U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended March 31, 1997
OR
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from _______ to _______
Commission File Number 1-14556; 0-21857
POORE BROTHERS, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 86-0786101
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2664 S. Litchfield Road, Goodyear, Arizona 85338
------------------------------------------ -----
(Address of Principal Executive Offices) (Zip Code)
(602) 925-0731
--------------
(Issuer's Telephone Number, Including Area Code)
Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
As of March 31, 1997, the number of issued and outstanding shares of common
stock of the Registrant was 6,986,324.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
1
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996........................... 3
Consolidated Statements of Operations for the three months ended March 31, 1997
and 1996......................................................................................... 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1997
and 1996......................................................................................... 5
Notes to Consolidated Financial Statements....................................................... 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.............................................................................. 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................ 10
Item 2. Changes in Securities............................................................................ 10
Item 3. Defaults Upon Senior Securities.................................................................. 10
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 10
Item 5. Other Information................................................................................ 10
Item 6. Exhibits and Reports on Form 8-K................................................................. 11
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
1997 1996
---- ----
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 2,145,509 $ 3,603,850
Restricted certificate of deposit...................................... 1,250,000
Short term investments................................................. 980,420
Accounts receivable, net of allowance of $120,000 in 1997
and $121,000 in 1996................................................. 1,856,288 1,912,064
Inventories............................................................ 836,589 863,309
Other current assets................................................... 134,523 193,581
----------------- ---------------------
Total current assets................................................. 5,953,329 7,822,804
Property and equipment, net............................................... 4,992,684 4,032,343
Goodwill, net............................................................. 2,264,528 2,295,617
Organizational costs, net................................................. 161,756 174,614
Other assets.............................................................. 15,083 15,067
----------------- ---------------------
Total assets......................................................... $ 13,387,380 $ 14,340,445
================= =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 1,086,010 $ 1,318,952
Accrued and other current liabilities.................................. 432,563 500,192
Current portion of long-term debt...................................... 1,255,575 1,818,058
----------------- ---------------------
Total current liabilities............................................ 2,774,148 3,637,202
Long-term debt, less current portion...................................... 2,725,384 3,355,651
Other liabilities......................................................... 6,000 6,000
----------------- ---------------------
Total liabilities.................................................... 5,505,532 6,998,853
----------------- ---------------------
Shareholders' equity:
Common stock, $.01 par value; 15,000,000 shares authorized, shares issued and
outstanding 6,986,324 (1997), 6,648,824 (1996)....................... 69,863 66,488
Additional paid-in capital............................................. 10,718,241 9,702,940
Accumulated deficit.................................................... (2,906,256) (2,427,836)
----------------- ---------------------
Total shareholders' equity........................................... 7,881,848 7,341,592
----------------- ---------------------
Total liabilities and shareholders' equity........................... $ 13,387,380 $ 14,340,445
================= =====================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Revenues................................................. $ 4,733,686 $ 3,466,040
Cost of sales............................................ 3,769,038 2,604,509
----------------- -----------------
Gross profit.......................................... 964,648 861,531
Selling, general and administrative expenses............. 1,302,948 852,984
Depreciation and amortization............................ 102,083 119,570
----------------- -----------------
Operating loss........................................ (440,383) (111,023)
----------------- -----------------
Interest income.......................................... 42,776
Interest expense......................................... (80,813) (92,861)
----------------- -----------------
Total................................................. (38,037) (92,861)
----------------- -----------------
Net loss................................................. $ (478,420) $ (203,884)
================= =================
Loss per common share and common share
equivalent............................................ $ (0.07) $ (0.05)
================= =================
Loss per common share - assuming full dilution........... * *
Weighted average common and common
equivalent shares outstanding......................... 6,960,362 4,154,255
================= =================
</TABLE>
*Anti-dilutive.
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months ended March 31,
1997 1996
---- ----
(unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net loss................................................................ $(478,420) $(203,884)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization......................................... 102,083 119,570
Bad debt expense...................................................... 9,000
Change in operating assets and liabilities:
Accounts receivable................................................. 46,776 (567,305)
Inventories......................................................... 26,720 (118,030)
Other assets and liabilities........................................ 196,997 24,199
Accounts payable and accrued liabilities............................ (438,526) 362,693
------------------ -------------------
Net cash used in operating activities...................................... (535,370) (382,757)
------------------ -------------------
Cash flows from investing activities:
Proceeds on disposal of property........................................ 705,809 3,080
Purchase of equipment................................................... (857,986) (89,218)
Purchase of short term investments...................................... (980,420)
------------------ -------------------
Net cash used in investment activities..................................... (1,132,597) (86,138)
------------------ -------------------
Cash flows from financing activities:
Proceeds from issuance of common stock.................................. 1,181,250 1,046,499
Payments on purchase of common stock.................................... (56,709)
Stock issuance costs.................................................... (162,574) (94,639)
Payments made on long-term debt......................................... (1,956,117) (51,567)
Net decrease in restricted cash......................................... 1,250,000
Net increase (decrease) in working capital line......................... (102,933) 127,000
------------------ -------------------
Net cash provided by financing activities.................................. 209,626 970,584
------------------ -------------------
Net increase (decrease) in cash and cash equivalents....................... (1,458,341) 501,689
Cash and cash equivalents at beginning of period........................... 3,603,850 200,603
------------------ -------------------
Cash and cash equivalents at end of period................................. $2,145,509 $702,292
================== ===================
Supplemental disclosures of cash flow information:
Summary of non cash investing and financing activities:
Construction loan for new facility.................................... 860,838
Capital lease obligation incurred - equipment acquisition............. 5,462 88,270
Cash paid during the three months for interest, net of amounts
capitalized............................................................. 110,213 85,352
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
POORE BROTHERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies:
General
Poore Brothers, Inc. (the "Company"), a Delaware corporation, was
organized in February 1995 as a holding company and on May 31, 1995
acquired substantially all of the equity of Poore Brothers Southeast, Inc.
("PB Southeast") in an exchange transaction pursuant to which 1,560,000
previously unissued shares of the Company's common stock, par value $.01
per share (the "Common Stock"), were exchanged for 150,366 issued and
outstanding shares of PB Southeast's common stock. The exchange transaction
with PB Southeast has been accounted for similar to a pooling since both
entities had common ownership and control immediately prior to the
transaction. In December 1996, the Company completed an initial public
offering of its common stock.
The Company manufactures and distributes potato chip and other snack
food products under the Poore Brothers(TM) brand name, as well as private
label potato chips and also distributes a wide variety of other
independently manufactured snack food items.
Basis of Presentation
The consolidated financial statements include the accounts of Poore
Brothers, Inc. and all of its controlled subsidiaries. In all situations,
the Company owns from 94% to 100% of the voting interests of the controlled
subsidiaries. All significant intercompany amounts and transactions have
been eliminated. The financial statements have been prepared in accordance
with the instructions for Form 10-QSB and, therefore, do not include all
the information and footnotes required by generally accepted accounting
principles. In the opinion of the Company, all adjustments required to
fairly present the Company's financial position, results of operations and
cash flows as of March 31, 1997 have been made. A description of the
Company's accounting policies and other financial information is included
in the audited December 31, 1996 financial statements filed on Form 10-KSB.
Included in this filing are footnotes and information that is new or
updated subsequent to the December 31, 1996 filing of the Form 10-KSB. The
results of operations for the quarter ended March 31, 1997 are not
necessarily indicative of the results expected for the full year.
