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 28, 1996.
_____ 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 001-11621
F O O D B R A N D S A M E R I C A , I N C .
______________________________________________________
(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 N.W. 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. [X]
As of March 20, 1997, the aggregate market value of the
voting stock held by non-affiliates of the registrant was
$93,447,470.
On March 20, 1997, the number of shares outstanding of the
registrant's common stock, $.01 par value, was 12,465,107 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.
_________________________
TABLE OF CONTENTS
FORM 10-K
Page
PART I
Item 1. Business ..................................... 1
Item 2. Properties ................................... 8
Item 3. Legal Proceedings ............................ 10
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters .................. 11
Item 6. Selected Financial Data ...................... 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......... 14
Item 8. Financial Statements and Supplementary Data .. 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .......... 25
PART III
Item 10. Directors and Executive Officers of the
Registrant ................................... 25
Item 11. Executive Compensation ....................... 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................... 26
Item 13. Certain Relationships and Related Transactions 26
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K .......................... 26
- 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."
On March 25, 1997, Foodbrands America entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 25, 1997, with IBP, inc. ("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, the
Purchaser will commence a tender offer (the "Tender Offer") for
any and all outstanding shares of common stock, par value $.01
per share, of the Company (the "Common Stock") at a price of
$23.40 per share net to the seller in cash. 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
converted into the right to receive $23.40 per share in cash.
Concurrently with the execution and delivery of the Merger
Agreement, Joseph Littlejohn & Levy, L.P., a Delaware limited
partnership, and Joseph Littlejohn & Levy Fund II, L.P., a
Delaware limited partnership (together, "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, The Airlie Group, L.P., a Delaware limited
partnership ("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.
Following the Merger of the Company, the contingent payments
payable as a result of the 1995 acquisitions of KPR Holdings,
L.P. ("KPR") and TNT Crust, Inc. ("TNT") described under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" will be amended. The KPR payment due on
April 1, 1997 will be made in cash and an additional payment of
approximately $3.8 million would also be made following the
completion of the Merger. The contingent payments which can be
earned in 1997 and 1998 could be elected to be taken in cash or
common stock of IBP (at a price of $22.50 per share), at the
option of the sellers. With regards to the TNT contingent
payments, following the consummation of the Merger the previous
contingent earnout provisions would be deleted and the sellers of
TNT would receive a cash payment of $9.5 million.
The Company is a leading producer, marketer and
distributor of frozen and refrigerated processed food products to
the foodservice industry (which encompasses all aspects of away-
from-home food preparation). It targets many of its products to
segments of the foodservice industry which it believes will grow
at rates greater than, and provide profit margins higher than,
those of the foodservice industry in general. The Company
believes it is one of the nation's leading foodservice suppliers
of meat-based pizza toppings, partially baked and self-rising
pizza crusts, burritos, frozen stuffed pastas, breaded
appetizers, soups, sauces and side dishes, and processed meat
products. The Company's customers include wholesale foodservice
distributors, multi-unit restaurant chains, food processors,
grocery store delicatessens and warehouse clubs, many of which
are market leaders within their industry sectors.
Business Strategy. The Company focuses on adding value
to products targeted to market niches experiencing higher than
industry growth in the foodservice industry through distinct
processes such as developing, formulating, 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.
The foodservice industry is fragmented with many
companies manufacturing an extensive variety of food products
prepared away-from-home. The Company strives to distinguish its
products through product quality, solid price/value
relationships, high level of customer service, low production
costs and an ongoing new product development program. The
Company believes these characteristics are critical to growing
revenue and profits in the away-from-home dining and foodservice
industries.
Narrative Description of Business
Marketing. The Company's products are marketed and
distributed through separate sales and marketing organizations
associated with each of its four operational divisions. Each
division is structured to focus on different purchasing groups
within the foodservice industry. Recognizing the unique
requirements of its separate buying sectors, the Company offers
each sector a complete product line designed to meet its specific
needs through a specially trained sales organization. The
Company markets the products of each division as an integrated
line, offering products at several price points to each buying
sector with the convenience of consolidated delivery of a broad
range of products through its centralized distribution system.
The Company believes this focused approach gives it a competitive
advantage with its customers, many of whom are limiting the
number of suppliers from whom they purchase.
Operational Divisions. The Company's operations are
conducted through distinct legal entities which are grouped into
four operational divisions all operating in one industry segment:
(i) the Food Service Division, which produces and markets
processed meat products, meat-based pizza toppings, pepperoni 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, pepperoni 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 and produces processed meat
products for the Food Service Division.
Food Service Division. The Food Service Division
provides approximately 600 products under the brand names of
Doskocil and Wilson Foodservice , as well as private labels.
The division is a leader in processed meats, meat-based pizza
toppings and partially baked pizza crusts, and is recognized as
one of the largest suppliers of pepperoni, meat-based pizza
toppings and partially baked pizza crusts in the United States.
Production plants are based in Kansas and Wisconsin.
The division markets meat-based 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 Sysco Corporation and Alliant Foodservice,
Inc.), buying group associations (such as ComSource), warehouse
clubs (such as Sam's Club) and large food processors (such as
Kraft Pizza Company and Schwan's Sales Enterprises, Inc.).
KPR Foods Division. KPR is a producer and marketer of
meat-based pizza toppings, pepperoni, and soups, sauces and side
dishes to large chain restaurants in the foodservice industry.
The division currently offers approximately 180 products under
private labels and operates two production facilities in Texas.
KPR is also currently involved in a joint venture to manufacture
meat-based pizza toppings and pepperoni in Dublin, Ireland for
sale to pizza operators in Europe, the Middle East, Northern
Africa and Asia.
The business and its products are focused on a limited
number of national restaurant chain customers 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.
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 approximately 660 value-added products
under trademarks that include Fred's , Rotanelli's , Posada and
Pacific Tortilla Kitchen . Production plants are in California,
New Mexico, Missouri and New York.
Specialty Brands sells through brokered sales forces to
major foodservice distributors (such as Sysco Corporation and
Alliant Foodservice, Inc.), to buying group associations (such as
EMCO) and to smaller distributors. Distributors resell products
to restaurants, hotels and school systems. Another group of
Specialty Brands' food brokers sells to grocery stores while an
in-house sales force sells to vending operators (such as VSA) and
convenience stores (such as QuickTrip), either direct or through
distributors. Warehouse clubs and military stores purchase
products through both the division's direct sales force and
brokers.
Deli Division. The Deli Division, a leading provider
of deli meats, offers approximately 130 products under the
Wilson's Continental Deli , American Favorite and Fresh Cuts
labels. In addition, the division markets pizza crusts produced
by the Food Service Division and ethnic products produced by the
Specialty Brands Division to its customers. Production plants
are based in Iowa and Missouri.
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 Grocers, Inc.), regional grocery chains
(such as Hy-Vee Food Stores, Inc.) and independent distributors
to grocery stores (such as CCS Distributors, Inc.). In addition,
approximately one third of the Deli Division's production volume
is manufactured for the Food Service Division.
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. The Company focuses on providing customers with
quality products for meals away-from-home with minimal "back-of-
the-house" preparation. The percentage of net sales for each of
the Company's major product lines for the years 1996, 1995 and
1994, respectively, are (i) processed meat - 40.0%, 46.3%, and
50.1%; (ii) meat-based pizza toppings, pepperoni and pizza crust
- - 32.3%, 23.3%, and 26.8%; (iii) frozen entrees and vegetables -
22.6%, 29.7%, and 22.0% and (iv) soups and sauces - 5.1% in 1996
and no percentage in prior years as this line of business was
acquired in late 1995. Management believes the Company is one of
the market leaders in sales to the foodservice industry of meat-
based pizza toppings, pepperoni and pizza crusts, premium hams,
appetizers and frozen pasta and burritos to convenience stores
and warehouse club stores.
Distribution System. The Company's products are
transported by independent carriers from its distribution/
customer service centers in Edwardsville, Kansas and Rialto,
California or are shipped directly from the production facility
with a view toward achieving an efficient, cost-effective method
of distribution. 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 method. 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 also can
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 of the Company's
products and, by lowering customer shipping costs through the
elimination of higher-cost, fragmented deliveries.
Government Regulation. The Company is subject to
various laws and regulations of federal, state and other
government entities, including 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 are required to 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 and safety
laws and regulations. Management does not believe that the costs
of continued compliance with existing laws and regulations will
have a material adverse effect on the Company's financial
condition.
As with similar companies, the Company's operations and
properties are also subject to a wide variety of increasingly
complex and stringent federal, state and local laws and
regulations, including those governing the use, storage,
handling, generation, treatment, emission, release, discharge and
disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health
and safety of employees. As such, the nature of the Company's
operations exposes it to the risk of claims with respect to
environmental matters. Based upon its experience to date, the
Company believes that the future cost of compliance with existing
environmental laws and regulations, and liability for known
environmental claims, will not have a material adverse effect on
the Company's business or financial position. However, future
events, such as changes in existing laws and regulations or their
interpretation, and more vigorous enforcement policies of
regulatory agencies, may give rise to additional expenditures or
liabilities that could be material.
Seasonality. Net sales of the Company's products and
income from continuing operations have historically been somewhat
higher in the fourth quarter than in any other quarter of the
year. However, the Company believes that it is not subject to a
material seasonality of sales.
Employees. At December 28, 1996 the Company employed
approximately 3,400 persons, approximately 45% of whom are
covered by collective bargaining agreements. A new labor
agreement was approved at the Company's Riverside, California
processing facility in January 1997 with no significant cost
increases. In November 1996, the International Brotherhood of
Teamsters Local 795 lost a certification election at the
Company's Hutchinson, Kansas processing facility. Current labor
contracts extend through various dates in 1998, 1999 and 2001.
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 81 trademarks and 4 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
AmericaTM, Fred's , Posada , Rotanelli's , Pacific Tortilla
KitchenTM, Deli Wrap , Wilson's Continental Deli , Wilson's
Continental Deli LiteTM, American FavoriteTM, Wilson Foodservice,
Butcher Boy , Fresh CutsTM, Poco Posada , Little Juan , Jefferson
MeatsTM, Marquez , Pizza Topper , Mr. NuccioTM, 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
frozen and fresh meat, flour, tortillas, vegetables, cheese and
other dairy products, sugar, other agricultural products and
vegetable oils. 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/or its profits. The Company
utilizes several techniques for reducing the risk of future raw
material price increases including 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. In Fiscal 1996, 10.3% of the Company's sales were
made to PepsiCo Food Systems ("PFS"), a division of PepsiCo,
Inc., which supplies the PepsiCo restaurant businesses.
Competition. The Company operates in highly
competitive markets competing with a significant number of
companies of various sizes, including divisions or subsidiaries
of larger companies. The principal competitive factors in its
markets are price, service, innovative products, and quality.
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.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION
The Company and its representatives may from time to
time make written or oral forward-looking statements with respect
to their current views and estimates of future economic
circumstances, industry conditions, the Company performance,
financial results and other matters affecting the Company.
Although the Company and its representatives believe the
expectations reflected in such forward-looking statements are
reasonable, they give no assurance that such expectations will
prove to have been correct. These forward-looking statements are
subject to a number of factors and uncertainties which could
cause the Company's actual results and experiences to differ
materially from the anticipated results and expectations
expressed in such forward-looking statements. The Company wishes
to caution readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made.
Among the factors that may affect the operating results
of the Company are the following: (i) fluctuations in the cost
and availability of raw materials; (ii) changes in the
availability and relative costs of labor; (iii) market conditions
for finished products, including increased competition; (iv)
effectiveness of advertising and marketing programs; (v)
development of new technology products and production methods by
competitors; (vi) the ability of the Company to make effective
acquisitions and to successfully integrate newly acquired
businesses into existing operations; (vii) risks associated with
being highly leveraged, including cost increases due to rising
interest rates and limitation on use of funds available for
operations; (viii) loss of key executive officers; (ix) changes
in regulations and laws, including changes in accounting
standards, environmental laws, and occupational, health and
safety laws; (x) a change of control which limits the utilization
of NOLs currently available; (xi) the inherent uncertainty
associated with any litigation; and (xii) the effect of, or
changes in, general economic conditions.
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
25,700 square feet research and Leased
office facility
Iowa:
Cherokee 173,900 square feet production Leased
facility on 46 acres
Kansas:
Edwardsville 120,000 square feet distribution, Leased
warehouse and office 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
Concordia 58,500 square feet production Leased
facility on 17.3 acres
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 33,900 square feet office Leased
facilities
Texas:
Dallas 126,000 square feet production Owned
facility on 7.1 acres
Ft. Worth 85,000 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 36,000 square feet production Owned
facility on 1.3 acres
84,500 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 $0.9 million. The production facility located
at Concordia, Missouri is subject to a short-term lease with an
option to purchase. 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, with the exception of the
Edwardsville facility, 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
UNITED REFRIGERATED SERVICES, INC. V. WILSON FOODS
CORPORATION, ET AL, Circuit Court of Saline County, Missouri,
Division Four, Case No. C0492-235, filed September 11, 1992;
CONAGRA, INC. V. WILSON FOODS CORPORATION, ET AL, Circuit Court
of Saline County, Missouri, Division Four, Case No. CO493-282,
filed October 28, 1993: United Refrigerated Services, Inc.
("URS") filed suit against Continental Deli Foods, Inc. (formerly
known as Wilson Foods Corporation), a wholly-owned subsidiary of
the Company ("Continental Deli"), the Company (formerly known as
Doskocil Companies Incorporated) and unaffiliated parties Lopez
Foods, Incorporated (formerly known as Normac Foods, Inc.)
("Lopez") and Thompson Builders of Marshall, Inc. ("Thompson")
claiming property damage as a result of a fire in a warehouse
owned by URS in Marshall, Missouri, in which Continental Deli was
leasing space. ConAgra, Inc. ("ConAgra") also filed suit against
Continental Deli, the Company, Lopez and Thompson seeking to
recover damages for frozen food that was stored in another part
of the Marshall warehouse at the time of the fire and allegedly
damaged.
The fire occurred in a part of the URS warehouse being
leased by Continental Deli in which Continental Deli had produced
sausage patties under contract for Lopez until the contract
terminated in September 1991. Lopez's contractor, Thompson, was
removing Lopez's equipment with a torch when fire broke out and
destroyed a large section of the URS warehouse and its contents.
On March 19, 1997, all parties to the consolidated
suits reached settlement agreements in principle for all claims,
including cross claims, counter claims and third party claims.
As a result of the settlement, the Company will not incur any
charge to its financial statements.
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 ("Nasdaq") under the symbol
"FBAI." Approximately 12,465,107 shares of the Common Stock were
outstanding as of March 20, 1997. The number of holders of
record of Common Stock at March 20, 1997 was approximately 3,420.
The following table sets forth the range of high and
low closing sale prices (bid prices in the case of Nasdaq) for
the Common Stock for each full quarterly period in Fiscal 1996
and Fiscal 1995, respectively, as reported by the New York Stock
Exchange subsequent to February 13, 1996 and as quoted by Nasdaq
prior to such date.
High Low
Fiscal 1996
First Quarter $17 7/8 $11 1/2
Second Quarter $17 3/8 $12 1/8
Third Quarter $13 1/2 $11
Fourth Quarter $15 $12
High Low
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
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 (as hereinafter defined under "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Financial Condition and Liquidity") and the indenture for the
Company's 10 3/4% Senior Subordinated Redeemable Notes due 2006.
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 Meat Division (a separate
industry segment). The historical financial data for the Retail
Meat Division for 1995 has been reported as discontinued
operations and accordingly the historical financial data for all
prior years presented has been restated.
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended Ended
December 28, December 30, December 31, January 1, January 2,
1996 1995 1994 1994 1993
____________ ____________ ____________ ___________ ___________
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales $835,175 $634,700 $512,352 $393,270 $365,950
======== ======== ======== ======== ========
Gross profit $161,726 $134,715 $102,234 $ 57,482 $ 58,104
Total operating expenses 113,230 <F2> 99,612 91,025 <F6> 54,054 49,088
________ ________ ________ ________ ________
Operating income $ 48,496 $ 35,103 $ 11,209 $ 3,428 $ 9,016
======== ======== ======== ======== ========
Income (loss) from
continuing operations $ 15,918 <F3> $ 9,601 $ (5,195) $ (4,374) $ 644
======== ======== ======== ======== ========
Net income (loss) <F1> $ 10,867 <F4> $(34,095) <F5> $(16,198)<F7> $(32,019)<F8> $(26,834)<F9>
======== ======== ======== ======== ========
Earnings (loss) per share:
Income (loss) from
continuing operations $ 1.28 $ 0.77 $ (0.59) $ (0.59) $ 0.11
======== ======== ======== ======== ========
Net income (loss) $ 0.87 $ (2.73) $ (1.85) $ (4.32) $ (4.63)
======== ======== ======== ======== ========
Balance Sheet Data
Total assets $548,526 $532,572 $453,734 $304,560 $255,464
Long-term debt 310,307 305,407 224,260 122,377 134,409
Cash Flow Data
Depreciation $ 18,346 $ 11,509 $ 10,508 $ 7,806 $ 7,525
Amortization <F10> 6,028 4,495 4,123 2,843 2,968
____________________
<FN>
<F1> Includes income (loss), net of applicable income taxes, from operations of the discontinued Retail Meat Division of $(4.1)
million, $(8.5) million, $6.8 million, and $(27.5) million in the fiscal years ended December 30, 1995, December 31, 1994,
January 1, 1994, and January 2, 1993, respectively.
<F2> Includes a net provision of $0.2 million for restructuring and integration. (See Note 4 to the Financial Statements.)
<F3> Includes a tax benefit of $6.7 million from the elimination of the deferred tax asset valuation allowance. (See Note 10 to
the Financial Statements.)
<F4> Includes an extraordinary loss, net of applicable income tax benefit, of $5.1 million associated with the early
extinguishment of debt. (See Note 8 to the Financial Statements).
<F5> Includes the loss on disposal of the Retail Meat Division of $38.5 million and extraordinary loss on early extinguishment
of debt of $1.0 million.
<F6> Includes a $10.6 million provision for restructuring and integration. (See Note 4 to the Financial Statements.)
<F7> Includes an extraordinary loss of $2.5 million associated with the early extinguishment of debt.
<F8> 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.
<F9> Includes a $32.0 million provision from a Retail Meat Division plant closing.
<F10> Amortization of intangible assets only. Does not include amortization of certain other items included in interest expense of
$1.8 million, $1.2 million, $1.3 million and $0.4 million in the fiscal years ended December 28, 1996, December 30, 1995,
December 31, 1994 and January 1, 1994, respectively.
</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") which produces and markets
custom prepared foods and prepared meat items for multi-unit
restaurant chains. The purchase price the Company paid was
approximately $102.1 million, including transaction related costs
of the acquisition. In addition, the Company agreed to certain
contingent payments payable in Common Stock of the Company (at a
price of $13.125 per share) or cash, at the option of the
sellers, aggregating up to approximately $14.3 million, over the
three year period following the acquisition based on the
attainment of specified earnings levels. In 1996, KPR achieved
the required earnings levels and a payment will be made in either
Common Stock of the Company or cash no later than April 1, 1997,
in the amount of $4.3 million, which is net of $0.4 million paid
during 1996 in connection with the settlement of certain
litigation. The accrual of the first payment was recorded at
December 28, 1996, as an increase in goodwill, and any subsequent
payments will also increase goodwill. The acquisition was
accounted for by the purchase method of accounting. The excess
of the total purchase price over fair value of net assets
acquired of $66.0 million and the realized contingent payments of
$4.7 million has been recognized as goodwill and the balance
remaining at December 28, 1996 is being amortized over the
remaining life of 39 years.
On December 18, 1995, the Company purchased all the
outstanding stock of TNT Crust, Inc. ("TNT") which produces and
markets partially baked and frozen self-rising crusts for use by
pizza chains, restaurants and frozen pizza manufacturers and
operates as a part of the Food Service Division. The purchase
price the Company paid was approximately $56.5 million, including
transaction related costs of the acquisition. In addition, 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. As a result of the sales
growth achieved in 1996, $2.9 million of the contingent earnout
payment was earned and recorded as a liability in 1996. This
accrual increased goodwill and any additional amounts will also
increase goodwill. The acquisition was accounted for by the
purchase method of accounting. The excess of the total purchase
price over fair value of net assets acquired of $47.5 million and
the realized contingent earnout payment of $2.9 million has been
recognized as goodwill and the balance remaining at December 28,
1996 is being amortized over the remaining life of 39 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
Specialty Brands, Inc., manufactures frozen food products,
including ethnic Mexican and Italian food products, as well as
appetizers, entrees and portioned meats. The acquisition was
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 Meat Division (a separate industry
segment) 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
Meat 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. 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. During
1995, the Company completed most of the program including the
consolidation of production operations and the closing of certain
production and distribution facilities.
During Fiscal 1996, the Company paid $0.2 million that
was charged against the restructuring reserve and applied $1.0
million of the restructuring reserve to write down the net book
value of certain assets. After extensive review of several
alternative plans, the Company determined that it would not close
one of its manufacturing facilities that had been contemplated
under the 1994 restructuring program and the estimated cost to
complete another project under the program was reduced. As a
result, the Company recorded a $2.1 million credit to the
restructuring and integration provision during 1996.
During Fiscal 1996, the Company established a new
restructuring program consisting of two components. The first
involved the realignment of the Company's ham production by
moving an existing product line into a new production facility
with a charge of $0.6 million. The second component involved the
restructuring of the sales, marketing and administrative
activities of the Specialty Brands Division including shifting
the marketing program to an Everyday Low Pricing concept. The
charge related to the Specialty Brands Division totalled $1.7
million and included severance costs of $0.7 million for
approximately 26 employees and the writedown of certain assets
used in the business. The total charge for the new restructuring
program of $2.3 million was netted with the $2.1 million credit
from the 1994 restructuring program discussed in the preceding
paragraph.
Both of the restructuring programs are substantially
completed as of December 28, 1996.
Income Taxes. After considering utilization
restrictions, the Company has approximately $97.3 million of net
operating loss carryforwards ("NOLs") which will be available as
follows: $78.4 million in 1997, $13.3 million in 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: $21.3 million in 1998, $6.0 million in 1999,
$0.9 million in 2000, $4.2 million in 2001 and $64.9 million
during the years 2002 through 2009. As a result, management
anticipates that the Company's cash income tax liability for the
next three to four 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 the second quarter of 1996, the Company eliminated
its valuation allowance of $43.3 million resulting in a net
deferred tax asset at that time of $68.5 million. Two factors
contributed to the elimination of the valuation allowance. The
first factor was the acquisitions of KPR and TNT in December
1995. The results of operations from these two acquisitions
through the end of the second quarter of 1996 exceeded
expectations and enhanced the Company's projections of taxable
income. The other factor was the debt refinancing which occurred
in May 1996 (see "Financial Condition and Liquidity") which
increased the Company's financial flexibility. As a result of
these two factors, the Company's projected taxable income
indicates that it is more likely than not that the net deferred
tax benefits will be realized in the future.
A majority of the deferred tax assets were attributable
to pre-reorganization temporary differences and NOLs, and the tax
benefit from utilizing the pre-reorganization temporary
differences and NOLs was recorded as a reduction of
Reorganization Value and other intangible assets arising from
bankruptcy. Therefore, the adjustment resulted in the
elimination of the remaining Reorganization Value of $23.0
million and a reduction in intangible assets of $4.2 million. In
addition, a tax benefit of $6.7 million was recorded resulting
from the elimination of the valuation allowance associated with
post-reorganization temporary differences and NOLs.
Results of Operations
Comparability of Periods. Because the acquisitions of
KPR and TNT occurred in mid-December 1995, the financial
statements for the year ended December 30, 1995, do not reflect
the operating results of KPR and TNT for the majority of the
year. The operating results attributable to KPR and TNT for the
year ended December 28, 1996, include net sales of $157.3
million, gross profit of $31.1 million and operating income of
$21.7 million. The operating results attributable to KPR and TNT
subsequent to their acquisitions and included in the Company's
results for the year ended December 30, 1995, were net 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 28, 1996 ("Fiscal 1996")
Compared to the Fiscal Year Ended December 30, 1995 ("Fiscal
1995"). Net sales for Fiscal 1996 of $835.2 million increased
32% over net sales for Fiscal 1995 of $634.7 million. Of the
$200.5 million increase in net sales, $149.6 million was a result
of the KPR and TNT acquisitions in December 1995. The remaining
increase was due to sales volume increases primarily in the Food
Service and Deli Divisions and higher product pricing resulting
from increased raw material costs in the Food Service Division.
Gross profit for Fiscal 1996 of $161.7 million
increased 20%, or $27.0 million, over gross profit for Fiscal
1995 of $134.7 million. This increase included a $29.5 million
increase due to the addition of KPR and TNT and a $2.1 million
increase in the Deli Division due to sales volume increases.
These increases were partially offset by reduced margins in the
Specialty Brands Division resulting from a change in product mix
and in the Food Service Division by margin pressures resulting
from abnormally high and erratic raw material costs in the second
and third quarters of 1996, not all of which could be recovered
through increases in selling prices particularly in two fixed
price contracts. Although raw material prices remained high in
the fourth quarter and are not expected to significantly decrease
during the first half of 1997, margins have improved as raw
material cost swings have declined and the fixed price contracts
have been renegotiated to reduce the impact of changing raw
material costs in 1997.
Selling expenses for Fiscal 1996 of $77.8 million
increased 12%, or $8.3 million, over Fiscal 1995 selling expenses
of $69.5 million. The addition of KPR and TNT accounted for $3.8
million of this increase. The remaining increase was due to (i)
charges incurred at the Specialty Brands Division in 1996
resulting from ineffective promotional programs, which were
eliminated by the Division's new sales management team; (ii)
increased selling and marketing expenditures incurred in response
to competition in the Specialty Brands Division's appetizer and
retail lines; and (iii) increased sales volumes in the Food
Service and Deli Divisions.
General and administrative expenses increased 14%, or
$3.5 million, from $25.6 million in Fiscal 1995 to $29.1 million
in Fiscal 1996. Of this increase, $2.3 million resulted from the
KPR and TNT acquisitions and the remainder was due to normal cost
increases offset in part by the reversal of $0.9 million of
accruals associated with asset dispositions which occurred during
Fiscal 1996.
Amortization of intangibles, a noncash element of
operating expense, increased $1.5 million due to the amortization
of intangibles related to the KPR and TNT purchase offset in part
by a decrease in amortization resulting from the reduction in
intangible assets which occurred in the second quarter of 1996 in
connection with the elimination of the deferred tax asset
valuation allowance.
Interest, financing and other costs increased $13.8
million primarily as a result of the debt incurred for the KPR
and TNT acquisition. The increase was also due to the increase
in outstanding indebtedness and increase in interest rates for
the Senior Subordinated Notes as a result of the debt refinancing
(see "Financial Condition and Liquidity" below).
The Company recorded income tax expense in both Fiscal
1996 and Fiscal 1995 of $7.0 million based on the statutory
(federal and state) tax rate applied to income from continuing
operations after adding back expenses with no tax deductibility.
The Fiscal 1996 expense was before a $6.7 million benefit
resulting from the elimination of the Company's valuation
allowance associated with its deferred tax assets.
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 was 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 was 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 accounted for $14.8 million of the increase. The
remaining increase of $2.5 million related 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 was 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, financing and other costs increased $2.7
million because of the debt associated with the acquisitions
partially offset by the reduction in debt associated with the
sale of the Retail Meat 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 tax deductibility. Income tax expense for Fiscal 1994 of $0.6
million consisted solely of state income taxes.
Discontinued Operations
Discontinued operations included the net sales and
related expenses associated with the Retail Meat Division's
operations. Net sales for Fiscal 1995 and 1994 were $72.4
million and $238.3 million, respectively. Gross profit was $9.1
million and $44.2 million, respectively. Operating income (loss)
was $(4.8) million and $(3.5) million for each year,
respectively. Corporate interest expense allocated to the Retail
Meat Division based on net assets employed was $2.0 million and
$4.4 million for each fiscal year, respectively. Net income
(loss) attributable to the Retail Meat Division after allocated
interest expense was $(4.1) million and $(8.5) million. The loss
for Fiscal 1995 was net of an income tax benefit of $2.9 million
and no income tax benefit or expense was recognized in Fiscal
1994.
Amortization of intangible assets included in operating
expense of the Retail Meat Division was $1.6 million and $3.2
million for Fiscal 1995 and 1994, respectively.
Extraordinary Losses
During Fiscal 1996, Fiscal 1995 and Fiscal 1994, the
Company incurred an extraordinary loss on early extinguishment of
debt of $5.1 million, $1.0 million and $2.5 million,
respectively. The loss incurred in Fiscal 1996 was comprised of
the write off of the remaining unamortized deferred loan costs
associated with the Company's 9 3/4% Notes (as defined under
"Financial Condition and Liquidity" below) and premium fees paid
to redeem the 9 3/4% Notes in connection with the issuance of the
Company's 10 3/4% Notes (as defined under "Financial Condition
and Liquidity" below). The Fiscal 1996 and Fiscal 1995 losses
were net of income tax benefits of $3.6 million and $0.7 million,
respectively. The Fiscal 1995 and Fiscal 1994 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 Fiscal 1995 and the Specialty Brands Division in Fiscal
1994. The loss in Fiscal 1994 included the termination of a
related interest rate swap agreement.
Cash Flows and Capital Expenditures
Fiscal 1996. Net cash provided by operating activities
was $20.1 million for Fiscal 1996 compared to $12.8 million in
Fiscal 1995. The increase in cash resulted primarily from the
results of continuing operations after adding back net noncash
items including depreciation and amortization and a decrease in
deferred charges and other assets. The total increases in cash
for Fiscal 1996 were partially offset by increases in accounts
receivable, inventories, and other current assets, a decrease in
accounts payable and a reduction in accrued liabilities and other
long-term liabilities resulting primarily from payments for
interest and employee benefit programs and by payments related to
the discontinued operations and the restructuring programs.
Expenditures for additions to property, plant and
equipment were $32.7 million. The primary source of the funds
for these expenditures was from cash provided by operations with
approximately $6.6 million of the funding being provided from
capital leases. Approximately $18.6 million of these
expenditures related to expansion of production facilities and
the remainder was for cost savings programs and for replacements
and modifications to existing facilities. Net cash provided by
other investing activities in Fiscal 1996 was $1.1 million
primarily due to proceeds from the sale of property, plant and
equipment.
During Fiscal 1996, the Company paid a $50.0 million
promissory note that was executed as part of the KPR acquisition
by drawing down the remaining balance available under its bank
credit agreement term loan. The Company also paid $6.3 million
in connection with the early extinguishment of debt and received
a net $3.4 million of cash from other financing sources.
Fiscal 1995. Net cash provided by continuing
operations was $25.1 million for Fiscal 1995 compared to $32.5
million in Fiscal 1994. The operations of the discontinued
Retail Meat Division used $12.3 million of cash in Fiscal 1995.
Cash of $33.4 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. 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 Meat
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
million for discontinued operations. Approximately $6.9 million
of these expenditures related to increased capacity in
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 Meat 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
$33.1 million in Fiscal 1994. The Specialty Brands Division
provided $10.6 million of the total for Fiscal 1994. The
operations of the discontinued Retail Meat 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, provisions for restructuring,
integration and plant closings was $20.3 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.
Financial Condition and Liquidity
On May 15, 1996, Foodbrands America completed an
offering of $120 million Senior Subordinated Notes due 2006 at
par with an interest rate of 10 3/4% (the "10 3/4% Notes"). The
10 3/4% Notes are unsecured and subordinated in right of payment
to all existing and future senior indebtedness. The net proceeds
from the offering were used to consummate a tender offer to
repurchase the outstanding 9 3/4% Senior Subordinated Redeemable
Notes due 2000 (the "9 3/4% Notes").
The Company has a credit agreement consisting of (i) a
term loan A for $45.0 million, (ii) a term loan B for $100.0
million, (iii) an acquisition term loan and (iv) a working
capital revolving facility not to exceed $75.0 million ("the
Credit Agreement"). On December 28, 1996, amounts outstanding
under the Credit Agreement consisted of $138.8 million under term
loans A and B, $56.1 million under the acquisition term loan, and
$15.5 million under the working capital revolving facility. The
Credit Agreement includes a subfacility for standby and
commercial letters of credit not to exceed $7.0 million. On
December 28, 1996, there was $3.1 million of standby letters of
credit outstanding under this subfacility. 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.
Simultaneously with the redemption of the 9 3/4% Notes,
the bank credit agreement was amended to extend the maturity of
the $100.0 million term loan B to seven years from four and a
half, thus reducing the quarterly amortization. Payments
totaling $26.6 million will be required in 1997. At December 28,
1996, $50.0 million was available for borrowing under the working
capital revolving facility based on current working capital and
amounts outstanding.
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. The Company expects capital
expenditures for 1997 to equal approximately $26.0 million for
general expansion, modification and maintenance of the Company's
facilities, and will be financed by the Company's cash flow and
capital leases. The Company continually updates its computer
systems. Any new systems and revisions to existing systems will
be financed by cash flows from operations.
The Credit Agreement and the 10 3/4% Notes contain
customary covenants associated with similar facilities, including
maintenance of a specific ratio of total debt to EBITDA (as
defined therein), maintenance of a specific ratio of EBITDA to
Fixed Charges (as defined therein), maintenance of a specific
ratio of EBITDA minus capital expenditures to cash interest
expense, a prohibitation on the payment of dividends and
limitations on stock repurchases, and limitations on certain
liens, acquisitions, mergers, consolidations, sale of assets or
incurrence of debt and additional guarantees, etc. The Company
currently is in compliance with all such covenants. Obligations
under the Credit Agreement and the 10 3/4% Notes are guaranteed
by substantially all of the Company's direct and indirect
subsidiaries. There are currently no restrictions on the ability
of the subsidiaries to transfer funds to the Company in the form
of cash dividends, loans or advances.
The Company's primary raw materials are fresh and
frozen meat, flour, tortillas, vegetables, cheese and other dairy
products, sugar, other agricultural products and vegetable oils.
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/or 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 maximum absolute
dollar value of hedging contracts outstanding during Fiscal 1996,
1995, and 1994 was less than $0.1 million, $3.1 million and $11.8
million, respectively, representing 0%, 0.6% and 2.9% of total
cost of sales for each year. Total realized loss for Fiscal
1996, 1995 and 1994 from futures trading was less than $0.1
million, $0.3 million and $1.7 million, respectively. The
Company's fiscal year-end is typically a seasonal low point in
hedging activities and deferred losses as of the end of Fiscal
1996, 1995 and 1994 were each less than $0.1 million.
Impact of Changing Prices and Inflation
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 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 1996, Fiscal 1995 or Fiscal 1994. 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 1997,"
"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," and "Stock Price Performance Graph" 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 is
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 28, 1996 and December 30, 1995 . . . F-1
Consolidated Statement of Operations
For the Years Ended December 28, 1996,
December 30, 1995 and December 31, 1994 . . . F-2
Consolidated Statement of Stockholders' Equity
For the Years Ended December 28, 1996,
December 30, 1995 and December 31, 1994 . . . F-4
Consolidated Statement of Cash Flows
For the Years Ended December 28, 1996,
December 30, 1995 and December 31, 1994 . . . F-5
Notes to Consolidated Financial Statements . . . . F-8
Report of Independent Accountants. . . . . . . . .F-30
Quarterly Results of Operations (Unaudited). . . .F-31
2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying
Accounts . . . . . . . . . . . . . . . . . .F-32
3. 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. as
amended
3.2 Amended and Restated Bylaws of Foodbrands
America, Inc. as amended
4.1 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc. as
amended (see Exhibit 3.1 above)
4.2 Amended and Restated Bylaws of Foodbrands
America, Inc. as amended (see Exhibit 3.2
above)
4.3 Specimen certificate for Foodbrands America,
Inc. Common Stock, par value $.01 per share
4.4 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000
4.5 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee
4.5a First Supplemental Indenture between Doskocil
and First Fidelity Bank, National
Association, New York, as Trustee dated as of
June 1, 1994
4.5b Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
4.5c Third Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
December 11, 1995
4.5d Fourth Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
May 15, 1996
4.6* Foodbrands America, Inc. 1992 Stock Incentive
Plan as amended
4.7* Foodbrands America, Inc. Associate Stock
Purchase Plan
4.8* Foodbrands America, Inc. Nonqualified
Associate Stock Purchase Plan
4.9 Indenture between Foodbrands America, Inc.
and its subsidiaries, and The Liberty Bank
and Trust Company of Oklahoma City, N.A., as
trustee, dated as of May 15, 1996
4.10 Form of 10 3/4% Senior Subordinated Notes Due
2006
10.1 Credit Agreement among Foodbrands America,
Inc., the Lender parties hereto, The Chase
Manhattan Bank (formerly known as Chemical
Bank) and Citibank, N.A., dated as of
December 11, 1995
10.1a Amendment No. 1 to Credit Agreement among
Foodbrands America, Inc. the Lender parties
thereto, The Chase Manhattan Bank (formerly
known as Chemical Bank) and Citibank, N.A.
dated as of May 13, 1996
10.1b Amendment No. 2 to Credit Agreement among
Foodbrands America, Inc., the Lender parties
thereto, The Chase Manhattan Bank (formerly
known as Chemical Bank) and Citibank, N.A.
dated as of January 31, 1997
10.2 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (see Exhibit 4.4
above)
10.3 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (see Exhibit 4.5 above)
10.3a First Supplemental Indenture between Doskocil
and First Fidelity Bank, National
Association, New York, as Trustee dated as of
June 1, 1994 (see Exhibit 4.5a above)
10.3b Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
(see Exhibit 4.5b above)
10.3c 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 4.5c above)
10.3d Fourth Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
May 15, 1996 (see Exhibit 4.5d above)
10.4 Indenture between Foodbrands America, Inc.
and its subsidiaries and The Liberty Bank and
Trust Company of Oklahoma City, N.A., as
trustee, dated as of May 15, 1996 (see
Exhibit 4.9 above)
10.5 Form of 10 3/4% Senior Subordinated Notes due
2006 (see Exhibit 4.10 above)
10.6 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory
banks thereto
10.7* Foodbrands America, Inc. Key Management Cash
Incentive Plan
10.8* Employment Agreement dated August 2, 1994,
between Doskocil and R. Randolph Devening
10.8a* First Amendment to Employment Agreement dated
December 31, 1996, between Foodbrands
America, Inc. and R. Randolph Devening
10.9* Employment Agreement dated October 9, 1995,
between Patrick A. O'Ray and Foodbrands
America
10.10* Employment Agreement dated December 11, 1995,
between Foodbrands America and William E.
