
Note 8 Long-term Debt
Long-term debt, more fully described below, at December 30,
1995 and December 31, 1994 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
________ ________
<S> <C> <C>
Notes payable to banks $160,500 $111,000
Promissory note 50,000 -
Industrial revenue bonds and mortgage notes - 280
9 3/4% Senior Subordinated Redeemable Notes
due 2000, net of discount 109,741 109,684
Capital lease obligations 3,507 4,950
________ ________
323,748 225,914
Less current maturities 18,341 1,654
________ ________
$305,407 $224,260
======== ========
</TABLE>
Based on the borrowing rates currently available to the
Company for bank borrowings with similar terms and average
maturities, the Company believes that the carrying amount of
these borrowings at December 30, 1995, approximates face value.
The fair value of the $110.0 million of 9 3/4% Senior
Subordinated Redeemable Notes due 2000 (the "Senior Subordinated
Notes"), based on the quoted market price at December 30, 1995,
approximates the carrying amount of $109.7 million.
The aggregate amounts of long-term obligations, excluding
obligations under capitalized leases, which become due during
each of the next five fiscal years are as follows (in millions):
$16.9 in 1996, $43.0 in 1997, $59.3 in 1998, $65.5 in 1999 and
$135.5 in 2000.
Notes Payable to Banks
On December 11, 1995, the Company consummated a credit
agreement consisting of (i) a term loan for $145.0 million, (ii)
an acquisition revolving facility not to exceed $100.0 million
and (iii) a working capital revolving facility not to exceed
$75.0 million ("the Credit Agreement"). The proceeds received on
that date were net of $3.9 million of debt issuance costs and
were used to repay the existing bank debt outstanding under the
previous bank term loan totaling $53.0 million and to fund the
acquisition of KPR. The acquisition revolving facility was
subsequently drawn down to finance the acquisition of TNT. The
Credit Agreement includes a subfacility for standby and
commercial letters of credit not to exceed $7.0 million. The
Credit Agreement ranks senior to all existing indebtedness and is
collateralized by essentially all the assets of the Company
including accounts receivable, inventory, general intangibles and
mortgaged properties.
Borrowings under the Credit Agreement bear interest at an
annual rate equal to, at the Company's option, either the
Eurodollar Rate, as defined by the agreement, plus 1.75% (subject
to adjustment based on the Company's Total Debt Ratio, as
defined) or an Alternate Base Rate, as defined in the agreement,
which is based on Chemical Bank's prime rate, plus 0.75% (subject
to adjustment based on the Company's Total Debt Ratio, as
defined). On December 30, 1995 the weighted average interest
rate on the borrowings was 7.97%. Interest on the borrowings
is payable quarterly in arrears. The term loan requires
quarterly payments beginning May 1996. The acquisition revolving
facility requires quarterly payments beginning May 1997. To the
extent not previously paid, all borrowings under the Credit
Agreement are due and payable January 15, 2000. Payments
totaling $16.9 million will be required in 1996. At December 30,
1995, borrowings under the working capital revolving facility
were $9.0 million and $50.9 million was available for borrowing
at that date based on accounts receivable and inventory. The
Company also has the ability to borrow an additional $43.5
million under the acquisition revolving facility in 1996 to fund
future acquisitions.
In connection with the extinguishment of debt discussed
above, the Company incurred an extraordinary loss of $1.0
million, net of $0.7 million income tax benefit.
In connection with the early extinguishment of debt in 1994
and termination of a related interest rate swap agreement, the
Company incurred an extraordinary loss in the amount of $2.5
million.
The Credit Agreement and the Senior Subordinated Notes
described below contain certain restrictive covenants and
conditions among which are limitations on further indebtedness,
restrictions on dispositions and acquisitions of assets,
limitations on dividends and compliance with certain financial
covenants, including but not limited to a maximum total debt
ratio and minimum interest expense coverage.
Promissory Note
Upon the acquisition of KPR, the Company executed a
promissory note to the sellers for $50.0 million. The note was
payable on January 15, 1996, and bore interest at the rate of 6%.
The note was retired using funds previously not drawn down under
the term loan facility of the Credit Agreement. The note has
been classified as long term based on the classification of the
Credit Agreement.
Senior Subordinated Notes
The Senior Subordinated Notes mature on July 15, 2000.
Interest is payable on January 15 and July 15 of each year. The
Senior Subordinated Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after July 15,
1998. If the Senior Subordinated Notes are redeemed during the
12-month period beginning July 15, 1998, the redemption price
(expressed as a percentage of principal amount) will be 103.0%,
and if they are redeemed during the 12-month period beginning
July 15, 1999, the redemption price will be 101.5%. The Senior
Subordinated Notes are unsecured and subordinated to all existing
and future senior indebtedness of the Company, including
borrowings under the Credit Agreement.
The Senior Subordinated Notes are guaranteed by all direct
and indirect subsidiaries of the Company, all of which are wholly
owned. The guarantees are joint and several, full, complete and
unconditional. There are currently no restrictions on the
ability of the subsidiary guarantors to transfer funds to the
Company in the form of cash dividends, loans or advances.
Combined financial statements for the subsidiary guarantors are
not presented herein because the Company is a holding company
with no operations and the combined financial statements of the
subsidiaries are the same as those of the Company with immaterial
differences.
Leases
The Company leases certain facilities, equipment and
vehicles under agreements which are classified as capital leases.
The building leases have original terms ranging from 20 to 25
years and have renewal options for varying periods ranging from
three years to 60 years. Most equipment leases have purchase
options at the end of the original lease term. Leased capital
assets included in property, plant and equipment at December 30,
1995 and December 31, 1994 are as follows (in thousands):
1995 1994
_______ _______
Buildings $ 2,666 $ 2,666
Machinery and equipment 6,079 6,479
_______ _______
8,745 9,145
Accumulated amortization 4,207 3,413
_______ _______
$ 4,538 $ 5,732
======= =======
Future minimum payments, by year and in the aggregate, under
noncancellable capital leases and operating leases with
initial or remaining terms of one year or more consist of the
following at December 30, 1995 (in thousands):
Capital Operating
Leases Leases
_______ _________
1996 $1,717 $ 4,413
1997 981 3,949
1998 396 3,838
1999 250 3,792
2000 142 3,754
Future years 673 4,235
______ _______
Total minimum lease payments 4,159 $23,981
Amounts representing interest 652 =======
______
Present value of net minimum
payments 3,507
Current portion 1,466
______
$2,041
======
The Company's rental expense for operating leases was (in
millions) $5.3, $4.5 and $4.0 for the fiscal years ended December
30, 1995, December 31, 1994 and January 1, 1994.
In connection with the KPR acquisition, the Company entered
into a ten year operating lease for a production facility. The
base rent is $0.8 million per year and is payable to a
corporation related to the former owners and current management
of KPR. Rent expense for 1995 was less than $0.1 million.
Note 9 Stockholders' Equity
In October 1994, the Company completed a stock rights
offering. The rights offering provided stockholders the ability
to purchase 0.68 shares for each share owned. As a result of the
offering, 4,511,867 rights were exercised at $9.00 per share for
gross proceeds of $40.6 million. Net proceeds, after expenses,
were $38.6 million. The Company used $35.0 million of the
proceeds to reduce bank debt.
At December 30, 1995, the Company has warrants outstanding
to purchase 282,036 shares. The warrant agreement provides the
holders an irrevocable put option, which obligates the Company to
repurchase the warrants at a price per warrant equal to the
excess of (i) the then-current market price per share of Common
Stock, over (ii) $17.53, which may be exercised by each of the
holders of the warrants only upon a Change of Control, as defined
in the current warrant agreement. The warrants may be exercised
through December 31, 1998.
Note 10 Income Taxes
Deferred tax assets primarily result from net operating loss
carryforwards and certain accrued liabilities not currently
deductible, and deferred tax liabilities result from the
recognition of depreciation and amortization in different periods
for financial reporting and income tax purposes. Income tax
expense results from the income tax payable for the year and the
change during the year in deferred tax assets and liabilities
including the realization of prereorganization net operating
losses.
The provision (benefit) for income taxes in continuing
operations consists of the following components (in thousands):
Fiscal Year Ended
________________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
Current:
Federal $ 103 $ - $ 44
State 800 600 375
______ ______ _______
903 600 419
______ ______ _______
Deferred:
Federal $5,168 $ - $(1,370)
State 970 - (261)
______ ______ _______
6,138 - (1,631)
______ ______ _______
Total $7,041 $ 600 $(1,212)
====== ====== =======
The income tax provision (benefit) applicable to the net
losses from discontinued operations associated with the Retail
Division are (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
<S> <C> <C> <C>
Operations of the Retail Division
Deferred expense (benefit) $(2,899) $ - $1,631
======= ==== ======
Disposal of the Retail Division:
Current expense:
Federal $ 278 $ - $ -
State 469 - -
Deferred expense 9,553 - -
_______ ____ ______
$10,300 $ - $ -
======= ==== ======
</TABLE>
The effective tax rate on income from continuing operations
differs from the statutory rate as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
________________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ _______
(Liability Method)
________________________________
<S> <C> <C> <C>
Statutory rate 35.0% (34.0)% (34.0)%
Tax effect of:
Amortization of
intangible assets 4.0 18.4 15.2
State taxes, net of
federal benefit 3.1 8.6 (1.3)
Limitation on recognition
of tax benefit - 20.1 -
Benefit of net deductible
temporary differences - - -
Other 0.2 - (1.6)
_____ _____ _____
42.3% 13.1% (21.7)%
===== ===== =====
</TABLE>
At December 30, 1995 and December 31, 1994, the deferred tax
assets and deferred tax liabilities were as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994
_______ _______
<S> <C> <C>
Deferred tax assets:
Retiree medical benefit plan accruals $26,962 $26,805
Pension plan accruals 5,487 5,373
Plant closing accruals 2,036 2,524
Employee compensation and benefits
accruals 5,531 7,111
Other accrued expenses 978 1,227
Net operating loss carryforwards 43,385 53,360
_______ _______
Total deferred tax assets 84,379 96,400
_______ _______
Deferred tax liabilities:
Capitalized leases (420) (265)
Accumulated depreciation (3,046) (1,496)
Intangible assets (4,787) (9,059)
Other (72) (78)
_______ _______
Total deferred tax liabilities (8,325) (10,898)
_______ _______
Net deferred tax assets 76,054 85,502
Valuation allowance (43,314) (54,564)
_______ _______
Net deferred tax assets $32,740 $30,938
======= =======
</TABLE>
In accordance with Fresh Start Reporting as prescribed by
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" issued by the American
Institute of Certified Public Accountants, the tax benefit
realized from utilizing the pre-reorganization net operating loss
carryforwards should be recorded as a reduction of the
Reorganization Value rather than be realized as a benefit in the
statement of operations. In 1995, the Company reduced the
Reorganization Value by $12.1 million.
At December 30, 1995, after considering utilization
restrictions, the Company's tax loss carryforwards approximated
$108.5 million. The net operating loss carryforwards are subject
to utilization limitations due to ownership changes. The net
operating loss carryforwards may be utilized to offset future
taxable income as follows: $76.3 million in 1996, $13.3 million
in each of years 1997 and 1998, $5.0 million in 1999 and $0.6
million in 2000. Loss carryforwards not utilized in the first
year that they are available may be carried over and utilized in
subsequent years, subject to their expiration provisions. These
carryforwards expire as follows: $10.9 million in 1996, $21.7
million in 1998, $6.0 million in 1999, $.9 million in 2000 and
$69.0 million during the years 2001 through 2009.
Note 11 Employee Benefit Plans
The Company and certain subsidiaries maintain employee
benefit plans covering most employees. All full-time employees
of the Company and its subsidiaries who have obtained the age of
21, have completed one year of employment and are not subject to
a collective bargaining agreement are permitted to contribute up
to 15% of their salary, not to exceed the limit set by the
Internal Revenue Service, to a 401(k) plan. The Company makes
contributions on behalf of each participant of a matching amount
not to exceed the employee's contribution or 3% of such
employee's salary.
Substantially all of the hourly employees at the Cherokee,
Iowa, Jefferson, Wisconsin and Riverside, California facilities
participate in defined benefit pension plans. Information
presented below also includes benefits and Company obligations
associated with participants of closed and sold operations.
The funded status of the defined benefit plans at December 30,
1995 and December 31, 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
_______ _______
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $65,972 $59,992
======= =======
Accumulated benefit obligation $68,229 $61,516
======= =======
Projected benefit obligation $68,229 $61,516
Plan assets at fair value 55,170 48,722
_______ _______
Projected benefit obligation
in excess of plan assets 13,059 12,794
Unrecognized net actuarial loss -
difference in assumptions and actual
experience (5,010) (1,637)
Adjustment required to recognize
additional minimum liability 4,743 1,575
_______ _______
Accrued pension cost $12,792 $12,732
======= =======
</TABLE>
Plan assets are comprised of cash and cash equivalents and
mutual funds investing primarily in interest bearing and equity
securities. The funding policy for the plan at the Cherokee
facility is to contribute amounts sufficient to meet the minimum
funding requirements of the Employee Retirement Income Security
Act of 1974 (ERISA), and the plans at the Jefferson and Riverside
facilities are funded based upon a recommendation from the
Company's actuary. Such contributions for the plan at the
Jefferson facility have, in prior years, exceeded the minimum
funding requirements.
Pension costs of the defined benefit plans for fiscal 1995,
1994 and 1993 are composed of the following components, based on
expected long-term rates of return of 9.0%, 8.5% and 9.0% and
discount rates of 7.5%, 8.75% and 7.5% for the plan at the
Jefferson facility, expected long-term rates of return of 8.5%,
8.5% and 8.5% and discount rates of 7.5%, 8.75% and 7.5% for the
plan at the Cherokee facility and expected long-term rate of
return of 9.0% and discount rate of 7.5% for fiscal 1995 for the
plan at the Riverside facility which became effective in 1995 (in
thousands):
<TABLE>
<CAPTION>
December 30, December 31, January 1,
1995 1994 1994
____________ ____________ __________
<S> <C> <C> <C>
Service cost for benefits
earned during the year $ 465 $ 370 $ 304
Interest cost on projected
benefit obligation 5,121 4,991 5,104
Return on plan assets (4,094) (4,330) (3,667)
Amortization of transition
obligation and unrecognized
prior service cost 11 - 41
______ ______ ______
Total pension cost $1,503 $1,031 $1,782
====== ====== ======
</TABLE>
Expenses for all of the Company's retirement plans for
fiscal years 1995, 1994 and 1993 were (in millions) $2.6, $2.1
and $3.0, respectively.
The Company provides life insurance and medical benefits
("Postretirement Medical Benefits") for substantially all retired
hourly and salaried employees of one of its subsidiaries under
various defined benefit plans. Contributions are made by certain
retired participants toward their Postretirement Medical
Benefits.
In 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS 106"). Upon
adoption of the new standard, the Company recorded, in the first
quarter of 1993, a one-time, noncash charge for the cumulative
effect of the change in accounting principle of $34.4 million, a
deferred tax benefit of approximately $31.0 million and a
liability of $65.4 million for Postretirement Medical Benefits.
The obligation as of the beginning of fiscal 1993 represents the
discounted present value of accumulated retiree benefits, other
than pensions, attributed to employees' service rendered prior to
that date. The effect of adopting FAS 106 for the year ended
January 1, 1994 was to increase net periodic postretirement
benefit cost and decrease earnings before cumulative effect of
accounting change by $1.1 million ($0.15 per share) and increase
net loss by $35.5 million ($4.79 per share).
The components of net periodic postretirement benefit cost
for the years ended December 30, 1995 and December 31, 1994 were
as follows (in thousands):
1995 1994
______ ______
Service cost $ 231 $ 241
Interest on accumulated benefit obligation 5,399 5,372
Other (61) (21)
______ ______
Net periodic postretirement benefit cost $5,569 $5,592
====== ======
The actuarial and recorded liabilities for these
Postretirement Medical Benefits at December 30, 1995 and December
31, 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
_______ _______
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents $68,095 $58,421
Actives not fully eligible 6,203 5,535
Actives fully eligible 226 341
_______ _______
74,524 64,297
Assets at fair value (1,056) (641)
_______ _______
Accumulated postretirement benefit obligation
in excess of plan assets 73,468 63,656
Unrecognized net gain (loss) (6,443) 2,965
Unrecognized prior service cost 379 391
_______ _______
Liability recognized on the balance sheet 67,404 67,012
Less current portion 7,854 5,076
_______ _______
Noncurrent liability for postretirement
medical benefits $59,550 $61,936
======= =======
</TABLE>
For measuring the accumulated postretirement medical benefit
obligation, a 10.5% annual rate of increase in the per capita
claims cost was assumed for 1996. This rate was assumed to
decrease gradually to 8.9% by 2000, 7.7% by 2005, and 6.5% by
2010 and remain at that level thereafter. The weighted average
discount rate used in determining the accumulated obligation was
7.5% and 8.75% for fiscal 1995 and 1994, respectively. The
expected long-term rate of return on plan assets was 6.0% for
both fiscal years 1995 and 1994.
If the health care cost trend rate were increased 1.0%, the
accumulated benefit obligation as of December 30, 1995 would have
increased by $1.4 million. The effect of this change on the
aggregate of service and interest cost for the year ended
December 30, 1995 would be an increase of $0.3 million.
The 1992 Stock Incentive Plan, as amended, (the "Plan")
authorizes the Company to grant stock options and/or Common Stock
aggregating 1,900,000 shares to directors, officers and other key
employees. In February 1992, the Company granted 105,000
restricted shares (11,666 shares subsequently lapsed), one-third
of which vested annually, beginning January 1, 1993. On January
1, 1995, the remaining restricted shares vested. The Company
also granted 105,000 performance shares (53,330 shares
subsequently lapsed) which vested annually over three years based
upon the attainment of targeted earnings. The number of
performance shares that were issued and vested is 51,670 (which
includes 35,416 shares issued under employee separation
agreements). As of December 30, 1995, the Company had also
granted under the Plan 1,426,547 Common Stock options at option
prices ranging from $9.00 to $15.25 per share. The options are
exercisable over a three to five year period. At December 30,
1995, 328,443 Common Stock options were available for future
issuance.
<TABLE>
Stock option transactions are as follows:
<CAPTION>
Options Price Range
_________ ______________
<S> <C> <C>
Outstanding, January 2, 1993 249,500 $14.00 - 14.38
Granted 27,166 $ 9.88 - 16.00
Canceled and forfeited (35,000)
_________
Outstanding, January 1, 1994 241,666 $ 9.88 - 16.00
Granted 913,528 $ 9.00 - 11.00
Canceled and forfeited (34,000)
_________
Outstanding, December 31, 1994 1,121,194 $ 9.00 - 16.00
Granted 475,128 $ 7.88 - 13.18
Exercised (19,686) $ 9.00 - 10.75
Canceled and forfeited (169,775)
_________
Outstanding, December 30, 1995 1,406,861 $ 9.00 - 15.25
=========
</TABLE>
The Company has issued 25,000 Common Stock options to
members of the Board of Directors under an option plan covering
nonemployee directors. The options vested upon granting at an
exercise price of $7.875.
Statement of Financial Accounting Standards No. 112
"Employer's Accounting for Postemployment Benefits" became
effective for fiscal year 1994. The Company generally does not
provide postemployment benefits, other than workers compensation
and long-term disability, the costs of which are estimated and
accrued as the events occur. Accordingly, implementation of this
statement has not had a material effect on the Company's
financial condition or results of operations.
Note 12 Commitments and Contingencies
The Company has committed to minimum purchases of raw
materials, supplies and equipment for delivery at various times
in 1996. The total of such commitments at December 30, 1995, is
approximately $17.5 million.
The Company is involved in two related actions alleging
infringement of two patents held by C&F Packing Company, Inc.
("C&F"). Prior to Foodbrands America acquiring KPR, C&F had
instituted a civil action against KPR alleging that KPR, using
equipment and a process to make a particular sausage product,
infringed the C&F patents. KPR has denied these allegations and
contends that C&F's patents are invalid and that, even if valid,
the process and equipment used by KPR does not infringe the
patents. C&F has also alleged misappropriation of trade secrets
and proprietary information, as well as other claims, all of
which KPR denies.
In 1988 and 1989, C&F filed actions against Doskocil
Companies Incorporated (Foodbrands America's predecessor)
alleging patent infringement and misappropriation of trade
secrets and proprietary information. In 1991, as part of
Doskocil's bankruptcy reorganization, and in settlement of the
litigation, Doskocil entered into a license agreement with C&F
and two consent decrees were entered.
Immediately prior to closing on the acquisition of KPR,
Foodbrands America and KPR instituted a declaratory judgment
action against C&F. The action seeks a ruling that the equipment
and process used by KPR do not violate the C&F patents and that,
in any event, it is not a violation of the consent decrees for
KPR to continue to use the equipment and process being utilized
by KPR prior to Foodbrands America acquiring KPR. C&F has
responded to the declaratory judgment action with a Motion to
Dismiss or to Transfer the actions to the Court that entered the
consent decrees. These motions are pending and have not been
ruled upon. Although the plaintiff has not specified any amount
of damages, liability for patent infringement may include
disgorgement of profits which the Company believes could be
material. The litigation is complex and the ultimate outcome can
not be presently determined. The Company and KPR intend to
vigorously prosecute the declaratory judgment action against C&F
and KPR intends to vigorously defend the suit by C&F.
In September 1992, United Refrigerated Services, Inc.
("URS") filed suit against Wilson Foods and unaffiliated parties
Normac Foods, Inc. ("Normac") and Thompson Builders of Marshall,
Inc. ("Thompson") in the Circuit Court of Saline County,
Missouri. The URS lawsuit involves claims for property damage as
a result of a fire in a warehouse owned by URS in Marshall,
Missouri, in which Wilson Foods was leasing space. The URS
lawsuit is in discovery stages. URS claims real and personal
property damage of approximately $9.8 million or, alternatively,
for trebling of the real property damage (currently estimated by
the Company at approximately $2.0 million, or $6.0 million in the
aggregate).
In its answer, Wilson Foods filed a counterclaim against URS
and a cross-claim against other codefendants for indemnity and/or
contribution. The fire occurred in a part of the URS warehouse
being leased by Wilson Foods in which Wilson Foods had produced
sausage patties under contract for Normac until the contract
terminated in September 1991. Normac's contractor, Thompson, was
removing Normac's equipment with a torch when fire broke out and
destroyed a large section of the URS warehouse and its contents.
In 1993, ConAgra, Inc. ("ConAgra") also filed suit against
Wilson Foods, Normac and Thompson in Saline County, Missouri.
ConAgra seeks damages in the amount of $9.4 million from the
named defendants for frozen food that was stored in another part
of the Marshall warehouse at the time of the fire and allegedly
damaged. The ConAgra case also is in discovery.
The Company's insurer has retained counsel to defend the
Company in these matters. Wilson Foods has substantial defenses
to these pending and threatened claims and the Company believes
it is not likely that Wilson Foods will ultimately incur a loss
in excess of its insurance coverage.
In the opinion of management, the Company's exposure to
loss, if any, under various claims and legal actions that have
arisen in the normal course of business, that are not covered by
insurance, will not be material.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Foodbrands America Inc.
We have audited the consolidated financial statements of
Foodbrands America, Inc. and subsidiaries as listed in Item 14(a)
of this Form 10-K. 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 consolidated
financial position of Foodbrands America, Inc. and subsidiaries
as of December 30, 1995 and December 31, 1994, and the
consolidated results of their operations and their cash flows for
the years ended December 30, 1995, December 31, 1994 and January
1, 1994 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
February 12, 1996
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 30, 1995 and December 31, 1994.
(Amounts are in thousands except per share data.)
<CAPTION>
Quarter
______________________________________
Year ended December 30, 1995 First<F1> Second<F2> Third Fourth<F3>
____________________________ ________ ________ ________ ________
<S> <C> <C> <C> <C>
Net sales $139,412 $146,582 $169,223 $179,483
Gross profit 31,165 32,587 34,463 36,500
Income (loss) from
continuing operations 1,792 1,932 2,503 3,374
Net income (loss) (563) (38,360) 2,503 2,325
Earnings (loss) per share,
primary and fully diluted:
Income (loss) from
continuing operations $ 0.14 $0.16 $0.20 $0.27
Net income (loss) (0.05) (3.07) 0.20 0.19
</TABLE>
<TABLE>
<CAPTION>
Quarter
______________________________________
Year ended December 31, 1994<F4><F5> First Second<F6>Third<F7> Fourth<F8>
________ ________ ________ ________
<S> <C> <C> <C> <C>
Net sales $ 94,347 $111,556 $152,189 $154,260
Gross profit 14,614 19,936 32,858 34,826
Income (loss) from
continuing operations (448) (396) 1,255 (5,606)
Net income (loss) (478) (1,767) (3,526) (10,427)
Earnings (loss) per share,
primary and fully diluted:
Income (loss) from
continuing operations $(0.06) $(0.05) $0.16 $(0.50)
Net income (loss) (0.06) (0.22) (0.44) (0.93)
_______________________
<FN>
<F1> Net income includes net loss from operating activities of the discontinued Retail
Division of $2.3 million.
<F2> Net income includes net loss from operating activities of the discontinued Retail
Division of $1.8 million and loss on disposal of the division of $38.5 million.
<F3> Net income includes extraordinary loss on early extinguishment of debt of $1.0
million, net of income tax benefit of $0.7 million.
<F4> Includes the results of operations of the Specialty Brands Division acquired June
1, 1994.
<F5> Net income includes net losses from operations of the discontinued Retail Division
of breakeven, $0.4 million, $3.3 million and $4.8 million for the first, second,
third and fourth quarters, respectively.
<F6> Net income for the second quarter of the year ended December 31, 1994, included an
extraordinary loss on early extinguishment of debt, net of income tax benefit, of
$1.0 million.
<F7> Net income for the third quarter of the year ended December 31, 1994, included a
charge to the extraordinary loss of $1.4 million for the reversal of an income tax
benefit.
<F8> Net income for the fourth quarter of the year ended December 31, 1994, included a
charge of $10.6 million for restructuring and integration.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
FOODBRANDS AMERICA, INC.
By:/s/ William L. Brady
William L. Brady
Vice President, Controller
and Assistant Corporate
Secretary
Dated: February 26, 1996
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
_________ ______ ____
Chairman of the Board, Feb. 26, 1996
/s/ R. Randolph Devening President, Chief
R. Randolph Devening Executive Officer and
Director
Senior Vice President Feb. 26, 1996
/s/ Horst O. Sieben and Chief Financial
Horst O. Sieben Officer
Vice President, Feb. 26, 1996
/s/ William L. Brady Controller and
William L. Brady Assistant Corporate
Secretary
/s/ R. Theodore Ammon Director Feb. 26, 1996
R. Theodore Ammon
/s/ Richard T. Berg Director Feb. 26, 1996
Richard T. Berg
/s/ Dort A. Cameron III Director Feb. 26, 1996
Dort A. Cameron III
/s/ Terry M. Grimm Director Feb. 26, 1996
Terry M. Grimm
/s/ Peter A. Joseph Director Feb. 26, 1996
Peter A. Joseph
/s/ Paul S. Levy Director Feb. 26, 1996
Paul S. Levy
/s/ Angus C. Littlejohn, Jr. Director Feb. 26, 1996
Angus C. Littlejohn, Jr.
/s/ Paul W. Marshall Director Feb. 26, 1996
Paul W. Marshall
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
_______ ___________
3.1 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc.
(incorporated herein by reference to Exhibit
3.1 to Form 8-B filed on May 7, 1995)
3.2 Amended and Restated Bylaws of Foodbrands
America, Inc. (incorporated herein by
reference to Exhibit 3.2 to Form 8-B filed on
May 17, 1995)
4.1 Specimen certificate for Foodbrands America,
Inc. Common Stock, par value $.01 per share
(incorporated herein by reference to Exhibit
4.1 to Form 8-B filed on May 17, 1995)
4.2 Credit Agreement among Foodbrands America,
Inc., the Lender parties hereto, Chemical Bank
and Citibank, N.A., dated as of December 11,
1995 (incorporated herein by reference to
Current Report on Form 8-K dated December 11,
1995, and filed on December 26, 1995)
4.3 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (incorporated herein
by reference to Exhibit 4.22 to Amendment No.
2 to Registration Statement on Form S-1 filed
April 13, 1993)
4.4 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (incorporated herein by reference to
Exhibit 3 to Current Report on Form 8-K, dated
April 28, 1993, and filed April 30, 1993)
4.5 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National Association,
New York, as Trustee dated as of June 1, 1994
(incorporated herein by reference to Exhibit
4.7 to Annual Report on Form 10-K filed on
March 7, 1995)
4.6 Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
(incorporated herein by reference to Exhibit
4.8 to Form 8-B filed on May 17, 1995)
4.7 Third Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
December 11, 1995
4.8 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory banks
thereto (incorporated herein by reference to
Exhibit 4.2 to Annual Report on Form 10-K,
dated March 12, 1992, and filed on March 13,
1992)
4.9 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc. (see
Exhibit 3.1 above)
4.10 Amended and Restated Bylaws of Foodbrands
America, Inc. (see Exhibit 3.2 above)
4.11* Foodbrands America, Inc. 1992 Stock Incentive
Plan (incorporated herein by reference to
Exhibit 4.9 to Annual Report on Form 10-K
filed on March 31, 1994)
4.12* Doskocil 1992 Stock Incentive Plan, as amended
(incorporated herein by reference to Form S-8
filed on May 15, 1995)
4.13* Doskocil 1992 Stock Incentive Plan, as amended
(incorporated herein by reference to Form S-8
filed on September 13, 1995)
10.1 Credit Agreement among Foodbrands America,
Inc., the Lender parties hereto, Chemical Bank
and Citibank, N.A., dated as of December 11,
1995 (see Exhibit 4.2 above)
10.2 Credit Agreement among Foodbrands America,
Inc., the Several Lenders from Time to Time
Parties Thereto and Chemical Bank, as Agent
dated as of May 25, 1994 (incorporated herein
by reference to Exhibit 1 to Current Report on
Form 8-K filed on June 14, 1994)
10.3 First Amendment to Credit Agreement dated
November 2, 1994 (incorporated herein by
reference to Exhibit 4.3 to Annual Report on
Form 10-K, dated and filed on March 7, 1995)
10.4 Second Amendment to Credit Agreement dated
February 10, 1995 (incorporated herein by
reference to Exhibit 4.4 to Annual Report on
Form 10-K, dated and filed on March 7, 1995)
10.5 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (see Exhibit 4.3
above)
10.6 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (see Exhibit 4.4 above)
10.7 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National Association,
New York, as Trustee dated as of June 1, 1994
(see Exhibit 4.5 above)
10.8 Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
(see Exhibit 4.6 above)
10.9 Third Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
December 11, 1995 (see Exhibit 4.7 above)
10.10 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory banks
thereto (see Exhibit 4.8 above)
10.11* Foodbrands America, Inc. Key Management Cash
Incentive Plan
10.12* Foodbrands America, Inc. 1992 Stock Incentive
Plan (see Exhibit 4.11 above)
10.13* Doskocil 1992 Stock Incentive Plan, as amended
(see Exhibit 4.12 above)
10.14* Doskocil 1992 Stock Incentive Plan, as amended
(see Exhibit 4.13 above)
10.15* Employment Agreement dated August 2, 1994,
between Doskocil and R. Randolph Devening
(incorporated herein by reference to the
exhibit filed with the Current Report on Form
8-K, dated August 15, 1994 and filed on August
17, 1994)
10.16* Employment Agreement dated January 30, 1995
between Doskocil and Larry P. Swafford
(incorporated herein by reference to Exhibit
10.18 to Annual Report on Form 10-K, dated and
filed on March 7, 1995)
10.17* General Release and Separation Agreement
between Foodbrands America and Larry P.
Swafford dated as of May 25, 1995
10.18* Employment Agreement dated October 9, 1995,
between Patrick A. O'Ray and Foodbrands
America
10.19* Employment Agreement dated December 11, 1995,
between Foodbrands America and William E.
Rosenthal
10.20* Employment Agreement dated December 11, 1995,
between Foodbrands America and Howard S. Katz
10.21* Form of Transition Employment Agreement dated
on or after December 17, 1991, between
Doskocil and Thomas G. McCarley, William L.
Brady, David J. Clapp, Raymond J. Haefele,
Bryant P. Bynum, Horst O. Sieben, and Howard
C. Madsen (incorporated herein by reference to
Exhibit 10.18 to Amendment No. 3 to
Registration Statement on Form S-1,
Registration Statement No. 33-59484, filed on
April 20, 1993)
10.22* First Amendment to Transition Employment
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O. Sieben
10.23* Non-Qualified Stock Option Agreement dated
September 29, 1994 between Doskocil and R.
Randolph Devening (incorporated herein by
reference to Exhibit 10.21 to Annual Report on
Form 10-K, dated and filed on March 7, 1995)
10.24* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and R. Randolph
Devening
10.25* Form of Non-Qualified Stock Option Agreement
dated on or after September 29, 1994 between
Doskocil and William L. Brady, Bryant P.
Bynum, David J. Clapp, Horst O. Sieben, Thomas
G. McCarley, Raymond J. Haefele, Howard C.
Madsen, Patrick A. O'Ray, William E.
