-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CNy2ChRd63ZsIXCvrQoOrtz+AeeFJGAlm7LsLb4M51SlsQu75V52VwyI8sMY+DCO cfuy3xoie7BTnejJuw8ZBg== 0000950152-01-503395.txt : 20010727 0000950152-01-503395.hdr.sgml : 20010727 ACCESSION NUMBER: 0000950152-01-503395 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20010428 FILED AS OF DATE: 20010726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESEE CORP CENTRAL INDEX KEY: 0000040934 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 160445920 STATE OF INCORPORATION: NY FISCAL YEAR END: 0503 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-01653 FILM NUMBER: 1690037 BUSINESS ADDRESS: STREET 1: 600 POWERS BUILDING STREET 2: 16 WEST MAIN STREET CITY: ROCHESTER STATE: NY ZIP: 14614 BUSINESS PHONE: 7164541250 MAIL ADDRESS: STREET 1: 445 ST PAUL STREET CITY: ROCHESTER STATE: NY ZIP: 14605 FORMER COMPANY: FORMER CONFORMED NAME: GENESEE BREWING CO INC DATE OF NAME CHANGE: 19880322 10-K405 1 l89110ae10-k405.txt GENESEE CORPORATION FORM 10-K405 1 Index to Exhibits at Page 51 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: APRIL 28, 2001 ------------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to______________________ Commission File Number: 0-1653 ---------------------- GENESEE CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK 16-0445920 - ----------------------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 POWERS BLDG., 16 W. MAIN STREET, ROCHESTER, NEW YORK 14614 - -------------------------------------------------------- ------------------- (Address of principal executive offices) (zip code) Registrant's Telephone Number, including area code: (716) 454-1250 -------------------- Securities Registered Pursuant to Section 12(b) of the Act: NONE Securities Registered Pursuant to Section 12(g) of the Act: Class B Common Stock, par value $.50 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [__] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting common stock (Class A) held by non-affiliates, based on the price for Class B Common Stock at the close of trading on July 16, 2001 was $1,950,124. The number of shares outstanding of each of the registrant's classes of common stock as of July 16, 2001 was: Number of Shares CLASS OUTSTANDING ----- --------------- Class A Common Stock (voting) 209,885 par value $.50 per share Class B Common Stock (non-voting) par value $.50 per share 1,464,201 2 Page 2 of 141 PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL. Genesee Corporation (the "Corporation") was incorporated in 1932 under the laws of the State of New York. Until 1986, the Corporation was known as The Genesee Brewing Company, Inc. and was engaged solely in the production and sale of malt beverages. In 1986, the Corporation implemented a strategy to diversify its business operations beyond its traditional brewing business. The Corporation subsequently restructured to become a holding company, changed its name and expanded its business to include subsidiaries conducting dry food processing and packaging, equipment leasing and real estate investment. On October 19, 2000, the Corporation's shareholders approved a plan to liquidate and dissolve the Corporation. Pursuant to this plan, the Corporation sold its brewing business and a substantial portion of its equipment leasing business in December 2000. The Corporation is currently investigating opportunities to divest its real estate investments. As a result of these transactions, the Corporation's brewing, equipment leasing and real estate investment businesses are reported as discontinued operations. The Corporation continues to operate its Foods Division as it evaluates alternatives for the divestiture of this business. Results for the Corporation's Foods Division and corporate segment are reported as continuing operations. Segment information for these continuing operations is set forth in Note 10 to the consolidated financial statements set forth in Item 8 of this report. CONTINUING OPERATIONS FOODS DIVISION. The Corporation's Foods Division produces a variety of dry food and beverage products, including side dishes, bouillon cubes and powder, artificial sweeteners, soup mixes, iced tea mixes, instant beverage mixes and hot cocoa. The Corporation expanded into the foods business in fiscal 1988, when it acquired Ontario Foods, Inc., a producer of private label dry food and beverage products. Following a period of internal growth and a series of small acquisitions, the Corporation acquired Freedom Foods, Inc., the nation's largest producer of private label bouillon cubes and powder, in May 1997. The Corporation acquired TKI Foods, Inc., the nation's largest producer of private label artificial sweeteners, in August 1998. In October 1998, the Corporation purchased a 340,000 square foot production facility in Medina, New York to house all Foods Division operations. The Foods Division made improvements to the Medina facility to accommodate Foods Division operations and in January 2000 completed the relocation of all operations to the Medina facility. Foods Division products are produced by mixing and blending various dry ingredients and packaging these products in a variety of packaging configurations, including flexible pouches, cups, cartons, fiber and metal cans and bulk packaging in fiber drums and polyethylene lined cartons. Foods Division products are sold by Foods Division salesmen and through a network of independent brokers to food store chains throughout the United States as private label products under the label of the food store chain or as house brands under Foods Division proprietary brand labels. Chain store private label products are a growing product category in the United States and represent the largest component of Foods Division revenues. 3 Page 3 of 141 The Foods Division's proprietary brand labels are Thirst Quench'r, Taste of the Alps, Sadano's, Golden Kettle, Freedom, Thin & Trim, Sweet 10, Sprinkle Sweet and Superose. Except for these trademarks, the Foods Division does not own any trademarks, patents, franchises or concessions which are material to its business. The Foods Division also produces and packages dry food and beverage products under contract processing/packaging arrangements with major food companies. Contract processing/packaging agreements are typically short term in nature, terminating with the end of the particular production run. As a result of the TKI Foods acquisition, the Foods Division also produces and packages a broad range of products for a small number of large grocery distributors who in turn sell to retail grocery chains and other food retailers. The food and beverage products produced by the Foods Division utilize a variety of ingredients. Some of these ingredients are processed by the Foods Division from a raw state while others have been pre-processed and are further processed by the Foods Division to produce the finished product. Numerous sources of supply are available for the ingredients used in the Foods Division's products. Packaging materials used by the Foods Division are purchased from a variety of sources. Products produced under contract processing/packaging agreements typically utilize ingredients and packaging supplied by the customer. The Foods Division's product mix varies on a seasonal basis. For example, iced tea and beverage mixes are produced in greater quantity in the spring and summer months whereas bouillon products, dry soup mixes, side dishes and hot cocoa are typically produced more heavily in the fall and winter months. The dry food industry consists of thousands of producers ranging from large multi-national companies with extensive product offerings and operations, to small specialty producers which serve specific geographic areas or market niches. The Foods Division competes primarily on the basis of quality, price and service. The Foods Division's major product lines are facing serious competitive pressure. Prolonged price promotion by the leading side dish brand has resulted in lower sales and operating margins for the Foods Division's side dish line. The Foods Division's private label iced tea mix has also experienced a decline in revenues and margins as a result of aggressive efforts by a large Canadian sugar refiner to displace the Foods Division's products in key supermarket accounts. The Foods Division's line of private label artificial sweeteners is facing new competition from the producer of the leading national brand, which expanded its product line to include private label artificial sweeteners. The accelerating pace of consolidation within the retail food industry poses another challenge for the Foods Division. This consolidation is creating bigger, more powerful store chains that have greater buying power, centralized purchasing and larger geographic scope. One of the objectives of these consolidations is to exercise greater control over chain store suppliers like the Foods Division. To remain competitive, the Foods Division would have to continue to lower its costs, expand its product lines and improve the efficiency of its distribution network to serve the nationwide operations of these large chains. In addition to the governmental regulations common to most businesses, food processing is regulated by the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the New York Department of Agriculture and Markets and a variety of other state and local agencies. These regulations cover, among other things, ingredients and packaging materials, product labeling, plant sanitation and processing methods, and disposal of adulterated or contaminated ingredients or products. 4 Page 4 of 141 EMPLOYEES. As of April 28, 2001, the Corporation's Foods Division employed approximately 200 people, none of whom is represented by a union. Employee relations with the Foods Division's employees have been good. DISCONTINUED OPERATIONS On December 15, 2000, the Corporation sold substantially all of the assets and certain liabilities of its brewing business to High Falls Brewing Company, LLC ("High Falls") for $27.2 million, of which $16.2 million was paid in cash and $11.0 million in notes receivable from High Falls. The Corporation recorded a pre-tax deferred gain of $11.9 million on the sale of the brewing business. On December 28, 2000, the Corporation's equipment leasing subsidiary, Cheyenne Leasing Company ("Cheyenne") sold a significant portion of its lease portfolio for $15.3 million, generating net proceeds to the Corporation of $12.8 million. The Corporation recorded a pre-tax loss of $3.1 million as a result of the sale. Cheyenne retained a small portion of its lease portfolio, which it will continue to manage for the duration of the respective lease terms. As of April 28, 2001, there were 43 leases remaining in Cheyenne's portfolio. The Corporation has three real estate investments that it owns through wholly-owned subsidiaries of the Corporation's Genesee Ventures, Inc. subsidiary. One investment is a ten-percent interest in a Class A office building in Rochester, New York. The second investment is a fifty-percent interest in a 408-unit residential property located in a suburb of Syracuse, New York. The third investment is a fifty-percent interest in a 150-unit residential property located in a suburb of Rochester, New York. The Corporation is exploring opportunities to divest its real estate investments pursuant to the plan of liquidation and dissolution. ITEM 2. PROPERTIES CONTINUING OPERATIONS FOODS DIVISION. The Foods Division owns a 340,000 square foot facility in Medina, New York that houses all of its operations. Since being acquired in October 1998, this facility has been extensively modified to accommodate all office, production, laboratory and warehousing requirements of the Foods Division. The Medina facility is encumbered by a mortgage given to secure financing to acquire the property. The Foods Division has production equipment for mixing and packaging of food products. This equipment is in generally good condition, is regularly maintained and upgraded and is comparable to that used in the industry. The Medina facility and related equipment are adequate and suitable for the current needs of the Foods Division and the Medina facility has adequate space to accommodate additional operations. DISCONTINUED OPERATIONS The Corporation's Genesee Ventures subsidiary has interests in three real estate investments which are described in the Discontinued Operations section of Item 1 of this report. Each real estate investment is owned by a separate subsidiary of Genesee Ventures, Inc. in partnership with a real estate investment and management company. 5 Page 5 of 141 ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter ended April 28, 2001. 6 Page 6 of 141 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Corporation's Class B Common Stock trades on the NASDAQ National Market tier of the NASDAQ Stock Market under the symbol GENBB. As of July 13, 2001, the number of holders of record of Class A (voting) Common Stock and Class B (non-voting) Common Stock were 98 and 867, respectively. There is no established public trading market for the Corporation's Class A stock, which has generally traded within the same range as Class B stock. The price for the Class B stock as reported by NASDAQ and the dividends paid per share on Class A and B stock for each quarter for the past two years are shown below:
UNAUDITED FISCAL YEAR ENDED APRIL 28, 2001 FISCAL YEAR ENDED APRIL 29, 2000 Market Price Market Price High Low Dividends High Low Dividends ---------------------------------------------------------------------------------------------------------------- First Quarter $ 21 17 3/4 .35 $ 26 5/8 20 1/3 .35 Second Quarter 40 7/8 20 .00 26 19 4/7 .35 Third Quarter 37 1/4 32 1/8 .00 29 1/8 19 3/4 .35 Fourth Quarter 35 3/4 22 2/3 7.50 23 17 1/2 .35 ----------------------------------------------------------------------------------------------------------------
After paying a regular quarterly dividend of $.35 per share on June 1, 2000, the Board of Directors suspended the payment of quarterly dividends, choosing instead to make liquidating distributions as and when feasible under the plan of liquidation and dissolution approved by shareholders on October 19, 2000. The first partial liquidating distribution of $7.50 per share was paid on March 1, 2001. ITEM 6. SELECTED FINANCIAL DATA
- ------------------------------------------------------------------------------------------------------------------------- YEARS ENDED 4/28/01 4/29/00 5/1/99 5/2/98 5/3/97 - ------------------------------------------------------------------------------------------------------------------------- Net Revenues From Continuing Operations $ 46,533 $ 45,548 44,893 35,358 26,031 Net (Loss)/Earnings From Continuing Operations (1,064) (1,141) 920 2,430 1,421 Net (Loss)/Earnings From Discontinued Operations (1,350) (2,259) 1,543 (1,095) 1,925 Total Assets 90,002 95,771 143,953 135,589 136,929 Total Long Term Debt 5,973 6,273 4,761 - - Basic (Loss)/Earnings Per Share From Continuing Operations (.65) (.70) .57 1.50 .88 Basic (Loss)/Earnings Per Share From Discontinued Operations (.83) (1.40) .95 (.67) 1.19 Diluted (Loss)/Earnings Per Share From Continuing Operations (.65) (.70) .57 1.49 .87 Diluted (Loss)/Earnings Per Share From Discontinued Operations (.83) (1.40) .95 (.67) 1.19 Cash Dividends Per Share 7.85 1.40 1.80 1.80 1.80 - ------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data)
7 Page 7 of 141 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This financial review should be read in conjunction with the accompanying consolidated financial statements and contains management's discussion and analysis of the Corporation's results of operations and liquidity. The discussion of operating results and liquidity and capital resources for fiscal 2001, fiscal 2000, and fiscal 1999 excludes the discontinued brewing, equipment leasing, and real estate investment businesses discussed in Note 2 of the accompanying consolidated financial statements. SUMMARY OF CONTINUING AND DISCONTINUED OPERATIONS Consolidated net revenues from continuing operations for the fiscal year ended April 28, 2001 were $46.5 million compared to $45.5 million in fiscal 2000 and $44.9 million in fiscal 1999. The increase in net revenues from continuing operations was due to the introduction of a new drink mix product that was partially offset by a decrease in sales of various other retail products and lower contract packaging revenue. On a consolidated basis, the Corporation reported an operating loss from continuing operations of $1.8 million for fiscal 2001 compared to operating loss of $1.7 million for fiscal 2000 and operating income of $752,000 for fiscal 1999. On a consolidated basis, the Corporation reported a loss from continuing operations of $1.1 million, or $.65 basic and diluted loss per share, for fiscal 2001, compared to a loss from continuing operations of $1.1 million, or $.70 basic and diluted earnings per share, for fiscal 2000, compared to earnings from continuing operations of $920,000, or $.57 basic diluted earnings per share, for fiscal 1999. The Corporation reported a net loss from discontinued operations of $1.35 million, net of a tax benefit of $15,000, or $.83 basic and diluted loss per share for fiscal 2001, compared to a net loss from discontinued operations of $2.3 million, net of tax benefit of $1.4 million, or $1.40 basic and diluted loss per share for fiscal 2000, compared to net earnings from discontinued operations of $1.5 million, net of tax expense of $1.0 million, or $.95 basic and diluted earnings per share for fiscal 1999. RESULTS OF CONTINUING OPERATIONS (Fiscal 2001 vs. Fiscal 2000) FOODS DIVISION Net sales for the Corporation's Foods Division increased $1.0 million to $46.5 million in fiscal 2001 as compared to $45.5 million in fiscal 2000. The increase in net sales was primarily attributable to the introduction of a new drink mix product that was partially offset by a decrease in sales of various other retail products and lower contract packaging revenue. Gross profit for the Foods Division increased to $6.4 million in fiscal 2001 compared to $6.1 million in fiscal 2000. The increase in gross profit was due to $1.1 million of gross profit from sales of the new drink mix product mentioned above and the absence of $1.9 million in costs incurred in fiscal 2000 in connection with transitioning operations to the Medina, New York facility. Gross profit in fiscal 2001 was adversely affected by $1.3 million of costs associated with start-up of the new drink mix product and a quality problem encountered during the introduction of this product, a $600,000 decrease in gross profit related to lower sales of various other retail products and lower contract packaging revenue mentioned above, and $800,000 in other unfavorable variances including an increase in the provision for obsolete inventory of $250,000. Selling, general and administrative expenses decreased $600,000 in fiscal 2001 compared to fiscal 2000. This decrease is primarily the result of a variety of reductions in SG&A costs including 8 Page 8 of 141 lower retail products division selling costs as well as the absence of costs incurred during fiscal 2000 related to transitioning production to the Medina, New York facility. The Foods Division had an operating profit of $1.0 million in fiscal 2001, which was $810,000 greater than the $190,000 operating profit reported in 2000. Foods Division profitability in fiscal 2001 was positively impacted by the reasons identified above. See also Item 1 of this Report for information regarding known trends and uncertainties affecting the Foods Division, which is incorporated herein by reference thereto. CORPORATE SEGMENT General and administrative expenses increased approximately $1.0 million when comparing fiscal 2001 and fiscal 2000. This increase is the result of $1.4 million of compensation expense related to the exercise of stock options during fiscal 2001 offset by approximately $400,000 in expense reductions as the Corporation entered into the liquidation and dissolution phase following shareholder approval of a plan of liquidation and dissolution on October 19, 2000. RESULTS OF CONTINUING OPERATIONS (Fiscal 2000 vs. Fiscal 1999) FOODS DIVISION Net sales for the Corporation's Foods Division increased $600,000 to $45.5 million in fiscal 2000, compared to $44.9 million in fiscal 1999. The increase in net sales was primarily attributable to an additional $500,000 in revenue from a new packaging contract. Gross profit for the Foods Division decreased $1.9 million to $6.1 million in fiscal 2000, compared to $8.0 million in fiscal 1999. The decrease in gross profit was primarily the result of $1.9 million of costs incurred by the Foods Division during fiscal 2000 in transitioning production to the Medina, New York facility that was acquired in fiscal 1999. Selling, general and administrative expenses decreased $600,000 in fiscal 2000 compared to fiscal 1999. This decrease is primarily the result of the elimination of duplicate staffing costs incurred in connection with the acquisition of TKI Foods and Spectrum Foods during fiscal 1999. The Foods Division had an operating profit of $190,000 in fiscal 2000, which was $1.4 million less than the $1.6 million operating profit reported in fiscal 1999. Foods Division profitability in fiscal 2000 was adversely impacted by the reasons identified above. In fiscal 2000 the Foods Division completed the consolidation of all operations at the Medina facility. See also Item 1 of this Report for information regarding known trends and uncertainties affecting the Foods Division, which is incorporated herein by reference thereto. LIQUIDITY AND CAPITAL RESOURCE APRIL 29, 2000 TO APRIL 28, 2001 (FROM CONTINUING OPERATIONS) Cash and cash equivalents and marketable securities in the aggregate increased $5.6 million from April 29, 2000 to April 28, 2001. Cash and cash equivalents totaled $12.2 million at April 28, 2001 and $7.6 million at April 29, 2000 (see accompanying consolidated statement of cash flows for components of this net increase in cash and cash equivalents). Marketable securities totaled $9.0 million at April 28, 2001 and $8.0 million at April 29, 2000. Net trade accounts receivable decreased by $76,000. This decrease is primarily attributable to timing of the cash receipts. 9 Page 9 of 141 Inventories decreased by $439,000 as a result of a concerted effort by the Foods Division to reduce inventory levels. Net property, plant and equipment decreased by $392,000 This decrease is primarily a result of Foods Division acquisitions of property, plant and equipment being offset by depreciation and amortization of such assets. Notes receivable related to the Corporation's sale of its brewing business in December 2000 totaling $11.0 million are reported in the Corporation's consolidated April 28, 2001 balance sheet. Accounts payable, accrued compensation and accrued expenses decreased in the aggregate by $324,000. This decrease is primarily attributable to the timing of payments. Notes payable decreased by $300,000 as a result of scheduled principal payments during fiscal 2001. A pre-tax deferred gain on the sale of the Corporation's brewing business to High Falls Brewing Company, LLC ("High Falls") in the amount of $11.9 million is recorded in the Corporation's consolidated April 28, 2001 balance sheet. As mentioned in Note 2 to the consolidated financial statements, the gain is deferred due to the Corporation's receipt of a significant portion of the sale price in the form of notes receivable and certain performance based guarantees in place between the Corporation and a significant contract customer of High Falls. Other liabilities decreased by $625,000. This decrease from April 29, 2000 is due to payment under a deferred compensation arrangement to the estate of a former Chairman of the Board and Chief Executive Officer of the Corporation during the first half of fiscal 2001. In connection with the decision to sell or dispose of all the Corporation's assets and dissolve the Corporation, the Corporation's Board of Directors decided to suspend the payment of quarterly dividends and to instead make liquidating distributions as and when feasible under the Corporation's plan of liquidation and dissolution. The first partial liquidating distribution was paid on March 1, 2001 (see Note 3 to the consolidated financial statements). The Corporation expects to make additional liquidating distributions as the Corporation: (a) receives payment from High Falls Brewing Company on the promissory notes that financed a portion of the purchase price in the sale of the brewing business; (b) receives proceeds from the sale of the Foods Division and other assets of the Corporation and; (c) discharges post closing obligations arising from such transactions and other contingent liabilities. Factors that will affect the amount and timing of additional liquidating distributions include the amount that will ultimately be realized from and the timing of the sale of the Foods Division and others assets of the Corporation, which will depend on the terms of the transactions in which those assets are sold; the payment or provision for the payment of debts, expenses, taxes and other liabilities of the Corporation; and the timing and cost of liquidating and winding up the Corporation's business affairs. See also the description of risks and uncertainties affecting the payment of liquidating distributions set forth in the Forward Looking Statements section of Item 7 of this report, which are incorporated herein by reference. See also the information in Item 1 regarding known trends and uncertainties in the Corporation's Foods Division, which is incorporated herein by reference thereto. 10 Page 10 of 141 FORWARD-LOOKING STATEMENTS This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include statements about the operations and prospects for the Corporation's Foods Division, industry trends and conditions that may affect the performance or financial condition of the Corporation and its Foods Division, and the payment of additional liquidating distributions. These forward-looking statements are subject to a number of significant risks and uncertainties, and there can be no assurance that the expectations reflected in those statements will be realized or achieved. Such risks and uncertainties include, without limitation, the risk of default by High Falls Brewing Company on its payment and other obligations under the promissory notes held by the Corporation; risks identified in Item 1 of this report associated with continued ownership and operation of the Foods Division; the possibility of delay in finding buyers and completing the divestiture of the Foods Division and other assets of the Corporation; the amounts that the Corporation is able to realize from the divestiture of the Foods Division and other assets of the Corporation; possible contingent liabilities and post-closing indemnification and other obligations arising from the sale of the Corporation's operating businesses and other assets; and risks associated with the liquidation and dissolution of the Corporation, ___ including without limitation, settlement of the Corporation's liabilities and obligations, costs incurred in connection with carrying out the plan of liquidation and dissolution, the amount of income earned on the Corporation's cash and cash equivalents and short-term investments during the liquidation period, and the actual timing of liquidating distributions. 11 Page 11 of 141 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) Selected Quarterly Financial Data (Unaudited)
FIRST SECOND THIRD FOURTH TOTAL FISCAL YEAR ENDED 4/28/01 QUARTER QUARTER QUARTER QUARTER YEAR - --------------------------------------------------------------------------------------------------------------------- Net Revenues From Continuing Operations $ 11,074 $ 12,869 $ 11,596 $ 10,994 $ 46,533 Gross Profit From Continuing Operations 409 2,008 1,888 2,066 6,371 Net (Loss)/Earnings From Continuing Operations (529) 155 23 (713) (1,064) Net Earnings/(Loss) From Discontinued Operations 520 (1,164) 6 (712) (1,350) Basic (Loss)/Earnings Per Share From Continuing Operations (.33) .10 .01 (.43) (.65) Basic Earnings/(Loss) Per Share From Discontinued Operations .32 (.71) .00 (.44) (.83) Diluted (Loss)/Earnings Per Share From Continuing Operations (.33) .10 .01 (.43) (.65) Diluted Earnings/(Loss) Per Share From Discontinued Operations .32 (.71) .00 (.44) (.83) FIRST SECOND THIRD FOURTH TOTAL FISCAL YEAR ENDED 4/29/00 QUARTER QUARTER QUARTER QUARTER YEAR - --------------------------------------------------------------------------------------------------------------------- Net Revenues From Continuing Operations $ 10,483 $ 12,518 $ 11,786 $ 10,761 $ 45,548 Gross Profit From Continuing Operations 840 1,760 1,995 1,532 6,127 Net (Loss)/Earnings From Continuing Operations (643) 77 407 (982) (1,141) Net Earnings/(Loss) From Discontinued Operations 1,169 (1,549) (105) (1,774) (2,259) Basic (Loss)/Earnings Per Share From Continuing Operations (.40) .05 .25 (.60) (.70) Basic Earnings/(Loss) Per Share From Discontinued Operations .72 (.96) (.06) (1.10) (1.40) Diluted (Loss)/Earnings Per Share From Continuing Operations (.40) .05 .25 (.60) (.70) Diluted Earnings/(Loss) Per Share From Discontinued Operations .72 (.96) (.06) (1.10) (1.40) (Dollars in thousands, except per share data)
12 Page 12 of 141
(b) INDEX TO FINANCIAL STATEMENTS PAGE Report of Independent Accountants - PricewaterhouseCoopers LLP 13 Consolidated Balance Sheets at April 28, 2001 and April 29, 2000 14 Consolidated Statements of Earnings and Comprehensive Loss For the three years ended April 28, 2001, April 29, 2000, and May 1, 1999 15 Consolidated Statements of Shareholders' Equity For the three years ended April 28, 2001, April 29, 2000, and May 1, 1999 16 Consolidated Statements of Cash Flows 17 For the three years ended April 28, 2001, April 29, 2000, and May 1, 1999 Notes to Consolidated Financial Statements 18 Financial Statement Schedule: For the three years ended April 28, 2001, April 29, 2000, and May 1, 1999 Schedule II - Consolidated Valuation and Qualifying Accounts 50
13 Page 13 of 141 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of Genesee Corporation: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Genesee Corporation and its subsidiaries at April 28, 2001 and April 29, 2000, and the results of their operations and their cash flows for each of the three years in the period ended April 28, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Rochester, New York June 18, 2001 14 Page 14 of 141
GENESEE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets April 28, 2001 and April 29, 2000 (Dollars in thousands, except per share data) 2001 2000 -------- -------- Assets Current assets: Cash and cash equivalents $ 12,237 $ 7,649 Marketable securities available for sale 9,037 8,029 Trade accounts receivable, less allowance for doubtful receivables of $262 at April 28, 2001 and April 29, 2000 2,700 2,776 Notes receivable, current portion 771 0 Inventories, at lower of cost (first-in, first-out) or market 8,758 9,197 Deferred income tax assets, current portion 338 113 Other current assets 180 61 Net assets held for disposal - current 5,179 0 -------- -------- Total current assets 39,200 27,825 Net property, plant and equipment 12,237 12,629 Goodwill and other intangibles net of accumulated amortization of $4,070 at April 28, 2001 and $3,107 at April 29, 2000 25,426 26,662 Notes receivable, noncurrent portion 10,229 0 Other assets 1,138 1,446 Deferred income tax assets, noncurrent portion 1,772 0 Net assets held for disposal - noncurrent 0 27,209 -------- -------- Total assets $ 90,002 $ 95,771 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Notes payable, current portion $ 1,474 $ 300 Accounts payable 1,281 1,454 Income taxes payable 0 64 Accrued compensation 493 235 Accrued expenses and other 975 1,384 Net liabilities held for disposal - current 0 2,127 -------- -------- Total current liabilities 4,223 5,564 Notes payable, noncurrent portion 4,499 5,973 Deferred gain on sale of brewing business 11,926 0 Deferred income tax liabilities, noncurrent portion 0 381 Other liabilities 21 646 -------- -------- Total liabilities 20,669 12,564 -------- -------- Shareholders' equity: Common stock: Class A common stock, voting, $.50 par value. Authorized 450,000 shares; 105 105 209,885 shares issued and outstanding Class B common stock, non-voting, $.50 par value. Authorized 3,850,000 shares; 753 753 1,506,876 shares issued Additional paid-in capital 5,803 5,847 Retained earnings 64,485 80,023 Officer loans (411) 0 Accumulated other comprehensive income / (loss) 91 (120) Less: Class B treasury stock, at cost; 42,675 shares in April 2001 and 96,564 shares in April 2000 (1,493) (3,401) -------- -------- Total shareholders' equity 69,333 83,207 -------- -------- Total liabilities and shareholders' equity $ 90,002 $ 95,771 ======== ========