Rosenthal
10.11* Employment Agreement dated December 11, 1995,
between Foodbrands America and Howard S. Katz
10.12* Form of Transition Employment Agreement dated
May 30, 1996, between Foodbrands America,
Inc. and Thomas G. McCarley, Patrick A.
O'Ray, Raymond J. Haefele, Bryant P. Bynum,
William L. Brady, David J. Clapp, and Howard
C. Madsen
10.13* Form of Transition Employment Agreement dated
on or after December 17, 1991, between
Doskocil Companies Incorporated and Horst O.
Sieben
10.13a* First Amendment to Transition Employment
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O.
Sieben
10.13b* Form of Amendment to Transition Employment
Agreement dated December 31, 1996, between
Foodbrands America, Inc. and Horst O. Sieben,
Thomas G. McCarley, Patrick A. O'Ray, Raymond
J. Haefele, Bryant P. Bynum, William L.
Brady, David J. Clapp, and Howard C. Madsen.
10.14* Non-Qualified Stock Option Agreement dated
September 29, 1994 between Doskocil and R.
Randolph Devening
10.14a* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and R. Randolph
Devening
10.15* Form of Non-Qualified Stock Option Agreement
dated June 1, 1996, between Foodbrands
America, Inc. and Thomas G. McCarley, Patrick
A. O'Ray, Raymond J. Haefele, Bryant P.
Bynum, William L. Brady, David J. Clapp,
Howard C. Madsen, William E. Rosenthal, and
Howard S. Katz
10.16* Form of Non-Qualified Stock Option Agreement
dated September 29, 1994, between Foodbrands
America, Inc. and Horst O. Sieben
10.16a* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O.
Sieben
10.17* Separation Pay Plan, dated April 1, 1995
10.18* Deferred Stock Compensation Plan between
Foodbrands America and its non-employee
Directors
10.19* Form of Indemnification Agreement between
Doskocil and its non-employee Directors
10.20 Lease Agreement dated April 4, 1992, between
Doskocil and Millard Refrigerated Services-
Atlanta, as amended
10.21 Stock Purchase Agreement by and between
Doskocil and JLL dated February 16, 1993
10.22 Agreement dated as of March 22, 1993, by and
between Joseph Littlejohn and Levy Fund,
L.P., The Airlie Group, L.P. and Doskocil
10.23 Stockholders Agreement dated as of March 22,
1993, by and between the Airlie Group, L.P.
and Doskocil
10.24 Stock Purchase Agreement between
International Multifoods Corporation and
Doskocil Companies Incorporated dated as of
March 17, 1994
10.25 Agreement, Acknowledgement and Waiver between
Foodbrands America, Inc. and Joseph
Littlejohn & Levy Fund, L.P. dated May 16,
1995
10.26 Doskocil/Airlie Agreement dated March 7, 1995
10.27 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
10.27a 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
10.28 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
10.28a Amended Noncompete Agreement by Foodbrands
America, Inc. and Continental Deli Foods,
Inc. in favor of Thorn Apple Valley, Inc.
dated November 8, 1996
10.29 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
10.29a Letter Agreement between KPR Holdings, Inc.
and Foodbrands America, Inc. dated March 24,
1997
10.30 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
10.30a 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
10.30b 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
10.30c Third Amendment to Stock Purchase Agreement
by and among the shareholders of TNT Crust,
Inc. and Foodbrands America, Inc. dated as of
June 1, 1996
10.30d Letter Agreement between Morgan Stanley
Capital Partners, III, L.P. and Foodbrands
America, Inc. dated March 24, 1997
10.31 Master Equipment Lease Agreement between
NationsBank Leasing Corporation of North
Carolina and Foodbrands America, Inc. dated
January 31, 1996
10.32 Lease Agreement between Bam Corporation and
KPR Holdings, L.P. dated December 11, 1995
10.33 Lease Agreement with Option to Purchase
between Thorn Apple Valley, Inc. and
Continental Deli Foods, Inc. dated as of June
3, 1996
10.34 Master Lease Agreement between BancBoston
Leasing, Inc. and Foodbrands America, Inc.
dated July 11, 1996
10.35* Form of Stay Bonus Agreement dated December
31, 1996, between Foodbrands America, Inc.
and Horst O. Sieben, Bryant P. Bynum, William
L. Brady, Thomas G. McCarley, Raymond J.
Haefele, Howard C. Madsen, Patrick A. O'Ray,
William E. Rosenthal, Howard S. Katz, Tony L.
Prater, Roger E. LeBreck, and David J. Clapp
10.36 Agreement and Plan of Merger by and among
Foodbrands America, Inc. and IBP, inc. and
IBP Sub, Inc. dated March 25, 1997
11.1 Calculation of Earnings Per Share
21.1 Subsidiaries of Foodbrands America, Inc.
23.1 Consent of Independent Accountants
24.1 Power of Attorney
27.1 Financial Data Schedule
* Management contracts and compensatory plans or arrangements
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the
fourth quarter of the fiscal year covered by this
report.
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands, except par value)
<CAPTION>
December 28, December 30,
1996 1995
____________ ____________
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,442 $ 18,207
Receivables 46,582 46,166
Inventories 62,960 58,523
Other current assets 26,342 10,378
________ ________
Total current assets 146,326 133,274
Property, plant and equipment - net of
accumulated depreciation and amortization
of $56,434 in 1996 and $38,188 in 1995 152,778 139,926
Intangible assets, net of accumulated
amortization of $10,623 in 1996 and
$5,375 in 1995 193,390 195,025
Deferred charges and other assets 56,032 39,036
Reorganization value in excess of amounts
allocable to identifiable assets, net
of accumulated amortization of $9,641
in 1995 - 25,311
________ ________
$548,526 $532,572
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 28,368 $ 18,341
Accounts payable 33,298 36,961
Accrued liabilities 47,542 50,294
________ ________
Total current liabilities 109,208 105,596
Long-term debt 310,307 305,407
Other long-term liabilities 73,393 78,340
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, 4,000,0000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 20,000,000
shares authorized, 12,464,080 and
12,467,738 shares issued and
outstanding, respectively 125 125
Capital in excess of par value 151,364 151,248
Retained earnings (deficit) (94,336) (105,203)
Minimum pension liability adjustment (1,535) (2,941)
________ ________
Total stockholders' equity 55,618 43,229
________ ________
$548,526 $532,572
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Net sales $835,175 $634,700 $512,352
Cost of sales 673,449 499,985 410,118
________ ________ ________
Gross profit 161,726 134,715 102,234
Operating expenses:
Selling 77,832 69,483 52,165
General and administrative 29,143 25,634 24,151
Amortization of intangible assets 6,028 4,495 4,123
Provision for restructuring and
integration, net (Note 4) 227 - 10,586
________ ________ ________
Total 113,230 99,612 91,025
________ ________ ________
Operating income 48,496 35,103 11,209
Other income (expense):
Interest and financing costs (31,374) (17,268) (15,102)
Other, net (896) (1,193) (702)
________ ________ ________
Total (32,270) (18,461) (15,804)
________ ________ ________
Income (loss) from continuing operations
before income taxes 16,226 16,642 (4,595)
Income tax provision 308 7,041 600
________ ________ ________
Income (loss) from continuing operations 15,918 9,601 (5,195)
Discontinued operations (Notes 3 and 10):
Loss from operations of the Retail
Meat Division, net of income tax - (4,121) (8,522)
Loss on disposal of the Retail Meat
Division (plus applicable income tax
expense of $10,300) - (38,526) -
Extraordinary loss on early extinguishment
of debt (less income tax benefit)
(Note 8) (5,051) (1,049) (2,481)
________ ________ ________
Net income (loss) $ 10,867 $(34,095) $(16,198)
======== ======== ========
(continued)
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Earnings (loss) per share -
primary and fully diluted:
Income (loss) from continuing
operations $ 1.28 $ 0.77 $(0.59)
Loss from discontinued operations - (0.33) (0.98)
Loss on disposal of discontinued
operations - (3.09) -
Extraordinary loss on early
extinguishment of debt (0.41) (0.08) (0.28)
_______ _______ ______
Net income (loss) $ 0.87 $ (2.73) $(1.85)
======= ======= ======
Weighted average number of
common and common equivalent
shares outstanding - primary
and fully diluted 12,471 12,453 8,727
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
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 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) -
Net Income - - - 10,867 - -
Issuance of new shares 9 - 116 - - -
Cancellation of stock (13) - - - - -
Minimum pension liability
adjustment, net of deferred
tax - - - - 1,406 -
______ ____ ________ _________ _______ _______
Balance, December 28, 1996 12,464 $125 $151,364 $ (94,336) $(1,535) $ -
====== ==== ======== ========= ======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
_______________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing
operations $ 15,918 $ 9,601 $ (5,195)
Adjustments to reconcile income (loss)
from continuing operations to net
cash provided (used) by continuing
operating activities:
Depreciation and amortization 18,346 11,509 10,508
Amortization of intangible assets 6,028 4,495 4,123
Amortization included in interest
expense 1,833 1,195 1,279
Deferred income taxes (306) 6,138 -
Provision for restructuring and
integration, net 227 - 10,586
Deferred compensation 778 460 -
Payments for restructuring/
integration (1,649) (3,240) (1,020)
Changes in:
Receivables (817) (8,413) 430
Inventories (4,997) (2,844) 1,713
Other current assets (1,077) (587) (354)
Deferred charges and other assets 1,084 (219) 357
Accounts payable and accrued
liabilities (12,569) 7,135 9,776
Other long-term liabilities (1,144) (41) 242
Other 113 (51) 22
________ _______ _______
Net cash provided by continuing
operations 21,768 25,138 32,467
Net cash provided (used) by
discontinued operations including
changes in working capital (1,636) (12,294) 627
________ _______ _______
Net cash provided (used) by operating
activities 20,132 12,844 33,094
________ _______ _______
(Continued)
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment $(26,094) $(24,255) $(10,063)
Acquisition of KPR Holdings, L.P. (575) (51,935) -
Acquisition of TNT Crust, Inc. (91) (56,379) -
Acquisition of International Multifoods
Foodservice Corp. - - (137,684)
Payments received on notes receivable 641 358 672
Proceeds from sale of property,
plant and equipment 1,540 130 436
Increase in notes receivable (450) - -
Proceeds from sale of Retail Meat
Division - 65,786 -
Net investing activities of
discontinued operations - (838) (4,557)
________ ________ ________
Net cash used by investing activities (25,029) (67,133) (151,196)
________ ________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations, net
of issuance costs 164,850 147,636 141,154
Borrowings under revolving working
capital facility 222,500 30,000 195,500
Payments on revolving working capital
facility (216,000) (21,000) (203,500)
Payment on promissory note incurred in
conjunction with the acquisition of
KPR Holdings, L.P. (50,000) - -
Payments on capital lease and
debt obligations (117,992) (112,629) (36,720)
Payment on early extinguishment of debt (6,325) - (1,088)
Issuance of common stock 99 195 38,626
Net financing activities of
discontinued operations - (549) 1,016
________ ________ ________
Net cash provided (used) by
financing activities (2,868) 43,653 134,988
________ ________ ________
Increase (decrease) in cash
and cash equivalents (7,765) (10,636) 16,886
Cash and cash equivalents at beginning
of period 18,207 28,843 11,957
________ ________ ________
Cash and cash equivalents at end of
period $ 10,442 $ 18,207 $ 28,843
======== ======== ========
(Continued)
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Supplemental disclosure of noncash
operating activities:
Loss on early extinguishment of
debt $ (2,374) $ (1,722) $ (1,393)
Supplemental disclosure of noncash
investing and financing activities:
Promissory note issued upon
acquisition $ - $ 50,000 $ -
Capital lease obligations-
Continuing operations 6,595 22 550
Discontinued operations - - 2,853
Contingent purchase price expected
to be settled in common stock 7,201 - -
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 32,673 $ 19,944 $ 19,441
Income taxes 263 727 442
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
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 restaurant chains, major foodservice
distributors, warehouse clubs and grocery store
delicatessens, principally in the United States.
In Fiscal 1996, 10.3% of the Company's sales were
made to a single customer.
The Company's annual reporting period ends on the
Saturday nearest December 31. Accordingly, the
annual reporting periods ended December 28, 1996,
December 30, 1995 and December 31, 1994 each
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 (collectively
referred to herein as the "Company").
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 recoverability of deferred tax
assets. Accrued pension costs and postretirement
benefits involve the use of actuarial assumptions,
including selection of discount rates (See Notes 11
and 12). Recoverability of deferred tax assets
considers estimates of projected taxable income
(See Note 10).
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. There were no cash equivalents
at December 28, 1996. Cash equivalents of $10.1
million at December 30, 1995, represent investments
primarily in Commercial Paper and U.S. Government
Securities, carried at cost, which approximates
market. The Company nets its cash balances within
the same bank and presents positive cash balances
as cash and negative balances as accounts payable.
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 customers'
financial conditions are performed periodically,
and the Company generally does not require
collateral from its customers. As of December 28,
1996, the Company had concentrations of cash in
bank balances totaling approximately $6.5 million
located at 6 banks which exposes the Company to
concentrations of credit risk. As of December 30,
1995, the Company had concentrations of cash in
bank balances totaling approximately $4.2 million
located in 6 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.
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.
"Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets" ("Reorganization
Value") was being amortized using the straight-line
method over 20 years. The Reorganization Value was
written off in 1996 as a result of the elimination
of the valuation allowance associated with the
deferred tax assets (see Note 10).
The Company continually reevaluates the carrying
amount of the 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 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 $42.4 million and $25.5
million at December 28, 1996 and December 30, 1995,
respectively. Deferred loan costs associated with
various debt instruments are being amortized over
the terms of the related debt using the interest
method. At December 28, 1996 and December 30,
1995, $7.3 million and $6.1 million, respectively,
remained to be amortized over future periods.
Amortization expense for these loans included in
interest expense for Fiscal 1996, 1995 and 1994 was
approximately $1.8 million, $1.1 million and $1.2
million, respectively. Deferred loan costs of
$2.1 million and $1.7 million were written off in
Fiscal 1996 and 1995, respectively, due to the
early extinguishment of debt.
j. Income Taxes:
The Company utilizes the asset and liability
approach for financial accounting and reporting for
income taxes. 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") and tax credit carryforwards
at each year-end.
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:
In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, Earnings
Per Share and Statement No. 129, Disclosure of
Information About Capital Structure. Statement No.
128 specifies the computation, presentation, and
disclosure requirements for earnings per share.
Statement No. 129 consolidates existing
requirements to disclose certain information
about an entity's capital structure. Both
statements are effective for financial statements
issued for periods ending after December 15, 1997.
Based on the Company's present capital structure
and common stock equivalents (stock options), the
Company does not believe that the implementation of
these new standards will have a material impact on
its financial statements.
m. Reclassifications:
Certain reclassifications have been made to the
prior years' financial statements to conform with
current presentation.
Note 2 Acquisitions
On December 11, 1995, the Company purchased KPR Holdings,
L.P. ("KPR") which produces and markets custom prepared foods and
prepared meat items for multi-unit restaurant chains. The
purchase price the Company paid was approximately $102.1 million,
including transaction related costs of the acquisition. In
addition, the Company agreed to certain contingent payments
payable in Common Stock of the Company (at a price of $13.125 per
share) or cash, at the option of the sellers, aggregating up to
approximately $14.3 million, over the three year period following
the acquisition based on the attainment of specified
earnings levels. In 1996, KPR achieved the required earnings
levels and a payment will be made in either Common Stock of the
Company or cash no later than April 1, 1997, in the amount of
$4.3 million, which is net of $0.4 million paid during 1996 in
connection with the settlement of certain litigation. The
accrual of the first payment was recorded at December 28, 1996,
as an increase in goodwill, and any subsequent payments will also
increase goodwill. The acquisition was accounted for by the
purchase method of accounting. The excess of the total purchase
price over fair value of net assets acquired of $66.0 million and
the realized contingent payments of $4.7 million has been
recognized as goodwill and the balance remaining at December 28,
1996, is being amortized over the remaining life of 39 years.
On December 18, 1995, the Company purchased all the
outstanding stock of TNT Crust, Inc. ("TNT") which produces and
markets partially baked and frozen self-rising crusts for use by
pizza chains, restaurants and frozen pizza manufacturers and
operates as a part of the Food Service Division. The purchase
price the Company paid was approximately $56.5 million, including
transaction related costs of the acquisition. In addition, 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. As a result of the sales
growth achieved in 1996, $2.9 million of the contingent
earnout payment was earned and recorded as a liability in 1996.
This accrual increased goodwill and any additional amounts will
also increase goodwill. The acquisition was accounted for by the
purchase method of accounting. The excess of the total purchase
price over fair value of net assets acquired of $47.5 million and
the realized contingent earnout payment of $2.9 million has been
recognized as goodwill and the balance remaining at December 28,
1996, is being amortized over the remaining life of 39 years.
Both the KPR & TNT contingent earnout payments are included
in other long-term liabilities as an obligation expected to be
settled in Common Stock of the Company.
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
Specialty Brands, Inc., manufactures frozen food products,
including ethnic foods in the Mexican and Italian categories, as
well as appetizers, entrees and portioned meats. The acquisition
was 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, TNT and
Specialty Brands occurred at the beginning of 1994. 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.
Year Ended
__________________
Dec. 30, Dec. 31,
1995 1994
________ ________
(in thousands, except
per share)
Net sales $751,008 $689,577
Operating income 50,418 28,457
Income (loss) from continuing
operations 10,385 (5,349)
Net income (loss) (33,311) (16,352)
Earnings (loss) per share -
primary and fully diluted:
Income (loss) from continuing
operations $ 0.83 $(0.61)
Net income (loss) (2.67) (1.87)
Note 3 Discontinued Operations
On May 30, 1995, the Company sold the assets of its Retail
Meat Division (a separate industry segment) 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 and to pay
expenses related to the sale. The results of operations and cash
flows attributable to the Retail Meat Division were reported as
discontinued operations. Corporate interest expense was
allocated to the Retail Meat 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,
1995 1994
________ ________
Net sales $72,357 $238,308
======= ========
Income (loss) before taxes $(7,020) $ (8,522)
Tax expense (benefit) (2,899) -
_______ ________
Net income (loss) $(4,121) $ (8,522)
======= ========
Included in accounts payable and accrued liabilities at
December 30, 1995, were certain amounts, totalling $2.1 million,
related to the sale of the Retail Meat Division. Payments
associated with these accruals have been reflected in the 1996
consolidated statement of cash flows as net cash flows used by
discontinued operations.
The assets included in the sale of the Retail Meat Division
had significantly different financial and tax basis. Therefore,
for income tax purposes this transaction generated taxable income
of approximately $28.6 million requiring the utilization of net
operating loss carryforwards. The tax affect of this utilization
was approximately $10.9 million.
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 that related to excess
capacity, as well as duplication of activities after the
acquisition of the Specialty Brands Division. 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. During 1995, the Company completed most of the program
including the consolidation of production operations and the
closing of certain production and distribution facilities.
During Fiscal 1996, the Company paid $0.2 million that was
charged against the restructuring reserve and applied $1.0
million of the restructuring reserve to write down the net book
value of certain assets. After extensive review of several
alternative plans, the Company determined that it would not close
one of its manufacturing facilities that had been contemplated
under the 1994 restructuring program and the estimated cost to
complete another project under the program was reduced. As a
result, the Company recorded a $2.1 million credit to the
restructuring and integration provision during 1996.
During Fiscal 1996, the Company established a new
restructuring program consisting of two components. The first
involved the realignment of the Company's ham production by
moving an existing product line into a new production facility
with a charge of $0.6 million. The second component involved the
restructuring of the sales, marketing and administrative
activities of the Specialty Brands Division including shifting
the marketing program to an Everyday Low Pricing concept. The
charge related to the Specialty Brands Division totalled $1.7
million and included severance costs of $0.7 million for
approximately 26 employees, and the writedown of certain assets
used in the business. The total charge for the new restructuring
program of $2.3 million was netted with the $2.1 million credit
from the 1994 restructuring program.
Both of the restructuring programs are substantially
completed as of December 28, 1996.
Note 5 Inventories
Inventories at December 28, 1996 and December 30, 1995 are
summarized as follows (in thousands):
1996 1995
_______ _______
Raw materials and supplies $19,234 $20,147
Work in process 8,499 7,365
Finished goods 35,227 31,011
_______ _______
$62,960 $58,523
======= =======
Note 6 Property, Plant and Equipment
Property, plant and equipment at December 28, 1996 and
December 30, 1995 is summarized as follows (in thousands):
1996 1995
________ ________
Land $ 3,673 $ 3,053
Buildings and improvements 79,948 68,461
Machinery and equipment 117,960 97,705
Construction in progress 7,631 5,621
________ ________
209,212 174,840
Less accumulated depreciation and
amortization 56,434 38,188
________ ________
152,778 136,652
Assets to be disposed of, net - 3,274
________ ________
$152,778 $139,926
======== ========
Note 7 Accrued Liabilities
Accrued liabilities at December 28, 1996 and December 30,
1995 are summarized as follows (in thousands):
1996 1995
_______ _______
Interest $ 3,579 $ 5,883
Salaries, wages and payroll taxes 8,994 9,285
Employee medical benefits 9,418 11,361
Workers' compensation benefits 2,146 2,404
Pension and retirement benefits 5,106 2,098
Marketing expenses 7,334 5,360
Provisions for facility restructuring
and integration 504 1,240
Provisions for discontinued operations,
closed and sold facilities 480 2,968
Other 9,981 9,695
_______ _______
$47,542 $50,294
======= =======
Note 8 Long-term Debt
Long-term debt, more fully described below, at December 28,
1996 and December 30, 1995 consisted of the following (in
thousands):
1996 1995
________ ________
Notes payable to banks $210,380 $160,500
Promissory note - 50,000
10 3/4% Senior Subordinated Notes
due 2006 120,000 -
9 3/4% Senior Subordinated Redeemable
Notes due 2000, net of discount - 109,741
Capital lease obligations 8,295 3,507
________ ________
338,675 323,748
Less current maturities 28,368 18,341
________ ________
$310,307 $305,407
======== ========
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 28, 1996, approximates face value.
The fair value of the $120.0 million of 10 3/4% Senior
Subordinated Notes due 2006 (the "10 3/4% Senior Subordinated
Notes"), based on the quoted market price at December 28, 1996,
is $127.2 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):
$26.6 in 1997, $36.1 in 1998, $38.0 in 1999, $28.2 in 2000, $28.6
in 2001 and $172.9 thereafter.
Notes Payable to Banks
On December 11, 1995, the Company consummated a credit
agreement and at December 28, 1996, it consists of (i) a Term
loan A for $45.0 million, (ii) a Term loan B for $100.0 million,
(iii) an acquisition term loan for $56.1 million and (iv) a
working capital revolving facility not to exceed $75.0 million
("the Credit Agreement"). The proceeds received on December 11,
1995, 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. On
December 28, 1996, there was $3.1 million of standby letters of
credit outstanding under this subfacility. 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 2.75% for the
Term loan B and plus 2.50% for all other loans (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 The Chase Manhattan Bank's prime rate, plus 1.75% for
the Term loan B and plus 1.50% for all other loans (subject to
adjustment based on the Company's Total Debt Ratio, as defined).
On December 28, 1996 the weighted average interest rate on the
borrowings was 8.17%. Interest on the borrowings is payable
quarterly in arrears. The Term loan A requires quarterly
payments which began in May 1996 while the Term loan B and the
acquisition term loan require quarterly payments beginning in May
1997. To the extent not previously paid, all borrowings under
the Credit Agreement are due and payable February 28, 2003. At
December 28, 1996, borrowings under the working capital revolving
facility were $15.5 million and $50.0 million was available for
borrowing at that date based on accounts receivable and inventory
balances.
In connection with the extinguishment of debt discussed
above, the Company incurred an extraordinary loss in 1995 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 10 3/4 % 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
paid 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.
10 3/4% Senior Subordinated Notes
On May 15, 1996, Foodbrands America completed an offering of
$120 million 10 3/4% Senior Subordinated Notes. The net proceeds
from the offering were used to consummate a tender offer to
repurchase the outstanding 9 3/4% Senior Subordinated Redeemable
Notes due 2000 (the "9 3/4% Notes"). Interest on the 10 3/4%
Senior Subordinated Notes is payable on May 15 and November 15 of
each year beginning with November 15, 1996. The 10 3/4% Senior
Subordinated Notes are unsecured and subordinated in right of
payment to all existing and future senior indebtedness, including
borrowings under the Credit Agreement.
Terms of the 10 3/4% Senior Subordinated Notes include a
guarantee by substantially all of Foodbrands America's direct and
indirect subsidiaries, all of which are wholly-owned. The
guarantees are joint and several, full, complete and
unconditional. There are no restrictions on the ability of any
subsidiaries to transfer funds to Foodbrands America in the form
of cash dividends, loans or advances. Foodbrands America is a
holding company with no assets, liabilities, or operations other
than its investments in its subsidiaries. The non-guarantors are
inconsequential, individually and in the aggregate to the
consolidated financial statements, and separate financial
statements of the guarantors are not presented because management
has determined that they would not be material to investors.
In connection with the early extinguishment of the 9 3/4%
Notes, the Company incurred an extraordinary loss in 1996 of $5.1
million, net of $3.6 million income tax benefit. The loss was
comprised of premium fees paid to redeem the 9 3/4% Notes and the
remaining unamortized deferred loan costs and debt discount
associated with these notes.
Leases
The Company leases one facility and various equipment and
vehicles under agreements which are classified as capital leases.
The building lease had an original term of 25 years and the lease
is in the first of four renewal option periods for fifteen years
each. 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 28, 1996 and December
30, 1995 are as follows (in thousands):
1996 1995
_______ _______
Buildings $ 2,666 $ 2,666
Machinery and equipment 12,674 6,079
_______ _______
15,340 8,745
Accumulated amortization 6,478 4,207
_______ _______
$ 8,862 $ 4,538
======= =======
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 28, 1996 (in thousands):
Capital Operating
Leases Leases
_______ _________
1997 $ 2,345 $ 5,202
1998 1,759 4,774
1999 1,613 4,300
2000 1,505 4,030
2001 2,411 976
Future years 531 3,378
_______ _______
Total minimum lease payments 10,164 $22,660
Amounts representing interest 1,869 =======
_______
Present value of net minimum
payments 8,295
Current portion 1,755
_______
$ 6,540
=======
The Company's rental expense for operating leases was (in
millions) $6.4, $5.3 and $4.5 for the fiscal years ended December
28, 1996, December 30, 1995 and December 31, 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 1996 was $0.8 million and for 1995 was
less than $0.1 million.
Note 9 Stockholders' Equity
Effective November 1, 1996, the remaining balance of
approximately 13,000 shares of Common Stock reserved for issuance
to pre-bankruptcy equity holders was cancelled pursuant to the
terms on which such reserve was previously established.
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 28, 1996, the Company has warrants outstanding
to purchase 290,342 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 consisted of the following components (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
________________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Current:
Federal $ 409 $ 103 $ -
State 205 800 600
______ ______ _______
614 903 600
______ ______ _______
Deferred:
Federal 5,408 5,168 -
State 987 970 -
______ ______ _______
6,395 6,138 -
______ ______ _______
Change in valuation allowance (6,701) - -
______ ______ _______
Total $ 308 $7,041 $ 600
====== ====== =======
</TABLE>
The income tax provision (benefit) applicable to the net
losses from discontinued operations associated with the Retail
Meat Division were (in thousands):
Fiscal Year Ended
____________________
Dec. 30, Dec. 31,
1995 1994
________ ________
Operations of the Retail Meat Division
Deferred expense (benefit) $(2,899) $ -
======= =======
Disposal of the Retail Meat Division:
Current expense:
Federal $ 278 $ -
State 469 -
Deferred expense 9,553 -
_______ _______
$10,300 $ -
======= =======
The effective tax rate on income from continuing operations
differs from the statutory rate as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
________________________________
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
(Liability Method)
________________________________
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% (34.0)%
Tax effect of:
Amortization of
intangible assets 4.2 4.0 18.4
State taxes, net of
federal benefit 4.4 3.1 8.6
Limitation on recognition
of tax benefit - - 20.1
Other (0.4) 0.2 -
_____ _____ _____
43.2 42.3 13.1
Change in valuation allowance (41.3) - -
_____ _____ _____
1.9% 42.3% 13.1%
===== ===== =====
</TABLE>
At December 28, 1996 and December 30, 1995, the deferred tax
assets and deferred tax liabilities were as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
_______ _______
<S> <C> <C>
Deferred tax assets:
Retiree medical benefit plan accruals $25,909 $26,962
Pension plan accruals 2,794 5,487
Plant closing accruals 318 2,036
Employee compensation and benefits
accruals 5,771 5,531
Other accrued expenses 3,265 978
Net operating loss carryforwards 33,389 43,385
AMT credits 885 -
_______ _______
Total deferred tax assets 72,331 84,379
_______ _______
Deferred tax liabilities:
Capitalized leases (568) (420)
Accumulated depreciation (1,630) (3,046)
Intangible assets (5,342) (4,787)
Other (489) (72)
_______ _______
Total deferred tax liabilities (8,029) (8,325)
_______ _______
Net deferred tax assets 64,302 76,054
Valuation allowance - (43,314)
_______ _______
Net deferred tax assets 64,302 32,740
Current portion 21,870 7,248
_______ _______
Noncurrent portion $42,432 $25,492
======= =======
</TABLE>
In the second quarter of 1996, the Company eliminated its
valuation allowance resulting in a net deferred tax asset at that
time of $68.5 million. Two factors contributed to the
elimination of the valuation allowance. The first factor was the
acquisitions of KPR and TNT in December 1995. The results of
operations from these two acquisitions through the end of the
second quarter of 1996 exceeded expectations and enhanced the
Company's projections of taxable income. The other factor was
the debt refinancing which occurred in May 1996 which increased
the Company's financial flexibility. As a result of these two
factors, the Company's projected taxable income indicates that it
is more likely than not that the net deferred tax benefits
will be realized in the future.
A majority of the deferred tax assets were attributable to
pre-reorganization temporary differences and NOLs, and the tax
benefit from utilizing the pre-reorganization temporary
differences and NOLs was recorded as a reduction of
Reorganization Value and other intangible assets arising from
bankruptcy. Therefore, the adjustment in 1996 resulted in the
elimination of the remaining Reorganization Value of $23.0
million and a reduction in intangible assets of $4.2 million. In
addition, a tax benefit of $6.7 million was recorded resulting
from the elimination of the valuation allowance associated
with post-reorganization temporary differences and NOLs. In
1995, the Company reduced the Reorganization Value by $12.1
million as a result of utilizing pre-reorganization net operating
loss carryforwards.
At December 28, 1996, after considering utilization
restrictions, the Company's tax loss carryforwards approximated
$97.3 million. The net operating loss carryforwards which are
subject to utilization limitations due to ownership changes may
be utilized to offset future taxable income as follows: $78.4
million in 1997, $13.3 million in 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: $21.3
million in 1998, $6.0 million in 1999, $0.9 million in 2000, $4.2
million in 2001 and $64.9 million during the years 2002 through
2009.
Note 11 Pension Plans
Foodbrands America and certain subsidiaries maintain
employee benefit plans covering most employees. All full-time
employees of the Company who have obtained the age of 21, have
completed one year of employment and are not subject to a
collective bargaining agreement or one of the other plans
described below 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.
Hourly employees at the Jefferson, Wisconsin facility who
have obtained the age of 18 and have completed one year of
employment are permitted to contribute up to 15% of their annual
gross earnings, not to exceed the limit set by the Internal
Revenue Service, to a 401(k) plan. The Company contributes $0.10
for every hour worked by participants enrolled in the plan. In
addition, approximately 14% of the Company's employees are
covered under two other profit sharing plans.
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 28, 1996
and December 30, 1995 is as follows (in thousands):
1996 1995
_______ _______
Actuarial present value of benefit
obligations:
Vested benefit obligation $64,368 $65,972
======= =======
Accumulated benefit obligation $66,368 $68,229
======= =======
Projected benefit obligation $66,368 $68,229
Plan assets at fair value 59,528 55,170
_______ _______
Projected benefit obligation
in excess of plan assets 6,840 13,059
Unrecognized net actuarial loss -
difference in assumptions and actual
experience (2,517) (5,010)
Adjustment required to recognize
additional minimum liability 2,475 4,743
_______ _______
Accrued pension cost $ 6,798 $12,792
======= =======
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 plans at the
Jefferson and Riverside facilities have, in prior years, exceeded
the minimum funding requirements.
Pension costs of the defined benefit plans for fiscal 1996,
1995 and 1994 are composed of the following, based on expected
long-term rates of return of 9.0%, 9.0% and 8.5% and discount
rates of 7.75%, 7.5% and 8.75% 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 7.75%, 7.5% and 8.75% for the plan at
the Cherokee facility and expected long-term rates of return of
9.0% and 9.0% and discount rates of 7.75% and 7.5% for fiscal
1996 and 1995, respectively for the plan at the Riverside
facility which became effective in 1995 (in thousands):
<TABLE>
<CAPTION>
December 28, December 30, December 31,
1996 1995 1994
____________ ____________ ____________
<S> <C> <C> <C>
Service cost for benefits
earned during the year $ 555 $ 465 $ 370
Interest cost on projected
benefit obligation 4,933 5,121 4,991
Return on plan assets (4,635) (4,094) (4,330)
Amortization of transition
obligation and unrecognized
prior service cost 23 11 -
______ ______ ______
Total pension cost $ 876 $1,503 $1,031
====== ====== ======
</TABLE>
Expenses for all of the Company's retirement plans for
fiscal years 1996, 1995 and 1994 were (in millions) $2.9, $2.6
and $2.1, respectively.
In connection with a new labor agreement which was approved
in January 1997 at the Company's Riverside facility, the defined
benefit plan at that facility has been frozen and no future
benefits will accrue under the plan. A new defined contribution
plan has been established at the Riverside facility in February
1997 which allows employees to contribute up to 15% of their
compensation. Terms of the agreement require the Company to
match the employees' contributions at a 50% level up to 3% and to
make a seed contribution of 1/2% of the employees' compensation.
Note 12 Postretirement Medical Benefits
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.
The components of net periodic postretirement benefit cost
for the years ended December 28, 1996, December 30, 1995 and
December 31, 1994 were as follows (in thousands):
1996 1995 1994
______ ______ ______
Service cost $ 290 $ 231 $ 241
Interest on accumulated benefit
obligation 5,277 5,399 5,372
Other (33) (61) (21)
______ ______ ______
Net periodic postretirement
benefit cost $5,534 $5,569 $5,592
====== ====== ======
The actuarial and recorded liabilities for these
Postretirement Medical Benefits at December 28, 1996 and December
30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
_______ _______
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents $62,481 $68,095
Actives not fully eligible 6,627 6,203
Actives fully eligible 214 226
_______ _______
69,322 74,524
Assets at fair value (271) (1,056)
_______ _______
Accumulated postretirement benefit obligation
in excess of plan assets 69,051 73,468
Unrecognized net gain (loss) (4,917) (6,443)
Unrecognized prior service cost 367 379
_______ _______
Liability recognized on the balance sheet 64,501 67,404
Less current portion 6,365 7,854
_______ _______
Noncurrent liability for postretirement
medical benefits $58,136 $59,550
======= =======
</TABLE>
For measuring the accumulated postretirement medical benefit
obligation, a 9.86% annual rate of increase in the per capita
claims cost was assumed for 1997. 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 rates used in determining the accumulated obligation was
7.75%, 7.5% and 8.75% for fiscal 1996, 1995 and 1994,
respectively. The expected long-term rate of return on plan
assets was 6.0% for fiscal years 1996, 1995 and 1994.
If the health care cost trend rate were increased 1.0%, the
accumulated benefit obligation as of December 28, 1996 would have
increased by $1.5 million. The effect of this change on the
aggregate of service and interest cost for the year ended
December 28, 1996 would be an increase of $0.1 million.
Note 13 Stock Incentive Plans
At December 28, 1996, the Company had three stock-based
compensation plans, which are described below. The Company
applies APB Opinion No. 25 ("Opinion 25") and related
Interpretations in accounting for its plans. FASB Statement No.
123 "Accounting for Stock-Based Compensation" ("SFAS 123") was
issued by the FASB in 1995 and, if fully adopted, changes the
methods for recognition of cost on plans similar to those of the
Company. Adoption of SFAS 123 is optional; however, pro forma
disclosures as if the Company adopted the cost recognition
requirements under SFAS 123 in 1995 are presented below.
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 of Common Stock, of which 11,666 shares lapsed
prior to vesting. The Company also granted 105,000 performance
shares of Common Stock, of which 51,670 shares were issued and
vested. The Company has also granted under the Plan Common Stock
options at option prices ranging from $9.00 to $15.25 per share,
which vest over a three to five year period and expire after ten
years. A summary of the status of the Company's stock options as
of December 28, 1996, December 30, 1995 and December 31, 1994 and
changes during the year ended on those dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
_______________________ _______________________ _______________________
Wgtd. Avg. Wgtd. Avg. Wgtd. Avg.
