UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
June 4, 1997
Date of Report (Date of earliest event reported)
POORE BROTHERS, INC.
(Exact name of registrant as specified in its charter)
1-14556
DELAWARE 0-21857 86-0786101
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
3500 South La Cometa Drive
Goodyear, Arizona 85338
(Address of principal executive officer)(zip code)
(602) 925-0731
(Registrant's telephone number, including area code)
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Item 2. Aquisition or Disposition of Assets
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On June 4, 1997, Poore Brothers of Texas, Inc. ("PB Texas"), a
wholly-owned subsidiary of the Registrant, entered into an Asset Purchase,
Licensing and Distribution Agreement effective June 1, 1997, pursuant to which
PB Texas sold certain assets (including inventory, vehicles and capital
equipment) to Mr. David Hecht (the "Buyer"). In addition, pursuant to the
Agreement the Buyer has been granted a license to be Registrant's exclusive
distributor in the Houston, Texas market. The purchase price for the assets sold
by PB Texas is approximately $157,000, 50% of which was paid by the Buyer in
cash at the closing and 50% of which will be paid pursuant to a one year,
non-interest bearing promissory note issued by the Buyer to the Registrant. The
Registrant will provide certain financial support to the Buyer, estimated at up
to $40,000, in connection with the transition of the business to the Buyer.
A copy of the Asset Purchase, Licensing and Distribution Agreement between Poore
Brothers of Texas, Inc. and Mr. David Hecht is attached as an exhibit hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- --------------------------------------------------------------------------
(b) Pro Forma Financial Information
The required pro forma financial information will be filed as
an amendment to this report as soon as practicable, but no
later than 60 days after the date this report is required to
be filed.
(c) Exhibits
10.1 Asset Purchase, Licensing and Distribution Agreement
dated as of June 1, 1997, by and between Poore Brothers of
Texas, Inc. and Mr. David Hecht.
99.1 Press release dated June 4, 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POORE BROTHERS, INC.
(registrant)
Dated: June 19, 1997 By: /s/ Thomas W. Freeze
-------------------
Thomas W. Freeze
Vice President and Chief Finanicial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
10.1 Asset Purchase, Licensing and Distribution Agreement
dated as of June 1, 1997, by and between Poore
Brothers of Texas, Inc. and Mr. David Hecht.
99.1 Press Release dated June 4, 1997
ASSET PURCHASE, LICENSING AND
-----------------------------
DISTRIBUTION AGREEMENT
----------------------
This Agreement is made as of this 1st day of June, 1997
between POORE BROTHERS OF TEXAS, INC., a Texas corporation, whose business
address is 7801 North Shepard Boulevard, Suite 100, Houston, Texas 77088
("Seller") and DAVID HECHT, whose business address is 6038 Dumfries, Houston,
Texas 77096 ("Buyer").
WHEREAS, Seller has operated a potato chip and other food
product distributing business in Houston, Texas, which Buyer is desirous of
acquiring and continuing to operate;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and with other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Seller and Buyer
hereby agree as follows:
1. Sale of Assets. Seller hereby agrees to sell and transfer
to Buyer certain assets and grant certain licenses that will enable Buyer to
operate the above-described business. Attached hereto as Exhibit "A" is a
schedule of the equipment belonging to Seller being acquired by Buyer (the
"Equipment"); Seller shall, at the Closing, deliver to Buyer a bill of sale in
form and substance reasonably satisfactory to Buyer transferring title to the
Equipment owned by Seller to Buyer free, clear and unencumbered. Seller shall
also deliver to Buyer the certificates of title to the motor vehicles listed on
Exhibit "A" with appropriate signatures such that title to the motor vehicles
can be transferred to Buyer. All of Seller's product inventory which is not
damaged, is currently authorized and with a code date indicating expiration more
than 21 days after the Closing Date (as defined herein) shall be transferred to
Buyer. Such inventory is listed on Exhibit "A-1". At the Closing, Seller will
transfer to Buyer all customer lists, leads, prospects and other business
information used by Seller in connection with the business. The equipment listed
on Exhibit "A," the inventory listed on Exhibit "A-1," and all customer lists
and other tangible or intangible information to be transferred hereunder, are
sometimes collectively referred to as the "Assets."
