<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[_] Preliminary Information Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14c-
5(d)(2))
[X] Definitive Information Statement
FOODBRANDS AMERICA, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
FOODBRANDS AMERICA, INC.
1601 N.W. EXPRESSWAY, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73118-1495
----------------
NOTICE OF ACTION TAKEN BY STOCKHOLDERS
----------------
NOTICE IS HEREBY GIVEN that on March 25, 1997 the Stockholders of FOODBRANDS
AMERICA, INC., a Delaware corporation (the "Company"), approved the following:
An amendment to Article Fifth of the Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc. as described in the attached
Information Statement under the caption "CHARTER AMENDMENT."
Section 228 of the General Delaware Corporation Law provides that any action
which may be taken at a meeting of the stockholders may be taken without a
meeting, without prior notice and without vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, provided that prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
A consent in writing approving the foregoing amendment to the Amended and
Restated Certificate of Incorporation approved and proposed by the Board of
Directors on March 25, 1997 was signed by holders of outstanding stock having
6,313,033 votes, said shares representing greater than a majority of the total
number of shares outstanding of the Company and was delivered to the Company.
Accordingly, the Company is notifying you of the actions so taken by
delivering this Notice along with the attached Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY OR CONSENT AND YOU ARE REQUESTED NOT TO
SEND US A PROXY OR CONSENT WITH RESPECT TO THE MATTERS SET FORTH HEREIN.
LOGO
Bryant P. Bynum
Corporate Secretary
Oklahoma City, Oklahoma
April 8, 1997
<PAGE>
FOODBRANDS AMERICA, INC.
1601 N.W. EXPRESSWAY, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73118-1495
----------------
INFORMATION STATEMENT
----------------
ACTION TAKEN BY WRITTEN CONSENT OF STOCKHOLDERS
----------------
EFFECTIVE
APRIL 28, 1997
WE ARE NOT ASKING YOU FOR A PROXY OR CONSENT AND YOU ARE REQUESTED NOT TO
SEND US A PROXY OR CONSENT WITH RESPECT TO THE MATTERS SET FORTH HEREIN.
GENERAL INFORMATION
Introduction. This Information Statement is furnished in connection with
certain actions taken by certain of the stockholders of Foodbrands America,
Inc., a Delaware corporation (the "Company").
On March 25, 1997, the Board of Directors of the Company adopted a
resolution setting forth a proposed amendment of the Amended and Restated
Certificate of Incorporation of the Company as reflected in Exhibit A hereto
(the "Charter Amendment"), declared its advisability and called a special
meeting of the stockholders entitled to vote on the Charter Amendment. The
Charter Amendment was adopted by the Board to expedite the transactions
contemplated by the Merger Agreement (as hereafter defined). See "Interest of
and Security Ownership of Certain Beneficial Owners and Management--Tender
Offer." Thereafter, and as requested by the Purchaser (as hereafter defined),
three stockholders, Joseph Littlejohn & Levy Fund II, L.P., a Delaware limited
partnership, Joseph Littlejohn & Levy, L.P., a Delaware limited partnership
(collectively, "JLL"), and The Airlie Group, L.P., a Delaware limited
partnership ("Airlie") (together, the "Consenting Stockholders"), each
executed a written consent approving the Charter Amendment, effective upon the
expiration of the twenty calendar day period following the mailing of this
Information Statement to the stockholders, and delivered such written consent
to the Company (the "Written Consent"). The Written Consent contained the
consents of the holders of 6,313,033 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"). This Information Statement is being
mailed to stockholders of the Company on or about April 8, 1997.
Section 228 of the General Corporation Law of the State of Delaware provides
that any action which may be taken at a meeting of the stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted, provided that prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
As of March 25, 1997, the date the Written Consent was executed and
delivered by the Consenting Stockholders (the "Action Date"), the Company had
outstanding 12,465,107 shares of its Common Stock. The holder of each share of
Common Stock is entitled to one vote. Accordingly, because the Written Consent
approves the Charter Amendment by greater than a majority of the total number
of shares outstanding of the Company, the approval of the Charter Amendment is
complete and the Company is notifying you of the actions so taken. NO MEETING
OF STOCKHOLDERS IS BEING HELD TO CONSIDER THE CHARTER AMENDMENT.
Appraisal Rights. The stockholders of the Company do not have appraisal
rights or similar rights of dissent with respect to the matter acted upon.
<PAGE>
CHARTER AMENDMENT
The Board of Directors approved and recommended that the stockholders
consider and approve a proposal to amend the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") by amending
Article Fifth thereof as follows:
(i) Section 5.1(3) is amended by deleting the last sentence thereof.
(ii) A new Section 5.1(4) is added to read in its entirety as follows:
"(4) Notwithstanding anything contained herein to the contrary, this
Article Fifth shall not apply to any transaction or series of
transactions which the Board, in its sole discretion upon the exercise
of its fiduciary duties in accordance with applicable law, determines
to be in the best interest of the stockholders of the Corporation. In
addition, and in any event, this Article Fifth shall not apply to any
of the transactions contemplated by the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of March 25, 1997 by and among IBP,
inc. ("IBP"), IBP Sub, Inc. and the Company and the Tender Agreements
(as defined in the Merger Agreement)."
Attached as Exhibit A is Section 5.1 of Article Fifth of the Company's
Certificate of Incorporation, reflecting the changes proposed and approved by
the Board of Directors. THE BOARD OF DIRECTORS BELIEVES THE CHARTER AMENDMENT
IS IN THE BEST INTEREST OF THE STOCKHOLDERS AND DOES NOT ADVERSELY AFFECT THE
PROTECTION OF THE STOCKHOLDERS PROVIDED BY THE TRANSFER RESTRICTIONS (AS
HEREAFTER DEFINED).