Shares Exer. Price Shares Exer. Price Shares Exer. Price
______ ___________ ______ ___________ ______ ___________
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 1,406,861 $10.71 1,121,194 $10.00 241,666 $14.07
Granted 14,500 13.02 475,128 12.44 913,528 9.08
Exercised (8,000) 12.38 (19,686) 9.89 - -
Forfeited (15,500) 13.29 (169,775) 10.75 (34,000) 14.26
_________ _________ _________
Outstanding at end
of year 1,397,861 $10.70 1,406,861 $10.71 1,121,194 $10.00
========= ====== ========= ====== ========= ======
Options exercisable
at year end 645,401 $10.84 457,753 $10.57 212,105 $12.18
========= ====== ========= ====== ========= ======
</TABLE>
As of December 28, 1996, the stock options outstanding under
the Plan have a weighted-average remaining contractual life of
7.7 years and 329,443 Common Stock options are available for
future issuance. The weighted average fair value of options
granted during 1996 and 1995, respectively, was $8.14 and $7.68.
The compensation cost that was charged against income for this
Plan for all outstanding options for Fiscal 1996 and 1995,
respectively, was $0.8 million and $0.5 million.
The fair value of each option granted during 1996 and 1995 is
estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions used for
grants in 1996 and 1995, respectively: (1) dividend yield of 0%
for both years; (2) expected volatility of 48% and 49%; (3)
risk-free interest rates ranging from 6.4% to 6.8% for 1996 and
5.7% to 7.6% for 1995; and (4) expected life of 8 years for the
options granted in both years.
Director Option Agreement - The Company issued 25,000 Common
Stock options during 1995 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, expire after
ten years, and all options remain outstanding at December 28,
1996. In accordance with Opinion 25, no compensation costs were
recorded in 1996 or 1995 for these options. The fair value of
these options granted during 1995 was estimated at $5.08 on the
date of grant using the Black-Scholes option-pricing model with
the following assumptions: dividend yield of 0%, expected life of
8 years, expected volatility of 49%, and risk-free interest rate
of 7.1%.
Employee Stock Purchase Plan - The Company implemented an
Associate Stock Purchase Plan ("Stock Purchase Plan") in 1996
which authorized the issuance of up to 100,000 shares of Common
Stock to its eligible employees. Under the terms of the Stock
Purchase Plan, employees can choose each year to have up to three
percent of their annual base earnings withheld to purchase the
Company's Common Stock. The purchase price of the stock is 90
percent of the lower of its fair market value at the beginning of
the plan year or the end of the plan year. It is estimated that
the Company will sell approximately 27,000 shares to employees in
1997 under this Stock Purchase Plan. In accordance with Opinion
25, no compensation cost has been recognized in connection with
the Stock Purchase Plan. However, as required by SFAS 123, the
following pro forma disclosures include the fair value of the
employees' purchase rights which was estimated using the Black-
Scholes model with the following assumptions for 1996: dividend
yield of 0%; an expected life of 1 year; expected volatility of
48%; and risk-free interest rate of 5.9%.
Had compensation cost for the Company's three stock-based
compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the
method of SFAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated
below (in thousands except per share data):
<TABLE>
<CAPTION>
As Reported Pro Forma As Reported Pro Forma
1996 1996 1995 1995
___________ _________ ___________ _________
<S> <C> <C> <C> <C>
Net income (loss) $10,867 $10,505 $(34,095) $(34,371)
Earnings (loss) per share -
primary and fully diluted $0.87 $0.84 $(2.73) $(2.76)
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure
are not necessarily indicative of future amounts as SFAS 123 does
not apply to awards prior to 1995.
Note 14 Commitments and Contingencies
The Company has committed to minimum purchases of raw
materials, supplies and equipment for delivery at various times
in 1997. The total of such commitments at December 28, 1996, is
approximately $15.6 million.
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.
In September 1992, United Refrigerated Services, Inc. ("URS")
filed suit against Continental Deli Foods, Inc. (formerly known
as Wilson Foods Corporation), a wholly-owned subsidiary of
Foodbrands America ("Continental Deli") the Company (formerly
known as Doskocil Companies Incorporated) and unaffiliated
parties Lopez Foods, Incorporated (formerly known as Normac
Foods, Inc.) ("Lopez") 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 Continental Deli was leasing space. ConAgra, Inc.
("ConAgra") also filed suit against Continental Deli, the
Company, Lopez and Thompson seeking to recover damages for frozen
food that was stored in another part of the Marshall warehouse at
the time of the fire and allegedly damaged.
The fire occurred in a part of the URS warehouse being leased
by Continental Deli in which Continental Deli had produced
sausage patties under contract for Lopez until the contract
terminated in September 1991. Lopez's contractor, Thompson, was
removing Lopez's equipment with a torch when fire broke out and
destroyed a large section of the URS warehouse and its contents.
On March 19, 1997, all parties to the consolidated suits
reached settlement agreements in principle for all claims,
including cross claims, counter claims and third party claims.
As a result of the settlement, the Company will not incur any
charge to its financial statements.
Note 15 Subsequent Event
On March 25, 1997, Foodbrands America entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 25, 1997, with IBP, inc. ("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, the
Purchaser will commence a tender offer (the "Tender Offer") for
any and all outstanding shares of common stock, par value $.01
per share, of the Company (the "Common Stock") at a price of
$23.40 per share net to the seller in cash. 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
converted into the right to receive $23.40 per share in cash.
Concurrently with the execution and delivery of the Merger
Agreement, Joseph Littlejohn & Levy, L.P., a Delaware limited
partnership, and Joseph Littlejohn & Levy Fund II, L.P., a
Delaware limited partnership (together, "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, The Airlie Group, L.P., a Delaware limited
partnership ("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.
Following the Merger of the Company, the contingent payments
payable as a result of the 1995 acquisitions of KPR Holdings,
L.P. ("KPR") and TNT Crust, Inc. ("TNT") described in Note 2 will
be amended. The KPR payment due on April 1, 1997 will be made in
cash and an additional payment of approximately $3.8 million
would also be made following the completion of the Merger. The
contingent payments which can be earned in 1997 and 1998 could be
elected to be taken in cash or common stock of IBP (at a price of
$22.50 per share), at the option of the sellers. With regards to
the TNT contingent payments, following the consummation of the
Merger the previous contingent earnout provisions would be
deleted and the sellers of TNT would receive a cash payment of
$9.5 million.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Foodbrands America, Inc.
We have audited the consolidated financial statements and the
financial statement schedule of Foodbrands America, Inc. and
subsidiaries as listed in Item 14(a) of this Form 10-K. These
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
financial statement schedule 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 28, 1996 and December 30, 1995, and the
consolidated results of their operations and their cash flows for
the years ended December 28, 1996, December 30, 1995 and December
31, 1994 in conformity with generally accepted accounting
principles.
In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
February 18, 1997, except as to
the information presented in the
last paragraph of Note 14, and the
information presented in Note 15,
for which the date is March 26, 1997.
<PAGE>
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 28, 1996 and
December 30, 1995.
(Amounts are in thousands except per share data.)
<TABLE>
<CAPTION>
Quarter
______________________________________
Year ended December 28, 1996 First Second<F1> Third Fourth
________ ________ ________ ________
<S> <C> <C> <C> <C>
Net sales $185,997 $200,710 $218,656 $229,812
Gross profit 39,309 40,050 40,307 42,060
Income from continuing
operations 2,122 8,707 1,910 3,179
Net income 2,122 3,656 1,910 3,179
Earnings per share, primary
and fully diluted:
Income from continuing
operations $0.17 $0.70 $0.15 $0.26
Net income 0.17 0.29 0.15 0.26
</TABLE>
<TABLE>
<CAPTION>
Quarter
_______________________________________
Year ended December 30, 1995 First<F2> Second<F3> Third Fourth<F4>
________ __________ _____ _________
<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 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 from continuing
operations $ 0.14 $0.16 $0.20 $0.27
Net income (loss) (0.05) (3.07) 0.20 0.19
_______________________
<FN>
<F1> Net income includes extraordinary loss on early extinguishment of debt of $5.1
million, net of income tax benefit of $3.6 million and a tax benefit of $6.7
million from the elimination of the deferred tax asset valuation allowance.
<F2> Net income includes net loss from operating activities of the discontinued Retail
Meat Division of $2.3 million.
<F3> Net income includes net loss from operating activities of the discontinued Retail
Meat Division of $1.8 million and loss on disposal of the division of $38.5
million.
<F4> Net income includes extraordinary loss on early extinguishment of debt of $1.0
million, net of income tax benefit of $0.7 million.
</TABLE>
<PAGE>
<TABLE>
Schedule II
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollar amounts in thousands)
<CAPTION>
Balance at Charged to Charged to
Beginning of Costs and Other Balance at
Description Period Expenses Accounts Deductions End of Period
___________ ____________ __________ __________ __________ _____________
<S> <C> <C> <C> <C> <C>
1996:
Allowance for doubtful
accounts $396 $ 24 $ - $ (1) $419
1995:
Allowance for doubtful
accounts <F1> 428 15 - (47) 396
1994:
Allowance for doubtful
accounts <F2> 466 170 - (233) 403
____________________
<FN>
<F1> In 1995, Foodbrands America acquired TNT Crust, Inc. The purchase included the
accounts receivables of the company net of an allowance for doubtful accounts of
$25 which has been included in the balance at beginning of period for 1995.
<F2> In 1994, Foodbrands America acquired International Multifoods Foodservice Corp.
The purchase included the accounts receivables of the company net of an allowance
for doubtful accounts of $67 which has been included in the balance at beginning
of period for 1994.
</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: March 27, 1997
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 March 27, 1997
/s/ R. Randolph Devening Board, President,
R. Randolph Devening Chief Executive
Officer and Director
Senior Vice President March 27, 1997
/s/ Horst O. Sieben and Chief Financial
Horst O. Sieben Officer
Vice President, March 27, 1997
/s/ William L. Brady Controller and
William L. Brady Assistant Corporate
Secretary
/s/ R. Theodore Ammon* Director March 27, 1997
R. Theodore Ammon
/s/ Richard T. Berg* Director March 27, 1997
Richard T. Berg
/s/ Dort A. Cameron III* Director March 27, 1997
Dort A. Cameron III
/s/ Terry M. Grimm* Director March 27, 1997
Terry M. Grimm
Director _____ __, 1997
Peter A. Joseph
/s/ Paul S. Levy* Director March 27, 1997
Paul S. Levy
/s/Angus C. Littlejohn, Jr.* Director March 27, 1997
Angus C. Littlejohn, Jr.
/s/ Paul W. Marshall* Director March 27, 1997
Paul W. Marshall
*By /s/ William L. Brady
William L. Brady
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
_______ ___________
3.1 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc. as
amended (incorporated herein by reference to
Exhibit 3.1 to Form 10-Q filed on July 26,
1996)
3.2 Amended and Restated Bylaws of Foodbrands
America, Inc. as amended (incorporated herein
by reference to Exhibit 3.2 to Form 10-Q filed
on July 26, 1996)
4.1 Amended and Restated Certificate of
Incorporation of Foodbrands America, Inc. as
amended (see Exhibit 3.1 above)
4.2 Amended and Restated Bylaws of Foodbrands
America, Inc. as amended (see Exhibit 3.2
above)
4.3 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)
4.4 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)
4.5 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)
4.5a 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)
4.5b 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)
4.5c Third Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
December 11, 1995 (incorporated herein by
reference to Exhibit 4.7 to Annual Report on
Form 10-K filed on February 26, 1996)
4.5d Fourth Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
May 15, 1996 (incorporated herein by reference
to Exhibit 4.18 to Form 10-Q filed on July 26,
1996)
4.6* Foodbrands America, Inc. 1992 Stock Incentive
Plan as amended (incorporated herein by
reference to Exhibit 4.11 to Form 10-Q filed
on July 26, 1996)
4.7* Foodbrands America, Inc. Associate Stock
Purchase Plan (incorporated herein by
reference to Exhibit 4.14 to Form 10-Q filed
on July 26, 1996)
4.8* Foodbrands America, Inc. Nonqualified
Associate Stock Purchase Plan (incorporated
herein by reference to Exhibit 4.15 to Form
10-Q filed on July 26, 1996)
4.9 Indenture between Foodbrands America, Inc. and
its subsidiaries, and The Liberty Bank and
Trust Company of Oklahoma City, N.A., as
trustee, dated as of May 15, 1996
(incorporated herein by reference to Exhibit
4.16 to Form 10-Q filed on July 26, 1996)
4.10 Form of 10 3/4% Senior Subordinated Notes Due
2006 (incorporated herein by reference to
Exhibit 4.17 to Form 10-Q filed on July 26,
1996)
10.1 Credit Agreement among Foodbrands America,
Inc., the Lender parties hereto, The Chase
Manhattan Bank (formerly known as 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)
10.1a Amendment No. 1 to Credit Agreement among
Foodbrands America, Inc. the Lender parties
thereto, The Chase Manhattan Bank (formerly
known as Chemical Bank) and Citibank, N.A.
dated as of May 13, 1996 (incorporated herein
by reference to Exhibit 10.52 to Form 10-Q
filed on July 26, 1996)
10.1b Amendment No. 2 to Credit Agreement among
Foodbrands America, Inc., the Lender parties
thereto, The Chase Manhattan Bank (formerly
known as Chemical Bank) and Citibank, N.A.
dated as of January 31, 1997
10.2 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (see Exhibit 4.4
above)
10.3 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (see Exhibit 4.5 above)
10.3a First Supplemental Indenture between Doskocil
and First Fidelity Bank, National Association,
New York, as Trustee dated as of June 1, 1994
(see Exhibit 4.5a above)
10.3b Second Supplemental Indenture between
Foodbrands and First Fidelity Bank, N.A., New
York, as Trustee, dated as of May 16, 1995
(see Exhibit 4.5b above)
10.3c 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 4.5c above)
10.3d Fourth Supplemental Indenture between
Foodbrands America, Inc. and First Fidelity
Bank, N.A., New York, as Trustee, dated as of
May 15, 1996 (see Exhibit 4.5d above)
10.4 Indenture between Foodbrands America, Inc. and
its subsidiaries and The Liberty Bank and
Trust Company of Oklahoma City, N.A., as
trustee, dated as of May 15, 1996 (see Exhibit
4.9 above)
10.5 Form of 10 3/4% Senior Subordinated Notes due
2006 (see Exhibit 4.10 above)
10.6 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)
10.7* Foodbrands America, Inc. Key Management Cash
Incentive Plan (incorporated herein by
reference to Exhibit 10.11 to Annual Report on
Form 10-K filed on February 26, 1996)
10.8* 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)
10.8a* First Amendment to Employment Agreement dated
December 31, 1996, between Foodbrands America,
Inc. and R. Randolph Devening
10.9* Employment Agreement dated October 9, 1995,
between Patrick A. O'Ray and Foodbrands
America (incorporated herein by reference to
Exhibit 10.18 to Annual Report on Form 10-K
filed on February 26, 1996)
10.10* Employment Agreement dated December 11, 1995,
between Foodbrands America and William E.
Rosenthal (incorporated herein by reference to
Exhibit 10.19 to Annual Report on Form 10-K
filed on February 26, 1996)
10.11* Employment Agreement dated December 11, 1995,
between Foodbrands America and Howard S. Katz
(incorporated herein by reference to Exhibit
10.20 to Annual Report on Form 10-K filed on
February 26, 1996)
10.12* Form of Transition Employment Agreement dated
May 30, 1996, between Foodbrands America, Inc.
and Thomas G. McCarley, Patrick A. O'Ray,
Raymond J. Haefele, Bryant P. Bynum,
William L. Brady, David J. Clapp, and Howard
C. Madsen (incorporated herein by reference to
Exhibit 10.21 to Form 10-Q filed on July 26,
1996)
10.13* Form of Transition Employment Agreement dated
on or after December 17, 1991, between
Doskocil Companies Incorporated and Horst O.
Sieben (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)
10.13a* First Amendment to Transition Employment
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O. Sieben
(incorporated herein by reference to Exhibit
10.22 to Annual Report on Form 10-K filed on
February 26, 1996)
10.13b* Form of Amendment to Transition Employment
Agreement dated December 31, 1996, between
Foodbrands America, Inc. and Horst O. Sieben,
Thomas G. McCarley, Patrick A. O'Ray, Raymond
J. Haefele, Bryant P. Bynum, William L. Brady,
David J. Clapp, and Howard C. Madsen
10.14* 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)
10.14a* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and R. Randolph
Devening (incorporated herein by reference to
Exhibit 10.24 to Annual Report on Form 10-K
filed on February 26, 1996)
10.15* Form of Non-Qualified Stock Option Agreement
dated June 1, 1996, between Foodbrands
America, Inc. and Thomas G. McCarley, Patrick
A. O'Ray, Raymond J. Haefele, Bryant P. Bynum,
William L. Brady, David J. Clapp, Howard C.
Madsen, William E. Rosenthal, and Howard S.
Katz (incorporated herein by reference to
Exhibit 10.25 to Form 10-Q, filed on July 26,
1996)
10.16* Form of Non-Qualified Stock Option Agreement
dated September 29, 1994, between Foodbrands
America, Inc. and Horst O. Sieben
(incorporated herein by reference to Exhibit
10.22 to Annual Report on Form 10-K filed on
March 7, 1995)
10.16a* First Amendment to Non-Qualified Stock Option
Agreement dated as of December 15, 1995,
between Foodbrands America and Horst O. Sieben
(incorporated herein by reference to Exhibit
10.26 to Annual Report on Form 10-K filed on
February 26, 1996)
10.17* Separation Pay Plan, dated April 1, 1995
(incorporated herein by reference to Exhibit
10.25 to Form 8-B filed on May 17, 1995)
10.18* Deferred Stock Compensation Plan between
Foodbrands America and its non-employee
Directors (incorporated herein by reference to
Exhibit 10.28 to Annual Report on Form 10-K
filed on February 26, 1996)
10.19* 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)
10.20 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)
10.21 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)
10.22 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)
10.23 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)
10.24 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)
10.25 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)
10.26 Doskocil/Airlie Agreement dated March 7, 1995
(incorporated herein by reference to Current
Report on Form 8-K filed on March 7, 1995)
10.27 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)
10.27a 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)
10.28 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)
10.28a Amended Noncompete Agreement by Foodbrands
America, Inc. and Continental Deli Foods, Inc.
in favor of Thorn Apple Valley, Inc. dated
November 8, 1996 (incorporated herein by
reference to Exhibit 10.40 to Form 10-Q filed
on November 8, 1996)
10.29 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)
10.29a Letter Agreement between KPR Holdings, Inc.
and Foodbrands America, Inc. dated March 24,
1997
10.30 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)
10.30a 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)
10.30b 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)
10.30c Third Amendment to Stock Purchase Agreement by
and among the shareholders of TNT Crust, Inc.
and Foodbrands America, Inc. dated as of June
1, 1996 (incorporated herein by reference to
Exhibit 10.53 to Form 10-Q filed on July 26,
1996)
10.30d Letter Agreement between Morgan Stanley
Capital Partners, III, L.P. and Foodbrands
America, Inc. dated March 24, 1997
10.31 Master Equipment Lease Agreement between
NationsBank Leasing Corporation of North
Carolina and Foodbrands America, Inc. dated
January 31, 1996 (incorporated herein by
reference to Exhibit 10.45 to Annual Report on
Form 10-K filed on February 26, 1996)
10.32 Lease Agreement between Bam Corporation and
KPR Holdings, L.P. dated December 11, 1995
(incorporated herein by reference to Exhibit
10.46 to Annual Report on Form 10-K filed on
February 26, 1996)
10.33 Lease Agreement with Option to Purchase
between Thorn Apple Valley, Inc. and
Continental Deli Foods, Inc. dated as of June
3, 1996 (incorporated herein by reference to
Exhibit 10.54 to Form 10-Q filed on July 26,
1996)
10.34 Master Lease Agreement between BancBoston
Leasing, Inc. and Foodbrands America, Inc.
dated July 11, 1996 (incorporated herein by
reference to Exhibit 10.57 to Form 10-Q filed
on November 8, 1996)
10.35 Form of Stay Bonus Agreements dated December
31, 1996, between Foobrands America, Inc. and
Horst O. Sieben, Bryant P. Bynum, William L.
Brady, Thomas G. McCarley, Raymond J. Haefele,
Howard C. Madsen, Patrick A. O'Ray, William E.
Rosenthal, Howard S. Katz, Tony L. Prater,
Roger E. LeBreck, and David J. Clapp
10.36 Agreement and Plan of Merger by and among
Foodbrands America, Inc. and IBP, inc., and
IBP Sub, Inc. dated March 25, 1997
11.1 Calculation of Earnings Per Share
21.1 Subsidiaries of Foodbrands America, Inc.
23.1 Consent of Independent Accountants
24.1 Power of Attorney
27.1 Financial Data Schedule
* Management contracts and compensatory plans or arrangements
Exhibit 10.1b
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of January 31, 1997 (this
"Amendment"), among Foodbrands America, Inc., a Delaware
corporation (the "Borrower"), the financial institutions
parties thereto (the "Lenders"), The Chase Manhattan Bank,
formerly known as Chemical Bank, a New York banking corporation,
as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), collateral agent (in such capacity, the
"Collateral Agent") and Issuing Lender (in such capacity, the
"Issuing Lender"), and Citibank, N.A. as managing agent (in such
capacity, the "Managing Agent").
PRELIMINARY STATEMENTS.
(1) The Borrower, the Lenders, the Administrative
Agent, the Collateral Agent, the Issuing Lender and the Managing
Agent have entered into the Credit Agreement dated as of
December 11, 1995 and into Amendment No. 1 to the Credit
Agreement dated as of May 13, 1996 (the Credit Agreement as so
amended is referred to herein as the "Credit Agreement").
(2) The parties hereto have agreed to amend the Credit
Agreement as hereinafter set forth.
(3) Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in
the Credit Agreement.
In consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto
agree, on the terms and subject to the conditions set forth
herein, as follows:
SECTION 1. Amendment of the Credit Agreement. The
Credit Agreement is amended as follows:
(a) The definition of "EBITDA" in the Credit Agreement
is amended to add the following after subsection (e) thereof:
", minus noncash gains for such period (other than any
noncash gain realized by the Borrower prior to January
1, 1997)."
(b) Section 7.15 of the Credit Agreement is amended to
reflect the following maximum Total Debt Ratios for the following
fiscal periods:
Fiscal Period Ending: Ratio:
September 30, 1997 5.00 to 1.00
December 31, 1997 4.50 to 1.00
March 31, 1998 4.50 to 1.00
June 30, 1998 4.50 to 1.00
September 30, 1998 4.50 to 1.00
December 31, 1998 4.00 to 1.00
(c) Section 7.16 of the Credit Agreement is amended to
reflect the following permissible Consolidated Interest Expense
Coverage Ratios for the following fiscal periods:
Fiscal Period Ending: Ratio:
March 31, 1997 1.20 to 1.00
June 30, 1997 1.20 to 1.00
September 30, 1997 1.20 to 1.00
December 31, 1997 1.50 to 1.00
March 31, 1998 1.50 to 1.00
June 30, 1998 1.75 to 1.00
September 30, 1998 1.75 to 1.00
December 31, 1998 2.00 to 1.00
(d) Exhibit M to the Credit Agreement is amended to
delete Item 2 thereof and renumber the remaining items therein
accordingly.
SECTION 2. Representations and Warranties. The
Borrower represents and warrants to each of the Lenders, the
Administrative Agent, the Collateral Agent and the Issuing
Lender that:
(a) This Amendment has been duly authorized, executed
and delivered by it and constitutes its legal, valid and
binding obligation, enforceable in accordance with its
terms except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity
(regardless of whether such enforceability is considered in
a proceeding at law or in equity).
(b) Before and after giving effect to this Amendment,
the representations and warranties set forth in Article IV
of the Credit Agreement are true and correct in all
material respects with the same effect as if made on the
date hereof, except to the extent such representations and
warranties expressly relate to an earlier date.
(c) Before and after giving effect to this Amendment,
no Event of Default or Default has occurred and is
continuing.
SECTION 3. Conditions to Effectiveness. The
amendments to the Credit Agreement set forth in this Amendment
shall become effective as of the date first above written
when the Administrative Agent shall have received:
(a) counterparts of this Amendment that, when taken
together, bear the signatures of the Borrower, the
Subsidiary Guarantors, and the Required Lenders;
(b) a certificate of the Secretary or Assistant Secretary
of each of the Borrower and the Subsidiary Guarantors dated
as of the date hereof and certifying (i) that attached
thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of the Borrower or such
Subsidiary Guarantor, as the case may be, authorizing the
execution, delivery and performance of this Amendment, and
that such resolutions have not been modified, rescinded or
amended and are in full force and effect; (ii) that the
certificate of incorporation and bylaws of the Borrower or
such Subsidiary Guarantor, as the case may be, in effect as
of the date hereof have not been amended, modified, altered
or rescinded since May 9, 1996 or that the certificate of
incorporation and bylaws of the Borrower or such Subsidiary
Guarantor, as the case may be, in effect as of the date
hereof are attached thereto; and (iii) as to the incumbency
and specimen signature of each officer executing this
Amendment or any other document delivered in connection
herewith on behalf of the Borrower or such Subsidiary
Guarantor, as the case may be;
(c) a certificate of another officer as to the incumbency
and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to (b) above;
and
(d) such other documents as the Lenders or their counsel or
Sidley & Austin, counsel for the Administrative Agent, may
reasonably request.
SECTION 4. Reaffirmation. The Borrower reaffirms, and
by acknowledging this Amendment in the space provided below each
Subsidiary Guarantor reaffirms, its obligations under each Loan
Document (including without limitation the Guarantee Agreement)
to which it is a party, which Loan Documents remain in full force
and effect.
SECTION 5. Credit Agreement. Except as specifically
amended hereby, the Credit Agreement shall continue in full force
and effect in accordance with the provisions thereof as in
existence on the date hereof. After the date hereof, any
reference to the Credit Agreement shall mean the Credit Agreement
as amended hereby.
SECTION 6. Applicable Law. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
SECTION 7. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall
constitute but one contract.
SECTION 8. Expenses. The Borrower agrees to reimburse
the Administrative Agent for its reasonable out-of-pocket
expenses in connection with this Amendment, including
the reasonable fees, charges and disbursements of Sidley &
Austin, counsel for the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first written above.
FOODBRANDS AMERICA, INC.
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
THE CHASE MANHATTAN BANK,
individually, as Administrative
Agent, as Collateral Agent and as
Issuing Lender,
By: /s/ Timothy J. Storms
______________________
Name: Timothy J. Storms
Title: Managing Director
CITIBANK, N.A., individually and as
Managing Agent,
By: /s/ Charles S. Foster
______________________
Name: Charles S. Foster
Title: Vice President
CREDIT LYONNAIS, CAYMAN
ISLANDS BRANCH,
By:____________________________
Name:
Title:
CREDIT LYONNAIS, NEW YORK
BRANCH,
By:____________________________
Name:
Title:
FIRST BANK NATIONAL
ASSOCIATION,
By: /s/ Bradley R. Sprang
______________________
Name: Bradley R. Sprang
Title: Commercial Banking
Officer
THE FIRST NATIONAL BANK OF
BOSTON,
By: /s/ Kimberly F. Harris
_______________________
Name: Kimberly F. Harris
Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ Christina M. Rashid
________________________
Name: Christina M. Rashid
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH,
By: /s/ Armund J. Schoen, Jr.
__________________________
Name: Armund J. Schoen, Jr.
Title: V.P. & Deputy General
Manager
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
By: /s/ Hachiro Hosoda
___________________
Name: Hachiro Hosoda
Title: Senior Vice President
NATIONSBANK OF TEXAS, N.A.,
By: /s/ Bianca Hemmen
__________________
Name: Bianca Hemmen
Vice President: Senior Vice
President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR,
By: /s/ G. Kevin Dooley
____________________
Name: G. Kevin Dooley
Title: Vice President
By: /s/ William C. Maier
_____________________
Name: William C. Maier
Title: VP-Group Manager
LIBERTY BANK AND TRUST
COMPANY OF OKLAHOMA CITY, N.A.,
By: /s/ Mark C. Demos
__________________
Name: Mark C. Demos
Title: Vice President
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES,
By: /s/ Stephan A. Wiedemann
_________________________
Name: Stephan A. Wiedemann
Title: Vice President
By: /s/ Thomas A. Foley
____________________
Name: Thomas A. Foley
Title: Assistant Vice
President
BANQUE PARIBAS,
By:
Name:
Title:
By:
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
By: /s/ Kathleen A. Zarn
_____________________
Name: Kathleen A. Zarn
Title: Vice President
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor LGT Senior Secured
Management, Inc. as Portfolio
Advisor
By: /s/ Gregory L. Smith
_____________________
Name: Gregory L. Smith
Title: Vice President
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASETS 2 (ROSA2)
By: Chancellor LGT Senior Secured
Management, Inc. as Portfolio
Advisor
By: /s/ Gregory L. Smith
_____________________
Name: Gregory L. Smith
Title: Vice President
AERIES FINANCE LTD.,
By: /s/ Andrew Ian Wignall
________________________
Name: Andrew Ian Wignall
Title: Director
CAPTIVA FINANCE LTD.,
By: /s/ Derrie Boggess
___________________
Name: Derrie Boggess
Title: Director
ACKNOWLEDGED AND AGREED TO:
JOS. COPPERFIELD & SONS, INC.
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
CONTINENTAL DELI FOODS, INC.
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
SPECIALTY BRANDS, INC.
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
FBAI INVESTMENTS CORPORATION
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
BRENNAN PACKING CO., INC.
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
NATIONAL SERVICE CENTER, INC.
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
DOSKOCIL FOOD SERVICE COMPANY, L.L.C.
By: Continental Deli Foods, Inc., as Member
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
KPR HOLDINGS, L.P.
By: Jos. Copperfield & Sons, Inc.
General Partner
By: /s/ Bryant P. Bynum
____________________
Name: Bryant P. Bynum
Title: Vice President
EXHIBIT 10.8a
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is made by
and between Foodbrands America, Inc., a Delaware corporation, and
R. Randolph Devening and dated as of the 31st day of December,
1996.
W I T N E S S E T H:
WHEREAS, Foodbrands America, Inc., a Delaware
corporation (the "Corporation"), is the successor to Doskocil
Companies Incorporated within the meaning of paragraph 7(c) of
the Employment Agreement dated as of August 2, 1994 between
Doskocil Companies Incorporated and R. Randolph Devening (the
"1994 Agreement"); and
WHEREAS, the Corporation and the Executive desire to
make certain changes in the 1994 Agreement and have agreed to
state those changes in this document amending the 1994 Agreement
(the "Amendment");
NOW, THEREFORE, in consideration of the mutual
covenants and representations contained herein, the parties
hereto agree as follows:
1. Definitions. Unless otherwise defined herein,
defined terms shall have the meaning ascribed to them in the 1994
Agreement.
2. Accounting Treatment. In the event that the
Corporation becomes a party to a transaction which is otherwise
intended to qualify for "pooling of interests" accounting
treatment then (A) this Amendment shall, to the extent
practicable, be interpreted so as to permit such accounting
treatment, and (B) to the extent that the application of clause
(A) of this sentence does not preserve the availability of such
accounting treatment, then, to the extent that any provision of
this Amendment disqualifies the transaction as a "pooling"
transaction (including, if applicable, this entire Amendment),
such provision shall be null and void as of the date hereof. All
determinations under this paragraph shall be made by the
accounting firm whose opinion with respect to "pooling of
interests" is required as a condition to the consummation of
such transaction.
3. Paragraph 1.2 Compensation and General Benefits.
The first sentence of paragraph 1.2(a) of the 1994 Agreement
shall be deleted and the following sentence substituted therefor:
"(a) The Corporation shall pay to the
Executive a base salary of not less than
$700,000 per annum effective retroactively to
January 1, 1996, such annual compensation
being herein sometimes referred to as the
'base salary.'"
Paragraph 1.2(b) of the 1994 Agreement shall be amended
to read, in its entirety, as follows:
"(b) The Corporation shall also pay to
the Executive a performance bonus for each
fiscal year beginning after December 31, 1995,
of 100% of his base salary for such year (the
'Target Bonus') if the Corporation meets its
EBIT target for such year (as set by the
Compensation Committee of the Board in the
annual budget after consulting with senior
management of the Corporation), plus a minimum
of 25% of his annual base salary for such year
if the Corporation exceeds such EBIT target by
10% or more, plus a minimum of an additional
25% of his base salary for such year if the
Corporation exceeds such EBIT target by 20% or
more; provided, however, that the Executive
remains an employee of the Corporation on the
last day of each such fiscal year for which a
performance bonus is being paid, except that,
in the event of the Executive's death or his
qualification for a benefit under the Corpora-
tion's long term disability plan (the 'LTD
Plan'), the Executive shall be entitled to the
entire bonus to which he would otherwise be
entitled had he remained an employee of the
Corporation as of the last day of the year in
which such event of death or qualification
occurred. The performance bonus for any year
shall be payable as soon as administratively
feasible after it is determined and shall be
paid in the form of cash or Common Stock
(based on market price on the date of payment)
or a combination thereof as selected by the
Executive, but subject to such limitation on
the number of shares as the Compensation
Committee of the Board may have set for such
year. For the purposes of this Agreement and
subject to extraordinary events, 'EBIT' shall
mean the Corporation's consolidated earnings
before interest and taxes, all determined in
accordance with generally accepted accounting
principles ('GAAP') consistently applied."
Paragraph 1.2(c)(iv) of the 1994 Agreement shall be
amended to read, in its entirety, as follows:
"(iv) In the event of a 'Change of
Control' (as defined below), all outstanding
option shares not previously vested shall vest
on the date of such event provided the
Executive is an employee of the Corporation on
such date. For the purpose of the 1994
Agreement and this Amendment, 'Change of
Control' means each of the following:
(A) A change in shareholder
ownership of the Corporation, whereby a
person or company, or a group of affili-
ated persons or companies, acquires a
sufficiently large block of Common Stock,
which, when voted together with the
shares of Common Stock of all other
shareholders of the Corporation whose
proxies or written consents are solicited
by such person, company or group without
the benefit of a management supported
proxy statement at any meeting of the
shareholders of the Corporation, would
enable such person or company or group of
affiliated persons or companies to elect
a majority of the members of the Board;
(B) A merger or consolidation of
the Corporation with and into another
company, other than with or into a
wholly-owned subsidiary of the Corpora-
tion, where the Corporation is not the
surviving company; or the Corporation is
the surviving company and the members of
the Board immediately prior to the merger
or consolidation do not constitute a
majority of the Board of the surviving
company after the merger or consolida-
tion;
(C) Whether such transaction
results in a Change of Control pursuant
to subparagraphs (A) or (B) above or not,
the following events shall be deemed a
Change of Control: (i) a transaction or
series of transactions pursuant to which
Joseph Littlejohn & Levy Fund, L.P.,
transfer substantially all of its benefi-
cial ownership (within the meaning of
Rule 13d-3 promulgated under the Secu-
rities Exchange Act of 1934, as amended
(the 'Exchange Act')) in the capital
stock of the Corporation of any other
person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Ex-
change Act), or (ii) substantially all of
the outstanding capital stock of the
Corporation is acquired by any person or
group in one or more related transac
tions; or
(D) Any other kind of a corporate
reorganization or takeover where: (i)
the Corporation is not the surviving
company; or the Corporation is the sur-
viving company and the members of the
Board immediately prior to the reorgani-
zation do not constitute a majority of
the Board.
With respect to the events described in sub-
paragraphs (B), (C) and (D) above, the Change
of Control shall be deemed to occur on the
later of the transaction described in such
subparagraph or a shareholder vote approving
such a transaction."
4. Employment Period. Paragraph 4.1 Duration of the
1994 Agreement is hereby amended to provide that the Employment
Period which commenced on August 1, 1994 shall be extended to
December 31, 1999, and unless previously terminated as provided
herein and therein, the Employment Period shall be extended
automatically for one (1) year after December 31, 1999, unless
prior to January 1, 1999, either party provides to the other
party written notice of the intent of such party not to extend.
The following sentences shall be added at the end of
paragraph 4.1:
"Further, notwithstanding any of the preceding
provisions of this paragraph 4.1, if a Change
of Control shall occur within the Employment
Period, the Employment Period (unless previ-
ously terminated as herein provided) shall be
extended to the second anniversary of the
Change of Control. Further, notwithstanding
any other provision hereof, any obligations of
the Corporation or the Executive under this
Agreement which by their nature may require
either partial or total performance after the
expiration of the Employment Period shall
survive such expiration."
5. Termination Without Cause. Paragraph 4.3 of the
1994 Agreement is hereby amended to read, in its entirety, as
follows:
"4.3. Termination Without Cause. The
Executive's employment may be terminated with-
out 'cause,' as defined in paragraph 4.2 of
the 1994 Agreement, at any time by the Board
during the Employment Period or by the
Executive for 'Good Reason', as defined in
paragraph 4.5 of the 1994 Agreement and in
each instance before a Change of Control
occurs. In such event, the Corporation shall
pay to the Executive a severance payment equal
to three (3) times the sum of (i) his base
salary under paragraph 1.2(a) hereof for the
last twelve-month period ending prior to such
termination, plus (ii) an amount equal to the
Executive's Target Bonus of 100% of his base
salary regardless of whether such bonus was
earned and paid under paragraph 1.2(b) hereof
for the last fiscal year of the Corporation
ending prior to such termination. The sever-
ance payment described in the immediately
preceding sentence shall be made in thirty-six
(36) equal monthly installments, commencing
within thirty (30) days after date of termina-
tion, except, if such termination occurs and
this paragraph is invoked and a Change of
Control subsequently occurs, payment of the
balance of the severance payment, if any,
shall be made in a single lump sum payment
upon the Change of Control. Payment under
this paragraph 4.3 shall be in lieu of any
other benefits that may otherwise be payable
to the Executive under any severance pay plan
or arrangement. In the event Executive should
die prior to the end of said thirty-six (36)
month period, the unpaid portion of the sever-
ance payment shall be paid in a lump sum to
the Executive's surviving spouse, and if none,
then to his estate."