2. Current Office Lease. Prior to Closing, Seller gave notice
to the Landlord of the building where the business currently operates, of
Seller's intention to terminate the lease and vacate the premises within 60 days
after the date of the notice. Seller shall be responsible for rental payments
required by the lease and Buyer shall be permitted, but not required, to remain
in such space for the balance of the 60-day period remaining after the Closing
without being obligated to make basic rental payments, but Buyer, if it elects
to remain in the space for any period after the Closing, shall be responsible
for all other expenses, fees and charges which are the tenant's obligations
under the Lease. A copy of the Lease has been provided to Buyer. The consent of
the Landlord to subletting the space to Buyer will be obtained prior to Closing.
During the period in which Buyer occupies the leased space, Buyer shall be
obligated to pay all charges and fees
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other than basic rent, including, but not limited to, liability insurance
(adding Seller as an additional named insured), utilities, taxes and similar
charges. Thereafter, Buyer shall be responsible for obtaining space in which to
operate the business without further obligation on the part of Seller.
3. Accounts Receivable. All accounts receivables and all
amounts due, whether billed or unbilled, for products sold prior to the closing
date shall remain the property of Seller and Buyer shall have no right or
interest therein. All payments applicable to these accounts shall be applied to
the accounts on the basis that each customer's payments shall be applied based
on invoice date. All payments for invoices dated prior to May 31, 1997 shall be
remitted to Seller. Payments of amounts due to Seller for the receivable
actually received by Buyer or to Buyer's account shall be transmitted to Seller
within three days. Seller shall have the right to inspect Buyer's books and
records from time to time to confirm that Buyer has appropriately accounted for
all payments received.
Buyer shall use its good faith efforts and good business
practice to collect all amounts due as promptly as possible; Buyer shall consult
with Seller as to any receivables to be written down or compromised or turned to
collection. Buyer shall provide a bi-weekly listing of the status of the
accounts including the amounts collected for such period, unpaid balances and
steps taken towards collection. The amount due as described in this paragraph
shall not be subject to offset for any amounts otherwise due or claimed to be
due by Buyer from Seller.
4. Assets and Business Being Purchased "As Is" and "Where Is".
Buyer acknowledges that Seller has made available all books and records about
the business being acquired pursuant to this Agreement. Accordingly, all assets
of the business being acquired hereunder are being acquired "AS IS" and "WHERE
IS" without any warranty, express or implied, from Seller; no warranty is given
as to the condition or status thereof or as to the future prospects or financial
prospects of the business being acquired hereunder. Buyer and its principal are
relying solely upon their own independent review and analysis with regard to
their decision to purchase the business as provided herein.
5. Purchase Price. The purchase price to be paid for the
Assets by Buyer to Seller is $156,828.42 which is the inventory priced at the
lower of cost, as evidenced by actual invoices (including trade, but not cash
discounts), or market. The purchase price shall be paid as follows: one-half of
the amount ($78,414.21) shall be paid in cash, certified check or wire transfer
at Closing or as soon thereafter as the value of the inventory has been
determined. The unpaid amount as of the Closing shall be evidenced by a
Promissory Note (Exhibit "B") to Seller which shall be executed by David Hecht
and his spouse. The Promissory Note will be non-interest bearing and will be due
one year after the Closing. If the Promissory Note is not paid when due, then in
addition to all other
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remedies available to Seller hereunder, or the holder of the Promissory Note
thereunder, the Promissory Note shall bear interest at the rate of 18% per annum
until paid.