Background. In May 1995, in connection with the merger of Doskocil Companies
Incorporated into the Company (the "Doskocil Merger"), the stockholders
approved certain transfer restrictions applicable to the shares of Common Stock
as set forth in Article Fifth of the Company's Certificate of Incorporation
(the "Transfer Restrictions"), in order to help ensure that certain tax
benefits--primarily in the form of net operating loss carryforwards ("NOLs")--
would continue to be available to the Company for the benefit of its
stockholders.
NOLs offset taxable income in future years and eliminate income taxes
otherwise payable on such taxable income (except for purposes of calculating
alternative minimum tax liability). NOLs not fully utilized in the first year
they are available may be carried over and utilized in subsequent years,
subject to their expiration provisions. The Company's NOLs expire as follows:
$21.3 million in 1998, $6.0 million in 1999, $.9 million in 2000, $4.2 million
in 2001 and $64.9 million during the years 2002 through 2009. At the time the
Transfer Restrictions were adopted, although JLL and Airlie were subject to
agreements that limited their ability to buy or sell Common Stock, there was a
greater risk that, absent the Transfer Restrictions, an "Ownership Change" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code") could
result if other persons acquired 5% or more of the Common Stock. As a result of
the increased valuation of the Company and the Company's accelerated use of its
NOLs, these risks have decreased.
Section 382 of the Code provides that, if a company undergoes an Ownership
Change, its ability to use its NOLs in the future may be limited. An Ownership
Change occurs when the aggregate cumulative increase in the percentage
ownership of a corporation's capital stock owned by persons holding 5% or more
of the fair market value of such stock ("5-Percent Shareholders") is more than
50 percentage points within a three-year testing period. If an Ownership Change
occurs within the meaning of Code Section 382, the amount of NOLs that a
company may use to offset income in any future taxable year is limited, in
general, to an amount determined by multiplying the fair market value of such
company's outstanding capital stock on the change date by the "long-term tax-
exempt rate" (currently 5.5%), which is published monthly by the Internal
Revenue Service.
The following is a summary of the Transfer Restrictions, which are set forth
in Article Fifth of the Company's Certificate of Incorporation. The Transfer
Restrictions apply to transfers of Common Stock and any other instrument that
would be treated as "stock," as determined under applicable Treasury
Regulations (collectively, "Stock"). They are intended to prevent any person or
group of persons from becoming a 5-Percent
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<PAGE>
Shareholder of the Company which would result in the Company losing its NOLs
to the detriment of its stockholders. Under the Transfer Restrictions, if a
stockholder transfers or agrees to transfer Stock, the transfer will generally
be prohibited and void to the extent that it would cause the transferee to
hold a prohibited ownership percentage, which is defined under the Company's
Certificate of Incorporation by reference to complex federal tax laws and
regulations, but generally means direct and indirect ownership of 5% or more
(based on value) of Stock or any other percentage that would cause a
transferee to be considered a 5-Percent Shareholder under applicable Treasury
Regulations (a "Prohibited Ownership Percentage"). A transfer is also
generally prohibited and void if either it would result in the transferee's
ownership percentage increasing if the transferee had held a Prohibited
Ownership Percentage within the three prior years or the transferee's
ownership percentage already exceeds the Prohibited Ownership Percentage,
unless otherwise agreed to by the Company.
The Transfer Restrictions terminate upon the earliest of: (i) the day after
the 14th anniversary of the effective date of the Doskocil Merger; (ii) the
repeal of Section 382 of the Code if the Company's Board of Directors
determines that the Transfer Restrictions are no longer necessary; or (iii)
the beginning of a taxable year of the Company to which the Board of Directors
determines that no NOLs or other tax benefits otherwise available to the
Company may be carried forward (the "Expiration Date"). In addition, the Board
of Directors of the Company is authorized to modify certain terms of the
Transfer Restrictions (including acceleration or extension of the Expiration
Date), if the Board determines that such modification is reasonably necessary
or desirable to preserve the NOLs or other tax benefits or that the Transfer
Restrictions are no longer necessary for the preservation thereof.
The Transfer Restrictions do not apply to any transfer that has been
approved by the Company's Board of Directors if such approval is based upon a
determination by the Board that such proposed transfer will not jeopardize the
Company's full utilization of the NOLs. Specifically, Subsection 5.1(3) of
Article Fifth provides in part as follows:
"[A transfer] shall nonetheless be permitted if information relating to a
specific proposed transaction is presented to the Board of Directors and
the Board determines that, based on the facts in existence at the time of
such determination, such transaction will not jeopardize the Corporation's
full utilization of the Tax Benefits, based upon an opinion of legal
counsel selected by the Board to that effect. Nothing in this subsection
will be construed to limit or restrict the Board of Directors in the
exercise of its fiduciary duties under applicable law."
A principal reason for granting the Board the authority to waive the
transfer restrictions where the tax benefits would be fully realized is
economic. In 1995 when the transfer restrictions were proposed and adopted
into the Company's Certificate of Incorporation, the Company's value was
substantially less than its current value and it could not then reasonably
project earnings sufficient to use the NOLs before some of them expired. Had
an Ownership Change occurred at that time, the Section 382 limitation would
have had a material adverse effect on the value of the NOLs. As a result, the
Transfer Restrictions were designed to protect the value of the NOLs from an
inadvertent Ownership Change and the Board of Directors was given the
discretion to waive the restrictions if the NOLs could be fully utilized
notwithstanding an Ownership Change. The full utilization of the NOLs would
mean, of course, that their aggregate value would be protected and the Board
of Directors has the discretion (and fiduciary obligation) to determine
whether fair value is being attributed to that asset.