See accompanying notes to consolidated financial statements. 15 Page 15 of 141
GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings and Comprehensive Loss Years Ended April 28, 2001, April 29, 2000, and May 1, 1999 (Dollars in thousands, except per share data) 2001 2000 1999 Revenues $ 46,533 $ 45,548 $ 44,893 Cost of goods sold 40,162 39,421 36,854 ----------- ----------- ----------- Gross profit 6,371 6,127 8,039 Compensation expense - stock options 1,378 0 0 Selling, general and administrative expenses 6,804 7,801 7,287 ----------- ----------- ----------- Operating loss (1,811) (1,674) 752 Investment and interest income 1,048 549 1,604 Other income 381 185 524 Loss on disposal of fixed assets (300) 0 0 Interest expense (422) (351) (873) ----------- ----------- ----------- (Loss) earnings from continuing operations before income taxes (1,104) (1,291) 2,007 Income tax (benefit) expense (40) (150) 1,087 ----------- ----------- ----------- (Loss) earnings from continuing operations (1,064) (1,141) 920 Discontinued operations: (Loss) earnings from operations of the discontinued segments (less applicable income tax (benefit) expense of $(981), $(142), and $ 1,008 respectively) (2,119) (399) 1,543 Adjustment to the loss and the loss on disposal of Genesee Ventures, Inc., respectively (less applicable income tax expense (benefit) of $966 in fiscal 2001 and $( 1,240) in fiscal 2000) 769 (1,860) 0 ----------- ----------- ----------- Net (loss) earnings (2,414) (3,400) 2,463 Other comprehensive income (loss), net of income taxes: Unrealized holding gains (losses) arising during the period 211 (197) (675) ----------- ----------- ----------- Comprehensive (loss) income $ (2,203) $ (3,597) $ 1,788 =========== =========== =========== Basic and diluted (loss) earnings per share from continuing operations $ (0.65) $ (0.70) $ 0.57 Basic and diluted (loss) earnings per share from discontinued operations $ (1.30) $ (0.25) $ 0.95 Basic and diluted gain (loss) per share from disposal of Genesee Ventures, Inc. $ 0.47 $ (1.15) $ -- ----------- ----------- ----------- Basic and diluted (loss) earnings per share $ (1.48) $ (2.10) $ 1.52 =========== =========== =========== Weighted average common shares outstanding 1,633,164 1,620,013 1,618,793 Weighted average and common equivalent shares 1,633,164 1,620,013 1,618,841
See accompanying notes to consolidated financial statements. 16 Page 16 of 141
GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years ended April 28, 2001, April 29, 2000, and May 1, 1999 (Dollars in thousands, except per share data) Accumulated Other Additional Comprehensive Treasury Common Stock Paid-In Retained Officer Income Stock Class A Class B Capital Earnings Loans (Loss) Class B Total -------- -------- -------- -------- ------ --------- -------- -------- BALANCE AT MAY 2, 1998 $ 105 $ 753 $ 5,842 $ 86,143 $ -- $ 752 $ (3,475) $ 90,120 ========================================================================================== Comprehensive income: Net earnings 2,463 2,463 Other comprehensive income (675) (675) -------- Total comprehensive income 1,788 Dividends paid - $1.80 per share (2,914) (2,914) Common stock bonus issued 14 29 43 ------------------------------------------------------------------------------------------ BALANCE AT MAY 1, 1999 105 753 5,856 85,692 -- 77 (3,446) 89,037 ========================================================================================== Comprehensive income: Net loss (3,400) (3,400) Other comprehensive loss (197) (197) -------- Total comprehensive loss (3,597) Dividends paid - $1.80 per share (2,269) (2,269) Common stock bonus issued (9) 45 36 ------------------------------------------------------------------------------------------ BALANCE AT APRIL 29, 2000 105 753 5,847 80,023 -- (120) (3,401) 83,207 ========================================================================================== Comprehensive income: Net loss (2,414) (2,414) Other comprehensive income 211 211 -------- Total comprehensive loss (2,203) Regular dividend paid - $.35 per share (567) (567) Common stock bonus issued and exercise of stock options and issuance (44) (411) 1,908 1,453 Liquidating distribution paid - $7.50 per share (12,557) (12,557) ------------------------------------------------------------------------------------------ BALANCE AT APRIL 28, 2001 $ 105 $ 753 $ 5,803 $ 64,485 $ (411) $ 91 $ (1,493) $ 69,333 ==========================================================================================
See accompanying notes to consolidated financial statements 17 Page 17 of 141
GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows YEARS ENDED APRIL 28, 2001, APRIL 29, 2000, AND MAY 1, 1999 (Dollars in thousands) 2001 2000 1999 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net ( loss) earnings from continuing operations $ (1,064) $ (1,141) $ 920 Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities: Depreciation and amortization 3,009 2,853 2,165 Net loss (gain) on sale of property, plant, and equipment 300 0 (98) Net loss (gain) on sale of marketable securities (157) (7) (922) Compensation expense - stock options 1,378 0 0 Deferred tax provision (66) 185 (327) Other (60) 1,097 762 Changes in non-cash assets and liabilities, net of amounts sold: Trade accounts receivable 76 775 (336) Inventories 439 1,868 (1,671) Other assets (445) (327) 904 Accounts payable (173) (429) 54 Accrued expenses and other (151) (809) (1,584) Income taxes payable (64) (1,151) 365 Other liabilities (625) (547) 101 ------------ ------------ ------------ Net cash provided by continuing operating activities 2,397 2,367 333 Net cash (used in) provided by discontinued operations (17,840) 1,464 8,157 ---------------------------------------------------------------------------------- ------------ ------------ NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (15,443) 3,831 8,490 ---------------------------------------------------------------------------------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of TKI Foods, net of cash acquired 0 0 (18,632) Capital expenditures, net (1,020) (4,491) (5,368) Proceeds from sale of property, plant, and equipment 0 65 600 Proceeds from sale of marketable securities 3,382 3,455 10,140 Purchases of marketable securities and other investments (4,212) (3,499) (1,929) ------------ ------------ ------------ Net cash used in continuing investing activities (1,850) (4,470) (15,189) ------------ ------------ ------------ Proceeds from sale of brewing business assets 16,218 0 0 Proceeds from sale of equipment leases 12,605 0 0 Other cash provided by discontinued operations 6,482 6,209 4,996 ------------ ------------ ------------ Net cash provided by discontinued operations 35,305 6,209 4,996 ---------------------------------------------------------------------------------- ------------ ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 33,455 1,739 (10,193) ---------------------------------------------------------------------------------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from acquisition of debt 0 1,700 14,800 Principal payments on debt (300) (3,188) (7,039) Payment of liquidating distribution (12,557) 0 0 Payment of dividends (567) (2,269) (2,914) ---------------------------------------------------------------------------------- ------------ ------------ NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (13,424) (3,757) 4,847 ---------------------------------------------------------------------------------- ------------ ------------ Net increase in cash and cash equivalents 4,588 1,813 3,144 Cash and cash equivalents at beginning of the period 7,649 5,836 2,692 ---------------------------------------------------------------------------------- ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 12,237 $ 7,649 $ 5,836 ================================================================================== ============ ============
See accompanying notes to consolidated financial statements. 18 Page 18 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements April 28, 2001, April 29, 2000, and May 1, 1999 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS The consolidated financial statements of Genesee Corporation and subsidiaries (the Corporation) include for continuing operations, the consolidated accounts of Genesee Corporation and Ontario Foods, Inc., the Corporation's Foods Division. The Corporation's Foods Division produces a variety of dry food and beverage products, including side dishes, bouillon cubes and powder, artificial sweeteners, soup mixes, iced tea mixes, instant beverage mixes and hot cocoa. The vast majority of the Corporation's food products are sold in the United States to independent wholesalers or retail establishments. All significant inter-company balances and transactions have been eliminated in consolidation. RECENTLY ISSUED ACCOUNTING STANDARDS Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. For a derivative not designated as a hedging instrument, changes in the fair value of the derivative are recognized in earnings in the period of change. The Corporation must adopt SFAS No. 133 in the first quarter of fiscal 2002. Management does not believe the adoption of SFAS No. 133 will have a material effect on the financial position or operations of the Corporation. In December 1999, the SEC issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101). SAB No. 101 provides additional guidance on revenue recognition as well as criteria for when revenue is generally realized and earned. The Corporation adopted SAB No. 101 effective in the fourth quarter of fiscal 2001 with no material impact on its results of operations and financial position. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less. Marketable securities include mutual funds, corporate, government and government agency obligations. 19 Page 19 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (CONTINUED) COMPREHENSIVE INCOME The Corporation reports comprehensive income in accordance with the provisions of Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130). This statement establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, losses, and other comprehensive income) in a set of financial statements in order to report a measure of all changes in equity of an enterprise. Other comprehensive income refers to revenues, expenses, gains and, losses that are included in comprehensive income but excluded from net earnings. The amount of income tax expense or (benefit) allocated to other comprehensive income for fiscal 2001, 2000, and 1999 was approximately $118,000, $(110,000), and $(380,000), respectively. PROPERTY, PLANT AND EQUIPMENT The Corporation provides for depreciation at rates that are estimated to expense the cost of depreciable assets over the following useful lives: buildings and building improvements, 20 to 25 years; machinery and equipment, 7 to 10 years; office equipment, furniture and fixtures, 5 years; vehicles, 5 years; leasehold improvements, 10 years. The straight-line method of depreciation is generally used on all assets. Depreciation expense amounted to $1.1 million, $1.4 million, and $674,000 in fiscal 2001, 2000, and 1999, respectively. The Corporation regularly assesses all of its long-lived assets for impairment and recognizes a loss when the carrying value of an asset exceeds its expected future cash flows. The Corporation determined that no impairment loss needs to be recognized for applicable assets in fiscal 2001, fiscal 2000, and fiscal 1999. GOODWILL AND OTHER INTANGIBLES Goodwill and other intangibles are amortized on a straight-line basis ranging from 3 to 25 years. The carrying value of goodwill and other intangibles are assessed periodically based on the expected future cash flows of the assets associated with the goodwill and other intangibles. INCOME TAXES The provision for income taxes is based upon pre-tax earnings, with deferred income taxes arising from the permanent and temporary ___ differences between the financial reporting basis and the tax basis of the Corporation's assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to reverse and give immediate effect to changes in income tax rates. 20 Page 20 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) STOCK-BASED COMPENSATION The Corporation measures compensation cost for its stock-based compensation plans under the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. In accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), disclosure of compensation costs on the basis of fair value is presented in Note 12 - Stock Option and Bonus Plans. CONCENTRATION OF CREDIT RISK Substantially all of the accounts receivable balances are from food retailers. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. EARNINGS PER SHARE The Corporation presents basic earnings per share, which is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the period, and diluted earnings per share, which reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In fiscal 2001, 2000, and 1998, respectively, 27,500, 216,051, and 133,500 shares of potential common stock are considered anti-dilutive and are excluded from the calculation of diluted earnings per share. RECLASSIFICATIONS It is the Corporation's policy to reclassify certain amounts in the prior year consolidated financial statements to conform with the current year presentation. FISCAL YEAR The Corporation's fiscal year ends on the Saturday closest to April 30. Fiscal years for the financial statements included herein are for the 52 week periods ending April 28, 2001, April 29, 2000, and May 1, 1999. 21 Page 21 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) DIVESTITURE OF THE CORPORATION'S OPERATING BUSINESSES On October 19, 2000, the Corporation's shareholders approved a plan to liquidate and dissolve the Corporation. The Corporation will be liquidated by selling or otherwise disposing of all the Corporation's assets and winding up all of the Corporation's affairs. The proceeds from this liquidation will then be distributed (see Note 3), after paying or providing for all its claims, obligations and expenses, to the Corporation's shareholders in a series of liquidating distributions, after which the Corporation will be dissolved. On December 15, 2000, the Corporation sold substantially all of the assets and certain liabilities of its brewing business for $25.8 million ($14.8 million in cash and $11.0 million in notes receivable) to High Falls Brewing Company, LLC ("High Falls"). Upon completion of a closing date balance sheet audit, the Corporation received an additional $1.4 million from High Falls bringing the total sales price for the brewery to $27.2 million. A pretax deferred gain on the brewing business sale in the amount of $11.9 million is reported in the accompanying consolidated balance sheet. The gain is deferred due to the Corporation's receipt of a significant portion of the sale price in the form of notes receivable and certain performance based guarantees in place between the Corporation and a significant contract customer of High Falls. On December 28, 2000, Cheyenne Leasing Company, which is a subsidiary of Genesee Ventures, Inc., the Corporation's real estate investment and leasing subsidiary, sold a significant portion of its lease portfolio for approximately $15.3 million, generating net proceeds to the Corporation of approximately $12.8 million. The Corporation recorded an estimated pretax loss of $3.1 million in the fourth quarter of fiscal 2000 related to this sale. The Corporation favorably adjusted this loss by $ 1.7 million, pretax, for fiscal 2001, which reflects better than expected leasing operating results. The Corporation is evaluating strategies to sell or otherwise divest the Corporation's remaining assets. In accordance with accounting principles generally accepted in the United States of America ("GAAP"), the results of operations of the Corporation's brewing, equipment leasing and real estate businesses have been segregated from the Corporation's continuing operations and accounted for as discontinued operations in the accompanying consolidated statements of earnings and comprehensive income and in the consolidated statements of cash flows. Continuing operations consist of the Foods Division and the Corporate segment. 22 Page 22 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) DIVESTITURE OF THE CORPORATION'S OPERATING BUSINESSES (CONTINUED) The results of operations for the discontinued brewing, equipment leasing and real estate investment businesses were as follows:
(Dollars in thousands) Fiscal 2001 Fiscal 2000 Fiscal 1999 Revenue $ 71,366 $ 120,983 $ 135,687 Less beer taxes (13,302) (24,552) (28,411) --------- --------- --------- Net revenue 58,064 96,431 107,276 Cost of goods sold (43,220) (70,785) (78,897) Selling, general, and admin (17,120) (25,661) (28,783) Other income 911 (526) 2,955 Loss from operations of the discontinued segments, net of tax benefit or expense (2,119) (399) 1,543 ========= ========= ========= Adjustment to the loss on disposal of Genesee Ventures, Inc., net of tax expense $ 769 $ (1,860) $ _ ========= ========= =========
The net assets of the brewing, equipment leasing and real estate investment businesses have been excluded from their respective captions and reported as net assets held for disposal in the accompanying consolidated balance sheet at April 28, 2001. The net assets of the brewing, equipment leasing and real estate investment businesses at April 28, 2001 were as follows:
(Dollars in thousands) Accounts receivable, net $ 353 Other current assets 256 Investment in direct financing and leveraged leases 1,389 Investment in and notes receivable from unconsolidated real estate partnerships 5,193 Other assets 741 Net deferred income tax asset 993 Accrued expenses and other (3,001) Accrued postretirement benefits ( 745) ------------- Net assets held for disposal - current $ 5,179 =============
23 Page 23 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) DIVESTITURE OF THE CORPORATION'S OPERATING BUSINESSES (CONTINUED) The Corporation's investment in a real estate limited partnership in which it has less than a majority interest is accounted for by the equity method. The Corporation's proportionate share of the results of operations of this unconsolidated limited partnership is recorded net of tax in discontinued operations. REVENUE RECOGNITION Revenue from the Corporation's lease portfolio is recognized on a level yield method. CONCENTRATION OF CREDIT RISK The Corporation's lease receivable balances are from a diversity of lessees in various industries and businesses. This diversity, in addition to security interests in the leased equipment, allows the Corporation to minimize its credit risk on lease receivables. REAL ESTATE INVESTMENT During the second quarter of fiscal 1998, the Corporation and its partners finalized negotiations with a new lender to refinance the mortgage on a Rochester, New York office building. The financing package includes a $31.5 million first mortgage loan obtained on a non-recourse basis and a $5.5 million term loan that is secured, in part, by a 50% limited guarantee from the Corporation. The Corporation's exposure under the guarantee is capped at $2.75 million. The building has an appraised value in excess of the total debt against it. 24 Page 24 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) DIVESTITURE OF THE CORPORATION'S OPERATING BUSINESSES (CONTINUED) LEASING ACTIVITIES The Corporation's leasing activity is conducted by Cheyenne Leasing Company, a wholly owned subsidiary of Genesee Ventures, Inc. On October 31, 2000, Genesee Ventures, Inc. bought out the 15% minority interest in Cheyenne Leasing Company from its joint venture partner to obtain this wholly owned status. Information pertaining to the Corporation's net investment in direct financing leases and leveraged leases at April 28, 2001 and April 29, 2000 is presented below:
2001 2000 -------------------------- ----------------------- Direct Direct Financing Leveraged Financing Leveraged Minimum rentals receivable $ 156 $ 0 $ 1,160 $ 287 Estimated unguaranteed residual value of leased assets 76 1,201 687 24,382 Unearned and deferred income 0 (44) (187) (4,838) ---- --- ------- -------- Investment in leases 232 1,157 1,660 19,831 ----- ----- ------ ------- Investment in direct financing and leveraged leases 1,389 21,491 Deferred taxes arising from leases (511) (10,800) ---- ------- Net after-tax investment in leases $ 878 $ 10,691 (Dollars in thousands) The following is a schedule of minimum rentals receivable by year for direct financing and leveraged leases at April 28, 2001: Fiscal Year: 2002 $ 96 2003 60 -- Total minimum rentals receivable $ 156 ===
(Dollars in thousands) 25 Page 25 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) DIVESTITURE OF THE CORPORATION'S OPERATING BUSINESSES (CONTINUED) POSTRETIREMENT BENEFITS The Corporation previously provided certain health care and life insurance benefits to eligible retired employees and spouses under a welfare benefit plan (the Plan) covering substantially all retirees and employees of Genesee Brewing Company. Effective with the sale of its brewing business on December 15, 2000, the Corporation was relieved of its liability and responsibility for these postretirement benefits. However, the Corporation implemented a phase-out plan whereby retiree postretirement benefits will continue at decreasing levels through the end of calendar 2001 at which time benefits will be discontinued. This reduced liability is included in the Corporation's consolidated balance sheet at April 28, 2001. (3) PARTIAL LIQUIDATING DISTRIBUTION On March 1, 2001 the Corporation paid a partial liquidating distribution in the amount of $12,557,000 ($7.50 per share) to shareholders of record as of February 20, 2001. (4) FINANCIAL INSTRUMENTS The following estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Corporation could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amount of cash and cash equivalents approximate a reasonable estimation of their fair value. Fair value of marketable securities is determined based on quoted market prices for investments. Fair value of the notes receivable approximates the carrying value at April 28, 2001. Fair value of the mortgage payable, based on discounted cash flows, approximates the carrying value at April 28, 2001 and is $401,000 less than the carrying value at April 29, 2000. 26 Page 26 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (4) FINANCIAL INSTRUMENTS (CONTINUED) Marketable equity securities are classified as available for sale. The amortized cost, gross unrealized gains/losses and fair values of marketable securities at April 28, 2001 are as follows:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value -------- -------- -------- -------- Fixed income securities: Debt securities issued by U.S. Government $ 5,304 $ 64 $ 4 $ 5,364 Corporate debt securities 3,345 94 12 3,427 -------- -------- -------- -------- 8,649 158 16 8,791 -------- -------- -------- -------- Mutual funds: Fixed income funds 44 -- 2 42 -------- -------- -------- -------- Other 204 -- -- 204 -------- -------- -------- -------- Marketable securities available for sale $ 8,897 $ 158 $ 18 $ 9,037 ======== ======== ======== ========
(Dollars in thousands) The amortized cost, gross unrealized gains/losses and fair values of marketable securities at April 29, 2000 are as follows:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value -------- -------- -------- -------- Fixed income securities: Debt securities issued by U.S. Government $ 3,595 $ 43 $ 90 $ 3,548 Corporate debt securities 4,485 -- 138 4,347 -------- -------- -------- -------- 8,080 43 228 7,895 -------- -------- -------- -------- Mutual funds: Fixed income funds 42 -- 2 40 -------- -------- -------- -------- Other 94 -- -- 94 -------- -------- -------- -------- Marketable securities available for sale $ 8,216 $ 43 $ 230 $ 8,029 ======== ======== ======== ========
27 Page 27 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (4) FINANCIAL INSTRUMENTS (CONTINUED) The amortized cost and fair value of fixed income securities at April 28, 2001, by contractual maturity, are as follows:
Amortized Fair Cost Value ---- ----- Contractual maturity: Less than one year $ 0 $ 0 After one year, but within five years 7,961 8,083 After five years, but within ten years 551 566 After ten years 137 142 ------ ------ Total fixed income securities $8,649 $8,791 ====== ======
(Dollars in thousands) The following represents the total proceeds from sales of marketable securities for fiscal years ended April 28, 2001, April 29, 2000, and May 1, 1999, and the components of net gains and losses realized on those sales, which are determined on a weighted average basis:
2001 2000 1999 ---- ---- ---- Proceeds from sales $ 3,382 $ 3,455 $ 10,140 ======== ======== ======== Gains from sales 167 104 1,048 Losses from sales (10) (97) (126) -------- -------- -------- Net gains from sales $ 157 $ 7 $ 922 ======== ======== ======== (Dollars in thousands)
28 Page 28 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (5) INCOME TAXES Components of income tax (benefit) expense from continuing operations for the fiscal years ended April 28, 2001, April 29, 2000, and May 1, 1999 are as follows:
2001 2000 1999 ---- ---- ---- Current: Federal $ 23 $ (319) $ 1,202 State 3 (16) 212 ------- ------- ------- Total current income tax expense (benefit) 26 (335) 1,414 ------- ------- ------- Deferred: Federal (58) 157 (278) State (8) 28 (49) ------- ------- ------- Total deferred income tax (benefit) expense (66) 185 (327) ------- ------- ------- Total income tax (benefit) expense $ (40) $ (150) $ 1,087 ======= ======= ======= (Dollars in thousands)
The actual tax expense reflected in the consolidated statements of earnings differs from the expected tax expense, computed by applying the U.S. federal corporate tax rate to earnings before income taxes as follows for the fiscal years ended April 28, 2001, April 29, 2000, and May 1, 1999:
2001 2000 1999 ---- ---- ---- Computed expected tax (benefit) expense @ 34% $ (375) $ (439) $ 682 State income taxes (net of federal income tax benefit) (66) 8 74 Amortization of goodwill 367 375 330 Other, net 34 (94) 1 ------ ------ ------ Total income tax (benefit) expense $ (40) $ (150) $1,087 ====== ====== ====== Effective tax rate 4.5% 11.6% 54.2% ====== ====== ====== (Dollars in thousands)
29 Page 29 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (5) INCOME TAXES (CONTINUED) The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities at April 28, 2001 and April 29, 2000 are presented below:
2001 2000 ---- ---- Deferred income tax assets: Deferred gain on sale of brewing business $ 2,656 $ -- Allowance for doubtful accounts 79 82 Unrealized loss on marketable securities -- 67 Operating accruals 248 170 Package design 91 169 Non-compete agreement 102 94 Deferred compensation and other employee related accruals 313 195 Other 126 30 ------- ------- Gross deferred income tax assets 3,615 807 Valuation allowance for deferred income tax assets -- -- ------- ------- Total deferred income tax assets 3,615 807 ------- ------- Deferred income tax liabilities: Basis differential on leasing portfolio -- -- Accelerated depreciation on plant and equipment 727 774 Unrealized gains on marketable securities 51 -- Other 727 301 ------- ------- Total deferred income tax liabilities 1,505 1,075 ------- ------- Net deferred income tax assets (liabilities) $ 2,110 $ (268) ======= =======
(Dollars in thousands) The change in the deferred tax asset or liability for unrealized gains or losses on investments classified as available for sale is reflected in equity in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). A valuation allowance has been established to reflect the uncertainty of the realization of certain state investment tax credits. These credits and the related valuation allowance are included in discontinued operations. 30 Page 30 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) INVENTORIES Inventories at April 28, 2001 and April 29, 2000 are summarized as follows:
2001 2000 ---- ---- Finished goods $ 3,881 $ 4,867 Raw materials, containers and packaging supplies 4,877 4,330 ------- ------- Total inventories $ 8,758 $ 9,197 ====== ===== (Dollars in thousands)
(7) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at April 28, 2001 and April 29, 2000 are summarized as follows:
2001 2000 ---- ---- Land and land improvements $ 294 $ 294 Buildings 6,893 6,553 Machinery, equipment, furniture and fixtures 10,618 9,843 Construction in process 112 511 -------- -------- Total property, plant and equipment 17,917 17,201 Less accumulated depreciation 5,680 4,572 --------- --------- Net property, plant and equipment $ 12,237 $ 12,629 ========= ========= (Dollars in thousands)
31 Page 31 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (8) NOTES RECEIVABLE Notes receivable consists of three separate notes from High Falls which are dated December 15, 2000 and were executed in connection with the sale of the Corporation's brewing business to High Falls as of that date. The general terms of the notes follow. Subordinated Promissory Note - $4,500,000 note receivable with an original maturity date of December 15, 2003 bearing interest at 12% per annum payable quarterly with principal payments of $500,000, $1,000,000 and $3,000,000 due on the first, second and third anniversary dates of the note, respectively. Under certain circumstances, the final $3,000,000 of principal may be paid $1,000,000, $1,000,000 and $1,000,000 on the third, fourth, and fifth anniversary dates, respectively. The entire principal balance was outstanding at April 28, 2001. First Senior Bridge Note - $3,500,000 note receivable with a maturity date of June 1, 2004 bearing interest at Manufacturers & Traders Trust Company's prime rate plus 1% per annum payable quarterly with principal payments of $125,000 commencing September 15, 2001 and quarterly thereafter through the maturity date at which time the entire outstanding principal and accrued interest is due. The note provides for a mandatory prepayment to the extent High Falls receives proceeds from HUD financing or JDA financing. The entire principal balance was outstanding at April 28, 2001. Second Senior Bridge Note - $3,000,000 note receivable with a maturity date of June 1, 2004 bearing interest at Manufacturers & Traders Trust Company's prime rate plus 1% per annum payable monthly through August 15, 2001 with principal and interest payments based on an amortization period of 240 months commencing September 15, 2001 and monthly thereafter through the maturity date at which time the entire outstanding principal and accrued interest is due. The note provides for a mandatory prepayment to the extent High Falls receives proceeds from HUD financing or JDA financing. The entire principal balance was outstanding at April 28, 2001. (9) NOTES PAYABLE Mortgage Note Payable The Corporation borrowed $4,800,000 through a building loan agreement with a bank to purchase a building for the Corporation's food business. This mortgage note payable matures in November 2008, at which time all outstanding principal and interest is due. Monthly payments of principal and interest, currently $32,380, are required with interest accruing at a fixed annual rate of 6.49%. The note is secured by the building acquired as well as by certain equipment and has an outstanding balance of $4,592,000 at April 28, 2001. The note agreement contains certain financial covenants of which the Corporation is currently in compliance. 32 Page 32 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (9) NOTES PAYABLE (CONTINUED) Term Note Payable During fiscal 2000, the Corporation borrowed $1,700,000 under a multiple disbursement term note payable of which $1,381,000 was outstanding at April 28, 2001. These funds were used for renovation to, and construction at, the building mentioned above. This note was paid in full on May 31, 2001. Future aggregate maturities of debt for the next five fiscal years and thereafter is as follows:
Fiscal Year: 2002 $ 1,474 2003 101 2004 107 2005 114 2006 121 Thereafter 4,056 ------- $ 5,973 =======
(Dollars in thousands) 33 Page 33 of 141 (10) SEGMENT REPORTING The Corporation has two reportable segments included in continuing operations: food processing and corporate. The food processing segment produces dry side dish, bouillon, artificial sweeteners, soup, drink mix and instant iced tea products under private label for many of the country's largest supermarket chains. The corporate segment retains the Corporation's investments in marketable securities, generating investment income as well as supporting corporate costs. The accounting policies of the operating segments are described in the summary of significant accounting policies (Note 1.) The Corporation evaluates performance based on operating income or loss and earnings before income taxes. Intersegment sales and transfers are not material and are eliminated in consolidation. No single customer accounted for more than 10% of revenues, and the Corporation's international revenues are not significant. 34 Page 34 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (10) SEGMENT REPORTING (CONTINUED) Financial information for the Corporation's reportable segments is as follows:
- ---------------------------------------------------------------------------------------------------- FOOD DISCONTINUED Fiscal Year PROCESSING CORPORATE OPERATIONS CONSOLIDATED - --------------------------------------------------------------------------------------------------- 2001 - ---------------------------------------------------------------------------------------------------- Net revenues from external customers $ 46,533 -- $ -- $ 46,533 Depreciation and amortization 3,009 -- -- 3,009 Operating income/(loss) 1,046 (2,857) -- (1,811) Investment income -- 1,048 -- 1,048 (Loss)/earnings from continuing operations before income taxes (460) (644) -- (1,104) Identifiable assets 50,704 34,119 5,179 90,002 Capital expenditures 1,020 -- -- 1,020 - ---------------------------------------------------------------------------------------------------- 2000 - ---------------------------------------------------------------------------------------------------- Net revenues from external customers $ 45,548 -- $ -- $ 45,548 Depreciation and amortization 2,853 -- -- 2,853 Operating income/(loss) 190 (1,864) -- (1,674) Investment income -- 549 -- 549 (Loss)/earnings from continuing operations before income taxes (701) (590) -- (1,291) Identifiable assets 53,040 15,522 27,209 95,771 Capital expenditures 4,491 -- -- 4,491 - ---------------------------------------------------------------------------------------------------- 1999 - ---------------------------------------------------------------------------------------------------- Net revenues from external customers $ 44,893 $ -- $ -- $ 44,893 Depreciation and amortization 2,165 -- -- 2,165 Operating income/(loss) 1,554 (802) -- 752 Investment income 32 1,572 -- 1,604 (Loss)/earnings from continuing operations before income taxes 806 1,201 -- 2,007 Identifiable assets 54,162 3,265 86,526 143,953 Capital expenditures 5,368 -- -- 5,368 - ----------------------------------------------------------------------------------------------------
(Dollars in thousands) 35 Page 35 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (11) SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for taxes was approximately $ 8,894,000, $1,765,000, and $1,132,000 in fiscal 2001, fiscal 2000, and fiscal 1999, respectively; cash paid for interest was approximately $ 422,000, $351,000, and $873,000 in fiscal 2001, fiscal 2000, and fiscal 1999, respectively. Interest capitalized amounted to $194,000 in fiscal 2000. No interest was capitalized in fiscal 2001 or 1999. (12) STOCK OPTION AND BONUS PLANS Under the Corporation's 1992 Stock Plan, as amended (the "Stock Plan"), officers and other key employees may, at the discretion of the Management Continuity Committee of the Board of Directors, be granted options that allow for the purchase of shares of the Corporation's Class A and Class B common stock. These options may be exercised any time from the award date to a specified date not more than ten years from the award date or five years in the case of 10% or more shareholders. Under the Stock Plan, outside directors are granted options to purchase shares of Class B common stock. Outside director options may be exercised at any time from the option award date until five years after the award date. The Corporation has adopted a Stock Bonus Incentive Program under the Stock Plan (the "Bonus Program"). The Bonus Program authorizes the Board of Directors to award shares of Class B common stock to officers and other key employees. These shares are issued from treasury shares in five equal annual installments commencing in the year in which the award takes place. Changes in stock options are as follows:
Options Weighted Average Options Weighted Average Outstanding Price Per Share Exercisable Price Per Share ----------- --------------- ----------- --------------- Balance at May 2, 1998 125,000 42.63 125,000 42.63 Granted 38,500 32.35 Expired (15,000) 35.77 Forfeited (10,000) 39.77 -------- ------- Balance at May 1, 1999 138,500 40.72 138,500 40.72 Granted 131,301 25.24 Expired (21,000) 39.40 Forfeited (32,750) 40.12 -------- ------- Balance at April 29,2000 216,051 $ 31.53 119,075 $ 36.60 Granted 2,000 38.31 Expired (3,000) 44.27 Forfeited (39,750) 43.29 Exercised (147,801) 25.90 -------- ------- Balance at April 28, 2001 27,500 $43.92 27,500 $43.92
36 Page 36 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) STOCK OPTION AND BONUS PLANS (CONTINUED) Common stock reserved for options and employee awards totaled 27,500 shares as of April 28, 2001 and 219,019 shares as of April 29, 2000. The Corporation adopted the disclosure-only provisions of SFAS 123, and continues to apply the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees for plan accounting. If compensation cost for the Corporation's stock-based plans had been determined based on the fair value at the grant dates in accordance with SFAS 123, the Corporation's net earnings and basic and diluted earnings per share for the fiscal years ended April 28, 2001, April 29, 2000, and May 1, 1999 would have been reduced to the pro forma amounts indicated below:
Reported Pro Forma -------- --------- Earnings Earnings -------- --------- 2001 ---- Net loss $ (2,414) $ (2,447) Basic loss per share (1.48) (1.50) Diluted loss per share (1.48) (1.50) 2000 ---- Net loss $ (3,400) $ (3,590) Basic loss per share (2.10) (2.22) Diluted loss per share (2.10) (2.22) 1999 ---- Net earnings $ 2,463 $ 2,332 Basic earnings per share 1.52 1.44 Diluted earnings per share 1.52 1.44 (Dollars in thousands, except per share data)
For purposes of this disclosure, the fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected option term of 5 years, expected volatility of 39.3%, 23.6%, and 19.2%, in fiscal 2001, fiscal 2000, and fiscal 1999, respectively, expected dividend yield of 0%, 5.6%, and 5.8% and risk-free interest rates of 5.69%, 5.92%, and 5.29% in fiscal 2001, fiscal 2000, and fiscal 1999, respectively. The weighted average fair value of stock options granted was $16.64, $4.26, and $3.40 in fiscal 2001 fiscal 2000, and fiscal 1999, respectively. 37 Page 37 of 141 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) STOCK OPTION AND BONUS PLANS (CONTINUED) The following table summarizes information about stock options outstanding and exercisable at April 28, 2001:
----------------------------------------------------------------------------------------------------------------------- Options Outstanding Options Exercisable ----------------------------------------------------------------------------------------------------------------------- Range of Exercise Prices Wgtd. Avg. Contractual Wgtd. Avg. Wgtd. Avg. Per Share Number Life in Years Exercise Price Number Exercise Price ----------------------------------------------------------------------------------------------------------------------- $38.00 - 40.99 5,000 2.1 $ 39.70 5,000 $ 39.70 41.00 - 46.00 22,500 0.9 44.86 22,500 44.86 ----------------------------------------------------------------------------------------------------------------------- $38.00 - 46.00 27,500 1.1 $ 43.92 27,500 $ 43.92 -----------------------------------------------------------------------------------------------------------------------
(13) RETIREMENT PLANS All salaried and office employees who have been employed by the Foods Division for two years are eligible for coverage in fully trusteed, contributory (optional) profit sharing retirement plans. The plans generally provide for annual contributions by the Foods Division at the discretion of its Board of Directors. Contributions under the plans are paid currently and charged directly to earnings in the amount of $182,000 for fiscal 2001, $237,000 for fiscal 2000, and $302,000 for fiscal 1999. 38 Page 38 of 141 GENESEE CORPORATION AND SUBSIDIARIES PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) DIRECTORS: The table below lists the directors of the Corporation and sets forth their ages, their other positions with the Corporation and its subsidiaries, the principal occupations of those directors who do not hold other positions with the Corporation or its subsidiaries, and the expiration of their terms in office. The term in office of each director expires at the annual meeting of shareholders of the Class A Common Stock held in the year specified.
Expiration Director Position and Principal Occupation of Term Name and Age Since for the Last Five Years in Office - -------------------------------------------------------------------------------------------------------------------------- Stephen B. Ashley (61) 1987 President of the Corporation (1) 2002 William A. Buckingham (58) 1992 Retired; formerly Executive Vice President of First Empire 2001 State Corporation and Manufacturers and Traders Trust Company (2) Thomas E. Clement (68) 2001 Retired; formerly a partner of Nixon Peabody, LLP (3) 2003 Carl E. Sassano (51) 2001 Private business consultant (4) 2001 Charles S. Wehle (53) 1976 Chairman of the Board of Directors of the Corporation (5) 2003
(1) See Note (1) to Item 10(b). (2) Mr. Buckingham retired in 1996 as Executive Vice President of First Empire State Corporation, a publicly held bank holding company, and Manufacturers and Traders Trust Company, a New York State chartered bank. Mr. Buckingham is also a director of Hahn Automotive Warehouse, Inc. (3) Mr. Clement retired as a partner of the law firm of Nixon Peabody LLP in 2000, a position he had held for more than five years. Mr. Clement previously served as a director of the Corporation from 1970 to 1999. (4) Mr. Sassano is a private business consultant. From 1999 to 2000 he served as President and Chief Operating Officer of Bausch & Lomb, Inc., a global vision and health care products manufacturer. From 1996 to 1999 Mr. Sassano served as President - Global Vision Care of Bausch & Lomb, Inc. Mr. Sassano is also a director of Transmation, Inc. (5) See Note (2) to Item 10(b). 39 Page 39 of 141 (b) EXECUTIVE OFFICERS: The table below lists the executive officers of the Corporation and its subsidiaries and sets forth their ages, the dates they became officers and the offices held. Officers of the Corporation and its subsidiaries serve for a term of one year beginning with the first meeting of the Board of Directors occurring after the annual meeting of the holders of Class A Common Stock of the Corporation.
Officer of the Name Age Company Since Office - -------------------------------------------------------------------------------------------------------------------- Stephen B. Ashley 61 2000 President (1) Charles S. Wehle 53 1988 Chairman of the Board of Directors (2) Mark W. Leunig 46 1988 Senior Vice President, Chief Administrative Officer, Secretary and General Counsel (3) Karl D. Simonson 58 1994 Vice President - Foods Division (4) Steven M. Morse 37 2000 Vice President and Treasurer (5)
(1) Mr. Ashley was elected President of the Corporation on December 15, 2000. Since July 1996 Mr. Ashley has been Chairman and Chief Executive Officer of The Ashley Group, an affiliated group of privately owned real estate management and investment companies. Mr. Ashley is also a Director of Hahn Automotive Warehouse, Inc., Federal National Mortgage Association, Exeter Fund, Inc. and Manning & Napier Insurance Fund, Inc. (2) Mr. Wehle was elected Chairman of the Board of Directors on March 16, 2000. He retired as Senior Vice President of the Corporation and President of Genesee Brewing Company on May 15, 2000. He had served as Senior Vice President of the Corporation for more than five years and as President of Genesee Brewing Company since October 1996. (3) Mr. Leunig was elected Senior Vice President, Chief Administrative Officer and Secretary of the Corporation on December 15, 2000. Prior to that, he was Vice President, Secretary and General Counsel of the Corporation, positions he held for more than five years. (4) Mr. Simonson was elected Vice President - Foods Division in October 1999. Prior to that he served as Vice President - Planning and Development of the Corporation, a position he held for more than five years. He is also President of Ontario Foods, Inc., a position he has held for more than five years. (5) Mr. Morse was elected Vice President and Treasurer of the Corporation on December 15, 2000. From 1999 to 2000, he served as the Corporation's Corporate Consolidations Manager. From 1996 to 1999, he served as an Audit Manager at the public accounting firm of Delloitte & Touche, LLP. Mr. Morse is a certified public accountant. (c) COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934: To the Corporation's knowledge, based solely on review of copies of reports of initial ownership and changes of ownership furnished to the Corporation by its directors, executive officers and persons who own more than ten percent of the Corporation's Class B Common Stock, and written representations to the Corporation by such persons that no other reports were required, there were no failures by such persons to comply with the reporting requirements under Section 16(a) of the Securities Exchange Act of 1934 during the Corporation's fiscal year ended April 28, 2001. 40 Page 40 of 141 ITEM 11. EXECUTIVE COMPENSATION (a) SUMMARY OF EXECUTIVE COMPENSATION. The table below sets forth a summary of compensation paid during the past three fiscal years for all services rendered to the Corporation and its subsidiaries by the former Chief Executive Officer, the President of the Corporation (who is acting in the capacity of the chief executive officer) and the three other most highly compensated executive officers of the Corporation whose total annual salary and bonus for the fiscal year ended April 28, 2001 exceeded $100,000. SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation ------------------------------------------------- ------------------------------------------- Other Stock Annual Restricted Options/ All Other Name and Fiscal Compen Stock -------- Compensa- Principal Position Year Salary ($) Bonus ($) -sation($) Awards ($) SARs (#) tion ($) - ------------------ ------ ---------- --------- ---------- ---------- -------- --------- Samuel T. Hubbard Jr., former President and 2001 192,750 0 0 0 0 243,431(2) Chief Executive 2000 269,850 131,250 0 0 66,222 41,186 Officer (1) 1999 -- -- -- -- 1,000 -- Stephen B. Ashley, 2001 22,500 0 -- 0 1,000 31,875(3) President 2000 -- -- -- -- 1,000 -- 1999 -- -- -- -- 1,000 -- Karl D. Simonson, Vice 2001 146,577 6,320 3,160 0 0 22,028(4) President - Foods Division 2000 148,000 1,875 938 0 4,000 20,464 1999 139,000 38,064 943 250 2,000 18,053 Mark W. Leunig, Senior 2001 137,660 94,320 57,647(5) 0 9,576 39,162(6) Vice President, General 2000 115,833 91,875 938 0 12,800 21,375 Counsel and Secretary 1999 110,000 32,498 943 250 1,500 12,897 Steven M. Morse, 2001 79,125 61,250 30,094(7) 0 5,289 13,612(8) Vice President and 2000 -- -- -- -- 0 -- Treasurer 1999 -- -- -- -- 0 --
(1) Mr. Hubbard resigned as President and Chief Executive Officer on December 15, 2000. (2) Amount reflects severance compensation of $225,000, $18,193 contribution under the Corporation's Benefit Restoration Plan, $1,518 in premiums paid by the Corporation on life insurance for the benefit of Mr. Hubbard and $238 paid by the Corporation for medical insurance buy out. (3) Amount reflects director fees paid to Mr. Ashley prior to being elected President of the Corporation. 41 Page 41 of 141 (4) Amount reflects $7,547 contribution under the Corporation's Profit Sharing Retirement Plan, $13,398 retirement payment under employment agreement with the Corporation, and $1,084 in premiums paid by the Corporation on life insurance policies for the benefit of Mr. Simonson. (5) Amount includes $54,487 of above-market value SARs paid to Mr. Leunig. (6) Amount reflects $5,321 contribution under the Corporation's Profit Sharing Retirement Plan, $38,856 retirement payment under employment agreement with the Corporation, and $306 in premiums paid by the Corporation on life insurance policies for the benefit of Mr. Leunig. (7) Amount reflects above-market value SARs paid to Mr. Morse. (8) Amount reflects $13,526 retirement payment under employment agreement with the Corporation and $86 in premiums paid by the Corporation on life insurance policies for the benefit of Mr. Morse. (b) The Corporation did not grant any options to the executive officers identified in Item 11(a) during the Corporation's fiscal year ended April 28, 2001. The table below sets forth information about stock appreciation rights ("SARs") granted to the named executive officers during the Corporation's fiscal year ended April 28, 2001.
Individual Grants Potential Realizable ----------------------------------------- Value at Assumed % of Total Annual Rates of Stock SARs Price Appreciation SARs Granted to for SARs Term (3) Granted Employees in Base Price Expiration ------------------------ Name (#) (1) Fiscal Year ($/SH)(2) Date 5% ($) 10% ($) - --------------------------------------------------------------------------------------------------------------------- Mark W. Leunig 9,576 64.4% $17.81 12/15/11 214,339 471,505 Steven M. Morse 5,289 35.6% $17.81 12/15/11 118,384 260,241
(1) Stock appreciation rights granted to the named executive under employment and stock appreciation rights agreement with the Corporation. SARs are exercisable in their entirety from and after the date of grant. (2) Under the terms of the agreements under which the SARs were granted, the Base Price of the SARs is reduced by the amount of any liquidating distributions. The Base Price and potential realizable values set forth in the above table reflect the reduction of the Base Price by the $7.50 per share liquidating distribution paid on March 1, 2001 (3) The potential realizable value illustrates value that might be realized upon exercise of the SARs immediately prior to the expiration of their eleven year term, assuming the specified annual compound rates of appreciation on the Corporation's Class B Common Stock over the term of the SARs. The Corporation currently expects that it will take two to three more years to complete the plan of liquidation and dissolution that was approved by shareholders in October 2000. The potential realizable value of the SARs based on a three year term at the stated assumed annual rates of stock price appreciation is:
NAME 5% ($) 10% ($) ---- ------ ------- Mark W. Leunig 89,959 128,974 Steven M. Morse 49,686 71,235
42 Page 42 of 141 (c) EXERCISE OF OPTIONS BY EXECUTIVE OFFICERS. The table below sets forth information about the aggregate number of shares received and the value realized by the named executive officer upon exercise of options exercised during the Corporation's fiscal year ended April 28, 2001; and the aggregate number and value of options held by the named executive officer at the end of the fiscal year: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised Number of Unexercised In-the-Money Options At Fy-end (#) Options At Fy-end ($) --------------------- --------------------- Shares Acquired on Value Exercis- Unexercis- Exercis- Unexercis- Name Exercise Realized ($) able able able able - -------------------------------------------------------------------------------------------------------------------- Samuel T. Hubbard, Jr. 17,202 597,756 0 0 0 0 Stephen B. Ashley 696 23,970 3,000 0 0 0 Karl D. Simonson 6,000 44,190 3,500 0 0 0 Mark W. Leunig 12,974 124,052 3,000 0 0 0 Steven M. Morse 0 0 0 0 0 0
(d) DIRECTOR COMPENSATION. Directors who are employees of the Corporation do not receive directors' fees or other compensation for their services as directors. Directors who are not employees receive an annual fee of $7,000 plus $500 for each Board and Committee meeting they attend. Charles S. Wehle receives an additional annual fee of $10,000 as Chairman of the Board of Directors. Members of the Special Committee of the Board of Directors created to review strategic alternatives for the Corporation's brewing business were paid a fee of $250 per hour for time spent working on Special Committee matters outside of Committee meetings. Each director who is not an employee is also granted an option each year under the Corporation's 1992 Stock Plan to purchase 1,000 shares of Class B Common Stock. (e) AGREEMENTS WITH NAMED EXECUTIVE OFFICERS. (1) Under an agreement with the Corporation, Samuel T. Hubbard, Jr. resigned as President and Chief Executive Officer of the Corporation, effective December 15, 2000. Under this agreement, the Corporation paid to Mr. Hubbard severance compensation of $225,000 on December 18, 2000. The Corporation is also required to pay $225,000 to Mr. Hubbard within ten days following the sale of the Corporation's Foods Division if the sale is completed on or before April 30, 2002. If the sale of the Foods Division is not completed by April 30, 2002, the Corporation is required to pay Mr. Hubbard $175,000 by May 10, 2002. (2) The Corporation has an employment agreement with Mr. Simonson which provides that if Mr. Simonson's employment is terminated without "Cause" or after a "Sale of the Company" (as those terms are defined in the agreement) the Corporation must pay to Mr. Simonson a lump sum payment equal to his annual salary. Under the agreement, Mr. Simonson is eligible to receive an annual bonus of up to 35% of his annual salary at the discretion of the Management Continuity Committee of the Board of Directors. Also under the agreement, the Corporation granted options to Mr. Simonson to purchase 4,000 shares of the Corporation's Class B common stock pursuant to the vesting and other terms contained in the agreement. (3) The Corporation has an employment agreement with Mr. Leunig which provides that if Mr. Leunig's employment is terminated without "Cause" (as that term is defined in the agreement) 43 Page 43 of 141 the Corporation must pay to Mr. Leunig a lump sum payment equal to 150% of his annual salary. Under the agreement, Mr. Leunig is eligible to receive an annual bonus of up to 40% of his annual salary at the discretion of the Management Continuity Committee of the Board of Directors. Also under the agreement, the Corporation: (a) granted to Mr. Leunig the stock appreciation rights identified in Item 11(b) of this report pursuant to the terms contained in the agreement; (b) is required to pay to Mr. Leunig a retirement payment equal to 16.67% of Mr. Leunig's annual gross income; and (c) is required to continue, for stated periods subsequent to termination of employment, coverage for Mr. Leunig under certain medical insurance and other employee benefit plans. (4) The Corporation has an employment agreement with Mr. Morse which provides that if Mr. Morse's employment is terminated without "Cause" (as that term is defined in the agreement) the Corporation must pay to Mr. Morse a lump sum payment equal to his annual salary. Under the agreement, Mr. Morse is eligible to receive an annual bonus of up to 25% of his annual salary at the discretion of the Management Continuity Committee of the Board of Directors. Also, under the agreement, the Corporation: (a) granted to Mr. Morse the stock appreciation rights identified in Item 11(b) of this report pursuant to the terms contained in the agreement; (b) is required to pay to Mr. Morse a retirement payment equal to 16.67% of Mr. Morse's annual gross income; and (c) is required to continue, for stated periods subsequent to termination of employment, coverage for Mr. Morse under certain medical insurance and other employee benefit plans. (5) Under an agreement with the Corporation, Stephen B. Ashley is expected to devote approximately 400 hours per year to his duties as President of the Corporation and is paid a salary of $5,000 per month. (6) It is contemplated that the Corporation will pay incentive compensation to Mr. Simonson in an amount to be determined upon the successful divestiture of the Foods Division. (f) COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Stephen B. Ashley served during the fiscal year ended April 28, 2001 as a member of the Management Continuity Committee of the Corporation's Board of Directors. 44 Page 44 of 141 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The Corporation's only class of voting securities is its Class A Common Stock. As of July 16, 2001, persons who owned of record or were known by the Corporation to own beneficially more than 5% of the outstanding Class A Common Stock were:
Percent of Name and Address Amount Owned Class a Stock - -------------------------------------------------- ------------ ------------- Charles S. Wehle as Trustee 73,845 (1) 35.2% under the Will of Louis A. Wehle 600 Powers Building 16 West Main Street Rochester, New York 14614 Charles S. Wehle and Henry S. Wehle 41,957 (2) 20.0% 600 Powers Building 16 West Main Street Rochester, New York 14614 Charles S. Wehle as Trustee under 12,145 (3) 5.8% Elizabeth R. Wehle Trust 600 Powers Building 16 West Main Street Rochester, New York 14614
(1) The power to vote and otherwise act with respect to these shares is vested in Charles S. Wehle while a trustee. In the event of his death, resignation or incapacity, such power would pass to Henry S. Wehle. (2) Excludes shares owned by trusts described elsewhere in this table and notes. Includes 31,443 shares held by Trust under Will of John L. Wehle, 8,595 shares owned individually by the Estate of John L. Wehle, Jr., 1,890 shares owned individually by Charles S. Wehle and 29 shares owned individually by Henry S. Wehle. Pursuant to a Shareholder Agreement and Irrevocable Proxy dated June 22, 1988 (the "Shareholder Agreement") among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle (the "Shareholders"), Charles S. Wehle is appointed proxy to vote all voting securities of the Corporation then owned or thereafter acquired by the Shareholders. Under the Shareholder Agreement, Henry S. Wehle would succeed Charles S. Wehle as proxy in the event of the death, incapacity or resignation of Charles S. Wehle. The Shareholder Agreement will continue in effect until terminated in writing signed by all of the surviving Shareholders. As of July 16, 2001, 41,957 Class A shares, constituting 20% of the Class A shares outstanding, are subject to the Shareholder Agreement. (3) The power to vote and otherwise act with respect to these shares is vested in Charles S. Wehle while a trustee. In the event of his death, resignation or incapacity, such power would pass to Henry S. Wehle. Except as otherwise described above, to the Corporation's knowledge the persons listed above have sole voting and sole investment power with respect to all Class A shares listed. (b) SECURITY OWNERSHIP OF MANAGEMENT. The number of and percentage of outstanding shares of Class A and Class B Common Stock of the Corporation beneficially owned (as determined in 45 Page 45 of 141 accordance with Rule 13d-3 under the Securities Exchange Act of 1934) as of July 16, 2001 by each director and by all directors and executive officers as a group are set forth in the following table:
Shares of Percentage Of Shares of Percentage of Name of Director Class A Class A Class B Class B Or Executive Officer Common Stock Common Stock Common Stock Common Stock - -------------------- ------------ ------------ ------------ ------------ Samuel T. Hubbard. Jr. NONE - 17,202 1.2% Charles S. Wehle 127,947(1) 61.0% 80,173(2) 5.5% Mark W. Leunig NONE - 16,499(4) 1.1% Steven M. Morse NONE - 250 (8) Stephen B. Ashley NONE - 3,896(5) (8) Karl D. Simonson NONE - 10,025(6) (8) William A. Buckingham 240 (8) 3,723(3)(7) (8) Thomas E. Clement NONE - NONE(3) - Carl E. Sassano NONE - NONE - All Directors and Executive Officers as a group (9 128,187 61.1% 131,768 8.9% persons)
(1) See Table under Item 12(a) and Notes (1), (2) and (3) thereto. (2) Includes 40,633 shares held as trustee under the will of Louis A. Wehle (see Note (1) to table set forth in Item 12(a) above); 37,090 shares held as trustee under Elizabeth R. Wehle irrevocable trust dated January 12, 1950, the power to act with respect which is vested in Mr. Wehle as a trustees; and 2,450 shares owned individually (3) Mr. Buckingham and Mr. Clement serve as trustees of Genesee Country Museum, which holds 37,638 Class B shares, none of which are included in the table above. (4) Includes 13,499 shares owned individually and 3,000 shares which may be acquired pursuant to presently exercisable stock options. (5) Includes 896 shares owned individually and 3,000 shares which may be acquired pursuant to presently exercisable stock options. (6) Includes 6,525 shares owned individually and 3,500 shares which may be acquired pursuant to presently exercisable stock options. (7) Includes 723 shares owned individually and 3,000 shares which may be acquired pursuant to presently exercisable stock options. (8) Amount of shares owned does not exceed one-percent of shares outstanding. 46 Page 46 of 141 (c) CHANGE OF CONTROL ARRANGEMENTS. A Shareholder Agreement and Irrevocable Proxy among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle dated June 22, 1988 may at a subsequent date result in a change in control of the Corporation, which agreement is more fully described in Note (2) to Item 12(a). ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. (a) TRANSACTIONS WITH MANAGEMENT. On December 15, 2000, the Corporation's brewing business sold substantially all of its assets to High Falls Brewing Company, LLC in a transaction more fully described at Note 2 to the Consolidated Financial Statements filed with this report and in Form 8-K filed with the Securities and Exchange Commission on January 2, 2001, both of which are incorporated herein be reference. The transferred assets consisted principally of all machinery, equipment, and other tangible property used in the brewing business, accounts receivable, inventory, customers contracts, intellectual property and other intangible property used in the brewing business, and certain real property and improvements located thereon. The principals of High Falls Brewing Company include several former officers and directors of the Corporation, including Samuel T. Hubbard, Jr., a former director and the former President and Chief Executive Officer of the Corporation, John B. Henderson, the former Senior Vice President and Chief Financial Officer of the Corporation, Gary C. Geminn, a former director of the Corporation and the former Senior Vice President of The Genesee Brewing Company, and Michael C. Atseff, the former Vice President and Controller of the Corporation. Because of these individuals' interest in the transaction, the Corporation formed a Special Committee of independent directors to negotiate and approve the transaction. The terms of the transaction were determined through negotiations between the parties. The Special Committee retained the firm of Houlihan Lokey Howard & Zukin Financial Advisors, Inc. ("Houlihan Lokey") to evaluate the fairness of the transaction. Houlihan Lokey opined that the transaction was fair to Genesee Brewing Company, the Corporation and the Corporation's shareholders from a financial point of view. (b) CERTAIN BUSINESS RELATIONSHIPS. During the fiscal year ended April 28, 2001 the former directors and officers of the Corporation identified in Item 13(a) of this report served as executive officers of High Falls Brewing Company, LLC which is indebted to the Corporation as more fully described in Item 13(a) of this report and Note 2 to the Consolidated Financial Statements filed with this report, both of which are incorporated herein by reference. The Corporation subleases approximately 1,200 square feet of office space from S.B. Ashley Management Corporation. Steven B. Ashley, a director and President of the Corporation, is an officer, director and majority owner of S.B. Ashley Management Corporation. During the fiscal year ending April 27, 2002, the Corporation expects to pay approximately $30,000 to S.B. Ashley Management Corporation for rent, utilities, taxes and ancillary services under the sublease with S.B. Ashley Management Corporation. (c) INDEBTEDNESS OF MANAGEMENT. Mark W. Leunig, Senior Vice President and Secretary of the Corporation and Karl D. Simonson, Vice President - - Foods Division of the Corporation are indebted to the Corporation in connection with loans made by the Corporation to allow such executive officers to exercise options to purchase shares of the Corporation's Class B common stock (the "Purchased Shares"). As of July 16, 2001, Mr. Leunig owes the Corporation $272,968 and Mr. Simonson owes the Corporation $138,304 in connection which such loans. The largest aggregate amount of indebtedness outstanding under such loans during the fiscal year ended April 28, 2001 was $368,968 for Mr. Leunig and $183,304 for Mr. Simonson. The indebtedness is secured by a pledge of the Purchased Shares and Mssrs. Leunig and Simonson have assigned to the Corporation all liquidating distributions paid on the Purchased Shares to repay the indebtedness. The indebtedness is without interest until the earlier of: (i) six (6) months after the Corporation's Board of Directors determines that 47 Page 47 of 141 the Corporation will not make any further liquidating distributions; or (ii) six (6) months after termination of employment for "Cause" (as that term is defined in the promissory note evidencing such indebtedness) or resignation from the Corporation. 48 Page 48 of 141 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report: 1. FINANCIAL STATEMENT SCHEDULE: See Index to Financial Statements at Page 12 of this report. Other schedules have been omitted because they are either not applicable or not required, or the required information is given in the consolidated financial statements or the notes thereto. 2. EXHIBITS: See Exhibit Index at Page 51 of this report. (b) REPORTS ON FORM 8-K. The Corporation filed reports on Form 8-K on April 12, 2001 and June 21, 2001 to report information under Item 5 (Other Events). 49 Page 49 of 141 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. GENESEE CORPORATION July 26, 2001 By: /s/ Stephen B. Ashley - ---------------------------- ----------------------------------------- (Date) Stephen B. Ashley, President July 26, 2001 By: /s/ Steven M. Morse - ---------------------------- ----------------------------------------- (Date) Steven M. Morse, Vice President and Treasurer Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Stephen B. Ashley July 26, 2001 Director - -------------------------------------------- --------------------------- Stephen B. Ashley (Date) /s/ William A. Buckingham July 26, 2001 Director - -------------------------------------------- --------------------------- William A. Buckingham (Date) /s/ Charles S. Wehle July 26, 2001 Director - -------------------------------------------- --------------------------- Charles S. Wehle (Date) /s/ Thomas E. Clement July 26, 2001 Director - -------------------------------------------- --------------------------- Thomas E. Clement (Date) /s/ Carl E. Sassano July 26, 2001 Director - -------------------------------------------- --------------------------- Carl E. Sassano (Date)