6. Change of Control. Paragraph 4.4 of the 1994
Agreement is hereby amended to read, in its entirety, as follows:
"4.4. Change of Control.
(a) The Executive's Agreement. In
the event of a Change of Control, upon receipt
by the Executive of the Change of Control
Payment, subject only to death, disability,
termination of employment by the Executive for
Good Reason (as defined in paragraph 4.5 of
the 1994 Agreement) or termination of employ-
ment by the Corporation, the Executive agrees
to continue his employment pursuant to para-
graph 1.1 hereof under the same terms and
conditions and in the capacity set forth in
the 1994 Agreement and herein during the one-
year period immediately following a Change of
Control (the 'Stay Period'). During the Stay
Period, the Executive shall be entitled to all
compensation and benefits as otherwise would
be provided to the Executive during the
Employment Period. The parties recognize that
it would be difficult to determine the amount
of damages that will result to a prospective
purchaser of the Corporation in the event the
Executive should fail to perform his agreement
to provide services to the Corporation during
the Stay Period as provided in this paragraph
4.4(a). Accordingly, the Corporation and the
Executive agree that as liquidated damages for
the Executive's failure to perform such ser-
vices and to remain in the employ of the
Corporation as provided herein, the Executive
agrees to reimburse the Corporation an amount
equal to one-third of the Change of Control
Payment (as defined in paragraph 4.4(b) below)
less the amount of income and employment taxes
attributable to such amount which have been or
will be required to be paid by the Executive,
but excluding from the amount to be repaid the
Gross-up Payment (as defined in paragraph 8
below), herein attributable to such amount,
and to forfeit all but $100.00 of the Covenant
Payment (as defined in paragraph 4.4(c) be-
low), herein the 'Liquidation Amount'; provid-
ed, in the event that (i) the Executive de-
ducts any of the Liquidation Amount which has
been paid to the Company pursuant to this
paragraph 4.4(a) as a deductible expense under
Section 165(c) of the Code and (ii) the Inter-
nal Revenue Service allows a final refund of
any income or employment taxes (including
interest) no longer subject to audit (the
'Refund') attributable to the Liquidation
Amount, the Executive shall immediately pay
the Refund to the Company. The Corporation
and the Executive agree that the payment of
the Liquidation Amount by the Executive to the
Corporation shall be the sole and exclusive
remedy of the Corporation for the breach by
Executive of the provisions of this paragraph
4.4(a), and that paragraph 3 of the 1994
Agreement shall not be applicable.
(b) Payments Upon Change of
Control. Upon a Change of Control, the Corpo-
ration shall pay to the Executive in a single
lump sum an amount equal to the sum of (i) the
amount which would otherwise be paid to the
Executive under paragraph 4.3 hereof if the
Executive was terminated by the Corporation
without cause prior to a Change of Control
(the 'Change of Control Payment') and (ii) the
a Gross-Up Payment as provided in paragraph 8
hereof. The parties agree that the Change of
Control Payment would be a parachute payment
as described in Section 280G of the Internal
Revenue Code of 1986, as amended (the 'Code')
and subject to the excise tax imposed under
Section 4999 of the Code. The Change of
Control Payment and the Gross-Up Payment shall
be paid within fifteen (15) days after the
Executive becomes entitled to payment pursuant
to the immediately preceding sentence.
(c) Covenant Not to Compete and
Payment. Upon the occurrence of a Change of
Control, (i) paragraph 2.1 of the 1994 Agree-
ment shall no longer be applicable and (ii) if
the Executive's employment with the Corpora-
tion is terminated upon such Change of Control
or at any time thereafter for any reason
whatsoever, the Executive agrees to not enter
into a Competitive Business (as defined below)
(the 'Covenant Not to Compete') anywhere in
the United States for a period of twenty-four
(24) months after his termination of employ-
ment (the 'Covenant Period'). In consider
ation of such covenant, the Corporation shall
pay to the Executive the sum of $1,000,000
(the 'Covenant Payment') which shall be paid
on a monthly basis of $41,666.66 commencing as
of the first day of the month following his
termination of employment and will continue as
of the first day of each month thereafter
during the Covenant Period. Except with prior
written consent of the Corporation, the Execu-
tive shall not enter into the employ of,
render services to, or invest in any person or
entity that is in competition (or is actively
planning to engage in competition) with the
Corporation in any 'Competitive Business.'
Ownership of up to 1% of stock of a public
company which is a Competitive Business shall
not be deemed to violate the immediately
preceding sentence. Competitive Businesses
shall include any business actively conducted
by the Corporation at the Executive's
termination of employment and any business
which the Corporation plans to enter at the
time of the Executive's termination of employ-
ment pursuant to a business strategy in the
development of which the Executive actively
participated and which was adopted by the
Board prior to the Executive's termination of
employment. By way of illustration, at the
present time, the foodservice industry (de-
fined as all aspects of away-from-home food
preparation) would not be considered a Com-
petitive Business in its entirety. However,
the production, marketing or distribution of
frozen and refrigerated products to the seg-
ments of the foodservice industry which the
Corporation has currently targeted (for exam-
ple, pizza toppings, pizza crusts, ethnic
foods, kettle-cooked sauces, soups, and side
dishes and branded and processed meat prod-
ucts) would be Competitive Businesses. Fur-
ther, during the Covenant Period, except with
prior written consent of the Corporation, the
Executive shall not attempt to induce any
other Corporation employee to be employed or
perform services elsewhere. Upon any viola-
tion by the Executive of the non-compete or
non-solicitation provisions of this Agreement,
the Corporation shall be entitled to cease
making the Covenant Payment after it provides
written notice to the Executive that a viola-
tion of this paragraph 4.4(c) has occurred,
and the Executive has not ceased such viola-
tion after a period of thirty (30) days. The
Corporation shall also have the right to seek
damages and/or a temporary or permanent
injunction against the Executive for violating
this paragraph 4.4(c). If any provision of
this paragraph 4.4(c) is unenforceable because
of its duration or the area covered, the court
having jurisdiction can reduce the duration
and/or area to the extent required to make it
enforceable.
(i) Funding of Covenant Payment. The
Corporation agrees that in order to provide a
source of funding for the Covenant Payment,
immediately upon a Change of Control, the
Corporation shall transfer the sum of
$1,000,000 to the trustee of a 'rabbi trust'
as described in Internal Revenue Procedure 92-
64 (the 'Rabbi Trust'). The Covenant Payment
will be held by and paid from the Rabbi Trust
during the Covenant Period. In accordance
with the terms of the Rabbi Trust, (i) the
assets of the Rabbi Trust will at all times be
subject to the general creditors of the Corpo-
ration and (ii) any earnings on the assets
held in the Rabbi Trust during its existence
shall be returned to the Corporation upon the
termination of the Rabbi Trust.
(ii) Payment of Covenant Payment in
Event of Death. In the event of the
death of the Executive during the Cove-
nant Period, the balance of the Covenant
Payment, if any, will be paid to the
Executive's surviving spouse, and if
none, then to his estate."
7. Additional Payments to Executive Upon Termination.
Paragraph 4.7 of the 1994 Agreement is hereby amended to read, in
its entirety, as follows:
"4.7. Additional Payments to Executive
Upon Termination. In the event of the termi-
nation of the employment of the Executive for
any of the reasons provided in paragraphs 4.3,
4.4 or 4.5 hereof, and in addition to all
amounts required to be paid to the Executive
by the Corporation, then during the thirty-six
(36) month period following a termination
pursuant to such paragraphs, and during the
Covenant Period, the Executive shall be enti-
tled to continue to participate in all of the
Corporation's health plans and welfare plans
(including life insurance policies), and after
the expiration of such thirty-six (36) month
period or such Covenant Period, the Executive
shall then be eligible to elect COBRA continu-
ation coverage under the Corporation's health
plan. During such thirty-six (36) month
period and during the Covenant Period the
Executive shall also be entitled to continue
to receive all of the other welfare benefits
and perquisites described in paragraph 1.2(c)
at the higher of the level of such coverage
and perquisites immediately prior to the
Change of Control or immediately prior to such
termination, provided, however, if the
Executive is prohibited by law from partici-
pating in such plans, the Corporation shall
provide equivalent benefits."
8. Additional Payments by the Corporation. Paragraph
8 of the 1994 Agreement is hereby amended to read, in its
entirety,
as follows:
"8. Additional Payment by the Corpora-
tion. Anything in this Agreement to the
contrary notwithstanding, in the event it
shall be determined that any right, payment or
distribution by the Corporation to or for the
benefit of the Executive, whether paid or
payable or distributed or distributable pursu-
ant to the terms of this Agreement or other-
wise including by example and not by limita-
tion, acceleration of the date of vesting or
payment or rate of payment under any plan,
program or arrangement of the Corporation or
any payment under this paragraph 8 (the 'Pay-
ment'), would be subject to the excise tax
imposed by Section 4999 of the Code, or any
interest or penalties with respect to such
excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the 'Excise Tax'),
then, the Executive shall be entitled to
receive an additional payment (the 'Gross-Up
Payment') in an amount such that after payment
by the Executive of all taxes on the Gross-Up
Payment (including any interest or penalties
imposed with respect to such taxes), the
Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon
the Payment. Provided, the parties agree that
the Covenant Payment shall not be considered
for any purposes as a parachute payment under
Section 280G of the Code for which the Corpo-
ration would be obligated to pay a Gross-Up
Payment. If the Executive receives a refund
on any Excise Tax for which he received pay-
ment hereunder, the Executive shall pay such
refund (net of any applicable taxes) to the
Corporation. The amount of the Gross-Up
Payment required to be paid to the Executive
shall be determined by Coopers & Lybrand (the
'Accounting Firm') which shall provide de-
tailed supporting calculations both to the
Corporation and to the Executive within fif-
teen (15) business days of a Change of Control
or at such earlier time as requested by the
Corporation or the Executive. The Gross-Up
Payment determined under this paragraph 8
shall be paid to the Executive within five (5)
days of receipt of the Accounting Firm's
determination. The cost of performing all
calculations with respect to termination of
the applicable Gross-Up Payment shall be paid
solely by the Corporation."
9. Boards. The Corporation agrees that, for purposes
of paragraph 1.1(b) of the 1994 Agreement, its advance consent
shall be deemed to have been given as to the Executive's serving
as a member of the board of directors of each of the following
companies: Arkwright Mutual Insurance Company, Hancock Fabrics,
Inc., Autocraft Industries, Inc., ENTEX Information Services,
Inc. and Del Monte Corporation.
10. Amendments. Subject to applicable law, this
Amendment may be amended only in writing signed by each of the
parties hereto.
11. Headings. The descriptive headings of the several
paragraphs of this Amendment are inserted for convenience only
and do not constitute a part of this Amendment.
12. Governing Law. The 1994 Agreement and this
Amendment and the legal relations between the parties shall be
governed by and construed in accordance with the laws of the
State of Oklahoma.
13. 1994 Agreement. The 1994 Agreement, as amended by
this Amendment, shall constitute the entire agreement between the
parties as to the subject matter hereof and shall be in full
force and effect as herein provided.
IN WITNESS WHEREOF, the parties hereto have executed
this First Amendment to Employment Agreement as of the day and
year first above written.
CORPORATION: FOODBRANDS AMERICA, INC.
By /s/ Bryant P. Bynum
Bryant P. Bynum
Vice President
EXECUTIVE: /s/ R. Randolph Devening
R. Randolph Devening
EXHIBIT 10.13b
AMENDMENT TO
TRANSITION EMPLOYMENT AGREEMENT
THIS AMENDMENT TO TRANSITION EMPLOYMENT AGREEMENT is
made by and between Foodbrands America, Inc. (the "Company") and
the executive named on the signature page hereto (the
"Executive") dated as of the 31st day of December, 1996.
WITNESSETH:
WHEREAS, the Company and the Executive have previously
entered into that certain Transition Employment Agreement dated
as of May 30, 1996 (the "Original Agreement"); and
WHEREAS, the Original Agreement was not intended by
either party to cause the amounts payable to the Executive
pursuant to the Original Agreement to be reduced by aggregating
such amounts with any other payments or benefits payable to the
Executive and the parties desire to amend Paragraph 9 of the
Original Agreement to clarify and effectuate the parties' intent.
NOW, THEREFORE, in consideration of mutual covenants
and representations contained herein, the parties hereto agree as
follows:
1. In the event that the Company becomes a party to a
transaction which is otherwise intended to qualify for "pooling
of interests" accounting treatment the (A) this Amendment shall,
to the extent practicable, be interpreted so as to permit such
accounting treatment, and (B) to the extent that the application
of clause (A) of this sentence does not preserve the availability
of such accounting treatment, then, to the extent that any
provision of this Amendment disqualifies the transaction as a
"pooling" transaction (including, if applicable, this entire
Amendment), such provision shall be null and void as of the date
hereof. All determinations under this paragraph shall be made by
the accounting firm whose opinion with respect to "pooling of
interests" is required as a condition to the consummation of such
transaction.
2. Paragraph 9 of the Original Agreement is hereby
amended to read, in its entirety as follows:
9. (a) Notwithstanding any other provisions of
this Agreement, in the event that any payment or benefit
which is part of the Total Payments (as defined in
Paragraph 9(d) hereof) would be subject (in whole or
part) to the Excise Tax (as defined in Paragraph 9(d)
hereof), then, after taking into account any reduction in
the Total Payments provided by reason of section 280G of
the Code in any applicable plan, arrangement or agreement
other than this Agreement, the cash Agreement Payments
(as defined in Paragraph 9(d) hereof) shall first be
reduced, to the extent necessary so that no portion of
the Total Payments is subject to the Excise Tax but only
if (A) the net amount of such Total Payments, as so
reduced (and after subtracting the net amount of Federal,
state and local income taxes on such reduced Total
Payments) is greater than or equal to (B) the net amount
of such Total Payments without such reduction (but after
subtracting the net amount of Federal, state and local
income taxes on such Total Payments and the amount of
Excise Tax to which the Executive would be subject in
respect of such unreduced Total Payments).
(b) For purposes of determining whether and
the extent to which the Total Payments will be subject to
the Excise Tax, (i) no portion of the Total Payments the
receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to consti-
tute a "payment" within the meaning of section 280G(b) of
the Code shall be taken into account, (ii) no portion of
the Total Payments shall be taken into account which, in
the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the account-
ing firm (the "Auditor") which was, immediately prior to
the Change of Control, the Company's independent auditor,
does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code (including by
reason of section 280G(b)(4)(A) of the Code) and, in
calculating the Excise Tax, no portion of such Total
Payments shall be taken into account which, in the
opinion of Tax Counsel, constitutes reasonable compensa-
tion for services actually rendered, within the meaning
of section 280G(b)(4)(B) of the Code, in excess of the
Base Amount (as defined in Paragraph 9(d) hereof)
allocable to such reasonable compensation, and (iii) the
value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be deter-
mined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
(c) At the time that payments are made under
this Agreement, the Company shall provide the Executive
with a written statement setting forth the manner in
which such payments were calculated and the basis for
such calculations including, without limitation, any
opinions or other advice the Company has received from
Tax Counsel, the Auditor or other advisors or consultants
(and any such opinions or advice which are in writing
shall be attached to the statement). If the Executive
objects to the Company's calculations, then, subject to
Paragraph 9(e) hereof, the Company shall pay to the
Executive such portion of the Agreement Payments (up to
one hundred (100%) percent thereof) as the Executive
determines is necessary to result in the proper applica-
tion of Paragraph 9(a) hereof.
(d) As used in this Paragraph 9, the following
terms shall have the meanings set forth below:
(i) "Affiliate" shall have the meaning
set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.
(ii) "Agreement Payments" shall have the
meaning given in Paragraph 9(d)(vii) hereof.
(iii) "Base Amount" shall have the
meaning set forth in section 280G(b)(3) of the Code.
(iv) "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended from time to
time.
(v) "Excise Tax" shall mean any excise
tax imposed under section 4999 of the Code.
(vi) "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company
or any of its Affiliates, (iii) an underwriting tempo-
rarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company.
(vii) "Total Payments" shall mean all
payments and benefits received or to be received by the
Executive (including the payments provided under this
Agreement without regard to this Paragraph 9 (the
"Agreement Payments")) in connection with a Change of
Control or the termination of the Executive's employment
(whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company,
any Person whose actions result in a Change of Control or
any Person affiliated with the Company or such Person).
(e) In the event that the amount of the
Agreement Payments made hereunder exceeds the amount
subsequently determined to have been due (taking into
account this Paragraph 9), such excess shall constitute
a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in
section 1274(b)(2)(B) of the Code).
3. Except as amended above, the Original Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment to the Original Agreement on the day and year
first above written.
COMPANY:
FOODBRANDS AMERICA, INC.
By:_______________________________
Name: R. Randolph Devening
Title: Chairman, Chief Execu-
tive Officer and
President
EXECUTIVE:
__________________________________
Name:
Title:
EXHIBIT 10.29a
March 26, 1997
Mr. William E. Rosenthal, President
KPR Holdings, Inc.
Ft. Worth, Texas
Dear Billy:
The purpose of this letter is to evidence the
understanding reached with regard to the amendment of the
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 (the "Agreement"). As you are aware,
Foodbrands is negotiating an agreement and plan of merger (the
"Acquisition Agreement") with a third party which has been
disclosed to you (the "Acquirer") pursuant to which Foodbrands
would become a wholly owned subsidiary of Acquirer. In
connection with facilitating Foodbrands entering into the
agreement with the Acquirer, you have agreed on behalf and as of
agent of the Sellers under the Agreement that the Contingent
Purchase Price provisions will be modified so that the Sellers
would no longer have any right to receive shares of Foodbrands
America common stock at an exercise price of $13.125, but, in
lieu thereof, would have the right to elect, subject to the terms
of the Agreement, to receive common stock of the Acquirer at a
deemed price of $22.50 per share of such Acquirer's common stock.
In addition, the following amendments would be made to the
Agreement:
1. In each of Section 2.05(b), (c) and (d) of the
Agreement, wherever the term "Foodbrands" appears, the name of
the Acquirer shall be substituted. Also, in the Election Notice
attached as Exhibit C to the Agreement, in each instance that
Foodbrands appears, the name of the Acquirer will be substi-
tuted.
2. In each instance where the term "Foodbrands"
appears in Section 2.06(b) of the Agreement, the name of the
Acquirer will be substituted.
3. With respect to the Contingent Purchase Price
payable on April 1, 1997, as to which the Sellers have the option
to elect for Foodbrands America common stock, the Contingent
Purchase Price will be payable in cash and not Foodbrands common
stock. The portion of the Contingent Purchase Price payable
on April 1, 1997 of $4,308,063.00 (the "Original Amount") will be
paid in cash on April 1, 1997. Upon consummation of the
Acquisition Agreement, an additional amount will be paid equal to
$400,000 plus the product of (i) 328,233 (the number of shares of
Foodbrands America common stock Sellers could have received on
April 1, 1997) multiplied by (ii) the Share Price payable
pursuant to the Acquisition Agreement less $13.125 (collec-
tively, the "Additional Amount"). The Additional Amount will be
paid upon earlier of the consummation of the tender offer
contemplated by or the Effective Time as defined in the
Acquisition Agreement. If, however, the consummation of the
transaction contemplated by the Acquisition Agreement is
terminated, the Sellers will only be entitled to the Original
Amount, but will have thirty (30) days to make an election as to
whether to receive cash or Foodbrands American common stock and
will return the Original Amount. No interest will be payable on
the Contingent Purchase Price.
4. Except as modified herein, the Agreement shall
remain in full force and effect.
5. Upon merger, Acquirer will agree to take whatever
action is required to cause Foodbrands to perform its obligations
under the Agreement.
6. Upon merger, Acquirer will enter into a guarantee
of the BAM Lease in the form attached to such lease.
If the above conforms with your understanding, please indicate so
below and return a copy to me.
Very truly yours,
FOODBRANDS AMERICA, INC.
By /s/ R. Randolph Devening
________________________________
R. Randolph Devening, President
ACCEPTED THIS 24th DAY OF
MARCH, 1997
KPR HOLDINGS, INC., for itself
and as agent and attorney-in-fact
for the Shareholders of RKR-GP, Inc.
By /s/ William E. Rosenthal
________________________________
William E. Rosenthal, President
EXHIBIT 10.30d
March 26, 1997
Morgan Stanley Capital Partners, III, L.P.
1221 Avenue of the Americas
33rd Floor
New York, New York 10020
Gentlemen:
The purpose of this letter is to evidence the
understanding reached with regard to the amendment of the Earnout
Payment provision and other provisions of the Stock Purchase
Agreement by and among TNT Crust, Inc. and The Shareholders of
TNT Crust, Inc. and Foodbrands America, Inc. ("Foodbrands") dated
as of November 22, 1995 (the "Agreement"). As you are aware,
Foodbrands is negotiating an agreement and plan of merger (the
"Acquisition Agreement") with a third party which has been
disclosed to you (the "Acquiror") pursuant to which Foodbrands
would become a wholly owned subsidiary of Acquiror. In
connection with facilitating Foodbrands entering into the
agreement with the Acquiror, you have agreed on behalf and as of
agent of the Sellers under the Agreement that the Earnout Payment
provision will be terminated and certain indemnification
obligations of the Sellers will also be terminated on the terms
set forth below. The Agreement is hereby amended as follows
(terms not otherwise defined herein shall have the meaning
ascribed to them in the Agreement):
The Agreement
1. Upon the earlier of (i) the Effective Time as
defined in the Acquisition Agreement and (ii) 45
days after the consummation of the tender offer
contemplated by the Acquisition Agreement,
Sections 2.04(c),(d), (e) and (f) of the Agreement
are hereby deleted and terminated in their
entirety. Section 9.04 of the Agreement is hereby
amended to limit the liability of the Sellers with
respect to Income Tax Claims to the lesser of
fifty (50) percent (%) of the first $1 million of
such claims or $500,000.
The Acquisition Agreement
2. Upon the earlier of (i) the Effective Time as
defined in the Acquisition Agreement and (ii) 45
days after the consummation of the tender offer
contemplated by the Acquisition Agreement,
Foodbrands shall pay to the Agent for the benefit
of the Sellers the sum of $9.5 million. The
parties acknowledge and agree that all payments to
former Option Holders may be subject to applicable
withholding taxes and Foodbrands agrees to
withhold or cause a subsidiary to withhold the
employee portions of all such applicable taxes and
to pay the employer portions of all such
applicable taxes. The parties further agree,
however, that the Sellers shall be responsible for
the payment of all applicable income taxes
resulting from such $9.5 million payment.
It is understood and agreed that if the transactions contemplated
by the Acquisition Agreement are terminated for any reason
without the tender offer contemplated in the Acquisition
Agreement being consummated, this Agreement shall be terminated
and of no force and effect. If the above conforms with your
understanding, please indicate so below and return a copy to us.
Very truly yours,
FOODBRANDS AMERICA, INC.
By /s/ Bryant P. Bynum
________________________________
Bryant P. Bynum, Vice President
ACCEPTED THIS 24th DAY OF
MARCH, 1997
MORGAN STANLEY CAPITAL PARTNERS III, L.P,
for itself and as agent and attorney-in-
fact for the Shareholders of TNT CRUST, Inc.
By: /s/ Lawrence B. Sorrel
_______________________
Lawrence B. Sorrel
EXHIBIT 10.35
STAY BONUS AGREEMENT
THIS STAY BONUS AGREEMENT is made by and between
Foodbrands America, Inc., a Delaware corporation (the "Corpora-
tion"), and ________________________ ("Executive") and dated as
of the 31st day of December, 1996.
W I T N E S S E T H:
WHEREAS, the Corporation and Executive are parties to
an existing Transition Employment Agreement ("Executive's
Employment Agreement") which provides for certain compensation to
Executive if Executive is terminated by the Corporation after a
Change of Control Event (as defined below) but the Company
presently provides no additional incentive to Executive to remain
in the employ of the Company before or after a Change of Control
Event; and
WHEREAS, Executive is a key employee of the Corporation
and the Corporation desires to provide sufficient incentive to
Executive to remain in the employ of the Corporation both before
and after a Change of Control Event;
NOW, THEREFORE, in consideration of the mutual
covenants and representations contained herein, the parties
hereto agree as follows:
1. Accounting Treatment. In the event that the
Corporation becomes a party to a transaction which is otherwise
intended to qualify for "pooling of interests" accounting
treatment then (A) this Agreement shall, to the extent
practicable, be interpreted so as to permit such accounting
treatment, and (B) to the extent that the application of clause
(A) of this sentence does not preserve the availability of such
accounting treatment, then, to the extent that any provision of
this Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, this entire Agreement),
such provision shall be null and void as of the date hereof. All
determinations under this paragraph shall be made by the
accounting firm whose opinion with respect to "pooling of
interests" is required as a condition to the consummation of
such transaction.
2. Definitions.
(a) "Beneficial Owner" and "Beneficial Ownership"
shall have the meaning used in Rule 13d-3 promulgated under the
Exchange Act.
(b) "Cause" shall have the same meaning as in
Executive's Employment Agreement.
(c) "Change of Control Event" means each of the
following:
(i) A change in stockholder ownership of the
Corporation, whereby any person or Group other than Joseph
Littlejohn & Levy Fund, L.P. or any of its affiliates, acquires
Control of the Corporation after the date of this Agreement;
(ii) A merger or consolidation of the
Corporation with and into another company, other than with or
into a wholly-owned subsidiary of the Corporation, where:
(1) the Corporation is not the
surviving company; or
(2) the Corporation is the surviving
company and the members of the Board of Directors of the Corpora-
tion immediately prior to the merger or consolidation do not
constitute a majority of the Board of Directors of the surviving
company after the merger or consolidation;
(iii) The sale of all or substantially all of
the assets of the Corporation; or
(iv) Any other kind of a corporate
reorganization or takeover where:
(1) the Corporation is not the
surviving company; or
(2) the Corporation is the surviving
company and the members of the Board of Directors of the Corpora-
tion immediately prior to the reorganization do not constitute a
majority of the Board of Directors of the surviving company.
(v) Whether such transaction results in a
Change of Control Event pursuant to subparagraphs (i) or (iv)
above or not, the following events shall be deemed a Change of
Control Event (i) a transaction or series of transactions
pursuant to which Joseph Littlejohn & Levy Fund, L.P., transfer
all of its Beneficial Ownership in the capital stock of the
Corporation to any other person or Group, or (ii) all of the
outstanding capital stock of the Corporation is acquired by any
person or Group in one or more related transactions.
With respect to the events described in subparagraphs
(ii), (iii) and (iv) above, the "Change of Control Event" shall
be deemed to occur on the later to occur of the transaction
described in such subparagraph or a shareholder vote approving
such a transaction.
(d) "Control" shall mean the record or Beneficial
Ownership of the outstanding stock of the Corporation which, when
voted together with the shares of outstanding stock of all other
stockholders of the Corporation with proxies or written consents
or held by such person or Group would constitute 50% or more of
all voting power of the Corporation.
(e) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(f) "Good Reason" shall have the meaning assigned
to such term in Executive's Employment Agreement.
(g) "Group" shall have the same meaning as such
term has been construed pursuant to Section 13(d)(3) or 14(d)(2)
of the Exchange Act.
3. Stay Bonus. Subject only to death, disability,
termination of employment by the Executive for Good Reason or
termination of employment by the Corporation, the Executive
agrees to continue his employment during the one-year period
immediately following the Change of Control Event (the "Stay
Period"). The Executive shall be entitled to and shall be paid a
cash bonus equal to $_____________ (the "Stay Bonus") (i) upon
the completion of the Executive's employment by the Corporation
for the Stay Period or (ii) if earlier, upon his termination of
employment with the Corporation for Good Reason or the
termination of his employment by the Corporation for reasons
other than for Cause (excluding death or permanent disability).
The Stay Bonus shall be paid within fifteen (15) days after the
Executive becomes entitled to payment pursuant to the immediately
preceding sentence. If, however, during the Stay Period the
Executive should voluntarily terminate his employment other than
for Good Reason or if he should die or if he should become
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 Corpora-
tion before the occurrence of his resignation, death or permanent
disability and the denominator is 365.
4. Additional Payments. This Stay Bonus Agreement is
in addition to all of the rights, duties and obligations of the
parties under any other employment arrangements or welfare or
benefit plans applicable to Executive.
5. Non-Competition. In the event Executive's employ-
ment is terminated after a Change of Control of Event (a) for
Cause, (b) voluntarily by Executive for other than Good Reason,
or (c) voluntarily by Executive less than one (1) year after the
Stay Period, Executive may not, directly or indirectly, (i)
conduct any activities involving the developing, manufacturing or
marketing or selling of products that are competitive with the
products marketed by the Corporation immediately prior to the
Change of Control Event (the "Prohibited Business"); (ii) engage
(as an individual or as a stockholder, trustee, partner,
financier, agent, employee or representative, firm, corporation,
or association), or have any interest, direct or indirect in any
Prohibited Business; and (iii) may not assist or engage in any
business related activities involving those products currently
produced or under development by the Corporation, all for a
period of two (2) 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 paragraph 5
is to be effective or reasonable, however, in the event that any
court determines that the time period or 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 and effect for the greatest time
period and for the greatest area that would not render it unen-
forceable. 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 a geographic area where the covenant not
to compete is intended to be effective. Notwithstanding anything
to the contrary in this paragraph 5, ownership of less than 5% of
the voting stock of any publicly held corporation shall not
constitute a violation of this paragraph 5.
6. Amendments. Subject to applicable law, this
Agreement may be amended only in writing signed by each of the
parties hereto.
7. Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
8. Agreement. This Agreement shall constitute the
entire agreement between the parties as to the subject matter
hereof and shall be in full force and effect as herein provided.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
CORPORATION: FOODBRANDS AMERICA, INC.
By___________________________
R. Randolph Devening
Chairman, Chief Executive
Officer and President
EXECUTIVE: ___________________________
Executive
EXHIBIT 10.36
AGREEMENT AND PLAN OF MERGER
by and among
FOODBRANDS AMERICA, INC.
AND
IBP, inc.
AND
IBP SUB, INC.
Dated as of
March 25, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Offer . . . . . . . . . . . . . . . . . . . .1
1.2 Company Action. . . . . . . . . . . . . . . . . .4
1.3 Board of Directors of the Company . . . . . . . .5
ARTICLE II THE MERGER. . . . . . . . . . . . . . . . . . . .6
2.1 The Merger. . . . . . . . . . . . . . . . . . . .6
2.2 Effect of Merger. . . . . . . . . . . . . . . . .7
(a) Name of Surviving Corporation . . . . . . . .7
(b) Certificate of Incorporation. . . . . . . . .7
(c) Bylaws. . . . . . . . . . . . . . . . . . . .7
(d) Corporate Organization. . . . . . . . . . . .7
(e) Directors and Officers. . . . . . . . . . . .8
(f) Closing . . . . . . . . . . . . . . . . . . .8
(g) Filing of Certificate of Merger;
Effective Date and Effective Time . . . . . .8
2.3 Conversion of Shares. . . . . . . . . . . . . . .8
2.4 Dissenters' Rights. . . . . . . . . . . . . . . .9
2.5 Payment for Shares; Surrender of Certificates . .9
2.6 Stock Options . . . . . . . . . . . . . . . . . 11
2.7 Lost Certificates . . . . . . . . . . . . . . . 12
2.8 Closing of Company Transfer Books . . . . . . . 12
2.9 Further Assurances. . . . . . . . . . . . . . . 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . 13
3.1 Organization of the Company . . . . . . . . . . 13
3.2 Authorization . . . . . . . . . . . . . . . . . 13
3.3 Capitalization of the Company . . . . . . . . . 14
3.4 Subsidiaries of the Company . . . . . . . . . . 15
3.5 Undisclosed Liabilities . . . . . . . . . . . . 16
3.6 Absence of Certain Changes or Events. . . . . . 16
3.7 Title to Assets, Etc. . . . . . . . . . . . . . 18
3.8 Condition of Tangible Assets. . . . . . . . . . 18
3.9 Contracts and Commitments . . . . . . . . . . . 19
3.10 No Conflict or Violation; Third Party Consents. 20
3.11 Consents and Approvals. . . . . . . . . . . . . 20
3.12 Compliance with Law . . . . . . . . . . . . . . 20
3.13 Brokers . . . . . . . . . . . . . . . . . . . . 21
3.14 No Other Agreements to Sell the Company . . . . 21
3.15 Intellectual Property . . . . . . . . . . . . . 21
3.16 Employee Benefit Plans. . . . . . . . . . . . . 22
3.17 Tax Matters . . . . . . . . . . . . . . . . . . 23
3.18 SEC Documents . . . . . . . . . . . . . . . . . 24
3.19 Environmental Matters . . . . . . . . . . . . . 25
3.20 Proxy Statement; Information Statement. . . . . 27
3.22 Vote Required . . . . . . . . . . . . . . . . . 28
3.23 Opinion of Financial Advisor. . . . . . . . . . 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE PURCHASER. . . . . . . . . . . . 28
4.1 Organization. . . . . . . . . . . . . . . . . . 28
4.2 Authorization . . . . . . . . . . . . . . . . . 29
4.3 Consents and Approvals. . . . . . . . . . . . . 29
4.4 No Conflict or Violation; Third Party Consents. 29
4.5 No Brokers. . . . . . . . . . . . . . . . . . . 30
4.6 Proxy Statement; Information Statement. . . . . 30
4.7 Share Ownership . . . . . . . . . . . . . . . . 31
4.8 Financing . . . . . . . . . . . . . . . . . . . 31
ARTICLE V ACTIONS BY THE COMPANY, THE PARENT
AND THE PURCHASER PRIOR TO THE EFFECTIVE DATE . 31
5.1 Maintenance of Business . . . . . . . . . . . . 31
5.2 Certain Prohibited Transactions . . . . . . . . 31
5.3 Investigation by the Parent and the Purchaser . 34
5.4 Consents and Reasonable Best Efforts. . . . . . 35
5.5 Notification of Certain Matters.. . . . . . . . 36
5.6 Stockholders' Meeting; Board Recommendations;
Proxy Material . . . . . . . . . . . . . . . . 36
5.7 Information Statement . . . . . . . . . . . . . 38
ARTICLE VI CONDITIONS. . . . . . . . . . . . . . . . . . . 41
6.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . 41
6.2 Conditions to Obligation of the Parent to Effect
the Merger . . . . . . . . . . . . . . . . . . 42
ARTICLE VII ADDITIONAL COVENANTS OF THE COMPANY,
THE PARENT AND THE PURCHASER. . . . . . . . . . 42
7.1 Employee Benefits . . . . . . . . . . . . . . . 42
7.2 Officers' and Directors' Insurance;
Indemnification. . . . . . . . . . . . . . . . 43
7.3 Transition Agreements . . . . . . . . . . . . . 44
7.4 Restructuring of Transaction. . . . . . . . . . 45
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . 45
8.1 Termination . . . . . . . . . . . . . . . . . . 45
8.2 Effect of Termination . . . . . . . . . . . . . 46
8.3 No Survival of Representations, Warranties
and Covenants. . . . . . . . . . . . . . . . . 46
8.4 Assignment. . . . . . . . . . . . . . . . . . . 47
8.5 Notices . . . . . . . . . . . . . . . . . . . . 47
8.6 Choice of Law . . . . . . . . . . . . . . . . . 49
8.7 Entire Agreement; Amendments and Waivers. . . . 49
8.8 Schedules . . . . . . . . . . . . . . . . . . . 49
8.9 No Third Party Beneficiary. . . . . . . . . . . 50
8.10 Counterparts. . . . . . . . . . . . . . . . . . 50
8.11 Invalidity. . . . . . . . . . . . . . . . . . . 50
8.12 Headings. . . . . . . . . . . . . . . . . . . . 50
8.13 Publicity . . . . . . . . . . . . . . . . . . . 50
Annex A
Exhibits
Exhibit "A" Tender Agreements
Exhibit "B" Charter Amendment
<PAGE>
DEFINITIONS
The following terms are defined in the Sections
indicated and shall have the meanings ascribed to them therein
unless the context clearly indicates otherwise.