Rosenthal, and Howard S. Katz (incorporated
herein by reference to Exhibit 10.22 to Annual
Report on Form 10-K, dated and filed on March
7, 1995)
10.26* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O. Sieben
10.27* Separation Pay Plan, dated April 1, 1995
(incorporated herein by reference to Exhibit
10.25 to Form 8-B filed on May 17, 1995)
10.28* Deferred Stock Compensation Plan between
Foodbrands America and its non-employee
Directors
10.29* Form of Indemnification Agreement between
Doskocil and its non-employee Directors
(incorporated herein by reference to Exhibit
10.42 to Amendment No. 1 to Registration
Statement on Form S-1 dated March 24, 1993)
10.30 Lease Agreement dated April 4, 1992, between
Doskocil and Millard Refrigerated Services-
Atlanta, as amended (incorporated herein by
reference to Exhibit 10.27 to Registration
Statement on Form S-1 dated August 28, 1992)
10.31 Equipment Lease Agreement between Wilson Foods
and MDFC Equipment Leasing Corporation, dated
May 20, 1992, and related unconditional
Guaranty executed by Doskocil dated June 11,
1992, and Equipment Lease Addendum to date
(incorporated herein by reference to Exhibit
10.38 to Amendment No. 1 to Registration
Statement on Form S-1 dated March 24, 1993)
10.32 Stock Purchase Agreement by and between
Doskocil and JLL dated February 16, 1993
(incorporated herein by reference to Exhibit 1
to Current Report on Form 8-K dated February
18, 1993 and Filed on February 19, 1993)
10.33 Agreement dated as of March 22, 1993, by and
between Joseph Littlejohn and Levy Fund, L.P.,
The Airlie Group, L.P. and Doskocil
(incorporated herein by reference to Exhibit
10.43 to Amendment No. 1 to Registration
Statement on Form S-1 dated March 24, 1993)
10.34 Stockholders Agreement dated as of March 22,
1993, by and between the Airlie Group, L.P.
and Doskocil (incorporated herein by reference
to Exhibit 10.44 to Amendment No. 1 to
Registration Statement on Form S-1 dated
March 24, 1993)
10.35 Stock Purchase Agreement between International
Multifoods Corporation and Doskocil Companies
Incorporated dated as of March 17, 1994
(incorporated herein by reference to Exhibit
10.36 to Annual Report on Form 10-K filed on
March 31, 1994)
10.36 Agreement, Acknowledgement and Waiver between
Foodbrands America, Inc. and Joseph Littlejohn
& Levy Fund, L.P. dated May 16, 1995
(incorporated herein by reference to Exhibit
10.34 to Form 8-B filed on May 17, 1995)
10.37 Doskocil/Airlie Agreement dated March 7, 1995
(incorporated herein by reference to Current
Report on Form 8-K filed on March 7, 1995)
10.38 Asset Purchase Agreement by and among Thorn
Apple Valley, Inc. and Doskocil Companies
Incorporated, Wilson Foods Corporation,
Concordia Foods Corporation, Dixie Foods
Company and Shreveport Foods Company dated
April 29, 1995 (incorporated herein by
reference to Current Report on Form 8-K filed
on April 29, 1995)
10.39 First Amendment to Asset Purchase Agreement
between Thorn Apple Valley, Inc. and
Foodbrands America, Inc., Wilson Foods
Corporation, Concordia Foods Corporation,
Dixie Foods Company and Shreveport Foods
Company dated May 26, 1995 (incorporated
herein by reference to Current Report on Form
8-K filed on May 30, 1995)
10.40 Noncompete Agreement by Foodbrands America,
Inc., Wilson Foods Corporation, Concordia
Foods Corporation, Dixie Foods Company and
Shreveport Foods Company in favor of Thorn
Apple Valley, Inc. dated May 30, 1995
(incorporated herein by reference to Form 10-Q
filed on August 9, 1995)
10.41 Purchase Agreement by and among KPR Holdings,
Inc. and the Shareholders of RKR-GP, Inc. and
Foodbrands America, Inc. dated as of November
14, 1995 (incorporated herein by reference to
Current Report on Form 8-K dated December 11,
1995 and filed on December 26, 1995)
10.42 Stock Purchase Agreement by and among TNT
Crust, Inc. and the Shareholders of TNT Crust,
Inc. and Foodbrands America, Inc. dated as of
November 22, 1995 (incorporated herein by
reference to Current Report on Form 8-K dated
December 11, 1995 and filed on December 26,
1995)
10.43 First Amendment to Stock Purchase Agreement by
and among TNT Crust, Inc. and the Shareholders
of TNT Crust, Inc. and Foodbrands America,
Inc. dated as of December 11, 1995
(incorporated herein by reference to Current
Report on Form 8-K dated December 11, 1995 and
filed on December 26, 1995)
10.44 Second Amendment to Stock Purchase Agreement
by and among TNT Crust, Inc. and the
Shareholders of TNT Crust, Inc. and Foodbrands
America, Inc. dated as of December 14, 1995
(incorporated herein by reference to Current
Report on Form 8-K dated December 11, 1995 and
filed on December 26, 1995)
10.45 Master Equipment Lease Agreement between
NationsBank Leasing Corporation of North
Carolina and Foodbrands America, Inc. dated
January 31, 1996
10.46 Lease Agreement between Bam Corporation and
KPR Holdings, L.P. dated December 11, 1995
11.1 Calculation of Earnings Per Share
20.1** Annual Report on Form 11-K with Respect to
Foodbrands America, Inc. Retirement and Profit
Sharing Plan
21.1 Subsidiaries of Foodbrands America, Inc.
22.1** Proxy Statement for Annual Meeting of
Stockholders
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
* Management contracts and compensatory plans or arrangements
** To be filed by amendment.
EXHIBIT 4.7
FOODBRANDS AMERICA, INC., as Issuer
and
the GUARANTORS as identified herein
and
FIRST FIDELITY BANK, NATIONAL ASSOCIATION,
as Trustee
THIRD SUPPLEMENTAL INDENTURE
Dated as of December 11, 1995
$110,000,000
9 3/4% Senior Subordinated Redeemable Securities due 2000
<PAGE>
TABLE OF CONTENTS
Page
SECTION I
GUARANTEE OF SECURITIES
Section 1.01. Addition of Subsidiary Guarantors . . . . . . . .2
Section 1.02. Opinion of Counsel and Officer's Certificate. . .2
SECTION II
MISCELLANEOUS PROVISIONS
Section 2.1. Terms Defined . . . . . . . . . . . . . . . . 2
Section 2.2. Indenture . . . . . . . . . . . . . . . . . . 2
Section 2.3. Governing Law . . . . . . . . . . . . . . . . 2
Section 2.4. Successors . . . . . . . . . . . . . . . . . 3
Section 2.5. Multiple Counterparts . . . . . . . . . . . . 3
Section 2.6. Effectiveness . . . . . . . . . . . . . . . . 3
Section 2.7. Recitals . . . . . . . . . . . . . . . . . . 3
Section 2.8. Notices . . . . . . . . . . . . . . . . . . . 3
Note: This Table of Contents shall not, for any
purpose, be deemed to be a part of the Third
Supplemental Indenture.
<PAGE>
THIRD SUPPLEMENTAL INDENTURE, dated as of December 11,
1995, by FOODBRANDS AMERICA, INC., a corporation incorporated
under the laws of the State of Delaware (the "Company"), and
RKR-GP, INC., a Delaware corporation, KPR HOLDINGS, L.P., a
Delaware limited partnership, DOSKOCIL FOOD SERVICE COMPANY,
L.L.C., an Oklahoma limited liability company, FBAI INVESTMENTS
CORPORATION, an Oklahoma corporation, and BRENNAN PACKING CO.,
INC., a Delaware corporation (individually each a "Guarantor" and
collectively the "Guarantors"), and FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, a national banking association, as trustee the
"Trustee").
WHEREAS, the Company previously executed and delivered
an Indenture dated as of April 28, 1993 providing for the
issuance initially of $110,000,000 aggregate principal amount of
the Company's 9 3/4% Senior Subordinated Redeemable Securities
due 2000 (the "Securities"); and
WHEREAS, there have been issued and are now outstanding
under the Indenture, Securities in the aggregate principal amount
of $110,000,000; and
WHEREAS, Doskocil Specialty Brands Company, (formerly known
as International Multifoods Foodservice Corp.), a Delaware
corporation, Continental Deli Foods, Inc., (formerly known as
Wilson Foods Corporation and successor in interest to
Stoppenbach, Inc.), a Delaware corporation and Wilson Certified
Express, Inc., a Delaware corporation, were made party to the
Indenture dated as of April 28, 1993 by the First Supplemental
Indenture dated as of June 1, 1994; and
WHEREAS, pursuant to the Second Supplemental Indenture dated
as of May 16, 1995, the Company as the successor in interest to
Doskocil Companies Incorporated ("Doskocil") expressly assumed
all obligations of Doskocil under the April 28, 1993 Indenture
(the above referenced Indenture and each Supplemental Indenture
are collectively referred to herein as the "Indenture"); and
WHEREAS, the Company is entering into that certain
Credit Agreement to be dated as of December 11, 1995 with the
lenders as identified therein ("Lenders"), Chemical Bank, a New
York banking corporation as syndications agent, documentation
agent and administrative agent for the Lenders, and as issuing
lender, and Citibank, N.A., as managing agent, for $320,000,000
(the "Credit Agreement"), whereby the Restricted Subsidiaries
identified herein as the Guarantors will guarantee the
obligations of the Company under the Credit Agreement; and
WHEREAS, pursuant to and as contemplated by Section 4.17(a)
and Article Twelve of the Indenture, each of the Guarantors
desires by this Third Supplemental Indenture to subject itself to
the provisions of the Indenture as a Guarantor; and
WHEREAS, the execution and delivery of this Third
Supplemental Indenture has been authorized by a resolution of the
Board of Directors of the Company and each of the Guarantors; and
WHEREAS, all conditions and requirements necessary to
make this Third Supplemental Indenture a valid and binding
instrument in accordance with its terms have been performed and
the execution and delivery of this agreement have been in all
respects duly authorized;
THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the other and for the equal and
ratable benefit of the holders of the Securities as follows:
SECTION I
GUARANTEE OF SECURITIES
Section 1.01. Addition of Subsidiary Guarantors. In
accordance with Article 12.03 of the Indenture, the undersigned
Guarantors guarantee the Indenture, thereby subjecting themselves
to all terms of the Indenture as a Guarantor, as evidenced by
execution and delivery of this Third Supplemental Indenture to
the Trustee.
Section 1.02. Opinion of Counsel and Officer's Certificate.
This Third Supplemental Indenture shall be accompanied by an
opinion of counsel, McAfee & Taft A Professional Corporation, and
an officer's certificate to the effect that the Third
Supplemental Indenture has been duly authorized and executed, and
constitutes the legal, valid, binding and enforceable obligation
of the Company and the Subsidiary Guarantors.
SECTION II
MISCELLANEOUS PROVISIONS
Section 2.1. Terms Defined. For all purposes of this
Third Supplemental Indenture, except as otherwise defined or
unless the context otherwise requires, terms used in capitalized
form in this Third Supplemental Indenture and defined in the
Indenture have the meanings specified in the Indenture.
Section 2.2. Indenture. Except as amended hereby, the
Indenture and the Securities are in all respects ratified and
confirmed and all terms thereof shall remain in full force and
effect.
Section 2.3. Governing Law. This Third Supplemental
Indenture shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the
conflicts of laws rules existing there.
Section 2.4. Successors. All agreements of the Company,
each of the Guarantors, and the Trustee in this Third
Supplemental Indenture and the Securities shall bind their
respective successors.
Section 2.5. Multiple Counterparts. The parties may sign
multiple counterparts of this Third Supplemental Indenture. Each
signed counterpart shall be deemed an original, but all of them
together represent the same agreement.
Section 2.6. Effectiveness. The provisions of this Third
Supplemental Indenture will take effect immediately upon its
execution and delivery by the Trustee, the Company, and each of
the Guarantors.
Section 2.7. Recitals. The recitals of fact contained
here shall be taken as the statements of the Company and the
Guarantors, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as
to the validity or adequacy of this Third Supplemental Indenture
or its due execution by the Company and the Guarantors.
Section 2.8. Notices. Any notices or communication to the
Guarantors shall be given pursuant to Section 11.02 of the
Indenture, addressed as follows:
If to any Guarantor to:
[Insert Guarantor's Name]
1601 N.W. Expressway, Suite 1700
Oklahoma City, Oklahoma 73118
Attention: Bryant P. Bynum
With a copy to:
McAfee & Taft A Professional Corporation
Tenth Floor
Two Leadership Square
Oklahoma City, Oklahoma 73102
Attention: Brice E. Tarzwell
FOODBRANDS AMERICA, INC., a Delaware
corporation
By: /s/ Bryant P. Bynum
_______________________________
Bryant P. Bynum, Vice President
RKR-GP, INC., a Delaware corporation
By: /s/ Bryant P. Bynum
_______________________________
Bryant P. Bynum, Vice President
KPR HOLDINGS, L.P., a Delaware
limited partnership
By: RKR-GP, a Delaware corporation,
its general partner
By: /s/ Bryant P. Bynum
_________________________
Bryant P. Bynum,
Vice President
DOSKOCIL FOOD SERVICE COMPANY,
L.L.C., an Oklahoma limited
liability company
By: RKR-GP, a Delaware corporation,
its Manager
By: /s/ Bryant P. Bynum
_________________________
Bryant P. Bynum,
Vice President
FBAI INVESTMENTS CORPORATION, an
Oklahoma corporation
By: /s/ Bryant P. Bynum
_______________________________
Bryant P. Bynum, Vice President
BRENNAN PACKING CO., INC., a
Delaware corporation
By: /s/ Bryant P. Bynum
_______________________________
Bryant P. Bynum, Vice President
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, as Trustee
By: /s/ George Rayzis
_______________________
Name: George Rayzis
Title: Vice President
EXHIBIT 10.11
KEY MANAGEMENT CASH INCENTIVE PLAN
I. CORPORATE OFFICERS
PURPOSE
To provide a program to pay annual cash incentives to Doskocil's
Senior Management group based on achievement of annual
performance targets as approved by the Board of Directors. The
program design will leverage incentive payout for performance
above target and provide for reduced payout or no payout for
off-target performance. The plan will tie an individual
executive's incentive compensation to combined performance for
division or staff function, the corporation and individual
impact.
PLAN DESIGN
Each participating executive will have a target incentive
percentage (TIP), a percent of base salary in effect at the
beginning of the year, which will develop a target incentive
award (TIA). The TIA will be paid for performance at planned
levels. However, achievement of plan will require a balance of
performance between division or staff function, individual and
corporate performance. No incentives will be paid in the event
performance does not achieve plan regardless of achievement of
individual or staff function targets. An exception is the
situation where a division makes plan and the company does not.
In that case, the Division President may qualify for an incentive
of 60% of the TIA that would be calculated for divisional
performance alone. Also, for 1995 only, if all divisions meet
plan except Retail and the total company performance is short of
target by no more than 10% of the Retail Division Plan, then
target incentives may be paid. This special one-time provision
recognizes the "Wild Card" character of the Retail Division.
Plan is on an EBIT basis.
For division presidents the TIA will be based 65% on divisional
performance, 25% on corporate performance and 10% on attainment
of individual objectives. For the CEO and COO, 80% of the TIA
will be based on corporate performance and 20% related to
personal objectives. For functional staff officers, 65% of the
TIA will be based on corporate EBIT performance and 35% on
performance against individual standards.
To develop actual incentive awards, each element is evaluated on
its own. However, the individual performance rating will be
controlled by the performance rating of the division or staff
function and not corporate performance. An executive must be
employed by the company at year end in order to receive an
incentive award. Awards may be prorated in the event an
executive holds a qualifying position for part of the year.
Incentives will be paid no later than March 15 of the following
year based on audited financials.
The TIP percentages proposed are as follows:
Position TIP %
CEO 75
COO 60
Division Presidents 50
SVP and CFO 50
VP - Procurement 40
VP - Operating Services 40
VP - Distribution 35
VP - Controller 35
VP - Planning Corporate Finance 35
VP - General Counsel 35
The following example demonstrates the plan's mechanics by using
a hypothetical operating executive with a $150,000 base salary
and 50% TIP which results in a TIA of $75,000. The table below
shows how incentive compensation would work at various
performance levels:
<TABLE>
<CAPTION>
---------TIA Values---------
Achievement 65% 25% 10% % %
Level Division Corporate Individual Total Base Comp. TIA
_______________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
100% 48,750 18,750 7,500 75,000 50.0% 100.0%
(Target)
110% 58,500 22,500 9,000 90,000 60.0% 120.0%
125% 73,125 28,125 11,250 112,500 75.0% 150.0%
= >140% 97,500 37,500 15,000 150,000 100.0% 200.0%
</TABLE>
As the table illustrates, incentive awards are leveraged
significantly where performance exceeds targets. Upward leverage
terminates at 140% of target and there is no payment if corporate
performance is lower than target except for Division Presidents
who achieve at least 100% of divisional EBIT target where a TIA
of up to 60% of target could be earned for divisional performance
only.
Using the table above, with corporate performance of 90% and
divisional performance of 110%, the payout to the hypothetical
executive would be $44,100; $35,100 for division performance, $0
for corporate performance and $9,000 for individual performance.
The rating of individual performance is controlled by the rating
resulting from divisional performance. Within the 100-140%
achievement levels, performance will be interpolated.
Individual performance requires evaluation of achievement of
personal objectives scored on a 1 to 10 scale for each objective.
Equal weight is given to each objective and the individual score
is the simple average of all perSonal objectives. A point value
is established by dividing the TIA for the individual portion of
the program by 10. Hence, for the hypothetical executive, the
point value would be $750. The above example assumes a score of
10. However, for a 7.5 score for personal objectives, the
executive would receive $5,625 with division performance at
target and the amount would increase with above plan divisional
performance, e.g. $6,750 at 110%.
Evaluation of staff functional performance will be based on the
level of corporate EBIT achievement and rating of accomplishment
against selected measures of the function's performance. Point
value is established by dividing the TIA value for the function
and individual categories by 10. The scoring will be the simple
average of the individual scores for function and individual
performance on a 1 to 10 scale multiplied by the TIA value. For
functional staff executives using a hypothetical executive with a
base compensation of $150,000 and 35% TIP and $52,500 TIA, the
following would apply.
<TABLE>
<CAPTION>
---------TIA Values---------
Achievement
Level Corporate Function Individual Total Base Comp. TIA
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
100% 34,125 13,125 5,250 52,500 35.0% 100.0%
(Target)
110% 40,950 15,750 6,300 63,000 42.0% 120.0%
125% 51,188 19,687 7,875 78,750 52.50% 150.0%
= >140% 68,250 26,250 10,500 105,000 70.0% 200.0%
</TABLE>
II. DIVISIONAL MANAGEMENT INCENTIVE PLANS (Excluding Division
Presidents)
Certain aspects of divisional incentive programs must have
uniformity among divisions. This is especially appropriate for
key members of the division management group where the TIP needs
to be comparable for similar functions within other divisions.
The following are the significant elements of divisional
incentive programs that are required to meet the abovementioned
objective:
. Comparable TIP
For key division executives, the maximum TIP for target
performance is 40% and the maximum TIP at = > 140% of target is
70%. Divisional management will have three TIP categories: 40%,
30% and 20%.
. Incentive Bases
For key division management, 85% of the TIA will relate to
division performance against EBIT target and 15% will be based on
an assessment of individual performance against performance
standards. Evaluation of individual performance will follow the
approach used for corporate officers.
. Qualification for Divisional Bonuses
Divisions must accrue bonus awards based on the sum of all
executives TIA's. In the event that a division makes its EBIT
target, but the consolidated corporate EBIT performance falls
short of the target for payout, key division executives can
qualify for the 60% of the TIA attributable to divisional
performance.
. Incentive Payout
Each division will have a comparable ratio of the total of all
TlA's to target EBIT for the division. This relationship is a
good indicator of balanced coverage of incentive compensation of
the target level among divisions.
. Qualifying Positions
Retail Division
TIP
40% Chuck Sweeney Vice President, Product
Management/Operations
40% Joe Baker Vice President, Sales
40% Controller Vice President
30% Bob Neeley Director, Ham
30% Bob Lenocker Director, Sausage
30% John Bumps Director, Pricing
30% Jim Krapfl Director, Marketing
30% Dave Moe Director, R&D
20% Stan Larson Manager, Bacon/Product
Logistics
Deli Division
TIP
40% Charlie Bates Vice President, Sales
30% Dave Dunlevy Director, Marketing
30% Phil Broderick Director of Operations
30% Ron Petersen Director, Product
Management
30% Diane Emrick Controller
20% Joe Thompson Manager, Deli Products
Food Service Division
TIP
40% Lee Harrisons Vice President, Food
Service Distributor Sales
40% Rob Riddle Vice President, National
Accounts
40% Don Dogotch Vice President,
Controller
40% Arvid Lundmark Vice President, Product
Management
30% John Riley Director, Marketing
30% Steve Seideman Director, Research &
Development
30% Kim Knight Director, Customer
Service
30% Don Bynum Director, Hutchison
Operations
30% Dev Traver Director, Jefferson
Operations
20% Rebecca Shelton Assistant Controller
Specialty Brands Division
TIP
40% Greg Ibsenons Vice President, Sales and
Marketing
40% Chris Meyer Vice President, Finance
40% Charles Smith Vice President,
Operations
30% Gary Burton Vice President, Logistics
30% Buz Carter Marketing Director -
Ethnic Entrees/Portion
Meats
30% Mark Miller Director - New Product
Development/R&D
30% Susan Morrison Director - Appetizers
30% Mike Cramer Director - Quality
Assurance
30% Ed Tostenrud Director - Mexican
Operations
30% Dave Werner Operations Manager -
Carthage/Piedmont
20% Bill Blount Plant Superintendent -
Piedmont
20% Frank Peterson Plant Manager - New
Rochelle
20% Bob Reinhart Plant Manager -
Albuquerque
20% John Traub Plant Manager -
Noblesville
EXHIBIT 10.17
GENERAL RELEASE AND SEPARATION AGREEMENT
This Agreement is made and entered into this 25 day of May
1995, by and between Larry P. Swafford located at 3100 NW
Expressway, Apt. 516, , Oklahoma City, OK 73120 (hereinafter
"Swafford") and Foodbrands America, Inc. located at 2601 NW
Expressway, Oklahoma City, OK 73112, (hereinafter "Company").
WHEREAS, Swafford's employment with the Company will be
terminated effective June 30, 1995;
NOW THEREFORE, the parties agree as follows:
1. In exchange for the promises of the Company made in
Paragraph 2 below, Swafford agrees to:
(a) release, discharge and covenant not to sue the
Company and its officers, directors, employees, agents,
successors and assigns with respect to any and all manner of
actions, causes of action, suits, debts, claims, demands, sums of
money, compensation, contracts, controversies, agreements,
promises, damages, costs and liabilities of any kind or character
whatsoever, known or unknown, arising out of or relating in any
manner to his employment at the Company, or the termination
thereof, including but without limiting the generality of the
foregoing, all claims and causes of actions arising under Title
VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000(e) et
seq., the Age Discrimination in Employment Act, 29 U.S.C. Sec.
621 et seq., any other federal, state or local law, statute,
ordinance or executive order, and all claims for wages, vacation
pay, separation pay, or other benefits (except as provided in
Paragraph 3 below);
(b) keep confidential the existence and terms of this
Agreement, except for disclosure to his immediate family members.
2. In exchange for the promises of Swafford in Paragraph 1
above, the Company agrees to:
(a) pay Swafford after executing this Agreement,
severance pay in the lump-sum amount of $400,000 (less standard
payroll deductions for federal, social security taxes);
(b) pay Swafford $70,000 (less standard payroll
deductions for federal, social security taxes) representing a
one-time bonus per employment contract;
(b) pay Swafford compensation for his unpaid vacation,
said payment to be sent to him at the above stated address not
later than June 30, 1995;
(c) pay Swafford his current salary through June 30,
1995 and medical insurance benefits through July 31, 1995
requiring Swafford to pay his portion of benefits for July; and
(d) offer Swafford, effective August 1, 1995, the
option of continuing and converting existing medical insurance
coverage, which ends effective July 31, 1995, in accordance with
the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA").
(e) provide Swafford with one year of outplacement
counseling services through a professional outplacement firm or
until he locates new employment, whichever is earlier.
3. Swafford retains any and all rights accrued in his
behalf as a result of his participation in the Doskocil Companies
Retirement and Profit Sharing Plan (401(k)) under the terms and
conditions set forth in said plan as of the date of termination
of his employment.
4. The parties agree and understand that the release of
claims agreed to herein by Swafford is not intended to, and will
not, affect the enforceability of this Agreement in any
subsequent proceeding for breach of this General Release and
Separation Agreement, and is otherwise not intended to, and will
not affect the enforceability of the Company's promises
contained in Paragraph 2 above.
5. The parties further agree that after Swafford signs
this Agreement, he has seven (7) calendar days to revoke it. If
he desires to revoke it, a written revocation must be delivered
to the Director of Human Resources at the Company, within seven
(7) calendar days of signing this Agreement.
6. The parties further agree and acknowledge that they
have read this General Release and Separation Agreement and agree
that this document constitutes the full, complete and entire
Agreement between the parties and supersedes all proposals, oral
or written, and all prior memoranda, policies, practices, and all
prior negotiations, conversations or discussions between the
parties relating to the subject matter of this Agreement.
SWAFFORD ACKNOWLEDGES THAT HE HAS READ AND FULLY UNDERSTANDS
THE FORGOING PROVISIONS OF THIS GENERAL RELEASE AND SEPARATION
AGREEMENT, MAY HAVE AT LEAST TWENTY-ONE (21) DAYS TO EVALUATE THE
TERMS OF THIS AGREEMENT, HAS BEEN ADVISED TO CONSULT WITH COUNSEL
BEFORE SIGNING THIS AGREEMENT, AND FREELY AND WITHOUT
RESERVATIONS ENTERS INTO THIS AGREEMENT.
IN WITNESS WHEREOF, Swafford has caused his name to be
hereunto subscribed this 30th day of June 1995.
IN WITNESS WHEREOF, the Company has also caused its
corporate name to be hereunto subscribed this 30th day of June
1995.
FOODBRANDS AMERICA, INC.
(Larry P. Swafford) by: (Kay Titchenal)
_____________________ _____________________________
Larry P. Swafford
Its: Director Human Resources
EXHIBIT 10.18
October 9, 1995
PERSONAL AND CONFIDENTIAL
Mr. Patrick A. O'Ray
1688 West Avenue, #503
Miami Beach, FL 33139
Dear Mr. O'Ray:
Foodbrands America, Inc. (the "Company") considers it
essential to the best interests of the Company to have your
services available to the Company. In order to secure your
services as Senior Vice President of the Company and President of
the Specialty Brands Division (the "Specialty Brands Division"),
the Company has offered and you have accepted the terms and
conditions for employment set forth in (i) a letter of offer
dated September 27, 1995, (ii) a Transition Employment Agreement
dated October 9, 1995 (the "Transition Employment Agreement");
and (iii) this agreement (this "Agreement").
1. Services to be Provided. You agree to devote
substantially all of your business time and attention to
performing your duties hereunder which include the following:
a. Responsibility for the day-to-day operation of the
Specialty Brands Division. All senior personnel of the Specialty
Brands Division will report to you.
b. Responsibility for the development and execution of
the marketing plan for the Specialty Brands Division.
c. Responsibility for any interaction between the
Specialty Brands Division and the Company's headquarters and
other Divisions.
d. Responsibility for maintaining and negotiating
supply and co-packing agreements of the Specialty Brands
Division.
e. Assisting in the development and execution of the
Specialty Brands Division's annual operating plan and five (5)
year strategic plan.
f. Assisting the Company in its interactions with its
banks, Wall Street and other financing sources and outside
constituencies.
g. Any other executive duties and responsibilities
which may be assigned to you in writing from time-to-time by the
Chief Executive Officer of the Company, or his successor or
designee, or such other executive of the Company of comparable
rank as the Board of Directors of the Company may direct, or by
the Board of Directors of the Company.
You shall report to the Chief Executive Officer of the
Company, or to his successor or designee, or to such other
executive of the Company of comparable rank as the Board of
Directors of the Company may direct in writing. In the
performance of your employment duties, you shall
comply with the Company's policies in effect from time to time.
2. Compensation. The Company shall provide you with the
following minimum compensation and benefits:
a. Salary. You shall be paid at the rate of $210,000
per annum (such payment shall be referred to in this Agreement as
the "Base Compensation"), payable twice monthly in accordance
with the policy of the Company. These payments will be subject
to withholding for all applicable taxes.
b. Bonus.
(i) You have received a sign-on bonus of $50,000.
(ii) For fiscal 1996, the Company shall pay you a
minimum cash bonus of $75,000, subject to upward adjustment as
provided in this Agreement. Any amount of cash incentive in
excess of such amount shall be as provided in the Company's Cash
Incentive Plan conditioned upon the Specialty Brands Division
achieving the performance targets (referred to in this Agreement
as an "EBITDA Target") established by the Board of Directors for
1996. Such cash incentive shall be payable in February 1997.
Thereafter, cash incentives shall be based on the Company's Cash
Incentive Plan as in effect from time to time.
(iii) The Annual Bonus will be paid when the
other bonuses of senior executives of the Company are or would be
paid, according to the policy of the Company.
c. Expenses. The Company shall promptly reimburse you
for all reasonable expenses incurred by you in connection with
your employment pursuant to the terms of this Agreement, provided
you properly account therefor in accordance with the policy of
the Company as amended from time-to-time.
d. Vacations. The Company shall provide you with four
weeks of vacation per year, to be taken by you at such time or
times as shall be mutually convenient to you and to the Company.
e. Other Benefits. In addition to the aforementioned
items, the Company shall provide or make available to you such
benefits as are described in the Offer Letter and such pension
and welfare benefit plans and programs of the Company as are
provided to other senior executives of the Company (other than
executives who are also employees of affiliated entities),
and to receive benefits thereunder, in accordance with their
respective terms or in accordance with plans or programs
providing you with at least substantially equivalent benefits.
You shall also be eligible to participate in the 401(k) plan of
the Company. Except as otherwise set forth in this Agreement, it
is understood that you will not participate in any other stock
option or bonus plan of the Company. In addition, the Company
shall provide you with a car allowance in accordance with the
practice of the Company as of the Effective Date.
f. Stock Options. As soon as practicable, but in no
event later than 90 days after the date of this Agreement, the
Company shall cause to be executed, and you shall execute, a
stock option agreement with respect to stock options to be
granted to you as described in the Offer Letter.
3. Termination. Your employment hereunder may terminate
for any of the following reasons.
a. Death. Your employment shall terminate upon your
"Death."
b. Disability. If, as a result of your incapacity due
to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Company for
any six months within any consecutive twelve month period, your
employment may be terminated for "Disability."
c. Cause. Termination by the Company of your
employment for "Cause" shall mean termination based upon (i) your
indictment for, or conviction of, any felony or any crime
involving moral turpitude, (ii) your committing of any theft,
fraud or embezzlement which results in your gain or personal
enrichment at the expense of the Company, (iii) your failure to
follow instructions of the Chief Executive Officer of the
Company, or his successor or designee, or such other executive of
the Company of comparable rank as the Board of Directors of the
Company may direct, or of the Board of Directors of the Company,
(iv) your inability to perform your duties and responsibilities
as a result of addiction to alcohol or drugs, other than drugs
legally prescribed and administered by a duly licensed physician
or (v) your breach of any of your obligations under this
Agreement including but not limited to breaches of Sections 6, 7
or 8 of this Agreement or misfeasance, malfeasance or nonfeasance
of any job responsibilities outlined in this Agreement (Section
1) or as specified by the Chief Executive Officer of the Company,
or his successor or designee, or such other executive of the
Company of comparable rank as the Board of Directors of the
Company may direct, or of the Board of Directors of the Company.
You may not be terminated for Cause unless the Company has first
specified the act, omission or breach forming the basis for such
termination in the Notice of Termination (as hereinafter defined)
and you have failed or refused to correct such act, omission or
breach within ten days of receipt of the Notice of Termination or
such act, omission or breach is incapable of being cured.
d. Voluntary Termination. You may voluntarily
terminate your employment at any time (a "Voluntary
Termination").
e. Termination by the Company. The Company may
terminate your employment for any reason (without "Cause"),
including, but not limited to, closing or selling the Specialty
Brands Division, provided, however, that upon such termination,
you will be compensated as provided in Section 4.
f. Notice of Termination. Any termination of your
employment shall be communicated by written Notice of Termination
to the other party hereto in accordance with this Section 3. For
purposes of this Agreement, a "Notice of Termination" shall mean
a written notice which shall indicate the specific termination
provision in this Agreement relied upon and which shall specify a
date as your last day of employment (the "Termination Date").
g. Change of Control. In the event the Transition
Employment Agreement becomes effective as a result of a Change of
Control (as defined therein), this Agreement shall terminate and
the obligations of the parties shall be governed by the
Transition Employment Agreement.
4. Compensation Upon Termination or During Disability.
Upon termination of your employment or during a period of
Disability, you shall be entitled to the following benefits:
a. During any period that you fail to perform your
full-time duties with the Company as a result of your Disability,
you shall continue to receive your Base Compensation during such
period, and the Bonus for the Bonus Period in which the
Disability occurs. During such period that you fail to perform
your full-time duties with the Company as a result of your
Disability, you shall continue to receive all compensation
payable to you under the Company's disability benefit programs
then in effect during such period, unless and until this
Agreement shall be terminated pursuant to Section 3(b) of this
Agreement.
b. If your employment shall terminate for any reason
other than as set forth in Section 4(c), the Company shall pay
your Base Compensation through the date specified as your last
day of employment in the Notice of Termination and all other
benefits shall be determined under the retirement, insurance and
other compensation programs (other than the bonus arrangements
described in Section 2(b) of this Agreement) of the Company then
in effect in accordance with the terms of such programs.
c. If your employment shall be terminated by the
Company for Cause or as a result of a Voluntary Termination, the
Company shall pay you your Base Compensation through the date
specified as your last day of employment in the Notice of
Termination, and the Company and its affiliates shall have no
further obligations to you under this Agreement.
d. If your employment shall be terminated by the
Company without "Cause," (reasons other than for Death, Cause or
Disability, or other than as a result of a Voluntary
Termination), the Company shall pay you an amount equal to
one-half of your Base Compensation.
5. Successors; Binding Agreement. This Agreement and all
of the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of
the other parties, nor is this Agreement intended to confer upon
any other person except the parties hereto any rights or remedies
hereunder. Notwithstanding the foregoing, the Company may assign
its rights under this Agreement, but no such assignment shall
relieve the Company of its obligations hereunder. This Agreement
shall be void and of no further force and effect if the Effective
Date shall not have occurred.
6. Non-Competition. Notwithstanding anything to the
contrary contained in this Agreement, you may not engage,
anywhere in the United States, in any activities, directly or
indirectly, that are competitive in any way with the Company or
the Specialty Brands Division and may not engage in any
business-related activities involving those products currently
produced or under development by the Specialty Brands Division
until the first anniversary of the termination of your
employment under this Agreement. The parties hereto agree that
the duration and the geographic area for which the covenant not
to compete set forth in this Section 6 is to be effective are
reasonable. However, in the event that any court determines that
the time period or the geographic area, or both of them, are
unreasonable and that such covenant is to that extent
unenforceable, the parties hereto agree that the covenant shall
remain in full force and effect for the greatest time period
and for the greatest area that would not render it unenforceable.
The parties hereto agree that the covenant shall be deemed to be
a series of separate covenants, one of each and every state or
county of the geographic area where the covenant not to compete
is intended to be effective. Notwithstanding anything to the
contrary in this Section 6, ownership of less than five percent
of the voting stock of any publicly held corporation shall not
constitute a violation of this Section 6.
7. Non-Solicitation. From the Effective Date of this
Agreement until the first anniversary of the termination of your
employment under this Agreement, you agree not to solicit any
individuals or business entities that were customers of the
Company or the Specialty Brands Division during your employment
and any prospective customers with respect to whom the Company
has initiated contacts during the twelve months preceding the
termination of your employment. You further agree that for this
same period you shall not, directly or indirectly, solicit any
employees of the Company or the Specialty Brands Division to
leave the employ of the Company or the Specialty Brands Division.
8. Confidential Information. You shall not, without the
prior written consent of the Company (except as may be required
in connection with any judicial or administrative proceeding
or inquiry) disclose to any person, other than an officer or
director of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance of your duties hereunder, any confidential
information obtained by you while in the employ of the
Company with respect to the business of the Company or the
Specialty Brands Division, assets or operations, including
confidential information relating to the properties, accounts,
books, records, supplies, trade secrets and contracts of the
Company or the Specialty Brands Division.
9. Return of Documents. Upon termination of your
employment for any reason, you agree to return all documents and
other property provided to you or prepared by you during your
employment with the Company.
10. Notice. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States certified mail, return
receipt requested, postage pre-paid, addressed to the respective
addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the
Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
11. Disputes. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof, shall be
settled by submitting the matter to binding arbitration in
Oklahoma City, Oklahoma, or at such other location the parties
agree by and pursuant to the rules of the American Arbitration
Association then in effect. The determination of the arbitrator
shall be conclusive and binding on the Company and you, and
judgment may be entered on the arbitrator's award in any court of
competent jurisdiction.
12. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification
or discharge shall be agreed to in writing and signed by you and
by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. All
descriptive headings in this Agreement are inserted for
convenience only and shall be disregarded in construing or
applying any provision of this Agreement. The validity,
interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Oklahoma. Any
payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local
law. The obligations under Sections 4, 6, 7 and 8 shall survive
the termination of your employment.
13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
If you agree that this letter sets forth our agreement on
the subject matter hereof, please sign and return to the Company
the enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
FOODBRANDS AMERICA, INC
By: (R. Randolph Devening)
Name: R. Randolph Devening
Title: Chairman, President
& Chief Executive Officer
Agreed to this 10th day
of November, 1995
(Patrick A. O'Ray)
Patrick A. O'Ray
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
AGREEMENT dated this 11th day of December, 1995,
between RKR-GP, Inc., a Delaware corporation (the "General
Partner"), as general partner of KPR Holdings, L.P., a Delaware
limited partnership (the "Company") and William E. Rosenthal
(the "Executive").
WHEREAS, Foodbrands America, Inc. ("Foodbrands") is
acquiring the entire limited partnership interest in the Company
and all stock of the General Partner for the purpose of
maintaining and operating the businesses owned thereby;
WHEREAS, the Executive, directly and indirectly, is a
beneficial owner of General Partner and the Company and has
specific duties and unique talents with regard to these business
operations and Foodbrands and the Company desire to ensure the
continued success of these operations; and
WHEREAS, in connection with the acquisition of the
Company and General Partner by Foodbrands, Foodbrands and
Executive have required that this Employment Agreement be entered
into;
NOW, THEREFORE, it is agreed as follows:
1. Services to be Provided. Executive will serve as
President and Chief Executive Officer of General Partner and the
Company and Senior Vice President of Foodbrands. Consistent with
Executive's office, Executive shall render such services to
General Partner and the Company as the Board of Directors of
General Partner may from time to time designate. Executive shall
see that all orders and resolutions of the Board of Directors of
General Partner are carried into effect. In addition, and
without limiting the foregoing, executive shall be responsible
for the day-to-day operations of the Company, the development and
execution of appropriate marketing plans and budgets for the
Company, the interaction between the Company and the headquarters
of Foodbrands and Foodbrands' other divisions and subsidiaries.
Executive shall devote such time and efforts to the
performance of his duties hereunder and to advancing the interest
of the Company and Foodbrands, subject only to reasonable working
hours, conditions and requirements as are consistent with past
practices of Executive for the Company. In the performance of
his duties, the Executive shall comply with the Company's
policies. Executive will not engage in consulting work or any
trade or business for his own account or for or on behalf of any
other person, firm or corporation which competes, conflicts or
interferes with the performance of his duties hereunder in any
way (except as specifically provided in Section 7 below);
provided that the Company acknowledges that the Executive may
perform consulting services for Winchester Food Processing, Inc.
("Winchester") and Standard Meat Company L.P. ("Standard") as
long as performance of such services do not materially interfere
with the performance of Executive's duties under this Agreement.
The foregoing shall not preclude the Executive from devoting
reasonable time to the supervision of his personal investments,
civic and charitable affairs and serving on other boards,
provided that such activities do not interfere with the
performance of his duties hereunder; and further provided that
the Executive shall not serve on the board of any other business
(except as provided in Section 7, below) without the advance
consent of the General Partner, which consent shall not
be unreasonably withheld.
2. Term. The Term of this Agreement shall refer to
the time during which it is in effect. It shall commence on
December 11, 1995, and end on December 10, 2000, or an earlier
date as provided herein.
3. Compensation. During the Term, the Company shall
provide Executive with the following minimum compensation and
benefits:
(a) Salary. Executive shall be paid at the rate
of $175,000 per annum (such payment shall be referred to in this
Agreement as the "Base Compensation"), payable in accordance with
the normal payroll policies of Foodbrands, as they may exist from
time to time. The Base Compensation will be subject to annual
merit increases in accordance with Foodbrands' normal policies.
These payments shall be subject to withholding for all applicable
taxes.
(b) Bonus. Commencing with fiscal year 1996,
Executive shall be entitled to participate in the Foodbrands' Key
Management Cash Incentive Plan, as it may exist from time to
time. The target incentive percentage for Executive will be set
by the Foodbrands' Compensation Committee consistent with those
established for executives of other divisions of Foodbrands
performing comparable duties. The annual bonus will be paid when
the other bonuses of senior executives of the Company are or will
be paid, according to the policy of the Company.
(c) Expenses. The Company shall promptly
reimburse Executive for all reasonable expenses incurred in
connection with employment pursuant to the terms of this
Agreement during the Term. In order to receive reimbursement,
Executive must properly account for expenses in accordance with
the policy of the Company.
(d) Other Benefits. In addition to the
aforementioned items, the Company shall provide or make available
to Executive such pension and welfare benefit plans and programs
of the Company as currently exist or those pension and welfare
benefit plans and programs of Foodbrands as are provided to other
executives of the Company in other divisions of Foodbrands in the
event the Company ceases providing any such benefits, and to
receive benefits thereunder, in accordance with their respective
terms. Except as otherwise set forth in this Agreement, it is
understood that Executive will not be entitled to participate in
any other stock option, bonus or severance plan of Foodbrands.
In addition, the Company shall provide the Executive during the
Term with a car in accordance with the past practice of the
Company.
(e) Stock Options. As soon as practicable, but
in no event later than 90 days after the date of this Agreement,
the Company and Executive shall execute a Stock Option Agreement
with respect to stock options to be granted to the Executive (the
"Option Agreement") pursuant to the Foodbrands America, Inc. 1992
Stock Incentive Plan (the "Stock Plan"). Pursuant to the Option
Agreement:
(i) Foodbrands will immediately grant options to
purchase 12,000 shares of the common stock of Foodbrands at a per
share price equal to $13.125. Nine percent (9%) of the options
shall be exercisable or vested as of the date of this Agreement
and 18.2% of the options shall vest as of the end of each fiscal
year commencing with December 28, 1996 until all options have
vested subject to achieving the EBITDA performance targets of
Foodbrands as established by the Compensation Committee of
Foodbrands and the terms and conditions set forth in the Stock
Plan and the Option Agreement.
4. Termination During the Term. Executive's
employment hereunder may terminate for any of the following
reasons:
(a) Death. This Agreement shall terminate upon
Executive's death.
(b) Disability. If, as a result of Executive's
incapacity due to physical or mental illness ("Disability"),
Executive shall have been absent from the full-time performance
of his duties with the Company for any six months within any
consecutive 12-month period, Executive's employment may be
terminated.
(c) Cause. Termination by the Company of
Executive's employment for "Cause" shall mean termination based
upon (i) Executive's indictment for, or conviction of, any felony
or any crime involving moral turpitude, (ii) commission any
theft, fraud or embezzlement by Executive which results in
Executive's gain or personal enrichment at the expense of the
Company, (iii) Executive's failure to follow instructions of the
Chief Executive Officer of the Company, or his successor or
designee, or such other executive of the Company of comparable
rank as the Board of Directors of the Company may direct, or the
Board of Directors of the Company, (iv) inability to perform
duties and responsibilities as a result of an addiction to
alcohol or drugs, other than drugs legally prescribed and
administered by a duly licensed physician, or (v) breach of any
obligations under this Agreement, including, but not limited, to
breaches of Sections 7, 8 or 9 of this Agreement. Executive may
not be terminated for Cause unless the Company has first
specified the act, omission or breach forming the basis for such
termination in the Notice of Termination (as hereinafter
defined), and Executive has failed or refused to correct such
act, omission or breach within ten days of receipt of the Notice
of Termination or such act, omission or breach is incapable of
being cured.
(d) Voluntary Termination. Executive may
voluntarily terminate employment at any time during the Term (a
"Voluntary Termination").
(e) Termination by the Company. The Company may
terminate Executive's employment for any reason during the Term
hereof, including, but not limited to, closing or selling the
Company provided, however, that upon such termination, Executive
will be compensated as provided in Section 5.
(f) Notice of Termination. Any termination of
Executive's employment shall be communicated by written Notice of
Termination to the other party hereto in accordance with this
Section 4(f). For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon and
which shall specify a date as Executive's last day of employment
(the "Termination Date").
5. Compensation Upon Termination or During
Disability. Upon termination of employment or during a period of
disability, Executive shall be entitled to the following
benefits:
(a) If Executive's employment is terminated
during the Term by reason of death, the Company shall pay to
Executive's estate Executive's Base Compensation as though
employment was were terminated by the Company without Cause (the
"Continued Compensation Period"), and the bonus for the bonus
period in which the Termination Date occurs. Thereafter, the
Company and its affiliates shall have no further obligations to
Executive, other than as provided in this Agreement.
(b) During any period that Executive fails to
perform his full-time duties with the Company as a result of
Disability, Executive shall continue to receive Base Compensation
during such period, and the bonus for the bonus period in which
the Disability occurs. During such period that Executive fails
to perform his full-time duties with the Company as a result of
Disability, Executive shall continue to receive all compensation
payable to Executive and Company's Disability benefit programs
then in effect during such period, unless and until this
Agreement shall be terminated pursuant to Section 4(b) of this
Agreement.
(c) If Executive's employment is terminated
during the Term by reason of Disability, Executive shall continue
to receive his Base Compensation through the Continued
Compensation Period and the bonus for the bonus period in which
the Termination Date occurs. Executive shall also continue to
receive all compensation payable under the Company's Disability
benefit programs then in effect through the expiration of the
Term; thereafter, benefits shall be determined under the
retirement, insurance and other compensation programs (other than
the bonus arrangements described in Section 3(b) of this
Agreement of the Company then in effect in accordance with the
terms of such programs).
(d) If Executive's employment is terminated by
the Company for Cause or as a result of a Voluntary Termination,
the Company shall pay Executive his Base Compensation through the
Termination Date in the Notice of Termination, and the Company
and its affiliates shall have no further obligations under this
Agreement.
(e) If Executive's employment is terminated
during the Term by the Company other than for death, Cause or
Disability, or other than as a result of a Voluntary Termination,
then the Company shall pay Executive his Base Compensation equal
to a one-year period.
(f) The Executive and Foodbrands may enter into
an agreement providing for certain rights of the parties in the
event of a change of control in the ownership of Foodbrands, in
which event Executive's rights and obligations on the occurrence
of such an event will be governed thereby.
(g) In addition to all other amounts payable to
Executive under this Section 5, Executive shall be entitled to
receive all benefits payable to Executive under the plans or
agreements of the Company relating to retirement benefits
pursuant to the terms of such plan.
6. Successors; Binding Agreement. This Agreement and
all of the provisions hereof shall be binding upon and inure to
the benefits of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written
consent of the other parties, nor is this Agreement intended to
confer upon any other except the parties hereto, any rights or
remedies hereunder. Notwithstanding the foregoing, the Company
may assign its rights under this Agreement, but no such
assignment shall relieve the Company of its obligations
hereunder.
7. Noncompetition. Notwithstanding anything to the
contrary contained in this Agreement, Executive may not, directly
or indirectly, (1) conduct any activities involving the
developing, manufacturing, or marketing or selling of soups,
sauces, side dishes or pizza toppings or other products that are
competitive in any way with the Company (the "Prohibited
Business"); (2) engage (as an individual or as a stockholder,
trustee, partner, financier, agent, employee or representative of
any person, firm, corporation, or association), or have any
interest, direct or indirect, in any Prohibited Business and (3)
may not assist or engage in any business related activities
involving those products currently produced or under development
by the Company, all for a period of five (5) years after
termination of employment. The parties hereto agree that the
duration and geographic area for which the covenant not to
compete set forth in this Section 7 is to be effective are
reasonable. However, in the event that any court determines that
the time period or the geographic area, or both of them, are
unreasonable, and that such covenant is, to that extent,
unenforceable, the parties hereto agree that the covenant shall
remain in full force and effect for the greatest time period and
for the greatest area that would not render it unenforceable.
The parties hereto agree that the covenant shall be deemed to be
a series of separate covenants, one for each and every state or
county of the geographic area where the covenant not to compete
is intended to be effective. Notwithstanding anything to the
contrary in this Section 7, ownership of less than 5% of the
voting stock of any publicly held corporation shall not
constitute a violation of this Section 7. In addition, this
Section 7 shall not apply in connection with the passive
ownership of any interest in Winchester and Standard (including,
without limitation, serving as a member of their respective
Boards of Directors) nor to any management activity of Executive
for Winchester or Standard, so long as Winchester and Standard do
not compete with any products produced by the Company other than
meat ball, pasta meat, and other products of Winchester being
produced or under development as of the date of this Agreement,
which are described in Exhibit A hereto. This paragraph 7 shall
terminate if that certain Lease Agreement of even date between
the Company and BAM Corporation expires or is terminated without
the Company exercising its option to purchase the facility in
question.
8. Nonsolicitation. For a period of five (5) years
from the termination of this Agreement, whether by expiration of
the Term or pursuant to Section 4, Executive agrees not to
solicit, or to attempt to induce to cease doing business in whole
or in part with the Company or Foodbrands, any individuals or
business entities that were customers of the Company or
Foodbrands, during his employment and any prospective customers
with respect to whom the Company has initiated contacts during
the 12 months preceding the termination of employment. Executive
further agrees that for this same period he shall not, directly
or indirectly, solicit any employees of the Company or Foodbrands
to leave the employ of the Company or Foodbrands.
9. Confidential Information. During the Term and at
all times thereafter, Executive shall not, without the prior
written consent of Foodbrands (except as may be required in
connection with any judicial or administrative proceeding or
inquiry), disclose to any person, other than an officer or
director of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance of duties hereunder, any confidential information of
the Company, whether obtained while in the employ of the Company
or otherwise, with respect to the business of the Company or
Foodbrands, assets or operations, including confidential
information relating to the properties, accounts, books, records,
supplies, trade secrets and contracts of the Company or
Foodbrands.
10. Injunctive Relief. The remedy at law for any
breach of Sections 7, 8 and 9 of this Agreement is and will be
inadequate, and in the event of a breach or threatened breach by
Executive of the provisions of this Agreement, the Company shall
be entitled to an injunction restraining Executive from
soliciting employees or customers of the Company or from
disclosing, in whole or in part, the private, secret and
confidential information described herein, or from rendering any
services to any person, firm, corporation, association or other
entity to whom such information has been disclosed or is
threatened to be disclosed, from engaging, participating in or
otherwise being connected with any business which would violate
Section 7, or from otherwise violating the provisions of this
Agreement. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available for such
breach or threatened breach, including the recovery of
damages from Executive.
11. Separate Covenants. This Agreement shall be
deemed to consist of a series of separate covenants. Executive
expressly agree that the character, duration and geographical
scope of this Agreement are reasonable in light of the
circumstances as they exist on the date upon which this Agreement
has been executed. If, in any judicial proceeding, a court shall
refuse to enforce all of the separate covenants included herein
because they are more extensive than necessary to assure
Foodbrands and the Company of the intended benefit of this
Agreement, then those covenants which, if eliminated, would
permit the remaining separate covenants to be enforced in such
proceeding shall, for the purpose of such proceeding, be deemed
eliminated from this Agreement.
12. Return of Documents. Upon termination of
Executive's employment for any reason, Executive agrees to return
all documents and other property provided to Executive or
prepared during his employment with the Company.
13. Notice. For the purpose of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, provided that all notices
to the Company shall be directed to the Secretary of Foodbrands,
or to such other address as either party may have furnished to
the other in writing in accordance herewith, except the notice of
change of address shall be effective only upon receipt.
Foodbrands America, Inc.
1601 Northwest Expressway
Suite 1700
Oklahoma City, OK 73112
William E. Rosenthal
4420 Overton Crest
Ft. Worth, TX 76109
14. Disputes. Any controversy or claim arising out of
or relating to this Agreement, or any breach hereof, shall be
settled by submitting that matter to binding arbitration in
Oklahoma City, Oklahoma, or at such other location the parties
agree by and pursuant to the rules of the American Arbitration
Association then in effect. The determination of the arbitrator
shall be conclusive and binding on the Company and the Executive,
and judgment may be entered on the arbitrator's award in any
court of competent jurisdiction.
15. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge shall be agreed to in writing and
signed by Executive and by a duly authorized officer of the
Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. All descriptive headings in this
Agreement are inserted for convenience only and shall be
disregarded in construing or applying any provision of this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Oklahoma. Any payments provided for hereunder shall
be paid net of any applicable withholding requirements under
federal, state or local law. The obligations under Sections 5,
7, 8 and 9 shall survive the expiration of this Agreement or the
termination of employment.
16. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not effect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same instrument.
EXECUTED the date first above written.
(William E. Rosenthal)
William E. Rosenthal
"Executive"
KPR HOLDINGS, L.P.
By: RKR-GP, Inc., general partner
By (Howard S. Katz)
Howard S. Katz,
Vice President
"COMPANY"
<PAGE>
Winchester Food Processing, Inc. Products
EXHIBIT A
Pizza Hut Bacon Pieces
Pizza Hut Bacon Bits
Pizza Hut Meatballs
Pizza Hut Pasta Meat
KFC Diced Ham
Bacon Toppings*
Bacon Bits*
* Provided, Winchester will not sell these products directly to
existing Foodbrands customers
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
AGREEMENT dated this 11th day of December, 1995,
between RKR-GP, Inc., a Delaware corporation (the "General
Partner"), as general partner of KPR Holdings, L.P., a Delaware
limited partnership (the "Company") and Howard S. Katz (the
"Executive").
WHEREAS, Foodbrands America, Inc. ("Foodbrands") is
acquiring the entire limited partnership interest in the Company
and all stock of the General Partner for the purpose of
maintaining and operating the businesses owned thereby;
WHEREAS, the Executive, directly and indirectly, is a
beneficial owner of General Partner and the Company and has
specific duties and unique talents with regard to these business
operations and Foodbrands and the Company desire to ensure the
continued success of these operations; and
WHEREAS, in connection with the acquisition of the
Company and General Partner by Foodbrands, Foodbrands and
Executive have required that this Employment Agreement be entered
into;
NOW, THEREFORE, it is agreed as follows:
1. Services to be Provided. Executive will serve as
President of Kettle Cooked Foods and Vice President of the
General Partner and the Company and Vice President of Foodbrands.
Consistent with Executive's office, Executive shall render
services to the General Partner and the Company as the Board of
Directors of General Partner may time to time designate.
Executive will see that all orders and resolutions of the Board
of Directors of General Partner are carried into effect. In
addition, will be responsible for the day-to-day operations of
Kettle Cooked Foods a division of the Company, the development
and execution of the appropriate marketing plans and budgets for
the Company, the interaction between Kettle Cooked Foods, the
Company and the headquarters of Foodbrands and Foodbrands' other
divisions and subsidiaries.
Executive shall devote such time and efforts to the
performance of his duties hereunder and to advancing the interest
of the Company and Foodbrands, subject only to reasonable working
hours, conditions and requirements as are consistent with past
practices of Executive for the Company. In the performance of
his duties, the Executive shall comply with the Company's
policies. Executive will not engage in consulting work or any
trade or business for his own account or for or on behalf of any
other person, firm or corporation which competes, conflicts or
interferes with the performance of his duties hereunder in any
way (except as specifically provided in Section 7 below);
provided that the Company acknowledges that the Executive may
perform consulting services for Winchester Food Processing, Inc.
("Winchester") and Standard Meat Company L.P. ("Standard") as
long as performance of such services do not materially interfere
with the performance of Executive's duties under this Agreement.
The foregoing shall not preclude the Executive from devoting
reasonable time to the supervision of his personal investments,
civic and charitable affairs and serving on other boards,
provided that such activities do not interfere with the
performance of his duties hereunder; and further provided that
the Executive shall not serve on the board of any other business
(except as provided in Section 7, below) without the advance
consent of the General Partner, which consent shall not be
unreasonably withheld.
2. Term. The Term of this Agreement shall refer to
the time during which it is in effect. It shall commence on
December 11, 1995, and end on December 10, 2000, or an earlier
date as provided herein.
3. Compensation. During the Term, the Company shall
provide Executive with the following minimum compensation and
benefits:
(a) Salary. Executive shall be paid at the rate
of $175,000 per annum (such payment shall be referred to in this
Agreement as the "Base Compensation"), payable in accordance with
the normal payroll policies of Foodbrands, as they may exist from
time to time. The Base Compensation will be subject to annual
merit increases in accordance with Foodbrands' normal policies.
These payments shall be subject to withholding for all applicable
taxes.
(b) Bonus. Commencing with fiscal year 1996,
Executive shall be entitled to participate in the Foodbrands' Key
Management Cash Incentive Plan, as it may exist from time to
time. The target incentive percentage for Executive will be set
by the Foodbrands' Compensation Committee consistent with those
established for executives of other divisions of Foodbrands
performing comparable duties. The annual bonus will be paid when
the other bonuses of senior executives of the Company are or will
be paid, according to the policy of the Company.
(c) Expenses. The Company shall promptly
reimburse Executive for all reasonable expenses incurred in
connection with employment pursuant to the terms of this
Agreement during the Term. In order to receive reimbursement,
Executive must properly account for expenses in accordance with
the policy of the Company.
(d) Other Benefits. In addition to the
aforementioned items, the Company shall provide or make available
to Executive such pension and welfare benefit plans and programs
of the Company as currently exist or those pension and welfare
benefit plans and programs of Foodbrands as are provided to other
executives of the Company in other divisions of Foodbrands in the
event the Company ceases providing any such benefits, and to
receive benefits thereunder, in accordance with their respective
terms. Except as otherwise set forth in this Agreement, it is
understood that Executive will not be entitled to participate in
any other stock option, bonus or severance plan of Foodbrands.
In addition, the Company shall provide the Executive during the
Term with a car in accordance with the past practice of the
Company.
(e) Stock Options. As soon as practicable, but
in no event later than 90 days after the date of this Agreement,
the Company and Executive shall execute a Stock Option Agreement
with respect to stock options to be granted to the Executive (the
"Option Agreement") pursuant to the Foodbrands America, Inc. 1992
Stock Incentive Plan (the "Stock Plan"). Pursuant to the Option
Agreement:
(i) Foodbrands will immediately grant options to
purchase 12,000 shares of the common stock of Foodbrands at a per
share price equal to $13.125. Nine percent (9%) of the options
shall be exercisable or vested as of the date of this Agreement
and 18.2% of the options shall vest as of the end of each fiscal
year commencing with December 28, 1996 until all options have
vested subject to achieving the EBITDA performance targets of
Foodbrands as established by the Compensation Committee of
Foodbrands and the terms and conditions set forth in the Stock
Plan and the Option Agreement.
4. Termination During the Term. Executive's
employment hereunder may terminate for any of the following
reasons:
(a) Death. This Agreement shall terminate upon
Executive's death.
(b) Disability. If, as a result of Executive's
incapacity due to physical or mental illness ("Disability"),
Executive shall have been absent from the full-time performance
of his duties with the Company for any six months within any
consecutive 12-month period, Executive's employment may be
terminated.
(c) Cause. Termination by the Company of
Executive's employment for "Cause" shall mean termination based
upon (i) Executive's indictment for, or conviction of, any felony
or any crime involving moral turpitude, (ii) commission any
theft, fraud or embezzlement by Executive which results in
Executive's gain or personal enrichment at the expense of the
Company, (iii) Executive's failure to follow instructions of the
Chief Executive Officer of the Company, or his successor or
designee, or such other executive of the Company of comparable
rank as the Board of Directors of the Company may direct, or the
Board of Directors of the Company, (iv) inability to perform
duties and responsibilities as a result of an addiction to
alcohol or drugs, other than drugs legally prescribed and
administered by a duly licensed physician, or (v) breach of any
obligations under this Agreement, including, but not limited, to
breaches of Sections 7, 8 or 9 of this Agreement. Executive may
not be terminated for Cause unless the Company has first
specified the act, omission or breach forming the basis for such
termination in the Notice of Termination (as hereinafter
defined), and Executive has failed or refused to correct such
act, omission or breach within ten days of receipt of the Notice
of Termination or such act, omission or breach is incapable of
being cured.
(d) Voluntary Termination. Executive may
voluntarily terminate employment at any time during the Term (a
"Voluntary Termination").
(e) Termination by the Company. The Company may
terminate Executive's employment for any reason during the Term
hereof, including, but not limited to, closing or selling the
Company provided, however, that upon such termination, Executive
will be compensated as provided in Section 5.
(f) Notice of Termination. Any termination of
Executive's employment shall be communicated by written Notice of
Termination to the other party hereto in accordance with this
Section 4(f). For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon and
which shall specify a date as Executive's last day of employment
(the "Termination Date").
5. Compensation Upon Termination or During
Disability. Upon termination of employment or during a period of
disability, Executive shall be entitled to the following
benefits:
(a) If Executive's employment is terminated
during the Term by reason of death, the Company shall pay to
Executive's estate Executive's Base Compensation as though
employment was were terminated by the Company without Cause (the
"Continued Compensation Period"), and the bonus for the bonus
period in which the Termination Date occurs. Thereafter, the
Company and its affiliates shall have no further obligations to
Executive, other than as provided in this Agreement.
(b) During any period that Executive fails to
perform his full-time duties with the Company as a result of
Disability, Executive shall continue to receive Base Compensation
during such period, and the bonus for the bonus period in which
the Disability occurs. During such period that Executive fails
to perform his full-time duties with the Company as a result of
Disability, Executive shall continue to receive all compensation
payable to Executive and Company's Disability benefit programs
then in effect during such period, unless and until this
Agreement shall be terminated pursuant to Section 4(b) of this
Agreement.
(c) If Executive's employment is terminated
during the Term by reason of Disability, Executive shall continue
to receive his Base Compensation through the Continued
Compensation Period and the bonus for the bonus period in which
the Termination Date occurs. Executive shall also continue to
receive all compensation payable under the Company's Disability
benefit programs then in effect through the expiration of the
Term; thereafter, benefits shall be determined under the
retirement, insurance and other compensation programs (other than
the bonus arrangements described in Section 3(b) of this
Agreement of the Company then in effect in accordance with the
terms of such programs).
(d) If Executive's employment is terminated by
the Company for Cause or as a result of a Voluntary Termination,
the Company shall pay Executive his Base Compensation through the
Termination Date in the Notice of Termination, and the Company
and its affiliates shall have no further obligations under this
Agreement.
(e) If Executive's employment is terminated
during the Term by the Company other than for death, Cause or
Disability, or other than as a result of a Voluntary Termination,
then the Company shall pay Executive his Base Compensation equal
to a one-year period.
(f) The Executive and Foodbrands may enter into
an agreement providing for certain rights of the parties in the
event of a change of control in the ownership of Foodbrands, in
which event Executive's rights and obligations on the occurrence
of such an event will be governed thereby.
(g) In addition to all other amounts payable to
Executive under this Section 5, Executive shall be entitled to
receive all benefits payable to Executive under the plans or
agreements of the Company relating to retirement benefits
pursuant to the terms of such plan.
6. Successors; Binding Agreement. This Agreement and
all of the provisions hereof shall be binding upon and inure to
the benefits of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written
consent of the other parties, nor is this Agreement intended to
confer upon any other except the parties hereto, any rights or
remedies hereunder. Notwithstanding the foregoing, the Company
may assign its rights under this Agreement, but no such
assignment shall relieve the Company of its obligations
hereunder.
7. Noncompetition. Notwithstanding anything to the
contrary contained in this Agreement, Executive may not, directly
or indirectly, (1) conduct any activities involving the
developing, manufacturing, or marketing or selling of soups,
sauces, side dishes or pizza toppings or other products that are
competitive in any way with the Company (the "Prohibited
Business"); (2) engage (as an individual or as a stockholder,
trustee, partner, financier, agent, employee or representative of
any person, firm, corporation, or association), or have any
interest, direct or indirect, in any Prohibited Business and (3)
may not assist or engage in any business related activities
involving those products currently produced or under development
by the Company, all for a period of five (5) years after
termination of employment. The parties hereto agree that the
duration and geographic area for which the covenant not to
compete set forth in this Section 7 is to be effective are
reasonable. However, in the event that any court determines that
the time period or the geographic area, or both of them, are
unreasonable, and that such covenant is, to that extent,
unenforceable, the parties hereto agree that the covenant shall
remain in full force and effect for the greatest time period and
for the greatest area that would not render it unenforceable.
The parties hereto agree that the covenant shall be deemed to be
a series of separate covenants, one for each and every state or
county of the geographic area where the covenant not to compete
is intended to be effective. Notwithstanding anything to the
contrary in this Section 7, ownership of less than 5% of the
voting stock of any publicly held corporation shall not
constitute a violation of this Section 7. In addition, this
Section 7 shall not apply in connection with the passive
ownership of any interest in Winchester and Standard (including,
without limitation, serving as a member of their respective
Boards of Directors) nor to any management activity of Executive
for Winchester or Standard, so long as Winchester and Standard do
not compete with any products produced by the Company other than
meat ball, pasta meat, and other products of Winchester being
produced or under development as of the date of this Agreement,
which are described in Exhibit A hereto.
8. Nonsolicitation. For a period of five (5) years
from the termination of this Agreement, whether by expiration of
the Term or pursuant to Section 4, Executive agrees not to
solicit, or to attempt to induce to cease doing business in whole
or in part with the Company or Foodbrands, any individuals or
business entities that were customers of the Company or
Foodbrands, during his employment and any prospective customers
with respect to whom the Company has initiated contacts during
the 12 months preceding the termination of employment. Executive
further agrees that for this same period he shall not, directly
or indirectly, solicit any employees of the Company or Foodbrands
to leave the employ of the Company or Foodbrands.
9. Confidential Information. During the Term and at
all times thereafter, Executive shall not, without the prior
written consent of Foodbrands (except as may be required in
connection with any judicial or administrative proceeding or
inquiry), disclose to any person, other than an officer or
director of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance of duties hereunder, any confidential information of
the Company, whether obtained while in the employ of the Company
or otherwise, with respect to the business of the Company or
Foodbrands, assets or operations, including confidential
information relating to the properties, accounts, books, records,
supplies, trade secrets and contracts of the Company or
Foodbrands.
10. Injunctive Relief. The remedy at law for any
breach of Sections 7, 8 and 9 of this Agreement is and will be
inadequate, and in the event of a breach or threatened breach by
Executive of the provisions of this Agreement, the Company shall
be entitled to an injunction restraining Executive from
soliciting employees or customers of the Company or from
disclosing, in whole or in part, the private, secret and
confidential information described herein, or from rendering any
services to any person, firm, corporation, association or other
entity to whom such information has been disclosed or is
threatened to be disclosed, from engaging, participating in or
otherwise being connected with any business which would violate
Section 7, or from otherwise violating the provisions of this
Agreement. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available for such
breach or threatened breach, including the recovery of damages
from Executive.
11. Separate Covenants. This Agreement shall be
deemed to consist of a series of separate covenants. Executive
expressly agree that the character, duration and geographical
scope of this Agreement are reasonable in light of the
circumstances as they exist on the date upon which this Agreement
has been executed. If, in any judicial proceeding, a court shall
refuse to enforce all of the separate covenants included herein
because they are more extensive than necessary to assure
Foodbrands and the Company of the intended benefit of this
Agreement, then those covenants which, if eliminated, would
permit the remaining separate covenants to be enforced in such
proceeding shall, for the purpose of such proceeding, be deemed
eliminated from this Agreement.
12. Return of Documents. Upon termination of
Executive's employment for any reason, Executive agrees to return
all documents and other property provided to Executive or
prepared during his employment with the Company.
13. Notice. For the purpose of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, provided that all notices
to the Company shall be directed to the Secretary of Foodbrands,
or to such other address as either party may have furnished to
the other in writing in accordance herewith, except the notice of
change of address shall be effective only upon receipt.
Foodbrands America, Inc.
1601 Northwest Expressway
Suite 1700
Oklahoma City, OK 73112
Howard S. Katz
4300 Kirkland Dr.
Ft. Worth, TX 76109
14. Disputes. Any controversy or claim arising out of
or relating to this Agreement, or any breach hereof, shall be
settled by submitting that matter to binding arbitration in
Oklahoma City, Oklahoma, or at such other location the parties
agree by and pursuant to the rules of the American Arbitration
Association then in effect. The determination of the arbitrator
shall be conclusive and binding on the Company and the Executive,
and judgment may be entered on the arbitrator's award in any
court of competent jurisdiction.
15. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge shall be agreed to in writing and
signed by Executive and by a duly authorized officer of the
Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement. All descriptive headings in this
Agreement are inserted for convenience only and shall be
disregarded in construing or applying any provision of this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Oklahoma. Any payments provided for hereunder shall
be paid net of any applicable withholding requirements under
federal, state or local law. The obligations under Sections 5,
7, 8 and 9 shall survive the expiration of this Agreement or the
termination of employment.
16. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not effect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
17. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same instrument.
EXECUTED the date first above written.
(Howard S. Katz)
Howard S. Katz
"Executive"
KPR HOLDINGS, L.P.
By: RKR-GP, Inc., general partner
By (William E. Rosenthal)
William E. Rosenthal,
President
"COMPANY"
<PAGE>
Winchester Food Processing, Inc. Products
EXHIBIT A
Pizza Hut Bacon Pieces
Pizza Hut Bacon Bits
Pizza Hut Meatballs
Pizza Hut Pasta Meat
KFC Diced Ham
Bacon Toppings*
Bacon Bits*
* Provided, Winchester will not sell these products directly to
existing Foodbrands customers
<TABLE>
Exhibit 11.1
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per share figures)
<CAPTION>
Fiscal Year Ended
_______________________________
Dec. 30, Dec. 31, Jan. 1,
1995 1994 1994
________ ________ ________
<S> <C> <C> <C>
Income (loss) from continuing operations $ 9,601 $ (5,195) $ (4,374)
Income (loss) from discontinued
operations (4,121) (8,522) 6,781
Loss on disposal of discontinued
operations (38,526) - -
Extraordinary loss on early
extinguishment of debt (1,049) (2,481) -
Cumulative effect of change in
accounting for postretirement benefits
other than pensions - - (34,426)
________ ________ ________
Net income (loss) $(34,095) $(16,198) $(32,019)
======== ======== ========
Primary earnings per share:
Weighted average number of
common shares outstanding 12,453 8,727 7,419
Common stock equivalents:
Dilutive options and warrants - - -
______ _____ _____
Weighted average number of common
and common equivalent shares
outstanding 12,453 8,727 7,419
====== ===== =====
Income (loss) from continuing
operations $ 0.77 $(0.59) $(0.59)
Income (loss) from discontinued
operations (0.33) (0.98) 0.91
Loss on disposal of discontinued
operations (3.09) - -
Extraordinary loss on early
extinguishment of debt (0.08) (0.28) -
Cumulative effect of change in
accounting for postretirement
benefits other than pensions - - (4.64)
______ ______ ______
Net income (loss) per share $(2.73) $(1.85) $(4.32)
====== ====== ======
Fully diluted earnings per share:
Weighted average number of
common shares outstanding 12,453 8,727 7,419
Common stock equivalents:
Dilutive options and warrants - - -
______ _____ _____
Weighted average number of common
and common equivalent shares
outstanding 12,453 8,727 7,419
====== ===== =====
Income (loss) from continuing
operations $ 0.77 $(0.59) $(0.59)
Income (loss) from discontinued
operations (0.33) (0.98) 0.91
Loss on disposal of discontinued
operations (3.09) - -
Extraordinary loss on early
extinguishment of debt (0.08) (0.28) -
Cumulative effect of change in
accounting for postretirement
benefits other than pensions - - (4.64)
______ ______ ______
Net income (loss) per share $(2.73) $(1.85) $(4.32)
====== ====== ======
</TABLE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Subsidiaries of Foodbrands America, Inc.