50 Page 50 of 141 SCHEDULE II GENESEE CORPORATION AND SUBSIDIARIES Consolidated Valuation and Qualifying Accounts Years ended April 28, 2001, April 29, 2000 and May 1, 1999
BALANCE AT TRANSFERRED ADDITIONS BALANCE BEGINNING TO CHARGED TO COST AT END DESCRIPTION OF PERIOD DISC. OPER. AND EXPENSES DEDUCTIONS OF PERIOD - --------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) 2001 - ---- Allowance for doubtful receivables $ 262 - 7 7 262 Allowance for obsolete inventory 133 - 402 207 328 ------------------------------------------------------------------------------------------- $ 395 - 409 214 590 =========================================================================================== 2000 - ---- Allowance for doubtful receivables $ 478 (300) 90 6 262 Allowance for loss on idle plant and equipment - - 726 726 - Allowance for obsolete inventory 150 (19) 173 171 133 ------------------------------------------------------------------------------------------- $ 628 (319) 989 903 395 =========================================================================================== 1999 - ---- Allowance for doubtful receivables $ 433 - 100 55 478 Allowance for loss on idle plant and equipment 634 - - 634 - Allowance for obsolete inventory 387 - 127 364 150 ------------------------------------------------------------------------------------------- $ 1,454 - 227 1,053 628 ===========================================================================================
51 Page 51 of 141 EXHIBIT INDEX
Number Document Page ------ ------------------------------------------------------------ ------- 3-1 Certificate of Incorporation (incorporated by reference to -- Exhibit 3-1 to the Corporation's report on Form 10-K for the fiscal year ended April 29, 2000). 3-2 Certificate of Amendment of the Certificate of Incorporation (incorporated by reference to the -- Corporation's report on Form 10-Q for the fiscal quarter ended January 27, 2001). 3-3 By-Laws as amended in 2000 (incorporated by reference to Exhibit 3-2 to the Corporation's report on Form 10-K for the fiscal year ended April 29, 2000). -- 10-1 Asset Purchase Agreement, dated as of August 29, 2000 between The Genesee Brewing Company, Inc. and High Falls Brewing Company, LLC (incorporated by reference to Exhibit 10-1 to the Corporation's report on Form 8-K filed on January 2, 2001). -- 10-2 Amendment No. 1 to Asset Purchase Agreement dated as of -- December 15, 2000, between The Genesee Brewing Company, Inc. and High Falls Brewing Company, LLC (incorporated by reference to Exhibit 10-2 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-3 $3,500,000 First Senior Bridge Note dated December 15, 2000 executed by High Falls Brewing, LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-3 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-4 $3,000,000 First Senior Bridge Note dated December 15, 2000 -- executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-4 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-5 Mortgage dated as of December 15, 2000 executed by High Falls -- Brewing Company, LLC in favor of -- The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-5 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-6 $4,500,000 Subordinated Promissory Note dated December 15, -- 2000 executed by High Falls Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to -- Exhibit 10-6 to the Corporation's report on Form 8-K filed January 2, 2001).
52 Page 52 of 141
Number Document Page ------ ------------------------------------------------------------ ------- 10-7 Security Agreement dated as of December 15, 2000 executed by -- High Falls Brewing Company, LLC -- in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-7 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-8 Intercreditor Agreement dated as of December 15, 2000 among -- High Falls Brewing Company, LLC, The Genesee Brewing Company, Inc., Manufacturers and Traders Trust Company and Cephas Capital Partners, LP (incorporated by reference to Exhibit 10-8 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-9 Guaranty dated as of December 15, 2000 executed by The Genesee -- Brewing Company, Inc. in favor of Boston Brewing Company, Inc. d/b/a The Boston Beer Company for itself and as the sole general partner of Boston Beer Company Limited Partnership (incorporated by reference to Exhibit 10-9 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-10 Indemnification Agreement dated as of December 15, 2000 -- between The Genesee Brewing Company and High Falls Brewing Company, LLC (incorporated by reference to Exhibit 10-10 to the Corporation's report on Form 8-K filed January 2, 2001). 10-11 Management Separation Agreement dated as of December 15, 2000 -- among Genesee Corporation, The Genesee Brewing Company, Inc., and Samuel T. Hubbard, Jr. (incorporated by reference to Exhibit 10-11 to the Corporation's report on Form 8-K filed on January 2, 2001). -- 10-12 Management Separation Agreement dated as of December 15, 2000 -- between Genesee Corporation and John B. Henderson (incorporated by reference to Exhibit 10-12 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-13 Management Separation Agreement dated as of December 15, 2000 -- between Genesee Corporation and -- Gary C. Geminn (incorporated by reference to Exhibit 10-13 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-14 Portfolio Purchase Agreement dated as of September 1, 2000 -- among Cheyenne Leasing Company, -- Genesee Ventures, Inc., Taylor-Bolane Associates, Inc., Genesee Corporation and ICON Cheyenne, LLC (incorporated by reference Exhibit 10-14 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-15 Employment and Stock Appreciation Agreements with M. W. Leunig 54 dated as of December 15, 2000. 10-16 Employment and Stock Appreciation Agreements with S. M. Morse 71 dated as of December 15, 2000.
53 Page 53 of 141
Number Document Page ------ ------------------------------------------------------------ ------- 10-17 Employment Agreement with K. D. Simonson dated January 25, 84 2000. 10-18 Letter agreement with S. B. Ashley dated January 8, 2001. 95 10-19 Indemnification Agreement with Steven M. Morse dated June 27, 96 2001. Substantially identical 96 agreements were executed with all other directors and officers of the Corporation. 10-20 $368,968 Secured Promissory Note dated February 12, 2001 105 executed by Mark W. Leunig in favor of the Corporation. 10-21 $183,304 Secured Promissory Note dated February 12, 2001 108 executed by Karl D. Simonson in favor of the Corporation. 10-22 1992 Stock Plan as amended in 1999 (incorporated by reference -- to Exhibit 10-1 to the Corporation's report on Form 10-Q for the fiscal quarter ended October 30, 1999). 10-23 Stock Bonus Incentive Program under 1992 Stock Plan -- (incorporated by reference to Exhibit 10-3 to the Corporation's report on Form 10-K for the fiscal year ended May 2, 1998). 10-24 Agreement dated March 2, 2000 between the Corporation and Mr. -- J.L. Wehle, Jr. (incorporated by reference to Exhibit 10-5 to the Corporation's report on Form 10-K for the fiscal year ended April 29, 2000). 10-25 Severance Agreement and General Release dated December 15, -- 1999 between the Corporation and C.S. Wehle (incorporated by reference to Exhibit 10-1 to the Corporation's report on Form 10-Q for fiscal quarter ended January 29, 2000). 10-26 Employment Agreement dated December 15, 1999 between the -- Corporation and Samuel T. Hubbard, Jr. (incorporated by reference to Exhibit 10-2 to the Corporation's report on Form 10-Q for the fiscal quarter ended January 29, 2000). 10-27 Agreement of Sublease by and between S.B. Ashley Management 111 Corporation and the Corporation dated May 18, 2001. 10-28 Plan of Liquidation and Dissolution adopted by the 139 Corporation's shareholders on October 19, 2000. 21 Subsidiaries of the Registrant 141
EX-10.15 2 l89110aex10-15.txt EXHIBIT 10.15 1 Page 54 of 141 EXHIBIT 10-15 ------------- EMPLOYMENT AGREEMENT -------------------- This EMPLOYMENT AGREEMENT made as of December 15, 2000 (the "EFFECTIVE DATE"), by and between GENESEE CORPORATION, a New York corporation (the "COMPANY"), and MARK W. LEUNIG (the "EXECUTIVE"). PRELIMINARY STATEMENT: WHEREAS, the Company and the Executive desire to enter into this Agreement to replace the Executive's existing Employment Agreement dated September 2, 1999 with the Company (the "EXISTING EMPLOYMENT AGREEMENT"), and to otherwise establish the terms and conditions of Company's continued employment of the Executive; PROVISIONS: NOW, THEREFORE, in consideration of the premises and the terms hereafter set forth, the parties agree as follows: 1. EMPLOYMENT. The Company agrees to employ the Executive in the status described in Section 3, and the Executive agrees to accept such employment, upon the terms and conditions hereafter set forth. 2. TERM. The term of the Executive's employment under this Agreement shall commence on the Effective Date and shall expire on of the first anniversary of the Effective Date (subject to prior termination pursuant to Section 8); provided, that such term shall be automatically renewed for further periods of one year after each anniversary of the Effective Date each unless either party shall give the other notice of non-renewal not less than ninety (90) days prior to the expiration of the initial term or any one year renewal term. The entire period during which the Executive shall be employed by the Company pursuant to the terms of hereof is referred to as the "TERM OF EMPLOYMENT." 3. EMPLOYMENT SERVICES. At all times during the Term of Employment, the Executive shall serve in the capacity of the Company's Senior Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary, reporting to the President of the Company. In such capacity, the Executive shall perform such duties and responsibilities commensurate with his position, subject to the supervision of the President of the Company or his designee. The Executive agrees to devote his best efforts to promote the business and affairs of the Company and to perform on a full-time basis the duties assigned to him from time to time in accordance with the terms hereof. 2 Page 55 of 141 4. LOCATION. Except with his consent, the Executive shall not be required to perform duties that require his principal office or his residence to be maintained outside the Rochester, New York area. However, the Executive shall make himself available for reasonable business travel required by his position. 5. COMPENSATION. (a) During the Term of Employment, the Company shall pay the Executive for all services rendered hereunder by the Executive in any capacity a fixed salary at the rate of $170,000 per year (the "BASE SALARY"). The Executive's salary shall be payable in accordance with the Company's customary payroll practices. During the Term of Employment, the Executive's Base Salary shall be reviewed at least annually commencing in December 2001 in accordance with the Company's customary procedures and practices regarding executives. Any increases in the Base Salary shall be at the sole and absolute discretion of the Management Continuity Committee of the Company's Board of Directors (the "MCC"). In no event shall the Executive's Base Salary be reduced below $170,000 annually. (b) In recognition of the Executive's significant efforts during the sale by the Company's wholly-owned subsidiary of substantially all of its brewing business assets to High Falls Brewing Company, LLC ("HIGH FALLS"), the Executive acknowledges that the Company has paid to the Executive a one-time bonus of $20,000, which was fully earned and non-refundable upon payment thereof. (c) During the Term of Employment, the Executive shall have the opportunity to earn a bonus of up to 40% of his Base Salary during each complete fiscal year of the Company. The Company's President or the MCC, in his or its sole discretion, if any, shall determine the exact amount of the bonus. The payment of any bonus awarded to the Executive shall be made within ninety (90) days after the end of the fiscal year for which the bonus is awarded. (d) If the Term of Employment has not been previously terminated pursuant to Section 8 and is not renewed pursuant to Section 2, then following the expiration of the Term of Employment, the Company shall promptly thereafter pay to Executive a lump-sum amount equal to 150% of the Base Salary in effect on the Executive's last day of employment, provided that the Executive first executes and unconditionally delivers to the Company a full and complete release of any and all claims that the Executive may have against the Company and any of its subsidiaries or affiliates and any of their respective officers, directors or representatives arising out of or related to his employment with the Company or any such related parties (other than for indemnification or advancement of expenses in any litigation in Executive's capacity as an officer of the Company which may be provided for under any of the Company's constituent documents or any indemnification agreements) and which shall otherwise be satisfactory to the Company in all respects (the "RELEASE"). (e) In order to provide a source of retirement income to the Executive, during the Term of Employment and until the Company establishes for the benefit of the Executive a qualified retirement or pension plan, the Executive shall earn on a pro rated 3 Page 56 of 141 daily basis an amount equal to 16.67% per annum of the Executive's gross income reported (or reportable) on the W-2 Wage Statement issued (or to be issued) by the Company to the Executive for the Term of Employment (the "RETIREMENT PAYMENT"). The accrued Retirement Payment for each fiscal year shall be due within ninety (90) days after the end of such fiscal year, or on the Date of Termination (as defined below), whichever occurs earlier. (f) Simultaneously with the execution and delivery hereof, the Company and the Executive shall execute and deliver the Stock Appreciation Rights Agreement in the form of EXHIBIT A annexed hereto, pursuant to which the Company shall grant to the Executive stock appreciation rights based on the value of 9,576 shares of the Company's Class B common stock on the terms and conditions set forth therein. (g) The Company hereby acknowledges and agrees that the Executive has been awarded, and as of the Effective Date holds, options to purchase from the Company, subject to the terms and conditions of the Company's 1992 Stock Plan (the "PLAN") and EXHIBIT B annexed hereto, the number of shares of the Company's Class B common stock at the exercise price per share approved by the MCC on September 2, 1999 (the "OPTIONS"). The Executive acknowledges that the Executive has exercised all of the Options. (h) All payments to be made pursuant to Section 5(a) through 5(f) shall be subject to all federal, state and local payroll, withholding and other tax requirements. 6. EXPENSES. The Company will pay or reimburse the Executive for any expenses reasonably incurred by him in furtherance of his performance hereunder, including expenses for professional licensing fees, dues for professional membership organizations, continuing education expenses, entertainment, travel, meals, hotel accommodations and the like, provided that such expenses are properly documented and accounted for in accordance with such rules and policies relating thereto as the Company may from time to time adopt. 7. EXECUTIVE BENEFITS. (a) During the Term of Employment, the Executive and, as applicable, the Executive's family, shall be entitled to receive or be compensated for obtaining health, medical, life and disability benefits that are the substantially comparable to those benefits and programs sponsored by the Company immediately prior to the Effective Date and in which the Executive participated as of such time. The Company and the Executive anticipate that Executive will participate in the plans and programs sponsored by High Falls and that the Company will be responsible for the premiums and other costs and expenses that High Falls may incur due to Executive's participation in such plans and programs. (b) During the Term of Employment, the Executive shall be entitled to vacation not be less than four (4) weeks per year, or such greater time as may be approved by the MCC (prorated in any fiscal year during which the Executive is employed under this Agreement for less than the entire year in accordance with the number of days in such fiscal year during which he is so employed). In the event that full vacation is not taken in any fiscal year due to the work commitments of the Executive, the Executive may elect to 4 Page 57 of 141 accumulate such vacation and carry it over to the following fiscal year, or receive payment (at Executive's pro rated Base Salary). Upon any termination or resignation, the Company shall pay the Executive the value of any accrued or accumulated unused vacation time. The Executive, in his reasonable discretion and with the consent of the Company's President, shall determine the time and intervals of his vacation. The Executive shall also be entitled to all paid holidays given by the Company to its senior executive officers. (c) During the Term of Employment, the Executive shall be entitled to be reimbursed for tax return preparation fees up to a maximum of $1,000 per tax year. 8. TERMINATION. (a) TERMINATION FOR CAUSE. The Company may terminate the Term of Employment for Cause (as defined below) at any time on notice to the Executive, and thereby terminate all rights and obligations of the parties hereto as of the date of such notice other than the Executive's obligations under Section 11. For purposes of this Agreement, "CAUSE" shall mean (i) gross neglect, refusal or inability by the Executive to substantially perform his duties under this Agreement (other than any such failure resulting from the Executive's incapacity due to Disability (as defined below)), after a demand for substantial performance is delivered to the Executive by the President stating the manner in which the Company believes the Executive has not substantially performed his duties, and the Executive shall have failed to resume substantial performance of such duties within ten (10) days of receiving such demand, (ii) the engaging by the Executive in criminal conduct (including embezzlement and criminal fraud), (iii) the commission by the Executive of a felony, (iv) any misappropriation of funds or material damage to the property or businesses of the Company or any of its affiliates by the Executive or (v) the material breach of Section 11 of this Agreement by the Executive. (b) TERMINATION UPON DISABILITY. If, during the Term of Employment, the Executive shall become incapable of fulfilling his obligations hereunder because of injury or physical or mental illness (a "DISABILITY"), and such incapacity shall exist for a period of three (3) consecutive months or such shorter periods aggregating more than three (3) months during any twelve (12) consecutive months during the Term of Employment, the Company may, upon at least ninety (90) days' prior notice to the Executive, terminate the Term of Employment. An independent physician selected by the Company shall determine the Disability of the Executive. (c) TERMINATION BY DEATH. If the Executive dies during the term of this Agreement, the Term of Employment and all rights and obligations of the parties hereunder shall terminate immediately upon such death. (d) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE, DEATH OR DISABILITY. The Company may terminate the Term of Employment other than pursuant to Section 8(a), 8(b) or 8(c) at any time upon sixty (60) days advance notice to the Executive. (e) TERMINATION BY THE EXECUTIVE. The Executive may terminate this Agreement at any time upon sixty (60) days advance notice to the Company. 5 Page 58 of 141 9. CERTAIN PROVISIONS RELATING TO TERMINATION. (a) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive which is effected by notice shall be communicated by written Notice of Termination to the other party. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a written notice which shall indicate the provision in this Agreement relied upon to terminate the Term of Employment. (b) DATE OF TERMINATION. "DATE OF TERMINATION" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated for Disability, ninety (90) days after Notice of Termination is given, (iii) if the Executive's employment is terminated by the Company for Cause or without Cause, the date specified in the Notice of Termination after the expiration of any cure periods, if applicable,(iv) if the Executive's employment is terminated as a result of his voluntary termination, the date set forth in the Executive's Notice of Termination (but not beyond the then expiration date of the Term of Employment), and (v) if the Executive's employment is terminated for any other reason, the date on which a Notice of Termination is given after the expiration of any cure periods. Notwithstanding anything to the contrary in this Agreement, the Term of Employment shall terminate upon the Date of Termination. 10. COMPENSATION UPON TERMINATION OF TERM OF EMPLOYMENT (a) TERMINATION WITHOUT CAUSE. In the event the Term of Employment is terminated other than pursuant to Section 8(a), 8(b), 8(c) or 8(e), then the Company shall, as liquidated damages, pay to the Executive in a lump-sum promptly after the Date of Termination the following: (i) a lump-sum amount equal to 150% of the Base Salary in effect on the last day of employment (subject to the Company's receipt of a Release), (ii) the Base Salary due for the remaining Term of Employment as of the Date of Termination (the "TERMINATED TERM OF EMPLOYMENT"), (iii) the value of the unused vacation accrued as of the Date of Termination, (iv) an amount that the MCC determines, in its sole discretion, is appropriate to compensate the Executive for the bonus opportunity he had for the current year through the Date of Termination and (v) the other payments described in Section 10. In addition, in the event of such termination, subject to the last sentence of this Section 10(a), the Executive shall be entitled to continue receiving the benefits provided in Section 7(a) for up to eighteen (18) months following the Date of Termination. Upon payment of the foregoing, the Executive shall have no further right to receive any other compensation or benefits after such termination. The Executive shall not be required to mitigate the amount of any payments or benefits provided for in this Section 10(a) by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 10(a) be reduced by any compensation earned by the Executive as the result of employment by another employer or by any retirement benefits. The Executive shall cease receiving any of the Section 7(a) benefits provided for hereunder, however, on the first date on which the Executive is eligible to receive the same type of benefit from a new employer or entity for whom he is acting as an independent contractor. The Executive shall cease receiving one type of Section 7(a) benefit, but not another if he does not receive such benefits in his new position. 6 Page 59 of 141 (b) TERMINATION DUE TO CAUSE. DEATH OR RESIGNATION. In the event that the Term of Employment terminates pursuant to Sections 8(a), 8(c) or 8(e), then the Company's obligations to make payments to, and provide benefits for, the Executive under Sections 5, 6 and 7 shall immediately cease as of the Date of Termination. (c) COMPENSATION UPON TERMINATION DUE TO DISABILITY. In the event the Executive is terminated pursuant to Section 8(b), then the Executive shall continue to be (a) paid his Base Salary at the rate in effect at the time Notice of Termination is given pursuant to Section 8(b) (less any disability payments otherwise payable by or pursuant to plans provided by the Company); and (b) to received the other benefits provided for in Section 7(a), in each case until the earlier of twenty-seven (27) weeks after the Date of Termination or the date on which the Term of Employment would have expired had it not been renewed (assuming that no notice would be given to renew the Term of Employment). (d) EFFECT OF TERMINATION PAYMENTS. The payments and benefits (if any) required to be provided to the Executive under this Section 10 shall be in complete satisfaction of any claims that the Executive may have as a result of termination of the Executive's employment; provided, however the termination of this Agreement pursuant to Section 8 shall not terminate or limit the right of the Executive (or his beneficiaries) to receive amounts of Base Salary, unreimbursed expenses, additional compensation or benefits, if any, accrued but unpaid or vested as of the Date of Termination, including the Retirement Payment. 11. OTHER DUTIES OF EXECUTIVE DURING AND AFTER TERM OF EMPLOYMENT. (a) COOPERATION IN LITIGATION. Both during and after the Term of Employment, the Executive shall, upon reasonable notice, furnish such information as may be in his possession to, and cooperate with, the Company as may reasonably be requested by the Company in connection with any litigation in which the Company or any of its subsidiaries and affiliates is or may become a party (except for any litigation in which the Company and any of its affiliates and subsidiaries, on the one hand, and the Executive, on the other hand, have one or more claims against one another), provided that after the Term of Employment the Company agrees to pay and be responsible for all of the Executive's reasonable and documented out-of-pocket expenses incurred in connection therewith. (b) CERTAIN ACTIVITIES DURING EMPLOYMENT. Except with the prior written consent of the President, the Executive will not during the Term of Employment undertake or engage in any other employment, occupation or business enterprise other than one in which he is an inactive investor. This provision shall not be deemed to preclude (i) the Executive from serving on the board of directors of a reasonable number of other corporations upon the advance notice to the President, or (ii) membership in professional societies or trade associations or lecturing or the acceptance of honorary positions, in all cases, that are incidental to his employment by the Company and which are not adverse or antagonistic to the Company or its business prospects, whether financial or otherwise. The Executive will also not acquire, assume or participate in, directly or indirectly, any position, investment or interest adverse or antagonistic to the Company or its business or prospects, whether financial or otherwise, or take any action towards any of the foregoing. Further, during the Term of Employment, except on behalf of the 7 Page 60 of 141 Company or its subsidiaries, the Executive will not, directly or indirectly, whether as an officer, director, employee, stockholder, partner, proprietor, associate, representative or otherwise, become or be interested in any other person, corporation, firm, partnership or other entity whatsoever which directly competes with the Company, in any part of the world, in any line of business engaged in (or which the Company has made plans to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, Executive may own, as an inactive investor, securities of any competitor corporation, so long as his holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation. (c) UNAUTHORIZED DISCLOSURE. During the Term of Employment and for a two (2) year period thereafter, the Executive shall not, without the written consent of the Company's Board of Directors or a person authorized thereby, disclose to any person, other than an employee of the Company (or its subsidiaries) or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an employee of the Company, any confidential information obtained by him while in the employ of the Company with respect to any of the Company's customers, suppliers, creditors, lenders or investment bankers; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company. (d) NON-SOLICITATION OF EMPLOYEES. During the Term of Employment and for a period of two (2) years thereafter, the Executive shall not, directly or indirectly, without the written consent of the Company's Board of Directors or a person authorized thereby, for himself or for any other person, firm, corporation, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six (6) months. (e) BOOKS AND RECORDS. All books, records, accounts and similar repositories of confidential information of the Company, whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company upon termination or expiration of this Agreement or upon request at any time by the Company's Board of Directors or President. (f) INJUNCTION. The Company and the Executive acknowledge that a breach by the Executive of any of the agreements contained in this Section 11 may cause irreparable harm or damage to the Company, or its subsidiaries, the monetary amount of which may be virtually impossible to ascertain. As a result, the Executive and the Company agree that the Company and any of its subsidiaries shall be entitled to an injunction issued by any court of competent jurisdiction enjoining and restraining any and all violations of such agreements by the Executive or his associates, affiliates, partners or agents, and that such right to an injunction shall be cumulative and in addition to whatever other remedies the Company may possess. 8 Page 61 of 141 12. BINDING EFFECT; AMENDMENTS. This Agreement will bind and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties and may be modified and varied only in writing signed by the parties hereto. 13. NOTICES. All notices hereunder shall be given in writing by personal delivery or by recognized overnight courier (such as Federal Express) addressed to the President of the Company at its principal place of business and to the Executive at his residence address as then listed in the Company records. 14. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement and all obligations and undertakings of the Company hereunder. The Company shall promptly provide the Executive with a copy of any such assumption instrument. Unless the Executive agrees to the contrary, any such assumption shall not relieve the Company of its obligations hereunder Upon such consolidation, merger or transfer of assets and such assumption, the term "Company" as used herein shall mean such other corporation and this Agreement shall continue in full force and effect and the Company shall be jointly and severally liable for such other corporation's obligations. 