Defined in
Term Section
"Acquisition Proposal" . . . . . . . . . . . . . . . . . . 5.8
"Antitrust Improvements Act" . . . . . . . . . . . . . . . 3.11
"Assets" . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Business Day" . . . . . . . . . . . . . . . . . . . . . . 8.5
"CERCLA" . . . . . . . . . . . . . . . . . . . . . . . . .3.19(a)
"CERCLIS". . . . . . . . . . . . . . . . . . . . . . . . .3.19(c)
"Certificate of Amendment" . . . . . . . . . . . . . . . . 3.2(c)
"Certificate of Merger" . . . . . . . . . . . . . . . . . 2.2(g)
"Charter Amendment". . . . . . . . . . . . . . . . . . . . 3.2(c)
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . 2.2(f)
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Common Stock" . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
"Company Disclosure Letter". . . . . . . . . . . . . . . . 3.3
"Company Permits". . . . . . . . . . . . . . . . . . . . . 3.12
"Company SEC Documents" . . . . . . . . . . . . . . . . . 3.18
"Confidentiality Agreement". . . . . . . . . . . . . . . . 8.7
"Constituent Corporations" . . . . . . . . . . . . . . . . 2.1
"Delaware Law" . . . . . . . . . . . . . . . . . . . . . . 2.1
"Disbursing Agent" . . . . . . . . . . . . . . . . . . . . 2.5
"Dissenters' Shares" . . . . . . . . . . . . . . . . . . . 2.4
"Effective Date" . . . . . . . . . . . . . . . . . . . . . 2.2(g)
"Effective Time" . . . . . . . . . . . . . . . . . . . . . 2.2(g)
"Employment Agreements". . . . . . . . . . . . . . . . . . 7.1(a)
"Encumbrances" . . . . . . . . . . . . . . . . . . . . . . 3.7
"Environmental Laws" . . . . . . . . . . . . . . . . . . .3.19(a)
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Exchange Act" . . . . . . . . . . . . . . . . . . . . . . 1.1
"Expenses" . . . . . . . . . . . . . . . . . . . . . . . .5.10(c)
"Financial Statements" . . . . . . . . . . . . . . . . . . 3.5
"FINDS". . . . . . . . . . . . . . . . . . . . . . . . . .3.19(c)
"Governmental Entity". . . . . . . . . . . . . . . . . . . 3.11
"Hazardous Material" . . . . . . . . . . . . . . . . . . .3.19(b)
"Indemnified Parties" . . . . . . . . . . . . . . . . . . 7.2(a)
"Information Statement". . . . . . . . . . . . . . . . . . 5.7
"Intellectual Property". . . . . . . . . . . . . . . . . . 3.15
"Investment Banker". . . . . . . . . . . . . . . . . . . . 4.5
"JLL". . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Licenses" . . . . . . . . . . . . . . . . . . . . . . . . 3.15
"Material Adverse Change". . . . . . . . . . . . . . . . . 3.1
"Material Adverse Effect". . . . . . . . . . . . . . . . . 3.1
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Merger Consideration" . . . . . . . . . . . . . . . . . . 2.3(a)
"Minimum Condition". . . . . . . . . . . . . . . . . . . .Annex A
"Morgan Stanley" . . . . . . . . . . . . . . . . . . . . . 3.13
"NOLs" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17
"Notice of a Superior Proposal". . . . . . . . . . . . . . 5.8
"Offer". . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
"Offer Documents". . . . . . . . . . . . . . . . . . . . . 1.(b)
"Offer to Purchase". . . . . . . . . . . . . . . . . . . . 1.1(a)
"OSHA" . . . . . . . . . . . . . . . . . . . . . . . . . .3.19(a)
"Option Settlement Amount" . . . . . . . . . . . . . . . . 2.6
"Parent Companies" . . . . . . . . . . . . . . . . . . . . 5.6
"Patents". . . . . . . . . . . . . . . . . . . . . . . . . 3.15
"Pension Plans". . . . . . . . . . . . . . . . . . . . . . 3.16
"Personnel" . . . . . . . . . . . . . . . . . . . . . . . 3.6(b)
"Plans". . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Preferred Stock". . . . . . . . . . . . . . . . . . . . . 3.3
"Proxy Statement". . . . . . . . . . . . . . . . . . . . . 5.6(c)
"RCRA" . . . . . . . . . . . . . . . . . . . . . . . . . .3.19(a)
"SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
"Share Price" . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
"Special Meeting". . . . . . . . . . . . . . . . . . . . . 5.6(a)
"Stock Option Plans" . . . . . . . . . . . . . . . . . . . 2.6
"Subsidiary" or "Subsidiaries" . . . . . . . . . . . . . . 3.4
"Superior Proposal". . . . . . . . . . . . . . . . . . . . 5.8
"Surviving Corporation" . . . . . . . . . . . . . . . . . 2.1
"Takeover Proposal". . . . . . . . . . . . . . . . . . . .5.10(c)
"Tender Agreements". . . . . . . . . . . . . . . . . . Recitals
"Termination Fee". . . . . . . . . . . . . . . . . . . . .5.10(b)
"Trademarks" . . . . . . . . . . . . . . . . . . . . . . . 3.15
"Transition Agreements". . . . . . . . . . . . . . . . . . 7.3
"Warrant Agreement". . . . . . . . . . . . . . . . . . . . 3.3
"Welfare Plans" . . . . . . . . . . . . . . . . . . . . . 3.16
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of March
25, 1997 (the "Agreement") is by and among Foodbrands America,
Inc., a Delaware corporation (the "Company"), IBP, inc., a
Delaware corporation (the "Parent"), and IBP Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Parent
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the
Parent, Purchaser and the Company have each approved the
acquisition of the Company by the Parent upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, to induce the Parent and the Purchaser to
enter into this Agreement, each of Joseph Littlejohn & Levy Fund,
L.P., Joseph Littlejohn & Levy Fund II, L.P. (collectively,
"JLL") and The Airlie Group L.P. are concurrently entering into a
Tender Agreement with the Parent and the Purchaser in the form
attached hereto as Exhibit A (each a "Tender Agreement" and
collectively, the "Tender Agreements"), each of which Tender
Agreements have been approved by the Board of Directors of the
Company; and
WHEREAS, the Parent, the Purchaser and the Company
desire to make certain representations, warranties, covenants and
agreements in connection with the Offer and the Merger (each as
hereafter defined) and also to prescribe certain conditions to
the Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, the Parent, the Purchaser
and the Company hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.1 The Offer.
(a) In accordance with the provisions of this
Agreement and provided that nothing shall have occurred which
would result in a failure of any of the conditions set
forth in Annex A, attached hereto and made a part hereof, as
promptly as practicable, and in no event later than the fifth
(5th) business day following the date hereof, the Parent shall
cause the Purchaser to, and the Purchaser shall commence (within
the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), a tender offer (as it may
be amended from time to time as permitted hereunder, the "Offer")
for all of the issued and outstanding shares (the "Shares") of
the Common Stock (defined hereafter) at a price of Twenty Three
Dollars and Forty Cents ($23.40) per share net to the seller in
cash, without interest thereon (such price or such higher price
per share as may be paid in the Offer, being referred to herein
as the "Share Price"), which Offer, and the obligation of the
Purchaser to accept payment and pay for Shares tendered pursuant
to the Offer, shall be in accordance with the terms of this
Agreement, subject to the conditions set forth in Annex A
hereto. The Purchaser shall, subject only to the satisfaction or
waiver of the conditions set forth on Annex A hereto, accept for
payment and pay for all Shares validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the expiration
of the Offer. The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") containing the terms set forth
in this Agreement, the Minimum Condition (as defined in Annex A
hereto) and the other conditions set forth in Annex A hereto.
Notwithstanding the foregoing, the Purchaser expressly reserves
the right to increase the price per Share payable in the Offer
and make any other changes to the terms or conditions of the
Offer (or waive in whole or in part, at the sole discretion of
the Purchaser any of such conditions), provided, however, that
the Purchaser will not, without the prior written consent of the
Company (such consent to be authorized by the Board of Directors
of the Company), (i) waive the Minimum Condition, (ii) subject to
clause (z) of the proviso in the immediately following sentence,
extend the Offer if all of the Offer conditions are satisfied or
waived, (iii) decrease the Share Price, change the form of
consideration payable in the Offer or decrease the number of
Shares sought, (iv) impose additional conditions to the Offer,
(v) waive the condition described in clause (x) of Annex A hereto
or (vi) amend the conditions of the Offer or any other term of
the Offer in any manner adverse to the holders of Shares (other
than insignificant changes or amendments or other than to waive
any condition). The initial expiration date of the Offer
shall be 20 business days following commencement of the Offer
(such date and time, as may be extended in accordance with the
terms hereof, is referred to as the "Expiration Date");
provided, however, and notwithstanding anything in the foregoing
to the contrary, it is understood and agreed that the Purchaser
may, from time to time, in its sole discretion extend the
Expiration Date, but not beyond September 24, 1997, without the
consent of the Company (x) if any of the conditions to the Offer
have not been satisfied, for the minimum period of time necessary
to satisfy such condition; (y) for any period required by any
order, decree or ruling of, or any rule, regulation,
interpretation or position of, any Governmental Entity (as
hereafter defined) applicable to the Offer; or (z) for a period
of not more than five business days beyond the latest expiration
date that would otherwise be permitted under clause (x) or (y) of
this sentence solely for the purpose of obtaining valid tenders
(which are not withdrawn) of 90% of the Shares. A record holder
who validly tenders, and does not withdraw, pursuant to the Offer
at least 500,000 shares of Common Stock which such holder
beneficially owns, may receive, upon acceptance of such shares by
the Purchaser pursuant to the Offer, payment therefor by wire
transfer of immediately available funds to an account in the
United States designated in writing by such holder at the time
such shares are tendered pursuant to the Offer.
(b) As soon as practicable on the date the Offer
is commenced, the Parent and the Purchaser shall file with the
United States Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 with respect to the
Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase
and a form of letter of transmittal and summary advertisement
(collectively, together with any amendments and supplements
thereto, the "Offer Documents"). The Offer Documents will comply
as to form in all material respects with the provisions of
applicable federal securities laws and, on the date filed with
the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by
the Parent or the Purchaser with respect to information furnished
by the Company for inclusion or incorporation by reference in the
Offer Documents. The information supplied in writing by the
Company for inclusion or incorporation by reference in the Offer
Documents and by the Parent or the Purchaser for inclusion or
incorporation by reference in the Schedule 14D-9 (as hereinafter
defined) will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
Each of the Parent and the Purchaser will take all steps
necessary to cause the Offer Documents to be filed with the
SEC and to be disseminated to holders of the Shares, in each case
as and to the extent required by applicable federal securities
laws. Each of the Parent and the Purchaser, on the one hand, and
the Company, on the other hand, will promptly correct any
information provided by it for use in the Offer Documents if and
to the extent that it shall have become false and misleading in
any material respect and the Purchaser will take all steps
necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be
given the opportunity to review the Schedule 14D-1 before it is
filed with the SEC. In addition, the Parent and the Purchaser
will provide the Company and its counsel in writing with any
comments, whether written or oral, the Parent, the Purchaser or
their counsel may receive from time to time from the SEC or its
staff with respect to the Offer Documents promptly after the
receipt of such comments.
1.2 Company Action.
(a) The Company hereby approves of and consents to
the Offer and represents that its Board of Directors has duly
adopted resolutions approving the Offer, the Merger, this
Agreement, the Tender Agreements and the acquisition of shares of
Common Stock pursuant thereto, has determined that the Merger is
advisable and that the terms of the Offer and the Merger are fair
to, and in the best interests of, the Company's stockholders and
has resolved to recommend acceptance of the Offer and approval of
the Merger by the stockholders of the Company. The Company
hereby consents to the inclusion in the Offer Documents of the
recommendation of the Board of Directors of the Company described
in this Section 1.2(a), subject to the right of the Board of
Directors of the Company to withdraw or modify its approval or
recommendation of the Offer in accordance with Section 5.7(b)
hereof.
(b) Concurrently with the commencement of the
Offer, the Company shall file with the SEC a Solicitation/
Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-9") which shall, subject to the right
of the Board of Directors of the Company to withdraw or modify
its approval or recommendation of the Offer in accordance
with Section 5.7(b) hereof, contain the recommendation referred
to in Section 1.2(a) hereof. The Schedule 14D-9 will comply in
all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and
on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by
the Company with respect to information furnished by the Parent
or the Purchaser for inclusion or incorporation by reference in
the Schedule 14D-9. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC
and to be disseminated to holders of the Shares, in each case as
and to the extent required by applicable federal securities laws.
Each of the Company, on the one hand, and the Parent and the
Purchaser, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and
to the extent that it shall have become false and misleading in
any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable
federal securities laws. The Parent and its counsel shall be
given the opportunity to review the Schedule 14D-9 before it is
filed with the SEC. In addition, the Company agrees to provide
the Parent, the Purchaser and their counsel with any comments,
whether written or oral, that the Company or its counsel may
receive from time to time from the SEC or its staff with respect
to the Schedule 14D-9 promptly after the receipt of such comments
or other communications. The Company has been advised by each of
its directors that as of the date hereof each such person intends
to tender all of the shares of Common Stock owned by such person
pursuant to the Offer.
(c) In connection with the Offer, the Company
will promptly furnish or cause to be furnished to the Purchaser
mailing labels, security position listings and any available
listing or computer file containing the names and addresses of
all record holders of the Shares as of a recent date, and shall
furnish the Purchaser with such additional information
(including, but not limited to, updated lists of holders of the
Shares and their addresses, mailing labels and lists of security
positions) and assistance as the Purchaser or its agents may
reasonably request in communicating the Offer to the record and
beneficial holders of the Shares. Except for such steps as are
necessary to disseminate the Offer Documents, the Parent and the
Purchaser shall hold in confidence the information contained
in any of such labels and lists and the additional information
referred to in the preceding sentence, will use such information
only in connection with the Offer and the Merger, and, if this
Agreement is terminated, will upon request of the Company deliver
or cause to be delivered to the Company all copies of such
information then in its possession or the possession of its
agents or representatives.
1.3 Board of Directors of the Company.
(a) Promptly upon the purchase of and payment for
any Shares by the Parent or any of its subsidiaries which
represents at least a majority of the outstanding Shares (on a
fully diluted basis), the Parent shall be entitled to designate
such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as is equal to the product
of the total number of directors on such Board (giving effect to
the directors designated by the Parent pursuant to this sentence)
multiplied by the percentage that the number of Shares so
accepted for payment bears to the total number of Shares then
outstanding. In furtherance thereof, the Company shall, upon
request of the Purchaser, use its best efforts promptly either to
increase the size of its Board of Directors or secure the
resignations of such number of its incumbent directors, or both,
as is necessary to enable the Parent's designees to be so elected
to the Company's Board, and shall take all actions available to
the Company to cause the Parent's designees to be so elected. At
such time, the Company shall also cause persons designated by the
Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Company's Board of Directors
of (i) each committee of the Company's Board of Directors, (ii)
each board of directors (or similar body) of each Subsidiary (as
defined hereafter) of the Company, and (iii) each committee (or
similar body) of each such board. Notwithstanding the foregoing,
until the Effective Time (as defined hereafter), the Company
shall use all reasonable efforts to have at least two members of
the Board of Directors who are neither officers of the Parent or
designees, stockholders or affiliates of the Parent. Subject to
receipt by the Company from the Parent or the Purchaser of the
information referred to in the penultimate sentence of this
Section 1.3(a), the Company shall promptly take all actions
required pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in order to fulfill its obligations
under this Section 1.3(a), including mailing to stockholders the
information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable the Parent's designees to be elected to the
Company's Board of Directors. The Parent or the Purchaser will
supply the Company any information with respect to either of them
and their nominees, officers, directors and affiliates required
by such Section 14(f) and Rule 14f-1. The provisions of this
Section 1.3(a) are in addition to and shall not limit any rights
which the Purchaser, the Parent or any of their affiliates may
have as a holder or beneficial owner of Shares as a matter of
law with respect to the election of directors or otherwise.
(b) From and after the time, if any, that the
Parent's designees constitute a majority of the Company's Board
of Directors and prior to the Effective Date (as hereinafter
defined), any amendment of this Agreement by the Company, any
termination of this Agreement by the Company, any extension of
time for performance of any of the obligations of the Parent or
the Purchaser hereunder, any waiver of any condition to the
Company's obligations hereunder or any of the Company's rights
hereunder or action to amend or otherwise modify the Company's
Amended and Restated Certificate of Incorporation or Amended and
Restated By-Laws may be effected only by the action of a majority
of the directors of the Company then in office who were not
officers of the Parent or designees, stockholders or affiliates
of the Parent, which action shall be deemed to constitute the
action of any committee specifically designated by the Board of
Directors to approve the actions and transactions contemplated
hereby and the full Board of Directors; provided, that if there
shall be no such directors, such actions may be effected by
majority vote of the entire Board of Directors of the Company.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time, the Purchaser
shall be merged with and into the Company (the "Merger") upon the
terms and subject to the conditions hereinafter set forth as
permitted by and in accordance with the provisions of Section 251
(or other applicable provision) of the General Corporation Law of
the State of Delaware (the "Delaware Law"). The Company and the
Purchaser are sometimes referred to herein as the "Constituent
Corporations." The Company shall be the surviving corporation
following the effectiveness of the Merger (sometimes referred to
herein as the "Surviving Corporation"). Notwithstanding anything
to the contrary herein, at the election of the Parent, any direct
or indirect wholly-owned subsidiary of the Parent may be
substituted for the Purchaser as a Constituent Corporation in
the Merger; provided, however, that such substitution shall not
impede or delay the consummation of the transactions contemplated
by this Agreement. In such event, the parties agree to execute
an appropriate amendment to this Agreement, in form and substance
reasonably satisfactory to the Parent and the Company, in order
to reflect such substitution.
2.2 Effect of Merger. The parties agree to the
following provisions with respect to the Merger:
(a) Name of Surviving Corporation. The name of
the Surviving Corporation from and after the Effective Date shall
be "Foodbrands America, Inc."
(b) Certificate of Incorporation. The
Certificate of Incorporation of the Purchaser as in effect
immediately prior to the Effective Date shall from and after the
Effective Date be the Certificate of Incorporation of the
Surviving Corporation until changed or amended in accordance with
the provisions of applicable law.
(c) Bylaws. The Bylaws of the Purchaser as in
effect immediately prior to the Effective Date shall from and
after the Effective Date be and continue to be the Bylaws of the
Surviving Corporation until changed or amended as provided
therein or the Certificate of Incorporation of the Surviving
Corporation or in accordance with the provisions of applicable
law.
(d) Corporate Organization. The separate
corporate existence of the Purchaser shall cease at the Effective
Time. All the rights, privileges, immunities and franchises, of
a public as well as a private nature, and all property, real,
personal and mixed, of each of the Constituent Corporations, and
all debts due on whatever account to each of them, including
subscriptions for stock and other choses in action belonging to
each of them, shall be taken and deemed to be transferred to and
vested in the Surviving Corporation in accordance with Delaware
Law without further act or deed. The title to any real estate,
or any interest therein, vested in either of the Constituent
Corporations shall not revert or be in any way impaired by reason
of Merger. The Surviving Corporation shall thenceforth be
responsible for all the liabilities and obligations of each of
the Constituent Corporations, with the effect set forth in the
Delaware Law. Any claim, action or proceeding existing or
pending by or against any of the Constituent Corporations may be
prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in its place. The Surviving
Corporation shall have all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of
a corporation organized under the Delaware Law, and neither the
rights of creditors nor any liens upon the property of the
Purchaser or the Company shall be impaired by the Merger.
(e) Directors and Officers. The directors of the
Purchaser immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation, and the officers
of the Company immediately prior to the Effective Time will
be the initial officers of the Surviving Corporation, in each
case until the earlier of their resignation or removal or until
their successors are elected or appointed and qualified.
(f) Closing. The Merger shall be consummated and
the closing of this Agreement (the "Closing") shall take place at
the offices of Sidley & Austin, One First National Plaza,
Chicago, Illinois 60603, or at such other place as the parties
may mutually agree, no later than the second business day (the
"Closing Date") after the satisfaction or waiver of the
conditions to the obligations of the parties hereto set forth in
Article VI hereof.
(g) Filing of Certificate of Merger; Effective
Date and Effective Time. On the Closing Date (or such other date
as the Parent and the Company may agree) the Parent, the
Purchaser and the Company shall cause a certificate of merger or,
if applicable, a certificate of ownership and merger (the
"Certificate of Merger") to be executed and filed with the
Secretary of State of the State of Delaware as provided in the
Delaware Law. The Merger shall become effective on the date and
time at which the Certificate of Merger shall have been duly
filed with the Secretary of State of the State of Delaware or at
such other time as the Parent, the Purchaser and the Company
shall agree should be specified in the Certificate of Merger (the
date and time the Merger becomes effective being referred
to herein respectively as the "Effective Date" and the "Effective
Time").
2.3 Conversion of Shares. By virtue of the Merger and
without any action on the part of the Parent, the Purchaser or
any stockholder of the Company, as of the Effective Time pursuant
to this Agreement:
(a) Each share of common stock, $.01 par value
per share, of the Company (the "Common Stock") then issued and
outstanding immediately prior to the Effective Time (other than
shares of Common Stock held by the Company as treasury stock
or by any wholly-owned subsidiary of the Company or owned by the
Parent, the Purchaser or any other subsidiaries of the Parent and
other than the Dissenters' Shares (as defined in Section 2.4))
shall be cancelled and converted into and become the right to
receive, upon surrender of the certificate representing such
share an amount in cash, without interest thereon, equal to the
Share Price (the "Merger Consideration");
(b) Each outstanding share of Common Stock held
by the Company as a treasury share or by any wholly-owned
subsidiary of the Company and any shares of Common Stock owned by
the Parent, the Purchaser or any other subsidiary of the Parent
shall be cancelled and retired and cease to exist and no
consideration shall be delivered in exchange therefor; and
(c) Each share of common stock, $.01 par value
per share, of the Purchaser then issued and outstanding shall be
converted into one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
2.4 Dissenters' Rights. Each outstanding share of
Common Stock held by stockholders who shall have properly
exercised and perfected appraisal rights with respect thereto
under Section 262 of the Delaware Law ("Dissenters' Shares")
shall not be cancelled and converted into the right to receive
the Merger Consideration in cash, without interest, pursuant to
the Merger, but shall be entitled to receive payment of the
appraised value of such Dissenters' Shares in accordance with
provisions of such Section 262, except that any Dissenters'
Shares held by a stockholder who fails to perfect or withdraws
his or her demand for appraisal of such Dissenters' Shares or
loses his or her right to such payment shall be cancelled and
converted, as of the Effective Time, into the right to receive
the Merger Consideration. The Company will give the Parent
prompt written notice of any demands received by the Company for
appraisals of shares of Common Stock. The Company shall not,
except with the prior written consent of the Parent, make any
payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
2.5 Payment for Shares; Surrender of Certificates. In
order that the cash payments provided for by Sections 2.3(a) and
2.6 hereof may be made, the Parent shall cause Purchaser to
deliver to a bank or trust company designated by the Parent prior
to the Effective Time (herein referred to as the "Disbursing
Agent"), at or prior to the Effective Time, in trust for the
benefit of the holders of Common Stock and persons entitled to
any portion of the Option Settlement Amount (as defined in
Section 2.6), cash, in immediately available funds, in an
aggregate amount necessary to pay the Merger Consideration
pursuant to Section 2.3(a) (determined as though there are no
Dissenters' Shares), plus the Option Settlement Amount. As soon
as practicable after the Effective Time, the Parent shall cause
the Disbursing Agent to mail (and to make available for
collection by hand) to each record holder of an outstanding
certificate or certificates which immediately prior to the
Effective Time represented shares of Common Stock, a form letter
of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates shall
pass, only upon actual delivery of the certificates to the
Disbursing Agent and shall be in a form and have such other
provisions as the Parent may reasonably specify) and instructions
for use in effecting the surrender of such certificate or
certificates for payment therefor. Such letter of transmittal
and instructions shall request that each such record holder shall
surrender such holder's certificate or certificates to the
Disbursing Agent promptly following the Effective
Date.
Upon surrender of a certificate formerly representing
shares of Common Stock, together with a letter of transmittal
duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the Disbursing
Agent shall promptly pay to the persons entitled thereto the
amount to which such persons are entitled. No interest will be
paid or accrued on the cash payable upon the surrender of any
certificate or certificates (it being understood that any
interest earned on funds made available to the Disbursing Agent
pursuant to this Agreement shall be turned over to the Parent).
If payment is to be made to a person other than the
person in whose name the certificate so surrendered is
registered, it shall be a condition of payment that such
certificate shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment
shall pay any transfer or other taxes required by reason of the
delivery of such payment to a person other than the registered
holder of such certificate or establish to the satisfaction of
the Parent that any such taxes have been paid or are not
applicable. Until surrendered as contemplated by this Section
2.5, each certificate (other than certificates representing
Dissenters' Shares and certificates representing any shares of
Common Stock owned by the Parent or any subsidiaries of the
Parent, the Company or any wholly-owned subsidiary of the
Company) shall be deemed at any time after the Effective
Date to represent only the right to receive upon such surrender
the amount of cash, without interest, into which the shares of
Common Stock theretofore represented by such certificate
shall have been converted pursuant to Section 2.3(a).
Notwithstanding the foregoing, none of the Disbursing Agent, the
Surviving Corporation or any party hereto shall be liable to a
former stockholder of the Company for any cash or interest
delivered to a public official as is required pursuant to
applicable abandoned property, escheat or similar laws.
After six months after the Effective Date, any
remaining funds, including any interest or other income thereon,
held by the Disbursing Agent pursuant to this Section shall
be released from trust and shall be paid by the Disbursing Agent
to the Surviving Corporation. Thereafter, holders of shares of
Common Stock shall look only to the Parent or the Surviving
Corporation (subject to the terms of this Agreement and abandoned
property, escheat and other similar laws) as general creditors
thereof with respect to the Merger Consideration, without any
interest thereon, that may be payable per share of Common Stock
upon due surrender of the certificates held by them.
The Parent or the Disbursing Agent shall be entitled to
deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Common
Stock such amounts as the Parent or the Disbursing Agent is
required to deduct and withhold with respect to the making of
such payment under the Code (as hereinafter defined) or under any
provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Parent or the Disbursing
Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of
Common Stock in respect of which such deduction and withholding
was made by the Parent or the Disbursing Agent.
2.6 Stock Options. Immediately prior to the Effective
Time, subject to obtaining any consent which may be necessary
from the holder of the outstanding options, the Company shall
cancel and settle, by cash payment to the holders thereof (the
"Option Settlement Amount"), all the outstanding options to
purchase shares of Common Stock (whether or not such options are
currently exercisable or vested) which have heretofore been
granted under the following stock plans and agreements of the
Company: (i) Foodbrands America, Inc. 1992 Stock Incentive Plan,
as amended, (ii) Foodbrands America, Inc. Associate Stock
Purchase Plan, (iii) Foodbrands America, Inc. Nonqualified
Associate Stock Purchase Plan, (iv) Deferred Stock Compensation
Plan for the non-employee directors of Foodbrands, and (v) the
25,000 options issued to certain directors of the Company
pursuant to option agreements dated April 27, 1995. (Such plans
and agreements are referred to herein collectively as the "Stock
Option Plans.") Except as otherwise provided pursuant to
the terms of the Stock Option Plans in clauses (ii) and (iii)
above, such Option Settlement Amount with respect to each
cancelled option shall be in an amount equal to the excess, if
any, of the Merger Consideration over the per share exercise
price of such cancelled option, multiplied by the number of
shares of Common Stock into which such cancelled option
would be exercisable, less any amounts that the Company is
required to withhold and pay over to any federal and state, local
or other tax authorities under applicable law with respect
to such Option Settlement Amount. The remaining proceeds, if
any, will be paid to the option holder in cash. Such cash
settlement shall constitute full performance of the Company's
obligations under the Stock Option Plans and any related stock
option agreements. Except as otherwise agreed to by the parties,
the Stock Option Plans shall terminate before or as of the
Effective Time.
2.7 Lost Certificates. If any certificate
representing Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by
such person of a bond, in such reasonable amount as the
Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such certificate, the
Disbursing Agent will pay in exchange for such lost, stolen or
destroyed certificate the Merger Consideration multiplied by the
number of shares of Common Stock represented by such certificate,
to which the holder thereof is entitled pursuant to this Article
II.
2.8 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be
closed, and no transfer of shares of Common Stock shall
thereafter be made. If, after the Effective Time, share
certificates are presented to the Surviving Corporation, the
Disbursing Agent or the Parent, they shall be cancelled and
exchanged for the Merger Consideration as provided in this
Article II.
2.9 Further Assurances. If at any time the Surviving
Corporation shall consider or be advised that any further
assignments or assurances are necessary or desirable to vest in
the Surviving Corporation, according to the terms hereof, the
title of any property or rights of the Company or the Purchaser,
the last acting officers and directors of the Company or the
Purchaser, as the case may be, or the corresponding officers and
directors of the Surviving Corporation shall and will execute and
make all such proper assignments and assurances and do all things
necessary or proper to vest title in such property or rights
in the Surviving Corporation, and otherwise to carry out the
purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Parent and the Purchaser as follows:
3.1 Organization of the Company. The Company is duly
organized, validly existing and in good standing under the laws
of the State of Delaware, has full corporate power and authority
to conduct its business as it is presently being conducted and to
own and lease its properties and assets. Each of the direct and
indirect Subsidiaries of the Company is duly organized, validly
existing and in good standing under the laws of its respective
state of incorporation, has full corporate power and authority to
conduct its business as it is presently being conducted and to
own, operate and lease its properties and assets. Each of
the Company and its Subsidiaries is duly qualified to do business
as a foreign corporation and is in good standing in each
jurisdiction in which (i) such qualification is necessary under
the applicable law as a result of its conduct of its business or
ownership of assets or properties held under lease, and (ii)
where the failure to be so qualified would have a Material
Adverse Effect (as defined below) on the Company. "Material
Adverse Change" or "Material Adverse Effect" means, when used
with respect to the Parent or the Company, as the case may be,
any change or effect, either individually or in the aggregate,
that is or can reasonably be expected to be materially adverse to
the business, assets, liabilities, properties, condition
(financial or otherwise) or results of operations of the Parent
and its subsidiaries taken as a whole, or the Company and its
Subsidiaries taken as a whole, as the case may be.
3.2 Authorization.
(a) The Company has all necessary corporate power
and authority to enter into this Agreement and will at the
Closing have taken all necessary corporate action, including
stockholder consent or approval (if necessary), to consummate the
transactions contemplated hereby and to perform its obligations
hereunder. The execution and delivery of this Agreement by the
Company and the performance of its obligations hereunder have
been duly and validly authorized by the Board of Directors of the
Company and, other than the approval and adoption of this
Agreement by the requisite vote of the Company's stockholders, no
other corporate proceedings on the part of the Company are
necessary, and this Agreement has been duly executed and
delivered by the Company and (assuming the valid authorization,
execution and delivery of this Agreement by the Parent and the
Purchaser) constitutes a valid and binding obligation of the
Company enforceable against it in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now
or hereafter in effect, relating to or limiting creditors' rights
generally and (ii) general principles of equity (whether
considered in an action in equity or at law) which provide, among
other things, that the remedy of specific performance and
injunctive and other forms of equity relief are subject
to equitable defenses and the discretion of the court before
which any proceedings therefor may be brought.
(b) The Board of Directors of the Company has duly and
validly approved and taken all corporate action required to be
taken by the Board of Directors for the approval and confirmation
of the transactions contemplated by this Agreement and the Tender
Agreements, including, without limitation, all actions necessary
to render the provisions of Section 203 of the Delaware Law
inapplicable to transactions contemplated by this Agreement or
the Tender Agreements. No Oklahoma takeover statute or similar
statute or regulation applies or purports to apply to the Parent,
the Purchaser, the Merger, this Agreement, the Tender Agreements
or any of the transactions contemplated by this Agreement or the
Tender Agreements in connection with the transactions
contemplated by this Agreement or the Tender Agreements.
(c) The Board of Directors of the Company has duly and
validly approved and taken all corporate actions required to be
taken by the Board of Directors for the approval of the
amendments to the Amended and Restated Certificate of
Incorporation of the Company (which amendments are attached as
Exhibit B hereto) (the "Charter Amendment"). The stockholders of
the Company have duly and validly approved the Charter Amendment.
Subject to (i) the provisions of the Exchange Act relating to the
distribution of an information statement to the stockholders of
the Company and (ii) the filing of a certificate of amendment
("Certificate of Amendment") with the Secretary of State of the
State of Delaware, no further action is required to make
effective the Charter Amendment. The execution and delivery of
the Tender Agreements, the tender of shares of Common Stock
pursuant to the Offer and the grant of the options contemplated
by the Tender Agreements do not conflict with Article Fifth of
the Amended and Restated Certificate of Incorporation of the
Company, and upon the effectiveness of the Charter Amendment
neither the purchase of shares of Common Stock pursuant to the
Offer nor the exercise of any such options under the Tender
Agreement will violate the Amended and Restated Certificate of
Incorporation of the Company.
3.3 Capitalization of the Company. The Company has an
authorized capital stock of 20,000,000 shares of Common Stock and
4,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of the date hereof, 12,465,107
shares of Common Stock and no shares of Preferred Stock were
issued and outstanding. Such issued shares of Common Stock are
duly authorized, validly issued and are fully paid and
nonassessable and are not subject to preemptive rights. As of
the date hereof, there are no treasury shares, and there are no
outstanding stock appreciation rights. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock of the Company or any of its Subsidiaries.
Except as set forth on Schedule 3.3 of the letter from the
Company to the Parent dated the date hereof which relates to this
Agreement and is designated therein as the Company Disclosure
Letter (the "Company Disclosure Letter") and except for the
outstanding options and warrants to purchase 1,762,752 shares of
Common Stock granted under the Company's Stock Option Plans and
the Warrant Agreement dated October 31, 1991 among the Company
and certain banks (the "Warrant Agreement"), there are no
outstanding options, warrants or rights to purchase or acquire
any capital stock of the Company or any securities convertible,
exchangeable or exercisable for any of its capital stock, and
except as set forth on Schedule 3.3 of the Company Disclosure
Letter, there are no contracts, commitments, understandings,
arrangements or restrictions by which the Company is bound
to sell or issue any shares of its capital stock or any
securities convertible, exchangeable or exercisable for any of
its capital stock. As of the Effective Time, the Company will
have no obligation to issue any shares of Common Stock.
3.4 Subsidiaries of the Company. Schedule 3.4 of the
Company Disclosure Letter sets forth a complete and correct
description of the name and jurisdiction of incorporation or
formation of each of the direct and indirect subsidiaries of the
Company of which the Company owns more than a 50% equity
interest. Such subsidiaries are sometimes hereafter collectively
referred to as the "Subsidiaries" or "Subsidiary." Except as set
forth on Schedule 3.4 of the Company Disclosure Letter, all of
the issued and outstanding shares of common stock or other equity
interest of each Subsidiary have been duly authorized, validly
issued, are fully paid and nonassessable and are owned
beneficially by the Company or a Subsidiary of the Company free
and clear of any liens, claims or other encumbrances or rights of
third parties. There are no outstanding options, warrants or
rights to purchase or acquire any capital stock of any of the
Subsidiaries of the Company, and there are no contracts,
commitments, understandings, arrangements or restrictions by
which the Company or any Subsidiary of the Company is bound to
sell or issue any shares of capital stock of such Subsidiary.
Except for the Company's interest in its Subsidiaries and except
as disclosed on Schedule 3.4 of the Company Disclosure Letter,
neither the Company nor its Subsidiaries owns directly or
indirectly any interest or investment (whether equity or debt)
in, nor is the Company or any of its Subsidiaries subject to any
obligation or requirement to provide for or to make any
investment (in the form of a loan, capital contribution or
otherwise) to or in, any corporation, partnership, joint venture,
limited liability company, business, trust or entity.
3.5 Undisclosed Liabilities. Except as set forth in
the Company SEC Documents (as hereafter defined) and in the
audited financial statements of the Company and Subsidiaries as
of and for the fiscal year ended December 28, 1996 (the
"Financial Statements") listed on and attached to Schedule 3.5 of
the Company Disclosure Letter neither the Company nor any of its
Subsidiaries has any liabilities or obligations, either accrued,
absolute, contingent or otherwise, which would be required to be
reflected on a balance sheet, or in the notes thereto, prepared
in accordance with generally accepted accounting principles,
consistently applied, except for liabilities and obligations
listed in Schedule 3.5 of the Company Disclosure Letter, or
incurred in the ordinary course of business consistent with past
practice since December 28, 1996, or which would not have a
Material Adverse Effect on the Company.
3.6 Absence of Certain Changes or Events. Except as
otherwise contemplated by this Agreement or as disclosed in any
of the Company's SEC Documents or the Financial Statements, since
December 28, 1996, the Company and its Subsidiaries have operated
their respective businesses in the ordinary course consistent
with past practices and there has not been, occurred or arisen:
(a) any Material Adverse Change in the Company
(other than changes which are the result of general economic
changes affecting the industries or businesses in which the
Company or any of its Subsidiaries operate);
(b) except as required by the Transition
Agreements (as hereafter defined) (i) any increase in the
compensation payable or to become payable by the Company or its
Subsidiaries to any of their respective officers, employees or
agents (collectively, "Personnel") whose total compensation for
services rendered to the Company or its Subsidiaries is currently
at an annual rate of more than $75,000, except for normal
periodic increases in the ordinary course of business consistent
with past practice; or (ii) any new employment agreement to which
the Company or any Subsidiary is a party, other than agreements
entered into in the ordinary course of business, consistent with
past practices which provide for an annual salary less than
$75,000 and have no provisions with respect to a change of
control of the Company;
(c) except for the Transition Agreements (as
hereafter defined) (true and complete copies of which have
heretofore been furnished to the Parent), any material addition
to or modification of any of the employee benefit plans,
arrangements or practices affecting Personnel other than the
extension of coverage to other Personnel who became eligible
after December 28, 1996;
(d) any sale, assignment or transfer (except for
intercompany transfers or sales out of inventory in the ordinary
course of business) of any asset or group of related assets of
the Company or its Subsidiaries, having a fair market value in
excess of $500,000;
(e) any waiver of any rights of substantial value
to the Company and its Subsidiaries taken as a whole, whether or
not in the ordinary course of business;
(f) any failure to repay any obligation of the
Company or its Subsidiaries, except where such failure would not
have a Material Adverse Effect on the Company;
(g) any entry into or any commitment or
transaction that, individually or in the aggregate, has or is
reasonably likely to have, a Material Adverse Effect on the
Company;
(h) any change by the Company or any of its
Subsidiaries in accounting methods, principles or practices,
except for any such change required by reason of a concurrent
change in generally accepted accounting principles;
(i) any amendments or changes in the Amended and
Restated Certificate of Incorporation or Amended and Restated
Bylaws, as amended, of the Company;
(j) any revaluation by the Company or any of its
Subsidiaries of any of their respective assets, including,
without limitation, write-offs of accounts receivable,
other than in the ordinary course of the Company's and each of
its Subsidiaries' businesses consistent with past practices;
(k) any damage, destruction or loss affecting the
business or assets of the Company or any Subsidiary which,
individually or in the aggregate resulted in or is reasonably
likely to be materially adverse to the business, assets,
liabilities, properties, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries taken
as a whole;
(l) any declaration, setting aside or payment of
any dividend or other distribution with respect to any shares of
capital stock of the Company, or any repurchase, redemption or
other acquisition by the Company or any of its Subsidiaries of
any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company; or
(m) any agreement by the Company or any of its
Subsidiaries to do any of the foregoing or take any action which
would make any representation or warranty in Article III hereof
untrue or incorrect.