6. Grant of License; Territory; Availability of Product and
Pricing.
a. License and Territory. Seller hereby grants to
Buyer the right to use the name "Poore Brothers of Texas" in connection with the
business for a period of one (1) year after Closing, subject to the following
conditions. Buyer may not use any mark, logo, device or design when using the
name "Poore Brothers of Texas" without the express written consent of Seller or
Seller's parent corporation, Poore Brothers, Inc. Further, the license granted
to Buyer hereunder shall be restricted to an area within a 100-mile radius of
the United States Courthouse in Houston, Texas (the "Territory"). Buyer is
Seller's exclusive distributor in the Territory and Seller shall not sell to any
other party in the Territory except for the vending channel. Buyer shall have no
right to use the name "Poore Brothers of Texas" outside that territory. To the
maximum extent permitted by law, Buyer understands and agrees that in the event
Buyer or any affiliate of Buyer markets or distributes any kettle chip inside
the Territory other than Poore Brothers kettle chips, then Buyer's license as
described in this paragraph shall be immediately revoked. Buyer shall have no
right to use the name "Poore Brothers" or the Poore Brothers logo.
Notwithstanding any other provision of this Agreement, Seller shall have the
right to enforce this provision by judicial or any other lawful means.
b. Product and Pricing. Attached as Exhibit "C" is a
schedule showing the prices at which Seller, or an affiliate of Seller, shall
sell Poore Brothers products to Buyer. Prices reflected on Exhibit "C" shall be
binding upon the parties for a period of six months after the Closing. Prices
shall be FOB Nashville, Tennessee or Goodyear, Arizona, as mutually agreed.
Payment terms for such products purchased by Buyer shall be 2% 10 days, net 30
days. After six months, Poore Brothers products shall be sold at reasonable
market prices to Buyer and on standard payment terms. To the maximum extent
permitted by law, Buyer shall purchase all of its requirements of kettle chips
from Poore Brothers, Inc. for a period of two (2) years after Closing.
7. Support by Seller. At Closing, Seller shall pay Buyer the
sum of Eighteen Thousand Dollars ($18,000.00) as assistance to enhance Buyer's
ability to operate the business on a profitable basis. As additional assistance,
Seller agrees to reimburse Buyer for salaries and employer-paid payroll taxes
(such as FICA) of existing salaried employees of Seller, at current rates, for a
period of thirty days after Closing, as well as other benefits as to which the
parties may agree. Buyer shall advise Seller no later than three business days
before Buyer's payroll must be met of the gross amount due, and, if Seller
concurs that the amount is correct, Seller shall immediately forward by wire or
other expeditious means, an amount sufficient to cover Buyer's payroll
obligation to those transferred employees. The parties acknowledge that there
may be one or more employees of Seller who choose not to transfer to Buyer's
payroll and Buyer shall have no obligation with respect to any such employee.
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<PAGE>
8. Closing. The Closing shall occur on June 1, 1997, herein
sometimes referred to as the Closing Date.
9. Each Party Responsible For Its Own Conduct of the Business.
Seller shall be responsible for any liabilities, costs or expenses arising out
of the operation of the business prior to the Closing Date. Except as otherwise
provided herein, Buyer shall be responsible for any liabilities, costs or
expenses arising out of the operation of the business after the Closing Date.
Each party shall defend, indemnify and hold the other harmless in the event any
claim, award, judgment or other liability is made or asserted against one party
because of the other's operation of the business. Buyer shall maintain
comprehensive general liability insurance in the amount of One Million Dollars
($1,000,000.00) on the leased premises described in Section 2 hereof; such
insurance shall list Seller as an additional named insured.
10. Maintenance of Records. All customer records associated
with the operation of the business prior to Closing shall be transferred to
Buyer at Closing provided Seller shall have the access and use of such records
for purposes of determining that Buyer has appropriately accounted for and
allocated receipts from such customers. Seller may make and retain copies of any
records it believes are appropriate. In the event Seller revokes the license
granted in Section 6 hereof, then all records pertaining to customers of kettle
chips shall be immediately transferred to Seller. Buyer shall not destroy or
otherwise dispose of any records of customers of the business existing at the
time of Closing without the consent of the Seller, for a period of 18 months
after the Closing. Buyer shall follow good business practice in maintaining
adequate information about customers, including, but not limited to, accounts
receivable and account aging.