15. GOVERNING LAW. This Agreement and the interpretation and performance thereof shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect to its principles of conflict of laws. 16. SEVERABILITY. In case any one or more of the provisions or part of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall be deemed not to affect any other jurisdiction or any other provision or part of a provision of this Agreement, but this Agreement shall be reformed and construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal or unenforceable had never been contained herein and such provision or part reformed so that it would be valid, legal and enforceable in such jurisdiction to the maximum extent possible. 17. ENTIRE AGREEMENT. This Agreement, together with the other agreements referred to herein, sets forth the entire agreement between the parties with respect to the employment and compensation of the Executive by the Company and supersedes all prior agreements, negotiations and communications, written or oral, with respect thereto, including, but not limited to, the Existing Employment Agreement and letters or Board or MCC minutes approving any such terms at any time. The Executive represents and warrants that, as of the date hereof, he has complied in all material respects with, and has not breached his obligations under, Section 8 (Restrictive Covenant) of the Existing Employment Agreement. 18. BINDING AND ENFORCEABLE AGREEMENT. The Company represents and warrants to the Executive that it has all requisite power and authority to execute, deliver, and perform this Agreement and all necessary corporate proceedings of the Company and has been duly taken to 9 Page 62 of 141 authorize the execution, delivery, and performance of this Agreement by it and that this Agreement constitutes its binding obligation enforceable in accordance with its terms. *** SIGNATURE PAGE FOLLOWS 10 Page 63 of 141 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GENESEE CORPORATION By: /s/ Stephen B. Ashley ------------------------------------------ Name: Stephen B. Ashley Title: President /s/ Mark W. Leunig --------------------------------------------- Mark W. Leunig LIST OF EXHIBITS ---------------- Exhibit A - Stock Appreciation Rights Agreement Exhibit B - Certain Option Terms 11 Page 64 of 141 EXHIBIT A --------- STOCK APPRECIATION RIGHTS AGREEMENT ----------------------------------- This STOCK APPRECIATION RIGHTS AGREEMENT dated as of December 15, 2000 (the "EFFECTIVE DATE")) between GENESEE CORPORATION, a New York corporation (the "COMPANY"), and MARK LEUNIG, an Executive of the Company (the "EXECUTIVE"). PRELIMINARY STATEMENT: WHEREAS, the Company and the Executive have entered into a certain Employment Agreement dated as of December 15, 2000 (the "EMPLOYMENT AGREEMENT"), pursuant to which the Company agreed to award the Executive stock appreciation rights providing him with an opportunity to recognize value for appreciation in the value of the Company's Class B common stock on the terms and conditions set forth herein; PROVISIONS: NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties hereto agree as follows: 1. STOCK APPRECIATION RIGHT AWARD. Subject to the terms and conditions hereafter set forth (including adjustments pursuant to Sections 6 and 7), the Company hereby grants to the Executive 9,576 stock appreciation right units (the "SAR UNITS"). 2. BASE PRICE. Subject to adjustments pursuant to Sections 6 and 7, the base price-per-SAR Unit is $25.31 (the "BASE PRICE"). 3. TERM AND EXPIRATION DATE. This Agreement and the SAR Units granted hereby shall expire and terminate upon the earlier to occur of (a) the first anniversary after the termination of the Executive's employment with the Company for Cause (as defined in the Employment Agreement) or due to the Executive's resignation, (b) the date on which the Company distributes its final liquidating dividend to its shareholders, or (c) 5:00 p.m. on December 15, 2011 (the "EXPIRATION DATE"). 4. EXERCISE TERMS AND PROCEDURES. (a) The SAR Units may be exercised any time between the Effective Date and the Expiration Date. During such period, the SAR Units may be exercised on any date (each an "EXERCISE DATE") as to all or part to the extent then exercisable. The partial exercise of the SAR Units shall not cause the expiration, termination or cancellation of the remaining portion thereof. (b) The SAR Units shall be exercised only by delivering a notice of such exercise to the Company's President, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall specify the number of SAR Units that are being exercised and the effective date of the proposed exercise. The Executive may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise. The SAR Units may be exercised only once with respect to each SAR Unit. 12 Page 65 of 141 5. PAYMENT UPON EXERCISE OF STOCK APPRECIATION RIGHT. (a) Upon the exercise of a SAR Unit, the Executive shall receive an amount ("SAR PAYMENT AMOUNT") equal to the product of (i) the excess of (A) the Fair Market Value of one share of the Company's Class B common stock (the "STOCK") on the Exercise Date over (B) the Base Price, multiplied by (ii) the number of SAR Units exercised. The Company shall endeavor to pay the SAR Payment Amount in cash, without interest, within thirty (30) days after the Exercise Date with respect thereto. (b) As used herein, "FAIR MARKET VALUE" shall mean, with respect to a share of Stock on any given date, the average of the high and low sale prices of the Stock on a national exchange during the five (5) trading days immediately preceding the Exercise Date with respect to which the Fair Market Value is being determined. 6. PAYMENTS IN CONNECTION WITH DIVIDENDS. In the event that after the Effective Date the Company makes any dividend distribution upon or with respect to its Stock (other than a regular quarterly or annual dividend) ("LIQUIDATING DISTRIBUTION"), then the Base Price shall be reduced to the extent of the amount thereof is paid with respect to each outstanding share of Stock. After the Base Price has been reduced to zero, then for the balance of the Liquidating Distribution that reduced the Base Price to zero and for each Liquidating Distribution thereafter declared and paid, the Executive shall receive an amount equal to the amount which would be distributed to him if he held one share of Stock for each SAR Unit not previously exercised as of or prior to the record date for such Liquidating Distribution. 7. CHANGES IN STOCK, ETC. In the event of any stock dividend, stock split, reverse stock split, recapitalization, exchange of shares or similar change in capitalization affecting the outstanding Stock, the Management Continuity Committee of the Board of Directors (the "MCC") shall make adjustments in the (i) number of SAR Units and the rights with respect thereto and/or (ii) the Base Price, in the manner and to the extent the MCC believes in good faith is fair and equitable under the circumstances. In the event of any merger or consolidation, the MCC may make such substitution or adjustment in the number of SAR Units and in the Base Price as it may determine in good faith are fair and equitable under the circumstances, or accelerate, amend or terminate the terms applicable to the SAR Units upon such terms and conditions as it shall provide. Notwithstanding the foregoing, in the event that all or any portion of the SAR Units are terminated and not replaced with a similar award, the MCC shall deliver to the Executive such payment or other consideration as the MCC deems in good faith to be fair and equitable under the circumstances. 13 Page 66 of 141 8 WITHHOLDING TAXES. All payments under this Agreement shall be net of an amount sufficient to satisfy all federal, state and local payroll, withholding and other tax requirements. 9. NATURE OF PAYMENTS. (a) Any and all payments hereunder shall be paid in consideration of services performed for the Company or its Subsidiaries or for their benefit by the Executive. (b) All such payments shall constitute a special incentive payment to the Executive and shall not, unless otherwise determined by the MCC or unless otherwise expressly provided in any applicable plan document or agreement, be taken into account in computing the amount of salary or regular compensation of the Executive for the purposes of determining any other benefits to which the Executive may be entitled. 10. OTHER PAYMENTS OR AWARDS. Nothing contained in this Agreement shall be deemed in any way to limit or restrict the Company, any Subsidiary thereof or the MCC from making any award or payment to the Executive under any other plan, agreement, arrangement or understanding, whether now existing or thereafter in effect, nor shall anything contained in this Agreement create a right of the Executive to receive any other type of award or compensation. 11. RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Agreement shall confer upon the Executive the right to continue in the employment of the Company or any of its Subsidiaries or affect any right which the Company or any of its Subsidiaries may have to terminate the employment of the Executive. 12. NON-TRANSFERABILITY. No rights granted to the Executive under this Agreement shall be assignable or transferable by the Executive, except by will or by the laws of descent and distribution. During the life of the Executive, all rights granted to the Executive under this Agreement shall be exercisable only by the Executive or by the Executive's guardian or legal representative. 13. ADMINISTRATION. (a) The MCC shall have and exercise all of the power and authority, among other things, (i) to construe, interpret and implement this Agreement, and (ii) to take all determinations necessary or advisable in administering this Agreement. The Executive hereby acknowledges that all decisions, determination and interpretations made in good faith by the MCC in respect of this Agreement and the SAR Units shall be final and conclusive and binding on the parties. (b) No member of the MCC shall be liable for any action or determination made in good faith with respect to this Agreement and the SAR Units. 14 Page 67 of 141 14. NO RIGHTS AS A STOCKHOLDER. The parties agree and acknowledge that this Agreement does not confer upon the Executive as the holder of the SAR Units any right or interest as a shareholder of the Company, and that no fiduciary duties are owed by the Company or its directors, officers and shareholders in respect of this Agreement or the SAR Units. The Executive further agrees and acknowledges that the Company is not, and shall not be, restricted or limited in any manner from engaging in any transactions that may have dilutive effects, entering into or modifying any financing agreements that restrict or limit payments of dividends, reorganizations or recapitalizations, or otherwise taking any actions that may affect the SAR Units granted hereunder. 15. NOTICES. All notices hereunder shall be given in writing by personal delivery or by recognized overnight courier (such as Federal Express) addressed to the President of the Company at its principal place of business and to the Executive at his residence address as then listed in the Company records. 16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the successors and assigns of the Company and, to the extent set forth in Section 12 hereof, to the heirs and personal representatives of the Executive. 17. INTEGRATION. This Agreement together with the Employment Agreement contains the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter, and may only be amended with a writing signed by both parties. 18. NEW YORK LAW. This Agreement shall be governed and construed in accordance with the internal laws of the State of New York. *** SIGNATURE PAGE FOLLOWS 15 Page 68 of 141 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GENESEE CORPORATION By /s/ Stephen B. Ashley -------------------------------------------- Name: Stephen B. Ashley Title: President /s/ Mark W. Leunig ----------------------------------------------- Mark Leunig 16 Page 69 of 141 EXHIBIT B --------- CERTAIN OPTION TERMS -------------------- (A) The Company acknowledges that, as of the Effective Date, the Executive is fully vested in all of the Options. The Executive may exercise each of his Options only once. (B) In the event of any change in the outstanding shares of Stock by reason of any stock dividend, split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the number of unexercised Options awarded to the Executive shall be equitably adjusted by the MCC to preserve the benefits of this Agreement to the Executive, as determined by the MCC. (C) Any election by the Executive to exercise Options shall be made in writing, shall be signed by the Executive, shall specify the date as of which the exercise is to occur, shall be filed with the President the Company prior to the date the exercise is to occur and shall be in such form, and shall contain such information, as the President or the Secretary may reasonably require. The filing of the Executive's election to exercise the Options shall be deemed to have occurred on the date it is received by the President of the Company or, if sent by registered mail, postage pre-paid, return receipt requested, the date on which it is sent. (D) At the time of any exercise, the exercise price of the Shares as to which this option is being exercised shall be paid: (a) in cash or by check; (b) by delivery of shares of the Company Stock registered in the name of the Executive, duly assigned to the Company, and having a Fair Market Value on the Exercise Date equal to the exercise price; (c) by delivery of instructions to the Company to withhold from the Shares that would otherwise be issued on the exercise that number of whole Shares having a Fair Market Value equal to the exercise price; (d) a full recourse promissory note not bearing interest prior to an event of default, payable upon such terms as may be prescribed by the MCC (including the form of such note and the security to be given for such note) or (e) by a combination of the foregoing. Notwithstanding the foregoing, the Options may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. Any shares delivered to the Company in payment of the purchase price shall be deemed to have a value per share equal to the Fair Market Value of the shares on the date the shares are delivered to the Company. (E) The Options shall expire on the earlier to occur of 5:00 p.m. on (i) the first anniversary of the termination of the Executive's employment with the Company and (ii) September 1, 2008 (the "EXPIRATION DATE"). (F) The Executive shall have no rights as a shareholder with respect to any shares subject to the Options until the date of issuance to the Executive of a stock certificate for such 17 Page 70 of 141 Shares, and no adjustment shall be made for any dividends or other rights the record date for which is prior to the date such stock certificate is issued. (G) The Executive may not sell, assign, pledge or transfer, other than by law of descent and distribution, any Options, and any Options shall not be subject to the claims of creditors of the Executive other than the Company. (H) The Company shall not be required to deliver any certificate upon the exercise of any Options until it has been furnished with such opinion, representation or other document as it may reasonably deem necessary to insure compliance with any law or regulation of the Securities and Exchange Commission or any other governmental authority having jurisdiction over the Company or the shares subject to such Options. The Options are also subject to the requirement that if at any time the Board of Directors of the Company shall determine, in its discretion, that the listing, registration or qualification of the shares subject to the Options upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of the Options or the issue or purchase of shares under the Options, the Options shall not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors of the Company. (I) The Executive hereby acknowledges receipt of a copy of the Plan or the availability of a copy of the Plan, and agrees to be bound by all of the terms and provisions thereof including any which may conflict with those contained in the Agreement or this Exhibit B. (J) Pursuant to the provisions of the Plan, the Options are deemed to be non-incentive stock options. EX-10.16 3 l89110aex10-16.txt EXHIBIT 10.16 1 Page 71 of 141 EXHIBIT 10-16 ------------- EMPLOYMENT AGREEMENT -------------------- This EMPLOYMENT AGREEMENT made as of December 15, 2000 (the "EFFECTIVE DATE"), by and between GENESEE CORPORATION, a New York corporation (the "COMPANY"), and STEVEN M. MORSE (the "EXECUTIVE"). P R E L I M I N A R Y S T A T E M E N T : WHEREAS, the Company and the Executive desire to enter into this Agreement to establish the terms and conditions of Company's continued employment of the Executive; P R O V I S I O N S : NOW, THEREFORE, in consideration of the premises and the terms hereafter set forth, the parties agree as follows: 1. EMPLOYMENT. The Company agrees to employ the Executive in the status described in Section 2, and the Executive agrees to accept such employment, upon the terms and conditions hereafter set forth. 2. TERM. The term of the Executive's employment under this Agreement shall commence on the Effective Date and shall expire on of the first anniversary of the Effective Date (subject to prior termination pursuant to Section 8); provided, that such term shall be automatically renewed for further periods of one year after each anniversary of the Effective Date each unless either party shall give the other notice of non-renewal not less than ninety (90) days prior to the expiration of the initial term or any one year renewal term. The entire period during which the Executive shall be employed by the Company pursuant to the terms of hereof is referred to as the "TERM OF EMPLOYMENT." 3. EMPLOYMENT SERVICES. At all times during the Term of Employment, the Executive shall serve in the capacity of the Company's Vice President and Treasurer, reporting to the President of the Company. In such capacity, the Executive shall perform such duties and responsibilities commensurate with his position, subject to the supervision of the President of the Company or his designee. The Executive agrees to devote his best efforts to promote the business and affairs of the Company and to perform on a full-time basis the duties assigned to him from time to time in accordance with the terms hereof. 4. LOCATION. Except with his consent, the Executive shall not be required to perform duties that require his principal office or his residence to be maintained outside the Rochester, New York area. However, the Executive shall make himself available for reasonable business travel required by his position. 2 Page 72 of 141 5. COMPENSATION. (a) During the Term of Employment, the Company shall pay the Executive for all services rendered hereunder by the Executive in any capacity a fixed salary at the rate of $85,000 per year (the "BASE SALARY"). The Executive's salary shall be payable in accordance with the Company's customary payroll practices. During the Term of Employment, the Executive's Base Salary shall be reviewed at least annually commencing in December 2001 in accordance with the Company's customary procedures and practices regarding executives. Any increases in the Base Salary shall be at the sole and absolute discretion of the Management Continuity Committee of the Company's Board of Directors (the "MCC"). In no event shall the Executive's Base Salary be reduced below $85,000 annually. (b) In recognition of the Executive's significant efforts during the sale by the Company's wholly-owned subsidiary of substantially all of its brewing business assets to High Falls Brewing Company, LLC ("HIGH FALLS"), the Executive acknowledges that the Company has paid to the Executive a one-time bonus of $10,000, which was fully earned and non-refundable upon payment thereof. (c) During the Term of Employment, the Executive shall have the opportunity to earn a bonus of up to 25% of his Base Salary during each complete fiscal year of the Company. The Company's President or the MCC, in his or its sole discretion, if any, shall determine the exact amount of the bonus. The payment of any bonus awarded to the Executive shall be made within ninety (90) days after the end of the fiscal year for which the bonus is awarded. (d) If the Term of Employment has not been previously terminated pursuant to Section 8 and is not renewed pursuant to Section 2, then following the expiration of the Term of Employment, the Company shall promptly thereafter pay to Executive a lump-sum amount equal to the Base Salary in effect on the Executive's last day of employment, provided that the Executive first executes and unconditionally delivers to the Company a full and complete release of any and all claims that the Executive may have against the Company and any of its subsidiaries or affiliates and any of their respective officers, directors or representatives arising out of or related to his employment with the Company or any such related parties (other than for indemnification or advancement of expenses in any litigation in Executive's capacity as an officer of the Company which may be provided for under any of the Company's constituent documents or any indemnification agreements) and which shall otherwise be satisfactory to the Company in all respects (the "RELEASE"). (e) In order to provide a source of retirement income to the Executive, during the Term of Employment and until the Company establishes for the benefit of the Executive a qualified retirement or pension plan, the Executive shall earn on a pro rated daily basis an amount equal to 16.67% per annum of the Executive's gross income reported (or reportable) on the W-2 Wage Statement issued (or to be issued) by the Company to the Executive for the Term of Employment (the "RETIREMENT PAYMENT"). The accrued Retirement Payment for each fiscal year shall be due within ninety (90) days after the end of such fiscal year, or on the Date of Termination (as defined below), whichever occurs earlier. 3 Page 73 of 141 (f) Simultaneously with the execution and delivery hereof, the Company and the Executive shall execute and deliver the Stock Appreciation Rights Agreement in the form of EXHIBIT A annexed hereto, pursuant to which the Company shall grant to the Executive stock appreciation rights based on the value of 5,289 shares of the Company's Class B common stock on the terms and conditions set forth therein. (g) All payments to be made pursuant to Section 5(a) through 5(f) shall be subject to all federal, state and local payroll, withholding and other tax requirements. 6. EXPENSES. The Company will pay or reimburse the Executive for any expenses reasonably incurred by him in furtherance of his performance hereunder, including expenses for professional licensing fees, dues for professional membership organizations, continuing education expenses, entertainment, travel, meals, hotel accommodations and the like, provided that such expenses are properly documented and accounted for in accordance with such rules and policies relating thereto as the Company may from time to time adopt. 7. EXECUTIVE BENEFITS. (a) During the Term of Employment, the Executive and, as applicable, the Executive's family, shall be entitled to receive or be compensated for obtaining health, medical, life and disability benefits that are the substantially comparable to those benefits and programs sponsored by the Company immediately prior to the Effective Date and in which the Executive participated as of such time. The Company and the Executive anticipate that Executive will participate in the plans and programs sponsored by High Falls and that the Company will be responsible for the premiums and other costs and expenses that High Falls may incur due to Executive's participation in such plans and programs. (b) During the Term of Employment, the Executive shall be entitled to vacation not be less four (4) weeks per year, or such greater time as may be approved by the MCC (prorated in any fiscal year during which the Executive is employed under this Agreement for less than the entire year in accordance with the number of days in such fiscal year during which he is so employed). In the event that full vacation is not taken in any fiscal year due to the work commitments of the Executive, the Executive may elect to accumulate such vacation and carry it over to the following fiscal year, or receive payment (at Executive's pro rated Base Salary). Upon any termination or resignation, the Company shall pay the Executive the value of any accrued or accumulated unused vacation time. The Executive, in his reasonable discretion and with the consent of the Company's President, shall determine the time and intervals of his vacation. The Executive shall also be entitled to all paid holidays given by the Company to its senior executive officers. (c) During the Term of Employment, the Executive shall be entitled to be reimbursed for tax return preparation fees up to a maximum of $1,000 per tax year. 8. TERMINATION. (a) TERMINATION FOR CAUSE. The Company may terminate the Term of Employment for Cause (as defined below) at any time on notice to the Executive, and thereby terminate all rights and obligations of the parties hereto as of the date of such notice other than the Executive's obligations under Section 11. For purposes of this Agreement, "CAUSE" shall mean (i) gross neglect, refusal or inability by the Executive to substantially perform his duties under this Agreement (other than any such failure resulting from the Executive's incapacity due to Disability (as defined below)), after a demand for substantial performance is delivered to the Executive by the President stating the manner in which the Company believes the Executive has not substantially performed his duties, and the Executive shall have failed to resume substantial performance of such duties within ten (10) days of receiving such demand, (ii) the engaging by the Executive in criminal conduct (including embezzlement and criminal fraud), (iii) the commission by the Executive of a felony, (iv) any misappropriation of funds or material damage to the property or businesses of the Company or any of its affiliates by the Executive or (v) the material breach of Section 11 of this Agreement by the Executive. (b) TERMINATION UPON DISABILITY. If, during the Term of Employment, the Executive shall become incapable of fulfilling his obligations hereunder because of injury or physical or mental illness (a "DISABILITY"), and such incapacity shall exist for a period of three (3) consecutive months or such shorter periods 4 Page 74 of 141 aggregating more than three (3) months during any twelve (12) consecutive months during the Term of Employment, the Company may, upon at least ninety (90) days' prior notice to the Executive, terminate the Term of Employment. An independent physician selected by the Company shall determine the Disability of the Executive. (c) TERMINATION BY DEATH. If the Executive dies during the term of this Agreement, the Term of Employment and all rights and obligations of the parties hereunder shall terminate immediately upon such death. (d) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE, DEATH OR DISABILITY. The Company may terminate the Term of Employment other than pursuant to Section 8(a), 8(b) or 8(c) at any time upon sixty (60) days advance notice to the Executive. (e) TERMINATION BY THE EXECUTIVE. The Executive may terminate this Agreement at any time upon sixty (60) days advance written notice to the Company. 9. CERTAIN PROVISIONS RELATING TO TERMINATION. (a) NOTICE OF TERMINATION. Any termination of the Executive's employment by the Company or by the Executive which is effected by notice shall be communicated by written Notice of Termination to the other party. For purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a written notice which shall indicate the provision in this Agreement relied upon to terminate the Term of Employment. (b) DATE OF TERMINATION. "DATE OF TERMINATION" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated for Disability, ninety (90) days after Notice of Termination is given, (iii) if the Executive's employment is terminated by the Company for Cause or without Cause, the date specified in the Notice of Termination after the expiration of any cure periods, if applicable,(iv) if the Executive's employment is terminated as a result of his voluntary termination, the date set forth in the Executive's Notice of Termination (but not beyond the then expiration date of the Term of Employment), and (v) if the Executive's employment is terminated for any other reason, the date on which a Notice of Termination is given after the expiration of any cure periods. Notwithstanding anything to the contrary in this Agreement, the Term of Employment shall terminate upon the Date of Termination. 10. COMPENSATION UPON TERMINATION OF TERM OF EMPLOYMENT (a) TERMINATION WITHOUT CAUSE. In the event the Term of Employment is terminated other than pursuant to Section 8(a), 8(b), 8(c) or 8(e), then the Company shall, as liquidated damages, pay to the Executive in a lump-sum promptly after the Date of Termination the following: (i) a lump-sum amount equal to the Base Salary in effect on the last day of employment (subject to the Company's receipt of a Release), (ii) the Base Salary due for what would have been the remaining Term of Employment as of the Date of Termination (assuming no renewal) (the "TERMINATED TERM OF EMPLOYMENT"), (iii) the value of the unused vacation accrued as of the Date of Termination, (iv) an amount that the MCC determines, in its sole discretion, is appropriate to compensate the Executive for the bonus opportunity he had for the current year through the Date of Termination for which no bonus has previously been paid and (v) the other payments described in Section 10(d). In addition, in the event of such a termination, subject to the last sentence of this Section 10(a), the Executive shall be entitled to continue receiving the benefits provided in Section 7(a) for up to twelve (12) months following the Date of Termination. Upon payment of the foregoing, the Executive shall have no further right to receive any other compensation or other benefits after such termination. The Executive shall not be required to mitigate the amount of any payments provided for in this Section 10(a) by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 10(a) be reduced by any compensation earned by the Executive as the result of employment by another employer or by any retirement benefits. The Executive shall cease receiving any of the Section 7(a) benefits provided for hereunder, however, on the first date on which the Executive is eligible to receive the same type of benefit from a new employer or entity for whom he is acting as an independent contractor. The Executive shall cease receiving one type of Section 7(a) benefit, but not another if he does not receive such other benefit in his new position. 5 Page 75 of 141 (b) TERMINATION DUE TO CAUSE OR DEATH. In the event that the Term of Employment terminates pursuant to Sections 8(a), 8(c) or 8(e), then the Company's obligations to make payments to, and provide benefits for, the Executive under Sections 5, 6 and 7 shall immediately cease as of the Date of Termination. (c) COMPENSATION UPON TERMINATION DUE TO DISABILITY. In the event the Executive is terminated pursuant to Section 8(b), then the Executive shall continue (a) to be paid his Base Salary at the rate in effect at the time Notice of Termination is given pursuant to Section 8(b) (less any disability payments otherwise payable by or pursuant to plans provided by the Company); and (b) to receive the other benefits provided for in Section 7(a), in each case, until the earlier of twenty-seven (27) weeks after the Date of Termination or the date on which the Term of Employment would have expired had it not been renewed (assuming that no notice would be given to renew the Term of Employment). (d) EFFECT OF TERMINATION PAYMENTS. The payments and benefits (if any) required to be provided to the Executive under this Section 10 shall be in complete satisfaction of any claims that the Executive may have as a result of termination of the Executive's employment; provided, however the termination of this Agreement pursuant to Section 8 shall not terminate or limit the right of the Executive (or his beneficiaries) to receive amounts of Base Salary, unreimbursed expenses, additional compensation or benefits, if any, accrued but unpaid or vested as of the Date of Termination, including the Retirement Payment. 