The last sentence of Subsection 5.1(3) of Article Fifth was intended to
allow the Board the ability to waive the Transfer Restrictions where the Board
determined that such a waiver was in the best interest of all stockholders,
consistent with the Board of Director's fiduciary duties to shareholders.
Reasons for Charter Amendment. The Transfer Restrictions were not intended
to prohibit a sale of the Company and, in fact, do not prohibit an acquisition
of the Company by merger. In connection with negotiating the Merger Agreement
with IBP and the Purchaser, the Board of Directors determined that it was in
the best interest of the stockholders for IBP and the Purchaser to acquire the
Company by means of a two-step transaction; that is, first making the Tender
Offer (as hereafter defined) and then the Merger (as hereafter
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<PAGE>
defined). The Board determined that this was preferable to the stockholders
because it should expedite the transaction and allow the stockholders to
receive the cash consideration for their shares sooner. The Board of Directors
proposed the Charter Amendment to exclude the Merger Agreement and the Tender
Agreements (as defined in the Merger Agreement) and the transactions
contemplated thereby from the restrictions of Article Fifth of the Certificate
of Incorporation and to clearly grant the Board the ability to waive the
Transfer Restrictions when the Board, in exercising its fiduciary duty,
determines that such transaction is in the best interest of the stockholders
of the Company. The Board of Directors determined that the Merger Agreement
and the transactions contemplated thereby were in the best interests of the
stockholders of the Company, proposed and approved the Charter Amendment and
submitted the Charter Amendment to the stockholders. In connection with IBP
and the Purchaser obtaining Tender Agreements from JLL and Airlie, IBP and the
Purchaser required JLL and Airlie to approve the Charter Amendment. JLL and
Airlie did so by executing a Written Consent approving the Charter Amendment
and delivering such Written Consent to the Company. THE STOCKHOLDERS ARE NOT
BEING ASKED TO ACT ON THE MERGER AT THIS TIME AND, IF REQUIRED BY DELAWARE
LAW, THERE WILL BE A SEPARATE ACTION TAKEN WITH RESPECT TO THE MERGER.
In addition, in connection with the approval of the Merger Agreement, the
Tender Agreements and the transactions contemplated thereby, the Board, based
on the provisions of Subsection 5.1(3), above, waived the Transfer
Restrictions as they may have applied to the execution and delivery of the
Tender Agreements, the tender of the shares of Common Stock, the grant of the
options of Common Stock provided in the Tender Agreements and the Purchaser
making the Tender Offer (but not the purchase of the shares pursuant to the
Tender Offer.) The Board of Directors, based on the opinions of independent
legal counsel, determined that such actions would not jeopardize the Company's
full utilization of the NOLs.
INTEREST AND SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of March 24, 1997 with respect to (i) each
person known by the Company to beneficially own in excess of 5% of the
outstanding shares of Common Stock, (ii) each of the Company's Directors,
(iii) each named executive officer of the Company, and (iv) all Directors and
executive officers as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned.
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
BENEFICIALLY SHARES
NAME OWNED OUTSTANDING
- ---- ------------ -----------
<S> <C> <C>
Joseph Littlejohn & Levy Fund, L.P.(1).............. 2,182,500
Joseph Littlejohn & Levy Fund II, L.P............... 3,333,333 44.3
450 Lexington Avenue, Suite 3350
New York, NY 10017
The Airlie Group L.P.(2)............................ 797,200 6.4
115 East Putnam Avenue
Greenwich, CT 06830
R. Randolph Devening(3)............................. 296,145 2.3
Horst O. Sieben(4).................................. 33,962 *
Thomas G. McCarley(5)............................... 39,936 *
Patrick A. O'Ray(6)................................. 18,717 *
William E. Rosenthal(7)............................. 3,264 *
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
BENEFICIALLY SHARES
NAME OWNED OUTSTANDING
- ---- ------------ -----------
<S> <C> <C>
Theodore Ammon(8).................................. 10,000 *
Richard T. Berg(9)................................. 50,467 *
Dort A. Cameron III(2)(8)(9)....................... 807,200 6.5
Terry M. Grimm(8).................................. 10,226 *
Peter A. Joseph(1)(10)............................. 5,515,833 44.3
Paul S. Levy(1)(10)................................ 5,515,833 44.3
Paul W. Marshall(8)(11)............................ 13,340 *
All directors and executive officers as a group (19
persons)........................................... 6,905,964 53.3
</TABLE>
- --------
*Less than one percent
(1) Pursuant to a Schedule 13D filed on or about February 16, 1993, as amended
March 22, 1993, November 18, 1993, and October 27, 1994, Messrs. Joseph
and Levy reported that they had shared voting and dispositive power over
the shares of Common Stock held by Joseph Littlejohn & Levy Fund, L.P. and
Joseph Littlejohn & Levy Fund II, L.P.
(2) The following persons filed a Schedule 13D on or about November 8, 1991,
as amended on April 2, 1993 and October 25, 1994, reporting that they had
shared or sole voting and dispositive power over the shares of Common
Stock held by The Airlie Group L.P.; EBD L.P.; TMT-FW, Inc.; Dort A.
Cameron III; and Thomas M. Taylor. As part of that Schedule 13D, the
following persons reported sole dispositive power over 6,962 shares of
Common Stock, which shares are not included in the preceding table: Sid R.
Bass; Sid R. Bass, Inc.; Lee M. Bass; Lee M. Bass, Inc.; Edward D. Bass;
and Thru Line Inc. The Schedule 13D states that the single, joint filing
was made by all such persons because they may be deemed to constitute a
"group" under Section 13(d)(3) of the Exchange Act, but all such persons
disclaim membership in such group.
(3) Includes 284,019 shares subject to options which are currently
exercisable.