State of Percentage
Name Incorporation Owned
Continental Deli Foods, Inc. Delaware 100%
Doskocil Specialty Brands Company Delaware 100%
FBAI Investments Corporation Oklahoma 100%
Florida Panel Company* Florida 100%
National Service Center, Inc. Delaware 100%
Pafco Importing Company, Inc. Delaware 100%
RKR-GP, Inc. Delaware 100%
Wilson Certified Express, Inc. Delaware 100%
Subsidiaries of Continental Deli Foods, Inc.
State of Percentage
Name Incorporation Owned
Brennan Packing Co., Inc. Delaware 100%
Doskocil Food Service Company, L.L.C. Oklahoma 99.5%**
Subsidiaries of FBAI Investments Corporation
State of Percentage
Name Formation Owned
KPR Holdings, L.P. Delaware 99%**
* Florida Panel Company is an inactive corporation and has no
assets.
** RKR-GP owns 1% of KPR Holdings, L.P. and .5% of Doskocil
Food Service Company.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Foodbrands America, Inc. on Form S-8 (file No's.
33-45974, 33-59331, and 33-62611) of our report dated February
12, 1996, on our audits of the consolidated financial statements
of Foodbrands America, Inc. as of December 30, 1995, and December
31, 1994, and for the years ended December 30, 1995, December 31,
1994, and January 1, 1994, which report is included in the
Company's Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
February 26, 1996
EXHIBIT 10.22
FIRST AMENDMENT TO TRANSITION EMPLOYMENT AGREEMENT
This First Amendment to Transition Employment Agreement
dated as of this 15th day of December, 1995 (the "Amendment") by
and between Foodbrands America, Inc., formerly known as Doskocil
Companies Incorporated (the "Company"), and Horst O. Sieben (the
"Executive").
WHEREAS, the Company and the Executive entered into
that certain Transition Employment Agreement dated November 1,
1994 (the "Agreement"); and
WHEREAS, the Company and the Executive mutually desire
to amend the Agreement; and
WHEREAS, in connection with his agreement to become an
employee of the Company, the Executive received a letter dated
September 28, 1994 (the "Letter") from the Chairman, President
and Chief Executive Officer of the Company setting forth certain
provisions with respect to certain stock option grants to be made
to the Executive; and
WHEREAS, Section 8(b) of the Agreement is in conflict
with certain provisions of the Letter and it is the intent of the
parties hereto that the Letter and the Agreement be consistent;
and
WHEREAS, the purpose of this Amendment is to
incorporate certain provisions from the Letter into the Agreement
so that the inconsistency between the Letter and the Agreement
can be corrected; and
WHEREAS, the Board of Directors of the Company has
approved this Amendment at a meeting on December 14, 1995.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein, the Company
and the Executive hereby amend the Agreement as follows:
1. The Amendment. Section 8(b) of the Agreement is
amended by deleting it in its entirety and replacing it with the
following:
(b) In the event of a Change of Control, all
outstanding Company stock options,
restricted shares or performance shares
held by Executive shall vest on the
date of such event provided
Executive is an employee of the
Company on such date. In addition,
for a period of six months following
the date of a Triggering
Termination, Executive will receive
(i) the use of professional
outplacement services by qualified
consultants retained at Company
expense; and (ii) the opportunity to
purchase country club memberships
covering Executive for the actual
cost of the membership when
originally purchased by the Company
if such transfer is permitted by the
country clubs.
2. The Agreement. The term "Agreement" as used in
the Transition Employment Agreement and in this Amendment shall
hereafter mean the Transition Employment Agreement as amended by
this Amendment. The Transition Employment Agreement, as amended
hereby, shall continue in full force and effect in accordance
with the terms thereof.
3. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of
Oklahoma.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed on the date first above written.
FOODBRANDS AMERICA, INC.
By: (R. Randolph Devening)
R. Randolph Devening, Chairman,
President and Chief Executive
Officer
(Horst O. Sieben)
Horst O. Sieben
EXHIBIT 10.24
FIRST AMENDMENT TO NON-QUALIFIED STOCK OPTION AGREEMENT
This First Amendment to Non-Qualified Stock Option
Agreement dated as of this 15th day of December, 1995 (the
"Amendment") by and between Foodbrands America, Inc., formerly
known as Doskocil Companies Incorporated (the "Corporation"), and
R. Randolph Devening (the "Optionee").
WHEREAS, the Corporation and the Optionee entered into
that certain Employment Agreement dated as of August 2, 1994 (the
"Employment Agreement"); and
WHEREAS, Section 3 of the Agreement is consistent with
the terms of the Employment Agreement, but Sections 7(b) and 7(d)
of the Agreement are in conflict with both Section 3 of the
Agreement and the Employment Agreement.
WHEREAS, the purpose of this Amendment is to delete the
conflicting sections of the Agreement so that the Agreement is
internally consistent and consistent with the Employment
Agreement; and
WHEREAS, the Board of Directors of the Corporation has
approved this Amendment at a meeting held on December 14, 1995.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein, the
Corporation and the Optionee hereby amend the Agreement as
follows:
1. The Amendments.
(a) Section 7(b). Section 7(b) is amended by
deleting it in its entirety and replacing it with the following:
(b) If the Optionee dies (i) on or prior to
July 31, 1997 or (ii) on or after January 1, 2000
but before the Option Expiration Date and is
employed by the Corporation or a Subsidiary of the
Corporation at the time of death, or if the
Optionee dies within a period of three months
following the termination of his or her employment
(but before the Option Expiration Date), the
Option may be exercised, to the extent the
Optionee was entitled to exercise the Option as of
the date of his or her death, within a period
ending on the earlier to occur of (A) the date
which is one year following the date of death, or
(B) the Option Expiration Date. Under such
circumstances, the Option may be exercised by the
Beneficiary named by the Optionee in a valid
Beneficiary designation filed with the Committee,
as more fully described in Section 12 hereof, and
if no such Beneficiary designation has been filed
with the Committee at such time, or if no such
designated Beneficiary has survived the Optionee,
then the Option may be exercised by the executor
or administrator of the estate of the Optionee, or
by the person or persons who shall have acquired
the Option directly from the Optionee by bequest
or inheritance.
(b) Section 7(d). The Agreement is amended by
deleting Section 7(d) in its entirety.
2. The Agreement. The term "Agreement" as used in
the Non-Qualified Stock Option Agreement and in this Amendment
shall hereafter mean the Non-Qualified Stock Option Agreement as
amended by this Amendment. The Non-Qualified Stock Option
Agreement, as amended hereby, shall continue in full force and
effect in accordance with the terms thereof.
3. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of
Oklahoma.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed on the date first above written.
FOODBRANDS AMERICA, INC.
By: (Horst O. Sieben)
Horst O. Sieben, Senior Vice
President and Chief Financial
Officer
(R. Randolph Devening)
R. Randolph Devening
EXHIBIT 10.26
FIRST AMENDMENT TO NON-QUALIFIED STOCK OPTION AGREEMENT
This First Amendment to Non-Qualified Stock Option
Agreement dated as of this 15th day of December, 1995 (the
"Amendment") by and between Foodbrands America, Inc., formerly
known as Doskocil Companies Incorporated (the "Corporation"), and
Horst O. Sieben (the "Optionee").
WHEREAS, the Corporation and the Optionee entered into
that certain Non-Qualified Stock Option Agreement dated September
29, 1994 (the "Agreement"); and
WHEREAS, the Corporation and the Optionee mutually
desire to amend the Agreement; and
WHEREAS, in connection with his agreement to become an
employee of the Corporation, the Optionee received a letter dated
September 28, 1994 (the "Letter") from the Chairman, President
and Chief Executive Officer of the Corporation setting forth
certain provisions with respect to certain stock option grants to
be made to the Optionee; and
WHEREAS, certain provisions of the Agreement are in
conflict with certain provisions of the Letter and it is the
intent of the parties hereto that the Letter and the Agreement be
consistent; and
WHEREAS, the purpose of this Amendment is to
incorporate certain provisions from the Letter into the Agreement
so that the inconsistency between the Letter and the Agreement
can be corrected; and
WHEREAS, the Board of Directors has approved this
Amendment at a meeting held on December 14, 1995.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein, the
Corporation and the Optionee hereby amend the Agreement as
follows:
1. The Amendments.
(a) Section 3. Section 3 of the Agreement is
amended by adding the following new
subsections (d) and (e):
(d) If a Change of Control Event occurs, the
Option shall vest on the date of such
event provided the Optionee is an
employee of the Corporation on such date
(consistent with Section 7(c) of this
Agreement).
(e) Notwithstanding the foregoing, the
Option, to the extent it has not been
previously exercised, shall be cancelled
in the event of a material breach by the
Optionee of Section 6 of that certain
Transition Employment Agreement dated
November 1, 1994 between the Corporation
and the Optionee prior to the occurrence
of a Change of Control Event if such
breach causes financial injury to the
Corporation.
(b) Section 7(b). The Agreement is amended by
deleting Section 7(b) in its entirety and
replacing it with the following:
(b) If the Optionee dies (i) on or prior
to July 31, 1997 or (ii) on or after January
1, 2000 but before the Option Expiration Date
and is employed by the Corporation or a
Subsidiary of the Corporation at the time of
death, or if the Optionee dies within a
period of three months following the
termination of his or her employment (but
before the Option Expiration Date), the
Option may be exercised, to the extent the
Optionee was entitled to exercise the
Optionas of the date of his or her death,
within a period ending on the earlier to
occur of (A) the date which is one year
following the date of death, or (B) the
Option Expiration Date. Under such
circumstances, the Option may be exercised by
the Beneficiary named by the Optionee in a
valid Beneficiary designation filed with the
Committee, as more fully described in Section
12 hereof, and if no such Beneficiary
designation has been filed with the Committee
at such time, or if no such designated
Beneficiary has survived the Optionee, then
the Option may be exercised by the executor
or administrator of the estate of the
Optionee, or by the person or persons who
shall have acquired the Option directly from
the Optionee by bequest or inheritance.
(c) Section 7(d). Section 7(d) of the Agreement
is amended by deleting it in its entirety.
2. The Agreement. The term "Agreement" as used in
the Non-Qualified Stock Option Agreement and in this Amendment
shall hereafter mean the Non-Qualified Stock Option Agreement as
amended by this Amendment. The Non-Qualified Stock Option
Agreement, as amended hereby, shall continue in full force and
effect in accordance with the terms thereof.
3. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of
Oklahoma.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed on the date first above written.
FOODBRANDS AMERICA, INC.
By: (R. Randolph Devening)
R. Randolph Devening, Chairman,
President and Chief Executive
Officer
(Horst O. Sieben)
Horst O. Sieben
EXHIBIT 10.28
FOODBRANDS AMERICA, INC.
NON-EMPLOYEE DIRECTORS'
DEFERRED STOCK COMPENSATION PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.1 Purpose. The Foodbrands America, Inc.
Non-Employee Directors' Deferred Stock Compensation Plan (the
"Plan") is intended to advance the interests of the Company and
its shareholders by providing a means to attract and retain
highly-qualified persons to serve as non-employee Directors and
to promote ownership by non-employee Directors of a greater
proprietary interest in the Company, thereby aligning such
Directors' interests more closely with the interests of
shareholders of the Company.
1.2 Effective Date. This Plan shall become effective
April 27, 1995 subject to approval of the shareholders of the
Company by the affirmative vote of a majority of Shares present,
or represented, and entitled to vote on the subject matter, at
the 1996 Annual Meeting of Shareholders of the Company at which a
quorum is present or by a written consent of the holders of a
majority of the Company's then outstanding Shares.
ARTICLE II
DEFINITIONS
The following terms shall be defined as set forth
below:
2.1 "Board" means the Board of Directors of the
Company.
2.2 "Committee" means the Compensation Committee of
the Board.
2.3 "Company" means Foodbrands America, Inc., a
Delaware corporation, or any successor thereto.
2.4 "Deferral Date" means the date Fees would
otherwise have been paid to the Participant.
2.5 "Director" means any individual who is a member of
the Board.
2.6 "Exchange Act" means the Securities Exchange Act
of 1934, as amended. References to any provision of the Exchange
Act include rules thereunder and successor provisions and rules
thereto.
2.7 "Fair Market Value" means the closing sales price
for the Shares on the relevant date, or (if there were no sales
on such date) the closing sales price on the nearest day before
or the nearest day after the relevant date, as reported in The
Wall Street Journal or a similar publication selected by the
Committee.
2.8 "Fees" means all or part of any retainer and/or
fees payable to a non-employee Director in his or her capacity as
a Director.
2.9 "Participant" means a non-employee Director who
defers Fees under Article VI of this Plan.
2.10 "Reconciliation Events" means certain events which
cause the amount of Fees actually paid during a Plan year to
differ from the amount of Fees credited pursuant to Section 6.4,
including, but not limited to, the following: an increase or
decrease in Fees paid, additional meetings held, missed
attendance at certain meetings, newly elected directors and
Terminations of Service which occur prior to the end of the Plan
year.
2.11 "Secretary" means the Corporate Secretary or any
Assistant Corporate Secretary of Foodbrands America, Inc.
2.12 "Shares" means shares of the common stock of
Foodbrands America, Inc., par value $.01 per share, or of any
successor corporation or other legal entity adopting this Plan.
2.13 "Stock Units" means the credits to a Participant's
Stock Unit Account under Article VI of this Plan, each of which
represents the right to receive one Share upon settlement of the
Stock Unit Account.
2.14 "Stock Unit Account" means the bookkeeping account
established by the Company pursuant to Section 6.4.
2.15 "Termination Date" means the date the Plan
terminates pursuant to Section 12.8.
2.16 "Termination of Service" means termination of
service as a Director in any of the following circumstances:
(a) Where the Participant voluntarily resigns or
retires;
(b) Where the Participant is not re-elected (or
elected in the case of an appointed Director) to the Board by the
shareholders; or
(c) Where the Participant dies.
ARTICLE III
SHARES AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Article X, the
maximum number of Shares that may be distributed in settlement of
Stock Unit Accounts under this Plan shall not exceed 150,000.
Such Shares may include authorized but unissued Shares or
treasury Shares.
ARTICLE IV
ADMINISTRATION
4.1 This Plan shall be administered by the Board's
Compensation Committee, or such other committee or individual as
may be designated by the Board. Notwithstanding the foregoing,
no Director who is a Participant under this Plan shall
participate in any determination relating solely or primarily to
his or her own Shares, Stock Units or Stock Unit Account.
4.2 It shall be the duty of the Committee to
administer this Plan in accordance with its provisions and to
make such recommendations of amendments or otherwise as it deems
necessary or appropriate.
4.3 The Committee shall have the authority to make all
determinations it deems necessary or advisable for administering
this Plan, subject to the limitations in Section 4.1 and other
explicit provisions of this Plan.
ARTICLE V
ELIGIBILITY
5.1 Each Director who is not an employee of the
Company shall be eligible to defer Fees under Article VI of this
Plan.
5.2 If such Director subsequently becomes an employee
of the Company (or any of its subsidiaries), but does not incur a
Termination of Service, such Director shall (a) continue as a
Participant with respect to Fees previously deferred and (b)
cease eligibility with respect to all future Fees, if any, earned
while an employee.
ARTICLE VI
DEFERRAL ELECTIONS IN LIEU OF CASH PAYMENTS
6.1 General Rule. Each Director may, in lieu of
receipt of Fees, defer such Fees in accordance with this Article
VI, provided that such Director is eligible under Article V of
this Plan to defer such Fees at the date any such Fees are
otherwise payable.
6.2 Timing of Election. Each eligible Director who
wishes to defer Fees under this Plan must make an irrevocable
written election at least six (6) months prior to the start of
the calendar year for which the Fees would otherwise be paid;
provided, however, that with respect to (a) any election made by
a newly-elected or appointed Director ("New Director Elections")
and (b) any elections made by Directors with respect to Fees paid
in 1995 ("1995 Elections"), the following special rules shall
apply: (i) with respect to any New Director Elections, the
Company shall hold such deferred Fees (without interest) and
credit them pursuant to Section 6.4 on or as of the date which
follows by six months such deferral election and (ii) with
respect to any 1995 Elections, such elections shall be effective
for any Fees paid on the date the election was made and the
Company shall hold such deferred Fees (without interest) and
credit them pursuant to Section 6.4 on or as of the date on which
the shareholders of the Company approve the Plan in accordance
with Section 1.2; provided, however, the Fair Market Value used
to determine the number of Stock Units to be credited shall be
the Fair Market Value as of the date the election was made. An
election by a Director shall be deemed to be continuing and
therefore applicable to Fees to be paid in future years unless
the Director revokes or changes such election by filing a new
election form by the due date for such form specified in this
Section 6.2.
6.3 Form of Election. An election shall be made in a
manner satisfactory to the Secretary. Generally, an election
shall be made by completing and filing the specified election
form with the Secretary of the Company within the period
described in Section 6.2. At minimum, the form shall require the
Director to specify the following:
(a) a percentage (in 25% increments), not to
exceed an aggregate of 100% of the Fees to be deferred under this
Plan; and
(b) the manner of settlement in accordance with
Section 7.2.
6.4 Establishment of Stock Unit Account. The Company
will establish a Stock Unit Account for each Participant. All
Fees deferred pursuant to this Article VI shall be credited to
the Participant's Stock Unit Account as of the Deferral Date and
converted to Stock Units as follows: The number of Stock Units
shall equal the deferred Fees divided by the Fair Market Value of
a Share on the Deferral Date, with fractional units calculated to
three (3) decimal places.
6.5 Credit of Dividend Equivalents. As of each
dividend payment date with respect to Shares, each Participant
shall have credited to his or her Stock Unit Account an
additional number of Stock Units equal to: the per-share cash
dividend payable with respect to a Share on such dividend payment
date multiplied by the number of Stock Units held in the Stock
Unit Account as of the close of business on the record date for
such dividend divided by the Fair Market Value of a Share on such
dividend payment date. If dividends are paid on Shares in a form
other than cash, then such dividends shall be notionally
converted to cash, if their value is readily determinable, and
credited in a manner consistent with the foregoing and, if their
value is not readily determinable, shall be credited "in kind" to
the Participant's Stock Unit Account.
6.6 Reconciliations. Since the Company will pay Fees
in advance as of January 1 for each Plan year, except for 1995
Fees, the remainder of which will be paid as of the effective
date of the Plan, Reconciliation Events may occur. The Company
shall record all Reconciliation Events and, as soon as reasonably
practicable after the end of each Plan year or after a
Termination of Service, make appropriate adjustments to each
Participant's Stock Unit Account to reflect such Reconciliation
Events; provided, however, the Fair Market Value used to
determine such adjustments shall be the same Fair Market Value
used to determine the number of Stock Units credited to such
Participant's Stock Unit Account at the beginning of the Plan
year in which such Reconciliation Events occurred.
ARTICLE VII
SETTLEMENT OF STOCK UNITS
7.1 Settlement of Account. The Company will settle a
Participant's Stock Unit Account in the manner described in
Section 7.2 as soon as administratively feasible following the
earlier of (i) notification of such Participant's Termination of
Service or (ii) the Termination Date.
7.2 Payment Options. An election filed under Article
VI shall specify whether the Participant's Stock Unit Account is
to be settled by delivering to the Participant (or his or her
beneficiary) the number of Shares equal to the number of whole
Stock Units then credited to the Participant's Stock Unit
Accounts, in (a) a lump sum, or (b) substantially equal annual
installments over a period not to exceed ten (10) years. If,
upon lump sum distribution or final distribution of an
installment, less than one whole Stock Unit is credited to a
Participant's Stock Unit Account, cash will be paid in lieu of
fractional shares on the date of such distribution.
7.3 Continuation of Dividend Equivalents. If payment
of Stock Units is deferred and paid in installments, the
Participant's Stock Unit Account shall continue to be credited
with dividend equivalents as provided in Section 6.5.
7.4 In Kind Dividends. If any "in kind" dividends
were credited to the Participant's Stock Unit Account under
Section 6.5, such dividends shall be payable to the Participant
in full on the date of the first distribution of Shares under
Section 7.2.
ARTICLE VIII
UNFUNDED STATUS
The interest of each Participant in any Fees deferred
under this Plan (and any Stock Units or Stock Unit Account
relating thereto) shall be that of a general creditor of the
Company. Stock Unit Accounts, and Stock Units (and, if any, "in
kind" dividends) credited thereto, shall at all times be
maintained by the Company as bookkeeping entries evidencing
unfunded and unsecured general obligations of the Company.
ARTICLE IX
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by
the Committee, one or more beneficiaries to receive the Shares
described in Section 7.2 in the event of such Participant's
death. The Company may rely upon the beneficiary designation
last filed with the Committee, provided that such form was
executed by the Participant or his or her legal representative
and filed with the Committee prior to the Participant's death.
ARTICLE X
ADJUSTMENT PROVISIONS
In the event any recapitalization, reorganization,
merger, consolidation, spin-off, combination, repurchase,
exchange of shares or other securities of the Company, stock
split or reverse split, or similar corporate transaction or event
affects Shares such that an adjustment is determined by the Board
or Committee to be appropriate to prevent dilution or enlargement
of Participants' rights under this Plan, then the Board or
Committee will, in a manner that is proportionate to the change
to the Shares and is otherwise equitable, adjust the number or
kind of Shares to be delivered upon settlement of Stock Unit
Accounts under Article VII.
ARTICLE XI
COMPLIANCE WITH RULE 16b-3
Subject to Section 6.2, it is the intent of the Company
that this Plan comply in all respects with applicable provisions
of Rule 16b-3 under the Exchange Act in connection with the
deferral of Fees. Thus, other provisions of this Plan
notwithstanding, if any deferral of Fees would occur less than
six (6) months after the Participant filed an irrevocable
election which would result in such deferral and at a time that
the Company's employee benefit plans are being operated in
conformity with Rule 16b-3 as adopted and in effect, such
deferral election may be modified in a manner consistent with the
special rule described in Section 6.2 or in any other manner
consistent with Rule 16b-3 as then applicable to any transaction
by a Participant subject to Section 16 of the Exchange Act, or
would cause any Participant or Director to no longer be deemed a
"disinterested person" within the meaning of Rule 16b-3, such
provision will be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such
Participant or Director.
ARTICLE XII
GENERAL PROVISIONS
12.1 No Right to Continue as a Director. Nothing
contained in this Plan will confer upon any Participant any right
to continue to serve as a Director.
12.2 No Shareholder Rights Conferred. Nothing
contained in this Plan will confer upon any Participant any
rights of a shareholder of the Company unless and until Shares
are in fact issued or transferred to such Participant in
accordance with Article VII.
12.3 Change to the Plan. The Board may amend, alter,
suspend, discontinue, extend, or terminate the Plan without the
consent of shareholders or Participants, except that any such
action will be subject to the approval of the Company's
shareholders at the next annual meeting of shareholders having a
record date after the date such action was taken if such
stockholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated
quotation system on which the Shares may then be listed or
quoted, or if the Board determines in its discretion to seek such
shareholder approval; provided, however, that, without the
consent of an affected Participant, no such action may materially
impair the rights of such Participant with respect to any Stock
Units credited to his or her Stock Unit Account; and provided,
however, that any "plan provision" referred to in Rule
16b-3(c)(2)(ii)(B) under the Exchange Act, shall not be amended
more than once every six months, other than to comport with
changes in the Internal Revenue Code or the Exchange Act or the
rules thereunder.
12.4 Consideration; Agreements. The consideration for
Shares issued or delivered in lieu of payment of Fees will be the
Director's service during the period to which the Fees paid in
the form of Shares related.
12.5 Compliance with Laws and Obligations. The Company
will not be obligated to issue or deliver Shares in connection
with this Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any
other federal or state securities law, any requirement under any
listing agreement between the Company and any national securities
exchange or automated quotation system or any other laws,
regulations, or contractual obligations of the Company, until the
Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full.
Certificates representing Shares delivered under the Plan will be
subject to such stop-transfer orders and other restrictions as
may be applicable under such laws, regulations, and other
obligations of the Company, including any requirement that a
legend or legends be placed thereon.
12.6 Limitations on Transferability. Stock Units and
any other right under the Plan that may constitute a "derivative
security" as generally defined in Rule 16a-1(c) under the
Exchange Act will not be transferable by a Participant except by
will or the laws of descent and distribution (or to a designated
beneficiary in the event of a Participant's death); provided,
however, that such rights may be transferred to one or more
trusts or other beneficiaries during the lifetime of the
Participant in connection with the Participant's estate planning,
but only if and to the extent then permitted under Rule 16b-3 and
consistent with the registration of the offer and sale of Shares
on Form S-8 or a successor registration form of the Securities
and Exchange Commission. Stock Units and other rights under the
Plan may not be pledged, mortgaged, hypothecated, or otherwise
encumbered, and shall not be subject to the claims of creditors.
12.7 Governing Law. The validity, construction, and
effect of the Plan and any agreement hereunder will be determined
in accordance with the Delaware General Corporation Law, to the
extent applicable, other laws (including those governing
contracts) of the State of Oklahoma, without giving effect to
principles of conflicts of laws, and applicable federal law.
12.8 Plan Termination. Unless earlier terminated by
action of the Board or Executive Committee of the Board, the Plan
will remain in effect until the earlier of (i) such time as no
Shares remain available for delivery under the Plan and the
Company has no further rights or obligations under the Plan or
(ii) April 26, 2000.
EXHIBIT 10.45
MASTER EQUIPMENT LEASE AGREEMENT
THIS MASTER EQUIPMENT LEASE AGREEMENT (this "Lease") dated
as of January 31, 1996 is by and between NATIONSBANC LEASING
CORPORATION OF NORTH CAROLINA ("Lessor"), a corporation organized
under the laws of the State of North Carolina and having its
principal place of business at NationsBank Plaza, NC1-002-38-20,
101 South Tryon Street, Charlotte, North Carolina 28255, and
FOODBRANDS AMERICA, INC. ("Lessee"), a corporation organized
under the laws of the State of Delaware and having its principal
place of business at 1601 N.W. Expressway, Suite 1700, Oklahoma
City, OK 73118-0437.
R E C I T A L S
WHEREAS, the Lessee desires to lease from Lessor certain
Equipment (as hereinafter defined) from time to time as more
specifically set forth hereinafter.
WHEREAS, so long as the terms and conditions set forth in
this Lease and any Schedule(s) (as hereinafter defined) are
complied with by the Lessee, the Lessor is willing to enter
into this Lease for the purposes stated herein.
NOW, THEREFORE, in consideration of the mutual promises set
forth herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, each of
the parties hereto agrees as follows:
SECTION 1
LEASE AGREEMENT
Subject to the terms and conditions hereinafter set forth,
Lessor may lease to Lessee, and Lessee may lease from Lessor, the
units of personal property (collectively, with all attached
parts, replacements, additions, accessions and accessories
attached thereto, the "Equipment") described in one or more
Equipment Lease Schedules, an example of which is attached hereto
as Exhibit A (each, as amended from time to time, is referred to
herein as a "Schedule"). Each Schedule shall constitute a
separate and independent lease and contractual obligation of
Lessee. Until a Schedule is duly signed and delivered by Lessor,
a Schedule signed and delivered by Lessee constitutes an
irrevocable offer by Lessee to lease the Equipment described in
such Schedule from Lessor.
SECTION 2
TERM OF LEASE; RENTALS
The lease term (the "Term") with respect to any Equipment may
consist of an "Interim Term" and/or a "Base Term" as specified in
the Schedule covering such Equipment. Lessee shall pay rent for
the Interim Term ("Interim Rent") in such amounts and at such
times as set forth in the applicable Schedule, and shall pay rent
for the Base Term ("Base Rent") in such amounts and at such times
as set forth in the applicable Schedule. If the date that any
rent payment is due is other than a business day, the rent
payment otherwise payable on such date shall be payable on
the next succeeding business day. All payments required to be
made by Lessee to Lessor hereunder shall be made in immediately
available funds and in United States dollars at Lessor's
place of business at NationsBank Plaza, NC1-002-38-20, 101 South
Tryon Street, Charlotte, North Carolina 28255 or to such other
place as Lessor shall designate to Lessee in writing.
SECTION 3
LOCATION; USE OF EQUIPMENT; QUIET ENJOYMENT
(a) Each item of Equipment shall at all times be and
remain in the possession and control of Lessee at the location
stated in the Schedule covering such Equipment.
(b) Lessee shall use, operate, protect, and maintain
the Equipment in compliance with all applicable insurance
policies, laws, ordinances, rules, regulations and manufacturer's
instructions. Lessee, at its sole expense, may make alterations
and modifications in and additions and improvements to the
Equipment provided no such alteration, modification, addition or
improvement reduces the value or utility, or impairs the
warranty, certification, safety or performance of the Equipment.
Lessee shall promptly notify Lessor in writing upon the
completion of any material alteration, modification, addition or
improvement to the Equipment. Title to any part or item
incorporated in the Equipment as a result of such alteration,
modification, addition or improvement (an Addition ) shall vest
in Lessor without cost or payment, provided, that so long as such
Addition (I) does not adversely alter or impair the value or the
originally intended function or use of the Equipment and (ii) can
be readily removed without causing material damage to the
Equipment, title to such Addition shall remain in Lessee. Lessee
shall make, at its sole expense, any alterations or modifications
that are required during the term of this Lease to comply with
any applicable law or governmental rule or regulation. If
requested by Lessor, Lessee shall cause each item of Equipment to
be and remain marked by insignia, plaques, tags, decals or other
forms of notice to disclose Lessor's ownership of the Equipment.
Lessee shall keep the Equipment free and clear of any and all
liens, encumbrances, claims and charges (except for those created
expressly by or for the benefit of Lessor) and shall not in any
way encumber Lessor's rights hereunder or under any Schedule.
(c) Provided that no event of default has occurred and
is continuing hereunder, Lessor agrees that it shall not
interfere with Lessee's quiet enjoyment and use of the Equipment
during the Term and that it shall keep Lessee's quiet enjoyment
and use of the equipment free from interference from persons
claiming liens, encumbrances, claims and charges created
expressly by or for the benefit of Lessor.
SECTION 4
TAXES
Lessee shall reimburse Lessor on demand for all taxes,
assessments and other governmental charges paid by Lessor in
connection with the Equipment or its use, ownership, leasing or
operation while in Lessee's possession or the payment or receipt
of rent or other charges under any Schedule, including but not
limited to foreign, federal, state, county and municipal fees and
taxes, ad valorem, sales, use, value added, leasing, excise,
stamp and documentary taxes (other than federal, state or local
taxes based on Lessor's net income), and all related penalties,
fines and interest charges (other than penalties, fines and
interest charges incurred as a result of Lessor's gross
negligence or willful misconduct). Upon Lessor's request,
Lessee will immediately furnish to Lessor such information as
Lessor shall require in connection with the preparation and
filing of all returns relating to such taxes, assessments, or
charges.
SECTION 5
NET LEASE; LOSS AND DAMAGE
(a) Each Schedule is a net lease. All costs, expenses
and other liabilities associated with the Equipment shall be
borne by Lessee until the Equipment is returned to Lessor in
accordance with the terms of this Lease. Lessee's obligations
under any and all Schedules are absolute and unconditional, and
are not subject to any abatement, deferment, reduction, setoff,
defense, counterclaim or recoupment for any reason whatsoever.
Except as otherwise expressly provided herein, no Schedule shall
terminate nor shall the obligations of Lessee be affected, by
reason of any defect or damage to, or any destruction, loss,
theft, forfeiture, governmental requisition or obsolescence of
the Equipment, regardless of cause.
(b) As between Lessor and Lessee, Lessee assumes all
risk of damage to or loss, theft or destruction of the Equipment
from any cause whatsoever from the date the Equipment is shipped
by the seller or manufacturer. In the event of loss or
destruction of the Equipment from any cause whatsoever, other
than the failure of Lessor to receive whatever title to the
Equipment in conveyed to it by the seller or manufacture, from
the date the Equipment is shipped by the seller or
manufacturer, but prior to its acceptance by the Lessee, Lessee
shall promptly pay to Lessor all sums heretofore paid by Lessor
to such seller or manufacturer, and Lessor shall assign to Lessee
all of its rights or causes of action, if any, against such
seller or manufacturer. In the event of damage of any kind
whatsoever to any item of the Equipment on or after its
acceptance by Lessee, Lessee shall, at Lessor's option, either
place the same in good repair, condition or working order, or, if
in the reasonable judgment of Lessor the Equipment is determined
by Lessor to be lost, stolen, destroyed, damaged beyond repair,
or rendered permanently unfit for its intended use, Lessee shall
pay Lessor the Casualty Loss Value thereof (as provided in the
Schedule covering such Equipment). Upon such payment, the lease
of such Equipment shall terminate and Lessee thereupon shall
become entitled to such item of the Equipment "AS-IS, WHERE-IS"
without warranty by Lessor, express or implied, with respect to
any matter whatsoever.
SECTION 6
INSURANCE
Lessee shall, at its sole expense, procure and maintain the
following insurance coverage on the Equipment until the Equipment
is returned to Lessor, or Lessee's obligations with respect
thereto under any applicable Schedule are otherwise terminated:
(1) insurance against theft, fire, casualty, and such other risks
as are customarily insured against in Lessee's trade or industry,
under policies naming Lessor as loss payee; and (2) comprehensive
public liability and property damage insurance, under policies
naming Lessor as additional insured. Each such insurance
policy shall include provisions for the protection of Lessor
notwithstanding any act, neglect, breach of warranty, or default
of or by Lessee, shall provide for payment of insurance proceeds
to Lessor to the extent of its liability or interest, shall
provide that such policy may not be modified, terminated or
cancelled unless Lessor is given at least thirty (30) days prior
written notice thereof, shall provide that the coverage is
"primary coverage" for the protection of Lessee and Lessor
notwithstanding any other coverage carried by Lessee or Lessor
protecting against similar risks or liabilities, and shall be
issued in such amounts (which in the case of casualty
insurance will never be less than the Casualty Loss Value of the
Equipment covered thereby), with such deductibles, by such
insurance company, and otherwise in such form as shall all be
reasonably satisfactory to Lessor. Lessee shall furnish Lessor
with certificates or other satisfactory evidence of such
insurance, and shall furnish Lessor with a renewal certificate
for each policy before the policy renewal date. Lessor shall
have no duty to examine any certificate or other evidence of
insurance, or to advise Lessee in the event that its insurance is
not in compliance with this Section 6. The proceeds of any
public liability or property damage insurance shall be payable
first to Lessor to the extent of its liability, if any, and the
balance to Lessee. The proceeds of fire, theft, or other
casualty insurance shall be payable to Lessor and shall be used
for the repair or replacement of the affected Equipment or for
payment of the Casualty Loss Value in accordance with the
provisions of Section 5; unless an event of default hereunder
shall have occurred and be continuing, in which event such
proceeds may, at Lessor's sole option, be applied toward the
payment of Lessee's obligations under the applicable Schedule.
Lessee hereby appoints Lessor as Lessee's agent and
attorney-in-fact with full power to do all things (including
but not limited to making, adjusting, and settling claims, and
receiving payments and endorsing documents, checks, or drafts)
necessary or advisable to secure payment due under any insurance
policy contemplated hereby.