11. OTHER DUTIES OF EXECUTIVE DURING AND AFTER TERM OF EMPLOYMENT. (a) COOPERATION IN LITIGATION. Both during and after the Term of Employment, the Executive shall, upon reasonable notice, furnish such information as may be in his possession to, and cooperate with, the Company as may reasonably be requested by the Company in connection with any litigation in which the Company or any of its subsidiaries and affiliates is or may become a party (except for any litigation in which the Company and any of its affiliates and subsidiaries, on the one hand, and the Executive, on the other hand, have one or more claims against one another), provided that after the Term of Employment the Company agrees to pay and be responsible for all of the Executive's reasonable and documented out-of-pocket expenses incurred in connection therewith. (b) CERTAIN ACTIVITIES DURING EMPLOYMENT. Except with the prior written consent of the President, the Executive will not during the Term of Employment undertake or engage in any other employment, occupation or business enterprise other than one in which he is an inactive investor. This provision shall not be deemed to preclude (i) the Executive from serving on the board of directors of a reasonable number of other corporations upon the advance notice to the President, or (ii) membership in professional societies or trade associations or lecturing or the acceptance of honorary positions, in all cases, that are incidental to his employment by the Company and which are not adverse or antagonistic to the Company or its business prospects, whether financial or otherwise. The Executive will also not acquire, assume or participate in, directly or indirectly, any position, investment or interest adverse or antagonistic to the Company or its business or prospects, whether financial or otherwise, or take any action towards any of the foregoing. Further, during the Term of Employment, except on behalf of the Company or its subsidiaries, the Executive will not, directly or indirectly, whether as an officer, director, employee, stockholder, partner, proprietor, associate, representative or otherwise, become or be interested in any other person, corporation, firm, partnership or other entity whatsoever which directly competes with the Company, in any part of the world, in any line of business engaged in (or which the Company has made plans to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, Executive may own, as an inactive investor, securities of any competitor corporation, so long as his holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation. (c) UNAUTHORIZED DISCLOSURE. During the Term of Employment and for a two (2) year period thereafter, the Executive shall not, without the written consent of the Company's Board of Directors or a person authorized thereby, disclose to any person, other than an employee of the Company (or its subsidiaries) or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an employee of the Company, any confidential information obtained by him while in the employ of the Company with respect to any of the Company's customers, suppliers, creditors, lenders or investment bankers; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise 6 Page 76 of 141 considered confidential by persons engaged in the same business or a business similar to that conducted by the Company. (d) NON-SOLICITATION OF EMPLOYEES. During the Term of Employment and for a period of two (2) years thereafter, the Executive shall not, directly or indirectly, without the written consent of the Company's Board of Directors or a person authorized thereby, for himself or for any other person, firm, corporation, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any employee or former employee of the Company, unless such employee or former employee has not been employed by the Company for a period in excess of six (6) months. (e) BOOKS AND RECORDS. All books, records, accounts and similar repositories of confidential information of the Company, whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company upon termination or expiration of this Agreement or upon request at any time by the Company's Board of Directors or President. (f) INJUNCTION. The Company and the Executive acknowledge that a breach by the Executive of any of the agreements contained in this Section 11 may cause irreparable harm or damage to the Company, or its subsidiaries, the monetary amount of which may be virtually impossible to ascertain. As a result, the Executive and the Company agree that the Company and any of its subsidiaries shall be entitled to an injunction issued by any court of competent jurisdiction enjoining and restraining any and all violations of such agreements by the Executive or his associates, affiliates, partners or agents, and that such right to an injunction shall be cumulative and in addition to whatever other remedies the Company may possess. 12. BINDING EFFECT; AMENDMENTS. This Agreement will bind and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties and may be modified and varied only in writing signed by the parties hereto. 13. NOTICES. All notices hereunder shall be given in writing by personal delivery or by recognized overnight courier (such as Federal Express) addressed to the President of the Company at its principal place of business and to the Executive at his residence address as then listed in the Company records. 14. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this Agreement shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Agreement and all obligations and undertakings of the Company hereunder. The Company shall promptly provide the Executive with a copy of any such assumption instrument. Unless the Executive agrees to the contrary, any such assumption shall not relieve the Company of its obligations hereunder Upon such consolidation, merger or transfer of assets and such assumption, the term "Company" as used herein shall mean such other corporation and this Agreement shall continue in full force and effect and the Company shall be jointly and severally liable for such other corporation's obligations. 15. GOVERNING LAW. This Agreement and the interpretation and performance thereof shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect to its principles of conflict of laws. 16. SEVERABILITY. In case any one or more of the provisions or part of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall be deemed not to affect any other jurisdiction or any other provision or part of a provision of this Agreement, but this Agreement shall be reformed and construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal or unenforceable had never been contained herein and such provision or part reformed so that it would be valid, legal and enforceable in such jurisdiction to the maximum extent possible. 17. ENTIRE AGREEMENT. This Agreement, together with the other agreements referred to herein, sets forth the entire agreement between the parties with respect to the employment and compensation of the Executive by 7 Page 77 of 141 the Company and supersedes all prior agreements, negotiations and communications, written or oral, with respect thereto, including, but not limited to, letters or Board or MCC minutes approving any such terms at any time. 18. BINDING AND ENFORCEABLE AGREEMENT. The Company represents and warrants to the Executive that it has all requisite power and authority to execute, deliver, and perform this Agreement and all necessary corporate proceedings of the Company and has been duly taken to authorize the execution, delivery, and performance of this Agreement by it and that this Agreement constitutes its binding obligation enforceable in accordance with its terms. *** SIGNATURE PAGE FOLLOWS 8 Page 78 of 141 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. GENESEE CORPORATION By: /s/ Stephen B. Ashley --------------------- Name: Stephen B. Ashley Title: President /s/Steven M. Morse ------------------ Steven M. Morse LIST OF EXHIBITS Exhibit A - Stock Appreciation Rights Agreement 9 Page 79 of 141 EXHIBIT A STOCK APPRECIATION RIGHTS AGREEMENT ----------------------------------- This STOCK APPRECIATION RIGHTS AGREEMENT dated as of December 15, 2000 (the "EFFECTIVE DATE") between GENESEE CORPORATION, a New York corporation (the "COMPANY"), and STEVEN M. MORSE, an Executive of the Company (the "EXECUTIVE"). P R E L I M I N A R Y S T A T E M E N T : WHEREAS, the Company and the Executive have entered into a certain Employment Agreement dated as of December 15, 2000 (the "EMPLOYMENT AGREEMENT"), pursuant to which the Company agreed to award the Executive stock appreciation rights providing him with an opportunity to recognize value for appreciation in the value of the Company's Class B common stock on the terms and conditions set forth herein; P R O V I S I O N S : NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties hereto agree as follows: 1. STOCK APPRECIATION RIGHT AWARD. Subject to the terms and conditions hereafter set forth (including adjustments pursuant to Sections 6 and 7), the Company hereby grants to the Executive 5,289 stock appreciation right units (the "SAR UNITS"). 2. BASE PRICE. Subject to adjustments pursuant to Sections 6 and 7, the base price-per-SAR Unit is $25.31 (the "BASE PRICE"). 3. TERM AND EXPIRATION DATE. This Agreement and the SAR Units granted hereby shall expire and terminate upon the earlier to occur of (a) the first anniversary after the termination of the Executive's employment with the Company for Cause (as defined in the Employment Agreement) or due to the Executive's resignation, (b) the date on which the Company distributes its final liquidating dividend to its shareholders, or (c) 5:00 p.m. on December 15, 2011 (the "EXPIRATION DATE"). 4. EXERCISE TERMS AND PROCEDURES. (a) The SAR Units may be exercised any time between the Effective Date and the Expiration Date. During such period, the SAR Units may be exercised on any date (each an "EXERCISE DATE") as to all or part to the extent then exercisable. The partial exercise of the SAR Units shall not cause the expiration, termination or cancellation of the remaining portion thereof. (b) The SAR Units shall be exercised only by delivering a notice of such exercise to the Company's President, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall specify the number of SAR Units that are being exercised and the effective date of the proposed exercise. The Executive may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise. The SAR Units may be exercised only once with respect to each SAR Unit. 5. PAYMENT UPON EXERCISE OF STOCK APPRECIATION RIGHT. 10 Page 80 of 141 (a) Upon the exercise of a SAR Unit, the Executive shall receive an amount ("SAR PAYMENT AMOUNT") equal to the product of (i) the excess of (A) the Fair Market Value of one share of the Company's Class B common stock (the "STOCK") on the Exercise Date over (B) the Base Price, multiplied by (ii) the number of SAR Units exercised. The Company shall endeavor to pay the SAR Payment Amount in cash, without interest, within thirty (30) days after the Exercise Date with respect thereto. (b) As used herein, "FAIR MARKET VALUE" shall mean, with respect to a share of Stock on any given date, the average of the high and low sale prices of the Stock on a national exchange during the five (5) trading days immediately preceding the Exercise Date with respect to which the Fair Market Value is being determined. 6. PAYMENTS IN CONNECTION WITH DIVIDENDS. In the event that after the Effective Date the Company makes any dividend distribution upon or with respect to its Stock (other than a regular quarterly or annual dividend) ("LIQUIDATING DISTRIBUTION"), then the Base Price shall be reduced to the extent of the amount thereof is paid with respect to each outstanding share of Stock. After the Base Price has been reduced to zero, then for the balance of the Liquidating Distribution that reduced the Base Price to zero and for each Liquidating Distribution thereafter declared and paid, the Executive shall receive an amount equal to the amount which would be distributed to him if he held one share of Stock for each SAR Unit not previously exercised as of or prior to the record date for such Liquidating Distribution. 7. CHANGES IN STOCK, ETC. In the event of any stock dividend, stock split, reverse stock split, recapitalization, exchange of shares or similar change in capitalization affecting the outstanding Stock, the Management Continuity Committee of the Board of Directors (the "MCC") shall make adjustments in the (i) number of SAR Units and the rights with respect thereto and/or (ii) the Base Price, in the manner and to the extent the MCC believes in good faith is fair and equitable under the circumstances. In the event of any merger or consolidation, the MCC may make such substitution or adjustment in the number of SAR Units and in the Base Price as it may determine in good faith are fair and equitable under the circumstances, or accelerate, amend or terminate the terms applicable to the SAR Units upon such terms and conditions as it shall provide. Notwithstanding the foregoing, in the event that all or any portion of the SAR Units are terminated and not replaced with a similar award, the MCC shall deliver to the Executive such payment or other consideration as the MCC deems in good faith to be fair and equitable under the circumstances. 8 WITHHOLDING TAXES. All payments under this Agreement shall be net of an amount sufficient to satisfy all federal, state and local payroll, withholding and other tax requirements. 11 Page 81 of 141 9. NATURE OF PAYMENTS. (a) Any and all payments hereunder shall be paid in consideration of services performed for the Company or its Subsidiaries or for their benefit by the Executive. (b) All such payments shall constitute a special incentive payment to the Executive and shall not, unless otherwise determined by the MCC or unless otherwise expressly provided in any applicable plan document or agreement, be taken into account in computing the amount of salary or regular compensation of the Executive for the purposes of determining any other benefits to which the Executive may be entitled. 10. OTHER PAYMENTS OR AWARDS. Nothing contained in this Agreement shall be deemed in any way to limit or restrict the Company, any Subsidiary thereof or the MCC from making any award or payment to the Executive under any other plan, agreement, arrangement or understanding, whether now existing or thereafter in effect, nor shall anything contained in this Agreement create a right of the Executive to receive any other type of award or compensation. 11. RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Agreement shall confer upon the Executive the right to continue in the employment of the Company or any of its Subsidiaries or affect any right which the Company or any of its Subsidiaries may have to terminate the employment of the Executive. 12. NON-TRANSFERABILITY. No rights granted to the Executive under this Agreement shall be assignable or transferable by the Executive, except by will or by the laws of descent and distribution. During the life of the Executive, all rights granted to the Executive under this Agreement shall be exercisable only by the Executive or by the Executive's guardian or legal representative. 13. ADMINISTRATION. (a) The MCC shall have and exercise all of the power and authority, among other things, (i) to construe, interpret and implement this Agreement, and (ii) to take all determinations necessary or advisable in administering this Agreement. The Executive hereby acknowledges that all decisions, determination and interpretations made in good faith by the MCC in respect of this Agreement and the SAR Units shall be final and conclusive and binding on the parties. (b) No member of the MCC shall be liable for any action or determination made in good faith with respect to this Agreement and the SAR Units. 14. NO RIGHTS AS A STOCKHOLDER. The parties agree and acknowledge that this Agreement does not confer upon the Executive as the holder of the SAR Units any right or interest as a shareholder of the Company, and that no fiduciary duties are owed by the Company or its directors, officers and shareholders in respect of this Agreement or the SAR Units. The Executive further agrees and acknowledges that the Company is not, and shall not be, restricted or limited in any manner from engaging in any transactions that may have dilutive effects, entering into or modifying any financing agreements that restrict or limit payments of dividends, reorganizations or recapitalizations, or otherwise taking any actions that may affect the SAR Units granted hereunder. 15. NOTICES. All notices hereunder shall be given in writing by personal delivery or by recognized overnight courier (such as Federal Express) addressed to the President of the Company at its principal place of business and to the Executive at his residence address as then listed in the Company records. 16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the successors and assigns of the Company and, to the extent set forth in Section 12 hereof, to the heirs and personal representatives of the Executive. 12 Page 82 of 141 17. INTEGRATION. This Agreement together with the Employment Agreement contains the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter, and may only be amended with a writing signed by both parties. 18. NEW YORK LAW. This Agreement shall be governed and construed in accordance with the internal laws of the State of New York. *** SIGNATURE PAGE FOLLOWS 13 Page 83 of 141 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GENESEE CORPORATION By /s/ Stephen B. Ashley --------------------- Name: Stephen B. Ashley Title: President /s/ Steven M. Morse ------------------------------ Steven M. Morse EX-10.17 4 l89110aex10-17.txt EXHIBIT 10.17 1 Page 84 of 141 EXHIBIT 10-17 ------------- EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT made by and between GENESEE CORPORATION, together with its subsidiaries ("Genesee"), and KARL D. SIMONSON ("Executive"), on the 25th day of January, 2000 (the "Effective Date"). R E C I T A L S : A. Genesee wishes to employ Executive. B. Executive wishes to accept employment with Genesee. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth below, the parties agree as follows: 1. EMPLOYMENT. Genesee hereby agrees to employ Executive and Executive hereby agrees to be employed by Genesee upon the terms and conditions hereinafter set forth. 2. DUTIES. Executive shall serve as the PRESIDENT OF ONTARIO FOODS. INC., and shall perform the duties for such position established by the by-laws of Genesee, the customary duties of such position and such other commensurate duties as may be assigned from time to time by, and shall report to the President of Genesee Corporation. Executive shall devote all of Executive's working time and attention and best efforts to the business of Genesee and shall perform Executive's duties in a diligent, effective and loyal manner. 3. COMPENSATION. Executive shall be compensated for all services to be rendered pursuant to this Agreement, as follows: (a) During the Initial Term of this Agreement, Genesee shall pay Executive a base salary of no less than Executive's current annual salary (the "Base Salary"). The Base Salary shall be paid to Executive in accordance with the normal payroll practices of Genesee. (b) The President of Genesee in conjunction with Genesee's Management Continuity Committee ("MCC") shall review Executive's salary following expiration of the Initial Term, and may modify Executive's Base Salary in accordance with its established policies and procedures. Notwithstanding the foregoing, Executive's salary following the Initial Term shall not be set in an amount less than ninety percent (90%) of the Base Salary. (c) In addition to the Base Salary, Executive shall be eligible to receive an annual bonus (the "Annual Bonus") upon the achievement of certain goals as 2 Page 85 of 141 agreed upon in advance between Executive and Genesee for each fiscal year of Genesee up to a maximum of THIRTY-FIVE (35%) of his Base Salary. The MCC shall have sole and absolute discretion to determine whether an Annual Bonus will be awarded for any fiscal year. Up to fifty percent (50%) of any declared bonus may be paid in the form of Genesee stock, as determined by the MCC. Any Annual Bonus approved by the MCC shall be due and payable within ninety (90) days after the end of the Company's fiscal year for which such bonus was awarded. (d) LONG TERM INCENTIVE. (i) In addition to the Base Salary and the Annual Bonus, Genesee hereby grants to the Executive the option to purchase from Genesee, subject to the terms and conditions of this Section 3(d) and Genesee's 1992 Stock Plan (the "Plan"), the number of shares of Genesee Class B common stock at the purchase price per share, all as approved by the MCC on January 24, 2000 (the "Options"), such options to be exercised as hereinafter provided: (A) The aggregate number of Options that the Executive may exercise as of any date may not exceed the number of Options in which he is vested as of that date, reduced by the number of Options previously exercised by the Executive. In the event of any change in the outstanding shares of Genesee Class B common stock by reason of any stock dividend, split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the number of Options awarded to the Executive shall be equitably adjusted by the MCC to preserve the benefits of this Agreement to the Executive, as determined by the MCC. (B) Any election by the Executive to exercise Options shall be made in writing, shall be signed by the Executive, shall specify the date as of which the exercise is to occur, shall be filed with the Secretary of Genesee prior to the date the exercise is to occur and shall be in such form, and shall contain such information, as the Secretary may reasonably require. The filing of the Executive's election to exercise the Options shall be deemed to have occurred on the date it is received by the Secretary of Genesee or, if sent to the Secretary by registered mail, postage pre-paid, return receipt request, the date on which it is sent. (C) PAYMENT OF OPTION PRICE. At the time of any exercise, the purchase price of the shares as to which this option is being exercised shall be paid: (a) in cash or by check; (b) by delivery of shares of Genesee Common Stock registered in the name of the Executive, duly assigned to Genesee, and having a fair market value on the exercise date equal to the purchase price; (c) by delivery of instructions to Genesee to withhold from the shares that would otherwise be issued on the exercise that number of whole shares having a fair market value equal to the purchase price; or (d) by a combination of the foregoing. Any shares delivered to Genesee in payment of the purchase price shall be deemed to have a value per share equal to the fair market value of the shares on the date the shares are delivered to Genesee. 3 Page 86 of 141 (ii) The Executive shall be vested in one quarter (1/4) of the Options as of the Effective Date. The Executive shall become vested in the remaining Options in accordance with the following vesting schedule: (A) One quarter of the Options shall become vested when Genesee's Class B Common Stock trades at or above $30 per share for ten days during any period of thirty consecutive Trading Days (as defined below). (B) One quarter of the Options shall become vested when Genesee's Class B Common Stock trades at or above $35 per share for ten days during any period of thirty consecutive Trading Days. (C) The final quarter of the Options shall become vested when the Genesee's Class B Common Stock trades at or above $40 per share for ten days during any period of thirty consecutive Trading Days. A "Trading Day" is defined as any day on which at least one trade of Genesee's Class B Common Stock is reported on the NASDAQ National Market System. Notwithstanding the foregoing, all of the remaining Options shall immediately vest and become exercisable upon a Sale of the Company or upon the circumstances provided in Sections 7(d) and (e). (iii) As used herein, "Sale of the Company" shall mean that any of the following circumstances have occurred: (A) Any "person" (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act), directly or indirectly, of ninety percent (90%) or more of the outstanding common stock of Genesee excluding those shares owned or controlled by direct descendants of John L. Wehle, trusts established by Elizabeth R. Wehle and under the Wills of Louis A. Wehle and John L. Wehle and any trustees thereunder (collectively, the "Wehle Shares"). (B) Stockholders of Genesee approve and there is closed a (1) tender offer, merger or consolidation of Genesee with any other "person" (defined above) in which any "person" acquires more than ninety percent (90%) of Genesee's outstanding common stock other than the Wehle Shares; or (2) sale or disposition by Genesee and it subsidiaries (other than Ontario Foods, Incorporated) of more than eighty-five percent (85%) of the fair market value of their assets and the net proceeds are distributed to creditors and stockholders. (iv) Unless terminated earlier in accordance with the terms of this Agreement, the Options shall expire on September 1, 2008 (Expiration Date). (v) The Executive shall have no rights as a shareholder with respect to any shares for which he is granted an option until the date of issuance to the Executive of a stock certificate for such shares and no adjustment shall be made for 4 Page 87 of 141 any dividends or other rights the record date for which is prior to the date such stock certificate is issued. (vi) The Executive may not elect to exercise any Options after the date occurring after the forty-fifth (45th) day following the last day of the Term. Any Options that have not been exercised as of 5:00 p.m. on such forty-fifth (45th) day shall be automatically forfeited and of no further force or effect as of and after such time. In cases of termination due to disability, Sale of the Company or termination without cause, Options under this provision may be exercised within 120 days of termination. In the case of death of the Executive, Options may be exercised by a representative of the Executive's estate within 120 days of death. An Executive who is discharged for cause shall have no right to exercise Options after termination. (vii) The Executive may not sell, assign, pledge or transfer, other than by law of descent and distribution, any Options, and any Options and any rights under this Agreement shall not be subject to the claims of creditors of the Executive other than Genesee. (viii) GENERAL RESTRICTIONS. Genesee shall not be required to deliver any certificate upon the exercise of any Options until it has been furnished with such opinion, representation or other document as it may reasonably deem necessary to insure compliance with any law or regulation of the Securities and Exchange Commission or any other governmental authority having jurisdiction over Genesee or the shares subject to such Options. The Options are also subject to the requirement that if at any time the Board of Directors of Genesee shall determine, in its discretion, that the listing, registration or qualification of the shares subject to the Options upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of the Options or the issue or purchase of shares hereunder, the Options shall not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors of Genesee. (ix) PLAN CONTROLS. The Executive hereby acknowledges receipt of a copy of the Plan or the availability of a copy of the Plan, and agrees to be bound by all of the terms and provisions thereof including any which may conflict with those contained in this Agreement. (x) NON-INCENTIVE OPTIONS. Pursuant to the provisions of the Genesee Corporation 1992 Stock Plan, the stock options granted in this section are deemed to be non-incentive stock options. 4. BENEFITS. (a) Executive shall be provided with the following benefits: 5 Page 88 of 141 (i) Four (4) weeks of paid vacation per fiscal year, or such greater period as may be approved from time to time by Genesee. In the event that the full vacation is not taken in any year due to the work commitments of Executive, Executive may elect to either accumulate such vacation and carry it over to the following year or receive payment (at Executive's pro-rated Base Salary) for unused vacation days. Upon any termination or resignation of Executive, Executive will be entitled to be paid the value of any accrued or accumulated vacation time; (ii) Paid holidays, personal days, sick time, health care coverage, life insurance and other benefits as customarily provided to other comparable employees of Genesee; (iii) The Executive shall be entitled to participate in all non-stock or non-equity based employee benefit plans or arrangements made available to all of Genesee's senior management or key employees from time to time, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement. Such plans and arrangements shall include, without limitation, all pension and retirement plans, supplemental pension and retirement plans, savings and profit sharing plans, life insurance policies, officers and directors policies, life insurance plans, medical and health insurance plans, disability plans, dental plans, health and accident plans or similar plans or arrangements. Nothing paid to the Executive under any plan or arrangement presently in effect or made available in the future shall be deemed to be in lieu of the Base Salary or any other obligation payable to the Executive pursuant to this Agreement. The Executive expressly acknowledges that he shall not be entitled to, and he shall not participate on a going forward basis in, Genesee's 1986 Incentive Bonus Plan, Genesee's Stock Bonus Program or Incentive Stock Option Plan or any other stock or equity based program adopted by Genesee or any subsidiary as of and after the date hereof. Benefits currently vested or otherwise available under the terms of the aforementioned plans will continue to be vested or available as the plans allow, including without limitation, the unissued balance of shares awarded on June 17, 1999, under the Stock Bonus Program. (iv) Upon the submission of supporting documentation by the Executive, Genesee shall reimburse the Executive for all reasonable expenses actually paid or incurred by the Executive in the course of and pursuant to the business of Genesee, including expenses for travel and entertainment. (v) Executive shall be provided with, at Genesee's option, either: (a) the use of a Genesee-owned vehicle which value shall not exceed a retail price of $22,000 or (b) a car allowance in the amount of Four Hundred Fifty Dollars ($450.00) per month. (b) Executive's eligibility for any benefit provided herein shall be subject to Executive's compliance with the reasonable requests of any insurance company providing any of the benefits specified herein to Genesee's employees. Executive agrees to submit to any medical examination and to provide and complete any documentation 6 Page 89 of 141 (including medical records) required by any such insurance company. All benefits provided for hereunder are taxable to Executive to the extent required by applicable tax laws. 5. TERM OF EMPLOYMENT. The Initial Term of Executive's employment pursuant to this Agreement shall be for two (2) years, commencing on the Effective Date. The Term of this Agreement shall automatically renew for successive periods of one (1) year each, unless one party shall give the other party notice to the contrary at least ninety (90) days prior to the expiration of the Initial Term or the then current term (the Initial Term, together with all such renewals being the "Term"). 6. TERMINATION. (a) TERMINATION EVENTS. The Executive's employment under this Agreement may be terminated upon the occurrence of any of the following circumstances by the indicated party: (i) DEATH. Automatically upon the Executive's death. (ii) DISABILITY. By Genesee, if, as a result of the Executive's incapacity due to physical or mental illness ("Permanent Disability"), the Executive shall be unable to substantially perform Executive's duties under this Agreement for three (3) consecutive months as determined by a medical doctor retained by Genesee, and if within ninety (90) days after written Notice of Termination (defined below) is given (which notice may only be given after the end of such three (3) month period), the Executive shall not have returned to the performance of his duties under this Agreement. (iii) FOR CAUSE. By Genesee, for Cause. For purposes of this Agreement, "Cause" shall mean (A) neglect, refusal or inability by the Executive to substantially perform his duties under this Agreement (other than any such failure resulting from the Executive's incapacity due to Permanent Disability), after a demand for substantial performance is delivered to the Executive by the President or the MCC stating the manner in which Genesee believes the Executive has not substantially performed his duties, and the Executive shall have failed to resume substantial performance of such duties within sixty (60) days of receiving such demand, (B) the engaging by the Executive in criminal conduct (including embezzlement and criminal fraud), (C) the commission by the Executive of a felony or a misdemeanor, (D) any misappropriation of funds or material damage to the property or businesses of Genesee or any of its affiliates by the Executive or (E) the material breach of Section 8 of this Agreement by the Executive. (iv) WITHOUT CAUSE. By Genesee without Cause upon written notice to the Executive of its election to do so. (v) VOLUNTARY TERMINATION. By the Executive other than due to the Executive's death or Permanent Disability ("Voluntary Termination"), upon at least four (4) weeks notice. 