(4) Includes 33,962 shares subject to options which are currently exercisable.
(5) Includes 25,352 shares subject to options which are currently exercisable.
(6) Includes 18,717 shares subject to options which are currently exercisable.
(7) Includes 3,264 shares subject to options which are currently exercisable.
(8) Includes 10,000 shares each subject to options which are currently
exercisable.
(9) Includes the 797,200 shares beneficially owned by The Airlie Group L.P.
Mr. Cameron is the General Partner of EBD L.P., which is a general partner
of The Airlie Group L.P., and may disclaim beneficial ownership of some or
all of these shares.
(10) Includes the 5,515,833 shares held by JLL and JLL Fund II; these
Directors, who are general partners of JLL Associates, L.P., the general
partner of JLL, may disclaim beneficial ownership of some or all of these
shares.
(11) Includes 3,340 shares held by Paul W. Marshall, as Trustee of the Paul W.
Marshall Self-Directed Retirement Plan.
Tender Offer. On March 25, 1997, the Company entered into the Merger
Agreement with IBP and IBP Sub, Inc., a wholly owned subsidiary of IBP (the
"Purchaser"), providing for the acquisition of the Company by IBP. Pursuant to
the Merger Agreement, and subject to the terms and conditions therein, on April
1, 1997 the Purchaser commenced a tender offer (the "Tender Offer") for any and
all outstanding shares of Common Stock at a price of $23.40 per share net to
the seller in cash or such higher price pursuant to the Tender Offer (the
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<PAGE>
"Share Price"). Upon consummation of the Tender Offer, the Merger Agreement
contemplates that the Purchaser will be merged with and into the Company (the
"Merger"), with the Company being the surviving corporation and becoming a
wholly owned subsidiary of IBP. At the effective time of the Merger, each
outstanding share of Common Stock (other than shares held by IBP, the Company
or their respective subsidiaries and other than shares the holders of which
have validly perfected their dissenters rights under Delaware law) shall be
canceled and become the right to receive an amount in cash equal to the Share
Price.
Concurrently with the execution and delivery of the Merger Agreement, JLL
entered into a Tender Agreement dated as of March 25, 1997 (the "JLL Tender
Agreement") among JLL, IBP and the Purchaser whereby JLL has agreed to tender
all of their shares of Common Stock in the Tender Offer. Concurrently with the
execution and delivery of the Merger Agreement, Airlie entered into a Tender
Agreement dated as of March 25, 1997 (the "Airlie Tender Agreement") among
Airlie, IBP and the Purchaser whereby Airlie has agreed to tender a number of
shares which when taken together with the number of shares of Common Stock (i)
beneficially owned by IBP or its subsidiaries and (ii) which IBP or its
affiliates have the right to acquire from JLL pursuant to the JLL Tender
Agreement, would cause IBP or its affiliates to beneficially own 49.9% of the
aggregate voting power represented by the issued and outstanding capital stock
of the Company. In addition, each of JLL and Airlie has granted to the
Purchaser an option to purchase such shares of Common Stock under certain
circumstances, and each of JLL and Airlie has agreed with IBP to vote in favor
of the Merger Agreement, the Merger and the transactions contemplated therein
and to oppose any other acquisition proposal and to vote against any such
acquisition proposal.
Devening Employment Agreement. Pursuant to the Employment Agreement dated
August 1, 1994 between the Company and R. Randolph Devening, Chairman of the
Board, President and Chief Executive Officer of the Company, as amended by the
First Amendment to Employment Agreement, dated as of December 31, 1996 (the
"Devening Employment Agreement").
Mr. Devening is paid a base salary of $700,000 per annum (the "Base Salary").
The Devening Employment Agreement also provides that Mr. Devening will be paid
a performance bonus for each fiscal year beginning after December 31, 1995 in
an amount equal to the sum of 100% of his base salary (the "Target Bonus") for
such year if the Company meets its EBIT (earnings before interest and taxes)
target for such year (as set by the compensation committee of the Board of
Directors), plus a minimum of 25% of his Base Salary for such year if the
Company exceeds such EBIT target by 10% or more, plus a minimum of an
additional 25% of his Base Salary for such year if the Company exceeds such
EBIT target by 20% or more; provided, however that Mr. Devening remains an
employee of the Company on the last day of each such fiscal year for which a
performance bonus is being paid, provided further, however, that, in the event
of Mr. Devening's death or his qualification for a benefit under the Company's
long-term disability plan, Mr. Devening or his estate will be entitled to the
entire bonus to which he would otherwise be entitled had he remained an
employee of the Company as of the last day of the year in which such event of
death or qualification occurred.
The Devening Employment Agreement also provides that Mr. Devening's
employment period will extend to December 31, 1999, and, unless previously
terminated as provided for in the Devening Employment Agreement, shall be
extended automatically for one (1) year after December 31, 1999, unless prior
to January 1, 1999, either party provides to the other written notice of the
intent of such party not to extend. If, however, a Change of Control (as
defined in the Devening Employment Agreement) occurs, the employment period
will be extended to the second anniversary of the Change of Control.
Before a Change of Control, Mr. Devening's employment may be terminated
without cause at any time by the Board of Directors of the Company during the
employment period. Upon such termination, the Company will pay to Mr. Devening
a severance payment equal to three (3) times the sum of (i) the Base Salary for
the last twelve-month period ending prior to such termination, plus (ii) an
amount equal to Mr. Devening's Target Bonus regardless of whether such bonus
was paid, as discussed above, for the last fiscal year of the Company ending
prior to such termination (the "Termination Bonus"). The Termination Bonus will
be paid in thirty-six (36) equal monthly installments, commencing within thirty
(30) days after date of termination. Such payment shall be
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<PAGE>
in lieu of any other benefits that may otherwise be payable to Mr. Devening
under any severance pay plan or arrangement. In the event Mr. Devening should
die prior to the end of said thirty-six (36) month period, the unpaid portion
of the Termination Bonus shall nonetheless be paid to Mr. Devening's surviving
spouse, and if none, to his estate.