3.7 Title to Assets, Etc. The Company or its
Subsidiaries have, or on the Effective Date will have, good and
marketable title to the assets (the "Assets") reflected on
the Financial Statements other than those that are leased or
assets which have been acquired or disposed of as contemplated by
this Agreement or in the ordinary course of business consistent
with past practice since December 28, 1996, and (b) none of the
Assets is subject to any mortgage, deed of trust, pledge, lien,
security interest, encumbrance, claim, charge or adverse interest
(collectively, "Encumbrances") of any other person or entity not
reflected on the Financial Statements, except for liens incurred
in the ordinary course of business consistent with past practice
and except for minor liens which in the aggregate are not
substantial in amount, do not materially detract from the value
of the property or assets subject thereto or interfere with the
present use thereof.
Neither the Company nor any of its Subsidiaries has
received notice of any violation of any zoning, use, occupancy,
building or environmental regulation, ordinance or other law,
order, regulation or requirement relating to its owned or leased
real property that would have a Material Adverse Effect on the
Company.
3.8 Condition of Tangible Assets. The facilities and
equipment of the Company and its Subsidiaries necessary to the
operations of their businesses are in good operating condition
and repair except for (a) ordinary wear and tear and (b) any
defect the cost of repairing which would not be material to the
Company and its Subsidiaries taken as a whole.
All meats (fresh and frozen), frozen pizza crusts,
appetizers, sauces, soups, processed meat products, supplies, and
any other inventories on hand constituting assets of the Company
and its Subsidiaries are (i) in good and marketable condition and
usable or saleable in the ordinary course of business (normal
waste and spoilage excepted) and (ii) the Company is in
compliance as to content labeling and packaging with applicable
laws and regulations (including without limitation those of the
U.S. Department of Agriculture and Federal Food and Drug
Administration), except where the failure to be in such condition
or in compliance would not have a Material Adverse Effect on the
Company.
3.9 Contracts and Commitments. Except (i) as set
forth on Schedule 3.9 of the Company Disclosure Letter hereto,
(ii) for employee benefit plans set forth on Schedule 3.16 of the
Company Disclosure Letter and (iii) contracts entered into
pursuant to the terms of Section 5.2 after the date hereof,
neither the Company nor any of its Subsidiaries is a party
to any written or oral:
(a) commitment, contract, purchase order, letter
of credit or agreement, other than as described in subsections
(b) or (c) below, involving any obligation or liability on the
part of the Company or its Subsidiaries in excess of $250,000 and
not cancelable (without liability) within sixty (60) days, except
for purchases made in the ordinary course of business in amounts
not substantially in excess of past practice;
(b) lease of real property involving an annual
expense on the part of the Company or its Subsidiaries in excess
of $250,000 per year;
(c) lease of personal property involving an
annual expense on the part of the Company or its Subsidiaries in
excess of $250,000, which lease is not cancelable (without
liability) within sixty (60) days; or
(d) contracts and commitments not in the ordinary
course of business not otherwise described above or listed on
Schedule 3.9 of the Company Disclosure Letter relating to the
businesses of the Company and its Subsidiaries and materially
affecting the Company's and its Subsidiaries' businesses.
Except as set forth on Schedule 3.9 of the Company
Disclosure Letter, neither the Company nor any of its
Subsidiaries is (and to the best knowledge of the Company, no
other party is) in material breach or violation of, or default
under, any of the contracts, letters of credit, purchase orders,
leases, commitments, licenses or permits described on Schedule
3.9 of the Company Disclosure Letter, the breach or violation of
which would have a Material Adverse Effect on the Company.
3.10 No Conflict or Violation; Third Party Consents.
Assuming the accuracy and completeness of the representations and
warranties of the Parent and the Purchaser herein, and assuming
all consents and approvals referred to in Section 3.11 hereof are
obtained and except for the third party consents identified on
Schedule 3.10 of the Company Disclosure Letter, the execution and
delivery of this Agreement does not, and consummation of the
transactions contemplated hereby will not, result in (a) a
violation of or a conflict with any provision of the Amended and
Restated Certificate of Incorporation or Amended and Restated
Bylaws of the Company or the charter or bylaws or operating
agreements of any Subsidiary, (b) a breach or default under any
provision of any material contract, agreement, lease, commitment,
license, franchise or permit to which the Company or any of its
Subsidiaries is a party or by which the Assets are bound until
such time as a "Change of Control" (as defined in that certain
Indenture dated as of May 15, 1996 relating to the Company's
$120,000,000 10 3/4% Senior Subordinated Notes due 2006) to
occur, (c) a violation of any statute, rule, regulation,
ordinance, order, judgment, writ, injunction or decree the
violation of which would have a Material Adverse Effect on the
Company, or (d) an imposition of any material lien, mortgage,
pledge, encumbrance, claim, restriction or charge on the business
of the Company or any of its Subsidiaries or on any of the
Assets.
3.11 Consents and Approvals. Except where such
consent, approval or authorization, declaration, filing or
registration is not material to the Company and its Subsidiaries
taken as a whole or would not materially impair the ability of
the Company to perform its obligation hereunder, no consent,
approval or authorization of, or declaration, filing or
registration with, any foreign, federal, state or local
governmental or regulatory authority (each a "Governmental
Entity") is required to be made or obtained by the Company
in connection with the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, other than (i) the
filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "Antitrust Improvements
Act"), (ii) the filing of the Certificate of Merger with the
Secretary of State of Delaware, and (iii) filings made in
compliance with any applicable provisions of the Exchange Act.
3.12 Compliance with Law. The Company and its
Subsidiaries hold, and at all required times have held, all
permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary for the lawful conduct of
their respective businesses as currently being conducted (the
"Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which have
not had, and will not have a Material Adverse Effect on the
Company. The Company and its Subsidiaries are, and at all times
have been, in compliance with the terms of the Company Permits,
except where the failure so to comply would not have, a Material
Adverse Effect on the Company. The Company and its Subsidiaries
are in compliance with all applicable laws, statutes, ordinances
and regulations of any Governmental Entity, except where the
failure to comply would not have a Material Adverse Effect on the
Company. The Company (or its Subsidiaries) has not received any
written notice to the effect that, or otherwise been advised
that, it is not in compliance with any of such statutes,
regulations and orders, ordinances or other laws where the
failure to comply would have a Material Adverse Effect on the
Company, and, assuming the accuracy and completeness of the
representations and warranties of the Parent and the Purchaser
herein, the Company has no reason to anticipate that any
presently existing circumstances are likely to result in
violations of any such regulations which would have a Material
Adverse Effect on the Company. No investigation or review by any
Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the Company,
threatened, nor, to the knowledge of the Company, has any
Governmental Entity indicated an intention to conduct the same,
other than, in each case, those which will not have a Material
Adverse Effect on the Company.
3.13 Brokers. Other than the arrangement between the
Company and Morgan Stanley & Co. Incorporated ("Morgan Stanley"),
neither the Company nor any affiliates of the Company has entered
into or will enter into any agreement, arrangement or
understanding with any person or firm which will result in the
obligation of the Parent or any affiliate of the Parent or the
Company to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated
hereby. The parties hereby acknowledge the written arrangement
(a copy of which has been delivered to the Parent) with respect
to this transaction between the Company and Morgan Stanley, with
respect to which all fees due to Morgan Stanley will be paid by
the Company.
3.14 No Other Agreements to Sell the Company. Except
as contained in this Agreement, the Company has no legal
obligation, absolute or contingent, to any other person or firm
to sell the Common Stock or the stock of any of its Subsidiaries,
to sell substantially all of the assets of the Company or to
effect any merger, consolidation or other reorganization of the
Company or to enter into any negotiations or agreement with
respect thereto.
3.15 Intellectual Property. (a) For purposes of this
Agreement, "Intellectual Property" means (i) all United States
and foreign copyrights, whether registered or unregistered, and
pending applications to register the same, and all copyrightable
works, including, without limitation, software; (ii) all United
States, state and foreign trademarks, service marks and trade
names (including all assumed or fictitious names under which the
Company or any Subsidiary is conducting the business, whether
registered or unregistered, and pending applications to register
the foregoing ("Trademarks"); (iii) all United States and
foreign patents, patent applications, continuations,
continuations-in-part, divisions, reissues, patent disclosures,
inventions (whether or not patentable or reduced to practice) or
improvements thereto ("Patents"); (iv) all confidential ideas,
know-how, methods, formulae, trade secrets, processes, reports,
data, customer lists, business plans, or other proprietary
information; (v) all agreements, commitments, contracts,
understandings, licenses, sublicenses, assignments and
indemnities which relate or pertain to any of the intellectual
property identified in subsections (i) through (iv) above or to
disclosure or use of ideas or third parties ("Licenses"). All
Trademarks, Patents and Licenses of the Company and its
Subsidiaries which are material to the operation of the business
of the Company and its Subsidiaries taken as a whole , are listed
on Schedule 3.15 of the Company Disclosure Letter. The Company
owns or has the right to use all Intellectual Property required
to permit the conduct of the Company's or any Subsidiary's
business in the ordinary course. To the best knowledge of the
Company, the Company's and its Subsidiaries' use of their
Intellectual Property are not infringing upon or otherwise
violating the rights of any third party in or to such
Intellectual Property, and no proceedings have been instituted
against or claims received by the Company or any Subsidiary that
are presently outstanding alleging that the Company's (or any
Subsidiary's) use of it Intellectual Property infringe upon or
otherwise violate any right of a third party in or to such
Intellectual Property.
3.16 Employee Benefit Plans. Schedule 3.16 of the
Company Disclosure Letter contains a complete list of "employee
welfare benefit plans" (as that term is defined in Section 3(1)
of the Employee Retirement Income Security Act of 1974 ("ERISA")
in which employees of the Company and its Subsidiaries
participate (which plans, as applied to such active and former
employees are hereinafter referred to as "Welfare Plans").
Schedule 3.16 of the Company Disclosure Letter also contains a
complete list of "employee pension benefit plans" (as that term
is defined in Section 3(2) of ERISA), including any
"multi-employer plans" (as that term is defined in Section 3(37)
of ERISA) in which such employees of the Company and its
Subsidiaries participate (which plans as applied to such
employees are hereinafter referred to as "Pension Plans"). The
Welfare Plans and Pension Plans are hereinafter collectively
referred to as the "Plans." Each of the Plans is in compliance
with the provisions of all applicable laws, rules and
regulations, which shall include by example and not by limitation
ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"). None of the Pension Plans have incurred any
"accumulated funding deficiency" (as defined in Section 412(a) of
the Code). The Company and its Subsidiaries have not incurred
any liability to the Pension Benefit Guaranty Corporation under
Sections 4062, 4063 or 4064 of ERISA which has not been paid with
respect to any of the Plans or any withdrawal liability under
Title IV of ERISA with respect to any of the Pension Plans.
3.17 Tax Matters. The Company, any predecessor of the
Company and all members of any affiliated group of corporations
of which the Company or any such predecessor corporation is or
has been a member, have duly filed all tax returns and reports
required to be filed by them, including all federal, state, local
and foreign income tax returns and reports, and have timely paid
all taxes shown as due on such returns and reports (except
where failures to file such returns and reports or failures to
pay such taxes would not have a Material Adverse Effect on the
Company, any predecessor of the Company or any such member). All
such returns and reports required to have been filed are complete
and accurate in all material respects. The Company has made
adequate provision, in conformity with GAAP, for the payment of
all taxes of the Company or such Subsidiary, as the case may be,
existing as of the Effective Date for all periods ending on or
prior to the date of the Balance Sheet.
Except as reflected on Schedule 3.17 of the Company
Disclosure Letter, the consolidated federal income tax returns of
the Company (and any predecessor of the Company) have been
examined by the Internal Revenue Service. Except as set forth on
Schedule 3.17 of the Company Disclosure Letter neither the
Company, any predecessor of the Company, nor any Subsidiary (i)
has waived any statute of limitations, (ii) has filed a statement
under Section 341(f) of the Code, or (iii) is a party to any tax
sharing agreement. Except as set forth on Schedule 3.17 of the
Company Disclosure Letter, (i) the state income tax returns of
the Company, any predecessor of the Company and all Subsidiaries
and the federal income tax returns of all Subsidiaries have been
examined by the appropriate taxing authority, (ii) there is no
action, suit, investigation, audit, claim or assessment pending
or proposed or threatened in writing with respect to taxes of the
Company, any predecessor of the Company or any Subsidiary, (iii)
there are no liens for taxes upon the assets of the Company or
any Subsidiary except liens relating to current taxes not yet
due, (iv) all taxes which the Company or any predecessor of the
Company or any Subsidiary are required by law to withhold or
collect for payment have been duly withheld and collected, and
have been paid or accrued, reserved against and entered on the
books of the Company (except where failures to withhold and
collect and to pay or accrue, reserve against or enter on the
books of the Company would not have a Material Adverse Effect on
the Company, any predecessor of the Company or any Subsidiary),
(v) none of the Company, any predecessor of the Company or any
Subsidiary has been a member of any group of corporations filing
tax returns on a consolidated, combined, unitary or similar basis
other than each such group of which it is currently a member, and
(vi) as a result of a change in accounting method for a tax
period beginning on or before the Effective Date, none of the
Company or any Subsidiary will be required to include any
adjustment under Section 481(c) of the Code (or any corresponding
provision of state or local tax law) in taxable income for any
tax period beginning on or after the Effective Date.
Except as may be limited as a result of the
transactions contemplated by this Agreement, the "regular" and
"alternative minimum tax" net operating loss carryforwards of
the Company and the Subsidiaries for each of the taxable years
ended prior to the date of this Agreement (collectively, the
"NOLs") are set forth (for each year) on Schedule 3.17 of the
Company Disclosure Letter and are each available to the Company
(or the applicable Subsidiary) for a period of fifteen taxable
years from the end of the taxable year in which the applicable
NOL was incurred. Except as may be limited as a result of the
transactions contemplated by this Agreement and except as set
forth on Schedule 3.17 of the Company Disclosure Letter, none of
the NOLs constitute separate return limitation year ("SRLY")
losses immediately prior to the Effective Date, none of the NOLs
will be limited immediately prior to the Effective Date by
Section 382 or 384 of the Code and regulations thereunder, and
none of the NOLs constitutes "dual consolidated losses"
immediately prior to the Effective Date (as defined in Section
1503 of the Code and the regulations thereunder).
No transaction contemplated by this Agreement is
subject to withholding under Section 1445 of the Code (relating
to "FIRPTA").
For purposes of this Agreement, "tax" (and, with a
correlative meaning, "taxes") shall mean (i) any federal, state,
local or foreign net income, gross income, gross receipts,
windfall profit, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value-added, transfer
stamp, or environmental tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to
tax or additional amount imposed by any governmental authority;
and (ii) any liability of the Company or any Subsidiary for the
payment of amounts with respect to payments of a type described
in clause (i) as a result of being a member of an affiliated
group, or as a result of any obligation of the Company or any
Subsidiary under any tax sharing arrangement or tax indemnity
arrangement.
3.18 SEC Documents. The Company has filed all required
reports, proxy statements, forms and other documents with the SEC
since January 2, 1994 (the "Company SEC Documents"). As of their
respective dates, and giving effect to any amendments thereto,
(a) the Company SEC Documents, including, without limitation, any
financial statements and schedules contained therein, complied in
all material respects with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the applicable rules and regulations of
the SEC promulgated thereunder, and (b) none of the Company SEC
Documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in
the Company SEC Documents as at the dates thereof complied as to
form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly present in all material
respects the consolidated financial position of the Company and
its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in
financial position for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
3.19 Environmental Matters.
(a) Except as set forth in Schedule 3.19 of the
Company Disclosure Letter, the Company and each of its
Subsidiaries have complied with all applicable foreign, federal,
state and local laws, statutes, regulations, codes or ordinances
enacted, adopted, issued or promulgated by any Governmental
Entity relating to or addressing the environment, health or
safety as in effect at the relevant time, including the
Comprehensive Environmental Response, Compensation and Liability
Act, any amendments thereto, any successor statute and any
regulations promulgated thereunder ("CERCLA"), the Occupational
Safety and Health Act, any amendments thereto, any successor
statute and any regulations promulgated thereunder ("OSHA") and
the Resource Conservation and Recovery Act, any amendments
thereto, any successor statute and any applicable regulations
promulgated thereunder ("RCRA"), and any state equivalent
("Environmental Laws"), except for such failures to so comply
that would not have a Material Adverse Effect on the Company.
(b) Except as set forth on Schedule 3.19 of the
Company Disclosure Letter, or where the failure to do so would
not have a Material Adverse Effect on the Company, (i) any
handling, transportation, storage, treatment or usage of
Hazardous Material that has occurred on any tract of real
property owned by the Company or a Subsidiary during the period
of such ownership or real property covered by any real property
lease to which the Company or a Subsidiary is a party during the
term of such lease, has been in compliance with all applicable
Environmental Laws, (ii) no leak, spill, release, discharge,
emission or disposal of any Hazardous Material has occurred on
any such tract during the period of such ownership or term of
such lease pertinent to each such tract which would subject the
property to remedial action under any Environmental Laws, (iii)
each such tract is in substantial compliance with applicable
Environmental Laws, and (iv) each underground storage tank
located on any such tract, has been registered, maintained and
operated during the Company's or a Subsidiary's ownership or
operation of such tank in accordance with all applicable
Environmental Laws. Schedule 3.19 of the Company Disclosure
Letter, lists all reports, studies and tests in the possession of
the Company or a Subsidiary relating to the presence or suspected
presence of any Hazardous Material on any such tract in violation
of any Environmental Law or relating to the existence of any
underground storage tank thereon and the Company and each
Subsidiary agree that they will, promptly following the Company's
or a Subsidiary's receipt thereof, furnish to the Parent all such
reports, studies and tests hereafter obtained by the Company or a
Subsidiary on or prior to the Closing Date. "Hazardous Material"
means asbestos, petroleum (including without limitation, oil,
used oil, waste oil, gasoline, diesel and petroleum based fuels),
petroleum products and by-products, petroleum wastes, petroleum
contaminated soils, and any substance, material or waste which
is regulated as "hazardous", "toxic" or under any other similar
designation under any Environmental Law. Such term includes,
without limitation, (i) any material, substance or waste defined
as a "hazardous waste" pursuant to Section 1004 of the RCRA, (ii)
any material, substance or waste defined as a "hazardous
substance" pursuant to Section 101 of CERCLA or (iii) any
material, substance or waste defined as a "regulated substance"
pursuant to Subchapter IX of the Solid Waste Disposal Act (42
U.S.C. Section 6991, et seq.).
(c) Except as disclosed on Schedule 3.19 of the
Company Disclosure Letter, or where the failure to do so would
not have a Material Adverse Effect on the Company, (i) Hazardous
Materials have not been generated, used, treated, handled or
stored on, or transported to or from, or released or disposed on
or from any tract of real property owned by the Company during
the period of such ownership or any real property covered by
any real property lease to which the Company is a party during
the term of such lease in violation of any Environmental Law ;
(ii) the Company has disposed of all wastes, including those
wastes containing Hazardous Materials, in compliance with all
applicable Environmental Laws; (iii) there are no past
unresolved, pending or, to the knowledge of the Company or
the Subsidiaries, threatened, actions against the Company
relating to compliance with Environmental Laws or asserting
damages or injury to natural resources, wildlife or the
environment; (iv) no such tract or, to the knowledge of the
Company or the Subsidiaries, any property adjoining such tract,
is listed or proposed for listing on the National Priorities List
under CERCLA or on the Comprehensive Environmental Response,
Compensation and Liability Act Information System ("CERCLIS"),
the Facility Index System ("FINDS"), RCRA, Hazardous Waste
Registrations Listing Report as a result of any alleged violation
of any applicable Governmental Law; and (v) to the knowledge of
the Company or the Subsidiaries, neither the Company nor the
Subsidiaries has transported or arranged for the transportation
of any Hazardous Materials to any location that is listed or
proposed for listing on the National Priorities List under CERCLA
or on the CERCLIS or FINDS or which is the subject of any
environmental claim arising because of any alleged violation of
an Environmental Law.
3.20 Proxy Statement; Information Statement. (a) None
of the information supplied or to be supplied by the Company for
inclusion in the Proxy Statement (as defined hereafter) (and any
amendments thereof or supplements thereto), if any, will, with
respect to information relating to the Company, at the time of
the mailing of the Proxy Statement to the stockholders of the
Company and at the time of the Special Meeting (as defined
hereafter), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The Proxy Statement will, with respect to information relating to
the Company, comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made in
this Section 3.20(a) by the Company with respect to the
statements made in the Proxy Statement relating to the Parent or
the Purchaser or their affiliates or based on information
supplied by the Parent or the Purchaser for inclusion in the
Proxy Statement.
(b) None of the information supplied or to be supplied
by the Company for inclusion in the Information Statement (as
defined hereafter) (and any amendments thereof or supplements
thereto), if any, will, with respect to information relating to
the Company, at the time of the mailing of the Information
Statement to the stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The Information Statement
will, with respect to information relating to the Company, comply
as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made in this Section
3.20(b) by the Company with respect to the statements made in the
Information Statement relating to the Parent or the Purchaser or
their affiliates or based on information supplied by the Parent
or the Purchaser for inclusion in the Information Statement.
3.21 Certain Agreements. Except as set forth on
Schedule 3.21 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is a party to any oral or
written stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, incentive
compensation or bonus plan, employment agreement, severance or
termination agreement, consulting agreement or other benefit plan
or arrangement, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement or the Tender Agreements or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or the Tender
Agreements.
3.22 Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Common Stock
of the Company entitled to vote with respect to the Merger is the
only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger.
3.23 Opinion of Financial Advisor. The Company has
received the opinion of Morgan Stanley dated as of a date which
is on or prior to this Agreement substantially to the effect
that, as of the date of this Agreement, the consideration to be
received pursuant to the Merger Agreement by the Company's
stockholders (other than the Parent or any of its affiliates) is
fair to such stockholders from a financial point of view. A
complete and correct signed copy of such opinion has been
delivered to the Parent, and such opinion has not been withdrawn
or modified as of the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
PURCHASER
The Parent and the Purchaser hereby represent and
warrant to the Company as follows:
4.1 Organization. The Parent is duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has full corporate power and authority to conduct
its business and to own and lease its properties. The Purchaser
is duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full corporate power
and authority to conduct its business and to own and lease its
properties. The Purchaser has been formed for the purpose of
effecting the Offer and the Merger in accordance with the terms
of this Agreement. The Purchaser has not transacted, and prior
to the Effective Date will not transact any business or engage in
any activities other than in connection with the transactions
contemplated by this Agreement.
4.2 Authorization. Each of the Parent and the
Purchaser has all necessary corporate power and authority to
enter into this Agreement and will at the Closing have taken
all necessary corporate action to consummate the transactions
contemplated hereby and to perform its obligations hereunder.
The execution and delivery of this Agreement by the Parent and
the Purchaser and the performance of their obligations hereunder
have been duly authorized by the Board of Directors of each of
the Parent and the Purchaser and no other corporate proceeding
on the part of the Parent or Purchaser are necessary. This
Agreement has been duly executed and delivered by each of the
Parent and the Purchaser and (assuming the valid authorization,
execution and delivery of this Agreement by the Company)
constitutes a valid and binding obligation of the Parent and the
Purchaser, enforceable against each of them in accordance with
its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (ii) general principles
of equity (whether considered in an action in equity or at law)
which provide, among other things, that the remedy of specific
performance and injunctive and other forms of equitable relief
are subject to equitable defenses and the discretion of the court
before which any proceedings therefor may be brought.
4.3 Consents and Approvals. Except where such
consent, approval or authorization, declaration, filing or
registration would not have a Material Adverse Effect on
the Purchaser or would not materially impair the ability of the
Parent and the Purchaser to perform its obligations hereunder, no
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity is required to be
made or obtained by the Parent in connection with the execution,
delivery and performance by the Parent and the Purchaser of this
Agreement and the consummation by the Parent and the Purchaser of
the transactions contemplated hereby other than (i) the filings
required under the Antitrust Improvements Act, (ii) the filing of
the Certificate of Merger, and (iii) filings made in compliance
with any applicable provisions of the Exchange Act.
4.4 No Conflict or Violation; Third Party Consents.
Assuming the accuracy and completeness of the representations and
warranties of the Company herein, and assuming all consents and
approvals referred to in Section 4.3 hereof are obtained, the
execution and delivery of this Agreement does not, and
consummation of the transactions contemplated hereby will not,
result in (a) a violation of or a conflict with any provision of
the certificates of incorporation or bylaws or other
organizational documents of the Parent or the Purchaser,
(b) a breach or default under any provision of any material
contract, agreement, lease, commitment, license, franchise or
permit to which the Parent or the Purchaser is a party or
by which any of their respective assets are bound, (c) a
violation of any statute, rule, regulation, ordinance, order,
judgment, writ, injunction or decree the violation of which
would have a Material Adverse Effect on the Parent, or (d) an
imposition of any material lien, mortgage, pledge, encumbrance,
claim, restriction or charge on the business of the Parent or the
Purchaser or any of their respective assets.
4.5 No Brokers. Other than the arrangements between
the Parent and Donaldson, Lufkin & Jenrette Securities
Corporation (the "Investment Banker"), neither the Parent, the
Purchaser nor any affiliate of the Parent or the Purchaser has
entered into or will enter into any agreement, arrangement or
understanding with any person or firm which will result in the
obligation of the Parent or any affiliate of the Parent to pay
any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby. The
parties hereby acknowledge the arrangement with respect to this
transaction between the Parent and the Investment Banker, with
respect to which all fees due to the Investment Banker will be
paid by the Parent.
4.6 Proxy Statement; Information Statement. (a) None
of the information supplied or to be supplied by the Parent or
the Purchaser for inclusion in the Proxy Statement (including any
amendments thereof or supplements thereto) will, at the time of
mailing the Proxy Statement and at the time of the Special
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
except that no representation or warranty is made by the Parent
or the Purchaser with respect to statements made or incorporated
by reference therein based on information supplied by the Company
for inclusion or incorporation by reference therein.
(b) None of the information supplied or to be supplied
by the Parent or the Purchaser for inclusion in the Information
Statement (including any amendments thereof or supplements
thereto) will, at the time of mailing the Information Statement
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
that no representation or warranty is made by the Parent or the
Purchaser with respect to statements made or incorporated by
reference therein based on information supplied by the Company
for inclusion or incorporation by reference therein.
4.7 Share Ownership. As of the date of this
Agreement, the Parent and the Purchaser own 497,800 shares of
Common Stock and will not acquire beneficial ownership of any
additional shares of Common Stock except pursuant to this
Agreement and the Tender Agreements if the result would be a
Change of Control.
4.8 Financing. The Parent and the Purchaser have on
the date of the execution of this Agreement and will have upon
acceptance of any Shares pursuant to the Offer and at the Closing
sufficient available funds (through existing credit arrangements
or otherwise) to pay the Share Price or the Merger Consideration,
as applicable, for all shares to be purchased or converted
pursuant to Section 1.1(a), or Section 2.3(a), pay the Option
Settlement Amount, pay all fees and expenses required to be paid
in connection with the Merger and perform their obligations
hereunder and the obligations of the Surviving Corporation and
its Subsidiaries following the Effective Time.
ARTICLE V
ACTIONS BY THE COMPANY, THE PARENT
AND THE PURCHASER PRIOR TO THE EFFECTIVE DATE
The Company, the Parent and the Purchaser covenant as
follows for the period from the date hereof through the Effective
Date:
5.1 Maintenance of Business. The Company shall carry
on, and cause its Subsidiaries to carry on, their respective
businesses in the ordinary course of business consistent with
past practice and use their commercially reasonable efforts to
preserve the goodwill of those having business relationships with
them and use their reasonable best efforts to preserve intact
their current business organizations, keep available the services
of their current officers and key employees and preserve their
relationships with customers, suppliers and others having
business dealings with them.
5.2 Certain Prohibited Transactions. Except as
otherwise contemplated by this Agreement, each of the Company and
its Subsidiaries shall not, without the prior written consent of
the Parent (which consent shall not be unreasonably withheld or
delayed) from and after the date hereof:
(a) incur any additional indebtedness for
borrowed money, assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual,
partnership, firm or corporation or make any loans or advances to
any individual, partnership, firm or corporation in an amount in
excess of $30,000,000; provided, however, that total indebtedness
for borrowed money under the Company's Credit Agreement with
Chase Manhattan Bank, as of the Effective Date, shall not exceed
$251,000,000; and provided further, however, that the Company
shall not be prohibited from repaying any indebtedness of the
Company or its Subsidiaries prior to the Effective Date if such
repayments are made without penalty;
(b) enter into any capital or operating leases of
equipment except in accordance with the Master Equipment Lease
Agreement by and between NationBanc Leasing Corporation of North
Carolina and the Company, dated October, 1995 the Master
Lease Agreement by and between BancBoston Leasing, Inc. and the
Company, dated June 1996, and a new lease for equipment to be
installed at KPR Foods not to exceed $3,000,000;
(c) except for the Charter Amendment, amend its
Amended and Restated Certificate of Incorporation or Amended and
Restated Bylaws or the articles or certificate of incorporation
or bylaws of any of its Subsidiaries issue, deliver, sell,
pledge, dispose of or otherwise encumber any shares of its
capital stock, any other voting securities or equity equivalent
or any securities convertible or exchangeable into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent, except
for the issuance of up to 1,762,752 shares of Common Stock
pursuant to the exercise of stock options to purchase shares of
Common Stock under the Stock Option Plans and the Warrant which
are outstanding on the date hereof;
(d) mortgage, pledge or otherwise encumber any of
its material properties or assets or sell, transfer (except
pursuant to intercompany transfers) or otherwise dispose of any
of its material properties or material assets or cancel, release
or assign any indebtedness owed to it or any claims held by it,
except in the ordinary course of business and consistent with
past practice;
(e) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any business or
any corporation, partnership, limited liability company,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, in each case
that are material, individually or in the aggregate, to the
Company and its Subsidiaries, taken as a whole;
(f) enter into, terminate or permit any renewal
or extension options to expire with respect to any material
contract or agreement, or make any material change in any of its
leases and contracts, other than in the ordinary course of
business and consistent with past practice; provided, however,
the Company may (i) enter into, an amendment to the June 3, 1996
Lease Agreement with Option to Purchase between Continental Deli
Foods, Inc., a subsidiary of the Company, and Thorn Apple Valley,
Inc., which covers the Concordia, Missouri facility, to extend
the term from May 31, 1997, to May 31, 2002, and to increase the
rent to equal the purchase price payments under the promissory
note provided for in such lease and to retain the option to
purchase the property for a nominal amount at the end of the
extended lease term, or, at the option of the Parent, exercise
the option to purchase under the current agreement and (ii) enter
into two new office leases in Riverside and Irvine, California,
with annual rentals not to exceed $300,000 each;
(g) declare, set aside or pay any dividend or
distribution with respect to the capital stock of the Company or
any of its Subsidiaries or directly or indirectly redeem,
purchase or otherwise acquire any capital stock of the Company or
any of its Subsidiaries or effect a split or reclassification of
any capital stock of the Company or any of its Subsidiaries
or a recapitalization of the Company or any of its Subsidiaries,
except for intercompany transactions in the ordinary course of
business consistent with past practice;
(h) alter through merger, liquidation,
reorganization, restructuring or in any other fashion the
corporate structure or ownership of the Company or any of its
Subsidiaries;
(i) enter into or adopt or amend any existing
severance plan, severance agreement or severance arrangement, any
benefit plan or arrangement (including without limitation, the
Stock Option Plans) or employment or consulting agreement except
as required by law;
(j) increase the compensation payable or to
become payable to its officers or employees, except for increases
in the ordinary course of business in accordance with past
practices, or grant any severance or termination pay to, or enter
into any employment or severance agreement with any director or
officer of the Company or any of its Subsidiaries, or establish,
adopt, enter into or, except as may be required to comply with
applicable law, amend in any material respect or take action to
enhance in any material respect or accelerate any rights or
benefits under any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or
employee;
(k) settle or compromise any suit, proceeding or
claim or threatened suit, proceeding or claim for an amount that
is more than $50,000 in the case of any individual suit provided
that such settlement or compromise shall be made in the ordinary
course of business in accordance with past practice, other than
the Marshall fire case as to which there is an agreement in
principle to settle;
(l) knowingly violate or fail to perform any
material obligation or duty imposed upon it by any applicable
foreign, federal, state or local law, rule, regulation,
guideline, ordinance, order, judgment or decree;
(m) make any tax election or change any method of
accounting for tax purposes, in each case except to the extent
required by law, or settle or compromise any tax liability;
(n) change any of the accounting principles or
practices used by it except as required by the SEC or the
Financial Accounting Standards Board;
(o) grant any license relating to its
Intellectual Property, except as required by existing agreements
of the Company, except in connection with the settlement
of a protest by the Company of the use of the mark El Posado by a
third party; or
(p) enter into any agreement to enter a new line
of business, nor will the Company expend over $10,000 to produce
or provide a product in a new line of business;
(q) authorize or enter into an agreement,
contract, commitment or arrangement to do any of the foregoing.
5.3 Investigation by the Parent and the Purchaser.
Upon reasonable advance notice, the Company shall allow the
Parent and the Purchaser at their own expense, during regular
business hours through the Parent's and the Purchaser's
employees, agents and representatives, to make such investigation
of the businesses, properties, books and records of the Company
and Subsidiaries, and to conduct such examination of the
condition of the Company and Subsidiaries as the Parent and the
Purchaser deem necessary or advisable to familiarize themselves
further with such businesses, properties books, records,
condition and other matters, and to verify the representations
and warranties of the Company hereunder, provided that all
requests for information, to visit plants or facilities shall be
directed to and coordinated with the vice-president of finance of
the Company; and provided, further that the foregoing shall be
subject in each case to the Confidentiality Agreement referred to
in Section 8.7 hereof.
5.4 Consents and Reasonable Best Efforts.
(a) The Parent, the Purchaser and the Company
shall use their reasonable best efforts to make all filings
required under the Antitrust Improvements Act as soon as
practicable after the execution and delivery of this Agreement.
(b) The Parent, the Purchaser and the Company
shall, as soon as practicable, use their reasonable best efforts
required (i) to obtain all waivers, consents, approvals and
agreements of, and to give all notices and make all other filings
with, any persons, including Governmental Entities, necessary or
appropriate to authorize, approve or permit the Merger, including
all necessary consents or releases from holders of options or
warrants under the Stock Option Plans and to take all such other
action as may be necessary to give effect to the transactions
contemplated by Section 2.6, and (ii) to defend and cooperate
with each other in defending any lawsuits or other legal
proceedings, including appeals, whether individual or
administrative and whether brought derivatively or on behalf
of third parties (including Governmental Entities or officials)
challenging this Agreement or the consummation of the
transactions contemplated hereby. The Parent and the Purchaser
will furnish to the Company, and the Company will furnish to the
Parent and the Purchaser, such necessary information and
reasonable assistance as the Company, or the Parent and the
Purchaser, as the case may be, may request in connection with its
or their preparation of all necessary filings with any third
parties, including Governmental Entities. The Parent and the
Purchaser will furnish to the Company, and the Company will
furnish to the Parent and the Purchaser, copies of all
correspondence, filings or communications (or memoranda setting
forth the substance thereof) between the Parent and the
Purchaser, or the Company, or any of their respective
representatives, on the one hand, and any governmental agency or
authority, or members of the Staff of such agency or authority,
on the other hand, with respect to this Agreement, the Offer or
the Merger.
(c) Prior to the Effective Date, the Company and
the Parent shall each use its respective commercially reasonable
efforts to obtain the consent or approval of each person whose
consent or approval shall be required in order to permit the
Company, the Parent or the Purchaser, as the case may be, to
consummate the Offer and the Merger, including, without
limitation, consents or waivers from the third parties identified
on Schedule 3.10 of the Company Disclosure Letter.
(d) Upon the terms and subject to the conditions
contained herein, each of the parties hereto covenants and agrees
to use its reasonable best efforts to take, or cause to be taken,
all action or do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated
hereby. Notwithstanding anything to the contrary contained in
this Agreement, in connection with any filing or submission
required or action to be taken by either the Parent or the
Company to consummate the Offer, to effect the Merger and to
consummate the other transactions contemplated hereby, the
Company shall not, without the Parent's prior written consent,
commit to any divestiture transaction and neither the Parent
nor any of its affiliates shall be required to divest or hold
separate or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to
retain, the Company or any of the material businesses, product
lines or assets of the Parent or any of its affiliates.
5.5 Notification of Certain Matters. The Company
shall give prompt- notice to the Parent and the Purchaser, and
the Parent and the Purchaser shall give prompt notice to the
Company, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect any time from the
date hereof to the Effective Date and (ii) any material failure
of the Company, the Parent or the Purchaser, as the case may be,
to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder.
5.6 Stockholders' Meeting; Board Recommendations;
Proxy Material.
(a) If required to consummate the Merger,
following the expiration of the Offer the Company shall, in
accordance with applicable law and the Amended and Restated
Certificate of Incorporation and the Amended and Restated Bylaws
of the Company duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as
promptly as practicable for the purpose of considering and taking
action upon this Agreement and the Merger and such other matters
as may be appropriate at the Special Meeting. At such Special
Meeting, the Parent shall vote, or cause to be voted, all of the
Shares of Common Stock then owned by the Parent or Purchaser, or
any of their affiliates (collectively, the "Parent Companies") in
favor of this Agreement and the Merger.