Loss Per Share
Loss per common share and common share equivalent ("loss per common
share") is computed by dividing the net loss by the weighted average number
of shares of Common Stock and common stock equivalents outstanding during
each period. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83, Company issuance of Common Stock, and
options and warrants to purchase Common Stock granted by the Company during
the 12 months immediately preceding the initial filing date of the public
offering have been included in the calculation of weighted average number
of shares of Common Stock outstanding as if the underlying shares were
outstanding for all periods presented (even if anti-dilutive, using the
treasury stock method and an offering price of $3.50 per share). The effect
on loss per common share for the outstanding options and warrants issued
prior to the one year period preceding the initial public offering have
been excluded from the loss per common share computation as they are
anti-dilutive. For 1996, the principles of SAB No. 83 were applied for the
first three quarters of the year before the initial public offering became
effective. For the first quarter of 1997, the principles of Accounting
Principles Board Opinion No. 15 were followed. Accordingly, the effect on
loss per common share of the outstanding options and warrants in the first
quarter of 1997 have been excluded from the computation as they are
anti-dilutive. Loss per common share, assuming full dilution, is not
applicable for loss periods as it is anti-dilutive.
6
<PAGE>
Short-term Investments
Short-term investments represent investments with a maturity date of
greater than three months but less than one year. These investments are
held for cash management purposes and are recorded at cost.
2. Long-Term Debt
During January 1997, the $1,250,000 certificate of deposit was used to
pay down a portion of the loan obtained by the Company to finance the
construction of the new Arizona facility. The maximum amount of the loan
has been reduced to $1,150,000. On February 28, 1997, proceeds received
from the sale of the existing land and buildings were used to pay off
related mortgage debt and notes payable totaling approximately $650,000.
3. Litigation
On June 19, 1996, James Gossett and an associated entity commenced a
lawsuit in an Arizona state court against two directors of the Company,
Messrs. Mark S. Howells and Jeffrey J. Puglisi, and the Company's
subsidiary, PB Southeast, alleging, inter alia, that Mr. Gossett had an
oral agreement with Mr. Howells to receive up to a 49% ownership interest
in PB Southeast, that Messrs. Howells and Puglisi breached fiduciary duties
and other obligations to Mr. Gossett and that Mr. Gossett is entitled to
exchange such alleged stock interest for shares in the Company. Mr. Gossett
further alleges that PB Southeast and Messrs. Howells and Puglisi failed to
honor the terms of an alleged distribution agreement between Poore Brothers
Foods, Inc. and Mr. Gossett's associated entity, whereby such entity was
allegedly granted exclusive distribution rights to Poore Brothers products
in California. The complaint seeks unspecified amounts of damages, fees and
costs. In February 1997, plaintiffs filed pleadings indicating they are
seeking $3 million in damages; plaintiffs may not be limited by this damage
amount at trial. Management of the Company believes the complaint has no
merit and that the Company has defenses to the action. Messrs. Howells and
Puglisi and PB Southeast have filed an answer and counterclaim against Mr.
Gossett, denying the major provisions of the complaint, alleging various
acts of nonperformance and breaches of fiduciary duty on the part of Mr.
Gossett and seeking various compensatory and punitive damages. The Company
has agreed to indemnify Messrs. Howells and Puglisi in connection with this
lawsuit.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Quarter ended March 31, 1997 compared to the quarter ended March 31,
1996
Revenues for the three months ended March 31, 1997 were $4,733,686, up
$1,267,646, or 37%, from $3,466,040 for the three months ended March 31, 1996.
The increase occurred in all areas of the Company's business, including sales of
Poore Brothers(TM) brand products to new geographic markets, increased sales in
existing markets, sales of Poore Brothers(TM) brand low-fat potato chips not
available in the first quarter of 1996, higher sales of potato chips sold on a
private label basis to grocery chains, as well as increased sales of products
manufactured by others. For the first quarter of 1997, revenues from the private
label business (sales of which began in February 1996) totaled $254,487,
compared to $102,233 for the first quarter of 1996, and revenues from the sale
of low-fat potato chips (sales of which began in June 1996) totaled $128,261.
For 1997 and 1996, sales of products manufactured by the Company accounted for
60% and 61%, respectively, of total revenues.
Gross profit for the three months ended March 31, 1997 was $964,648, or
20% of revenues, as compared to $861,531, or 25% of revenues, for the three
months ended March 31, 1996. The increase in gross profit of $103,117 is due to
higher revenues. Gross profit as a percentage of revenues decreased due to less
7
<PAGE>
favorable product sales mix, higher raw material costs, and labor costs
associated with the addition of new production capacity.
Selling, general and administrative expenses increased to $1,302,948
for the first three months of 1997 from $852,984 in 1996. This represents a
$449,964 increase, or 53%, over the first quarter of 1996. Included in selling,
general and administrative expenses in 1997 were approximately $201,000 of
expenses related to severance, relocation and equipment writedowns. Also
included are approximately $64,000 of advertising and promotion allowance
incurred due to market expansion. As a percentage of revenues, selling, general
and administrative expenses were 28% for 1997 and 25% for 1996. If the Company
expands its marketing efforts to additional cities, it is expected that the
Company will incur additional selling expenses for market entry.
Depreciation and amortization totaled $102,083 for the quarter ended
March 31, 1997 and $119,570 for the quarter ended March 31, 1996. The decrease
of $17,487, or 15%, was partially due to the sale of the Company's Goodyear,
Arizona facilities in February. Since the sale and until the Company moves to
its new 61,000 square foot facility, currently scheduled to occur in June, these
facilities are rented by the Company on a month-to-month basis.
Net interest expenses decreased to $38,037 for the quarter ended March
31, 1997 from $92,861 for the quarter ended March 31, 1996. This decrease was
due primarily to interest income generated from investment of the proceeds of
the initial public offering and secondarily from lower interest expense
resulting from payments on the Company's indebtedness with a portion of the
proceeds from the initial public offering.
The Company's net losses for the quarters ended March 31, 1997 and
March 31, 1996 were $478,420 and $203,884, respectively. The increased net loss
was attributable primarily to the lower gross profit percentage and the higher
selling, general and administrative expenses.
In February 1997, the Financial Accounting Standard Board ("FASB")
adopted Statement of Financial Accounting Standard No. 128, Earnings per Share
("SFAS 128"), which supersedes and simplifies the standards for computing
earnings per share ("EPS") previously found in Accounting Principles Board
Opinion No. 15, Earnings per Share ("APB 15"). SFAS 128 replaces net income per
common and common equivalent share with a presentation of net income per common
share. Net income per common share excludes dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding for the period. Net income per common share assuming full
dilution is computed similarly under SFAS 128 as it was under APB 15, and
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. The Company will provide the required EPS disclosures in its
financial statements commencing with the fiscal year ended December 31, 1997.
SFAS 128 requires restatement of all prior period EPS data presented. Pursuant
to the provisions of SFAS 128, the Company's net loss per common share was $.07
for the 1997 first quarter and $.06 for the 1996 first quarter. The application
of the provisions of SFAS 128 would have no effect on the amounts reported in
the 1997 and 1996 first quarters for net loss per common share assuming full
dilution.
Liquidity and Capital Resources
In January 1997, the Company sold 337,500 additional shares of its
common stock, par value $.01 per share (the "Common Stock"), pursuant to an
over-allotment option granted to the underwriter of the Company's initial public
offering. Net proceeds from the sale were approximately $1,000,000.