Consummation of the Offer will result in a Change of Control under the
Devening Employment Agreement. As a result, Mr. Devening will be entitled to
receive a single lump payment equal to the Termination Bonus or approximately
$4.2 million (the "Change of Control Payment"). Also, under the Devening
Employment Agreement, Mr. Devening will continue his employment during the one
year period immediately following the Change of Control (the "Devening Stay
Period") upon the Company paying to him the Change of Control Payment. During
the Devening Stay Period, Mr. Devening shall be entitled to all compensation,
perquisites and benefits as he would otherwise be entitled to under the
Devening Employment Agreement. Mr. Devening is required to pay liquidated
damages to the Company of one-third of the Change of Control Payment if he
terminates his employment with the Company during the Devening Stay Period. In
addition to the Change of Control Payment, the Company will be required to pay
Mr. Devening an amount equal to any excise tax, interest and penalties
(including income tax) as required under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), resulting from the Change of Control
and receipt by him of the Change of Control Payment and the Option Payment
(described below).
The Devening Employment Agreement also contains an agreement by Mr. Devening
not to compete for a period of twenty four (24) months (the "Covenant Period")
after his termination of employment from the Company at any time following a
Change of Control for any reason. In consideration for such covenant, the
Company shall pay Mr. Devening upon such termination the sum of $1 million
(the "Covenant Payment") in twenty-four (24) equal monthly installments
following such termination. In the event of Mr. Devening's death during the
Covenant Period, the balance of the Covenant Payment, if any, shall be paid to
his surviving spouse, and if none, then to his estate.
In addition to all amounts required to be paid to Mr. Devening by the
Company upon his termination of employment for any reason prior to or after a
Change of Control, Mr. Devening shall be entitled to continue to participate
in all of the Company's health plans during the thirty-six (36) month period
following any such termination, and after the expiration of such thirty-six
(36) month period, Mr. Devening shall then be eligible to elect COBRA
continuation coverage under the Company's health plan. During such thirty-six
(36) month period Mr. Devening shall also be entitled to continue to receive
certain other welfare benefits and perquisites described in the Devening
Employment Agreement at the higher of the level of such coverage and
perquisites immediately prior to the Change of Control or immediately prior to
such termination.
In 1994, the Company granted to Mr. Devening options to purchase, in the
aggregate, 625,593 shares of the Company Common Stock at an option price of
$9.00 per share. Nine percent of such options vested on December 31, 1994,
18.2% of such options vested on each of December 31, 1995 and 1996, with the
remaining such options to vest on December 31 of each of the subsequent three
years if Mr. Devening remains an employee and the Company meets the specified
earnings target for such year. All options vest upon a Change of Control. The
options terminate 10 years from the date of grant and must be exercised within
90 days after Mr. Devening ceases to be an employee. Consummation of the Offer
will result in a Change of Control resulting in the vesting of all such
options. Upon consummation of the Offer Mr. Devening will receive
approximately $9 million, representing the difference between the option
exercise price of $9.00 and the Share Price, times the 625,593 options held by
Mr. Devening (the "Option Payment").
Sieben Agreement. Pursuant to the terms of a letter agreement ("Sieben
Agreement") with the Company, Mr. Sieben receives an annual salary of $225,000
and, for the first year of his employment, certain temporary living cost
reimbursements up to $2,000. Pursuant to the Sieben Agreement, he is eligible
for an annual bonus of up to 50% of his base salary if certain performance
objectives are met. In addition, Mr. Sieben received a signing bonus of
$65,000 and was granted options to purchase, in the aggregate, 68,814 shares
of Common Stock at an
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exercise price per share of $9.00. In fiscal 1995, Mr. Sieben was granted
additional options to purchase 10,000 shares of Common Stock at an exercise
price per share of $13.00. These options have a vesting schedule similar to
Mr. Devening's. Upon a Change of Control Event (as defined in the Stock
Incentive Plan) or in the event of the death of Mr. Sieben, all outstanding
option shares not previously vested will vest, provided Mr. Sieben is an
employee on the date of such event. In the event Mr. Sieben is terminated for
any reason other than dishonesty or malfeasance, he will be entitled to
receive his base salary for a period of six months from the termination date.
In addition, the Company and Mr. Sieben have entered into a Transition
Employment Agreement and a Stay Bonus Agreement. See "Transition Employment
Agreements" and "Stay Bonus Agreements."
O'Ray Employment Agreement. Effective as of October 9, 1995, Mr. O'Ray and
the Company entered into an employment agreement (the "O'Ray Agreement")
pursuant to which Mr. O'Ray serves as Senior Vice President of the Company and
President of the Specialty Brands Division. The O'Ray Agreement provides for
an annual salary of $210,000 and a signing bonus of $50,000. In addition, Mr.
O'Ray received options to purchase 68,814 shares of Company Common Stock at an
exercise price of $13.50 per share, which have a vesting schedule similar to
Mr. Devening's options adjusted to reflect the different grant date.
If Mr. O'Ray's employment is terminated during the term of the O'Ray
Agreement by the Company for "Cause" (as defined in the O'Ray Agreement) or as
a result of a voluntary termination, the Company will pay Mr. O'Ray his base
compensation through the date specified as his last day of employment. If Mr.
O'Ray's employment is terminated during the term of the O'Ray Agreement by the
Company without Cause, the Company will pay O'Ray an amount equal to one-half
of his annual base compensation.