11. Representations and Warranties of Seller. Seller
represents and warrants to Buyer that:
11.1 Authorization of Agreement. This Agreement
constitutes a valid and legally binding obligation of Seller, enforceable
according to its terms and Seller has all necessary approvals to execute this
Agreement. The execution and delivery of this Agreement, consummation of the
transactions contemplated by this Agreement and compliance by Seller with all
the provisions of this Agreement will not: (a) violate any provision of the
terms of any applicable law, rules, or regulation of any governmental body
having jurisdiction; or (b) result in the breach of, or accelerate or permit the
acceleration of the performance required by, any note, bond, mortgage,
indenture, license, agreement, or other instrument or obligation of any nature
whatsoever to which Seller is a party or by which the Assets may be bound.
11.2 Title to Assets. Seller has good and marketable
title to all Assets listed or described in Section 1 which are to be sold or
delivered to Buyer pursuant to this Agreement, free and clear of all mortgages,
liens, pledges, charges, or encumbrances of any nature whatsoever.
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<PAGE>
11.3 Intangible Property. All patents, trademarks,
service marks, trade names and copyrights, or applications for these
intellectual properties to be licensed to Buyer pursuant to Section 6 hereof are
owned by Seller, were validly issued, and are currently in full force and
effect. Seller has not received any notice with respect to any alleged
infringement or unlawful use of any patent, trademark, service mark, trade name,
copyright, process, invention, formula or other intangible property right owned
by others.
11.4 No Adverse Conditions. There are no unknown
adverse conditions or circumstances that may interfere with Buyer's use and
enjoyment of or opportunity to resell or encumber any Assets of Seller to be
purchased by this Agreement or that might otherwise impede Buyer's ability to
conduct the business using the Assets.
11.5 No Omissions or Misrepresentations. No
representation, warranty, or statement of Seller omits or will omit to state any
material fact necessary to make each representation or warranty or statement in
this Agreement accurate and not misleading in any material respect.
12. Representations and Warranties of Buyer. Buyer represents
and warrants to Seller that:
12.1 Authorization of Agreement. This Agreement
constitutes a valid and legally binding obligation of Buyer enforceable
according to its terms. Neither the execution and delivery of this Agreement,
nor the consummation of the transaction contemplated by this Agreement, will
violate any provision of the terms of any applicable law, rule, or regulation of
any governmental body having jurisdiction.
13. Conditions to Obligations of Seller to Close. The
obligation of Seller to consummate this Agreement is subject to the satisfaction
on or before the Closing Date of the following conditions, unless waived by
Seller.
13.1 Payment of Purchase Price. Seller shall have
received payment in cash, by certified check or wire transfer of the cash
consideration and the Promissory Note shall have been delivered to Seller by
Buyer.
14. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given when deposited in the mail and
sent by registered or certified mail, return receipt requested, postage prepaid
to the address set forth at the beginning of this Agreement or such other
addresses as shall be furnished in writing by any party named above, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
15. Binding Upon Successors; Limitation Upon Assignment. This
Agreement is binding upon and shall inure to the benefit of the parties'
successors and assigns. Seller may assign this Agreement and/or its rights and
obligations hereunder to an
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<PAGE>
affiliated entity. Buyer may not assign this Agreement nor any of its rights of
obligations hereunder except to an entity controlled by Buyer, without the prior
written consent of Seller in its sole discretion.
16. Entire Agreement; Severability. This Agreement and
exhibits hereto constitute the entire agreement of the parties, incorporates all
prior agreements and understandings of the parties, and may be amended only by
written agreement duly executed by both Seller and Buyer. In the event any
provision hereof is determined to be illegal or unenforceable, it shall be
deemed modified to the extent necessary to remove the illegality or
unenforceability.