Net working capital was $3,179,181 at March 31, 1997, with a current
ratio of 2.2:1. At December 31, 1996, net working capital was $4,185,602 with a
current ratio of 2.2:1. The decrease in working capital is primarily
attributable to the Company's cash operating loss for the three months ended
March 31, 1997 of $535,370, along with equipment acquisitions of $857,986.
8
<PAGE>
In January 1997, the Company applied a $1,250,000 certificate of
deposit against the $2,400,000 outstanding balance of its construction loan,
used to finance the construction of the new 61,000 square foot facility in
Goodyear Arizona, thereby reducing the total borrowing amount of the loan to
$1,150,000. On June 11, 1997 the remaining $1,150,000 balance becomes due. The
Company is in the process of negotiating permanent financing to repay the loan.
As a result of the expansion of the Company's operations, the Company
may incur additional operating losses in the future. Expenditures relating to
market and territory expansion, new product development and equipment relocation
may adversely affect selling, general and administrative expenses and
consequently operating and net income. These types of expenditures are expensed
for accounting purposes as incurred, while revenue generated from the result of
such expansion may benefit future periods.
Management believes that existing working capital, together with
available line of credit borrowings, anticipated cash generated from the
permanent building financing and new equipment lease agreements, and anticipated
cash flows from operations, will be sufficient to finance the operations of the
Company for at least the next twelve months. The belief is based on current
operating plans and certain assumptions, including those relating to the
Company's future revenue levels and expenditures, industry and general economic
conditions and other conditions. If any of these factors change, the Company may
require future debt or equity financings to meet its business requirements.
There can be no assurance that such financings will be available or, if
available, on terms attractive to the Company.
FORWARD LOOKING STATEMENTS
WHEN USED IN THIS FORM 10-QSB AND IN FUTURE FILINGS BY THE COMPANY WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE WORDS OR PHRASES
"WILL LIKELY RESULT," "THE COMPANY EXPECTS," "WILL CONTINUE," "IS ANTICIPATED,"
"ESTIMATED," "PROJECT," OR "OUTLOOK," OR SIMILAR WORDS OR EXPRESSIONS, ARE
INTENDED TO IDENTIFY "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY WISHES TO CAUTION READERS NOT TO
PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, EACH OF WHICH SPEAK
ONLY AS OF THE DATE MADE. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR PROJECTED. IN LIGHT OF
SUCH RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT FORWARD-LOOKING
INFORMATION CONTAINED IN THIS FORM 10-QSB WILL, IN FACT, TRANSPIRE OR PROVE TO
BE ACCURATE. THE COMPANY HAS NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY
REVISIONS WHICH MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT
ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE OF
SUCH STATEMENTS.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no new legal proceedings or material changes to legal
proceedings during the period from that reported in the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1996.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
At March 31, 1997, the Company had outstanding 9% Convertible
Debentures due July 1, 2002 (the "9% Convertible Debentures") in the principal
amount of $2,299,591. The Company was not in compliance with a required interest
coverage ratio of 1.5:1 that the Company is required to maintain while the 9%
Convertible Debentures are outstanding. However, the holders of the 9%
Convertible Debentures have granted the Company a waiver effective through
September 30, 1997. After that time, the Company will be required to be in
compliance with the following financial ratios, so long as the 9% Convertible
Debentures remain outstanding: working capital of at least $1,000,000; minimum
shareholders equity (net worth) that will be calculated based upon the earnings
of the Company and the consideration received by the Company from issuances of
securities by the Company; an interest coverage ratio of at least 1.5:1; and a
current ratio at the end of any fiscal quarter of at least 1.1:1. Interest on
the 9% Convertible Debentures is paid by the Company on a monthly basis.
Payments of principal are required to be made by the Company beginning in July
1998 through July 2002. Management believes that the fulfillment of the
Company's plans and objectives will enable the Company to attain a sufficient
level of profitability to be in compliance with the financial ratios; however,
there can be no assurance that the Company will attain any such profitability,
be in compliance with the financial ratios upon the expiration of the waivers or
be able to obtain an extension or renewal of the waivers. Any acceleration under
the 9% Convertible Debentures prior to their maturity on July 1, 2002 could have
a material adverse effect upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Effective April 10, 1997, Thomas W. Freeze replaced Jeffrey H.
Strasberg as the Company's Vice President, Chief Financial Officer, Treasurer
and Secretary.
On April 29, 1997, the Company filed a Registration Statement on Form
S-8 (the "Registration Statement") in connection with the registration of
2,320,000 shares of the Company's common stock, par value $.01 per share,
issuable upon the exercise of stock options granted pursuant to the Poore
Brothers, Inc. 1995 Stock Option Plan and pursuant to Non-Qualified Stock Option
Agreements entered into by the Company. The Registration Statement contains a
Reoffer Prospectus in connection with the sale by certain affiliates of the
Company of up to 1,528,000 shares of Common Stock issuable to such persons upon
the exercise of stock options previously granted to them by the Company.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description
10.1 Amendment dated January 28, 1997, amending Employment Agreement by and
between the Company and Wendell T. Jones. **
10.2 Employment Agreement dated January 24, 1997, by and between the Company
and Eric J. Kufel. **
10.3 First Amendment to Employment Agreement dated February 2, 1997,
amending Employment Agreement by and between the Company and David J.
Brennan. **
10.4 Employment Agreement dated February 4, 1997, by and between the Company
and Scott D. Fullmer. **
10.5 Employment Agreement dated February 14, 1997, by and between the
Company and Glen E. Flook. **
10.6 Second Loan Modification Agreement dated January 10, 1997, by and
between the Company and National Bank of Arizona. **
10.7 Commercial Real Estate Purchase Contract and Receipt for Deposit dated
January 22, 1997, by and between the Company and D.F. Properties, Inc.
**
10.8 Separation Agreement and Release of All Claims dated March 10, 1997, by
and between the Company and Jeffrey H. Strasberg. *
10.9 Separation Agreement and Release of All Claims dated March 5, 1997, by
and between the Company and Kenneth Charbonneau. *
10.10 Employment Agreement dated April 10, 1997, by and between the Company
and Thomas W. Freeze. *
11.1 Statement regarding computation of per share earnings. *
27.1 Financial Data Schedule. *
* Filed herewith.
** Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.
(b) Current reports on Form 8-K.
(1) Current Report on Form 8-K, dated January 10, 1997, regarding the
consummation of the sale by the Company of 337,500 shares of Common
Stock to Paradise Valley Securities, Inc., the underwriter of the
initial public offering of the Company's Common Stock, pursuant to its
over-allotment option.
(2) Current Report on Form 8-K, dated January 31, 1997, regarding the
appointment of Eric J. Kufel as the Company's President and Chief
Executive Officer and the election of Mr. Kufel to the Company's Board
of Directors.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
POORE BROTHERS, INC.
By: /s/ Eric J. Kufel
-------------------------------------------
Dated: May 15, 1997 Eric J. Kufel
President and Chief Executive Officer
(principal executive officer)
By: /s/ Thomas W. Freeze
-------------------------------------------
Dated: May 15, 1997 Thomas W. Freeze
Vice President, Chief Financial Officer,
Treasurer and Secretary
(principal financial and accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.8 Separation Agreement and Release of All Claims dated March 10, 1997, by
and between the Company and Jeffrey H. Strasberg.
10.9 Separation Agreement and Release of All Claims dated March 5, 1997, by
and between the Company and Kenneth Charbonneau.
10.10 Employment Agreement dated April 10, 1997 by and between the Company
and Thomas W. Freeze.