Rosenthal Agreements. Effective as of December 11, 1995, Mr. Rosenthal and
the Company entered into an employment agreement (the "Rosenthal Agreement")
pursuant to which Mr. Rosenthal serves as Senior Vice President of the Company
and President of the KPR Foods Division. The term of the Rosenthal Agreement
is from December 11, 1995 until December 10, 2000. The Rosenthal Agreement
provides for an annual salary of $175,000 as President of the KPR Foods
Division. Mr. Rosenthal will also receive an annual salary of $40,000 in
payment of his duties as Senior Vice President. In addition, Mr. Rosenthal
received options to purchase 12,000 shares of Company Common Stock at an
exercise price of $13.125 per share, which have a vesting schedule similar to
Mr. Devening's options adjusted to reflect the different grant date.
If Mr. Rosenthal's employment is terminated during the term of the Rosenthal
Agreement by reason of death, the Company shall pay to Rosenthal's estate his
base compensation as though employment was terminated by the Company without
"Cause" (as defined in the Rosenthal Agreement) and the bonus, if any, for the
bonus period in which "Termination Date" (as defined in the Rosenthal
Agreement) occurs. If Mr. Rosenthal's employment is terminated during the term
of the Rosenthal Agreement by disability, Mr. Rosenthal will continue to
receive his base compensation for a period of one year and the bonus, if any,
for the bonus period in which the disability occurs until the Rosenthal
Agreement is terminated. Mr. Rosenthal shall also continue to receive all
compensation payable under the Company's disability benefit programs then in
effect through the expiration of the term of the Rosenthal Agreement.
Thereafter, benefits shall be determined under the retirement, insurance and
other compensation programs. If Mr. Rosenthal's employment is terminated by
the Company for Cause or as a result of a voluntary termination, the Company
will pay Mr. Rosenthal his base compensation through the date specified as his
last day of employment. If Mr. Rosenthal's employment is terminated during the
term of the Rosenthal Agreement by the Company without Cause, the Company will
pay Rosenthal an amount equal to his base compensation for a period not to
exceed one year.
In connection with the acquisition of KPR Holdings, L.P. ("KPR") pursuant to
the Purchase Agreement dated November 14, 1995 (the "KPR Agreement"), the
Company has agreed to certain contingent payments payable in Common Stock of
the Company or cash, at the option of the sellers, aggregating approximately
$15 million over the next three years based on the attainment of specified
earning levels by KPR. As of April 1, 1997 the Company was obligated to pay
$4,308,063. If the sellers elect to receive the contingent payment in Common
Stock of the Company, it will be payable based on a price of $13.125 per
share. The right to this
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contingent payment is currently held by KPR Holdings, Inc. ("KPR Holdings"),
one of the sellers, and Mr. Rosenthal holds an equity position in KPR Holdings.
In addition, in connection with the acquisition of KPR, KPR entered into a
lease agreement with BAM Corporation pursuant to which BAM leases to KPR the
production and office facility located in Fort Worth, Texas (the "Lease"). The
Lease is for a period of ten years, with base rental payments of approximately
$71,000 per month. KPR has the option, pursuant to the Lease, to purchase the
leased facility based on its fair market value. Mr. Rosenthal and other members
of his immediate family own all of the equity securities of BAM Corporation.
Pursuant to a letter dated March 24, 1997 (the "KPR Letter"), the KPR
Agreement has been amended. Pursuant to the KPR Letter, the Company and KPR
Holdings agree to the following changes: (i) KPR Holdings agrees to modify the
Contingent Purchase Price (as defined in the KPR Agreement) provisions so that
KPR no longer has any rights to receive Common Stock at $13.125 but would have
the right to elect to receive IBP stock at $22.50 per share, (ii) the
$4,308,063 payable on April 1, 1997 (the "Original Amount") where KPR Holdings
has the option to choose Common Stock or cash will be payable in cash only, and
(iii) KPR Holdings is entitled to $400,000 plus an additional amount equal to
the product of (i) 328,233 shares (the number of shares KPR Holdings could have
received on April 1, 1997, and (ii) the Share Price payable pursuant to the
Merger Agreement less $13.125. If the consummation of the transaction as
contemplated by the Merger Agreement is not completed, then KPR Holdings is
entitled to the Original Amount in cash or Common Stock. Additionally, IBP will
enter into a guarantee of the real property lease with BAM Corporation in the
same form that Foodbrands has signed.
Katz Agreements. Effective as of December 11, 1995, Mr. Katz and the Company
entered into an employment agreement (the "Katz Agreement") pursuant to which
Mr. Katz serves as Vice President of the Company and President of Kettle Cooked
Foods, an operation of the KPR Foods Division. The term of the Katz Agreement
is from December 11, 1995 until December 10, 2000. The Katz Agreement provides
for an annual salary of $175,000. In addition, Mr. Katz received options to
purchase 12,000 shares of Company Common Stock at an exercise price of $13.125
per share which have a vesting schedule similar to Mr. Devening's options
adjusted to reflect the different grant date.
If Mr. Katz's employment is terminated during the term of the Katz Agreement
by reason of death, the Company shall pay to Katz's estate his base
compensation as though employment was terminated by the Company without "Cause"
(as defined in the Katz Agreement) and the bonus, if any, for the bonus period
in which "Termination Date" (as defined in the Katz Agreement) occurs. If Mr.