17. Arbitration; Limitation. In the event of a dispute between
the parties with respect to the duties, rights or obligations of either arising
under this Agreement, the parties shall submit the dispute to binding
arbitration in Houston, Texas under the commercial rules of the American
Arbitration Association. This provision shall not prohibit Seller from seeking
judicial relief to enforce its rights pursuant to the license granted in Section
6.a. hereof.
18. Texas Law to Govern. This Agreement shall be construed in
accordance with the laws of Texas.
19. No Waiver. Failure of either party to insist upon strict
compliance with any provision hereof shall not constitute a waiver of the right
to insist upon strict compliance with any other provision or any other
occurrence.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement effective as of the above date.
Witness: POORE BROTHERS OF TEXAS, INC., a
Texas corporation
/s/ Gena Van Den Berg By: /s/ Thomas W. Freeze
- ----------------------------------- --------------------------------------
Its: V.P. & C.F.O., Secretary
--------------------------------------
- -----------------------------------
Witness: /s/ David Hecht,
--------------------------------------
DAVID HECHT
- -----------------------------------
- -----------------------------------
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<PAGE>
EQUIPMENT LIST
--------------
DESCRIPTION PURCHASED DESCRIPTION PURCHASED
- ----------- --------- ----------- ---------
FILM PLATES OFFICE EQUIPMENT
2- PLATES Jul-94 DESK/FILE CABINET Oct-92
2- PLATES Feb-95 COPIER Dec-92
FURNITURE Mar-93
WAREHOUSE EQUIPMENT CHAIR/TABLE Aug-93
PALLET JACK Aug-91 FILE CABINET Oct-93
FORKLIFT Nov-92 REFRIGERATOR Jan-94
COMPUTER Jan-92 CHAIR/TABLE Feb-94
TRANSFORMER Oct-92 CHAIR Feb-94
COMPUTER UPGRADE Jan-93 MICROWAVE Nov-94
PALLET JACK Mar-93 PRINTER Jan-95
TELEPHONE Aug-93 COMPUTER Feb-95
COMPUTER Sep-93 HP DESKJET PRINTER Apr-96
COMPUTER UPGRADE Oct-93 COMPUTER Mar-97
PRINTER Dec-93
FAX Feb-94 VEHICLES
BBQ Jun-94 92 ISUZU 16' Box Van Jun-91
COMPUTER Aug-94 92 CHEVY 14' Box Van Jul-91
FAX Sep-94 91 ISUZU Box Van Mar-92
COMPUTER Dec-94 91 ISUZU Box Van Apr-93
COMPUTER Dec-94 90 IVECO Box Truck Aug-93
FAX Dec-94 86 ISUZU 14' Step Van Jun-94
STORAGE RACK Feb-95 81 VAN GMC Box Oct-95
PRINTER Feb-95
CONTAINER Jun-95
STORAGE RACK Nov-95
EXHIBIT "A" TO
ASSET PURCHASE AGREEMENT
<PAGE>
PRODUCT INVENTORY
June 1, 1997
PRODUCT CASES UNITS Total Cost
SNYDERS 3,424 801 $ 41,726.84
OBERTO 168 183 $ 7,097.76
CHILDERS 234 30 $ 2,894.76
SMART TEMP 471 24 $ 5,298.32
PREZ.CHOICE 281 12 $ 2,135.94
VALUE TIME 441 16 $ 4,080.17
R'MARKABLES 68 8 $ 847.33
ON/BORDER 706 115 $ 9,701.88
POORE BROS 5,012 616 $ 29,438.67
PB DIPS 369 35 $ 5,903.48
KEEBLER 175 43 $ 2,818.27
TX FLV DUST 1 298 $ 483.19
M.L.WEEKS 180 59 $ 1,618.42
PACE 160 50 $ 1,753.30
TX A& M 71 6 $ 1,861.86
MOM'S 115 48 $ 3,912.72
RICK'S 12 12 $ 319.80
AUSTIN CRCKRS 507 197 $ 13,956.30
CORDUA 139 127 $ 4,098.20
RAINFOREST 4 11 $ 72.75
FIOREVANTE 79 102 $ 2,324.33
HVJ BRAND 121 137 $ 3,138.82
JOSLIN VEG 176 234 $ 3,272.03
PEPPSoftheW 148 255 $ 3,327.19
SUNSHINE 53 12 $ 793.88
OCCAS. COFFEE 0 18 $ 0.00
KEEBLER 118 0 $ 2,158.24
COZY CABIN 59 0 $ 914.50
MILLERS SALSA 20 0 $ 338.40
DOS PADRES 58 0 $ 531.17
CALIDAD CHEESE SAUCE 2 0 $ 9.90
TOTAL INVENTORY 13,372 3,449 $156,828.42
EXHIBIT "A-1" TO