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
13
SEPARATION AGREEMENT
AND
RELEASE OF CLAIMS
This Separation Agreement and Release of All Claims ("Agreement") is entered
into this 10 day of March, 1997, between Jeffrey H. Strasberg ("Employee") and
Poore Brothers, Inc. ("Employer"). The term "parties" shall refer collectively
to both of these entities.
In consideration of the mutual promises herein contained, the adequacy
of which consideration is hereby acknowledged, the parties agree as follows.
1. Employee's employment by Employer is terminated by mutual agreement
as of April 30, 1997 (the "Termination Date"). The parties agree the termination
of employment shall be, for all purposes, deemed to be a voluntary resignation.
Employee hereby resigns as an officer of and director of Employer and its
subsidiaries on the Termination Date.
2. Employer shall provide the following severance benefits to Employee:
a. Employer shall pay Employee four months severance
("severance period") pay, subject to appropriate withholding and deductions as
required by law. This severance pay shall be paid to Employee by continuing to
pay him amounts equaling his regular salary during the employment, on the
regular paydays of Employer, until the severance pay, subject to appropriate
withholding and deductions is paid in full.
Employee's entitlement under this formula totals $38,333.
b. Any vested stock options held by Employee shall expire on
March 31, 1998. Employee may exercise such stock options at any time prior to
the expiration date. Employer agrees to file a Form S-8 with the Securities and
Exchange Commission prior to April 30, 1997 covering the Poore Brothers 1995
Stock Option Plan including options granted to Employee.
c. Any unvested stock options held by Employee, that were
scheduled to vest within six months after the date of execution of this
Agreement, will vest as of the execution of this Agreement and will be subject
to the expiration date stated in paragraph 2b above. The total number of options
that are thus vested are 83,333. Employee will not be entitled to any additional
options.
<PAGE>
Release of Claims
Page 2
d. Employer shall continue Employee's medical and life
insurance during the severance period specified in subparagraph a above. Upon
the expiration of the severance period, Employee shall have all rights to
continuation of such coverages as may be provided by law, including without
limitation COBRA.
e. Employer shall pay Employee two weeks accrued vacation pay
totaling $4,423, upon execution of this Agreement.
f. Employer shall pay Employee a bonus of $20,000 upon
execution of this Agreement for services provided in connection with the
Company's initial public offering of common stock.
The parties acknowledge that the above payments and benefits are
consideration in addition to anything of value to which Employee is already
entitled.
3. Employee, on behalf of himself/herself and his/her marital
community, heirs, executors, assigns and personal representatives, does hereby
release and forever discharge Employer and any parent company, subsidiary
company, and any other company affiliated with or under common ownership with
Employer, and each of their respective current and former officers, partners,
principals, directors, shareholders, attorneys, employees, agents, servants,
representatives, independent contractors, guarantors, heirs, successors,
insurers, assigns, and all affiliated entities, hereinafter collectively
referred to as the "the Released Parties," from any and all claims, demands,
causes of actions, or liability of any kind or character, known or unknown,
arising or accruing through the date this Agreement is executed by Employee,
including without limitation all claims that are in any way related to
Employee's employment by Employer or the termination thereof.
Without limiting the generality of the foregoing, the full release
contained in this paragraph applies to all claims arising under the Civil Rights
Act of 1964; the Age Discrimination in Employment Act of 1967; the Americans
With Disabilities Act of 1990; the Labor Management Relations Act; the Employee
Retirement Income Security Act of 1974; the Fair Labor Standards Act; the Family
and Medical Leave Act; the Immigration Reform and Control Act; the Consolidated
Omnibus Budget Reconciliation Act; the Occupational Safety and Health Act, or
any comparable state
2
<PAGE>
Release of Claims
Page 3
occupational safety and health statute; the Workers' Adjustment and Retraining
Act; 42 U.S.C. ss. 1981; the Arizona Civil Rights Act; the Arizona Wage Act; or
under any other applicable state or federal statute; and to any common law cause
of action, including without limitation claims for breach of contract, wrongful
discharge, unpaid wages, tort, personal injury, or any claim for attorney's fees
or other damages, costs or expenses of any kind or nature.
Notwithstanding the foregoing, the release contained in this paragraph
does not waive any claim arising out of any breach or alleged breach of this
Agreement, or any claim that may arise after the date this waiver is executed.
4. Each of the persons identified as a subject or beneficiary of the
release provisions of paragraph 3 above is intended as, and is expressly
designated as, a third party beneficiary of this Agreement.
5. On or before the effective date of termination set forth above,
Employee shall return all of Employer's property in his/her possession, custody,
or control, including without limitation all records, files, goods, equipment,
documents, computer software, data, disks, and any other property of any kind or
description whatsoever, including (if applicable) all copies thereof.
6. Employee agrees to keep the terms of this Agreement confidential,
and not to disclose the terms of this Agreement to any person except as may be
required by law. This obligation shall be equally be binding upon Employee's
counsel and upon his/her spouse, who shall also keep the terms of this Agreement
confidential and not disclose them to any person except as may be required by
law.
7. Consistent with the full release contained in paragraph 3 above,
Employee agrees not to file or lodge any type of complaint alleging violation of
any law by Employer with any agency, or otherwise disparage Employer in
statements to any person or assert any claims or demands against it. In the
event that Employee brings such a lawsuit or files or lodges such a complaint in
breach of this paragraph, then Employee shall be required (in addition to such
damages as may be recoverable by Employer) to reimburse Employer the sum and/or
value of all severance benefits received pursuant to paragraph 2 of this
Agreement.
3
<PAGE>
Release of Claims
Page 4
8. Employee understands and agrees that the execution of this Agreement
and the provision of severance benefits described herein are not to be construed
as an admission by Employer of any liability to Employee, liability being
expressly denied; but this Agreement instead represents a compromise and
settlement of disputed and unliquidated claims.
9. Employee is hereby advised to consult with an attorney before
executing this Agreement. By his/her signature hereon, Employee acknowledges
that he/she has been so advised, and that he/she has had an opportunity to
consult with, and has consulted with, an attorney before executing this
Agreement.
10. Employee acknowledges that he/she has been given a period of
twenty-one (21) days within which to consider this Agreement.
11. For a period of seven (7) days following the execution of this
Agreement by Employee, Employee may revoke the agreement, and the Agreement
shall not become effective or enforceable until the revocation period has
expired. This Agreement shall become effective upon the eighth day following
Employee's signature hereon, provided that Employee has delivered this signed
Agreement to Employer within the same period (the "Effective Date"). Funds to be
paid upon execution of this agreement shall not be paid until the seven day
period has elapsed.
12. This Agreement constitutes the entire Agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings, inducements
and conditions express or implied, oral or written, of any nature whatsoever
with respect to the subject matter hereof. This Agreement may not be modified or
amended other than by an agreement in writing signed by the party to be charged
with such modification or amendment.
13. Should any litigation be commenced between the parties hereto
concerning the terms of this Agreement, or the rights and duties of the parties
hereto under this Agreement, the prevailing party in such litigation shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum as and for the prevailing party's attorneys' fees, experts' fees, and
expenses of litigation.
4
<PAGE>
Release of Claims
Page 5
14. The provisions of this Agreement are independent of and separate
and severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part. If any
provision of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, that provision shall be deemed modified and replaced
by a provision, as similar in form, content and effect as possible, to the
invalid or unenforceable provision and the Agreement shall be deemed reformed
accordingly. Notwithstanding the foregoing, however, the obligations of either
party shall be rendered null and void if any part of the material consideration
for that party's obligations is or becomes unenforceable and no reasonable
substitute provision with the same material effect is available to the parties.