(b) The Board shall recommend acceptance of the
Offer and approval and adoption of this Agreement and the Merger
by the Company's stockholders and, to the extent required, shall
use its reasonable best efforts to obtain stockholder approval of
this Agreement and the Merger; provided that the Board may
withdraw, modify or change such recommendation if it has
reasonably determined in good faith, after consultation with
outside legal counsel, that the Board is required to withdraw,
modify or change such recommendation or the recommendation of the
Offer to comply with the Board's fiduciary duties to the
Company's stockholders under applicable law. In the event the
Parent acquires at least 90% of the outstanding shares of each
class of capital stock of the Company pursuant to the Offer or
otherwise, the Parent, the Purchaser and the Company shall take
all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition,
without a meeting of the stockholders of the Company, in
accordance with Delaware Law.
(c) If approval by the stockholders of the
Company of this Agreement or the Merger is required by law, the
Company shall, as soon as practicable following the termination
of the Offer, prepare and file with the SEC, and the Parent and
the Purchaser shall cooperate with the Company in such
preparation and filing, a preliminary proxy statement relating to
this Agreement and the transactions contemplated hereby and use
its reasonable best efforts to furnish the information required
to be included by the SEC in the Proxy Statement (as defined
hereafter) and, after consultation with the Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy statement and shall, cause a definitive proxy
statement (the "Proxy Statement") to be mailed to the Company's
stockholders that contains the recommendation of the Board that
stockholders of the Company approve and adopt this Agreement. If
applicable to the Merger, the Parent agrees to comply with the
requirements of Rule 13e-3 under the Exchange Act. The
Company will notify the Parent and the Purchaser of the receipt
of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the
preliminary proxy statement and the Proxy Statement or for
additional information and will supply the Parent and the
Purchaser with copies of all correspondence between the Company
or any of its representatives, on the one hand, and the SEC or
its staff, on the other hand, with respect to the preliminary
proxy statement and the Proxy Statement or the Merger. The
Company shall give the Parent and the Purchaser and its counsel
the opportunity to review the preliminary proxy statement and the
Proxy Statement prior to its being filed with the SEC and shall
give the Parent and the Purchaser and its counsel the opportunity
to review all amendments and supplements to the preliminary proxy
statement and the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. If at any time prior to
the approval of this Agreement by the Company's stockholders
there shall occur any event that is required to be set forth in
an amendment or supplement to the Proxy Statement, the Company
will prepare and mail to its stockholders such an amendment or
supplement.
5.7 Information Statement. As soon as practicable
after the date of this Agreement, the Company will prepare and
file with the SEC, and the Parent and the Purchaser shall
cooperate with the Company in such preparation and filing, a
preliminary information statement relating to the Charter
Amendment and use its reasonable best efforts to furnish the
information required to be included by the SEC in the Information
Statement and, after consultation with the Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary information statement and shall use its reasonable
best efforts to cause a definitive information statement (the
"Information Statement") to be mailed to the Company's
stockholders as soon as practicable. The Company will notify the
Parent and the Purchaser of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the preliminary information
statement and the Information Statement or for additional
information and will supply the Parent and the Purchaser with
copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the preliminary information
statement and the Information Statement or the Merger. The
Company shall give the Parent and the Purchaser and its counsel
the opportunity to review the preliminary information statement
and the Information Statement prior to its being filed with the
SEC and shall give the Parent and the Purchaser and its counsel
the opportunity to review all amendments and supplements to the
preliminary information statement and the Information Statement
and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to,
the SEC. The Company will cause the Certificate of Amendment to
be filed with Secretary of State of Delaware the next business
day after all applicable time periods for taking such actions
have expired. If at any time prior to the effectiveness of the
Charter Amendment there shall occur any event that is required
to be set forth in an amendment or supplement to the Information
Statement, the Company will prepare and mail to its stockholders
such an amendment or supplement.
5.8 Acquisition Proposals. From and after the date of
this Agreement until the earlier of the Effective Date or the
consummation of the Offer, except as provided below, the Company
agrees that (a) neither the Company nor its Subsidiaries shall,
and the Company shall not authorize or permit its officers,
directors, employees, agents or representatives (including,
without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) to, initiate, solicit
or knowingly encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders)
with respect to a merger, acquisition, consolidation, tender
offer, exchange offer or similar transaction involving, or any
purchase of all or any significant portion of the assets or any
significant portion of the equity securities (excluding any
issuable pursuant to agreement existing on the date hereof) of,
the Company or its Subsidiaries (any such proposal or offer,
other than by the Parent or its affiliates, being hereinafter
referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information
or data to, or have any substantive discussions with, any person
relating to an Acquisition Proposal, or otherwise knowingly
facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) it will immediately cease and cause to
be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect
to any of the foregoing; and (c) it will notify the Parent
immediately (but in no event later than 24 hours) if any such
Acquisition Proposals are received by the Company, any such
information is requested from the Company, or any such
negotiations or discussions are sought to be initiated or
continued with the Company. Any such notice pursuant to clause
(c) of the previous sentence shall include the identity of the
party making the Acquisition Proposal and the terms of such
proposal. Notwithstanding the foregoing, nothing contained in
this Section 5.8 shall prohibit the Board of Directors of the
Company from (i) furnishing information to or entering into
discussions or negotiations with, any person or entity that
indicates an interest in making a Superior Proposal (as
hereinafter defined), if, and only to the extent that, (A) the
Board of Directors reasonably determines in good faith after
consultation with outside counsel that such action is required
for the Board of Directors to comply with its fiduciary duties to
its stockholders under applicable law and (B) the Company keeps
the Parent informed of the status and terms of any such
discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal. If any
person or entity makes a Superior Proposal, upon receipt and
determination thereof, the Company shall promptly (but
in no event later than 24 hours after determination) provide
written notice (a "Notice of a Superior Proposal") to the Parent
of such Superior Proposal, including the identity of the parties
and the terms thereof. For purposes of this Agreement, "Superior
Proposal" means an unsolicited bona fide Acquisition Proposal by
a third party in writing that the Board of Directors of the
Company determines in its good faith reasonable judgment (based
on the advice of a nationally recognized investment banking firm)
provides greater aggregate value to the Company's stockholders
than the transactions contemplated by this Agreement and for
which any required financing is committed or which, in the good
faith reasonable judgment of the Board of Directors (based on the
advice of a nationally recognized investment banking firm), is
reasonably capable of being financed by such third party.
Nothing in this Section 5.8 shall (x) permit the
Company to terminate this Agreement, (y) permit the Company to
enter into any agreement with respect to an Acquisition Proposal
during the term of this Agreement, or (z) affect any other
obligation of any party under this Agreement.
5.9 Third Party Standstill Agreements. During the
period from the date of this Agreement until the earlier of the
Effective Date or termination hereof, the Company shall not
terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which the Company or
any of its Subsidiaries is a party (other than those involving
the Parent or its affiliates). During such period, the Company
agrees to enforce, to the fullest extent under applicable law,
the provisions of any such agreements, including, but not limited
to, injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any
court of the United States or any state thereof having
jurisdiction.
5.10 Expenses. (a) All costs and expenses incurred in
connection with this Agreement, the Merger and the transactions
contemplated hereby shall be paid by the party incurring such
cost or expense.
(b) Notwithstanding any provision in this Agreement to
the contrary, the Company shall pay, or cause to be paid, in same
day funds, to Parent (x) the Expenses (as hereinafter defined) in
an amount up to but not to exceed $3,000,000 and (y) $9,900,000
(the "Termination Fee") under the circumstances and at the times
set forth as follows:
(i) if the Company or the Parent terminates
this Agreement under Section 8.1(b) and after the date hereof a
Takeover Proposal (as defined hereafter) shall have been made and
concurrently with or within twelve months after such termination,
the Company shall enter into an agreement providing for a
Takeover Proposal or a Takeover Proposal shall have been
consummated, the Company shall pay the Expenses and the
Termination Fee concurrently with the earlier of the entering
into of such agreement or the consummation of such Takeover
Proposal; and
(ii) if the Company or the Parent terminates
this Agreement under Section 8.1(c) and after the date hereof
(but on or prior to the date of termination) a Takeover Proposal
shall have been made, the Company shall pay the Expenses and the
Termination Fee concurrently with such termination; and
(iii) if the Company or the Parent
terminates this Agreement under Section 8.1(e) as a result of the
occurrence of paragraphs (b) or (h) of Annex A, the Company shall
pay the Expenses; and
(iv) if the Company or the Parent terminates
this Agreement under Section 8.1(e) as a result of clause (x) of
Annex A, paragraph (b) of Annex A or the failure to attain the
Minimum Condition and, after the date hereof (but on or prior to
the date of termination) a Takeover Proposal shall have been
made, the Company shall pay, the Expenses and the Termination Fee
concurrently with such termination; and
(v) if the Parent terminates this Agreement
under Section 8.1(f), the Company shall pay the Expenses and the
Termination Fee concurrently with such termination.
(c) As used herein, (i) "Expenses" shall mean all
out-of-pocket fees and expenses incurred or paid by or on behalf
of the Parent or any affiliate of the Parent in connection with
this Agreement and the transactions contemplated herein,
including all fees and expenses of counsel, investment banking
firms, accountants and consultants which are evidenced by written
invoice or other supporting documentation provided by Parent; and
(ii) "Takeover Proposal" shall mean any proposal or offer to the
Company or its stockholders by a third party with respect to (x)
a tender offer or exchange offer for 30% or more of the
outstanding shares of capital stock of the Company, (y) a merger,
consolidation or sale of all or substantially all of the assets
of the Company, or similar transaction or (z) any liquidation
or recapitalization having the foregoing effect.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect
the Merger shall be subject to the satisfaction or waiver, where
permissible, prior to the Effective Time, of the following
conditions:
(a) If approval of this Agreement and the Merger
by the holders of Common Stock is required by applicable law,
this Agreement and the Merger shall have been approved by the
requisite vote of such holders.
(b) No injunction or any other order, decree or
ruling shall have been issued by a court of competent
jurisdiction or by a Governmental Entity, nor shall any
statute, rule, regulation or executive order have been
promulgated or enacted by any Governmental Entity, in each case
that prevents the consummation of the Merger; provided,
however, that each of the parties shall have used reasonable
efforts to prevent the entry of any such injunction or other
order, decree or ruling and to appeal promptly the same after
issuance thereof.
6.2 Conditions to Obligation of the Parent to Effect
the Merger. The obligations of the Parent and the Purchaser to
effect the Merger shall be further subject to the satisfaction or
waiver on or prior to the Effective Time of the condition that
the Purchase shall have accepted for payment and paid for Shares
tendered pursuant to the Offer; provided, that this condition
shall be deemed satisfied if the Purchaser's failure to accept
for payment and pay for such shares breaches this Agreement or
violates the terms and conditions of the Offer.
ARTICLE VII
ADDITIONAL COVENANTS OF THE
COMPANY, THE PARENT AND THE PURCHASER
7.1 Employee Benefits.
(a) The Surviving Corporation and its
subsidiaries will honor, and the Parent agrees to cause the
Surviving Corporation and its subsidiaries to honor, all of the
Company's employment, transition employment, non-compete,
consulting, benefit, compensation or severance agreements (the
"Employment Agreements") in accordance with their terms and, for
a period of not less than twelve (12) months immediately
following the Effective Date, all of the Company's written
employee severance plans (or policies), in existence on the date
hereof, including, without limitation, the separation pay plan
for corporate officers. Schedule 7.1 of the Company Disclosure
Letter hereto lists all Employment Agreements not terminable upon
30 days' written notice and which require annual payments in
excess of $75,000, true and complete copies of all of which have
been furnished to the Parent.
(b) If any salaried employee of the Company
becomes a participant in any employee benefit plan, practice or
policy of the parent, the Purchaser, any of their affiliates or
the Surviving Corporation, such employee shall be given credit
under such plan, practice or policy for all service prior to the
Effective Time with the Company, or any predecessor employer (to
the extent such credit was given by the Company), and all service
after the Effective Time and prior to the time such employee
becomes such a participant, for purposes of eligibility and
vesting and for all other purposes for which such service is
either taken into account or recognized; provided, however, such
service need not be credited to the extent it would result in a
duplication of benefits, including, without limitation, benefit
accrual service under defined benefit plans.
(c) For at least twelve months following the
Effective Date, the Parent shall cause the Surviving Corporation
to maintain employee benefits for management and hourly employees
of the Company and its Subsidiaries that are no less than the
employee benefits, in the aggregate, available to similarly
situated management and hourly employees of the Parent and its
subsidiaries. Nothing contained herein shall be construed to
obligate the Parent or any of its subsidiaries to employ, or
cause the Company or its Subsidiaries from and after the
Effective Date to continue to employ, any management or hourly
employee of the Company or its Subsidiaries.
7.2 Officers' and Directors' Insurance;
Indemnification.
(a) The Company shall indemnify and hold
harmless, and, after the Effective Date, the Surviving
Corporation and the Parent shall indemnify and hold harmless,
each present and former director and officer of the Company (the
"Indemnified Parties") against any expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such Indemnified Party in connection
with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative to which such Indemnified Party was made, or
threatened to be made, a party by reason of the fact that such
Indemnified Party was or is a director, officer, employee or
agent of the Company, or was serving at the request of the
Company as a director, officer, employee or agent of another
corporation, partnership, joint venture trust or other
enterprise and which arises out of or pertains to any action or
omission occurring prior to the Effective Date (including,
without limitation, any which arise out of or relate to the
transactions contemplated by this Agreement) to the full extent
permitted under the Delaware Law (and the Company or the
Surviving Corporation and the Parent, as the case may be, will
advance expenses to each such person to the full extent so
permitted); provided, that any determination required to be made
with respect to whether an Indemnified Party's conduct complied
with the standards set forth in the Delaware Law shall be made by
independent counsel selected by such Indemnified Party and
reasonably satisfactory to the Company or the Surviving
Corporation and the Parent, as the case may be (which shall pay
such counsel's fees and expenses). In the event any such claim,
action, suit, proceeding or investigation if brought against any
Indemnified Party (whether arising before or after the Effective
Date), (a) the Company (or the Parent and the Surviving
Corporation after the Effective Date) shall retain counsel for
the Indemnified Parties reasonably satisfactory to them, (b) the
Company (or the Surviving Corporation and the Parent after the
Effective Date) shall pay all fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are
received, and (c) the Company (or the Surviving Corporation and
the Parent after the Effective Date) will use its reasonable best
efforts to assist in the vigorous defense of any such matter,
provided, that neither the Company, the Surviving Corporation
nor the Parent shall be liable for any such settlement effected
without their written consent, which consent, however, shall not
be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 7.2, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify
the Company or the Surviving Corporation or the Parent thereof
and shall deliver to the Company or the Surviving Corporation or
the Parent an undertaking to repay any amounts advanced pursuant
hereto in the event a court of competent jurisdiction shall
ultimately determine, after exhaustion of all avenues of appeal,
that such Indemnified Party was not entitled to indemnification
under this Section.
(b) For five years after the Effective Date, the
Surviving Corporation and the Parent shall use their respective
reasonable best efforts to provide officers' and directors'
liability insurance for events occurring prior to the Effective
Time covering the Indemnified Parties who are currently covered
by the Company's officers' and directors' liability insurance
policy (a copy of which has heretofore been delivered to the
Parent) on terms no less favorable than those of such policy in
terms of coverage and amounts or, if substantially similar
insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Corporation shall not be
required to pay a per annum amount of premiums for such officers'
and directors' insurance in excess of 200 percent of the last per
annum amount of premiums incurred prior to the date hereof, but
in such case shall purchase as much coverage as possible for such
amount. The Company represents and warrants that the last per
annum amount of such premiums incurred by the Company is
approximately $280,000.
(c) This Section 7.2 shall survive the
consummation of the Merger. Subject to the Delaware Law, the
certificate of incorporation and bylaws of the Company and
the Surviving Corporation shall not be amended in a manner which
adversely affects the rights of the Indemnified Parties under
this Section 7.2.
7.3 Transition Agreements. The Parent and the
Purchaser agree that the Surviving Corporation shall maintain and
shall comply with the Company's Transition Employment Agreements,
as amended, and Stay Bonus Agreements, with several officers
of the Company listed on Schedule 7.3 of the Company Disclosure
Letter and the Employment Agreement, as amended, with R. Randolph
Devening set forth on Schedule 7.3 of the Company Disclosure
Letter (collectively referred to herein as the "Transition
Agreements"). The Company agrees not to amend the Transition
Agreements after the date hereof without first obtaining the
Parent's consent.
7.4 Restructuring of Transaction. Notwithstanding any
provision contained in this Agreement to the contrary, in the
event that any claim, suit, proceeding or action is brought
against any of the Parent, the Purchaser or the Company seeking
to limit, void or enjoin any of the transactions contemplated by
this Agreement, the Tender Agreements or any action taken by the
Board of Directors of the Company to facilitate any transaction
contemplated by this Agreement or the Tender Agreements on the
basis of the transfer restriction contained in Article Fifth of
the Company's Amended and Restated Certificate of Incorporation
or the rules of the New York Stock Exchange, either the Parent or
the Company may, at its option, upon written notice to the other
parties, elect to amend this Agreement to provide for a cash
merger of the Purchaser with and into the Company in lieu
of the Offer upon terms and conditions which are substantially
consistent with those contained in this Agreement, and all
parties shall as promptly as practicable following receipt
of such notice amend this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. Notwithstanding anything herein to
the contrary, this Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether
before or after the Company has obtained stockholder approval:
(a) by the mutual written consent of the Board of
Directors of each of the Company and the Parent;
(b) by either the Company or the Parent, if the
Merger has not been consummated by the close of business on
September 24, 1997, or such other date, if any, as the Company
and the Parent shall agree upon; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(b)
shall not be available to any party whose failure to fulfill any
of its obligations contained in this Agreement has been the cause
of, or resulted in, the failure of the Merger to have occurred
prior to the aforesaid date;
(c) by either the Company or the Parent, if the
acquisition of the Company has been restructured to be a cash
merger pursuant to Section 7.4 and the stockholders of the
Company fail to approve and adopt this Agreement and the Merger,
at the Special Meeting or any postponement or adjournment
thereof;
(d) by either the Company or the Parent, if any
Governmental Entity shall have issued any judgment, injunction,
order or decree enjoining Parent or the Company from consummating
the Offer or the Merger and such judgment, injunction, order or
decree shall become final and nonappealable; or
(e) by the Company or the Parent if the Offer
terminates or expires on account of the failure of any condition
specified in Annex A without the Parent having purchased any
Shares thereunder; provided, however, that the right to terminate
this Agreement pursuant to this Section 8.1(e) shall not be
available to any party whose failure to fulfill any of its
obligations contained in this Agreement has been the cause of, or
resulted in, the failure of any such condition;
(f) by the Parent prior to the consummation of
the Offer if (i) the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or
shall have modified or withdrawn its recommendation of the Offer
or the Merger or determination that the Offer or the Merger is
fair to and in the best interest of the Company and its
stockholders, or shall have resolved to do so, or (ii) the Board
of Directors of the Company fails to recommend against acceptance
of an Acquisition Proposal within five business days after a
request by Parent or Purchaser to do so.
The party desiring to terminate this Agreement
pursuant to this Section 8.1 shall give written notice of such
termination to the other party.
8.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 8.1 hereof, this Agreement shall
become void and of no effect with no liability on the part of any
party hereto; provided, that the agreements contained in this
Section 8.2 and in Sections 5.10 and 8.3 and the second proviso
of Section 5.3 hereof shall survive the termination hereof; and,
provided, further, that the termination of this Agreement shall
not relieve any party for liability for any willful and knowing
breach of this Agreement.
8.3 No Survival of Representations, Warranties and
Covenants. Except for the agreements set forth in Sections 7.1,
7.2 and 7.3 hereof, the respective representations, warranties
and covenants of the Company, Parent and the Purchaser contained
herein shall expire with, and be terminated and extinguished
upon, consummation of the Merger, and thereafter neither the
Company, Parent nor the Purchaser nor any officer, director or
principal thereof shall be subject to any liability whatsoever
based on any such representation, warranty or covenant.
8.4 Assignment. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by the Company
without the prior written consent of the Parent and the
Purchaser, or by the Parent or the Purchaser without the prior
written consent of the Company, except that Purchaser may
assign, in its sole discretion, any of or all its rights,
interests and obligations under this Agreement to the Parent or
to any direct or indirect wholly-owned subsidiary of the Parent,
but no such assignment shall relieve the Purchaser of any of its
obligations hereunder; provided, that such assignment shall not
materially impede or delay the consummation of the transactions
contemplated by this Agreement. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
8.5 Notices. All notices, requests, demands and other
communications hereunder to any party shall be in writing and
shall be delivered or transmitted by (i) delivery in person, (ii)
courier or messenger service, (iii) telegram, telex, telecopy, or
similar electronic or facsimile transmission, or (iv) registered
or certified United States Mail, postage prepaid and return
receipt requested, in each case as follows:
If to the Company, addressed to: Foodbrands America, Inc.
1601 N.W. Expressway
Suite 1700
Oklahoma City, OK 73118-1495
Attn: Mr. R. Randolph Devening
Chairman, President and
Chief Executive Officer
Facsimile No. (405) 840-2447
With copies to: McAfee & Taft
A Professional Corporation
Tenth Floor, Two Leadership Sq.
211 North Robinson
Oklahoma City, Oklahoma
73102-7103
Attention: John M. Mee, Esq.
W. Chris Coleman, Esq.
Facsimile No. (405) 235-0439
and
Skadden, Arps, Slate, Meagher &
Flom LLP
919 Third Avenue
New York, New York 10022-9931
Attention: Mark C. Smith, Esq.
Facsimile No. (212) 735-2000
If to the Parent or the Purchaser,
addressed to: IBP, inc.
IBP Avenue
P. O. Box 515
Dakota City, Nebraska 68731
Attention: Robert L. Peterson
Facsimile No. (402) 241-2427
With a copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden, Esq.
Paul L. Choi, Esq.
Facsimile No. (312) 853-7036
or to such other place and with such other copies as a party may
designate as to itself by written notice to the others. All
notices delivered or transmitted by any method described in
clauses (i), (ii), and (iv) of this Section 8.5 shall be deemed
given and effective upon receipt or refusal of receipt by the
addressee, with the courier's delivery record or the return
receipt being conclusive evidence of such receipt or attempted
delivery. All notices delivered or transmitted by any method
described in clause (iii) of this Section 8.4 shall be given and
effective upon receipt of transmission, with the answerback or
the facsimile or electronic confirmation of transmission being
conclusive evidence of such receipt (unless the addressee
promptly gives a notice to the transmitting party of the
incompleteness or illegibility of the original notice); provided,
however, any communication provided under clause (iii) shall be
followed by a duplicate communication under either clause (i),
clause (ii) or clause (iv). In any event, if receipt or refusal
of receipt is on a day that is not a Business Day, then receipt
shall be deemed to have occurred on the first Business Day
thereafter. A "Business Day" is any day that is not a Saturday,
Sunday, or state or federal legal holiday.
8.6 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in
accordance with the laws of the State of Delaware except with
respect to matters of law concerning the internal corporate
affairs of any corporate entity which is a party to or the
subject of this Agreement but is not incorporated in the State of
Delaware, and as to those matters the law of the jurisdiction
under which the respective entity derives its powers shall
govern.
8.7 Entire Agreement; Amendments and Waivers. This
Agreement, together with all schedules contained in the Company
Disclosure Letter and exhibits hereto and the confidentiality
agreement between the Parent and the Company dated January 25,
1997 (the "Confidentiality Agreement"), constitutes the entire
agreement among the parties pertaining to the subject matter
hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the
parties. To the extent any of the provisions of this Agreement
or the Tender Agreements conflict with any of the provisions
of the Confidentiality Agreement, the provisions of this
Agreement or the Tender Agreements, as the case may be, shall
control and any such provisions of the Confidentiality Agreement
shall be deemed amended and superseded. No supplement,
notification or waiver of this Agreement shall be binding unless
executed in writing by the party or parties to be bound thereby.
No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
8.8 Schedules. Notwithstanding anything to the
contrary contained in this Agreement, the Company, the Parent and
the Purchaser hereby agree that the schedules attached to the
Company Disclosure Letter are made a part of this Agreement for
all purposes. The parties further understand and agree that
disclosure made in any schedule shall be deemed disclosure in all
other schedules as if set forth therein, i.e., information set
forth in one schedule shall be deemed disclosure in all schedules
other than as to the matters disclosed in Schedules 3.3 and 3.10.
8.9 No Third Party Beneficiary. This Agreement is for
the benefit of, and may be enforced only by, the Parent, the
Purchaser and the Company and their respective assignees, and is
not for the benefit of, and may not be enforced by, any third
party except for Section 7.2.
8.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument and shall be effective when two or more
counterparts have been signed by each of the parties hereto and
delivered to the other parties.
8.11 Invalidity. In the event that any one or more of
the provisions contained in this Agreement or in any other
instrument referred to herein, shall, for any reason, be held
to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
8.12 Headings. The headings of the Articles and
Sections herein are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
8.13 Publicity. Unless required by law or the rules of
any applicable securities exchange, neither party shall issue any
press release or make any public statement regarding the
transactions contemplated hereby, without the prior approval of
the other party (which approval shall not be unreasonably
withheld).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by
their respective officers, thereunto duly authorized, as of the
day and year first above written.
FOODBRANDS AMERICA, INC.
("Company")
By /s/ R. Randolph Devening
_______________________________
R. Randolph Devening, Chairman,
President and Chief Executive
Officer
IBP, inc.
("Parent")
By /s/ Robert L. Peterson
_______________________________
Robert L. Peterson, Chairman and
Chief Executive Officer
IBP Sub, Inc.
(the "Purchaser")
By /s/ Larry Shipley
________________________
Larry Shipley, President
<PAGE>
ANNEX A
Certain Conditions Of The Offer
Notwithstanding any other provision of the Agreement or
the Offer, the Purchaser shall not be required to accept for
payment or pay for, or may delay the acceptance for payment of or
payment for, any tendered Shares, or may, in its sole discretion,
at any time, terminate or amend the Offer as to any Shares not
then paid for if (v) a majority of the Shares outstanding on a
fully diluted basis shall not have been validly tendered pursuant
to the Offer and not withdrawn prior to the expiration of the
Offer (the "Minimum Condition"), (w) any waiting period under the
Antitrust Improvements Act applicable to the purchase of shares
of Common Stock pursuant to the Offer shall not have expired or
shall not have been terminated prior to the expiration of the
Offer, (x) the Certificate of Amendment shall not have been filed
with the Secretary of State of the State of Delaware and the
Charter Amendment shall not be in full force and effect prior to
the close of business on September 24, 1997, (y) the Agreement
shall have been terminated in accordance with its terms, or (z)
on or after the date of the Agreement, and at or before the time
of payment for any such Shares, any of the following events shall
occur:
(a) there shall have occurred (i) any general
suspension of, or limitation on prices for,
trading in securities on the New York Stock
Exchange or on NASDAQ, (ii) a declaration of a
banking moratorium or any suspension of payments
in respect of banks in the United States, (iii) a
commencement of a war, armed hostilities or other
international or national calamity directly
involving the armed forces of the United States,
(iv) any general limitation (whether or not
mandatory) by any governmental authority on the
extension of credit by banks or other lending
institutions, (v) in the case of any of the
foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening
thereof, (vi) a decline of at least thirty percent
(30%) in the Dow Jones Industrial Average or the
Standard and Poors 500 Index from the date of this
Agreement to the expiration or termination of the
Offer or (vii) a change in general financial, bank
or capital market conditions which materially and
adversely affects the ability of financial
institutions in the United States to extend credit
or syndicate loans;
(b) any of the representations and warranties of the
Company set forth in the Agreement that are
qualified as to materiality shall not be true and
correct or any such representations and warranties
that are not so qualified shall not be true and
correct in any material respect, in each case, on
the date when made and at the Expiration Date, or
in the case of any representations and warranties
that are made as of a different date, as of that
date; or
(c) the Company shall have breached or failed to
comply in any material respect with any of its
obligations under the Agreement and such failure
continues for two (2) days after receipt by the
Company of notice from the Parent specifying such
failure; or
(d) there shall have been instituted or pending any
litigation by a Governmental Entity thereof (i)
which prohibits the consummation of the
transactions contemplated by the Offer or the
Merger; (ii) which prohibits the Parent's or the
Purchaser's ownership or operation of all or any
material portion of their or the Company's
business or assets, or which compels the Parent or
the Purchaser to dispose of or hold separate all
or any material portion of the Parent's or the
Purchaser's or the Company's business or assets as
a result of the transactions contemplated by the
Offer or the Merger, (iii) which makes the
acceptance for payment, purchase of, or payment
for, some or all of the Shares illegal; (iv) which
imposes material limitations on the ability of
the Parent or the Purchaser to acquire or hold or
to exercise effectively all rights of ownership of
Shares including, without limitation, the right
to vote any Shares purchased by the Purchaser or
the Parent on all matters properly presented to
the stockholders of the Company, or (v) which
imposes any limitations on the ability of the
Parent or the Purchaser, or any of their
respective subsidiaries, effectively to control
in any material respect the business or operations
of the Company;
(e) any statute, rule, regulation, order or injunction
shall be enacted, promulgated, entered, enforced
or deemed applicable to the Offer or the Merger or
any other action shall have been taken by any
United States governmental authority or court (i)
which prohibits the consummation of the
transactions contemplated by the Offer or the
Merger; (ii) which prohibits the Parent's or the
Purchaser's ownership or operation of all or any
material portion of their or the Company's
business or assets, or which compels the Parent or
the Purchaser to dispose of or hold separate all
or any material portion of the Parent's or the
Purchaser's or the Company's business or assets as
a result of the transactions contemplated by the
Offer or the Merger, (iii) which makes the
acceptance for payment, purchase of, or payment
for, some or all of the Shares illegal; (iv) which
imposes material limitations on the ability of
the Parent or the Purchaser to acquire or hold or
to exercise effectively all rights of ownership of
Shares including, without limitation, the right
to vote any Shares purchased by the Purchaser or
the Parent on all matters properly presented to
the stockholders of the Company, or (v) which
imposes any limitations on the ability of the
Parent or the Purchaser, or any of their
respective subsidiaries, effectively to control
in any material respect the business or operations
of the Company;
(f) Parent or the Purchaser shall have reached an
agreement or understanding in writing with the
Company providing for termination of the Offer or
the Agreement;
(g) any filing required to be made by the Company
with, or any consent, approval or authorization
required to be obtained prior to the Effective
Time by the Company from, any Governmental Entity
in connection with the execution and delivery of
the Agreement by the Company or the consummation
of the Offer or the transactions contemplated by
the Agreement, shall not have been made or
obtained; or
(h) a Material Adverse Change in the Company has
occurred,
which, in the sole judgment of the Purchaser, regardless of the
circumstances giving rise to any such conditions, makes it
inadvisable to proceed with the Offer and/or with such acceptance
for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of the
Parent and the Purchaser and may be asserted by the Parent or the
Purchaser regardless of the circumstances or may be waived by the
Parent or Purchaser in whole or in part at any time and from
time to time in its sole discretion.
EXHIBIT A
TENDER AGREEMENT
TENDER AGREEMENT dated as of March 25, 1997 (this
"Agreement"), among IBP, inc., a Delaware corporation (the
"Parent"), IBP Sub, Inc., a Delaware corporation and a wholly
owned subsidiary of the Parent ("Purchaser"), and The Airlie
Group, L.P. a Delaware limited partnership (the "Stockholder").
WHEREAS, concurrently with the execution and delivery of
this Agreement the Parent, Purchaser and Foodbrands America,
Inc., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger dated as of the date hereof (such
Agreement and Plan of Merger, as amended from time to time, the
"Merger Agreement"), which provides, among other things, that
Purchaser shall make the Offer (as defined in the Merger
Agreement) to purchase at a price of $23.40 per share, net to the
sellers in cash, all of the issued and outstanding shares of the
Company's Common Stock, par value $.01 per share (the "Company
Common Stock"), and shall merge with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth
in the Merger Agreement (any term used herein without definition
shall have the definition ascribed thereto in the Merger
Agreement);
WHEREAS, the Stockholder owns beneficially and of record
shares of Company Common Stock (such shares of Company Common
Stock being collectively referred to herein as the "Stockholder
Shares") and;
WHEREAS, as a condition to the willingness of the Parent and
Purchaser to enter into the Merger Agreement, and as an
inducement to them to do so, the Stockholder has agreed for the
benefit of the Parent and Purchaser to tender the Stockholder
Shares and any other shares of Company Common Stock at any time
during the term of this Agreement held by the Stockholder,
pursuant to the Offer, to vote all the Stockholder Shares and any
other shares of Company Common Stock owned by the Stockholder in
favor of the Merger, and to grant to Purchaser an option to
acquire all Stockholder Shares and all other shares of Company
Common Stock owned by the Stockholder under certain
circumstances, all on the terms and conditions contained in
this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement,
the parties hereby agree as follows:
ARTICLE I
Tender Offer and Option
SECTION 1.01. Tender of Shares. (a) From time to time
following the commencement by Purchaser of the Offer, the
Stockholder shall, if so requested in writing by Parent (the
"Request"), promptly tender to the Depository designated in the
Offer to Purchase (the "Offer to Purchase") distributed by
Purchaser in connection with the Offer (i) a letter of
transmittal with respect to such number as specified in the
Request not in excess of the then applicable Maximum Share
Number), of the Stockholder Shares and any other shares of
Company Common Stock held by the Stockholder (whether or not
currently held by the Stockholder; the Stockholder Shares,
together with any shares acquired by the Stockholder in any
capacity after the date hereof and prior to the termination of
this Agreement whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable
securities, or by means of purchase, dividend, distribution or
otherwise (the "Shares"), complying with the terms of the Offer
to Purchase; provided, that the number of Shares the Stockholder
shall be required to tender from time to time pursuant to a
Request, when taken together with all Shares previously tendered
in the Offer and not withdrawn, shall not exceed the aggregate
number of Shares owned by the Stockholder beneficially and of
record, at such time (ii) the certificates representing the
Shares specified in the Request, and (iii) all other documents or
instruments required to be delivered pursuant to the terms of the
Offer to Purchase.
(b) The Stockholder shall not, subject to applicable law,
withdraw the tender effected in accordance with Section 1.01(a);
provided, however, that the Stockholder may decline to tender, or
may withdraw, any and all Shares owned by the Stockholder and
tendered or requested to be tendered in excess of the Maximum
Share Number or if Purchaser amends the Offer to (w) reduce the
Offer Price to less than $23.40 in cash, net to the sellers, (x)
reduce the number of shares of Company Common Stock subject to
the Offer, (y) change the form of consideration payable in the
Offer or (z) amend or modify any term or condition of the Offer
in a manner adverse to the stockholders of the Company (other
than insignificant changes or amendments or other than to waive
any condition). The Stockholder shall give Purchaser at least
two business days' prior notice of any withdrawal of Shares owned
by the Stockholder pursuant to the immediately preceding proviso.
SECTION 1.02. Option. (a) The Stockholder hereby
irrevocably grants Purchaser an option (the "Option"),
exercisable from time to time only upon the events and subject to
the conditions set forth herein, to purchase such number (not in
excess of the then applicable Maximum Share Number), of the
Shares at a purchase price per share equal to $23.40 (or such
higher per share price as may be offered by Purchaser in the
Offer).
(b) Subject to the conditions set forth in Section 1.03 and
the termination provisions of Section 6.07, Purchaser may
exercise the Option in whole or in part at any time prior to the
date 60 days after the expiration or termination of the Offer
(such sixtieth day being herein called the "Option Expiration
Date") if (x) the Stockholder fails to comply with any of its
obligations under this Agreement or withdraws the tender of the
Shares except under the circumstances set forth in the proviso to
Section 1.01(b) (but the Option shall not limit any other right
or remedy available to the Parent or Purchaser against the
Stockholder for breach of this Agreement) or (y) the Offer is not
consummated because of the failure to satisfy any of the
conditions to the Offer set forth in Annex A to the Merger
Agreement (other than as a result of any action or inaction of
the Parent or Purchaser which constitutes a breach of the Merger
Agreement).
Upon the occurrence of any of such circumstances,
Purchaser shall be entitled to exercise the Option and (subject
to Section 1.03) Purchaser shall be entitled to purchase the
Shares and the Stockholder shall sell the Shares to Purchaser.
Purchaser shall exercise the Option by delivering written notice
thereof to the Stockholder (the "Notice"), specifying the number
of Shares to be purchased and the date, time and place for the
closing of such purchase which date shall not be less than three
business days nor more than five business days from the date the
Stockholder receives the Notice and in no event shall such date
be later than the Option Expiration Date. The closing of the
purchase of Shares pursuant to this Section 1.02 (the "Closing")
shall take place on the date, at the time and at the place
specified in such notice; provided, that if at such date any of
the conditions specified in Section 1.03 shall not have been
satisfied (or waived), Purchaser may postpone the Closing until a
date within five business days after such conditions are
satisfied (but not later than the Option Expiration Date).
(c) At the Closing, the Stockholder will deliver to
Purchaser (in accordance with Purchaser's instructions) the
certificates representing the Shares owned by the Stockholder and
being purchased pursuant to Section 1.02(c), duly endorsed or
accompanied by stock powers duly executed in blank; provided,
that the number of Shares the Stockholder shall be required to
deliver from time to time pursuant to a Notice, when taken
together with all Shares previously delivered pursuant to all
Notices, shall not exceed the aggregate number of shares owned by
the Stockholder beneficially and of record, at such time. At
such Closing, Purchaser shall deliver to the Stockholder, by bank
wire transfer of immediately available funds, an amount equal to
the number of Shares being purchased from the Stockholder as
specified in the Notice multiplied by $23.40 (or such higher per
share price as being offered by Purchaser in the Offer).