7 Page 90 of 141 (vi) SALE OF THE COMPANY. By Genesee upon the Sale of the Company, or upon the sale of Ontario Foods, Inc. (b) NOTICE OF TERMINATION. Any termination of the Executive's employment by Genesee or by the Executive shall be communicated by written Notice of Termination to the other party. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the provision in this Agreement relied upon to terminate the Term. The Executive may not give a Notice of Termination for Voluntary Termination more than thirty (30) days prior to the Date of Termination (defined below) stated therein. (c) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the Executive's employment is terminated by his death, the date of his death, (ii) if the Executive's employment is terminated for Permanent Disability, ninety (90) days after Notice of Termination is given (provided that the Executive shall not have returned to the performance of his duties during such ninety (90) day period), (iii) if the Executive's employment is terminated by Genesee for Cause, without cause or upon Sale of the Company or sale of Ontario Foods, Inc., the date specified in the Notice of Termination after the expiration of any cure periods, if applicable, (iv) if the Executive's employment is terminated as a result of his Voluntary Termination, the date set forth in the Executive's Notice of Termination (but not beyond the then expiration date of the Term), and (v) if the Executive's employment is terminated for any other reason, the date on which a Notice of Termination is given after the expiration of any cure periods. Notwithstanding anything to the contrary in this Agreement, the Term shall expire upon the Date of Termination. 7. COMPENSATION UPON TERMINATION OR DURING DISABILITY. (a) DEATH. If the Executive's employment shall be terminated by reason of his death, Genesee shall pay to such person as the Executive shall have designated in a notice filed with Genesee, or, if no such person shall have been designated, to his estate, (i) any unpaid amounts of his Base Salary or declared Annual Bonus and accrued vacation pay prior to the Date of Termination, and (ii) any payments the Executive's spouse, beneficiaries or estate may be entitled to receive pursuant to any pension or Executive benefit plan, life insurance policy or other plan, program or policy then maintained or provided by Genesee, or any other agreement between the Executive and Genesee. The payments and other benefits described in this Section 7(a) are hereinafter referred to as the "Termination Benefits". (b) DISABILITY. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness, the Executive shall continue to receive his full Base Salary until the Executive's employment is terminated pursuant to Section 6 hereof. The Executive shall continue to be paid in bi-monthly installments an amount equal to his Base Salary at the rate in effect at the time Notice of Termination is given until the later of twenty-seven (27) weeks after the Date of Termination or the expiration of the Term, less any disability payments otherwise payable by or pursuant to plans provided by Genesee. In addition, Genesee shall pay to the Executive the Termination Benefits. 8 Page 91 of 141 (c) FOR CAUSE. If the Executive's employment shall be terminated by Genesee for Cause, Genesee shall pay the Executive the Termination Benefits. (d) TERMINATION BY GENESEE WITHOUT CAUSE. If Genesee terminates the Executive's employment other than for Cause, upon Death or Permanent Disability, then all Options shall immediately vest and Genesee shall pay the Executive a lump sum payment equal to the annual base salary amount in effect on the date of termination less any disability payments he receives under the Genesee disability policy. (e) TERMINATION BY GENESEE UPON SALE OF THE COMPANY. If Genesee terminates the Executive's employment as a result of the Sale of Genesee or of Ontario Foods, Inc., then all Options shall immediately vest and the Company shall pay the Executive the Termination Benefits and a lump sum payment equal to the annual Base Salary amount in effect on the date that the Sale of the Company has been completed. (f) VOLUNTARY TERMINATION BY THE EXECUTIVE. If the Executive's employment with Genesee is terminated by his Voluntary Termination, then Genesee shall pay the Executive the Termination Benefits. (g) PAYMENT OF TERMINATION BENEFITS AND OTHER AMOUNTS. All Termination Benefits and lump sum payments shall be due and payable within forty-five (45) days after the Date of Termination. Upon making such payments, Genesee shall have no further liability hereunder, other than for the installment payments pursuant to Sections 7(b) and (d). 8. RESTRICTIVE COVENANTS. (a) CERTAIN ACTIVITIES DURING EMPLOYMENT. Except with the prior written consent of the MCC and the President, the Executive will not during the Term undertake or engage in any other employment, occupation or business enterprise other than one in which he is an inactive investor. This provision shall not be deemed to preclude (i) the Executive from serving on the Board of Directors of a reasonable number of other corporations upon the advance notice to the President, or (ii) membership in professional societies or trade associations or lecturing or the acceptance of honorary positions, in all cases, that are incidental to his employment by Genesee and which are not adverse or antagonistic to Genesee, its business or prospects, financial or otherwise. The Executive will also not acquire, assume or participate in, directly or indirectly, any position, investment or interest adverse or antagonistic to Genesee, its business or prospects, financial or otherwise, or take any action towards any of the foregoing. Further, during the Term, except on behalf of Genesee or its subsidiaries, the Executive will not, directly or indirectly, whether as an officer, director, Executive, stockholder, partner, proprietor, associate, representative or otherwise, become or be interested in any other person, corporation, firm, partnership or other entity whatsoever which directly competes with Genesee, in any part of the world, in any line of business engaged in (or which Genesee has made plans to be engaged in) by Genesee; provided, however, that anything above to the contrary notwithstanding, Executive may own, as an inactive investor, securities of any 9 Page 92 of 141 competitor corporation, so long as his holdings in any one such corporation shall not in the aggregate constitute more than one percent (1 %) of the voting stock of such corporation. (b) UNAUTHORIZED DISCLOSURE. During the Term and for a two (2) year period thereafter, the Executive shall not, without the written consent of the Board or a person authorized thereby, disclose to any person, other than an employee of Genesee (or its subsidiaries) or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an employee of Genesee, any confidential information obtained by him while in the employ of Genesee with respect to any of Genesee's customers, suppliers, creditors, lenders or investment bankers or methods of brewing, distribution or marketing; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by Genesee. (c) NON-SOLICITATION OF EMPLOYEES. While employed by Genesee and for a period of two (2) years thereafter if Executive receives the payment by Genesee provided for in paragraph 7(d) above, the Executive shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, attempt to employ or enter into any contractual arrangement with any employee or former employee of Genesee, unless such employee or former employee has not been employed by Genesee for a period in excess of six (6) months. (d) BOOKS AND RECORDS. All books, records, accounts and similar repositories of confidential information of Genesee, whether prepared by the Executive or otherwise coming into the Executive's possession, shall be the exclusive property of Genesee and shall be returned immediately to Genesee upon termination of this Agreement or upon the Board's or President's request at any time. (e) INJUNCTION. It is recognized and hereby acknowledged by Genesee and the Executive that a breach by the Executive of any of the agreements contained in this Section 8 may cause irreparable harm or damage to Genesee, or its subsidiaries, the monetary amount of which may be virtually impossible to ascertain. As a result, the Executive and Genesee agree that Genesee and any of its subsidiaries shall be entitled to an injunction issued by any court of competent jurisdiction enjoining and restraining any and all violations of such agreements by the Executive or his associates, affiliates, partners or agents, and that such right to an injunction shall be cumulative and in addition to whatever other remedies Genesee may possess. 9. GENERAL TERMS. (a) BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their personal representatives, and permitted successors and assigns. A "successor" of Genesee includes any entity which succeeds to the operations or assets of Genesee, whether by merger, asset transfer, change of control or otherwise. 10 Page 93 of 141 (b) ASSIGNMENT. This Agreement may not be assigned, in whole or in part, by any party hereto without the prior written consent of the other party, except such consent shall not be required with respect to any "successor" of Genesee. (c) ENTIRE AGREEMENT. This Agreement contains the entire understanding between or among the parties hereto and supersedes any prior understanding, memoranda or other written or oral agreements between or among any of them respecting the within subject matter. There are no representations, agreements, arrangements or understandings, oral or written, between or among any of the parties relating to the subject matter of this Agreement which are not fully expressed herein. (d) MODIFICATIONS; WAIVER. No modification or waiver of this Agreement or any part hereof shall be effective unless in writing and signed by the party or parties sought to be charged therewith. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. No waiver of any breach or condition of this Agreement by or with respect to any party hereto shall be deemed to be a waiver of the same breach or condition with respect to any other party hereto. No course of dealing between or among any of the parties hereto will be deemed effective to modify, amend or discharge any part of their Agreement or the rights or obligations of any party hereunder. (e) PARTIAL INVALIDITY. If any provision of this Agreement shall be held invalid or unenforceable by competent authority, such provision shall be construed so as to be limited or reduced to be enforceable to the maximum extent compatible with the law as it shall then appear. The total invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. (f) NOTICES. Unless otherwise provided in this Agreement, any notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given (i) upon hand delivery, or (ii) on the third day following delivery to the U.S. Postal Service as certified or registered mail, return receipt requested and postage prepaid, or (iii) on the first day following delivery to a nationally recognized United States overnight courier service, fee prepaid, return receipt or other confirmation of delivery requested. Any such notice or communication shall be delivered or directed to a party at its address set forth above or at such other address as may be designated by a party in a notice given to all other parties hereto in accordance with the provisions of their paragraph. (g) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York pertaining to contracts made and to be wholly performed within such state, without taking into account conflicts of laws principles. 11 Page 94 of 141 (h) EFFECT OF TERMINATION. Unless otherwise specifically agreed in writing, the terms of Paragraphs 7, 8 and 9 shall survive any termination, cancellation, repudiation or rescission of this Agreement, and under such circumstances Executive and the Company may continue to enforce such terms as if this Agreement were otherwise in full force and effect. (i) HEADINGS. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (j) FAIR MEANING. This Agreement shall be construed according to its fair meaning, the language used shall be deemed the language chosen by the parties hereto to express their mutual intent, and no presumption or rule of strict construction will be applied against any party hereto. (k) GENDER. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine or neuter forms and the singular of nouns, pronouns and verbs shall include the plural and vice versa. (I) COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of said counterparts together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of February 15, 2000. GENESEE CORPORATION By: /s/ Samuel T. Hubbard, Jr. --------------------------------------------- Samuel T. Hubbard, Jr. President The Executive /s/ Karl D. Simonson -------------------------------------------------- Karl D. Simonson EX-10.18 5 l89110aex10-18.txt EXHIBIT 10.18 1 Page 95 of 141 EXHIBIT 10-18 ------------- January 8, 2001 Charles S. Wehle Chairman, Genesee Corporation 136 Sylvania Drive Rochester, NY 14618 Dear Chip: This letter will outline the terms of an agreement between myself and Genesee Corporation in my capacity as an elected officer of the Corporation. 1. Title - President. In this capacity I will oversee the execution of the strategic plan for liquidation of the corporation's assets and distribution of the proceeds to the shareholders, as approved by the board of directors, or as modified from time to time by board action. I will regularly review and monitor the progress being made and will coordinate the activities of the Chief Administrative Officer and Vice President-Treasurer, as needed. I will serve as an interface between the Corporation and the management of High Falls Brewing and will manage the relationship between Genesee Corporation and High Falls Brewing under the terms of the Purchase and Sale Agreement. 2. Term - The date of this engagement shall begin December 15, 2000 and may be terminated by either party upon 30 days written notice. It is anticipated that approximately 400 hours will be required to perform these duties during calendar year 2001. 3. Compensation - $5,000 per month. It is also understood that I will not receive fees for attending directors meetings, committee meetings, or the directors retainer fee. 4. Location of Business - It is understood that the offices of the Genesee Corporation will be relocated to 600 Powers Building, Rochester, NY, no later than March 31, 2001. This relocation will facilitate the direct communicate between the Chief Administrative Officer, and the Vice President-Treasurer, and myself. Chip, if these terms meet the satisfaction of yourself and the Board of Directors, I will be pleased to serve in the above-defined capacity for the benefit of the shareholders. Yours very truly, /s/ Stephen B. Ashley Stephen B. Ashley SBA:mmg EX-10.19 6 l89110aex10-19.txt EXHIBIT 10.19 1 Page 96 of 141 EXHIBIT 10-19 ------------- INDEMNIFICATION AGREEMENT ------------------------- Agreement, dated June 27, 2001 between Genesee Corporation, a New York corporation (the "Company"), and Steven M. Morse (the "Indemnitee"). WHEREAS, highly competent persons are becoming more reluctant to serve as directors and officers of the Company unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the Company; WHEREAS, the current impracticability of obtaining adequate insurance and the uncertainties relating to indemnification have increased the difficulty of attracting and retaining such persons; WHEREAS, the Board of Directors of the Company has determined that the inability to attract and retain such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, the Indemnitee is willing to serve, continue to serve and to take an additional service for or on behalf of the Company on the condition that the Indemnitee be so indemnified; NOW, THEREFORE, the Company and the Indemnitee hereby agree as follows: ARTICLE I - DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings given: 1.1 "Board" shall mean the Board of Directors of the Company. 1.2 A "Change in Control" shall be deemed to have occurred if: (i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than (a) the Company or (b) any corporation owned, directly or indirectly, by the Company or the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (provided, however, that none of the direct descendants of John L. Wehle, Sr., the trust established under the will of Louis A. Wehle and any trustee thereunder shall be a "person" for purposes of this Section 1.2); 2 Page 97 of 141 (ii) during any period of two consecutive years, there is elected 20% or more of the members of the Board of Directors of Company without the approval of the nomination of such members by a majority of that portion of the Board consisting of members who were serving at the beginning of the two-year period; (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (a) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent more than 80% of the combined voting power of the voting securities of the Company, or such surviving entity, outstanding immediately after such merger or consolidation; or (b) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as defined above) acquires more than 20% of the combined voting power of the Company's then-outstanding securities; or (iv) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, including a sale or disposition of Genesee Brewing Co., Inc. or its assets. 1.3 "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee. 1.4 "Expenses" shall include all reasonable attorneys, fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding. 1.5 "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past three years has been, retained to represent (i) the Company or the Indemnitee in any matter material to either such party or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have any conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee's rights under this Agreement. 1.6 "Proceeding" includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other actual, threatened or completed proceeding, whether civil, criminal, administrative or investigative, other than, one initiated by the Indemnitee. For purposes of the foregoing sentence, a "Proceeding" shall not be deemed to have been initiated by the Indemnitee where the Indemnitee seeks pursuant to ARTICLE VII of this Agreement to enforce the Indemnitee's rights under this Agreement. ARTICLE II - SERVICES BY THE INDEMNITEE, NOTICE OF PROCEEDINGS 2.1 Services. The Indemnitee agrees to continue to serve as a director and/or officer of the Company. The Indemnitee may at any time and for any reason resign from such position(s) (subject to any other contractual obligation or any obligation imposed by operation of law). 3 Page 98 of 141 2.2 Notice of Proceeding. The Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document or communication relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder; provided, however, that the failure by the Indemnitee to give such notice, or any delay in giving such notice, shall not relieve the Company of its obligations under this Agreement except to the extent that the Company is actually prejudiced by any such failure or delay. ARTICLE III - INDEMNIFICATION 3.1 In General. In connection with any Proceeding, whether relating to events occurring before or after the date hereof, the Company shall indemnify, and advance Expenses, to the Indemnitee as provided in this Agreement and to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may thereafter from time to time permit. 3.2 Proceeding Other Than Proceedings by or in the Right of the Company. The Indemnitee shall be entitled to the rights of indemnification provided in this Section if, because the Indemnitee is or was a director or officer of the Company, the Indemnitee is, or is threatened to be made, a party to any Proceeding, other than a Proceeding by or in the right of the Company. Subject to SECTION 3.1, the Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement, actually and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in connection with such Proceeding. 3.3 Proceedings by or in the Right of the Company. The Indemnitee shall be entitled to the rights of indemnification provided in this Section if, because the Indemnitee is or was a director or officer of the Company, the Indemnitee is, or is threatened to be made, a party to any Proceeding brought by or in the right of the Company to procure a judgment in its favor. Subject to SECTION 3.1, the Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement, actually and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in connection with such Proceeding. Notwithstanding the foregoing, no such indemnification shall be made in respect of any claim, issue or matter in such Proceeding as to which the Indemnitee shall have been adjudged to be liable to the Company if applicable law prohibits such indemnification or if such claim, issue or matter involves an accounting of profits by the Indemnitee to the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended ("Section 16"). 3.4 Indemnification of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, because the Indemnitee is or was a director or officer of the Company, a party to and is successful, on the merits or otherwise, in any Proceeding, the Indemnitee shall be indemnified to the fullest extent permitted by law, against all Expenses, judgments, penalties, fines, and amounts paid in settlement, actually and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in connection therewith. If the Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Indemnitee to the fullest extent permitted by law, against all Expenses, judgments, penalties, fines, and amounts paid in settlement, actually and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. 4 Page 99 of 141 3.5 Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, because the Indemnitee is or was a director or officer of the Company, a witness in any Proceeding, the Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in connection therewith. ARTICLE IV - ADVANCEMENT OF EXPENSES Notwithstanding any provision to the contrary in ARTICLE V, the Company shall advance all reasonable Expenses which, because the Indemnitee is or was a director or officer of the Company, were incurred by or on behalf of the Indemnitee in connection with any Proceeding, within 10 days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses and shall include or be preceded or accompanied by an undertaking by or on behalf of the Indemnitee to repay any Expenses if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified against such Expenses. Any advance and undertakings to repay pursuant to this ARTICLE IV shall be unsecured and interest free. ARTICLE V - PROCEDURES FOR DETERMINATION OF ENTITLEMENT 5.1 Initial Request. To obtain indemnification under this Agreement, the Indemnitee shall submit to the Company a written request, including such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification. The Secretary of the Company shall promptly advise the Board in writing that the Indemnitee has requested indemnification. 5.2 Method of Determination. A determination (if required by applicable law) with respect to the Indemnitee's entitlement to indemnification shall be made as follows: (a) if a Change of Control has occurred, unless the Indemnitee shall request in writing that such determination be made in accordance with clause (b) of this Section, the determination shall be made by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee. (b) if a Change of Control has not occurred, the determination shall be made by the Board by a majority vote of a quorum consisting of Disinterested Directors. In the event that a quorum of the Board consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, the determination shall be made by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee. 5.3 Selection, Payment and Discharge of Independent Counsel. In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to the preceding Section, the Independent Counsel shall be selected, paid, and discharged in the following manner: (a) If a Change of Control has not occurred, the Independent Counsel shall be selected by the Board, and the Company shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected. (b) If a Change of Control has occurred, the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board, in which event clause (a) of this Section shall apply), and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. 5 Page 100 of 141 (c) Following the initial selection described in clauses (a) and (b) of this Section, the Indemnitee or the Company, as the case may be, may, within seven days after such written notice of selection has been given, deliver to the other party a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 1.5 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is made, the Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. (d) Either the Company or the Indemnitee may petition the Supreme Court of the State of New York or other court of competent jurisdiction if the parties have been unable to agree on the selection of Independent Counsel within 20 days after submission by the Indemnitee of a written request for indemnification pursuant to SECTION 5.1 of this Agreement. Such petition may request a determination whether an objection to the party's selection is without merit and/or seek the appointment as Independent Counsel of a person or firm selected by the court or by such other person as the court shall designate. A person or firm so appointed shall act as Independent Counsel under SECTION 5.2 of this Agreement. (e) The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with its actions pursuant to this Agreement, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section, regardless of the manner in which such Independent Counsel was selected or appointed. (f) Upon the due commencement of any judicial proceeding or arbitration pursuant to SECTION 7.2 of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). 5.4 Cooperation. The Indemnitee shall cooperate with the person, persons or entity making the determination with respect to the Indemnitee's entitlement to indemnification under this Agreement, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination. Any reasonable costs or expenses (including attorneys' fees and disbursements) incurred by the Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold the Indemnitee harmless therefrom. 5.5 Payment. If it is determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within ten days after such determination. ARTICLE VI - PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS 6.1 Burden of Proof. In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement if the Indemnitee has submitted a request for indemnification in accordance with SECTION 5.1 of this Agreement, and the Company shall have the burden of proof to overcome 6 Page 101 of 141 that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. 6.2 Effect of Other Proceedings. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of the Indemnitee to indemnification or create a presumption that the Indemnitee did not meet any applicable standard of conduct. 6.3 Actions of Others. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnification under this Agreement. ARTICLE VII - REMEDIES OF THE INDEMNITEE 7.1 Application. This ARTICLE VII shall apply in the event of a Dispute. For purposes of this Article, "Dispute", shall mean any of the following events: (a) a determination is made pursuant to ARTICLE V of this Agreement that the Indemnitee is not entitled to indemnification under this Agreement; (b) advance of Expenses is not timely made pursuant to ARTICLE IV of this Agreement; (c) the determination of entitlement to be made pursuant to SECTION 5.2 of this Agreement has not been made within 30 days after receipt by the Company of the request for indemnification; (d) payment of indemnification is not made pursuant to SECTION 3.5 of this Agreement within 20 days after receipt by the Company of a written request therefor; or (e) payment of indemnification is not made within 20 days after a determination has been made that the Indemnitee is entitled to indemnification pursuant to ARTICLE V of this Agreement. 7.2 Adjudication. In the event of a Dispute, the Indemnitee shall be entitled to an adjudication in an appropriate court of the State of New York, or in any other court of competent jurisdiction, of the Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, the Indemnitee, at the Indemnitee's option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which the Indemnitee first has the right to commence such proceeding pursuant to this Section. The Company shall not oppose the Indemnitee's right to seek any such adjudication or award in arbitration. 7.3 De Novo Review. In the event that a determination shall have been made pursuant to ARTICLE V of this Agreement that the Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this ARTICLE VII shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination or by reason of the absence of a determination pursuant to ARTICLE V. In any such proceeding or arbitration, the Company shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. 7.4 Company Bound. If a determination shall have been made or deemed to have been made pursuant to ARTICLE V of this Agreement that the Indemnitee is entitled to indemnification, the Company shall be bound 7 Page 102 of 141 by such determination in any judicial proceeding or arbitration absent (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law. 7.5 Procedures Valid. The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this ARTICLE VII that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. 7.6 Expenses of Adjudication. In the event that the Indemnitee, pursuant to this ARTICLE VII, seeks a judicial adjudication of, or an award in arbitration to enforce the Indemnitee's rights under, or to recover damages for breach of, this Agreement, the Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in SECTION 1.4 of this Agreement) actually and reasonably incurred by the Indemnitee in such adjudication or arbitration, but only if the Indemnitee prevails therein. If it shall be determined in such adjudication or arbitration that the Indemnitee is entitled to receive part, but not all of the indemnification or advancement of expenses sought, the expenses incurred by the Indemnitee in connection with such adjudication or arbitration shall be appropriately prorated. ARTICLE VIII - NON-EXCLUSIVITY, INSURANCE, SUBROGATION 8.1 Non-Exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation or By-Laws of the Company, any agreement, a vote of shareholders or a resolution of directors, or otherwise. No amendment, alteration, rescission or replacement of this Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee as a director of the Company prior to such amendment, alteration, rescission or replacement. 8.2 Insurance. The Company may maintain an insurance policy or policies against liability arising out of this Agreement or otherwise. 8.3 Subrogation. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. 8.4 No Duplicative Payment. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually unconditionally received such payment under any insurance policy, contract, agreement or otherwise. ARTICLE IX - GENERAL PROVISIONS 9.1 Binding Effect. This Agreement shall be binding upon the Company and its successors and assigns, shall inure to the benefit of the Indemnitee and the Indemnitee's heirs, executors and administrators and shall continue in effect regardless of whether the Indemnitee continues to serve as a director of the Company. 8 Page 103 of 141 9.2 Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 9.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. 9.4 Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. 9.5 Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 9.6 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the day on which it is so mailed: If to the Indemnitee: Steven M. Morse 2325 Fairport-Nine Mile Point Road Fairport, New York 14450 If to the Company: Attn: The President 600 Powers Building 16 West Main Street Rochester, New York 14614-1601 or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. 