15. Neither the failure nor any delay on the part of any party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege preclude any other or further exercise of the same or
of any other right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed
as a waiver of such rights, remedy, power, or privilege with respect to any
other occurrence.
16. This Agreement is the product of negotiation between the parties.
This Agreement shall be construed in accordance with its plain meaning and shall
not be construed for or against any party on account of the role of any party or
its counsel in the drafting of this Agreement.
17. This Agreement shall be governed by the substantive laws of Arizona
and any action to enforce or construe this Agreement or to declare the rights of
the parties hereunder shall be commenced and maintained in a state or federal
court in Arizona.
18. Employee has read this Agreement, and understands the extent and
effect of its terms, the relinquishment of his/her legal rights and the legal
consequences involved in entering into this Agreement. Employee is satisfied
with the terms and conditions of settlement represented by this Agreement.
Employee is signing this Agreement voluntarily.
5
<PAGE>
Release of Claims
Page 6
19. The parties agree that upon mutually agreeable terms, Employee will
assist Employer beyond the Termination Date to the extent Employee is not
otherwise employed. Employee to be paid reasonable consulting fees for the
providing of such services.
20. Notwithstanding any portion of the above Agreement:
(a) Company shall indemnify and hold Employee harmless and
defend Employee for, from and against all claims, liabilities, obligations,
fines, penalties and other matters and all costs and expenses relating thereto
that Company and/or such subsidiary or affiliated entity is permitted by
applicable law, except as any of the foregoing arises out of or relates to
Employee's negligence, willful malfeasance and/or breach of this Agreement.
(b) Company represents and warrants to Employee that neither
its articles of incorporation not its bylaws nor any resolutions of its
shareholders or board of directors restricts or limits Companies rights or
obligations to indemnify Employee as provided in subsection (a) of this Section
20, except to the extent such restrictions or limitations are required by
applicable law.
"Employee":
Jeffrey H. Strasberg
------------------------
(Print name)
/s/ Jeffrey H. Strasberg
------------------------
(Signature)
"Employer":
POORE BROTHERS, INC.
By /s/ Eric Kufel
------------------------
Its: President & CEO
-------------------
6
<PAGE>
Release of Claims
Page 7
Spousal Consent
- ---------------
_____________________, spouse of Employee, acknowledges that he/she has
read the foregoing Settlement Agreement and Release of All Claims, and agrees,
in consideration of the promises of Employee contained therein, to be bound by
the terms thereof, including without limitation the release of any and all
claims that he/she might have against Employer and any parent company,
subsidiary company, and any other company affiliated with or under common
ownership with Employer, and each of their respective officers, partners,
principals, directors, shareholders, attorneys, employees, agents, servants,
representatives, independent contractors, guarantors, heirs, successors,
insurers, assigns, and all affiliated entities, that are in any way related to,
resulting from, or arising out of Employee's employment with Employer or the
termination of that employment.
-------------------------------
Print name
-------------------------------
Signature
7
<PAGE>
Release of Claims
Page 8
STATE OF ARIZONA )
) ss.
Maricopa County )
On this 12th day of March, 1997, before me the undersigned notary
public, personally appeared Jeffrey Strasberg, who acknowledged to me that
he/she executed the within instrument for the purposes therein expressed.
/s/ Gena P. VanDenBerg
----------------------
Notary Public
My Commission Expires: March 23, 1999
--------------
"OFFICIAL SEAL"
Gena P. Vandenberg
STATE OF ARIZONA ) Notary Public-Arizona
) ss. Maricopa County
Maricopa County ) My Commission Expires 3/23/99
On this 12th day of March, 1997, before me the undersigned notary
public, personally appeared Patricia Strasberg, who acknowledged to me that
he/she executed the within instrument for the purposes therein expressed.
/s/ Gena P. VanDenBerg
----------------------
Notary Public
My Commission Expires: March 23, 1999
--------------
"OFFICIAL SEAL"
Gena P. Vandenberg
STATE OF ARIZONA ) Notary Public-Arizona
) ss. Maricopa County
Maricopa County ) My Commission Expires 3/23/99
On this 12th day of March, 1997, before me the undersigned notary
public, personally appeared Eric Kufel, who acknowledged to me that he/she is an
authorized agent of Poore Brothers, Inc., and as such has executed the within
instrument for the purposes therein expressed.
/s/ Gena P. VanDenBerg
----------------------
Notary Public
My Commission Expires: March 23, 1999
--------------
"OFFICIAL SEAL"
Gena P. Vandenberg
Notary Public-Arizona
Maricopa County
My Commission Expires 3/23/99
8
SEPARATION AGREEMENT
AND
RELEASE OF ALL CLAIMS
This Separation Agreement and Release of All Claims ("Agreement") is entered
into this 5 day of March, 1997, between Kenneth Charbonneau ("Employee") and
Poore Brothers, Inc. ("Employer"). The term "parties" shall refer collectively
to both of these entities.
In consideration of the mutual promises herein contained, the adequacy
of which consideration is hereby acknowledged, the parties agree as follows.
1. Employee's employment by Employer is terminated by mutual agreement
as of March 5, 1997 (the "Termination Date").
2. Employer shall provide the following severance benefits to Employee:
a. Employer shall pay Employee four months severance pay,
subject to appropriate withholding and deductions as required by law. This
severance pay shall be paid to Employee by continuing to pay him/her amounts
equaling his/her regular salary during the employment, on the regular paydays of
Employer, until the severance amount is paid in full.
Employee's entitlement under this formula totals $26,000.
b. Any vested stock options held by Employee shall expire on
March 31, 1998. Employee may exercise such stock options at any time prior to
the expiration date.
c. Any unvested stock options held by Employee, that were
scheduled to vest within six months after the date of execution of this
Agreement, will vest as of the execution of this Agreement and will be subject
to the expiration date stated in paragraph 2b above.
d. Employer shall continue Employee's medical and life
insurance during the severance period specified in subparagraph a above. Upon
the expiration of the severance period, Employee shall have all rights to
continuation of such coverages as may be provided by law, including without
limitation COBRA.
e. Employer shall pay Employee his/her accrued vacation not
yet taken or paid.
<PAGE>
Release of All Claims
Page 2
The parties acknowledge that the above payments and benefits are
consideration in addition to anything of value to which Employee is already
entitled.
3. Employee, on behalf of himself/herself and his/her marital
community, heirs, executors, assigns and personal representatives, does hereby
release and forever discharge Employer and any parent company, subsidiary
company, and any other company affiliated with or under common ownership with
Employer, and each of their respective current and former officers, partners,
principals, directors, shareholders, attorneys, employees, agents, servants,
representatives, independent contractors, guarantors, heirs, successors,
insurers, assigns, and all affiliated entities, hereinafter collectively
referred to as "the Released Parties," from any and all claims, demands, causes
of actions, or liability of any kind or character, known or unknown, arising or
accruing through the date this Agreement is executed by Employee, including
without limitation all claims that are in any way related to Employee's
employment by Employer or the termination thereof.
Without limiting the generality of the foregoing, the full release
contained in this paragraph applies to all claims arising under the Civil Rights
Act of 1964; the Age Discrimination in Employment Act of 1967; the Americans
With Disabilities Act of 1990; the Labor Management Relations Act; the Employee
Retirement Income Security Act of 1974; the Fair Labor Standards Act; the Family
and Medical Leave Act; the Immigration Reform and Control Act; the Consolidated
Omnibus Budget Reconciliation Act; the Occupational Safety and Health Act, or
any comparable state occupational safety and health statute; the Workers'
Adjustment and Retraining Act; 42 U.S.C. ss 1981; the Arizona Civil Rights Act;
the Arizona Wage Act; or under any other applicable state or federal statute;
and to any common law cause of action, including without limitation claims for
breach of contract, wrongful discharge, unpaid wages, tort, personal injury, or
any claim for attorney's fees or other damages, costs or expenses of any kind or
nature.