Katz's employment is terminated during the term of the Katz Agreement by
disability, Mr. Katz will continue to receive his base compensation for a
period of one year and the bonus, if any, for the bonus period in which the
disability occurs until the Katz Agreement is terminated. Mr. Katz shall also
continue to receive all compensation payable under the Company's disability
benefit programs then in effect through the expiration of the term of the Katz
Agreement. Thereafter, benefits shall be determined under the retirement,
insurance and other compensation programs. If Mr. Katz's employment is
terminated by the Company for Cause or as a result of a voluntary termination,
the Company will pay Mr. Katz his base compensation through the date specified
as his last day of employment. If Mr. Katz's employment is terminated during
the term of the Katz Agreement by the Company without Cause, the Company will
pay Katz an amount equal to his base compensation for a period not to exceed
one year.
Mr. Katz holds an equity position in KPR Holdings which is entitled to the
contingent payment under the KPR Agreement as described above.
LeBreck Agreement. Mr. LeBreck, who is an officer of the Company but not an
executive officer, was a shareholder of TNT Crust, Inc. ("TNT") which was
acquired by the Company on December 18, 1995. Pursuant to the Stock Purchase
Agreement by and among TNT and the shareholders of TNT (the "TNT Sellers") and
the Company (the "TNT Agreement"), the Company agreed to a contingent earnout
payment payable in common stock of the Company (at a price of $11.54 per share)
or cash, at the option of the sellers, not to exceed $6.5 million based on
sales growth to certain customers. Mr. LeBreck, as one of the TNT Sellers, is
entitled to a portion of the contingent payment. Mr. LeBreck was also granted
40,000 options at an exercise price of $12.125 with vesting provisions similar
to Mr. Devening's.
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Pursuant to the letter dated March 24, 1997 (the "TNT Letter"), the TNT
Agreement has been amended. Pursuant to the TNT Letter, the Company will pay
$9.5 million to an agent for the benefit of the TNT Sellers, subject to
successful completion of the Tender Offer. Additionally, the TNT Letter
provides that TNT Seller's tax liability is limited to the lesser of 50% up to
the first $1 million or $500,000. In connection with these changes, TNT
Sellers agree to waive the various earn-out and stock options provisions
contained in the TNT Agreement.
Transition Employment Agreements. The Company has entered into Transition
Employment Agreements ("Agreement") with each of the key employees of the
Company, including all of the executive officers (each an "Executive") other
than Mr. Devening, Mr. Rosenthal and Mr. Katz. The Agreements are effective
for a period of two years (the "Term" of the Agreement) after a "Change of
Control" (as defined in the Agreement), which includes, among other things, a
change in stock ownership whereby a person or group acquires a sufficiently
large block of Common Stock which, when voted with shares solicited by proxy
or written consent solicitation without the benefit of a management supported
proxy, would enable such person or group to elect a member of the Board of
Directors and will include (i) a sale by JLL of all of its interest in the
Company, and (ii) a sale of the Company. If the Executive's employment is
terminated by the Company without "Cause" (as defined in the Agreement) or by
the Executive for "Good Reason" (as defined in the Agreement), within two
years following a Change of Control, then (i) for the remainder of the Term of
the Agreement the Executive shall continue to be paid his or her
"Compensation" (as defined in the Agreement); (ii) all "Stock Options",
"Performance Shares", and shares of "Restricted Stock" (as such terms are
defined in the Agreement) held by the Executive shall vest; and (iii) the
Executive shall have a period of three months to exercise any such Stock
Options. The Agreement also provides that the Company will indemnify the
Executives to the fullest extent permitted by the Certificate of
Incorporation, the Company's bylaws, and Delaware law. The agreements also
contain confidentiality and noncompetition covenants by the Executives and
notice requirements prior to termination; and provides for continuation of
pre-Change of Control pay levels after a Change of Control.
Stay Bonus Agreements. On December 31, 1996, the Company entered into Stay
Bonus Agreements (the "Stay Bonus Agreements") with the following key
employees and officers: Thomas G. McCarley, Patrick A. O'Ray, Raymond J.
Haefele, Bryant P. Bynum, William L. Brady, David J. Clapp, Horst O. Sieben,
William E. Rosenthal, Howard S. Katz, Tony L. Prater, Roger E. LeBreck and
Howard C. Madsen (each, an "Executive"). Each of the Stay Bonus Agreements
provide that the Executive will continue his employment during the one year
period immediately following the Change of Control Event (as defined in the
Stay Bonus Agreements), (the "Stay Period"). The Executive will be paid the
bonus (i) upon the completion of the Executive's employment by the Company for
the Stay Period or (ii) if earlier, upon his termination of employment with
the Company for Good Reason (as defined in the Stay Bonus Agreements) or the
termination of his employment by the Company for reasons other than for Cause
(as defined in the Stay Bonus Agreements) (excluding death or permanent
disability). The transactions contemplated by the Merger Agreement would
constitute a change in control for purposes of the Stay Bonus Agreements. The
aggregate amount payable pursuant to the Stay Bonus Agreements is
approximately $3.2 million.
The Stay Bonus Agreements provide that during the Stay Period if the
Executive voluntarily terminates his employment other than for Good Reason or
if he dies or if he becomes permanently disabled, he shall nonetheless receive
a proportionate part of the Stay Bonus computed by multiplying the Stay Bonus
by a fraction, the numerator of which is the number of days in the Stay Period
the executive is employed by the Company before the occurrence of his
resignation, death or permanent disability and the denominator of which is
365. In addition, the Stay Bonus Agreements also provide a non-competition
agreement for a period of two years unless the Executive is already subject to
a non-competition provision.
Other. The Purchaser agreed in the Merger Agreement to honor, all of the
transition employment, non-compete, consulting, benefit, compensation or
severance agreements of the Company and its subsidiaries in accordance with
their terms and, for a period of not less than twelve months immediately
following the Effective Date (as defined in the Merger Agreement), all of the
Company's written employee severance plans (or policies), in existence on the
date of the Merger Agreement, including, without limitation, the separation
pay plans for corporate officers.