SECTION 1.03. Conditions to Option. The obligation of
Purchaser to purchase the Shares at the Closing is subject to the
following conditions:
(a) all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act")
applicable to such purchase shall have expired or been
terminated; and
(b) there shall be no preliminary or permanent
injunction or other order, decree or ruling issued by any
Governmental Entity, nor any statute, rule, regulation or
order promulgated or enacted by any Governmental Entity
prohibiting, or otherwise restraining, such purchase.
SECTION 1.04. No Purchase. Purchaser may allow the Offer
to expire without accepting for payment or paying for any Shares,
on the terms and conditions set forth in the Offer to Purchase,
and may allow the Option to expire without exercising the Option
and purchasing all or any Shares pursuant to such exercise. If
all Shares validly tendered and not withdrawn are not accepted
for payment and paid for in accordance with the terms of the
Offer to Purchase or pursuant to the exercise of the Option, they
shall be returned to the Stockholder, whereupon they shall
continue to be held by the Stockholder subject to the terms and
conditions of this Agreement.
SECTION 1.05. Maximum Share Number. For purposes of this
Agreement, the term "Maximum Share Number" shall mean, as of any
time of determination, such number of Shares that, when taken
together with all shares of the Company Common Stock that Parent
or any of its Affiliates (i) owns directly or indirectly,
beneficially or of record, at such time of determination and (ii)
has the right to acquire, at such time of determination, from
Joseph Littlejohn & Levy, L.P. and Joseph Littlejohn & Levy Fund
II, L.P. in accordance with the terms of the Tender Agreement
dated March 25, 1997 among Parent, Purchaser and Joseph
Littlejohn & Levy, L.P. and Joseph Littlejohn & Levy Fund II,
L.P. pursuant to the Offer or the exercise of the Option (as
defined in such Tender Agreement), would cause Parent or its
Affiliates to own directly or indirectly, beneficially or of
record, 49.9% of the aggregate voting power represented by the
issued and outstanding capital stock of the Company.
ARTICLE II
Consent and Voting
The Stockholder hereby revokes any and all previous proxies
granted with respect to the Shares owned by the Stockholder. By
entering into this Agreement, the Stockholder hereby consents to
the Merger Agreement and the transactions contemplated thereby,
including the Merger. So long as the Merger Agreement is in
effect, the Stockholder hereby agrees (i) to vote all Shares (not
to exceed the Maximum Share Number) now or hereafter owned by
such Stockholder or execute a consent and not revoke any proxy,
vote or consent, in favor of the Merger Agreement, the Merger and
the transactions contemplated thereby, and (ii) to oppose any
Acquisition Proposal and to vote all Shares (not to exceed the
Maximum Share Number) now or hereafter owned by such Stockholder,
or execute a consent, against any Acquisition Proposal.
ARTICLE III
Representations, Warranties and Covenants
of the Stockholder
The Stockholder represents, warrants and covenants to the
Purchaser and AC that:
SECTION 3.01. Ownership. As of the date hereof the
Stockholder is the sole, true, lawful and beneficial owner of
827,200 Shares and that there are no restrictions on voting
rights or rights of disposition pertaining to such Shares other
than those specified herein or any applicable provisions of
Article Fifth of the Company's Amended and Restated Certificate
of Incorporation. To the extent permitted by Article Fifth of
the Company's Amended and Restated Certificate of Incorporation,
the Stockholder will convey good and valid title to the Shares
owned by the Stockholder and being acquired pursuant to the
Offer, the Merger or the exercise of the Option, as the case may
be, free and clear of any and all liens, restrictions, security
interests or any encumbrances whatsoever (collectively, "Liens").
None of the Shares owned by the Stockholder is subject to any
voting trust or other agreement, arrangement or restriction with
respect to the voting of such Shares. Until this Agreement is
terminated, the Stockholder shall not, directly or indirectly,
sell, exchange, encumber, pledge, assign or otherwise transfer or
dispose of, or agree to or solicit any of the foregoing, or grant
any right or power to any person that limits the Stockholder's
sole power to vote, sell, assign, transfer, pledge, encumber or
otherwise dispose of the Shares owned by the Stockholder or
otherwise directs the Stockholder with respect to such Shares.
SECTION 3.02. Authority and Non-Contravention. The
execution, delivery and performance by the Stockholder of this
Agreement and the consummation of the transactions contemplated
hereby (i) are within the Stockholder's power and authority, have
been duly authorized by all necessary action (including any
consultation, approval or other action by or with any other
person), (ii) require no action by or in respect of, or filing
with, any Governmental Entity (except as may be required under
the HSR Act and under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(the "Exchange Act")), and (iii) do not and will not contravene
or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any right or
obligation of the Stockholder or to a loss of any benefit of the
Stockholder under, any provision of applicable law or regulation
or any agreement, judgment, injunction, order, decree, or other
instrument binding on the Stockholder or result in the imposition
of any Lien on any assets of the Stockholder.
SECTION 3.03. Binding Effect. This Agreement has been duly
executed and delivered by the Stockholder and is the valid and
binding agreement of the Stockholder, enforceable against it in
accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights generally.
SECTION 3.04. Total Shares. The Stockholder Shares owned
by the Stockholder are the only shares of Company Common Stock
beneficially owned as of the date hereof by the Stockholder and
the Stockholder has no option to purchase or right to subscribe
for or otherwise acquire any securities of the Company and has no
other interest in or voting rights with respect to any other
securities of the Company.
SECTION 3.05. Finder's Fees. No investment banker, broker
or finder is entitled to a commission or fee from Purchaser or
the Company in respect of this Agreement based upon any
arrangement or agreement made by or on behalf of the Stockholder,
except as otherwise disclosed in the Merger Agreement.
ARTICLE IV
Representations, Warranties and Covenants
of the Parent and Purchaser
The Parent and Purchaser represent, warrant and covenant to
the Stockholder:
SECTION 4.01. Corporate Power and Authority; Noncontra-
vention. The Parent and Purchaser have all requisite corporate
power and authority to enter into this Agreement and to perform
their obligations hereunder. The execution, delivery and
performance by the Parent and Purchaser of this Agreement and the
consummation by the Parent and Purchaser of the transactions
contemplated hereby (i) have been duly authorized by all
necessary corporate action on the part of the Parent and
Purchaser, (ii) require no action by or in respect of, or filing
with, any Governmental Entity (except as may be required under
the HSR Act and under the Exchange Act), or (iii) do not and will
not contravene or constitute a default under, the certificate of
incorporation or by-laws of Parent or Purchaser or any provision
of applicable law or regulation or any judgment, injunction,
order, decree, material agreement or other material instrument
binding on the Parent or Purchaser.
SECTION 4.02. Binding Effect. This Agreement has been duly
executed and delivered by the Parent and Purchaser and is a valid
and binding agreement of the Parent and Purchaser, enforceable
against each of them in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights generally.
SECTION 4.03. Acquisition for Purchaser's Account. Any
Shares to be acquired upon consummation of the Offer, or upon
exercise of the Option will be acquired by Purchaser for its own
account and not with a view to the public distribution thereof
and will not be transferred except in compliance with the
Securities Act and the rules and regulations promulgated
thereunder.
ARTICLE V
Additional Agreements
SECTION 5.01. Agreements of Stockholder. The Stockholder
hereby covenants and agrees that:
(a) No Solicitation. The Stockholder shall not
directly or indirectly (i) solicit, initiate or knowingly
encourage (or authorize any person to solicit, initiate or
encourage) any Acquisition Proposal, or (ii) participate in
any discussion or negotiations regarding, or furnish to any
other person any information with respect to, or otherwise
knowingly cooperate in any way with, or participate in,
facilitate or encourage any effort or attempt by any other
person to do or seek the foregoing. The Stockholder shall
promptly advise the Purchaser of the terms of any
communications it or any of its affiliates may receive
relating to any Acquisition Proposal (including, without
limitation, the identify of the party making any such
Acquisition Proposal).
(b) Adjustment upon Changes in Capitalization or
Merger. In the event of any change in the Company's capital
stock by reason of stock dividends, stock splits, mergers,
consolidations, recapitalization, combinations, conversions,
exchanges of shares, extraordinary or liquidating dividends,
or other changes in the corporate or capital structure of
the Company which would have the effect of diluting or
changing Purchaser's rights hereunder, the number and kind
of shares or securities subject to this Agreement and the
price set forth herein at which Shares may be purchased from
the Stockholder pursuant to the Offer or the exercise of the
Option shall be appropriately and equitably adjusted so that
Purchaser shall receive pursuant to the Offer or the
exercise of the Option the number and class of shares or
other securities or property that Purchaser would have
received in respect of the Shares purchasable pursuant to
the Offer or the exercise of the Option if such purchase had
occurred immediately prior to such event.
ARTICLE VI
Miscellaneous
SECTION 6.01. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party
incurring such cost or expense.
SECTION 6.02. Further Assurances. The Parent, Purchaser
and the Stockholder will execute and deliver or cause to be
executed and delivered all further documents and instruments and
use its reasonable best efforts to secure such consents and take
all such further action as may be reasonably necessary in order
to consummate the transactions contemplated hereby and by the
Merger Agreement.
SECTION 6.03. Additional Agreements. Subject to the terms
and conditions of this Agreement, each of the parties hereto
agrees to use all reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements,
contracts, commitments, instruments, understandings, arrangements
or restrictions of any kind to which such party is a party or by
which such party is governed or bound, to consummate and make
effective the transactions contemplated by this Agreement.
SECTION 6.04. Specific Performance. The parties
acknowledge and agree that performance of their respective
obligations hereunder will confer a unique benefit on the other
and that a failure of performance will not be compensable by
money damages. The parties therefore agree that this Agreement
shall be specifically enforceable and that specific enforcement
and injunctive relief shall be available to the Parent, Purchaser
or the Stockholder for any breach by the other party or parties
of any agreement, covenant or representation hereunder.
SECTION 6.05. Notices. All notices, requests, claims,
demands and other communications hereunder shall be deemed to
have been duly given when delivered in person, by telecopy, or by
registered or certified mail (postage prepaid, return receipt
requested) to such party at its address set forth on the
signature page hereto.
SECTION 6.06. Survival of Representations and Warranties.
All representations and warranties contained in this Agreement
shall survive delivery of and payment for the Shares pursuant to
Section 1.02 hereof. None of the representations and warranties
contained in this Agreement shall survive the acceptance for
payment and payment for the Shares pursuant to the Offer.
SECTION 6.07. Amendments; Termination. This Agreement may
not be modified, amended, altered or supplemented, except upon
the execution and delivery of a written agreement executed by the
parties hereto. Notwithstanding anything herein to the contrary,
this Agreement shall expire and be of no further force or effect
if (i) the conditions to the Purchaser's obligations to accept
for payment and pay for Shares pursuant to the Offer shall have
been satisfied and the Purchaser breaches any obligation of
Purchaser under the Merger Agreement to accept for payment and
promptly pay for all Shares validly tendered and not withdrawn
pursuant to the Offer upon expiration of the Offer or (ii) the
Purchaser amends the Offer to (w) reduce the Offer Price to less
than $23.40 in cash, net to the sellers, (x) reduce the number of
shares of Company Common Stock subject to the Offer, (y) change
the form of consideration payable in the Offer or (z) amend or
modify any term or condition of the Offer in a manner adverse to
the stockholders of the Company (other than insignificant changes
or amendments or other than to waive any condition). This
Agreement will also terminate upon the earlier of (i) the close
of business on September 24, or (ii) the Effective Time.
SECTION 6.08. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns;
provided, however, that Purchaser may assign its rights and
obligations to another wholly-owned subsidiary of the Parent
which is the assignee of Purchaser's rights under the Merger
Agreement; and provided further that except as set forth in the
prior clause, a party may not assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto and any purported
assignment, delegation or transfer without such consent shall be
null and void.
SECTION 6.09. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of Delaware
without giving effect to the principles of conflicts of laws
thereof.
SECTION 6.10. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effects as if the signatures
thereto and thereof were upon the same instrument. This
Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other
parties hereto.
SECTION 6.11. Stockholder Capacity. The Stockholder signs
solely in its capacity as the record holder and beneficial owner
of the Shares and nothing herein shall limit or affect any
actions taken by any officer, director, partner, employee or
affiliate of the Stockholder in his or her capacity as an officer
or director of the Company and no such actions shall be deemed a
breach of this Agreement.
SECTION 6.12. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions be
consummated as originally contemplated to the fullest extent
possible. To the extent that any provision of this Agreement and
the Merger Agreement conflict, the provisions of the Merger
Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
IBP, inc.
By:__________________________
Name: Robert L. Peterson
Title: Chairman and Chief
Executive Officer
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
IBP SUB, INC.
By:________________________
Name: Larry Shipley
Title: President
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
THE AIRLIE GROUP, L.P.
By: EBD L.P., General Partner
By: TMT-FW, Inc., General
Partner
By:__________________________
Name: Dort A. Cameron III
Title:
Address for Notices:
115 E. Putnam Ave.
Greenwich, Connecticut 06830
Attn: Dort A. Cameron III
<PAGE>
TENDER AGREEMENT
TENDER AGREEMENT dated as of March 25, 1997 (this
"Agreement"), among IBP, inc., a Delaware corporation (the
"Parent"), IBP Sub, Inc., a Delaware corporation and a wholly
owned subsidiary of the Parent ("Purchaser"), and Joseph
Littlejohn & Levy, L.P., a Delaware limited partnership, and
Joseph, Littlejohn & Levy Fund II, L.P., a Delaware limited
partnership (together, the "Stockholder").
WHEREAS, concurrently with the execution and delivery of
this Agreement the Parent, Purchaser and Foodbrands America,
Inc., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger dated as of the date hereof (such
Agreement and Plan of Merger, as amended from time to time, the
"Merger Agreement"), which provides, among other things, that
Purchaser shall make the Offer (as defined in the Merger
Agreement) to purchase at a price of $23.40 per share, net to the
sellers in cash, all of the issued and outstanding shares of the
Company's Common Stock, par value $.01 per share (the "Company
Common Stock"), and shall merge with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth
in the Merger Agreement (any term used herein without definition
shall have the definition ascribed thereto in the Merger
Agreement);
WHEREAS, the Stockholder owns beneficially and of record
shares of Company Common Stock (such shares of Company Common
Stock being collectively referred to herein as the "Stockholder
Shares" or individually referred to herein as the "Stockholder
Share") and;
WHEREAS, as a condition to the willingness of the Parent and
Purchaser to enter into the Merger Agreement, and as an
inducement to them to do so, the Stockholder has agreed for the
benefit of the Parent and Purchaser to tender the Stockholder
Shares and any other shares of Company Common Stock at any time
during the term of this Agreement held by the Stockholder,
pursuant to the Offer, to vote all the Stockholder Shares and any
other shares of Company Common Stock owned by the Stockholder in
favor of the Merger, and to grant to Purchaser an option to
acquire all Stockholder Shares and all other shares of Company
Common Stock owned by the Stockholder under certain
circumstances, all on the terms and conditions contained in
this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement,
the parties hereby agree as follows:
ARTICLE I
Tender Offer and Option
SECTION 1.01. Tender of Shares. (a) Within five business
days of the commencement by Purchaser of the Offer, the
Stockholder shall tender to the Depository designated in the
Offer to Purchase (the "Offer to Purchase") distributed by
Purchaser in connection with the Offer (i) a letter of
transmittal with respect to the Stockholder Shares and any other
shares of Company Common Stock held by the Stockholder (whether
or not currently held by the Stockholder; the Stockholder Shares,
together with any shares acquired by the Stockholder in any
capacity after the date hereof and prior to the termination of
this Agreement whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable
securities, or by means of purchase, dividend, distribution or
otherwise (the "Shares"), complying with the terms of the Offer
to Purchase, (ii) the certificates representing the Shares, and
(iii) all other documents or instruments required to be delivered
pursuant to the terms of the Offer to Purchase.
(b) The Stockholder shall not, subject to applicable law,
withdraw the tender effected in accordance with Section 1.01(a);
provided, however, that the Stockholder may decline to tender, or
may withdraw, any and all Shares owned by the Stockholder if the
Purchaser amends the Offer to (w) reduce the Offer Price to less
than $23.40 in cash, net to the stockholders, (x) reduce the
number of shares of Company Common Stock subject to the Offer,
(y) change the form of consideration payable in the Offer or (z)
amend or modify any term or condition of the Offer in a manner
adverse to the stockholders of the Company (other than
insignificant changes or amendments or other than to waive any
condition). The Stockholder shall give Purchaser at least two
business days' prior notice of any withdrawal of Shares owned by
the Stockholder pursuant to the immediately preceding proviso.
SECTION 1.02. Option. (a) The Stockholder hereby
irrevocably grants Purchaser an option (the "Option"),
exercisable only upon the events and subject to the conditions
set forth herein, to purchase any or all of the Shares at a
purchase price per share equal to $23.40 (or such higher per
share price as may be offered by Purchaser in the Offer).
(b) Subject to the conditions set forth in Section 1.03 and
the termination provisions of Section 6.07, Purchaser may
exercise the Option in whole or in part at any time prior to the
date 60 days after the expiration or termination of the Offer
(such sixtieth day being herein called the "Option Expiration
Date") if (x) the Stockholder fails to comply with any of its
obligations under this Agreement or withdraws the tender of the
Shares except under the circumstances set forth in the proviso to
Section 1.01(b) (but the Option shall not limit any other right
or remedy available to the Parent or Purchaser against the
Stockholder for breach of this Agreement) or (y) the Offer is not
consummated because of the failure to satisfy any of the
conditions to the Offer set forth in Annex A to the Merger
Agreement (other than as a result of any action or inaction of
the Parent or Purchaser which constitutes a breach of the Merger
Agreement).
Upon the occurrence of any of such circumstances,
Purchaser shall be entitled to exercise the Option and (subject
to Section 1.03) Purchaser shall be entitled to purchase the
Shares and the Stockholder shall sell the Shares to Purchaser.
Purchaser shall exercise the Option by delivering written notice
thereof to the Stockholder (the "Notice"), specifying the number
of Shares to be purchased and the date, time and place for the
closing of such purchase which date shall not be less than three
business days nor more than five business days from the date the
Stockholder receives the Notice and in no event shall such date
be later than the Option Expiration Date. The closing of the
purchase of Shares pursuant to this Section 1.02 (the "Closing")
shall take place on the date, at the time and at the place
specified in such notice; provided, that if at such date any of
the conditions specified in Section 1.03 shall not have been
satisfied (or waived), Purchaser may postpone the Closing until a
date within five business days after such conditions are
satisfied (but not later than the Option Expiration Date).
(c) At the Closing, the Stockholder will deliver to
Purchaser (in accordance with Purchaser's instructions) the
certificates representing the Shares owned by the Stockholder and
being purchased pursuant to Section 1.02(c), duly endorsed or
accompanied by stock powers duly executed in blank. At such
Closing, Purchaser shall deliver to the Stockholder, by bank wire
transfer of immediately available funds, an amount equal to the
number of Shares being purchased from the Stockholder as
specified in the Notice multiplied by $23.40 (or such higher per
share price as may be offered by Purchaser in the Offer).
SECTION 1.03. Conditions to Option. The obligation of
Purchaser to purchase the Shares at the Closing is subject to the
following conditions:
(a) all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act")
applicable to such purchase shall have expired or been
terminated; and
(b) there shall be no preliminary or permanent
injunction or other order, decree or ruling issued by any
Governmental Entity, nor any statute, rule, regulation or
order promulgated or enacted by any Governmental Entity
prohibiting, or otherwise restraining, such purchase.
SECTION 1.04. No Purchase. Purchaser may allow the Offer
to expire without accepting for payment or paying for any Shares,
on the terms and conditions set forth in the Offer to Purchase,
and may allow the Option to expire without exercising the Option
and purchasing all or any Shares pursuant to such exercise. If
all Shares validly tendered and not withdrawn are not accepted
for payment and paid for in accordance with the terms of the
Offer to Purchase or pursuant to the exercise of the Option, they
shall be returned to the Stockholder, whereupon they shall
continue to be held by the Stockholder subject to the terms and
conditions of this Agreement.
ARTICLE II
Consent and Voting
The Stockholder hereby revokes any and all previous proxies
granted with respect to the Shares owned by the Stockholder. By
entering into this Agreement, the Stockholder hereby consents to
the Merger Agreement and the transactions contemplated thereby,
including the Merger. So long as the Merger Agreement is in
effect, the Stockholder hereby agrees (i) to vote all Shares now
or hereafter owned by such Stockholder or execute a consent and
not revoke any proxy, vote or consent, in favor of the Merger
Agreement, the Merger and the transactions contemplated thereby,
and (ii) to oppose any Acquisition Proposal and to vote all
Shares now or hereafter owned by such Stockholder, or execute a
consent, against any Acquisition Proposal.
ARTICLE III
Representations, Warranties and Covenants
of the Stockholder
The Stockholder represents, warrants and covenants to the
Purchaser that:
SECTION 3.01. Ownership. As of the date hereof the
Stockholder is the sole, true, lawful and beneficial owner of
5,515,833 Shares and that there are no restrictions on voting
rights or rights of disposition pertaining to such Shares other
than those specified herein or any applicable provisions of
Article Fifth of the Company's Amended and Restated Certificate
of Incorporation. To the extent permitted by Article Fifth of
the Company's Amended and Restated Certificate of Incorporation,
the Stockholder will convey good and valid title to the Shares
owned by the Stockholder and being acquired pursuant to the
Offer, the Merger or the exercise of the Option, as the case may
be, free and clear of any and all liens, restrictions, security
interests or any encumbrances whatsoever (collectively, "Liens").
None of the Shares owned by the Stockholder is subject to any
voting trust or other agreement, arrangement or restriction with
respect to the voting of such Shares. Until this Agreement is
terminated, the Stockholder shall not, directly or indirectly,
sell, exchange, encumber, pledge, assign or otherwise transfer or
dispose of, or agree to or solicit any of the foregoing, or grant
any right or power to any person that limits the Stockholder's
sole power to vote, sell, assign, transfer, pledge, encumber or
otherwise dispose of the Shares owned by the Stockholder or
otherwise directs the Stockholder with respect to such Shares.
SECTION 3.02. Authority and Non-Contravention. The
execution, delivery and performance by the Stockholder of this
Agreement and the consummation of the transactions contemplated
hereby (i) are within the Stockholder's power and authority, have
been duly authorized by all necessary action (including any
consultation, approval or other action by or with any other
person), (ii) require no action by or in respect of, or filing
with, any Governmental Entity (except as may be required under
the HSR Act and under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(the "Exchange Act")), and (iii) do not and will not contravene
or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any right or
obligation of the Stockholder or to a loss of any benefit of the
Stockholder under, any provision of applicable law or regulation
or any agreement, judgment, injunction, order, decree, or other
instrument binding on the Stockholder or result in the imposition
of any Lien on any assets of the Stockholder.
SECTION 3.03. Binding Effect. This Agreement has been duly
executed and delivered by the Stockholder and is the valid and
binding agreement of the Stockholder, enforceable against it in
accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights generally.
SECTION 3.04. Total Shares. The Stockholder Shares owned
by the Stockholder are the only shares of Company Common Stock
beneficially owned as of the date hereof by the Stockholder and
the Stockholder has no option to purchase or right to subscribe
for or otherwise acquire any securities of the Company and has no
other interest in or voting rights with respect to any other
securities of the Company.
SECTION 3.05. Finder's Fees. No investment banker, broker
or finder is entitled to a commission or fee from Purchaser or
the Company in respect of this Agreement based upon any
arrangement or agreement made by or on behalf of the Stockholder,
except as otherwise disclosed in the Merger Agreement.
ARTICLE IV
Representations, Warranties and Covenants
of the Parent and Purchaser
The Parent and Purchaser represent, warrant and covenant to
the Stockholder:
SECTION 4.01. Corporate Power and Authority;
Noncontravention. The Parent and Purchaser have all requisite
corporate power and authority to enter into this Agreement and to
perform their obligations hereunder. The execution, delivery and
performance by the Parent and Purchaser of this Agreement and the
consummation by the Parent and Purchaser of the transactions
contemplated hereby (i) have been duly authorized by all
necessary corporate action on the part of the Parent and
Purchaser, (ii) require no action by or in respect of, or filing
with, any Governmental Entity (except as may be required under
the HSR Act and under the Exchange Act, or (iii) do not and will
not contravene or constitute a default under, the certificate of
incorporation or by-laws of Parent or Purchaser or any provision
of applicable law or regulation or any, judgment, injunction,
order, decree, material agreement or other material instrument
binding on the Parent or Purchaser.
SECTION 4.02. Binding Effect. This Agreement has been duly
executed and delivered by the Parent and Purchaser and is a valid
and binding agreement of the Parent and Purchaser, enforceable
against each of them in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights generally.
SECTION 4.03. Acquisition for Purchaser's Account. Any
Shares to be acquired upon consummation of the Offer, or upon
exercise of the Option will be acquired by Purchaser for its own
account and not with a view to the public distribution thereof
and will not be transferred except in compliance with the
Securities Act and the rules and regulations promulgated
thereunder.
ARTICLE V
Additional Agreements
SECTION 5.01. Agreements of Stockholder. The Stockholder
hereby covenants and agrees that:
(a) No Solicitation. The Stockholder shall not
directly or indirectly (i) solicit, initiate or knowingly
encourage (or authorize any person to solicit, initiate or
encourage) any Acquisition Proposal, or (ii) participate in
any discussion or negotiations regarding, or furnish to any
other person any information with respect to, or otherwise
knowingly cooperate in any way with, or participate in,
facilitate or encourage any effort or attempt by any other
person to do or seek the foregoing. The Stockholder shall
promptly advise the Purchaser of the terms of any
communications it or any of its affiliates may receive
relating to any Acquisition Proposal (including, without
limitation, the identify of the party making any such
Acquisition Proposal).
(b) Adjustment upon Changes in Capitalization or
Merger. In the event of any change in the Company's capital
stock by reason of stock dividends, stock splits, mergers,
consolidations, recapitalization, combinations, conversions,
exchanges of shares, extraordinary or liquidating dividends,
or other changes in the corporate or capital structure of
the Company which would have the effect of diluting or
changing Purchaser's rights hereunder, the number and kind
of shares or securities subject to this Agreement and the
price set forth herein at which Shares may be purchased from
the Stockholder pursuant to the Offer or the exercise of the
Option shall be appropriately and equitably adjusted so that
Purchaser shall receive pursuant to the Offer or the
exercise of the Option the number and class of shares or
other securities or property that Purchaser would have
received in respect of the Shares purchasable pursuant to
the Offer or the exercise of the Option if such purchase had
occurred immediately prior to such event.
ARTICLE VI
Miscellaneous
SECTION 6.01. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party
incurring such cost or expense.
SECTION 6.02. Further Assurances. The Parent, Purchaser
and the Stockholder will execute and deliver or cause to be
executed and delivered all further documents and instruments and
use its reasonable best efforts to secure such consents and take
all such further action as may be reasonably necessary in order
to consummate the transactions contemplated hereby and by the
Merger Agreement.
SECTION 6.03. Additional Agreements. Subject to the terms
and conditions of this Agreement, each of the parties hereto
agrees to use all reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations and which may be required under any agreements,
contracts, commitments, instruments, understandings, arrangements
or restrictions of any kind to which such party is a party or by
which such party is governed or bound, to consummate and make
effective the transactions contemplated by this Agreement.
SECTION 6.04. Specific Performance. The parties
acknowledge and agree that performance of their respective
obligations hereunder will confer a unique benefit on the other
and that a failure of performance will not be compensable by
money damages. The parties therefore agree that this Tender
Agreement shall be specifically enforceable and that specific
enforcement and injunctive relief shall be available to the
Parent, Purchaser or the Stockholder for any breach by the other
party or parties of any agreement, covenant or representation
hereunder.
SECTION 6.05. Notices. All notices, requests, claims,
demands and other communications hereunder shall be deemed to
have been duly given when delivered in person, by telecopy, or by
registered or certified mail (postage prepaid, return receipt
requested) to such party at its address set forth on the
signature page hereto.
SECTION 6.06. Survival of Representations and Warranties.
All representations and warranties contained in this Agreement
shall survive delivery of and payment for the Shares pursuant to
Section 1.02 hereof. None of the representations and warranties
contained in this Agreement shall survive the acceptance for
payment and payment for the Shares pursuant to the Offer.
SECTION 6.07. Amendments; Termination. This Agreement may
not be modified, amended, altered or supplemented, except upon
the execution and delivery of a written agreement executed by the
parties hereto. Notwithstanding anything herein to the contrary,
this Agreement shall expire and be of no further force or effect
if (i) the conditions to the Purchaser's obligations to accept
for payment and pay for Shares pursuant to the Offer shall have
been satisfied and the Purchaser breaches any obligation of
Purchaser under the Merger Agreement to accept for payment and
promptly pay for all Shares validly tendered and not withdrawn
pursuant to the Offer upon expiration of the Offer or (ii)
Purchaser amends the Offer to (w) reduce the Offer Price to less
than $23.40 in cash, net to the sellers, (x) reduce the number of
shares of Company Common Stock subject to the Offer, (y) change
the form of consideration payable in the Offer or (z) amend or
modify any term or condition of the Offer in a manner adverse to
the stockholders of the Company (other than insignificant changes
or amendments or other than to waive any condition). This
Agreement will also terminate upon the earlier of (i) the close
of business on September 24, or (ii) the Effective Time.
SECTION 6.08. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns;
provided, however, that Purchaser may assign its rights and
obligations to another wholly-owned subsidiary of the Parent
which is the assignee of Purchaser's rights under the Merger
Agreement; and provided further that except as set forth in the
prior clause, a party may not assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto and any purported
assignment, delegation or transfer without such consent shall be
null and void.
SECTION 6.09. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of Delaware
without giving effect to the principles of conflicts of laws
thereof.
SECTION 6.10. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effects as if the signatures
thereto and thereof were upon the same instrument. This
Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other
parties hereto.
SECTION 6.11. Stockholder Capacity. The Stockholder signs
solely in its capacity as the record holder and beneficial owner
of the Shares and nothing herein shall limit or affect any
actions taken by any officer, director, partner, employee or
affiliate of the Stockholder in his or her capacity as an officer
or director of the Company and no such actions shall be deemed a
breach of this Agreement.
SECTION 6.12. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions be
consummated as originally contemplated to the fullest extent
possible. To the extent that any provision of this Agreement and
the Merger Agreement conflict, the provisions of the
Merger Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
IBP, inc.
By:__________________________
Name: Robert L. Peterson
Title: Chairman and Chief
Executive Officer
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
IBP SUB, INC.
By:_______________________
Name: Larry Shipley
Title: President
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
JOSEPH LITTLEJOHN & LEVY FUND, L.P.
By: JLL Associates, L.P., General
Partner
By_____________________________
Name: Paul S. Levy
Title: General Partner
Address for Notices:
Joseph Littlejohn & Levy
450 Lexington Avenue, Suite 3350
New York, New York 10017
Attn: Paul S. Levy
JOSEPH LITTLEJOHN & LEVY FUND II,
L.P.
By: JLL Associates, L.P., General
Partner
By_____________________________
Name: Paul S. Levy
Title: General Partner
Address for Notices:
Joseph Littlejohn & Levy
450 Lexington Avenue, Suite 3350
New York, New York 10017
Attn: Paul S. Levy
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
FOODBRANDS AMERICA, INC.
_________________________________________________________________
Pursuant to Sections 228 and 242 of the
General Corporation Law of the State of Delaware
_________________________________________________________________
Foodbrands America, Inc., a Delaware corporation (the
"Corporation"), does hereby certify as follows:
FIRST: The name of the corporation is Foodbrands
America, Inc., a Delaware corporation.
SECOND: Effective immediately upon filing of this
Amendment and without further action on the part of the
Corporation or its stockholders the provisions of Section 5.1 of
the Corporation's Amended and Restated Certificate of
Incorporation shall be amended as as described herein.
THIRD: That the Amended and Restated Certificate of
Incorporation of the Corporation is hereby 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 interests 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)."
FOURTH: That this Amendment has been duly adopted in
accordance with the provisions of Sections 242 and 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment to be executed in its corporate name
this _____ day of _________, 1997.
FOODBRANDS AMERICA, INC.
By:__________________________
Name:
Title:
<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. 28, Dec. 30, Dec. 31,
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Income (loss) from continuing operations $ 15,918 $ 9,601 $ (5,195)
Income (loss) from discontinued
operations - (4,121) (8,522)
Loss on disposal of discontinued
operations - (38,526) -
Extraordinary loss on early
extinguishment of debt (5,051) (1,049) (2,481)
________ ________ ________
Net income (loss) $ 10,867 $(34,095) $(16,198)
======== ======== ========
Primary earnings per share:
Weighted average number of
common shares outstanding 12,471 12,453 8,727
Common stock equivalents:
Dilutive options and warrants - - -
______ ______ ______
Weighted average number of common
and common equivalent shares
outstanding 12,471 12,453 8,727
====== ====== ======
Income (loss) from continuing
operations $ 1.28 $ 0.77 $(0.59)
Income (loss) from discontinued
operations - (0.33) (0.98)
Loss on disposal of discontinued
operations - (3.09) -
Extraordinary loss on early
extinguishment of debt (0.41) (0.08) (0.28)
______ ______ ______
Net income (loss) per share $ 0.87 $(2.73) $(1.85)
====== ====== ======
Fully diluted earnings per share:
Weighted average number of
common shares outstanding 12,471 12,453 8,727
Common stock equivalents:
Dilutive options and warrants 175 - -
______ ______ ______
Weighted average number of common
and common equivalent shares
outstanding 12,646 12,453 8,727
====== ====== ======
Income (loss) from continuing
operations $ 1.26 $ 0.77 $(0.59)
Income (loss) from discontinued
operations - (0.33) (0.98)
Loss on disposal of discontinued
operations - (3.09) -
Extraordinary loss on early
extinguishment of debt (0.40) (0.08) (0.28)
______ ______ ______
Net income (loss) per share $ 0.86 $(2.73) $(1.85)
====== ====== ======
</TABLE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Subsidiaries of Foodbrands America, Inc.
________________________________________
State of Percentage
Name Incorporation Owned
____ _____________ __________
Continental Deli Foods, Inc. Delaware 100%
Specialty Brands, Inc. Delaware 100%
FBAI Investments Corporation Oklahoma 100%
Florida Panel Company* Florida 100%
National Service Center, Inc. Delaware 100%
Jos. Copperfield & Sons, 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.
** Jos. Copperfield & Sons, Inc. owns 1% of KPR Holdings, L.P.
and 0.5% 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 Nos. 33-
45974, 333-04915, 333-04925, 333-04665, 333-04671, 33-59331 and
33-62611) of our report dated February 18, 1997, except as to the
information presented in the last paragraph of Note 14 and the
information presented in Note 15 for which the date is March 26,
1997, on our audits of the consolidated financial statements and
the financial statement schedule of Foodbrands America, Inc. as
of December 28, 1996, and December 30, 1995, and for the years
ended December 28, 1996, December 30, 1995, and December 31,
1994, which report is included in this Annual Report on Form
10-K.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
March 26, 1997
EXHIBIT 24.1
POWER OF ATTORNEY
We, the undersigned directors of Foodbrands America, Inc.
(hereinafter, the "Company"), hereby severally constitute Horst
O. Sieben, Bryant P. Bynum and William L. Brady, and each of
them, severally, our true and lawful attorneys in fact with full
power to them and each of them to sign for us, and in our names
as directors of the Company, the Annual Report on Form 10-K for
the year ended December 28, 1996, and any amendment thereto,
granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and to perform each and
every act and thing requisite and necessary to be done with
respect to preparing and filing said annual report, as fully to
all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, may lawfully do or cause to be done by
virtue hereof.
DATED this 20th day of February, 1997.
Signature Title Date
____________________________ Chairman, February __, 1997
R. Randolph Devening President, Chief
Executive Officer
and Director
(Principal
Executive Officer)
/s/ R. Theodore Ammon Director February 20, 1997
____________________________
R. Theodore Ammon
/s/ Richard T. Berg Director February 20, 1997
____________________________
Richard T. Berg
/s/ Dort A. Cameron III Director February 20, 1997
____________________________
Dort A. Cameron III
/s/ Terry M. Grimm Director February 20, 1997
____________________________
Terry M. Grimm
/s/ Paul S. Levy Director February 20, 1997
____________________________
Paul S. Levy
Director February __, 1997
____________________________
Peter A. Joseph
/s/ Angus C. Littlejohn, Jr. Director February 20, 1997
____________________________
Angus C. Littlejohn, Jr.
/s/ Paul W. Marshall Director February 20, 1997
____________________________
Paul W. Marshall
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 28, 1996,
CONTAINED IN THE 1996 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-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 10,442
<SECURITIES> 0
<RECEIVABLES> 46,582
<ALLOWANCES> 0
<INVENTORY> 62,960
<CURRENT-ASSETS> 146,326
<PP&E> 209,212
<DEPRECIATION> 56,434
<TOTAL-ASSETS> 548,526
<CURRENT-LIABILITIES> 109,208
<BONDS> 310,307
0
0
<COMMON> 125
<OTHER-SE> 55,493
<TOTAL-LIABILITY-AND-EQUITY> 548,526
<SALES> 835,175
<TOTAL-REVENUES> 835,175
<CGS> 673,449
<TOTAL-COSTS> 673,449
<OTHER-EXPENSES> 113,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,374
<INCOME-PRETAX> 16,226
<INCOME-TAX> 308
<INCOME-CONTINUING> 15,918
<DISCONTINUED> 0
<EXTRAORDINARY> (5,051)
<CHANGES> 0
<NET-INCOME> 10,867
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
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