Notwithstanding the foregoing, the release contained in this paragraph
does not waive any claim arising out of any breach or alleged breach of this
Agreement, or any claim that may arise after the date this waiver is executed.
4. Each of the persons identified as a subject or beneficiary of the
release provisions of paragraph 3 above is intended as, and is expressly
designated as, a third party beneficiary of this Agreement.
2
<PAGE>
Release of All Claims
Page 3
5. On or before the effective date of termination set forth above,
Employee shall return all of Employer's property in his/her possession, custody,
or control, including without limitation all records, files, goods, equipment,
documents, computer software, data, disks, and any other property of any kind or
description whatsoever, including (if applicable) all copies thereof.
6. Employee agrees to keep the terms of this Agreement confidential,
and not to disclose the terms of this Agreement to any person except as may be
required by law. This obligation shall be equally binding upon Employee's
counsel and upon his/her spouse, who shall also keep the terms of this Agreement
confidential and not disclose them to any person except as may be required by
law.
7. Consistent with the full release contained in paragraph 3 above,
Employee agrees not to file or lodge any type of complaint alleging violation of
any law by Employer with any agency, or otherwise disparage Employer in
statements to any person or assert any claims or demands against it. In the
event that Employee brings such a lawsuit or files or lodges such a complaint in
breach of this paragraph, then Employee shall be required (in addition to such
damages as may be recoverable by Employer) to reimburse Employer the sum and/or
value of all severance benefits received pursuant to paragraph 2 of this
Agreement.
8. Employee understands and agrees that the execution of this Agreement
and the provision of severance benefits described herein are not to be construed
as an admission by Employer of any liability to Employee, liability being
expressly denied; but this Agreement instead represents a compromise and
settlement of disputed and unliquidated claims.
9. Employee is hereby advised to consult with an attorney before
executing this Agreement. By his/her signature hereon, Employee acknowledges
that he/she has been so advised, and that he/she has had an opportunity to
consult with, and has consulted with, an attorney before executing this
Agreement.
3
<PAGE>
Release of All Claims
Page 4
10. Employee acknowledges that he/she has been given a period of
twenty-one (21) days within which to consider this Agreement.
11. For a period of seven (7) days following the execution of this
Agreement by Employee, Employee may revoke the agreement, and the Agreement
shall not become effective or enforceable until the revocation period has
expired. This Agreement shall become effective upon the eighth day following
Employee's signature hereon, provided that Employee has delivered this signed
Agreement to Employer within the same period (the "Effective Date").
12. This Agreement constitutes the entire Agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings, inducements
and conditions express or implied, oral or written, of any nature whatsoever
with respect to the subject matter hereof. This Agreement may not be modified or
amended other than by an agreement in writing signed by the party to be charged
with such modification or amendment.
13. Should any litigation be commenced between the parties hereto
concerning the terms of this Agreement, or the rights and duties of the parties
hereto under this Agreement, the prevailing party in such litigation shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum as and for the prevailing party's attorneys' fees, experts' fees, and
expenses of litigation.
14. The provisions of this Agreement are independent of and separate
and severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part. If any
provision of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, that provision shall be deemed modified and replaced
by a provision, as similar in form, content and effect as possible, to the
invalid or unenforceable provision and the Agreement shall be deemed reformed
accordingly. Notwithstanding the foregoing, however, the obligations of either
party shall be rendered null and void if any part of the material consideration
for that party's obligations is or becomes unenforceable and no reasonable
substitute provision with the same material effect is available to the parties.
4
<PAGE>
Release of All Claims
Page 5
15. Neither the failure nor any delay on the part of any party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege preclude any other or further exercise of the same or
of any other right, remedy, power or privelege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such rights, remedy, power, or privilege with respect to any other
occurrence.
16. This Agreement is the product of negotiation between the parties.
This Agreement shall be construed in accordance with its plain meaning and shall
not be construed for or against any party on account of the role of any party or
its counsel in the drafting of this Agreement.
17. This Agreement shall be governed by the substantive laws of Arizona
and any action to enforce or construe this Agreement or to declare the rights of
the parties hereunder shall be commenced and maintained in a state or federal
court in Arizona.
18. Employee has read this Agreement, and understands the extent and
effect of its terms, the relinquishment of his/her legal rights and the legal
consequences involved in entering into this Agreement. Employee is satisfied
with the terms and conditions of settlement represented by this Agreement.
Employee is signing this Agreement voluntarily.
"Employee":
Kenneth Charbonneau
------------------------------
(Print name)
/s/ Kenneth Charbonneau
------------------------------
(Signature)
"Employer":
POORE BROTHERS, INC.
By /s/ Eric Kufel
------------------------------
Its: President and CEO
5
<PAGE>
Release of All Claims
Page 6
Spousal Consent
Darlene J. M-Charbonneau, spouse of Employee, acknowledges that he/she
has read the foregoing Settlement Agreement and Release of All Claims, and
agrees, in consideration of the promises of Employee contained therein, to be
bound by the terms thereof, including without limitation the release of any and
all claims that he/she might have against Employer and any parent company,
subsidiary company, and any other company affiliated with or under common
ownership with Employer, and each of their respective officers, partners,
principals, directors, shareholders, attorneys, employees, agents, servants,
representatives, independent contractors, guarantors, heirs, successors,
insurers, assigns, and all affiliated entities, that are in any way related to,
resulting from, or arising out of Employee's employment with Employer or the
termination of that employment.
Darlene J. M-Charbonneau
------------------------------
Print name
/s/ Darlene J. M-Charbonneau
------------------------------
Signature
6
<PAGE>
Release of All Claims
Page 7
STATE OF ARIZONA )
) ss.
Maricopa County )
On this 10th day of March, 1997, before me the undersigned notary
public, personally appeared Darlene Charbonneau, who acknowledged to me that
he/she executed the within instrument for the purposes therein expressed.
/s/ Gena P. VanDenBerg
----------------------
Notary Public
My Commission Expires: March 23, 1999
--------------
"OFFICIAL SEAL"
Gena P. Vandenberg
STATE OF ARIZONA ) Notary Public-Arizona
) ss. Maricopa County
Maricopa County ) My Commission Expires 3/23/99
On this 12th day of March, 1997, before me the undersigned notary
public, personally appeared Kenneth Charbonneau, who acknowledged to me that
he/she executed the within instrument for the purposes therein expressed.
/s/ Gena P. VanDenBerg
----------------------
Notary Public
My Commission Expires: March 23, 1999
--------------
"OFFICIAL SEAL"
Gena P. Vandenberg
STATE OF ARIZONA ) Notary Public-Arizona
) ss. Maricopa County
Maricopa County ) My Commission Expires 3/23/99
On this 12th day of March, 1997, before me the undersigned notary
public, personally appeared Eric Kufel, who acknowledged to me that he/she is an
authorized agent of Poore Brothers, Inc., and as such has executed the within
instrument for the purposes therein expressed.