ASSET PURCHASE AGREEMENT
<PAGE>
PROMISSORY NOTE
$78,414.21 Houston, Texas June 4, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Poore Brothers of Texas, Inc. ("Holder"), at Houston, Texas, or at such other
place as the Holder of this Note may designate, the principal sum of seventy
eight thousand four hundred fourteen and 21/100 ($78,414.21) in lawful money of
the United States of America, on or before June 3, 1998.
If this Note is not paid in full at maturity, the principal remaining
unpaid shall bear interest at the rate of eighteen percent (18%) per annum from
the date of default. Any payments received after default shall be applied first
to accrued interest and then to principal.
/s/ David Hecht
----------------------------------------
DAVID HECHT
/s/ Celine Hecht
----------------------------------------
CELINE HECHT
EXHIBIT "B" TO
ASSET PURCHASE AGREEMENT
<PAGE>
PRODUCT AND PRICING LIST
------------------------
Unit Cost
---------
1 oz $ .12
6 oz $ .51
12 oz $ 1.06
EXHIBIT "C" TO
ASSET PURCHASE AGREEMENT
POORE BROTHERS ANNOUNCES SALE OF
TEXAS DISTRIBUTION BUSINESS
Goodyear, AZ, June 4, 1997 - Poore Brothers, Inc. (NASDAQ:POOR)
announced today that it has entered into an agreement selling the distribution
business of its Poore Brothers of Texas, Inc. subsidiary to Mr. Dave Hecht, an
independent distributor with over 30 years of experience in the Houston market.
Under the agreement, Mr. Hecht has purchased certain assets of the
business, is licensed to be the company's exclusive distributor in Houston, and
is restricted from distributing any other brand of kettle chips.
Eric Kufel, President and Chief Executive Officer stated, "The sale of
the Poore Brothers of Texas business is an important step in our plan to
position the company to achieve profitable operations during the second half of
this year. In 1996, the Texas operation accounted for nearly one half of the
company's total net loss for the year, despite contributing only 20% of the
company's revenues. The agreement will allow us to continue Poore Brothers'
presence in the Houston market through an individual who has extensive
distribution experience. This action fortifies our strategic commitment to
operate through partnerships with high quality distributors and brokers outside
our home market of Arizona."
As a result of the disposition of the Poore Brothers of Texas
operation, the company expects to incur a net charge of approximately $150,000
during its second quarter associated with asset write-offs, severance and
related closing costs.
Poore Brothers currently manufactures batch cooked potato chips under
the Poore Brothers trade name at plants in Goodyear, Arizona and LaVergne,
Tennessee, along with private label potato chips for sale by grocery chains
served by the Arizona facility. Poore Brothers also distributes a variety of
snack food products manufactured by other companies.
Certain statements contained herein may be "forward-looking" statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995.) Because such statements include risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements include, but are not limited to, those discussed in filings made by
the company with the Securities and Exchange Commission.
POORE BROTHERS, INC.
2664 S. Litchfield Road o Goodyear, Arizona 85338
o (602) 925-0731 o Fax: (602) 925-2363