SECTION 7
LESSEE'S GENERAL INDEMNITIES
Lessee shall indemnify Lessor, its officers, directors,
stockholders, successors, assigns and agents against all claims,
liabilities, losses and expenses whatsoever, including attorneys'
fees and expenses (except those directly and primarily caused by
Lessor's gross negligence or willful misconduct), in any way
relating to or arising out of the use, operation, leasing,
maintenance or ownership of the Equipment or any part thereof, or
the ordering, acquisition, rejection, installation, possession,
condition, destruction, return, or disposition of the Equipment
or any part thereof, including Lessor's own negligence and strict
liability in tort, and including any infringement claim.
Lessee's obligations under this provision shall survive any
partial or total termination, expiration, or cancellation of this
Lease or any Schedule. Lessee's obligations under this Section 7
shall not increase as a result of any transfer or assignment of
this Lease, all or part of any Schedule or Lessor's interest in
any Equipment.
SECTION 8
SPECIAL TAX INDEMNITY
(a) Lessor and Lessee have made the following
assumptions regarding the characterization of this Lease for
federal income tax purposes (the "Tax Assumptions"): (1) Lessor
will be treated as the purchaser, owner, and lessor of the
Equipment; (2) the Equipment will be treated as placed in service
on the "In Service Date" set forth in the Schedule; and Lessor's
basis in the Equipment will be equal to the total actual cost to
Lessor of the Equipment; (3) for federal tax purposes, Lessor
will be entitled to claim depreciation deductions with respect to
one hundred percent (100%) of the total actual cost of the
Equipment computed (i) on the basis that the Equipment has the
classification (the "Property Classification") within the meaning
of Section 168(e)(1) of the Internal Revenue Code of 1986, as
amended (the "Code") as set forth in the Schedule, (ii) by using
the two hundred percent (200%) declining balance method,
switching to a straight line method for the first taxable year of
Lessor for which such method yields a larger allowance, (iii)
assuming salvage value is zero, and (iv) using the half-year
convention under Section 168(d)(1) and (d)(4)(A) of the Code; (4)
the only amounts that Lessor will be required to include in gross
income with respect to this Lease will be (i) rents of all types
as paid under this Lease, (ii) payments as a consequence of a
sale, or other loss, termination disposition of the Equipment and
(iii) any indemnity pursuant to this Section 8; (5) Lessor will
be able to amortize over the Term all of its transaction costs;
and (6) all items of income loss, depreciation and expense will
be treated on an accrual basis and as derived from or allocable
to sources within the United States.
(b) Lessee hereby represents, warrants and covenants to
Lessor as follows: (1) the Equipment will not be used
"predominantly outside the United States" within the meaning of
Sections 168(g)(1)(A) and 168(g)(4) of the Code; (2) if the Tax
Assumptions in subsections 8(a)(1) and (2) are accurate, then the
income tax consequences to Lessor set forth in Section 8(a)(3)
are correct; (3) under current law, neither the Equipment nor any
component thereof constitutes "limited use property" within the
meaning of Revenue Procedure 76-30, 1976-2 C.B. 647; (4) the
Equipment is complete for its intended use as of the In Service
Date set forth on the applicable Schedule; and (5) Lessee
(including any affiliate of Lessee) will not claim any
depreciation or cost recovery deductions with respect to the
Equipment, will not use the Equipment in any manner that will
cause the Equipment to cease to qualify under the Property
Classification, and has not taken and will not take any other
action in connection with filing its or their federal income tax
returns that would cause any of the Tax Assumptions to be
incorrect.
(c) If, by reason of any act or omission of Lessee or
by any other person in possession of the Equipment or by reason
of the inaccuracy or breach by Lessee of any of the
representations, warranties and covenants contained in Section
8(b), tax benefits resulting from the Tax Assumptions are lost,
disallowed, eliminated, reduced, recaptured, compromised, delayed
or otherwise made unavailable to Lessor or Lessor incurs a tax
detriment because it is required to include amounts in income
other than as contemplated in the Tax Assumptions, Lessee shall,
upon notice by Lessor, promptly pay to Lessor on demand in
immediately available funds, an indemnity payment, as determined
by Lessor, equal to the amount of such lost tax benefits and such
tax detriments incurred (computed at the then current maximum
federal tax rate applicable to corporations and including without
limitation, the incurrence of any tax detriments as a result of
the inclusion by Lessor in gross income of the aggregate
indemnity payment pursuant to this Section 8), plus any interest,
penalties and additions to tax thereon and plus any expenses
incurred by Lessor in connection therewith.
(d) All of the indemnities contained in this Section 8
shall apply to the Equipment and each component thereof and shall
continue in full force and effect, notwithstanding the expiration
or other termination of the Term and are expressly made for the
benefit of, and shall be enforceable by, Lessor.
SECTION 9
DELIVERY, ACCEPTANCE AND RETURN OF EQUIPMENT
(a) Upon delivery to and acceptance by Lessee of any
Equipment, Lessee shall execute and deliver the Schedule relating
to such Equipment, identifying same and acknowledging receipt
thereof, with all information required on the Schedule fully
completed. Lessee's execution of such Schedule shall constitute
acceptance of delivery of such Equipment and Lessee's
acknowledgement to Lessor that such Equipment is in good
operating order, repair, condition and appearance, is of the
manufacture, design and capacity selected by Lessee and is
suitable for the purposes for which such Equipment is leased.
(b) Subject to the provisions of any applicable
Schedule, at the expiration of the Term with respect to any
Equipment, upon demand Lessee shall, at its sole expense, return
such Equipment to Lessor, at a place designated by Lessor, in the
same operating order, repair, condition and appearance as when
originally received, ordinary wear and tear from proper use
thereof excepted. Such Equipment shall (1) be capable of being
immediately operated by a third party purchaser or third party
lessee without further inspection, repair, replacement,
alteration or improvement; (2) be in compliance with the
requirements of Section 10 of this Lease and any and all
statutes, laws, ordinances, rules and regulations of any Federal,
state or local governmental body, agency or authority applicable
to the use and operation of such Equipment; and (3) be free and
clear of any and all liens, encumbrances, claims and charges
(except those created expressly by or for the benefit of Lessor).
If upon such expiration or termination Lessee does not
immediately return an item of Equipment to Lessor, such item
shall continue to be held subject to all the terms and conditions
hereof, and Base Rent and other charges shall continue to accrue
and be payable hereunder with respect to such item until it is
returned to Lessor. Payment or acceptance of any such rent or
other charge shall not be deemed a waiver of any default and
shall not suspend or otherwise affect any right or remedy
hereunder, including without limitation Lessee's obligation to
return immediately (and Lessor's right to take immediate
possession of) any such item.
SECTION 10
MAINTENANCE
Lessee shall use the Equipment in a prudent and careful
manner, and with respect to the maintenance, use and operation of
the Equipment, Lessee shall comply with normal and safe
operating procedures for such Equipment, as set forth in
applicable operation manuals or instructions. Lessee shall also
comply with all maintenance requirements set forth in any
applicable Schedule. Lessee shall at its sole expense, maintain,
inspect, service, repair, overhaul and test the Equipment in
accordance with the manufacturer's specifications, instructions
and prudent industry practice (but in any event to the same
extent that Lessee would maintain similar property owned or
leased by Lessee) so as to keep the Equipment in good, safe and
satisfactory repair and order and in the same operating condition
and appearance as when received, ordinary wear and tear from
proper use thereof excepted. Lessee shall, at its sole expense,
promptly replace all parts and components of the Equipment which
may from time to time become worn out, lost, stolen, destroyed,
damaged beyond repair or otherwise rendered unfit for use. All
replacement parts and components shall be deemed a part of the
Equipment and shall be subject to the terms hereof and title to
such replacement parts and components shall vest in Lessor
without cost or payment.
SECTION 11
RENEWAL, EARLY TERMINATION AND
END OF LEASE TERM OPTIONS
Lessee's renewal, early termination and end of lease term
options, if any, with respect to any Equipment are set forth in
the applicable Schedule.
SECTION 12
ASSIGNMENT OF WARRANTIES AND LIMITATION OF RESPONSIBILITY
Lessor hereby transfers and assigns to Lessee, to the extent
allowable by law, for and during the Term of each Schedule with
respect to any Equipment covered by such Schedule, the
warranties, if any, of the manufacturer issued on such Equipment,
and hereby authorizes Lessee to obtain at Lessee's sole expense
the customary service furnished by the manufacturer in connection
therewith. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT A
MANUFACTURER, THE AGENT OF A MANUFACTURER OR ENGAGED IN THE SALE
OR DISTRIBUTION OF THE EQUIPMENT AND HAS NOT MADE, AND DOES NOT
HEREBY MAKE, ANY REPRESENTATIONS AS TO MERCHANTABILITY,
PERFORMANCE, CONDITION, FITNESS OR SUITABILITY OF ANY OF THE
EQUIPMENT FOR THE PURPOSES OF LESSEE OR MAKE ANY OTHER
REPRESENTATION WITH RESPECT THERETO. LESSOR SHALL NOT BE LIABLE
TO LESSEE FOR ANY LOSS, CLAIM, LIABILITY, COST, DAMAGE OR EXPENSE
OF ANY KIND CAUSED, OR ALLEGED TO BE CAUSED, DIRECTLY OR
INDIRECTLY, BY ANY EQUIPMENT, OR BY AN INADEQUACY THEREOF FOR ANY
PURPOSE, OR BY ANY DEFECT THEREIN, OR THE USE OR MAINTENANCE
THEREOF, OR ANY REPAIRS, SERVICING OR ADJUSTMENTS THEREOF, OR ANY
DELAY IN PROVIDING OR FAILURE TO PROVIDE SAME, OR ANY
INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, OR ANY LOSS OF
BUSINESS, PROFITS, CONSEQUENTIAL OR OTHER DAMAGE OF ANY NATURE.
LESSEE AGREES THAT ITS OBLIGATIONS HEREUNDER SHALL NOT IN ANY WAY
BE AFFECTED BY ANY DEFECT OR FAILURE OF PERFORMANCE OF ANY
EQUIPMENT.
SECTION 13
TRUE LEASE; LESSOR'S TITLE; PERSONAL PROPERTY
(a) This Lease is intended as a true lease. Lessee
will make no claim nor assert any right to the Equipment
inconsistent with Lessor's ownership and will make appropriate
entries upon its books and records reflecting Lessor's ownership
of the Equipment.
(b) Title to the Equipment shall at all times remain
vested in Lessor and at no time during the Lease shall title
become vested in Lessee.
(c) The Equipment shall remain personal property at all
times, notwithstanding the manner in which it may be attached or
affixed to realty. Lessee warrants that at any time any
Equipment is leased hereunder, or is removed to a new location,
either (1) the premises in which such Equipment will be installed
will be owned by Lessee free of any liens or encumbrances, or (2)
if not owned by Lessee free of liens or encumbrances, the owner
of such premises and/or the holder of any such liens or
encumbrances on such premises shall have consented and
acknowledged that such Equipment is and shall remain personal
property subject to all the provisions of this Lease. Lessee
will obtain and record such instruments and take such steps as
may be necessary to prevent any person from acquiring any
right in any Equipment paramount to the rights of Lessor by
reason of such Equipment being deemed to be real property. If
any third party should attempt to establish any legal right in
any Equipment, then Lessee shall immediately after learning
thereof, notify Lessor in writing, and within thirty (30) days
after such notice, either (1) cause such right to be waived or
eliminated to the satisfaction of Lessor or (2) otherwise stay
such action or indemnify Lessor to Lessor's satisfaction.
SECTION 14
DEFAULT AND REMEDIES
(a) Each of the following shall constitute an event of
default hereunder and under any and all Schedules then in effect:
(1) nonpayment when due of any installment of rent or other sum
owing by Lessee hereunder, under any and all Schedules or under
any other agreement between Lessor and Lessee if such nonpayment
continues for five (5) days; (2) Lessee's failure to perform and
comply with any provision of Section 6, Section 9, Section 16 or
Section 20(b) hereof or with any provision of any Schedule; (3)
Lessee's failure to perform and comply with any other provision
or condition hereunder or under any Schedule if such failure
continues for fifteen (15) days after written notice thereof by
Lessor to Lessee; (4) Lessee's attempt to sell or encumber any
item of the Equipment without Lessor's prior written consent, or
the attachment of any lien to any such item in favor of anyone
other than Lessor, or any attempted levy, seizure of, or
attachment on such item; (5) any representation or warranty made
by Lessee to Lessor hereunder or under any Schedule, certificate,
agreement, instrument or other statement, including income and
financial statements, proves to have been incorrect in any
material respect when made; (6) the suspension of Lessee's
present business; (7) Lessee's general assignment for the benefit
of creditors or commencement of any voluntary case or proceeding
for relief under the United States Bankruptcy Code, or any other
present or future law for the relief of debtors, or the taking of
any action to authorize or implement any of the foregoing; (8)
the filing of any petition or application against Lessee under
any present or future law for the relief of debtors, including
proceedings under the United States Bankruptcy Code, or for
the subjection of property of debtors to the control of any
court, receiver or agency for the benefit of creditors if such
petition or application is consented to by Lessee or not
dismissed within sixty (60) days from the date of filing; (9) a
default exists under any agreement or instrument of Lessee's with
or in favor of Lessor or any direct or indirect affiliate of
Lessor; or (10) the attempted repudiation of this Lease or any
Schedule or any obligation hereunder or thereunder by Lessee.
(b) Upon the occurrence of an event of default, Lessor
may at its option: (1) proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by
Lessee of the applicable covenants hereunder and under any or all
Schedules or to recover damages for the breach thereof; or (2)
cancel Lessee's right of possession of any or all of the
Equipment, whereupon all rights of Lessee to use the Equipment
shall absolutely cease and terminate, but Lessee shall remain
liable as herein provided. Upon such cancellation, Lessee shall,
at its own expense, immediately deliver such Equipment to Lessor
at a place within the continental United States designated by
Lessor. If Lessee shall fail to do so, Lessor may retake
possession of such Equipment by entering upon any premises at any
reasonable time, and thereafter Lessor may hold, possess, sell,
upgrade, lease to others or enjoy the same, free from any right
of Lessee, its successors of assigns. If Lessor elects to cancel
Lessee's right of possession of any Equipment, Lessor may recover
from Lessee any and all amounts that, under the terms of the
applicable Schedule, are then due or that have accrued to the
date of such termination, and may also recover forthwith from
Lessee, as damages for loss of its bargain and not as a penalty,
an amount equal to the Casualty Loss Value of such Equipment (as
provided in the Schedule covering such Equipment) as of the
rental payment date on or next preceding the date of the
occurrence of such event of default. However, if Lessor recovers
possession of such Equipment, Lessee's obligation under the
preceding sentence shall be reduced by (1) the net amount
Lessor in fact receives from the sale of any of such Equipment,
or (2) at Lessor's election, the present value (determined on the
basis of the "Discount Rate" as hereinafter defined) of the
noncancelable regularly scheduled rentals receivable under a
subsequent lease of any of the Equipment, taking into account
only the rentals receivable from the commencement date of such
subsequent lease until the end of the lease term for such
Equipment under the applicable Schedule. For purposes of this
Section 14, the Discount Rate shall be a rate of interest equal
to two percent (2%) plus the prime rate of NationsBank, N.A. (or
any successor to all or substantially all the assets thereof),
which rate is not necessarily the best or lowest rate offered,
(the "Prime Rate") as in effect on the day on which the
commencement date of such subsequent lease occurs.
(c) In addition to any amount recoverable under
subsection (b) above, Lessor may recover from Lessee all of
Lessor's costs and expenses incurred by reason of Lessee's breach
or default, including without limitation costs and expenses of
repossession, storing, holding, transporting, insuring,
servicing, repairing, maintaining, renting, and selling any
Equipment and collecting rents and other proceeds of its
disposition, and fees and expenses of attorneys and other
professionals employed by Lessor in connection with the
protection and enforcement of its title and interest in any and
all Equipment and its rights under this Lease and any and all
Schedules. From and after the occurrence of an event of default
hereunder, any installment of rent or other sum owing under any
Schedule that is not paid when due shall accrue interest from the
date of such event of default or, if later, the date such amount
becomes due, to the date it is paid, at a per annum rate equal to
the lesser of (1) two percent (2%) plus the Prime Rate and (2)
the highest rate, if any, permitted by applicable law.
(d) Except as otherwise expressly provided herein, all
rights and remedies of Lessor are concurrent and cumulative. The
exercise or partial exercise of any remedy shall not restrict
Lessor from further exercise of that remedy or any other remedy
provided for herein or otherwise available under applicable law.
To the extent permitted by applicable law, Lessee waives any
rights now or hereafter conferred by statute or otherwise that
may require Lessor to sell, re-lease or otherwise use or dispose
of any Equipment in mitigation of Lessor's damages or that may
otherwise limit or modify any of Lessor's rights or remedies.
SECTION 15
ASSIGNMENT BY LESSOR
LESSOR MAY ASSIGN OR TRANSFER, AND LESSEE HEREBY CONSENTS TO
THE ASSIGNMENT OR TRANSFER, OF THIS LEASE, ALL OR ANY PART OF ANY
SCHEDULE OR LESSOR'S INTEREST IN ANY EQUIPMENT WITHOUT NOTICE TO
LESSEE. Lessee agrees that the liability of Lessee to any
assignee of Lessor and any subsequent assignee of such assignee
shall be absolute and unconditional and shall not be affected by
any default hereunder of Lessor whatsoever or by the breach of
any warranty, express or implied, with respect to any Equipment
or Schedule.
SECTION 16
PROHIBITION OF ASSIGNMENT OF LESSEE
LESSEE SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY
PART OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ANY
SCHEDULE OR ENTER INTO ANY SUBLEASE OF ALL OR ANY PART OF ANY
EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, except
that Lessee may sublease the Equipment under a Permitted
Sublease. Lessee hereby grants to Lessor a security interest in
all of Lessee's rights and interests in, to and arising under any
Permitted Sublease.
"Permitted Sublease" means a sublease (1) to a corporation,
limited liability company, partnership or other business entity
that is and continues to be a wholly owned subsidiary of Lessee,
(2) the sublessee with respect to which shall be organized under
the laws of the United States or any state thereof and shall have
its principal place of business in the United States, (3) the
term of which shall in no event exceed the then remaining portion
of the Term, (d) immediately prior to the commencement of the
term of which, and after giving effect to which, there shall
exist no default or event of default, (5) which, if requested by
Lessor, shall be collaterally assigned to Lessor pursuant to an
assignment which in form and substance is satisfactory to Lessor,
(6) which shall contain unconditional payment provisions and
provisions relating to insurance, maintenance, operation in
accordance with applicable laws and insurance requirements,
possession, delivery and return conditions (insofar as general
condition of the Equipment is concerned), events of default,
remedies and permitted liens on the Equipment which provide for
benefits and protections to Lessee, as lessor, which are
substantially similar to the benefits and protections provided to
Lessor by such provisions of this Lease and (7) which shall
be expressly subject and subordinate to the terms of this Lease.
With respect to a Permitted Sublease, no such sublease by Lessee
will reduce any of the obligations of Lessee hereunder or
the rights of Lessor hereunder, and all of the obligations of
Lessee hereunder shall be and remain primary and shall continue
in full force and effect as the obligations of a principal and
not of a guarantor or surety. Lessee shall furnish to Lessor
not later than ten (10) days prior to the effective date of such
sublease (i) new insurance certificates from Lessee's insurance
broker, in form and substance satisfactory to Lessor, indicating
compliance with the insurance provisions of this Lease and (ii)
an officer's certificate from Lessee naming the sublessee and
specifying the address for the sublessee's principal place of
business. Lessee shall, and shall cause such sublessee to,
execute and deliver such instruments to the appropriate person
for filing and to deliver copies of the same to Lessor (including
sublease agreements and Uniform Commercial Code financing
statements) as may be requested by Lessor in connection with any
such sublease.
SECTION 17
INFORMATION
(a) Lessee shall deliver or cause to be delivered to
Lessor (1) within sixty (60) days after the last day of each
fiscal quarter except the fourth quarter, unaudited quarterly
financial reports including the consolidated balance sheets of
Lessee and its subsidiaries, each as of the end of such quarterly
period and consolidated statements of income, retained earnings
and cash flows for the quarter then ended and for the year to
date of Lessee and its subsidiaries, each setting forth in each
case comparative consolidated financial statements for the
corresponding quarterly period in the preceding year and the year
to date, all prepared in accordance with generally accepted
accounting principles applied on a consistent basis, and (2)
within one hundred twenty (120) days after the end of each fiscal
year, audited year end financial reports including consolidated
balance sheets of Lessee and its subsidiaries, each as of the end
of such fiscal year, and the notes thereto, and consolidated
statements of income, retained earnings and cash flows for the
year then ended of Lessee and its subsidiaries and the notes
thereto, and setting forth in each case comparative consolidated
financial statements for the corresponding period in the
preceding year, all prepared in accordance with generally
accepted accounting principles consistently applied and
containing opinions regarding Lessee and its subsidiaries
satisfactory to Lessor of a firm of independent certified public
accountants of national prominence selected by Lessee.
(b) Lessee shall furnish such information as Lessor may
reasonably request at any time concerning Lessee and its affairs,
including without limitation information concerning any Equipment
covered by a Schedule.
SECTION 18
TRANSACTION COSTS
Lessee further agrees, whether or not the transactions
contemplated hereby are consummated, to pay the out-of-pocket
transaction costs, fees and expenses of Lessor and Lessee
incurred in connection with the negotiation, preparation,
execution, delivery, filing, amendment, modification and/or
enforcement of the documents related thereto and all other costs,
fees and expenses of Lessor and Lessee in connection with the
transactions contemplated hereby, including but not limited to
reasonable legal fees of Lessor in connection with the
negotiation, execution and delivery of this Lease.
SECTION 19
NOTICES
All notices provided for or required under the terms and
provisions hereof shall be in writing, and any such notice shall
be deemed given when personally delivered or when deposited
with a nationally recognized overnight delivery service, with the
cost therefor prepaid, by facsimile with telephonic confirmation
during normal business hours, or in the United States mails, with
proper postage prepaid, for first class certified mail, return
receipt requested, addressed (1) if to Lessor or Lessee, at their
respective addresses as set forth herein or at such other address
as either of them shall, from time to time, designate in writing
to the other, and (2) if to any Assignee, to the address of such
Assignee as such Assignee shall designate, from time to time, in
writing to Lessor and Lessee.
If to Lessor: NationsBanc Leasing Corporation of North Carolina
NationsBank Plaza
101 South Tryon Street, NC1-002-38-20
Charlotte, North Carolina 28255
Attention: Manager, Corporate Lease
Administration
Telephone: (704) 386-7783
Facsimile: (704) 386-0892
If to Lessee: Foodbrands America, Inc.
1601 N.W. Expressway
Suite 1700
Oklahoma City, OK 73118-0437
Attention: Assistant Treasurer
Telephone: (405) 879-5500
Facsimile: (405) 879-5458
SECTION 20
REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) Lessee represents, warrants and covenants to and
with Lessor the following: (1) Lessee, is a corporation duly
organized, validly existing and in good standing under the laws
of the state in which it is incorporated, and is duly qualified
and authorized to do business wherever the nature of its
activities or the ownership of its properties requires such
qualification and authorization; (2) Lessee has the full power,
authority and legal right to execute, deliver and perform the
terms of this Lease; and this Lease has been duly authorized by
all necessary corporate action of Lessee and constitutes a valid
and binding obligation of Lessee, enforceable in accordance with
its terms; (3) neither the execution and delivery of, nor the
performance by Lessee under, this Lease will contravene any law
or government regulation or any charter, by-law of Lessee, or any
provision in any existing mortgage, indenture, contract or
agreement binding upon Lessee; (4) no consent of the
shareholders, or of any trustee or holder of any indebtedness of
Lessee, is or will be required as a condition to the validity of
this Lease, or if required, all such consents have been obtained
and duly certified copies thereof have been delivered to Lessor;
and (5) all information furnished by Lessee to Lessor is accurate
and all financial statements Lessee has furnished to Lessor,
including balance sheets and statements of income, retained
earnings and cash flows, have been prepared in accordance with
generally accepted accounting principles, consistently applied,
and reasonably reflect, as of their respective dates, results of
the operations and the financial condition of Lessee and its
subsidiaries, if any.
(b) Lessee shall not consolidate with or merge into or
with any person or sell, transfer, assign, lease or otherwise
convey all or substantially all of its assets to any person
unless:
(i) the successor entity formed by such a
consolidation or merger or the successor entity that acquires by
sale, transfer, assignment, lease or other conveyance all or
substantially all its assets (a) shall have a net worth of at
least the net worth of the Lessee immediately prior to the
transaction, (b) shall be solvent, (c) shall be organized under
the laws of the United States of America, a state thereof or the
District of Columbia, and (d) shall execute and deliver to the
Lessor an agreement in form and substance satisfactory to the
Lessor containing an assumption by such successor of the due and
punctual payment and performance of each obligation of Lessee
under this Lease and the Supplements;
(ii) immediately before and immediately after
giving effect to such transaction, no default or event of default
shall have occurred and be continuing, and no default or event of
default will result from such transaction; and
(iii) Lessee shall have delivered to the Lessor
an officer's certificate and an opinion of counsel satisfactory
to the Lessor stating that such consolidation, merger, sale,
transfer, assignment, lease or other conveyance, and the
assumption agreement required by clause (i) above, complies with
this Section 29(b) and that all conditions precedent relating
to such action have been complied with. Such opinion of counsel
shall also state that such assumption agreement has been duly
authorized, executed and delivered by such successor entity and
is enforceable against such successor corporation in accordance
with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and by general
principles of equity.
Upon any such consolidation, or merger, or any sale,
transfer, assignment, lease or other conveyance of all or of
substantially all the assets of Lessee in accordance with this
Section 29(b), then any successor entity formed by consolidation
or merger or to which such sale, conveyance, transfer,
assignment, lease or other conveyance shall be made shall succeed
to, and be substituted for, and may exercise every right and
power of, Lessee under this Lease and the Supplements with the
same effect as if successor had been named as Lessee therein. No
such transaction shall have the effect of releasing Lessee or any
successor entity that shall theretofore have become such in the
manner prescribed in this Section 29(b) from its liability under
the Lease or the Supplements.
SECTION 21
CONDITIONS PRECEDENT
(a) The obligation of Lessor to enter into this Lease
is subject to the delivery on the date hereof of the following
documents each in form and substance satisfactory to Lessor:
(1) this Lease duly executed by Lessee;
(2) Secretary's Certificate of Lessee
(substantially in the form of Exhibit B attached hereto)
certifying as to the corporate resolutions, articles of
incorporation and bylaws of Lessee, together with an incumbency
certificate of Lessee containing the name(s), title(s) and
specimen signature(s) of the person(s) authorized on behalf of
Lessee to execute the Lease and any related documents;
(3) articles of incorporation of Lessee certified
by the Secretary of State of Delaware and certificates of good
standing from the States where the Equipment will be located; and
(4) such other documents, appraisals,
certificates, financing statements and other items as Lessor may
reasonably require.
(b) The obligations of Lessor to purchase the Equipment
specified on any Schedule and to lease such Equipment to the
Lessee are subject to the delivery to Lessor on or prior to the
closing date specified in such Schedule of the following
documents each in form and substance satisfactory to Lessor:
(1) the Schedule (substantially in the form of
Exhibit A attached hereto) duly executed by the Lessee and dated
such closing date;
(2) Uniform Commercial Code financing statements
and other documents as Lessor shall deem necessary or advisable
to protect Lessor's interest in the Equipment and to effectuate
the purposes of this Lease.
(3) certificates of insurance for the Lessee
evidencing the coverages required under Section 6 hereof with
respect to the Equipment referenced in the Schedule;
(4) Assignments of Purchase Orders (substantially
in the form of Exhibit C attached hereto);
(5) officer's certificate of Lessee (substantially
in the form of Exhibit D attached hereto) certifying that no
default or event of default has occurred and is continuing, there
has been no adverse changes in the financial or other condition
of the Lessee and that the representations and warranties made in
the Lease are true and correct as of the date of the
certificates;
(6) UCC search results satisfactory to the Lessor;
and
(7) such other documents, appraisals,
certificates, financing statements and other items as Lessor may
reasonably require.
SECTION 22
MISCELLANEOUS
(a) Each Schedule is and is intended to be a lease, and
Lessee does not acquire hereby or under any Schedule any right,
title, equity or other interest in or to any Equipment, except
the right to use the same under the conditions hereof and under
the additional conditions set forth in the applicable Schedule.
Lessee waives any right to assert any lien or security interest
on any Equipment in Lessee's possession or control for any
reason.
(b) The relationship between Lessor and Lessee shall
always and only be that of lessor and lessee. Lessee shall never
at any time for any purpose whatsoever be or become the agent of
Lessor, and Lessor shall not be responsible for the acts or
omissions of Lessee or its agents.
(c) Lessor, its agents and employees shall have the
right to enter any property where any Equipment is located to
inspect such Equipment at any reasonable time. Lessor's right to
inspect the Equipment is solely for the benefit of Lessor and
shall not impose any obligation of any kind whatsoever on Lessor.
(d) Lessee agrees to pay Lessor overdue interest at a
per annum rate equal to the lesser of (1) two percent (2%) plus
the Prime Rate and (2) the highest rate, if any, permitted by
applicable law on all payments or other sums not paid by Lessee
to Lessor when the same are due and owing under the provisions of
this Lease and any Schedule.
(e) Lessor's rights and remedies with respect to any of
the terms and conditions of this Lease and each Schedule shall be
cumulative and not exclusive and shall be in addition to all
other rights and remedies in its favor. Lessor's failure to
enforce strictly any of the provisions of this Lease or any
Schedule shall not be construed as a waiver thereof or as
excusing Lessee from future performance.
(f) The invalidity of any portion of this Lease or any
Schedule shall not affect the force and effect of the remaining
valid portions hereof and thereof.
(g) Lessor and Lessee hereby agree that to the extent
permitted by law (1) Lessee will file all returns and other
appropriate documentation in regard to personal property taxes on
the Equipment, (2) pay all such personal property taxes and (3)
reimburse Lessor for any and all such personal property taxes
previously paid by Lessor.
(h) To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies conferred upon a
lessee by Sections 2A-508 through 2A-522 of the UCC, including
but not limited to Lessee's rights to: (1) cancel this Lease; (2)
repudiate this Lease; (3) reject the Equipment; (4) revoke
acceptance of the Equipment; (5) recover damages from Lessor for
any breaches of warranty or for any other reason; (6) a security
interest in the Equipment in Lessee's control or possession for
any reason; (7) deduct all or any part of any claimed damages
resulting from Lessor's default, if any, under this Lease; (8)
accept partial delivery of the Equipment; (9) "cover" by making
any purchase or lease of or contract to purchase or lease
Equipment in substitution for those due from Lessor; and (10)
specific performance, replevin, detinue, sequestration, claim and
delivery or the like for any Equipment identified to this Lease.
(i) Lessee hereby irrevocably appoints Lessor as
Lessee's agent and attorney-in-fact for Lessee to execute,
deliver, file or record any Uniform Commercial Code financing
statements as Lessor shall deem necessary or advisable to protect
Lessor's interest in the Equipment and to take such action for
Lessee and in Lessee's name, place and stead.
(j) THIS LEASE AND EACH SCHEDULE INCORPORATING ITS
TERMS AND CONDITIONS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING
TO THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA AS OF THE
DATE HEREOF, WITHOUT GIVING EFFECT TO ANY PRINCIPLE OF CONFLICTS
OF LAW OR CHOICE OF LAW THAT WOULD OTHERWISE MAKE THE LAW OF
ANY OTHER JURISDICTION THE LAW GOVERNING THIS LEASE OR ANY SUCH
SCHEDULE.
(k) IN THE EVENT THAT ANY ACTION, SUIT OR OTHER
PROCEEDING IS BROUGHT AGAINST LESSEE BY OR ON BEHALF OF LESSOR
TO ENFORCE THE OBSERVANCE OR PERFORMANCE OF ANY OF THE PROVISIONS
OF THIS LEASE OR ANY SCHEDULE, INCLUDING WITHOUT LIMITATION THE
COLLECTION OF ANY AMOUNTS OWING HEREUNDER OR THEREUNDER, LESSEE
HEREBY IRREVOCABLY (1) CONSENTS TO THE EXERCISE OF JURISDICTION
OVER LESSEE AND ITS PROPERTY BY ANY FEDERAL COURT LOCATED IN
NORTH CAROLINA AND ANY STATE COURT OF THE STATE OF NORTH CAROLINA
AND (2) WAIVES ANY OBJECTION IT MIGHT NOW OR HEREAFTER HAVE OR
ASSERT TO THE VENUE OF ANY SUCH PROCEEDING IN ANY COURT DESCRIBED
IN CLAUSE (1) ABOVE.
(l) EXCEPT AS PROHIBITED BY LAW, EACH PARTY HERETO
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION, UNDER OR IN CONNECTION WITH, THIS LEASE OR ANY
SCHEDULE, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY OTHER DAMAGES THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.
(m) This Lease may be executed in counterparts by the
parties hereto when so executed, and each such counterpart shall
be binding on both parties hereto, notwithstanding that both
parties are not signatories to the same counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Lease
to be executed by their duly authorized representatives as of the
date first above written.
LESSOR:
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (George L. Robinson Jr.)
Name: George L. Robinson Jr.
Title: Senior Vice President
LESSEE:
FOODBRANDS AMERICA, INC.
By: (William L. Brady)
Name: William L. Brady
Title: Vice President
COUNTERPART NO. ___ OF ___ SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT IF ANY THAT THIS DOCUMENT
CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO
SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE
TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART
NO. 1.
<PAGE>
EXHIBIT A
EQUIPMENT LEASE SCHEDULE NO. _____
FOR MASTER EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE SCHEDULE NO. _____ FOR MASTER EQUIPMENT
LEASE AGREEMENT (this "Schedule") dated as of __________ ___,
199_ is by and between NATIONSBANC LEASING CORPORATION OF NORTH
CAROLINA, a North Carolina corporation ("Lessor"), and FOODBRANDS
AMERICA, INC., a __________ Corporation ("Lessee"), is executed
pursuant to and is subject to the terms and conditions of the
Master Equipment Lease Agreement (the "Lease") dated January ___,
1996, between Lessor and Lessee. Capitalized terms used in this
Schedule and not defined herein shall have the respective
meanings assigned to such terms in the Lease.
1. Lessor's Total Equipment Cost: $_______________.
2. Description of Equipment: The Equipment is described on
Annex A, attached hereto and made a part hereof.
3. Term of Lease with Respect to Equipment: The term of
lease for the Equipment described herein (the "Term") commences
on _______________ (the "Acceptance Date"), and continues through
and includes _______________ (the "Base Term Expiration Date").
The Term consists of [an Interim Term of _______________
commencing on the Acceptance Date, and continuing through and
including _______________, (the "Base Term Commencement Date")
and] a Base Term of _______________ commencing on
[_______________ (the "Base Term Commencement Date"),] [the Base
Term Commencement Date] and continuing through and including the
Base Term Expiration Date.
4. Rental: Interim Rent, if any, shall be due Lessor for
each day by which the Acceptance Date precedes the Base Term
Commencement Date. Interim Rent for each day in the Interim Term
shall be equal to the first Base Rent installment divided by
_____ (__). Interim Rent shall be payable on the Base Term
Commencement Date. The aggregate Base Rent shall be payable in
the amounts and at the times as set forth in Schedule 1, attached
hereto and made a part hereof. A rental period shall consist of
one month.