/s/ Gena P. VanDenBerg
----------------------
Notary Public
My Commission Expires: March 23, 1999
--------------
"OFFICIAL SEAL"
Gena P. Vandenberg
Notary Public-Arizona
Maricopa County
My Commission Expires 3/23/99
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into
effective as of the 10th day of April, 1997 ("Effective Date"), by and between
POORE BROTHERS, INC. ("Company"), a Delaware corporation, and THOMAS W. FREEZE
("Employee"), a married man.
In consideration of the mutual promises and covenants contained herein,
and other good and valuable consideration, the receipt of which is acknowledged,
Company and Employee agree as provided in this Agreement.
1. Employment. Company hereby employs Employee, and Employee accepts
employment by Company, upon the terms and conditions contained in this
Agreement.
2. Term. Employee's employment by Company shall commence on April 10,
1997, and shall continue until either Company or Employee gives to the other
party written notice of termination. Employee shall be an employee at will and
if Employee's employment is terminated, Employee's status as officer of Company
shall also be terminated. Either Company or Employee may terminate Employee's
employment by Company with or without cause upon written notice of termination
to the other party.
3. Title. During the period of Employee's employment by Company,
Employee shall be Vice President, Chief Financial Officer, Secretary and
Treasurer of Company and shall have all rights, powers and authority inherent in
such positions including, without limitation, the authority to direct and
monitor the day-to-day financial operations and status of Company, subject at
all times, to overriding Board of Directors' ("Board") authority and/or policy.
4. Compensation. During the initial year of Employee's employment by
Company, Employee shall receive from Company an annual salary of $105,000.00,
which shall be payable proportionately on Company's regular payroll payment
dates for its employees. Employee's annual salary shall be subject to change at
the discretion of Company's compensation committee.
5. Bonuses. During and for the period of Employee's employment by
Company, Employee shall receive such bonuses, whether incentive, merit or
otherwise and whether cash, stock or otherwise, as Company's compensation
committee shall determine from time to time. Although Employee's first-year
bonus is yet to be determined by Company's compensation committee, Employee
acknowledges that, based upon, and subject to, Employee's and Company's
performance, a target amount of thirty percent (30%) of base salary is
reasonable and such bonus could be up to forty-five percent (45%) of base
salary.
<PAGE>
6. Fringe Benefits/Vacation. During the period of Employee's employment
by Company, Employee shall be entitled to participate in all of Company's
qualified retirement plans and welfare benefit plans (e.g., group health
insurance) on the same basis as Company's other employees. In addition, during
the period of Employee's employment by Company, Employee shall be entitled to
participate in all non-qualified deferred compensation and similar compensation,
bonus and stock plans offered, sponsored or established by Company on
substantially the same or a more favorable basis as any other employee of
Company.
Employee shall be entitled to three weeks vacation (prorated for part
years) during each year of his employment with Company.
7. Telephone and Credit Card. During the period of Employee's
employment by Company, Company shall furnish to Employee the following:
(a) Company shall furnish to Employee a mobile or cellular
telephone for Employee's use and shall pay all charges in connection therewith
(except Employee shall reimburse Company for the charges each month that are in
excess of $200 of charges in such month which are not accounted for by Employee
as charges for the purposes of Company). The telephone to be furnished to
Employee shall be agreed upon by Company and Employee from time to time.
(b) Company shall furnish to Employee a Company credit card
for Employee to use solely for purposes of Company.
8. Options.
Company hereby grants to Employee the right and option to
purchase 125,000 shares of Company's $0.01 par value voting common stock
("Common Stock"), in accordance with Company's 1995 Stock Option Plan ("Plan"),
at a price per share equal to the average closing bid price per share of
Company's stock for the five (5) consecutive day trading period ending on the
Effective Date hereof. These options will vest in equal 41,667 (41,666 shares in
the final year) share increments on the first, second and third anniversaries of
the Effective Date. Employee acknowledges receipt of a copy of the Plan and
agrees to the terms set forth therein. Employee further recognizes that the Plan
is subject to change from time to time by the Board of Directors of Company. All
of the terms and conditions of the options described herein shall otherwise be
governed by the terms of the Plan including, without limitation, exercise dates
and times, payment of option prices, revisions of the Options, expiration and
the like, all of the terms and conditions of which Plan are incorporated by
reference into this portion of this Agreement as if fully rewritten herein.
Notwithstanding the foregoing, all of the options granted to Employee hereunder
shall immediately, and without further action of
2
<PAGE>
any party, vest upon a "change of control" of Company. When used herein, the
term "change of control" shall mean the change of hands, within any consecutive
one-month period, of more than fifty-one percent (51%) of the voting stock of
the Company, with the concomitant result that the new owner or owners of such
stock exercise their voting rights to "control" the identities of the members of
the Board, as the term "control" is defined, or to which reference is made, in
the regulations promulgated under the Securities Exchange Act of 1934.
9. Confidentiality.
(a) During the period of Employee's employment by Company and
for a one year period thereafter, Employee shall hold in confidence and shall
not disclose or publish, except in the performance of his duties under this
Agreement, any Confidential Information (as defined below) that is presented or
disclosed to him in connection with his employment by Company.
(b) Subject to the provisions of Section 9(c) below, for
purposes of this Agreement the term "Confidential Information" shall mean
information or material that is proprietary to and owned by Company. Such
Confidential Information shall include, without limitation, Company's recipes
for specialty potato chips, manufacturing processes, customer lists, supplier
lists and pricing information.
(c) Notwithstanding the foregoing, the term Confidential
Information shall not include any information or material that:
(i) is in, or has passed into, the public domain;
(ii) is lawfully received by Employee from a third party;
(iii) is required to be disclosed by Employee by law or
pursuant to an order determination issued by a court or any federal, state or
municipal regulatory or administrative agency; or
(iv) was in the possession of, or known by, Employee prior to
his Employment by Company.
(d) Employee acknowledges that the Confidential Information of
Company is unique in character and that Company would not have an adequate
remedy at law for a material breach or threatened material breach by Employee of
his covenants under this Section 9. Employee therefor agrees that, in the event
of any such material breach or threat thereof, Company may obtain a temporary
and/or permanent injunction or restraining order to enjoin Employee from such
material breach or threat thereof, in addition to any other rights or remedies
available to Company at law or in equity.
3
<PAGE>
(e) Notwithstanding the foregoing, Employee may disclose
Confidential Information to his attorneys and other advisors on a need to know
basis provided the recipient is directed and required to maintain the disclosed
Confidential Information in confidence.
10. Noncompete. During the period of Employee's employment by Company,
Employee shall not, directly or indirectly, whether as principal, consultant,
employee, agent, officer, director, trustee or otherwise, engage in the business
of manufacturing specialty potato chips, salted snack foods or popcorn or engage
in the business of distributing specialty potato chips, salted snack foods or
popcorn. In addition, Employee shall not, for a period of one year beginning on
the date of termination of his employment, directly or indirectly, whether as
principal, consultant, employee, agent, officer, director, trustee or otherwise,
engage in the United States in the business of manufacturing specialty potato
chips, salted snack foods or popcorn or engage in the United States in the
business of distributing specialty potato chips, salted snack foods or popcorn.
Employee acknowledges that the foregoing limitations are minimum limitations
which are necessary to protect the legitimate interests of Company because of
Employee's sensitive executive position with Company. Therefore, if a breach of
the foregoing shall occur, in addition to any action for damages which Company
may have, Company shall have the right to obtain an injunction as a matter of
right prohibiting Employee's competition in violation of the foregoing. In the
event that the time period of non-competition is deemed to be unreasonable,
Employee acknowledges that 11 months shall be deemed reasonable. In the event 11
months is deemed unreasonable, then 10 months is deemed reasonable, and so on,
until the foregoing covenant is enforceable to the fullest extent permitted by
law. Similarly, in the event the entire United States is deemed unreasonable,
states shall be eliminated one by one beginning with Maine, continuing down the
east coast of the United States and in roughly in north to south linear fashion
across the United States until the geographical limit set forth above is deemed
reasonable to the fullest extent permitted by law.