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The Merger Agreement also provides that immediately prior to the Effective
Time (as defined in the Merger Agreement), subject to obtaining any consent
which may be necessary from the holder of outstanding options, the Company
shall cancel and settle, by cash payment to the holders thereof (the "Option
Settlement Amount"), all the outstanding options and warrants to purchase
shares of Common Stock (whether or not such options are currently exercisable
or vested) which were granted prior to the date of the Merger Agreement under
the Company's stock plans and agreements (the "Stock Option Plans"). There are
currently options and warrants to purchase 1,762,752 shares of Common Stock
outstanding at exercise prices varying from $7.875 to $17.53 per share. Except
as otherwise provided pursuant to the terms of the Stock Option Plans, such
Option Settlement Amount with respect to each cancelled option will be an
amount in cash equal to the excess of the Share Price over the per share
exercise price of such cancelled option, multiplied by the number of shares of
Common Stock into which such cancelled options would be exercisable, less any
amounts that the Company is required to withhold any pay over to any federal,
state, local or other tax authorities under applicable law with respect to
such Option Settlement Amount.
By Order of the Board of Directors,
LOGO
Bryant P. Bynum
Corporate Secretary
Oklahoma City, Oklahoma
April 8, 1997
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EXHIBIT A
CHANGES TO SECTION 5.1 OF ARTICLE FIFTH
OF THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
(strikeouts denote deletion and bold denotes additions)
Section 5.1 Transfer Restrictions. In order to preserve the net operating
loss carryovers (including any "net unrealized built-in loss," as defined
under applicable law), capital loss carryovers, general business credit
carryovers, alternative minimum tax credit carryovers and foreign tax credit
carryovers (the "Tax Benefits") to which the Corporation is entitled pursuant
to the Internal Revenue Code of 1986, as amended, or any successor statute
(collectively, the "Code") and the Treasury Regulations promulgated thereunder
(the "Treasury Regulations"), the following restrictions shall apply until the
earlier of (x) the day after the fourteenth (14th) anniversary of the
effectiveness of the merger of Doskocil Companies Incorporated, a Delaware
corporation, with and into the Corporation (the "Merger"), (y) the repeal of
Section 382 of the Code if the Board of Directors determines that the
restrictions are no longer necessary, and (z) the beginning of a taxable year
of the Corporation to which the Board of Directors determines that no Tax
Benefits may be carried forward, unless the Board of Directors shall fix an
earlier or later date in accordance with Section 5.7 of this Article Fifth
(such date is sometimes referred to herein as the "Expiration Date"):
(1) For purposes of this Article Fifth, (a) a "Prohibited Ownership
Percentage" shall mean any ownership of the Corporation's stock that would
cause a Person or Public Group to be a "5-percent shareholder" of the
Corporation within the meaning of Treasury Regulation Section 1.382-
2T(g)(1); (b) a "Public Group" shall have the meaning contained in Treasury
Regulation Section 1.383-2T(f)(13); (c) a "Person" shall mean any
individual, corporation, estate, trust, association, company, partnership,
joint venture, or similar organization (including the Corporation); (d)
"Transfer" refers to any means of conveying legal or beneficial ownership
of shares of stock of the Corporation, whether such means are direct or
indirect, voluntary or involuntary, including, without limitation, the
issuance by the Corporation of shares of stock of the Corporation (without
regard to whether such shares are treasury shares or new shares) and the
transfer of ownership of any entity that owns shares of stock of the
Corporation; and "Transferee" means any Person to whom stock of the
Corporation is Transferred.
(2) From and after the effectiveness of the Merger, no Person shall
Transfer any shares of stock of the Corporation (other than stock described
in Section 1504(a)(4) of the Code, or stock that is not so described solely
because it is entitled to vote as a result of divided arrearages) to any
other Person to the extent that such Transfer, if effective (i) would cause
the Transferee or any Person or Public Group to have a Prohibited Ownership
Percentage; (ii) would increase the ownership percentage of any Transferee
or any Person or Public Group having a Prohibited Ownership Percentage; or
(iii) would create a new Public Group under Treasury Regulation Section
1.382-2T(j)(3)(i).
(3) Any Transfer of shares of stock of the Corporation that would
otherwise be prohibited pursuant to the preceding subsection, including but
not limited to the issuance of stock by the Corporation pursuant to the
exercise of any warrants, options or other rights to acquire stock in the
Corporation, shall nonetheless be permitted if information relating to a
specific proposed transaction is presented to the Board of Directors and
the Board determines that, based on the facts in existence at the time of
such determination, such transaction will not jeopardize the Corporation's
full utilization of the Tax Benefits, based upon an opinion of legal
counsel selected by the Board to that effect. Nothing in this subsection
will be construed to limit or restrict the Board of Directors in the
exercise of its fiduciary duties under applicable law.
(4) NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THIS
ARTICLE FIFTH SHALL NOT APPLY TO ANY TRANSACTION OR SERIES OF TRANSACTIONS
WHICH THE BOARD, IN ITS SOLE DISCRETION UPON THE EXERCISE OF ITS FIDUCIARY
DUTIES IN ACCORDANCE WITH APPLICABLE LAW, DETERMINES TO BE IN THE BEST
INTEREST OF THE STOCKHOLDERS OF THE CORPORATION. IN ADDITION, AND IN ANY
EVENT, THIS ARTICLE FIFTH SHALL NOT APPLY TO ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE AGREEMENT AND PLAN OF MERGER (THE "MERGER AGREEMENTS"),
DATED AS OF MARCH 25, 1997 BY AND AMONG IBP, INC. ("IBP"), IBP SUB, INC.
AND THE COMPANY AND THE TENDER AGREEMENTS (AS DEFINED IN THE MERGER
AGREEMENT).
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