5. Casualty Loss Value: Upon the occurrence of any
casualty loss of any Equipment or other event giving Lessor the
right to require immediate payment of such Equipment's
"Casualty Loss Value", Lessor shall calculate such Casualty Loss
Value and give Lessee written notice thereof. The Casualty Loss
Value of any Equipment at any time shall be the amount computed
by multiplying the Lessor's Total Equipment Cost of such
Equipment (as set forth above) by the Casualty Loss Factor
corresponding to the immediately preceding Base Rent Payment
Date, as set forth on Schedule 1. The Casualty Loss Factor for
the first Base Rent Payment Date shall also apply to the Interim
Term, and the Casualty Loss Factor for the last Base Rent Payment
Date shall also apply to all periods thereafter.
6. Termination Value: Upon the occurrence of an optional
termination by Lessee of this Schedule with respect to the
Equipment, Lessor shall calculate the Termination Value and
give Lessee written notice thereof. The Termination Value of any
Equipment at any time shall be the amount computed by multiplying
the Lessor's Total Equipment Cost of such Equipment (as set forth
above) by the Termination Value Factor corresponding to the
immediately preceding Base Rent Payment Date, as set forth on
Schedule 1.
7. Intentionally Omitted
8. Property Classification: seven-year property.
9. In Service Date: The Equipment has been or will be
placed in service on: _______________.
10. Early Termination Date: July 1, 1998.
11. Location of Equipment: The Equipment is and will remain
located at the locations specified in Annex A.
12. Early Termination Option: So long as no event of
default under the Lease shall have occurred and be continuing, on
any Base Rent Payment Date after the Early Termination Date,
Lessee may, if Lessee determines that the Equipment under all the
Schedules has become obsolete or surplus to its needs as
evidenced by a certificate executed by a responsible officer of
Lessee, upon one hundred eighty (180) days prior written notice
to Lessor, terminate this Lease and all Schedules with respect to
all, but not less than all, of the Equipment on all Schedules on
the date specified in such notice. On such termination date,
Lessee shall cause to be purchased by a purchaser (other than
Lessee or person affiliated with Lessee) reasonably acceptable to
Lessor all of Lessor's right, title and interest in and to all,
but not less that all, the Equipment for a purchase price and on
terms acceptable to Lessor, and Lessee shall assemble and deliver
such Equipment to such purchaser in the condition provided for in
Section 9(b) of the Lease. Lessee shall continue to remain
liable for the full and complete payment and performance of all
rents and other obligations payable and performable by Lessee
under the Lease and this Schedule until such Equipment has been
so sold. In addition, Lessee shall pay to Lessor on the date of
such sale the amount, if any, by which the proceeds of such sale
are less than the sum of: (a) all rent for such Equipment due
and unpaid as of, together with rent accrued through, the date of
such sale; (b) the Termination Value of the Equipment, as
provided Schedule 1 to this Schedule, as of the date of
such sale; (c) an amount equal to accrued taxes and other amounts
payable hereunder and under the Lease by Lessee with respect to
such Equipment; (d) all costs, expenses, losses and damages
incurred or sustained by Lessor in connection with such sale
including all amounts Lessee shall be required to pay Lessor
pursuant to any indemnity provision contained in the Lease; and
(e) interest on each of the foregoing and on all sums not paid
when due under any provision of the Lease at a per annum rate
equal to the lesser of (i) two percent (2%) plus the Prime Rate
and (ii) the highest rate, if any, permitted by applicable law.
For purposes of this Section 12, rent shall be prorated daily and
the Termination Values set forth in Schedule 1 are to be prorated
daily by interpolation on a straight line basis to the date of
payment.
13. End of Term Options:
(A) If the lease of Equipment subject to this Schedule shall
not have been earlier terminated, Lessee shall elect, upon
written notice to Lessor delivered not later than one hundred
eighty (180) days prior to the Base Term Expiration Date for such
Equipment, either the option described in Section 13(A)(a) or the
option described in Section 13(A)(b); provided, that Lessee
shall be deemed to have elected the option described in Section
13(A)(b) hereof if Lessor does not receive such notice within the
time period specified in the preceding clause; provided further,
that Lessor shall not bound by Lessee's election if an event of
default under the Lease has occurred and is continuing on the
Base Term Expiration Date; provided further, that such election
by Lessee once made shall be irrevocable.
(a) Fair Market Value Purchase Option. Upon the
expiration of the Base Term and payment by Lessee of all amounts
due and owing under the Lease and this Schedule, Lessee shall
purchase all of Lessor's right, title and interest in and to all,
but not less than all, of the Equipment for a purchase price
equal to the greater of twenty percent (20%) of Lessor's Total
Equipment Cost or the Fair Market Value of the Equipment (the
"Purchase Price"). The sale of the Equipment to Lessee shall be
on an "AS-IS, WHERE-IS" basis, with no representations or
warranties (expressed or implied) as to any matter
whatsoever, except that Lessor shall represent to Lessee that no
security interest, lien or encumbrance against such Equipment has
been created by or through Lessor. Lessee shall pay Lessor on
the Base Term Expiration Date in immediately available funds the
sum of: (i) the Purchase Price; (2) all rent for such Equipment
due and unpaid as of, together with rent accrued through, the
date of such sale; (3) an amount equal to accrued taxes and other
amounts payable hereunder and under the Lease by Lessee with
respect to such Equipment; (4) all costs, expenses, losses and
damages incurred or sustained by Lessor in connection with such
sale including all amounts Lessee shall be required to pay Lessor
pursuant to any indemnity provision contained in the Lease; and
(5) interest on each of the foregoing and on all sums not paid
when due under any provision of this Lease at a per annum rate
equal to the lesser of (i) two percent (2%) plus the Prime Rate
and (ii) the highest rate, if any, permitted by applicable law.
For purposes of this Section 13, rent shall be prorated daily by
interpolation on a straight line basis to the date of payment.
"Fair Market Value" shall mean, with respect to the
Equipment, or any item of Equipment at any time, the fair market
sale value thereof at such time as determined by agreement
between Lessor and Lessee or, if requested by either of such
parties, by the Appraisal Procedure. Such Fair Market Value
shall be equal to the cash sale value of the Equipment which
would be obtained in an arm's-length transaction between an
informed and willing seller (other than the Lessee currently
in possession or a used equipment dealer) under no compulsion to
sell and an informed and willing buyer under no compulsion to
buy, which determination shall be made on the assumption that the
Equipment is free and clear of all liens and is at the location
and in the condition and repair required under the Lease, and
shall be calculated on the basis of its fair market sale value at
its existing location, without deduction for costs and expenses
of dismantling or removing.
"Appraisal Procedure" shall mean the following procedure
for determining Fair Market Value if either Lessor or Lessee
shall request by notice (the "Appraisal Request") to the other
the determination of such value by the Appraisal Procedure.
Lessor and Lessee shall, within 15 days after receipt of the
Appraisal Request, appoint an independent appraiser mutually
satisfactory to them, who shall determine such value. If Lessor
and Lessee are unable to agree on a mutually acceptable appraiser
within such 15-day period, Fair Market Value shall be
determined by a panel of three independent appraisers, one of
whom shall be appointed by Lessor, another by Lessee and the
third of whom shall be appointed by the other two appraisers or,
if such two appraisers are unable to agree on a third appraiser
within 45 days after the date of the Appraisal Request, by the
American Arbitration Association (or its successor); provided
that if either Lessor or Lessee shall not have appointed its
appraiser within 30 days after the Appraisal Request, such value
shall be determined solely by the appraiser selected by the other
party. The appraiser or appraisers appointed pursuant to the
foregoing procedure shall be instructed to determine Fair Market
Value within 45 days after such appointment and such
determination shall be final and binding on Lessor and Lessee.
If three appraisers are appointed and fail to reach agreement,
the determinations of the appraisers shall be averaged and such
average shall constitute the determination of the appraisers.
The fees and expenses of each appraiser shall be divided equally
between Lessee, on the one hand, and Lessor, on the other.
(b) Fair Market Value Renewal Option. Upon expiration
of the Base Term and payment of all amounts due and owing under
this Lease and this Schedule, Lessee shall renew the Lease of the
Equipment subject to this Schedule for an additional one year
term (the "Fair Market Renewal Term"). At the end of the Base
Term, if Lessee has elected to renew this Lease as provided in
this Section 13(B), and provided, that (i) there shall not then
have occurred and be continuing a default or event of default,
(ii) Basic Rent, Stipulated Loss Value and Casualty Value for
such Fair Market Renewal Term, have been determined as herein
provided and (iii) a Lease Supplement evidencing such renewal
shall have been executed, this Lease shall continue in full force
and effect during such Fair Market Renewal Term. During such
Fair Market Renewal Term (1) Lessee shall pay Lessor Basic Rent
in an amount equal to the higher of (x) the Fair Market Rental
Value as determined below for such Fair Market Renewal Term or
(y) ________% as a percent of Equipment Cost per month, which
Basic Rent shall be payable in equal twelve installments in
arrears, each such installment being due and payable on each
monthly anniversary of the first day of the Fair Market Renewal
Term and (2) the amounts that are payable during such Fair Market
Renewal Term in respect of the Stipulated Loss Value and Casualty
Value shall be determined on the basis of the Fair Market Value
of the Equipment as of the commencement of such Fair Market
Renewal Term. "Fair Market Rental Value" shall mean, with
respect to the Equipment, the fair market rental value thereof as
at such time determined by agreement between Lessor and Lessee
or, if requested by either of such parties, by the Appraisal
Procedure.
(B) If the Lease of the Equipment subject to this Schedule
shall have been renewed for the Fair Market Value Renewal Term
pursuant to Section 13(A)(b) and if the Lease of the Equipment
subject to this Schedule shall not have been earlier terminated,
Lessee may elect, upon notice to Lessor delivered not later than
one hundred eighty (180) days prior to the last day of the
Fair Market Value Renewal Term, the following option:
Fair Market Value Purchase Option. Upon the expiration
of the Fair Market Value Renewal Term and payment by Lessee of
all amounts due and owing under the Lease and this Schedule,
Lessee shall purchase all of Lessor's right, title and interest
in and to all, but not less than all, of the Equipment for a
purchase price equal to the Fair Market Value of the Equipment
(the "Purchase Price"). The sale of the Equipment to Lessee
shall be on an "AS-IS, WHERE-IS" basis, with no representations
or warranties (expressed or implied) as to any matter
whatsoever, except that Lessor shall represent to Lessee that no
security interest, lien or encumbrance against such Equipment has
been created by or through Lessor. Lessee shall pay Lessor on
the last day of the Fair Market Value Renewal term in immediately
available funds the sum of: (i) the Purchase Price; (2) all rent
for such Equipment due and unpaid as of, together with rent
accrued through, the date of such sale; (3) an amount equal to
accrued taxes and other amounts payable hereunder and under the
Lease by Lessee with respect to such Equipment; (4) all costs,
expenses, losses and damages incurred or sustained by Lessor in
connection with such sale including all amounts Lessee shall be
required to pay Lessor pursuant to any indemnity provision
contained in the Lease; and (5) interest on each of the foregoing
and on all sums not paid when due under any provision of this
Lease at a per annum rate equal to the lesser of (i) two percent
(2%) plus the Prime Rate and (ii) the highest rate, if any,
permitted by applicable law. For purposes of this Section 13(B),
rent shall be prorated daily by interpolation on a straight line
basis to the date of payment.
If Lessee does not elect the foregoing option, it shall
return all, but not less than all, of the Equipment to Lessor
pursuant to the provisions of Section 9(b) of the Lease.
14. Acknowledgement of Receipt of Equipment: Lessee
acknowledges that the Equipment described herein has been
delivered to and received and inspected by Lessee, that such
Equipment is of the manufacture, design and capacity selected by
Lessee and is suitable for the purposes for which such Equipment
is leased. Lessee confirms that the Equipment is in good
operating order, repair, condition and appearance and that the
same has been accepted as Equipment leased by Lessee under this
Schedule.
15. Modification. Except as expressly provided herein or in
the Lease, no representation, warranty, promise, guaranty or
agreement, oral or written, express or implied, has been made by
either party hereto with respect to the Lease, this Schedule or
any Equipment. The Lease and this Schedule constitute the entire
agreement between the parties hereto with respect to the leasing
of the Equipment. Any change or modification to the Lease or
this Schedule must be made in writing and signed by the parties
hereto.
_________________
Lessee's Initials
IN WITNESS WHEREOF, the parties hereunto have caused this
Schedule to be executed by their duly authorized representatives
as of the date first above written.
LESSOR:
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: _________________________
Name: _________________________
Title: _________________________
LESSEE:
FOODBRANDS AMERICA, INC.
By: _________________________
Name: _________________________
Title: _________________________
ANNEX A
Description of Equipment
Plant No. Location Vendor Equipment Description
<PAGE>
SCHEDULE 1
Base Rent Payment Schedule,
Casualty Loss Value Factors and Termination Value Factors
Base Rent Base Rent Casualty Loss Termination
Payment Date Payment* Value Factor* Value Factor*
* Expressed as a percentage of Lessor's Total Equipment Cost.
EXHIBIT B
SECRETARY'S CERTIFICATE
OF
FOODBRANDS AMERICA, INC.
This Certificate is being delivered in consideration of the
Master Equipment Lease Agreement (the "Lease") by and between
Foodbrands America, Inc. ("Lessee") and NationsBanc Leasing
Corporation of North Carolina ("Lessor"), dated as of January
___, 1996. The undersigned hereby certifies that [he/she] is the
duly elected, qualified and acting __________ Secretary of Lessee
and hereby further certifies as follows:
1. Attached hereto as Exhibit A is a true, correct and
complete copy of resolutions duly adopted by the Board of
Directors of Lessee authorizing the execution, delivery and
performance of the Lease by Lessee, and said resolutions
have not been modified or rescinded since the adoption thereof
and are in full force and effect on and as of the date hereof.
2. Attached hereto as Exhibit B is a true, correct and
complete copy of the articles of incorporation of Lessee,
together with any and all amendments to date, which articles
remain in full force and effect on and as of the date hereof.
3. Attached hereto as Exhibit C is a true, correct and
complete copy of the bylaws of Lessee, together with any and all
amendments to date, which bylaws have not been rescinded and
remain in full force and effect on and as of the date hereof.
4. The following individuals are duly elected officers
of Lessee who are authorized by the above resolutions to act on
behalf of Lessee in connection with the transactions contemplated
by the Lease, and the signatures appearing opposite their
respective names are genuine signatures of such individuals:
Name Position Signature
President ____________________
Vice President ____________________
Secretary ____________________
Assistant Secretary ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Secretary's Certificate as of this ___ day of _________, 199_.
By:____________________________________
Name:_________________________________
Title:__________________________________
EXHIBIT C
ASSIGNMENT OF PURCHASE ORDERS
THIS ASSIGNMENT OF PURCHASE ORDERS (this "Assignment") made
this _____ day of __________, 199_, by and between Foodbrands
America, Inc., a __________ corporation (the "Assignor") and
NationsBanc Leasing Corporation of North Carolina, a North
Carolina corporation (the "Assignee").
WHEREAS, the Assignor has executed and delivered the purchase
orders attached hereto as Exhibit A (the "Purchase Orders") to
the vendors shown in such Purchase Orders, which Purchase Orders
cover the property described therein (the "Equipment"); and
WHEREAS, the Assignor desires to assign to Assignee all of
its rights and obligations under the Purchase Orders so that
Assignee might purchase and take title to the Equipment in the
Assignor's stead in order to lease the Equipment to the Assignor
pursuant to the Equipment Lease Schedule No. ____, dated as of
the date hereof, between Assignor and Assignee;
NOW, THEREFORE, in consideration of the mutual promises set
forth herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged,
the parties hereto agree as follows:
1. The Assignor (a) represents and warrants that the
Purchase Orders constitute the entire understanding of the
parties thereto with respect to the purchase and sale of the
Equipment covered thereby; (b) hereby assigns to Assignee all of
its rights, if any, under the Purchase Orders; (c) hereby assigns
to Assignee and Assignee hereby assumes and agrees to perform
Assignor's payment obligations under the Purchase Orders; and (d)
represents and warrants that neither notice to nor consent from
the respective vendor is required in connection with the
execution, delivery and performance of this Assignment or for the
validity or enforceability of this Assignment.
2. Pursuant to this Agreement, the vendors referred to
above may look to Assignee for full performance of all the
Assignor's obligations under the Purchase Orders; provided,
however, that the Assignor hereby agrees with Assignee that the
Assignor shall continue to be responsible for the actual
performance of all such obligations (with the exception of the
obligation to pay the purchase price of the Equipment) and the
Assignor agrees to hold harmless and indemnify Assignee from
all liability, loss, damage, and expense arising from or directly
or indirectly attributable to such obligations.
IN WITNESS WHEREOF, the parties have duly executed this
Assignment by their respective authorized representatives as of
the day and year first above written.
FOODBRANDS AMERICA, INC.
By:____________________________________
Name: _________________________________
Title:___________________________________
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By:____________________________________
Name:_________________________________
Title:__________________________________
<PAGE>
EXHIBIT D
OFFICER'S CERTIFICATE
OF
FOODBRANDS AMERICA, INC.
Reference is made to the Master Equipment Lease Agreement,
dated as of January ___, 1996 (the "Lease"), by and between
Foodbrands America, Inc., a __________________ corporation (the
"Lessee") and NationsBanc Leasing Corporation of North Carolina,
a North Carolina corporation (the "Lessor"). Capitalized terms
used but not defined herein shall have the meanings assigned to
them in the Lease.
The undersigned,_______________, in [his/her] capacity as
_______________ of the Lessee hereby certifies on behalf of the
Lessee, pursuant to Section 21 of the Lease that:
1. As of the date hereof, no default or event of
default has occurred and is continuing. The Lessee is in
compliance with all of the terms and provisions of the Lease on
its part to be observed or performed, and the conditions set
forth in Section 21 of the Lease have been satisfied.
2. The corporate resolutions, the articles of
incorporation and the bylaws of Lessee are in full force and
effect on the date hereof and have not been amended or modified
since ________________ __, 199_.
3. The representations and warranties made by or with
respect to the Lessee contained in the Lease are true and correct
as if made herein on the date hereof.
4. Since the date of the most recent audited financial
statements of the Lessee delivered to the Lessor, there has been
no material adverse change in the assets or liabilities or in the
financial or other condition of the Lessee.
5. The following individuals are duly elected officers
of Lessee who are authorized by the above resolutions to act on
behalf of Lessee in connection with the transactions contemplated
by the Lease Agreement, and the signatures appearing opposite
their respective names are genuine signatures of such
individuals:
Name Position Signature
President ____________________
Vice President ____________________
Secretary ____________________
Assistant Secretary ____________________<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this _____
day of __________, 199_ on behalf of the Lessee.
By:____________________________
Name:__________________________
Title:___________________________
EXHIBIT 10.46
LEASE
by and between
BAM CORPORATION
and
KPR HOLDINGS, L.P.
TABLE OF CONTENTS
1. DEMISE AND DESCRIPTION. . . . . . . . . . . . . . . . . . 1
2. CONDITION OF PREMISES . . . . . . . . . . . . . . . . . . 1
3. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. RENTAL. . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. IMPOSITIONS . . . . . . . . . . . . . . . . . . . . . . . 3
6. SURRENDER OF LEASED PREMISES. . . . . . . . . . . . . . . 5
7. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 6
8. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. . . . . . 9
9. USE OF LEASED PREMISES. . . . . . . . . . . . . . . . . . 10
10. MECHANICS' LIENS. . . . . . . . . . . . . . . . . . . . . 11
11. REPAIRS, MAINTENANCE. . . . . . . . . . . . . . . . . . . 11
12. RIGHT OF LANDLORD TO INSPECT AND REPAIR . . . . . . . . . 12
13. INDEMNIFICATION BY TENANT . . . . . . . . . . . . . . . . 12
14. LIGHT, HEAT AND POWER . . . . . . . . . . . . . . . . . . 13
15. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . 13
16. DESTRUCTION AND RESTORATION . . . . . . . . . . . . . . . 15
17. SALE OR ASSIGNMENT OF LANDLORD'S INTEREST . . . . . . . . 17
18. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . 17
19. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 18
20. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . 21
21. RIGHTS OF MORTGAGEE . . . . . . . . . . . . . . . . . . . 26
22. ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . 26
23. INVALIDITY OF PARTICULAR PROVISIONS . . . . . . . . . . . 26
24. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 26
25. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . 27
26. HAZARDOUS MATERIAL. . . . . . . . . . . . . . . . . . . . 27
27. OPTION TO PURCHASE. . . . . . . . . . . . . . . . . . . . 29
28. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 29
<PAGE>
LEASE
THIS LEASE ("Lease") is made by and between BAM CORPORATION
("Landlord") and KPR HOLDINGS, L.P., a Delaware limited
partnership ("Tenant"), as of December 11, 1995, with reference
to the following circumstances:
RECITALS
A. Landlord is the owner of that certain real property
located in the City of Fort Worth, County of Tarrant, State of
Texas, commonly known as 7401 Will Rogers Boulevard, Fort
Worth, Texas and described on Exhibit "A" attached hereto and
incorporated herein by reference ("Land").
B. The Land is improved with a certain building and
related improvements (collectively the "Building").
C. Landlord is willing to lease the Land and the Building
to Tenant and Tenant is willing to lease the Land and Building
from Landlord on the terms and conditions contained herein.
Concurrently herewith, FOODBRANDS AMERICA, INC. has delivered to
Landlord a Continuing Guaranty, identical to Exhibit "B" attached
hereto and incorporated herein by reference, guaranteeing all of
Tenant's obligations hereunder.
OPERATIVE PROVISIONS
NOW, THEREFORE, in consideration of the foregoing Recitals,
which Recitals are incorporated herein by reference, and of the
covenants herein contained, Landlord and Tenant hereby agree as
follows:
1. DEMISE AND DESCRIPTION.
1.01 Landlord, for and in consideration of the rents
and covenants herein specified to be paid and performed by
Tenant, hereby leases to Tenant, and Tenant hereby hires from
Landlord, on the terms and conditions and for the purposes herein
set forth the Land and the Building, together with all easements,
rights and appurtenances in connection therewith or thereunto
belonging, but subject to all easements, licenses, rights-of-way,
encumbrances and all other matters of record in Tarrant County,
Texas.
1.02 The above-described Land, the Building and
appurtenances will be hereinafter referred to as the "Leased
Premises" or the "Premises".
2. CONDITION OF PREMISES. By entry hereunder, Tenant
accepts the Premises in its present condition and without any
representation or warranty by Landlord as to the condition
of the Premises or as to the use or occupancy which may be made
thereof, and, further, Landlord shall not be responsible for any
latent or other defect or change of condition in the Premises
caused by Tenant, and the rent hereunder shall in no event be
withheld or diminished on account of any such defect in the
Premises nor any such change in its condition, nor, except as
provided herein, for any damage occurring thereto. Landlord
hereby represents and warrants that Landlord is the owner of the
Premises, and has full authority to enter into this Lease, but
makes no other representation or warranty, express or implied, as
to any matter whatsoever.
3. TERM.
3.01 This Lease shall be for a basic term of ten (10)
years, which shall be deemed to have commenced as of the date of
mutual execution and delivery hereof ("Commencement Date"), and
shall terminate on the tenth (10th) anniversary of the
Commencement Date, unless terminated earlier or extended in
accordance with the provisions hereinafter set forth.
3.02 Tenant is given the option to extend the term of
this Lease on all the provisions contained in this Lease, except
for the rental, for two (2) additional five year terms
(individually a "renewal term" and collectively the "renewal
terms") following expiration of the basic term or prior renewal
term, as the case may be, by giving notice of exercise of the
option ("option notice") to Landlord at least six (6) months but
not more than one (l) year before the expiration of the basic
term or first renewal term, respectively. Provided that, if
Tenant is in default, and the applicable cure period for such
default has expired, on the date of giving any option notice,
such option notice shall be totally ineffective, or if Tenant is
in default, and the applicable cure period for such default has
expired, on the date a renewal term is to commence, such renewal
term shall not commence and this Lease shall expire at the end of
the basic term or prior renewal term. Unless the context clearly
indicates otherwise when used herein, the phrase "term of this
Lease" shall mean the basic ten (10) year term and each renewal
term.
4. RENTAL.
4.01 Subject to the adjustments hereinafter provided,
Tenant agrees to pay base rent of Seventy Thousand Five Hundred
Ninety-one Dollars ($70,591) per month lawful money of the United
States of America, for the Leased Premises, which base rent shall
be payable in advance on the first day of each calendar month for
the basic term of this Lease, to Landlord at 4420 Overton Crest,
Fort Worth, Texas 76109, or at such other address as Landlord may
hereafter designate. Tenant further agrees that it will deposit
with Landlord upon execution hereof an initial rent payment equal
to the sum of one (1) month's base rent. Such initial rent
payment shall be applied by Landlord toward the initial base rent
due under this Lease. In addition, Tenant agrees to pay, as
additional rent, such other amounts as required by the terms
and conditions specified in this Lease. Tenant's rent obligation
for any fractional portion of a calendar month at the beginning
or end of the term of this Lease shall be a similar fraction of
the rental due for an entire month.
4.02 As of each Adjustment Date (as hereinafter
defined), base rent hereunder shall be adjusted as hereafter
provided.
4.03 The base rent shall be subject to adjustment as of
third (3rd) anniversary of the Commencement Date, and, provided
that Tenant exercises its option to renew the term of this
Lease as set forth in Section 3.02 above, as of the commencement
date of each renewal term (individually an "Adjustment Date" and
collectively the "Adjustment Dates") as follows:
(a) On the first Adjustment Date, the base rent
shall be adjusted as follows: the base rent shall be adjusted to
reflect the increase, if any, in Landlord's cost of funds as of
May, 1993 [which was six and 7/10 percent (6.7%)] and Landlord's
cost of funds as of the first Adjustment Date. The base rent
shall be adjusted upward to reflect the cost of servicing a
debt of $7,500,000 given the cost of funds on and as of the dates
set forth above. As used in this Section, "Landlord's cost of
funds" as of the first Adjustment Date shall mean Landlord's
actual cost of funds as of the first Adjustment Date, provided
that Landlord shall use best efforts to obtain a favorable
interest rate for a loan secured by, or otherwise acquired to
service the debt arising from the acquisition by Landlord of, the
Building.
(b) Base rent shall be adjusted as of each
subsequent Adjustment Date by multiplying the base rent as
adjusted on the last previous Adjustment Date by 1.1, such that
the adjusted base rent shall be 110% of the base rent as adjusted
on the last previous Adjustment Date. On or prior to each
Adjustment Date, Landlord shall give Tenant written notice
indicating the amount of the adjusted base rent and the method of
computation thereof.
4.04 This Lease is what is commonly called a "triple
net lease", it being the purpose and intent of Landlord and
Tenant that the rent payable hereunder shall be net to Landlord,
so that this Lease shall yield net to Landlord the base rent
specified in this Section 4 in each month during the term of this
Lease free and clear of any and all other Impositions (as
hereinafter defined), taxes, liens, charges or expenses of any
nature whatsoever in connection with the ownership and operation
of the Premises. The parties hereto agree that all costs,
expenses and charges of every kind and nature relating to the
Leased Premises which may be attributed to, or become due during
the initial or any renewal term of this Lease, shall constitute
additional rent to be paid by Tenant and, upon failure of Tenant
to pay any such costs, expenses or charges, Landlord shall have
the same rights and remedies as otherwise provided in this Lease
for the failure of Tenant to pay rent. It is the intention of
the parties hereto that the Lease shall not be terminable for any
reason by Tenant and that Tenant shall in no event be entitled to
any abatement or reduction in rent payable hereunder, except as
expressly provided herein. Any present or future law to the
contrary shall not alter the agreement of the parties.
5. IMPOSITIONS.
5.01 During the term of this Lease, Tenant covenants
and agrees to pay, as rent in addition to all other rent payable
hereunder, before any fine, penalty, interest or cost may be
added thereto for the nonpayment thereof and ten (10) days prior
to delinquency, all taxes, sewer taxes, excises, license and
permit fees, assessments, water rates and charges and other
governmental charges, general and special, ordinary and
extraordinary, unforeseen, as well as foreseen, of any kind and
nature whatsoever, including but not limited to any tax based
upon a reassessment of the Premises and assessments for public
improvements or benefits, which prior to or during the term of
this Lease are assessed or imposed upon or become due and payable
and a lien upon: (i) the Leased Premises or any part thereof or
any personal property, equipment or other facility used in the
operation thereof; or (ii) the rent or income received from
subtenants or licensees; or (iii) any use or occupancy of the
Leased Premises; or (iv) this transaction or any document to
which Tenant is a party creating or transferring an estate or
interest in the Leased Premises (all of which taxes, assessments
and other governmental charges are hereinafter referred to as
"Impositions"); provided, however, that if, by law, any such
Imposition is payable, or may at the option of the taxpayer be
paid, in installments, Tenant may pay the same together with any
accrued interest on the unpaid balance of such Imposition in
installments as the same respectively become due and before any
fine, penalty, interest or cost may be added thereto for the
nonpayment of any such installment and interest; and provided,
further, that any Imposition relating to a fiscal period of the
taxing authority a part of which period is included within the
term of this Lease, shall be prorated as between Landlord and
Tenant so that Landlord shall pay the portion of Impositions
attributable to any period subsequent to the termination of the
term of this Lease, and Tenant shall pay the portion thereof
attributable to any period during the term of this Lease.
5.02 If at any time during the term of this Lease there
shall be assessed or imposed (i) a tax or assessment on the rents
received by Landlord or by Tenant in connection with the Leased
Premises, or (ii) a tax or assessment (including but not limited
to any municipal, state or federal levy) measured by or based in
whole or in part upon the value of the Leased Premises and
imposed upon Landlord, or (iii) a license fee, tax or assessment
measured by the rent payable under this Lease, then all such
taxes, assessments or fees shall be deemed to be included within
the term "Impositions" as defined in Section 5.01 hereof, and
Tenant shall pay and discharge the same as herein provided in
respect of the payment of Impositions, it being the intention of
the parties hereto that the rent to be paid hereunder shall be
paid to Landlord absolutely net without deduction of any nature
whatsoever, foreseeable or unforeseeable. The payment to be made
by Tenant pursuant to this Section shall be made before any fine,
penalty, interest or cost may be added thereto for the nonpayment
thereof, and ten days prior to delinquency. Each such tax,
assessment, levy, imposition or charge shall be deemed to be an
item of additional rent hereunder. Federal or state income tax
payable by Landlord by reason of the receipt of rents as in this
Lease provided shall not be deemed to be included within the term
"Impositions" as defined in Section 5.01 hereof.
5.03 Subject to the provisions of Section 5.04 hereof,
Tenant covenants to furnish to Landlord within thirty (30) days
after the date upon which any such Imposition is payable by
Tenant as in this Section provided, all official receipts of the
appropriate taxing authority, or other proof satisfactory to
Landlord, evidencing the payment thereof.
5.04 Tenant shall have the right before any delinquency
occurs to contest or object to the amount or validity of any such
Imposition by appropriate legal proceedings but this shall not be
deemed or construed in any way as relieving, modifying or
extending Tenant's covenant to pay any such Imposition at the
time and in the manner in this Section provided, unless
(a)(i) the legal proceedings shall operate to prevent the sale of
the Leased Premises or any part thereof to satisfy such
Imposition prior to final determination of such proceedings; or
(ii) Tenant shall have provided a good and sufficient bond or
undertaking as may be required or permitted by law to accomplish
a stay of such proceedings; and (b) no penalty or interest shall
be charged to Landlord as a result of Tenant's failure to timely
pay such Imposition. Landlord shall not be required to join in
any such proceedings unless it shall be necessary for it to do so
in order to properly prosecute such proceedings and Landlord
shall have been fully indemnified to its satisfaction against all
costs and expenses in connection therewith; provided, however
that Landlord shall not be subjected to any liability for the
payment of any costs or expenses in connection with any such
proceedings brought by Tenant, and Tenant covenants to indemnify
and save Landlord harmless from any such costs or expenses.
5.05 Landlord shall forward to Tenant any notice of
increase in the amount of any Imposition. As between the parties
hereto, Tenant alone shall have the duty of attending to,
making or filing any declaration, statement or report which may
be provided or required by law as the basis of or in connection
with the determination, equalization, reduction or payment of any
and every Imposition which is to be borne or paid or which may
become payable by Tenant under the provisions of this Section,
and Landlord shall not be or become responsible to Tenant
therefor, nor for the contents of any such declaration, statement
or report.
5.06 If any Mortgagee of the Leased Premises requires
Landlord to impound Impositions on a periodic basis during the
term of this Lease, Tenant, on notice from Landlord indicating
this requirement, shall pay a sum of money towards its liability
under this Section 5 to Landlord on a periodic basis in
accordance with such Mortgagee's requirements, provided that
such Mortgagee's requirements shall be commercially reasonable
and provided that such Mortgagee shall agree that all such sums
impounded shall be used only for the purpose of paying such
Impositions. Landlord shall impound the Impositions received
from Tenant in accordance with the requirements of the Mortgagee.
To the extent that tenant pays any money toward its liability
under this Section 5, Tenant shall be relieved of its obligation
to pay any Imposition directly to the taxing agency or other
party to whom such Imposition is owed.
6. SURRENDER OF LEASED PREMISES.
6.01 On the last day of the term hereof, or upon any
earlier termination of this Lease pursuant to the terms hereof,
or upon any reentry by Landlord upon the Leased Premises
pursuant to the provisions hereof, Tenant shall surrender to
Landlord the Leased Premises in good order, condition and repair,
reasonable wear and tear excepted, free and clear of all liens
and encumbrances, other than those, if any, permitted hereby or
otherwise created or consented to by Landlord or arising solely
out of any action of Landlord, and, if requested to do so, shall
execute, acknowledge and deliver to Landlord such instruments of
further assurance as in the opinion of Landlord are necessary or
desirable to confirm or perfect Landlord's right, title and
interest in and to the Leased Premises. All fixtures,
alterations or other improvements constructed or installed
on the Premises by Tenant, including, without limitation,
additions to the Building, shall, at no cost and expense to
Landlord, be deemed to be affixed to the Land and shall be the
property of Landlord. Tenant shall not, at the expiration or
sooner termination of the Lease, remove from the Premises any
fixtures, alterations or other improvements except with the
express written consent of Landlord, which consent may be
withheld in Landlord's sole discretion. Notwithstanding the
forgoing, Tenant shall have the right, at the expiration or
sooner termination of the Lease, to remove from the Premises
Tenant's trade fixtures, provided, however, that Landlord and
Tenant agree that the central refrigeration system for building
refrigeration, including any and all associated components, shall
be deemed to be affixed to the Land and shall not be deemed to be
trade fixtures.
6.02 If Tenant fails to surrender the Leased Premises
at the expiration or earlier termination of this Lease, Tenant
shall defend and indemnify Landlord from all liability and
expense resulting from the delay or failure to surrender,
including, without limitation, claims made by any succeeding
lessee founded on or resulting from Tenant's failure to surrender
the Leased Premises.