11. Severance. Although Employee is an employee at will, and Employee's
status as employee and officer of Company may be terminated at any time for any
reason or for no reason at all, Company agrees that, if Employee is terminated
by Company (as opposed to Employee resigning) without "cause" (to which
reference is made below), Employee shall be entitled to receive the greater of
the then-common Company policy compensation as regards severance pay for
individuals employed by Company in similar positions, if any, or four months'
salary ("Severance Compensation"), which Severance Compensation shall be paid as
regular compensation would be paid over said four-month period after Employee's
employment is terminated. Employee shall further be entitled to retain all
4
<PAGE>
vested options and Employer shall pay reasonable (in Employer's reasonable
determination) out-placement fees (not to exceed the greater of the then-common
Company policy as regards payment of out-placement expenses upon termination for
individuals previously employed by Company in similar positions or $5,000.00)
regarding Employee's future employment during the four month period following
the termination. Employee's right to receive such Severance Compensation shall
be conditioned upon Employee executing such documents (including reasonable
mutual releases which also must be executed by Employee's spouse, if any) in
such forms as may be prescribed by Company from time to time.
Employee acknowledges if Employee's employment is terminated by Company
for "cause," Employee shall be due no Severance Compensation or out-placement
assistance and may further be liable to Company for damages caused by the
existence of such cause, to the extent permitted by law and this Agreement. When
used herein, the term "cause" shall mean and refer to any of the following:
(i) Employee's continued insubordination or failure to follow
Company directives after notice from Company or its Board;
(ii) Employee conducting himself in a manner which is not
reasonably calculated to be in the best interest of Company or which brings
disrepute or disdain upon Company and/or its reputation and/or products, after
Employee has received notice from Company or the Board of such conduct and has
continued to persist in such conduct;
(iii) Any acts of gross negligence, willful malfeasance,
theft, fraud or dishonesty of Employee or the bankruptcy or insolvency of
Employee;
(iv) The death or disability of Employee, Employee
acknowledging that such events are covered by Company's general benefit package;
or
(v) Employee's breach of any other term of this Agreement,
which breach persists after ten (10) days written notice to Employee of such
breach.
12. Additional Provisions.
(a) This Agreement shall not be assigned by either Company or
Employee without the other party's prior written consent; otherwise, this
Agreement shall be binding upon, and shall inure to the benefit of, the heirs,
personal representatives, successors and assigns of Company and Employee
respectively.
5
<PAGE>
(b) This Agreement and the rights and obligations of Company
and Employee shall be governed by, and shall be construed in accordance with,
the laws of the State of Arizona without the application of any laws of
conflicts of laws that would require or permit the application of the laws of
any other jurisdiction.
(c) Time is of the essence of this Agreement and each
provision hereof.
(d) This Agreement sets forth the entire understanding of
Company and Employee with respect to the matters set forth herein and cannot be
amended or modified except by an instrument in writing signed by the party
against whom enforcement is sought.
(e) This Agreement is the result of negotiations between
Company and Employee, and Company and Employee hereby waive the application of
any rule of law that otherwise would be applicable in connection with the
interpretation and construction of this Agreement that ambiguous or conflicting
terms or provisions are to be interpreted or construed against the party who (or
whose attorney) prepared the executed Agreement or any earlier draft of the
same.
(f) If any provision or any portion of any provision of this
Agreement shall be deemed to be invalid, illegal or unenforceable, the same
shall not alter the remaining portion of such provision or any other provision
of this Agreement, as each provision of this Agreement and portion thereof shall
be deemed severable.
(g) Except as may be otherwise required by law, any notice
required or permitted to be given under this Agreement shall be given in writing
and shall be given either by (i) personal delivery, or (ii) overnight courier
service, or (iii) facsimile transmission, or (iv) United States certified or
registered mail, in each case with postage prepaid to the following address or
to such other address as Company or Employee may designate by notice given to
the other party pursuant to this section. Notice shall be effective on (v) the
day notice is personally delivered, if notice is given by personal delivery, or
(vi) the first business day after the date of delivery to the overnight delivery
service, if notice is given by such a delivery service, (vii) the day notice is
received, if notice is given by facsimile, or (viii) the fourth business day
after notice is deposited in the United States mail, if notice is given by
United States certified or registered mail.
Company: Poore Brothers, Inc.
2664 South Litchfield Road
Goodyear, Arizona 85338-1500
Fax No. (602) 925-2363
6
<PAGE>
Employee: Thomas W. Freeze
5120 East Exeter Blvd.
Phoenix, AZ 85018
Fax No. (602) 808-8903
(h) If any action, suit or proceeding is brought in connection
with this Agreement, or on account of any breach of this Agreement, or to
enforce or interpret any of the terms, covenants and conditions of this
Agreement, the prevailing party shall be entitled to recover from the other
party or parties, the prevailing party's reasonable attorneys' fees and costs,
and the amount thereof shall be determined by the court (not by a jury) or the
arbitrator and shall be made a part of any judgment or award rendered. All
actions arising hereunder or out of Employee's employment of Company shall be
adjudicated in the Superior Court of the State of Arizona in and for the County
of Maricopa, Phoenix, Arizona, in which Court the parties irrevocably and
unconditionally stipulate jurisdiction and venue. No action shall be commenced
elsewhere.
POORE BROTHERS, INC.
By /s/ Eric J. Kufel
----------------------------------
Its President/CEO
-------------------------------
[Company]
/s/ Thomas W. Freeze
-------------------------------------
Thomas W. Freeze
[Employee]
EXHIBIT 11-1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
POORE BROTHERS, INC.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
1997 1996
---- ----
<S> <C> <C>
Net Loss................................................. $ (478,420) $ (203,884)
------------ ------------
Weighted average common shares outstanding............... 6,960,362 3,585,733
Common stock equivalents from stock options and warrants * 568,522 (1)
------------ -------------
Total weighted average common shares outstanding......... 6,960,362 4,154,255
------------ -------------
Loss per common share and common share equivalent........ $ (.07) $ (.05)
-------------- -------------
</TABLE>
(1) Anti-dilutive common stock equivalents included in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83.
* Not included as they are anti-dilutive.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR
THE THREE MONTHS ENDED MARCH 31, 1997, INCLUDED WITH
FORM 10-QSB, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,145,509
<SECURITIES> 980,420
<RECEIVABLES> 1,856,288
<ALLOWANCES> 120,000
<INVENTORY> 836,589
<CURRENT-ASSETS> 5,953,329
<PP&E> 5,563,456
<DEPRECIATION> 570,772
<TOTAL-ASSETS> 13,387,380
<CURRENT-LIABILITIES> 2,774,148
<BONDS> 2,725,384
0
0
<COMMON> 69,863
<OTHER-SE> 7,811,985
<TOTAL-LIABILITY-AND-EQUITY> 13,387,380
<SALES> 4,733,686
<TOTAL-REVENUES> 4,733,686
<CGS> 3,769,038
<TOTAL-COSTS> 3,769,038
<OTHER-EXPENSES> 1,396,031
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 38,037
<INCOME-PRETAX> (478,420)
<INCOME-TAX> 0
<INCOME-CONTINUING> (478,420)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (478,420)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>