7. INSURANCE.
7.01 Tenant, at Tenant's sole cost and expense, shall
keep the Building, Tenant's leasehold improvements, alterations
additions or improvements permitted under Section 15, trade
fixtures, and personal property insured during the term of this
Lease for the mutual benefit of Landlord and Tenant as named
insureds as their interest appears, against all perils included
within the classifications of "all risk" or "special form and
flood (if required by any lender(s) having lien(s) on the
Premises), and against such other risks or hazards as Landlord
from time to time reasonably may designate, in amounts sufficient
to prevent Landlord or Tenant from becoming a co-insurer under
the terms of the applicable policies, but in any event in an
amount not less than one hundred percent (100%) of the then full
replacement costs of the Building (exclusive of the cost of
excavations, foundations, and footing below the lowest basement
floor), such leasehold improvements, alterations, additions or
improvements, trade fixtures, and personal property without
deduction for physical depreciation; and with not more than Fifty
Thousand Dollars ($50,000) deductible, or such other amount as
Landlord, in its sole discretion, consents to in writing, from
the loss payable for any casualty. The policies of insurance
carried in accordance with this Section shall contain a
"Replacement Cost Endorsement". Such full replacement cost
shall be determined from time to time, but not more frequently
than once in any twelve (12) consecutive calendar months (except
in the event of substantial changes or alterations to the
Building undertaken by Tenant as permitted under the provisions
hereof) upon the written request of Landlord, by written
agreement of Landlord and Tenant, or if they cannot agree within
thirty (30) days of such request, by one of the insurers, or at
the option of Landlord, by an appraiser, architect or contractor
who shall be mutually and reasonably acceptable to Landlord and
Tenant. A copy of any such determination shall promptly be sent
to Tenant upon receipt thereof by Landlord and subject to
approval by Landlord, which approval shall not be unreasonably
withheld, and the insurance maintained in this Section shall be
adjusted to one hundred percent (100%) of the new full
replacement cost. Tenant shall provide to Landlord written
evidence, satisfactory to Landlord, of the insurance required
under this Section.
7.02 In addition to the insurance specified in Section
7.01 hereof, Tenant, at its sole cost and expense, but for the
mutual benefit of Landlord and Tenant as named insureds as
their interest appears, shall maintain:
(a) Comprehensive general liability insurance and
products liability insurance on an occurrence basis" against
claims for "personal injury", including without limitation,
bodily injury, death or property damage, occurring upon, in or
about the Leased Premises and on, in or about the adjoining
sidewalks, streets, and passageways, such insurance to afford
immediate minimum protection, at the time of the inception of
this Lease, and at all times during the term hereof, to a limit
of not less than Two Million Dollars ($2,000,000) with respect to
damage to property and Five Million Dollars ($5,000,000) with
respect to personal injury or death to any one or more persons.
Such insurance shall also include coverage against liability for
bodily injury or property damage arising out of the use, by or on
behalf of Tenant, or any other person or organization, or any
owned, non-owned, leased or hired automotive equipment in the
conduct of any and all operations called for under this Lease.
(b) Such insurance as shall be required pursuant
to the terms hereof in the event of changes to, or alteration of,
the Building.
(c) Such other insurance (such as earthquake
insurance) and in such amounts, as may from time to time be
reasonably required by Landlord against the same or other
insurable hazards which at the time are commonly insured against
in the case of premises similarly situated, due regard being
given to the height and type of improvements thereon and their
construction, use and occupancy, including without limitation any
insurance which may be required by law.
(d) All policies of insurance provided for in
this Section shall be effected under valid and enforceable
policies, in such forms and amounts as may, from time to time, be
as hereinbefore specified, issued by insurers of recognized
responsibility, with a financial rating of at least an A-V status
as rated in the most recent edition of Best's Insurance Reports,
which are authorized to transact fire and casualty insurance and
liability insurance in the State of Texas, and which have been
approved in writing by Landlord. All such policies shall be
primary over any coverage carried by Landlord. Upon the
execution of this Lease and thereafter not less than fifteen (15)
days prior to the expiration date of each policy furnished
pursuant to this Section the original of each policy required to
be furnished pursuant to this Section (or, with the consent of
Landlord, which consent shall not be unreasonably withheld, in
the case of comprehensive general liability insurance and
products liability insurance, a certificate of the insurer
reasonably satisfactory to Landlord) accompanied by evidence
reasonably satisfactory to Landlord of such payment, shall be
delivered by Tenant to Landlord, except that upon demand of any
Mortgagee of the Leased Premises, such policies of insurance
shall be delivered to the Mortgagee and certified copies of such
policies shall be delivered to Landlord.
7.03 Each policy of insurance procured pursuant to
Section 7.01 and paragraphs b and c of Section 7.02 shall
contain, if obtainable, either (i) a waiver by the insurer of the
right of subrogation against any subtenant for negligence of such
subtenant, or (ii) a statement that the insurance shall not be
invalidated should any insured waive in writing prior to a loss
any or all right of recovery against any party for loss accruing
to the property described in the insurance policy.
7.04 All policies of insurance provided for in Section
7.01 and paragraphs b. and c. of Section 7.02 shall provide for
loss thereunder (i) to be adjusted by and payable to Tenant
with respect to any particular casualty resulting in damage or
destruction not exceeding Twenty-Five Thousand Dollars ($25,000)
in the aggregate, or (ii) with respect to any particular casualty
resulting in damage or destruction exceeding Twenty-Five Thousand
Dollars ($25,000) in the aggregate, to be adjusted by Landlord,
Tenant and any Mortgagee and payable to Landlord or, upon demand
of any Mortgagee to said Mortgagee, to be disbursed by any such
payee as provided in Section 16.02 hereof. Each such policy of
insurance shall include the interest of the Mortgagee, if any, as
provided in Section 7.06.
7.05 Each such policy or certificate therefor issued by
the insurer shall to the extent obtainable contain (i) a
provision that no act or omission of Tenant which would otherwise
result in forfeiture or reduction of the insurance therein
provided shall affect or limit the obligation of the insurance
company so to pay, in accordance with Section 7.04 of this Lease,
the amount of any loss sustained and (ii) an agreement by the
insurer that such policy shall not be cancelled without at least
thirty (30) days prior written notice by registered mail to
Landlord and to any Mortgagee.
7.06 All policies of insurance required to be furnished
by Tenant pursuant to Section 7.01 and paragraphs b and c of
Section 7.02 shall have attached thereto the Lender's Loss
Payable Endorsement, or its equivalent, or a loss payable clause
acceptable to Landlord, for the benefit of any Mortgagee, but the
right of any Mortgagee to the payment of insurance proceeds
shall at all times be subject to the provisions of this Lease
with respect to the application of the proceeds of such
insurance.
7.07 Tenant shall observe and comply with the
requirements of all policies of public liability, products
liability, fire and other policies of insurance at any time in
force with respect to the Building and the Leased Premises and
Tenant shall also perform and satisfy the requirements of the
companies writing such policies so that at all times companies of
good standing satisfactory to Landlord shall be willing to write
or to continue such insurance. Tenant shall, in the event of any
violations or attempted violations of the provisions of this
Section 7.07 by a subtenant (provided that such subtenant has
been approved pursuant to Section 20 hereof), take steps,
immediately upon knowledge of such violation or attempted
violation, to remedy or prevent the same as the case may be.
7.08 Any insurance provided for in this Lease may be
effected by a policy or policies of blanket insurance or may be
continued in such form until otherwise required by Landlord,
provided, however, that the amount of the total insurance
allocated to the Leased Premises shall be such as to furnish in
protection the equivalent of separate policies in the amounts
herein required, and provided further that in all other respects,
any such policy or policies shall comply with the other
provisions of this Lease. In any such case it shall not be
necessary to deliver the original of any such blanket policy to
Landlord, but Tenant shall deliver to Landlord and to any
Mortgagee a certificate or duplicate of such policy in form and
content acceptable to Landlord.
7.09 Tenant shall furnish Landlord annually, or more
often if Landlord shall so request, a certificate signed by an
authorized officer of Tenant containing a detailed list of the
insurance policies then outstanding and in force on the Leased
Premises and stating that such insurance complies with the
requirements of this Lease.
7.10 If any Mortgagee of the Leased Premises requires
Landlord to impound insurance premiums on policies of insurance
provided for in this Section on a periodic basis during the term
of this Lease, Tenant, on notice from Landlord indicating this
requirement, shall pay a sum of money toward its liability under
this Section to Landlord on a periodic basis in accordance with
such Mortgagee's requirements. Landlord shall impound the
insurance premiums received from Tenant in accordance with the
requirements of the Mortgagee.
7.11 The parties release each other, and their
respective authorized representatives, from any claims for damage
to any person or to the Premises and to the fixtures, personal
property, tenant's improvements, and alterations of either
Landlord or Tenant in or on the Premises that are caused by or
result from risks insured against under any insurance policies
carried by the parties and in force at the time of any such
damage. Each party shall cause each insurance policy obtained by
it as provided for in this Section to provide that the insurance
company waives all right of recovery by way of subrogation
against either party in connection with any damage covered by any
policy. Neither party shall be liable to the other for any
damage caused by fire or any of the risks insured against under
any insurance policy required by this lease. If any insurance
policy cannot be obtained with a waiver of subrogation, or is
obtainable only by the payment of an additional premium charge
above that charged by insurance companies issuing policies
without waiver of subrogation, the party undertaking to obtain
the insurance shall notify the other party of this fact. The
other party shall have a period of 10 days after receiving
the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry
the insurance with a waiver of subrogation, or to agree to pay
the additional premium if such a policy is obtainable at
additional cost. If the insurance cannot be obtained or the
party in whose favor a waiver of subrogation is desired refuses
to pay the additional premium charged, the other party is
relieved of the obligation to obtain a waiver of subrogation
rights with respect to the particular insurance involved.
8. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS.
8.01 If Tenant shall at any time fail to pay any
Imposition or other charge in accordance with Section 5 hereof,
within the time therein permitted or to pay for or maintain any
of the insurance policies provided for in Section 7 hereof,
within the time therein permitted, or to make any other payment
or perform any other act on Tenant's part by this Lease, then
Landlord, after ten (10) days' written notice to Tenant (or, in
case of any emergency, such notice, or without notice, as may be
reasonable under the circumstances) and without waiving or
releasing Tenant from any obligation of Tenant hereunder, may
(but shall not be required to):
(a) pay such Imposition or other charge payable
by Tenant pursuant to the provisions of Section 5 hereof, or
(b) pay for and maintain such insurance policies
provided for in Section 7 hereof, or
(c) make such other payment or perform such other
act on Tenant's part to be made or performed as provided in this
Lease, and may enter upon the Leased Premises for such purpose
and take all such action thereon as may be necessary therefor.
8.02 All sums so paid by Landlord and all costs and
expenses incurred by Landlord in connection with the performance
of any such act (together with interest thereon at the rate of
10% per annum from the respective dates of Landlord's making of
each such payment or incurring of each cost or expenses) shall
constitute additional rent payable by Tenant under this Lease and
shall be paid by Tenant to Landlord on demand. Landlord shall
not be limited in the proof of any damages which Landlord may
claim against Tenant arising out of or by reason of Tenant's
failure to provide and keep in force insurance as aforesaid to
the amount of the insurance premium or premiums not paid or
incurred by Tenant and which would have been payable upon such
insurance, but Landlord shall also be entitled to recover as
damages for such breach, the uninsured amount of any loss (to the
extent of any deficiency in the insurance required by the
provisions of this Lease), damages, costs and expenses of suit,
including attorneys' fees, suffered or incurred by reason of
damage to, or destruction of, the Leased Premises, occurring
during any period which Tenant shall have failed or neglected to
provide insurance as aforesaid.
9. USE OF LEASED PREMISES.
9.01 Tenant may use the Leased Premises for the
operation of a food processing facility and/or warehouse and
those activities reasonably related thereto and for no other uses
without Landlord's consent. Notwithstanding the foregoing,
Landlord agrees that Tenant may, with Landlord's written consent,
which shall not be unreasonably withheld, cause the Leased
Premises to be used for any lawful purpose ("Alternative
Permitted Use"), provided that as a condition precedent to
permitting such change in use, Landlord may require the execution
by Tenant of any reasonable amendments to this Lease which
amendments relate to the use of the Leased Premises for the
Alternative Permitted Use.
9.02 Tenant covenants and agrees that it will keep the
Premises in a neat, clean and orderly condition. Tenant agrees
that all trash and rubbish of Tenant shall only be deposited
within city-approved receptacles and that there shall be no other
trash receptacles permitted to remain outside of the Building.
Tenant shall cause such receptacles to be emptied and trash
removed at Tenant's sole cost and expense.
9.03 In the use and occupation of the Leased Premises
and the conduct of such business thereon, Tenant, at its sole
cost and expense, shall promptly comply with all present and
future laws, ordinances, orders, rules, regulations and
requirements of all federal, state and municipal governments,
courts, departments, commissions, boards, and officers, any
national or local Board of Fire Underwriters, or any other body
exercising functions similar to those of any of the foregoing,
foreseen or unforeseen, ordinary as well as extraordinary, which
may be applicable to the Leased Premises and the sidewalks and
curbs and vaults adjoining the Leased Premises as a direct result
of the use or manner of use to which the same is put by Tenant or
other occupants thereof, whether or not such law, ordinance,
order, rule, regulation or requirement shall necessitate
structural changes or improvements, or the removal of any
encroachments or projections, ornamental, structural or
otherwise, onto or over the streets adjacent to the Leased
Premises, or onto or over other property contiguous or adjacent
thereto. Tenant shall not cause or maintain any nuisance on the
Leased Premises.
9.04 Tenant shall have the right to contest by
appropriate proceedings diligently conducted in good faith, in
the name of Tenant or Landlord or both, without cost or expense
to Landlord, the validity or application of any law, ordinance,
order, rule, regulation or requirement of the nature referred to
in this Section. If compliance with any such law, ordinance,
order, rule, regulation or requirement may legally be delayed
pending the prosecution of any such proceeding without the
incurrence of any lien, charge or liability of any kind against
the Leased Premises or Tenant's interest therein and without
subjecting Tenant or Landlord to any liability, civil or
criminal, for failure so to comply therewith, Tenant may delay
compliance therewith until the final determination of such
proceeding. Even if such lien, charge or civil liability would
be incurred by reason of any such delay, Tenant may, with the
prior written consent of Landlord, contest as aforesaid and delay
as aforesaid, provided that such contest or delay does not
subject Landlord to criminal liability, damages or expense and
provided that Tenant (i) furnishes to Landlord security,
reasonably satisfactory to Landlord, against any loss or injury
by reason of such contest or delay, and (ii) prosecutes the
contest with due diligence.
Landlord shall not be required to join in any proceedings
referred to in this Section unless the provisions of any
applicable law, rule or regulations at the time in effect shall
require that such proceedings be brought by and/or in the name of
Landlord, in which event Landlord shall join in the proceedings
or permit the same to be brought in its name if Tenant shall pay
all expenses in connection therewith.
10. MECHANICS' LIENS.
10.01 During the term of this Lease, Tenant shall
not permit to remain, and shall promptly discharge, at its cost
and expense, all liens, encumbrances and charges (other than
liens, encumbrances and charges created by Landlord, or arising
solely out of any action of Landlord) upon the Building or the
Leased Premises or any part thereof; provided, that the existence
of any mechanics', laborers', materialmens', suppliers' or
vendors' liens or rights thereto shall not constitute a violation
of this Section if payment is not yet due under the contract
which is the foundation thereof and if such contract does not
postpone payment for more than ninety (90) days after the
performance thereof. Tenant shall, however, have the right to
contest with due diligence the validity or amount of any lien or
claimed lien, if Tenant shall give to Landlord such security
as Landlord may reasonably require to insure payment thereof and
prevent any sale, foreclosure or forfeiture of the Leased
Premises or any portion thereof by reason of such nonpayment. On
final determination of the lien or claim for lien, Tenant shall
immediately pay any judgment rendered with all proper costs and
charges and shall have the lien released or judgment satisfied
at Tenant's own expense, and if Tenant shall fail to do so,
Landlord may at its option pay any such final judgment and clear
the Leased Premises therefrom. If Tenant shall fail to contest
with due diligence the validity or amount of any such lien or
claimed lien, or to give Landlord security as hereinabove
provided, Landlord may, but shall not be required to, contest the
validity or amount of any such lien or claimed lien or settle or
compromise the same without inquiring into the validity of the
claim or the reasonableness of the amount thereof.
10.02 Should any lien be filed against the Leased
Premises or should any action of any character affecting the
title hereto be commenced, Tenant shall give to Landlord written
notice thereof as soon as notice of such lien or action comes to
the knowledge of Tenant.
11. REPAIRS, MAINTENANCE. Tenant covenants and agrees,
throughout the term of this Lease, without cost to Landlord, to
take good care of the Building and the Leased Premises and the
adjacent sidewalks, curbs, roadways, parking areas and fences,
and to keep the same in good order and condition, and shall
promptly at Tenant's own costs and expense, make all necessary
repairs, interior and exterior, structural and nonstructural,
ordinary as well as extraordinary, foreseen as well as
unforeseen, to keep the Building and the Leased Premises in
first-class, safe, clean and sanitary condition. When used in
this Section, the terms "repairs" shall include replacements or
renewals when necessary, and all such repairs made by Tenant
shall be at least equal in quality and class to the original
work. Notwithstanding the forgoing, in the event that Tenant
makes any structural repairs or replacements (but not any other
repairs or replacements or the construction of new improvements)
which will have a useful life extending past the termination date
of this Lease (including any renewal term, without regard to
whether the option to renew the Lease has been or is exercised),
the cost and expense of such structural repairs shall be prorated
between Landlord and Tenant based upon the useful life of such
repair and the period remaining on the term of this Lease
(including any renewal term); provided, however, that Landlord
shall approve the cost and expense of any such structural repair
prior to the performance thereof, and provided further that
Landlord shall determine, in its reasonable discretion, the
proration of such cost and expense between Landlord and Tenant.
Tenant shall keep and maintain all portions of the Building and
the Leased Premises and the sidewalks adjoining same in a clean
and orderly condition, free of accumulation of dirt and rubbish.
Landlord shall have no obligation or responsibility whatsoever to
make any repairs or replacements to the Leased Premises.
12. RIGHT OF LANDLORD TO INSPECT AND REPAIR. Tenant will
permit Landlord and its authorized agents and representatives to
enter the Leased Premises at all reasonable times for the purpose
of (i) inspecting the same and (ii) making any necessary repairs
thereto and performing any other work therein or thereon that may
be necessary by reason of Tenant's failure to make any such
repairs or perform any such other work therein or thereon or
to commence the same within ten (10) days after written notice
from Landlord. Nothing herein shall imply any duty upon the part
of Landlord to perform any such inspections or to do any such
work, and performance of any such work by Landlord shall not
constitute a waiver of Tenant's default in failing to perform the
same. Landlord may, during the progress of such work in or on
the Leased Premises, keep and store therein all necessary
materials, tools, supplies and equipment. Landlord shall not be
liable for inconvenience, annoyance, disturbance, loss of
business or other damage of Tenant by reason of making such
repairs or the performance of any such work, on or account of
bringing materials, tools, supplies or equipment into or through
the Leased Premises during the course thereof and the obligations
of Tenant under this Lease shall not be affected thereby;
provided, however, that Landlord shall make reasonable efforts
not to interfere with the operations of Tenant's business in the
making of such repairs or the performance of any such work.
Nothing herein shall limit the provisions of Section 8 hereof.
13. INDEMNIFICATION BY TENANT.
13.01 Tenant agrees to indemnify and save harmless
Landlord and its affiliated companies and their agents, servants,
directors, officers, and employees (collectively "Indemnitees")
from and against any and all liabilities, damages, claims, suits,
costs (including court costs, attorneys' fees, and costs of
investigation), and actions of any kind arising or alleged to
arise by reason of injury to or death of any person or damage to
or loss of property occurring on, in, or about the Leased
Premises or by reason of any other claim whatsoever of any person
or party occasioned or alleged to be occasioned in whole or in
part by any act or omission on the part of Tenant or any invitee,
licensee, employee, director, officer, servant, contractor,
subcontractor or tenant of Tenant, or by any breach, violation,
or nonperformance of any covenant of Tenant under this Lease,
even if such liability, claims, suits, costs, injuries, deaths or
damages arise from or are attributed to the concurrent negligence
of any Indemnitee. Tenant further agrees to indemnify and save
Landlord harmless against and from any and all claims by or on
behalf of any person or persons, firm or firms, corporation or
corporations, arising during the term of this Lease from any
condition of the Building, or any other structure or improvement
on the Leased Premises or any street, curb or sidewalk adjoining
the Leased Premises, or of any passageways or spaces therein or
appurtenant thereto, or arising from any breach or default on the
part of Tenant in the performance of any covenant or agreement on
the part of Tenant to be performed pursuant to the terms of this
Lease. If any action or proceeding shall be brought by or
against any Indemnitee in connection with any such liability or
claim, Tenant, on notice from Landlord, shall defend such action
or proceeding, at Tenant's expense, by or through attorneys
reasonably satisfactory to Landlord. The provisions of this
Section shall apply to all activities of Tenant with respect to
the Leased Premises or Building, whether occurring before or
after the termination of this Lease (but not occurring prior to
the Commencement Date). Tenant's obligations under this
Paragraph shall not be limited to the limits or coverage of
insurance maintained or required to be maintained by Tenant under
this Lease.
13.02 No Indemnitee shall be liable in any manner to
Tenant or any other party for any injury to or death of persons
unless caused solely by the willful misconduct or gross
negligence of an Indemnitee. In no event shall any indemnitee be
liable in any manner to Tenant or any other party as the result
of the acts or omissions of Tenant, its agents, employees,
contractors or any other tenant of the Building. All personal
property upon the Leased Premises shall be at the risk
of the Tenant only and no Indemnitees shall be liable for any
loss of or damage to property of Tenant, its employees, agents,
customers, invitees, or to others, regardless of whether such
property is entrusted to employees of the Building, or such loss
or damage is occasioned by casualty, theft, or any other cause of
whatsoever nature, whether or not due in whole or in part to the
negligence of any Indemnitee.
14. LIGHT, HEAT AND POWER. Tenant agrees to pay, or cause
to be paid, all charges which are incurred by Tenant or which
might be a charge or lien against the Leased Premises, for gas,
water, electricity, light, heat or power, telephone or other
communication service used, rendered or supplied upon or in
connection with the Leased Premises, throughout the term of this
Lease, and to indemnify and save Landlord harmless from and
against any liability or damages on such account. Tenant shall
also procure, or cause to be procured, without cost to Landlord,
any and all necessary permits, licenses or other authorizations
required for the lawful and proper installation and maintenance
upon the Leased Premises of wires, pipes, conduits, tubes and
other equipment and appliances for use in supplying any such
service to and upon the Leased Premises.
15. ALTERATIONS. Tenant shall have the right at any time
and from time to time during the term of this Lease to make, at
its sole cost and expense, changes and alterations in, to or of
the Building, subject, however, in all cases to the following
which Tenant covenants to observe and perform:
(a) No change or alteration involving in the aggregate
a cost of more than Twenty-Five Thousand Dollars ($25,000) shall
be undertaken without the prior written consent of Landlord, and
until plans and specifications have first been submitted to and
approved in writing by Landlord and Landlord shall have been
given the opportunity to go into the Leased Premises to post
notice of non-responsibility and record verified copies thereof
in connection with such changes and alterations.
(b) No change or alteration involving removal of any
part of any load-bearing wall, column, girder or other support of
the Building (herein referred to as a "structural change or
alteration") or any change or alteration in connection with any
restoration required by Section 16 hereof shall be made without
the prior written consent of Landlord. Every structural change
or alteration shall be constructed under the supervision of a
licensed architect or a trained professional engineer selected by
Tenant and approved in writing by Landlord, and no such
structural change or alteration shall be made except in
accordance with plans and specifications and cost estimates
prepared and approved in writing by such architect or engineer
and approved in writing by Landlord.
(c) No change or alteration of any type shall be
undertaken until Tenant shall have procured and paid for, so far
as the same may be required from time to time, all permits and
authorizations of any federal, state or municipal government or
departments or subdivisions of any of them, having jurisdiction.
Landlord shall join in the application for such permits or
authorizations whenever such action is necessary, provided,
however, that Landlord shall incur no liability or expense in
connection therewith. Any change or alteration shall be made
promptly and in a good and workmanlike manner and in accordance
with all applicable permits and authorizations and building and
zoning laws and with all other laws, ordinances, orders, rules,
regulations and requirements of all federal, state and municipal
governments, any national or local Board of Fire Underwriters, or
any other body hereafter exercising functions similar to those of
any of the foregoing.
(d) Any change or alteration shall, when completed, be
of such a character as not to materially reduce the value and
usefulness of the Building below its value and usefulness
immediately before such change or alteration.
(e) During the period of construction of any change or
alteration to or of the Building, Tenant shall maintain or cause
to be maintained the following insurance:
(i) The comprehensive general liability and
property damage insurance provided for in subparagraph a of
Section 7.02 shall be maintained for the limits specified
thereunder and shall provide coverage for the mutual benefit of
Landlord and Tenant as named insureds in connection with any
change or alteration permitted pursuant to this Section 15.
(ii) Fire and any other applicable insurance
provided for in Section 7 which policy or policies by endorsement
thereto, if not then covered under the provisions thereof,
shall also insure any change or alteration, including all
materials and equipment therefor incorporated in, on or about the
Leased Premises (including excavations, foundations, and
footings) under a broad form all risks builder's risk completed
value form or equivalent thereof; and
(iii) Worker's compensation insurance covering
all persons employed in connection with the work and with respect
to whom death or bodily injury claims could be asserted against
Landlord, Tenant or the Leased Premises, with statutory limits as
then required under the laws of the State of Texas.
The provisions of all applicable sections of Section 7 of
this Lease shall apply to all insurance provided for in this
section.
(f) Landlord hereby approves, subject to the approval
of the Agent (as defined in that certain Purchase Agreement by
and among KPR Holdings, Inc., and the Shareholders of RKR-GP,
Inc., and Foodbrands America, Inc., dated as of November 14, 1995
["Purchase Agreement"]) the performance of the work required to
be performed to make the capital improvements required to be made
by Section 2.07(d) of the Purchase Agreement.
16. DESTRUCTION AND RESTORATION.
16.01 Subject to the provisions of Section 16.04
hereof, in case of damage to or destruction of the Building or
any part thereof by fire or other cause, Tenant, at Tenant's sole
cost and expense, whether or not the insurance proceeds, if any,
shall be sufficient for the purpose, and irrespective of the
amount of any loss, shall restore the same as nearly as possible
to their value, condition and character immediately prior to such
damage or destruction, if the restoration can be made under
existing laws and can be completed within two (2) years after the
date of destruction. Such restoration shall be commenced with
due diligence and in good faith, and prosecuted with due
diligence and in good faith, unavoidable delays excepted.
In case of damage to or destruction of the Building by fire
or other cause resulting in a loss exceeding in the aggregate of
Ten Thousand Dollars ($10,000), Tenant shall promptly give
written notice thereof to Landlord.
16.02 All insurance money paid as provided in
Section 7.04 hereof, on account of any damage or destruction,
less the actual cost, fees and expenses, if any, incurred by
Landlord or any Mortgagee in connection with the adjustment of
the loss, which costs, fees and expenses shall be paid to
Landlord or any Mortgagee shall be applied, subject to the terms
of any mortgage, to the payment of the cost of the aforesaid
restoration, repairs, replacement, rebuilding or alterations,
including the cost or demolition and temporary repairs and for
the protection of property pending the completion of permanent
restoration, repairs, replacements, rebuilding or alterations
(all of which temporary repairs, protection of property and
permanent restoration, repairs, replacement, rebuilding or
alterations are hereinafter collectively referred to as the
"restoration"); and shall be paid out from time to time to Tenant
or in accordance with its directions, as such restoration
progresses upon the written approval of Landlord and the written
request of Tenant which shall be accompanied by the following:
(a) A certificate signed by Tenant, dated no more than
thirty days prior to such request, setting forth the following:
(i) That the sum then requested either has been
paid by Tenant, or is justly due to contractors, subcontractors,
materialmen, engineers, architects or other persons who
have rendered services or furnished materials for the restoration
therein specified, the names and addresses of such persons, a
brief description of such services and materials, the several
amounts so paid or due to each of said persons in respect
thereof, that no part of such expenditures has been or is being
made the basis in any previous or then pending request for the
withdrawal of insurance money or has been made out of the
proceeds of insurance received by Tenant, and that the sum then
requested does not exceed the value of the services and materials
described in the certificate.
(ii) That, except for the amount, if any, stated
in such certificate to be due for services or materials and
except for any amount to be withheld pursuant to a directly
related construction contract, there is no outstanding
indebtedness known to Tenant, after due inquiry, which is due and
payable for labor, wages, materials, supplies or services in
connection with such restoration which, if unpaid, might become
the basis of a vendor's, mechanic's, laborer's or materialman's
statutory or similar lien upon such restoration or upon the
Leased Premises or any part thereof.
(iii) That the cost, as estimated by Tenant,
of the restoration required to be done subsequent to the date of
such certificate in order to complete the same, does not exceed
the insurance money, plus any amount deposited by Tenant to
defray such cost and remaining in the hands of the recipient
designated in Section 7.04 hereof after payment of the sum
requested in such certificates.
(b) Evidence reasonably satisfactory to Landlord, to
the effect that there has not been filed with respect to the
Leased Premises or any part thereof any vendor's, mechanic's,
laborer's, materialman's or other similar lien, which has not
been discharged of record, except such as will be discharged by
payment of the amount then requested, and to the effect that
there has not been filed with respect to the Leased Premises any
federal tax or revenue lien, provided, however, that no such
evidence shall be required with respect to any such lien which
Tenant is disputing in accordance with the provisions of Section
10.01 hereof.
(c) Whenever such restoration shall involve the
construction of any foundation wall or any building wall,
evidence, during the course of such construction by survey and a
survey reading thereon, made by a duly licensed surveyor, that,
other than as approved by Landlord, there are, as a result of
such construction, no encroachments on adjoining property, no
encroachments on any street, alley or avenue or easement for
light and air, and no physical conditions that would render title
to the Leased Premises unmarketable.
Upon compliance with the foregoing provisions of this
Section 16.02 out of such insurance money there shall be paid to
Tenant or the persons named in such certificate the respective
amounts stated therein to have been paid by Tenant or to be due
to them, as the case may be.
If the insurance money at the time held by the recipient
designated by Section 7.04 hereof, less the actual cost, fees and
expenses, if any, incurred by Landlord in connection with the
adjustment of the loss, shall be insufficient in the judgment of
Landlord to pay the entire cost of such restoration, Tenant shall
pay the deficiency to said recipient, prior to commencement or
continuation of construction.
Upon the receipt by said recipient of satisfactory evidence,
of the character required by the foregoing provisions of this
Section 16.02, that the restoration has fully been completed and
paid for in full and that there are no liens of the character
referred to therein, and there is no default under the terms,
conditions, covenants and agreements of this Lease which can be
cured by the payment of money nor any default hereunder which has
become an event of default, any balance of the insurance money at
the time held by said recipient shall be paid to Tenant, unless
such balance shall be due any Mortgagee under any mortgage or
deed of trust.
16.03 Except as otherwise expressly provided in
Section 16.04 hereof and subject to the limitations of applicable
law, no destruction of, or damage to the Building or the Leased
Premises or any part thereof by fire or any other cause shall
permit Tenant to surrender this Lease or shall relieve Tenant
from its obligations to pay the full base rent and additional
rent payable under this Lease or from any of its other
obligations under this Lease, and Tenant waives any rights now or
hereafter conferred upon it by statute or otherwise to quit or
surrender this Lease or the Leased Premises or any suspension,
diminution, abatement or reduction of rent on account of any such
destruction or damage.
16.04 Anything contained in this Section to the
contrary notwithstanding, if at any time during the last year of
the initial term or any renewal term of this Lease any part of
the Building shall be damaged or destroyed by fire or other
casualty, act of god or other causes beyond the reasonable
control of Tenant to such an extent that said damage or
destruction cannot be repaired within one hundred twenty (120)
days, and provided Tenant is not in default under its obligations
set forth in Section 7 hereof, Tenant may, at its option,
terminate this Lease within thirty (30) days after a
determination of the existence of said right of termination.
Tenant may exercise its option to terminate this Lease under this
Section by serving upon Landlord at any time within said thirty
(30) day period a thirty (30) day written notice of Tenant's
election to so terminate, without any liability on the part of
Tenant to Landlord, except for the payment of base rent and all
additional sums required to be paid by Tenant under the terms of
this Lease up to the date of such termination and if requested in
writing by Landlord, full performance by Tenant, at its sole cost
and expense, of the work of demolition and removal of the
remaining portions of the Building so damaged or destroyed and
removal of all debris from the Land, provided, however, that
insurance money paid as provided in Sections 7.04 and 16.02
hereof shall be applied, to the extent such funds are available
for demolition and removal, to payment of the cost of such
demolition and removal.
In the event this Lease shall be terminated pursuant to the
provisions of this Section, any insurance proceeds payable in
connection with demolition and removal as set forth in the
previous paragraph of this Section shall be payable solely to
Landlord or to any Mortgagee.
17. SALE OR ASSIGNMENT OF LANDLORD'S INTEREST. Landlord
shall have the right at any time and from time to time during the
term hereof, to sell or assign to any person all or any portion
of its fee interest in the Leased Premises or any portion
thereof, subject, however, to the leasehold estate of Tenant
created hereby.
18. CONDEMNATION. If, at any time during the term of this
Lease, or any extension thereof, the whole of the Leased
Premises, or a substantial portion thereof, shall be taken by
exercise of the power of eminent domain, or by sale in lieu
thereof, for any public or quasi-public use, this Lease shall
terminate and expire on the date of transfer of possession to the
taking authority and all rights of Tenant hereunder shall
immediately cease and terminate. All rent, taxes and other
charges payable hereunder shall be apportioned and paid at the
time of such termination. For the purposes of this Section 18, a
"substantial portion" of the Leased Premises shall be deemed to
have been taken if the untaken portion cannot be reasonably
economically used or converted for Tenant's use as permitted by
this Lease. In the event of such taking and the termination of
this Lease, Tenant shall receive compensation only for the taking
and damages of Tenant's personal property and trade fixtures in,
on or about the Leased Premises, if any there are, and the costs
of removing and/or moving the same and/or such other compensation
as is allowable by law to a tenant; provided, however, that
notwithstanding anything herein contained, Landlord's
compensation for the full fair market value of any and all land
and improvements taken and/or damaged by reason of the severance
thereof shall not be reduced or diminished in any event by reason
of any compensation or damages which otherwise might be paid to
Tenant. In the event that a portion of the Leased Premises less
than a "substantial portion" as defined above be taken by the
exercise of the power of eminent domain, or by sale in lieu
thereof, this Lease shall not be terminated but shall continue in
force and effect with no reduction in rental.
19. DEFAULT.
19.01 The occurrence of any of the following events
shall constitute a default and breach of this Lease by Tenant:
(a) Any failure by Tenant timely to pay the
rental or to make any other payment required to be made by Tenant
hereunder, where such failure continues for ten (10) days after
written notice thereof by Landlord to Tenant.
(b) [RESERVED]
(c) A failure by Tenant to observe and perform
any other provision of this Lease to be observed or performed by
Tenant, where such failure continues for thirty (30) days after
written notice thereof by Landlord to Tenant; provided, further,
that if the nature of such default is such that the same cannot
reasonably be cured within such thirty-day period, Tenant shall
not be deemed to be in default if Tenant shall within such period
commence such cure and thereafter diligently prosecute the same
to completion.
(d) The making by Tenant of any general
assignment for the benefit of creditors; the filing by or against
a Tenant of a petition to have Tenant adjudged a bankrupt or of
a petition for reorganization or arrangement under any law
relating to bankruptcy where possession is not restored to Tenant
within thirty (30) days; or the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located
at the Leased Premises or of Tenant's interest in this Lease,
where such seizure is not discharged within thirty (30) days.
19.02 In the event of any such default by Tenant,
Landlord shall have the immediate option to terminate this Lease
and all rights of Tenant hereunder by giving written notice of
such intention to terminate in the manner specified herein. In
the event that Landlord shall elect to so terminate this Lease
then Landlord may recover from Tenant:
(a) The worth at the time of award of any unpaid
rent which had been earned at the time of such termination; plus
(b) The worth at the time of award of the amount
by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such
rental loss Tenant proves could have been reasonably avoided;
plus
(c) The worth at the time of award of the amount
by which the unpaid rent for the balance of the term after the
time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; plus
(d) Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's
failure to perform his obligations under this Lease or which in
the ordinary course of events would be likely to result
therefrom; plus
(e) Such other amounts in addition to or in lieu
of the foregoing in as may be permitted from time to time by
applicable Texas law.
As used above, the "worth at the time of award" is computed
by allowing interest at the rate of 10% per annum.
19.03 In the event of any such default by Tenant,
Landlord shall also have the right, with or without terminating
this Lease, to reenter the Leased Premises and remove all
persons and property, or any portion thereof, from the Leased
Premises; such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of
Tenant. Under no circumstances shall Landlord be held liable in
damages or otherwise by reason of any such re-entry or eviction
or by reason of the exercise by Landlord of any other remedy
provided in this Section. All property of Tenant which is stored
by Landlord pursuant hereto may be redeemed by Tenant within
thirty (30) days after Landlord takes possession thereof upon
payment to Landlord in full of all obligations then due from
Tenant to Landlord hereunder and of all costs incurred by
Landlord in providing such storage. If Tenant fails so to redeem
such property within said thirty (30) day period, Landlord may
sell such property in any reasonable manner, and shall apply the
proceeds of such sale actually collected first against the costs
of storage and sale and then against any other obligation due
from Tenant hereunder.
19.04 In the event of the vacation or abandonment
of the Leased Premises by Tenant or in the event that Landlord
shall elect to reenter as provided in Section 19.03 above or
shall take possession of the Leased Premises pursuant to legal
proceeding or pursuant to any notice provided by law, then if
Landlord does not elect to terminate this Lease as provided in
Section 19.02 above, then Landlord may from time to time, without
terminating this Lease, either recover all rental as it becomes
due or relet the Leased Premises or any part thereof for such
terms and conditions as Landlord in its sole discretion may deem
advisable with the right to make alterations and repairs to the
Leased Premises. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that
Landlord shall have no obligation to relet the Premises.
In the event that Landlord shall elect to so relet,
then rentals received by Landlord from such reletting shall be
applied: first, to the payment of any indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the
payment of any cost of such reletting; third, to the payment of
the cost of any alterations and repairs to the Leased Premises;
fourth, to the payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in payment
of future rent as the same may become due and payable hereunder.
Should the amount of rental received from such reletting during
any month which is applied to the payment of rent hereunder be
less than that agreed to be paid during that month by Tenant
hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand therefor by Landlord. Such deficiency
shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred
by Landlord in such reletting or in making such alterations and
repairs not covered by the rentals received from such reletting.
19.05 No reentry or taking possession of the Leased
Premises by Landlord pursuant to Sections 19.03 or 19.04 of this
Section shall be construed as an election to terminate this Lease
unless a written notice of such intention be given to Tenant or
unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination
by Landlord because of any default by Tenant, Landlord may at any
time after such reletting elect to terminate this Lease for any
such default.
19.06 In the event of default by Tenant, Landlord
shall have the right to change the locks to the Premises and to
prevent Tenant's entry to the Premises in accordance with the
provisions of Section 92.003 of the Texas Property Code as the
same may be amended from time to time.
19.07 Landlord shall be under no obligation to
observe or perform any covenant of this Lease on its part to be
observed or performed which accrues after the date of any default
by Tenant hereunder.
19.08 Any legal action by Landlord to enforce any
obligation of Tenant or in pursuance of any remedy hereunder
shall be deemed timely filed if commenced at any time prior
to one (1) year after the expiration of the term of this Lease or
prior to four (4) years after the cause of action accrues,
whichever period expires later.
19.09 In any action of unlawful detainer commenced
by Landlord against Tenant by reason of any default hereunder,
the reasonable rental value of the Leased Premises for the
period of the unlawful detainer shall be deemed to be the greater
of the amount of rent and additional charges reserved in this
Lease for such period or the comparable period of the preceding
year, unless Landlord or Tenant shall prove to the contrary by
competent evidence.
19.10 Tenant hereby waives any right of redemption
or relief from forfeiture under any present or future law, in the
event Tenant is evicted or Landlord takes possession of the
Premises by reason of any default by Tenant hereunder.
19.11 The various rights and remedies reserved to
Landlord herein, including those not specifically described
herein, shall be cumulative, and, except as otherwise provided by
Texas statutory law in force and effect at the time of the
execution hereof, Landlord may pursue any or all of such rights
and remedies, whether at the same time or otherwise.
19.12 No delay or omission of Landlord to exercise
any right or remedy shall be construed as a waiver of any such
right or remedy or of any default by Tenant hereunder.
19.13 A failure by Landlord to observe and perform
any provision of this Lease to be observed or performed by
Landlord, if such failure continues for thirty (30) days after
written notice thereof by the Tenant to Landlord, shall
constitute a default by Landlord; provided, however, that if the
nature of such default is such that the same cannot be reasonably
be cured within such thirty (30) day period, Landlord shall not
be deemed to be in default if Landlord shall within such time
period commence such a cure and thereafter diligently prosecute
the same to completion.
20. ASSIGNMENTS.
20.01 Tenant shall not, either voluntarily or by
operation of law, assign, sell, encumber, pledge or otherwise
transfer all or any part of Tenant's leasehold estate hereunder,
or permit the Leased Premises to be occupied as work space,
storage space, concession or otherwise by anyone other than
Tenant or Tenant's employees, or sublet the Leased Premises or
any portion thereof, without Landlord's prior written consent in
each instance, which consent shall not be unreasonably withheld.
Any such sale, assignment, hypothecation or other transfer or
subletting shall be subject in each instance to the provisions
contained in Section 20.04. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on
the following factors: (i) the business of the proposed assignee
or subtenant and the proposed use of the Lease Premises;
(ii) the net worth and reputation of the proposed assignee or
subtenant; (iii) Tenant's compliance with all of his obligations
under this Lease; (iv) such other factors as Landlord may
reasonably deem relevant. The consent by Landlord to an
assignment or subletting shall not be construed as relieving
Tenant or any assignee of this Lease or subtenant of the Leased
Premises from obtaining the express written consent of Landlord
to any further assignment or subletting or as releasing
Tenant or any assignee or subtenant of Tenant from any liability
or obligation hereunder whether or not accrued. This Section 20
shall be fully applicable to all further sales, hypothecation,
transfers, assignments and subleases of the Leased Premises, or
any portion thereof, by any successor or assignee of Tenant, or
any subtenant of the Leased Premises. If Tenant is a corporation
which, under the then current guidelines published by the
Commissioner of Corporations of the State of Texas, is not deemed
a public corporation, or is an unincorporated association,
partnership or trust, the transfer, assignment or hypothecation
of any stock or interest in such corporation, association,
partnership or trust in the aggregate in excess of twenty-five
percent (25%) shall be deemed an assignment within the meaning
and provisions of this Section 20. Tenant agrees to reimburse
Landlord for Landlord's reasonable costs and attorneys' fees
incurred in connection with the processing and documentation of
any such requested assignment, subletting, transfer, change of
ownership or hypothecation of this Lease or Tenant's interest in
and to the Leased Premises. Tenant shall not transfer, assign,
mortgage or hypothecate this Lease, or any interest therein, or
permit the use of the Leased Premises by any person or persons
other than Tenant, or sublet the Leased Premises, or any part
thereof, without the prior written consent of Landlord, which
consent will not be unreasonably withheld.
20.02 This prohibition against assigning or
subletting shall be construed to include a prohibition against
any assignment or subletting by operation of law, which term as
used herein shall include, without limiting the generality of the
foregoing, each of the following acts:
(a) The transfer of this Lease, or any interest
of Tenant therein by testacy or intestacy, excepting Tenant's
children or spouse.
(b) If Tenant is or becomes bankrupt or
insolvent, makes an assignment for the benefit of creditors, or
institutes a proceeding under the Bankruptcy Act in which Tenant
is the bankrupt, or if Tenant is a partnership or consists of
more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or
makes an assignment for the benefit of creditors.
(c) If a writ of attachment or execution is
levied on this Lease.
(d) If, in any proceeding or action to which
Tenant is a party, a receiver is appointed with authority to take
possession of the Leased Premises.
An assignment or subletting by operation of law shall
constitute a default by Tenant and Landlord shall have the right
to elect to terminate this Lease, in which case this Lease shall
not be treated as an asset of Tenant.
If a writ of attachment or execution is levied on this
Lease, Tenant shall have fifteen (15) days in which to cause the
attachment or execution to be removed. If any involuntary
proceeding in bankruptcy is brought against Tenant, or if a
receiver is appointed, Tenant shall have sixty (60) days in which
to have the involuntary proceeding dismissed or the receiver
removed.
20.03 If Tenant desires at any time to assign,
hypothecate or otherwise transfer this Lease or to sublet the
Leased Premises or any portion thereof, then at least forty-five
(45) days, but not more than ninety (90) days, prior to the date
when Tenant desires the assignment or sublease to be effective
(the "Assignment Date"), Tenant shall give Landlord a notice (the
"Assignment Notice") which shall set forth (i) the name, address
and business of the proposed subtenant or assignee; (ii)
information (including references) concerning the character of
the proposed subtenant or assignee, the Assignment Date, any
ownership or commercial relationship between Tenant and the
proposed subtenant or assignee; (iii) the consideration and all
other material terms and provisions of the proposed sublease or
assignment; and (iv) such reasonable information as Landlord may
request concerning the financial condition, business background
and qualifications of the proposed subtenant or assignee, all in
such detail as Landlord shall reasonably require. If Landlord
reasonably requests additional detail, the Assignment Notice
shall not be deemed to have been received until Landlord receives
such additional detail and Landlord may reasonably withhold
consent to any assignment or sublease until such information is
provided to Landlord.
20.04 If Tenant assigns or subleases, the following
shall apply:
(a) Tenant shall pay to Landlord as additional
rent under the Lease the Landlord's Share (as defined below) of
the Profit (as defined below) on such transaction as and when
received by Tenant, unless Landlord gives written notice to
Tenant and the assignee or subtenant that Landlord's Share shall
be paid by the assignee or subtenant to Landlord directly.
As used herein, the term "Profit" means (A) all amounts paid to
Tenant for such assignment or sublease, including, without
limitation, monthly rent in excess of the monthly rent payable
under the Lease, and all fees and other consideration paid for
the assignment or sublease, including fees under any collateral
agreements, but excluding any amounts paid to Tenant for
goodwill, fixtures or sale of the business, less (B) reasonable
costs and expenses directly incurred by Tenant in connection with
the execution and performance of such assignment or sublease,
real estate broker's commissions and costs of renovation or
construction of tenant improvements required under such
assignment or sublease. All such costs and expenses shall be
confirmed in writing, and no payments made by Tenant to any
person or entity related to Tenant shall be allowed as a cost and
expense in determining the "Profit" on such transaction. Tenant
is entitled to recover such costs and expenses before Tenant is
obligated to pay the Landlord's Share to Landlord. The
Profit in the case of a sublease of less than all the Leased
Premises is the rent allocable to the subleased space as a
percentage on a square footage basis. The "Landlord's Share"
shall equal fifty percent (50%).
(b) Tenant shall provide Landlord a written
statement certifying all amounts to be paid from any assignment
or sublease of the Property within thirty (30) days after
the transaction documentation is signed, and Landlord may inspect
Tenant's books and records to verify the accuracy of such
statement. On written request, Tenant shall promptly furnish to
Landlord copies of all the transaction documentation, all of
which shall be certified by Tenant to be complete, true and
correct. Landlord's receipt of Landlord's Share shall not be
consent to any further assignment or subletting. The breach of
Tenant's obligation under this Section 20.04 shall be a material
default of the Lease.
20.05 No assignment or sublease of all or any
portion of the Leased Premises shall affect or reduce any
obligations of Tenant or rights of Landlord hereunder, and all
obligations of Tenant hereunder shall continue in full force and
effect as the obligations of a principal and not of a guarantor
or surety, to the same extent as though no assignment or
subletting had been made.
20.06 Neither this Lease nor the Leased Premises
hereby demised shall be mortgaged by Tenant, nor shall Tenant
mortgage or pledge the interest of Tenant in and to any
sublease of the Leased Premises or the rent payable thereunder.
20.07 Any transfer of this Lease from the Tenant by
merger, consolidation, transfer of assets, dissolution, or
liquidation shall constitute an assignment for purposes of this
Lease.
20.08 Any sale, assignment, hypothecation or
transfer of this Lease or subletting of the Leased Premises that
is not in substantial compliance with the provisions of this
Section 20 shall be void and shall, at the option of Landlord,
terminate this Lease.
20.09 Notwithstanding any provision of this Section
20 to the contrary, Tenant shall have the right, at any time and
from time to time during the term of this Lease, to encumber
its estate in the Leased Premises pursuant to mortgages or deeds
of trust (hereinafter referred to as a "Leasehold Mortgage") in
favor of any life insurance company, bank, or other institutional
lender (hereinafter referred to as a "Leasehold Mortgagee"),
provided that notwithstanding any other form of notice, actual or
constructive, no Leasehold Mortgage shall be binding upon
Landlord in the enforcement of its rights and remedies herein and
by law provided unless and until a copy thereof shall have been
delivered to Landlord. Landlord and Tenant agree that so long as
such Leasehold Mortgage is a lien on Tenant's estate in the
Leased Premises, such Leasehold Mortgagee shall have all of the
rights set forth in this Section.
(a) If Tenant shall have delivered to Landlord
prior written notice of the address of any Leasehold Mortgagee,
Landlord will mail to the Leasehold Mortgagee a copy of any
notice under this Lease at the time of giving such notice to
Tenant, and will give to the Leasehold Mortgagee notice of any
rejection of this Lease by the trustee in bankruptcy of Tenant
or by Tenant as debtor in possession. No termination of this
Lease or termination of Tenant's right of possession of the
Leased Premises or reletting of the Leased Premises by Landlord
predicated on the giving of any notice shall be effective unless
Landlord gives to the Leasehold Mortgagee written notice or a
copy of its notice to Tenant of such default or termination, as
the case may be.
(b) In the event of any default by Tenant under
the provisions of this Lease, the Leasehold Mortgagee will have
the same concurrent grace periods as are given Tenant for
remedying such default or causing it to be remedied, plus, in
each case, an additional period of thirty (30) days after the
expiration thereof or after Landlord has served a notice or a
copy of a notice of default upon the Leasehold Mortgagee,
whichever is later.
(c) In the event that Tenant shall default under
any of the provisions of this Lease, the Leasehold Mortgagee,
without prejudice to its rights against Tenant, shall have the
right to make good such default within the applicable grace
periods provided for in the preceding section of this Section
whether the same consists of the failure to pay rent or the
failure to perform any other matter or thing which Tenant is
hereby required to do or perform, and Landlord shall accept such
performance on the part of the Leasehold Mortgagee as though the
same had been done or performed by Tenant. For such purpose
Landlord and Tenant hereby authorize the Leasehold Mortgagee to
enter upon the Leased Premises and to exercise any of Tenant's
rights and powers under this Lease, and subject to the provisions
of this Lease, under the Leasehold Mortgage.
(d) The term "incurable default" as used herein
means any default which cannot be reasonably cured by a Leasehold
Mortgagee. The term "curable default" means any default under
this Lease which is not an incurable default. In the event of
any curable default under this Lease, and if prior to the
expiration of the applicable grace period specified in Section
20.09(b), the Leasehold Mortgagee shall give Landlord written
notice that it intends to undertake the curing of such default,
or to cause the same to be cured, or to exercise its rights to
acquire the leasehold interest of Tenant by foreclosure or
otherwise, and shall immediately commence and then proceed with
all due diligence to do so, whether by performance on behalf of
Tenant of its obligations under this Lease, or by entry on the
Leased Premises by foreclosure or otherwise, then Landlord will
not terminate or take any action to effect a termination of this
Lease or re-enter, take possession of or relet the Leased
Premises or similarly enforce performance of this Lease so
long as the Leasehold Mortgagee is, with all due diligence and in
good faith, engaged in the curing of such default, or effecting
such foreclosure, provided, however, that the Leasehold
Mortgagee shall not be required to continue such possession or
continue such foreclosure proceedings if such default shall be
cured. Nothing herein shall preclude Landlord from terminating
this Lease with respect to any additional default which shall
occur during the aforesaid period of forbearance and not be
remedied within the period of grace, if any, applicable to any
such additional default.
(e) In the event that this Lease is terminated by
Landlord on account of any incurable default or in the event
Tenant's interest under this Lease shall be sold, assigned or
transferred pursuant to the exercise of any remedy of the
Leasehold Mortgagee, or pursuant to judicial proceedings, and if
(i) no rent or other charges shall then be due and payable by
Tenant under this Lease, and (ii) the Leasehold Mortgagee shall
have arranged to the reasonable satisfaction of Landlord to cure
any curable default of Tenant under this Lease, then Landlord,
within 30 days after receiving a written request therefor, which
shall be given within 60 days after such termination or transfer
and upon payment to it of all expenses, including attorney's
fees, incident thereto, will execute and deliver a new lease of
the Leased Premises to the Leasehold Mortgagee or its nominee or
to the purchaser, assignee or transferee, as the case may be, for
the remainder of the term of this Lease, containing the same
covenants, agreements, terms, provisions and limitations as are
contained herein. Upon the execution and delivery of such new
lease, the new tenant, in its own name or in the name of Landlord
may take all appropriate steps as shall be necessary to remove
Tenant from the Leased Premises, but Landlord shall not be
subject to any liability for the payment of fees, including
reasonable attorney's fees, costs or expenses in connection
therewith; and said new tenant shall pay all such fees, including
attorney's fees, costs and expenses or, on demand, make
reimbursements therefor to Landlord.
(f) In the event a default under the Leasehold
Mortgage shall have occurred, the Leasehold Mortgagee may
exercise, with respect to the Leased Premises, any right,
power or remedy under the Leasehold Mortgage, which is not in
conflict with the provisions of this Lease.
(g) This Lease may be assigned, without the
consent of Landlord, to or by the Leasehold Mortgagee or its
nominee, pursuant to foreclosure or similar proceedings, or
the sale, assignment or other transfer of this Lease in lieu
thereof, or the exercise of any other right, power or remedy of
the Leasehold Mortgagee, and any Leasehold Mortgagee shall be
liable to perform the obligations herein imposed on Tenant only
during the period it is in possession or ownership of the
leasehold estate created hereby.
(h) There shall be no merger of this Lease or any
interest in this Lease nor of the leasehold estate created
hereby, with the fee estate in the Leased Premises, by reason
of the fact that this Lease or such interest therein, or such
leasehold estate may be directly or indirectly held by or for the
account of any person who shall hold the fee estate in the Leased
Premises, or any interest in such fee estate, nor shall there be
such a merger by reason of the fact that all or any part of the
leasehold estate created hereby may be conveyed or mortgaged in a
Leasehold Mortgage to a Leasehold Mortgagee who shall hold the
fee estate in the Leased Premises or any interest of the Landlord
under this Lease.
(i) No surrender (except a surrender upon the
expiration of the term of this Lease or upon termination by
Landlord pursuant and subject to the provisions of this Lease)
by Tenant to Landlord of this Lease, or of the Leased Premises,
or any part thereof, or of any interest therein, and no
termination of this Lease by Tenant shall be valid or effective,
and neither this Lease nor any of the terms hereof may be
amended, modified, changed or cancelled without prior written
consent of the Leasehold Mortgagee.
(j) The provisions of this Section are for the
benefit of, and are to be enforceable by, the Leasehold
Mortgagee.
(k) Notices, demands and requests from Landlord
to the Leasehold Mortgagee shall be mailed to the address given
to Landlord by registered mail and notices, demands and requests
from the Leasehold Mortgagee to Landlord shall be mailed to the
address specified in Section 24 of this Lease. Any such notice,
demand or request shall be given in accordance with such Section.
(l) Landlord hereby agrees that its statutory
landlord's lien, arising under Texas law, shall be subordinate to
any Leasehold Mortgage in favor of any Leasehold Mortgagee, and
to any lien in favor of a vendor supplying equipment or trade
fixtures to Tenant.
21. RIGHTS OF MORTGAGEE. Landlord shall have the right at
all times to mortgage or hypothecate its ownership of the Leased
Premises and its lessor's interest in this Lease. At the option
of the mortgagee of any mortgage or beneficiary of any deed of
trust constituting a lien on all or part of the Leased Premises
(said mortgagee or beneficiary being called herein the
"Mortgagee"), this Lease shall be either (i) subject and
subordinated to or (ii) prior to the lien of any mortgage placed
on or against the Leased Premises on or against Landlord's
interest or estate therein without the necessity of having
further instruments on the part of Tenant to effectuate such
subordination. Notwithstanding the foregoing, in the event of a
foreclosure of any such mortgage, or of any other action or
proceeding for the enforcement thereof, or of any sale
thereunder, this Lease will not be barred, terminated, cut off or
foreclosed, nor will the rights and possession of Tenant
hereunder be disturbed, if Tenant shall not then be in default in
the payment of rent due or the performance of Tenant's other
obligations hereunder. Upon the request of any Mortgagee, Tenant
agrees to execute any amendment to this Lease which
does not, in the reasonable opinion of Tenant's counsel,
materially adversely affect Tenant's rights hereunder. Upon
receipt of written request of Tenant to so do, Landlord shall
obtain a non-disturbance agreement from the Mortgagee.
Concurrently with the mutual execution and delivery of this
Lease, Landlord shall deliver to Tenant a non-disturbance
agreement from any existing Mortgagee or other lienholder.
22. ESTOPPEL CERTIFICATES. At any time and from time to
time, Landlord, on at least twenty (20) days prior written
request by Tenant, and Tenant, on at least twenty (20) days
prior written request by Landlord, will deliver to the party
making such request a statement in writing certifying that this
Lease is unmodified and in full force and effect (or if there
shall have been modifications that the same is in full force and
effect as modified and stating the modifications) and the date to
which the rent and any other deposits or charges have been paid
and stating whether or not, to the best knowledge of the party
executing such certificate, the party requesting such statement
is in default in the performance of any covenant, agreement or
condition contained in this Lease and, if so, specifying each
such default of which the executing party may
have knowledge.
23. INVALIDITY OF PARTICULAR PROVISIONS. If any term or
provision of this Lease, or the application thereof to any person
or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not
be affected thereby, and each term and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by
law.
24. NOTICES. Whenever Landlord or Tenant shall desire to
give or serve upon the other any notice, demand, request or other
communication with respect to this Lease or with respect to the
Leased Premises each such notice, demand, request or other
communication shall be in writing and shall not be effective for
any purpose unless the same shall be given or served by personal
delivery to the party or parties to whom such notice, demand,
request or other communication is directed or by mailing the
same, in duplicate, to such party or parties by certified mail,
postage prepaid, return receipt requested, addressed as follows:
Landlord: With a Copy to:
BAM Corporation Gresham, Varner, Savage, Nolan &
c/o William E. Rosenthal Tilden
4420 Overton Crest 3750 University Avenue,
Fort Worth, TX 76109 Suite 610
Riverside, CA 92501
Attn: Craig O. Dobler
And With a Copy to:
Michael S. Goodrich
201 Main Street, Ste. 582
Fort Worth, Texas 76102
Tenant:
KPR Holdings, L.P.
c/o Foodbrands America, Inc.
1601 N.W. Expressway
Oklahoma City, OK 73118
Attn: R. Ralph Devening
Chairman, President and
Chief Executive Officer
or at such other address or addresses as Landlord or Tenant may
from time to time designate by notice given by certified mail.
Every notice, demand, request or communication hereunder
sent by mail shall be deemed to have been given or served as of
the second business day following the date of such mailing.
25. QUIET ENJOYMENT. Landlord covenants and agrees that
Tenant, upon paying the rent and all other charges herein
provided for and observing and keeping all covenants, agreements,
and conditions of this Lease on its part to be observed and kept,
shall quietly have and enjoy the Leased Premises during the term
of this Lease without hindrance or molestation by
anyone claiming by or through Landlord.
26. HAZARDOUS MATERIAL.
26.01 As used herein, the term "Hazardous Material"
means any hazardous or toxic substance, material or waste which
is or becomes regulated by any local governmental authority, the
State of Texas or the United States Government. The term
"Hazardous Material" includes, without limitation, any material
or substance which is (i) petroleum, (ii) asbestos, (iii)
designated as a "hazardous substance" pursuant to Section 311 of
the Federal Water Pollution Control Act (33 U.S.C. Section 1317)
or any Texas statute or regulation, (iv) defined as a "hazardous
waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42
U.S.C. Section 6903) or any Texas statue or regulation, or (v)
defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601) or
any Texas statute or regulation, and (vi) so defined in the
regulations adopted and publications promulgated pursuant
to any of such laws, or as such laws or regulations may be
further amended, modified or supplemented.
26.02 Tenant shall not cause or permit any
Hazardous Material to be brought upon, kept, used in or about or
disposed of from the Premises by Tenant, its agents, employees,
contractors or invitees, without the prior written consent of
Landlord (which Landlord shall not unreasonably withhold as long
as Tenant demonstrates to Landlord's reasonable satisfaction that
such Hazardous Material is necessary or useful to Tenant's
business and will be used, kept, stored and if necessary disposed
of in a manner that complies with all laws relating to any such
Hazardous Material so brought upon, used kept, stored in or about
or disposed of from the Premises). Notwithstanding the forgoing,
Landlord acknowledges that Tenant uses ammonia and oil in the
normal course of its business, and agrees that Tenant may use
ammonia and oil on the Premises as long as such substances are
used only in the ordinary course of business, stored only in
quantities required for the conduct of Tenant's business, and are
used, stored and disposed of in accordance with all applicable
laws. If Tenant breaches the obligations stated in the preceding
sentence, or if the presence of Hazardous Material on the
Premises caused or permitted by Tenant results in contamination
of the Premises, then Tenant shall indemnify, defend and hold
Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including,
without limitation, diminution in value of the Premises, damages
for the loss or restriction on use of rentable or usable space or
of any amenity of the Premises, and sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees) which
arise during or after the Lease Term as a result of such
contamination. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with
any investigation of Premises conditions, or any cleanup,
remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision
because of Hazardous Material present in the soil or ground water
on or under the Premises. Without limiting the foregoing, if the
presence of any Hazardous Material on the Premises caused or
permitted by Tenant results in any contamination of the Premises,
Tenant shall promptly take any actions at its sole expense as are
necessary to return the Premises to the condition existing prior
to the introduction of any such Hazardous Material to the
Premises; provided that Landlord's approval of such actions shall
first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises.
26.03 It shall not be unreasonable for Landlord to
withhold its consent to any proposed sublease or assignment if:
(a) the proposed assignee's or sublessee's anticipated use of
the Premises involves the generation, storage, use, treatment or
disposal of Hazardous Material; (b) the proposed assignee or
sublessee has been required by any prior landlord, lender or
governmental authority to take remedial action in connection with
Hazardous Material contaminating a property if the contamination
resulted from such assignee's or sublessee's actions or use of
the property in question; and/or (c) the proposed assignee or
sublessee is subjected to an enforcement order issued by any
governmental authority in connection with the use, disposal
or storage of a Hazardous Material.
27. OPTION TO PURCHASE.
27.01 Landlord grants to Tenant the option to
purchase ("Purchase Option") the Premises on the terms set forth
on Exhibit "C", attached hereto and incorporated herein by
reference, provided that the Purchase Option may not be exercised
at any time when Tenant is in default.
28. MISCELLANEOUS.
28.01 All rent and all other sums which may from
time to time become due and payable by Tenant to Landlord under
any of the provisions of this Lease shall bear interest from
and after the due date thereof at the rate of 10% per annum.
28.02 In all cases the language in all parts of
this Lease shall be construed simply, according to its fair
meaning and not strictly for or against Landlord or Tenant.
28.03 The word titles underlying the article
designations contained herein are inserted solely for convenience
and under no circumstances are they or any of them to be treated
or construed as any part of this instrument.
28.04 In any action or proceeding which either
party may take to enforce such party's rights hereunder, whether
prior to or after breach or termination, or to which such party
may be made a party because of any matters arising or growing out
of this Lease, and due to the act or default of the other, the
party whose act or default caused the other party, without fault
to become involved in such litigation, or who shall be defeated
in such litigation, agrees to pay all costs incurred by the
winning or other party therein, including reasonable attorneys'
fees.
28.05 If Tenant should remain in possession of the
Leased Premises after the expiration of the term of this Lease
and without executing a new lease, then such holding over
shall be construed as a tenancy from month to month, subject to
all the conditions, provisions and obligations of this Lease
insofar as the same are applicable to a month to month tenancy.
28.06 The voluntary or other surrender of this
Lease by Tenant or a mutual cancellation thereof shall not work a
merger of the estate herein demised and Landlord's reversionary
interest and shall, at Landlord's sole option terminate any and
all existing subleases or subtenancies or shall operate as an
assignment to it of any and all such subleases or subtenancies.
28.07 Each individual executing this Lease on
behalf of Tenant represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of said
corporation, and that this Lease is binding upon said corporation
in accordance with its terms.
28.08 Tenant covenants at all times during the term
of this Lease to comply with the requirements of the Occupational
Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq and
any analogous legislation in Texas (collectively, the "Act"), to
the extent that the Act applies to the Leased Premises and any
activities thereon. Without limiting the generality of the
foregoing, Tenant covenants to maintain all working areas, all
machinery, structures, electrical facilities and the like upon
the Leased Premises in a condition that fully complies with the
requirements of the Act, including such requirements as would be
applicable with respect to agents, employees or contractors of
Landlord who may from time to time be present upon the
Premises, and Tenant agrees to indemnify and hold harmless
Landlord from any liability, claims or damages arising as a
result of a breach of the foregoing covenant and from all costs,
expenses and charges arising therefrom including, without
limitation, attorneys' fees and court costs incurred by Landlord
in connection therewith, which indemnity shall survive the
expiration or termination of this Lease.
28.09 This Lease covers in full each and every
agreement of every kind or nature whatsoever between the parties
hereto concerning the Leased Premises and all preliminary
negotiations and agreements of every kind or nature whatsoever
with respect to the Leased Premises; and no other person, firm or
corporation has at any time had any authority from Landlord to
make any representations or promises on behalf of Landlord, and
Tenant expressly agrees that if any such representations or
promises have been made by Landlord or others, Tenant hereby
waives all right to rely thereon. No verbal agreement or implied
covenant shall be held to vary the provisions hereof, any
statute, law, or custom to the contrary notwithstanding. No
provision of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their
respective successors in interest. Tenant acknowledges that it
has read this Section and understands it to be a waiver of any
right to rely on any representations or agreements not expressly
set forth in this Lease.
28.10 Subject to the provisions hereof, this Lease
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, and
wherever a reference in this Lease is made to either of the
parties hereto such reference shall be deemed to include,
wherever applicable, also a reference to the successors and
assigns of such party, as if in every case so expressed.
28.11 [RESERVED]
28.12 Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third person
to create the relationship of principal and agent or of
partnership or of joint venture or of any association between
Landlord and Tenant, and neither the method of computation of
rent nor any other provision contained in this Lease nor any acts
of the parties hereto shall be deemed to create any relationship
between Landlord and Tenant other than the relationship of
landlord and tenant.
28.13 Tenant hereby acknowledges that late payment
by Tenant to Landlord of rent and other sums due under this Lease
will cause Landlord to incur additional costs not contemplated by
this Lease, the exact amount of which will be extremely difficult
to ascertain. Such additional costs include, without limitation,
processing and accounting charges, and late charges which may be
imposed upon Landlord by the terms of the mortgage or deed of
trust covering the Premises. Therefore, if any installment of
rent or any other sum due from Tenant shall not be received on
the date that such amount shall be due, Tenant agrees to pay, and
shall pay, to Landlord a late charge equal to five percent (5%)
of the overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such
overdue amount or prevent Landlord from exercising any or all of
the other rights and remedies granted under this Lease.
28.14 Tenant warrants that it has no dealings with
any real estate broker or agent in connection with the
negotiation of this Lease. Tenant shall indemnify and hold
harmless Landlord against any claim for brokerage commission
regarding this Lease.
28.15 This Lease shall be construed and enforced in
accordance with the laws of the State of Texas.
28.16 Any actions or proceedings with respect to
any matters arising under or growing out of this Lease shall be
instituted and prosecuted only in courts located in the City of
Fort Worth, County of Tarrant, State of Texas, and each party
hereto expressly waives its right to cause any such actions or
proceedings to be instituted or prosecuted elsewhere.
28.17 This instrument may be executed in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
28.18 Except as expressly set forth herein, any
approval required or permitted to be given by Landlord shall be
deemed given unless written notice of denial of such approval is
delivered to Tenant within thirty (30) days of Tenant's request
for such approval, except that if Landlord reasonably requests
from Tenant additional information regarding such approval prior
to the expiration of such thirty (30) day period, the thirty (30)
day period shall not be deemed to have begun until Landlord
receives from Tenant such additional information as requested by
Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Lease effective as of the day first written above.
Tenant
KPR HOLDINGS, L.P., a Delaware limited
partnership
By: RKR-GP, INC.
Its: General Partner
By: (William E. Rosenthal)
Its:
And: (Joseph C. Penshorn)
Its: Treasurer
Landlord
BAM CORPORATION
By: (William E. Rosenthal)
Its:
And: (Joseph C. Penshorn)
Its: Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 30, 1995,
CONTAINED IN THE 1995 FORM 10-K ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 7,398
<SECURITIES> 0
<RECEIVABLES> 46,166
<ALLOWANCES> 0
<INVENTORY> 58,523
<CURRENT-ASSETS> 115,217
<PP&E> 178,114
<DEPRECIATION> 38,188
<TOTAL-ASSETS> 521,763
<CURRENT-LIABILITIES> 94,787
<BONDS> 305,407
0
0
<COMMON> 125
<OTHER-SE> 43,104
<TOTAL-LIABILITY-AND-EQUITY> 521,763
<SALES> 634,700
<TOTAL-REVENUES> 634,700
<CGS> 499,985
<TOTAL-COSTS> 499,985
<OTHER-EXPENSES> 99,612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,268
<INCOME-PRETAX> 16,642
<INCOME-TAX> 7,041
<INCOME-CONTINUING> 9,601
<DISCONTINUED> (42,647)
<EXTRAORDINARY> (1,049)
<CHANGES> 0
<NET-INCOME> (34,095)
<EPS-PRIMARY> (2.73)
<EPS-DILUTED> (2.73)
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