9.7 Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without application of the conflict of laws principles thereof. 9 Page 104 of 141 9.8 Entire Agreement. This Agreement ,constitutes the entire agreement and understanding between the parties hereto in reference to all the matters herein agreed upon. This Agreement replaces all prior indemnification agreements or understandings of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. COMPANY: GENESEE CORPORATION By /s/ Stephen B. Ashley ---------------------------------------- Name: Stephen B. Ashley Title: President INDEMNITEE: /s/ Steven M. Morse ------------------------------------------- Steven M. Morse EX-10.20 7 l89110aex10-20.txt EXHIBIT 10.20 1 Page 105 of 141 EXHIBIT 10-20 ------------- SECURED PROMISSORY NOTE February 12, 2001 Rochester, New York $368,968.13 FOR VALUE RECEIVED, the undersigned (the "EXECUTIVE"), promises to pay to the order of GENESEE CORPORATION, a New York corporation (the "COMPANY"), at the principal office of Company or at such other place as Company may designate in writing to Executive, the principal sum of THREE HUNDRED SIXTY-EIGHT THOUSAND NINE HUNDRED SIXTY EIGHT DOLLARS AND THIRTEEN CENTS (U.S. $368,968.13) in lawful money of the United States of America, as follows: 1. BACKGROUND. This Note evidences a loan made by the Company to the Executive to facilitate the purchase by the Executive of 12,800 shares of the Company's Class B common stock, par value $0.50 per share (the "SHARES"), in accordance with the terms of a certain Employment Agreement, dated as of December 15, 2000, by and between the Company and the Executive (the "EMPLOYMENT AGREEMENT") 2. INTEREST. Prior to maturity of this Note pursuant to Section 3(b), by acceleration or otherwise (collectively, "MATURITY"), no interest shall accrue on the unpaid principal of this Note. After Maturity, interest shall accrue on the unpaid principal of this Note at the rate of 12% per annum until the Note has been paid in full. 3. PAYMENTS. (a) Subject to Section 3(b) and any earlier acceleration of this Note, the principal amount of this Note shall become due and payable in (i) the event of, and to the extent of any cash payments, cash dividends or other cash distributions in respect of the Pledged Shares and (ii) in the event of, and to the extent of, any Net Proceeds received from, the sale of any Pledged Shares. As used herein, "NET PROCEEDS" shall mean the total proceeds received from the sale of Pledged Shares by the Executive, minus an amount equal to any brokerage commissions or similar transaction expenses incurred by reason of the sale of such Pledged Shares. In the event any dividend payments or the sale of any Pledged Shares, the Executive hereby authorizes the Company to retain and apply the dividend payments and Net Proceeds to the payment of this Note. Concurrently with any such dividend or sale, the Company shall make a notation of such payment hereon. (b) This Note shall mature and all remaining unpaid principal of this Note shall become due and payable upon the earlier to occur of (i) the sixth (6th) month after the Company gives the Executive written notice that the Company's Board of Directors has determined, in its sole discretion, that it does not anticipate the Company making any further material liquidating dividends, and (ii) the termination of Executive's employment or service with the Company due to Cause, or his resignation from the Company. 4. WAIVERS, ETC. Executive hereby waives presentment, demand, notice of nonpayment, protest, notice of protest, notice of dishonor, bringing of suit and diligence in taking any action to collect amounts called for hereunder. 5. COLLATERAL. (a) In order to secure Executive's obligations hereunder, the Executive hereby pledges and grants to Company a continuing, perfected, first priority security interest in and to (a) the Shares which are represented by stock certificate number 12,503, and any and all shares or other securities hereafter issued by the Company with respect thereto (collectively, the "PLEDGED SHARES"), physical possession of which has been heretofore 2 Page 106 of 141 delivered to Company, irrevocably authorizing Company to arrange for the transfer of the Pledged Shares on the books of Company, in the name and for the benefit of Company upon Maturity; and (b) all proceeds from the sale, exchange or disposition of the Pledged Shares. This pledge of the Pledged Shares effected hereby shall remain in effect until, and shall automatically terminate without any action on the part of any person upon, the payment in full of this Note. (b) Prior to Maturity, Executive shall be entitled to: (i) vote the Pledged Shares in Executive's sole discretion; (ii) receive all dividends payable with respect to the Pledged Shares (subject to the Company's right to retain such dividends and apply them to the payment of this Note in accordance with Section 3(a) above); (iii) dispose of the Pledged Shares and receive the Net Proceeds therefrom (subject to the Company's right to retain such dividends and apply them to the payment of this Note in accordance with Section 3(a) above); and (iv) exercise all other rights afforded a holder of the Company's Class B common stock under applicable law; provided, however, that all stock or securities issuable upon any dividend, split, revision or reclassification on or with respect to the Pledged Shares, or any part thereof or received in exchange for the Pledged Shares as a result of a merger, consolidation or other corporate reorganization, shall be transferred directly to Company and held by Company as additional collateral under the terms hereof, and shall constitute Pledged Shares. 6. REMEDIES. (a) If this Note or any installment of principal hereunder is not paid when due, then Company may, at its option, declare this Note immediately due and payable in full. If the Executive should make an assignment for the benefit of creditors, or institute or have instituted against him or her any insolvency or bankruptcy proceedings, this Note shall become immediately due and payable, without any action on the part of the Company. (b) Upon the occurrence of any default in any payment of principal hereunder or in the event this Note is accelerated as a result of any insolvency or bankruptcy of Executive, Company shall be entitled to exercise all rights of foreclosure upon the Pledged Shares (and the proceeds therefrom) under applicable law and equity. Such powers shall include, without limitation, the full power and authority of Company, to the extent not prohibited by applicable law, to transfer to Company or its assignee the Pledged Shares without foreclosure, auction or sale and thereafter exercise all the rights incident to ownership of the Pledged Shares as referred to in Section 5 above. If this Note or any portion of the principal hereof is not paid when due, and this Note is placed in the hands of an attorney for collection, and/or suit is filed hereon, and as often as any of such events occur, Executive agrees to pay, in addition to the unpaid principal, all reasonable collection costs, including, without limitation, the Company's reasonable attorneys' fees and expenses incurred in connection with such collection activities and/or suit. (c) In addition to recourse against the Pledged Shares, recourse for the payment of the principal of or interest on this Note or for any claim based hereon (including, without limitation, any fees, expenses, costs of collection or other amounts of whatever nature) shall be had against the Executive, his heirs, legal representatives or assigns, directly or indirectly, by way of set-off or otherwise; all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly acknowledged and affirmed. 7. ASSIGNMENT. Upon any transfer of this Note, the holder of this Note may deliver the Pledged Shares or any part thereof to the transferee, who shall thereupon become vested with all the powers and rights hereinabove given to Company in respect of this Note and the Pledged Shares. 8. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive hereby represents and warrants to Company as follows: (a) Executive has good and marketable title to the Pledged Shares, free and clear of any and all liens, claims and encumbrances (except the pledge and security interest granted herein, as may be set forth in the Employment Agreement and under applicable securities laws); (b) Executive has full right and authority to execute, deliver and perform Executive's obligations under this Note and to pledge and grant a security interest in the Pledged Shares hereunder; and (c) this Note is binding and enforceable against Executive in accordance with its terms. 3 Page 107 of 141 9. MISCELLANEOUS. (a) In the event that any clause or provision of this Note is determined to be invalid or unenforceable for any reason, this Note shall continue to be enforceable to the maximum extent permitted by applicable law; and in particular, if any remedy is determined to be in excess of that permitted by applicable law, the excessive remedy shall be reduced to the maximum enforceable level and, as so reduced and modified, this Note shall be enforced to the maximum extent permitted by applicable law. (b) The provisions of this Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof. (c) All notices and other communications hereunder shall be in writing and will be deemed to have been duly given if delivered or mailed in accordance with the Employment Agreement. (d) The headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of the provisions hereof. IN WITNESS WHEREOF, the undersigned has executed and delivered this Note as of the date first set forth above. /S/ MARK W. LEUNIG ------------------------------ Mark W. Leunig EX-10.21 8 l89110aex10-21.txt EXHIBIT 21 1 Page 108 of 141 EXHIBIT 10-21 ------------- SECURED PROMISSORY NOTE February 12, 2001 Rochester, New York $183,304.39 FOR VALUE RECEIVED, the undersigned (the "EXECUTIVE"), promises to pay to the order of GENESEE CORPORATION, a New York corporation (the "COMPANY"), at the principal office of Company or at such other place as Company may designate in writing to Executive, the principal sum of ONE HUNDRED EIGHTY-THREE THOUSAND THREE HUNDRED FOUR DOLLARS AND THIRTY-NINE CENTS (U.S. $183,304.39) in lawful money of the United States of America, as follows: 1. BACKGROUND. This Note evidences a loan made by the Company to the Executive to facilitate the purchase by the Executive of (a) 4,000 shares of the Company's Class B common stock, par value $0.50 per share, in accordance with the terms of a certain Employment Agreement, dated as of January 25, 2000, by and between the Company and the Executive (the "EMPLOYMENT AGREEMENT"), and (b) 2,000 shares of the Company's Class B common stock, par value $0.50 per share, in accordance with an option granted under the Company's 1992 Stock Plan (collectively, the "SHARES"). 2. INTEREST. Prior to maturity of this Note pursuant to Section 3(b), by acceleration or otherwise (collectively, "MATURITY"), no interest shall accrue on the unpaid principal of this Note. After Maturity, interest shall accrue on the unpaid principal of this Note at the at the rate of 12% per annum until the Note has been paid in full. 4. PAYMENTS. (a) Subject to Section 3(b) and any earlier acceleration of this Note, the principal amount of this Note shall become due and payable in (i) the event of, and to the extent of any cash payments, cash dividends or other cash distributions in respect of the Pledged Shares and (ii) in the event of, and to the extent of, any Net Proceeds received from, the sale of any Pledged Shares. As used herein, "NET PROCEEDS" shall mean the total proceeds received from the sale of Pledged Shares by the Executive, minus an amount equal to any brokerage commissions or similar transaction expenses incurred by reason of the sale of such Pledged Shares. In the event any dividend payments or the sale of any Pledged Shares, the Executive hereby authorizes the Company to retain and apply the dividend payments and Net Proceeds to the payment of this Note. Concurrently with any such dividend or sale, the Company shall make a notation of such payment hereon. (b) This Note shall mature and all remaining unpaid principal of this Note shall become due and payable upon the earlier to occur of (i) the sixth (6th) month after the Company gives the Executive written notice that the Company's Board of Directors has determined, in its sole discretion, that it does not anticipate the Company making any further material liquidating dividends, and (ii) the termination of Executive's employment or service with the Company due to Cause, or his resignation from the Company. 4. WAIVERS, ETC. Executive hereby waives presentment, demand, notice of nonpayment, protest, notice of protest, notice of dishonor, bringing of suit and diligence in taking any action to collect amounts called for hereunder. 5. COLLATERAL. (a) In order to secure Executive's obligations hereunder, the Executive hereby pledges and grants to Company a continuing, perfected, first priority security interest in and to (a) the Shares which are 2 Page 109 of 141 represented by stock certificate numbers 12,506 and 12,507, and any and all shares or other securities hereafter issued by the Company with respect thereto (collectively, the "PLEDGED SHARES"), physical possession of which has been heretofore delivered to Company, irrevocably authorizing Company to arrange for the transfer of the Pledged Shares on the books of Company, in the name and for the benefit of Company upon Maturity; and (b) all proceeds from the sale, exchange or disposition of the Pledged Shares. This pledge of the Pledged Shares effected hereby shall remain in effect until, and shall automatically terminate without any action on the part of any person upon, the payment in full of this Note. (b) Prior to Maturity, Executive shall be entitled to: (i) vote the Pledged Shares in Executive's sole discretion; (ii) receive all dividends payable with respect to the Pledged Shares (subject to the Company's right to retain such dividends and apply them to the payment of this Note in accordance with Section 3(a) above); (iii) dispose of the Pledged Shares and receive the Net Proceeds therefrom (subject to the Company's right to retain such dividends and apply them to the payment of this Note in accordance with Section 3(a) above); and (iv) exercise all other rights afforded a holder of the Company's Class B common stock under applicable law; provided, however, that all stock or securities issuable upon any dividend, split, revision or reclassification on or with respect to the Pledged Shares, or any part thereof or received in exchange for the Pledged Shares as a result of a merger, consolidation or other corporate reorganization, shall be transferred directly to Company and held by Company as additional collateral under the terms hereof, and shall constitute Pledged Shares. 6. REMEDIES. (a) If this Note or any installment of principal hereunder is not paid when due, then Company may, at its option, declare this Note immediately due and payable in full. If the Executive should make an assignment for the benefit of creditors, or institute or have instituted against him or her any insolvency or bankruptcy proceedings, this Note shall become immediately due and payable, without any action on the part of the Company. (b) Upon the occurrence of any default in any payment of principal hereunder or in the event this Note is accelerated as a result of any insolvency or bankruptcy of Executive, Company shall be entitled to exercise all rights of foreclosure upon the Pledged Shares (and the proceeds therefrom) under applicable law and equity. Such powers shall include, without limitation, the full power and authority of Company, to the extent not prohibited by applicable law, to transfer to Company or its assignee the Pledged Shares without foreclosure, auction or sale and thereafter exercise all the rights incident to ownership of the Pledged Shares as referred to in Section 5 above. If this Note or any portion of the principal hereof is not paid when due, and this Note is placed in the hands of an attorney for collection, and/or suit is filed hereon, and as often as any of such events occur, Executive agrees to pay, in addition to the unpaid principal, all reasonable collection costs, including, without limitation, the Company's reasonable attorneys' fees and expenses incurred in connection with such collection activities and/or suit. (c) In addition to recourse against the Pledged Shares, recourse for the payment of the principal of or interest on this Note or for any claim based hereon (including, without limitation, any fees, expenses, costs of collection or other amounts of whatever nature) shall be had against the Executive, his heirs, legal representatives or assigns, directly or indirectly, by way of set-off or otherwise; all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly acknowledged and affirmed. 7. ASSIGNMENT. Upon any transfer of this Note, the holder of this Note may deliver the Pledged Shares or any part thereof to the transferee, who shall thereupon become vested with all the powers and rights hereinabove given to Company in respect of this Note and the Pledged Shares. 8. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive hereby represents and warrants to Company as follows: (a) Executive has good and marketable title to the Pledged Shares, free and clear of any and all liens, claims and encumbrances (except the pledge and security interest granted herein, as may be set forth in the Employment Agreement and under applicable securities laws); (b) Executive has full right and authority to execute, 3 Page 110 of 141 deliver and perform Executive's obligations under this Note and to pledge and grant a security interest in the Pledged Shares hereunder; and (c) this Note is binding and enforceable against Executive in accordance with its terms. 9. MISCELLANEOUS. (a) In the event that any clause or provision of this Note is determined to be invalid or unenforceable for any reason, this Note shall continue to be enforceable to the maximum extent permitted by applicable law; and in particular, if any remedy is determined to be in excess of that permitted by applicable law, the excessive remedy shall be reduced to the maximum enforceable level and, as so reduced and modified, this Note shall be enforced to the maximum extent permitted by applicable law. (b) The provisions of this Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof. (c) All notices and other communications hereunder shall be in writing and will be deemed to have been duly given if delivered or mailed in accordance with the Employment Agreement. (d) The headings contained in this Note are for reference purposes only and shall not affect in any way the meaning or interpretation of the provisions hereof. IN WITNESS WHEREOF, the undersigned has executed and delivered this Note as of the date first set forth above. /S/ KARL D. SIMONSON ----------------------------------- Karl D. Simonson EX-10.27 9 l89110aex10-27.txt EXHIBIT 10.27 1 Page 111 of 141 EXHIBIT 10-27 ------------- AGREEMENT OF SUBLEASE BY AND BETWEEN S.B. ASHLEY MANAGEMENT CORPORATION AS SUBLANDLORD AND GENESEE CORPORATION AS SUBTENANT May 18, 2001 The Powers Building 16 West Main Street Rochester, New York 14614 2 Page 112 of 141 TABLE OF CONTENTS
PAGE ARTICLE 1 PREMISES 1.01 Premises........................................................................................1 1.02 Definition of Building Common Areas.............................................................1 ARTICLE 2 TERM OF SUBLEASE................................................................................1 2.01 Term Commencement Date..........................................................................1 2.02 Right of Termination............................................................................1 2.03 Condition of Premises...........................................................................1 2.04 Subtenant's Trade Fixtures and Personal Property................................................2 ARTICLE 3 RENT, TAXES AND SUBLEASE YEAR...................................................................2 3.01 Fixed Rent......................................................................................2 3.02 Taxes...........................................................................................2 3.03 Past Due Rent...................................................................................3 3.04 Definition of Sublease Year and Partial Sublease Year...........................................4 ARTICLE 4 ALTERATIONS.....................................................................................4 4.01 Alterations, Additions and Improvements.........................................................4 ARTICLE 5 USE OF PREMISES.................................................................................4 5.01 Use of Premises.................................................................................4 ARTICLE 6 OPERATING COSTS.................................................................................4 6.01 Definitions.....................................................................................4 6.02 Subtenant to Share Increases in Operating Costs.................................................5 ARTICLE 7 REPAIRS.........................................................................................5 7.01 Repairs.........................................................................................5 7.02 Hazardous Materials.............................................................................6 ARTICLE 8 INDEMNITY.......................................................................................6 8.01 Indemnification by Subtenant....................................................................6 ARTICLE 9 INSURANCE.......................................................................................7 9.01 Liability Insurance.............................................................................7 9.02 All Risks and Difference in Conditions Insurance................................................7 9.03 Waiver of Subrogation...........................................................................7 9.04 Subtenant's Property............................................................................7 ARTICLE 10 FIRE AND OTHER CASUALTIES.......................................................................7
3 Page 113 of 141 10.01 Untenantability.................................................................................7 10.02 Loss of Property and Water Damage...............................................................8 ARTICLE 11 EMINENT DOMAIN..................................................................................8 11.01 Eminent Domain..................................................................................8
4 Page 114 of 141 ARTICLE 12 BANKRUPTCY AND DEFAULT PROVISIONS...............................................................8 12.01 Conditional Limitations.........................................................................8 12.02 Sublandlord's Remedies.........................................................................10 ARTICLE 13 MECHANIC'S LIENS...............................................................................11 13.01 Mechanic's Liens...............................................................................11 ARTICLE 14 MORTGAGES, ASSIGNMENTS AND SUBLEASES...........................................................11 14.01 Limitation on Subtenant's Rights...............................................................11 ARTICLE 15 SUBORDINATION OF SUBLEASE......................................................................11 15.01 Subordination to Mortgages and Ground Leases...................................................11 ARTICLE 16 ENTRY TO PREMISES..............................................................................12 16.01 Entry to Premises by Sublandlord...............................................................12 ARTICLE 17 NOTICES AND CERTIFICATES.......................................................................12 17.01 Notices and Certificates.......................................................................12 17.02 Certificate by Subtenant.......................................................................12 ARTICLE 18 COVENANT OF QUIET ENJOYMENT....................................................................13 18.01 Covenant of Quiet Enjoyment....................................................................13 ARTICLE 19 SERVICES.......................................................................................13 19.01 Services.......................................................................................13 19.02 Interruption of Service........................................................................13 ARTICLE 20 CERTAIN RIGHTS TO SUBLANDLORD..................................................................13 20.01 Certain Rights Reserved to Sublandlord.........................................................13 ARTICLE 21 MISCELLANEOUS PROVISIONS.......................................................................14 21.01 Holdover.......................................................................................14 21.02 Limitation on Personal Liability...............................................................14 21.03 No Representations by Sublandlord..............................................................15 21.04 Sublease Binding...............................................................................15 21.05 Force Majeure..................................................................................15 21.06 Attornment by Subtenant........................................................................15 21.07 Effect of Captions.............................................................................15 22.08 Execution in Counterparts......................................................................15 22.09 Law Governing, Effect and Gender...............................................................15 22.10 Brokerage......................................................................................16 22.11 Complete Agreement.............................................................................16 22.12 Invalidity of Particular Provisions............................................................16
5 Page 115 of 141 22.13 Execution of Sublease by Sublandlord...........................................................16 EXHIBIT "A" - Floor Plan (Premises) EXHIBIT "B" - Rules and Regulations
6 Page 116 of 141 AGREEMENT OF SUBLEASE - --------------------- This Agreement of Sublease made this 18th day of May, 2001, by and between the following parties: S.B. ASHLEY MANAGEMENT CORPORATION, a New York corporation hereinafter referred to as the "Sublandlord," having an office at 16 West Main Street, Rochester, New York 14614, and GENESEE CORPORATION, a New York corporation with its principal office at 445 St. Paul Street, Rochester, New York 14605, hereinafter referred to as the "Subtenant." ARTICLE 1 PREMISES 1.01 PREMISES. Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases and hires from Sublandlord those certain premises in The Powers Building (hereinafter called the "Building") which is located at 16 West Main Street in the City of Rochester, in the County of Monroe and State of New York, which premises are composed of 1,207 square feet of space, representing 1,042 square feet of office space and 165 square feet of AGREEMENT OF SUBLEASE shared common usage area, located on the 6th floor of the Building and are outlined as the shaded area on the floor plan attached hereto and made a part hereof as Exhibit "A" (said premises being hereinafter called the "Premises"), together with the right to use, in common with others, the Building Common Areas as hereinafter defined. Sublandlord reserves unto itself, its successors and assigns, the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements leading through the Premises in locations which will not materially interfere with Subtenant's use of the Premises. No right to use any part of the exterior of the Building and no easement for light or air are included in the Sublease of the Premises hereby made. 1.02 DEFINITION OF BUILDING COMMON AREAS. "Building Common Areas" shall be defined to mean all areas, space, equipment, signs and special services provided by Sublandlord specifically for the Building or for the common or joint use and benefit of all the subtenants in the Building, their employees, agents, customers, visitors and other invitees, including without limitation, hallways, corridors, trash rooms, mechanical and electrical rooms, storage rooms, stairways, entrances, elevators, rest rooms, lobbies, stairs, loading docks, pedestrian walks, roofs and basements, janitor's and storage closets within the Building and all other common rooms and common facilities within the Building. 7 Page 117 of 141 ARTICLE 2 TERM OF SUBLEASE 2.01 TERM COMMENCEMENT DATE. This Sublease shall commence on April 1, 2001 and shall end on the 30th day of September, 2003. 2.02 RIGHT OF TERMINATION. Subtenant shall have the right to terminate this Sublease by delivering written notice of its intention to terminate ninety (90) days prior to said termination. Notice shall be delivered to Sublandlord as provided under Article 17, below. 2.03 CONDITION OF PREMISES. Subtenant hereby agrees to accept Premises "as is." Subtenant's taking possession shall be conclusive evidence as against Tenant that the Premises were in good order and satisfactory condition when Subtenant took possession. At the termination of this Sublease, Subtenant shall return the Premises broom-clean and in as good condition as when Subtenant took possession, ordinary wear and tear, or loss by fire or other casualty excepted, failing which the Sublandlord may restore the Premises to such condition and Subtenant shall the cost thereof. 2.04 SUBTENANT'S TRADE FIXTURES AND PERSONAL PROPERTY. Upon expiration or sooner termination of this Sublease, Subtenant shall remove all of its trade fixtures and other property from the Premises and shall promptly repair any damage caused to the Premises or to the Building by such removal. If the Subtenant fails to so remove any trade fixtures or other property of Subtenant prior to vacating the Premises, such fixtures and/or other property shall be deemed abandoned by Subtenant and shall become the property of Sublandlord or, at Sublandlord's option, Sublandlord may cause the fixtures or property to be removed at Subtenant's expense. ARTICLE 3 RENT, TAXES AND SUBLEASE YEAR 3.01 FIXED RENT. Subtenant agrees to pay to Sublandlord at the offices of Sublandlord, or at such other place designated by Sublandlord, without any prior demand therefor and without any deduction or set-off whatsoever, as follows: Base Rent $12.95 per square foot Fixed Utilities $ .75 per square foot ------- Total Fixed Rent $13.70 per square foot For a total annual fixed rent of $16,535.90, payable on or before the first day of each month in installments in the amount of $1,377.99. 8 Page 118 of 141 If the term shall commence or terminate upon a day other than the first (or in the case of termination the last) day of a calendar month, Subtenant shall pay, upon the Term Commencement Date, and on the first day of the last calendar month, a prorata portion of the Fixed Rent for the first and last fractional calendar month, respectively, prorated on a per diem basis with respect to such fractional calendar month. 3.02 TAXES. (a) Sublandlord shall in the first instance, pay to the Landlord and building owner, P.B. Associates, L.P., all "Building Taxes" as hereinafter defined, pursuant to the Agreement of Lease by and between P.B. Associates, L.P. and Sublandlord, dated March 15, 1996. The term "Building Taxes" shall be deemed to include all real property taxes (which shall be deemed to include all property taxes and assessments, water and sewer rents, rates and charges, parking and environmental surcharges and any other governmental charges, general and special, ordinary and extraordinary), which may be levied or assessed by any lawful authority against the Building and the Building Common Areas. The amounts required to be paid by Sublandlord or any Subtenant or occupant of the Building pursuant to any Payment in Lieu of Tax Agreement entered into with a taxing authority having jurisdiction over the Building shall be considered for the purposes of this Sublease to be included within the definition of Building Taxes. (b) During the term of this Sublease, Subtenant agrees to pay to Sublandlord as additional rent 14.96% (hereinafter called "Subtenant's Allocable Share") of the amount by which Building Taxes payable by Sublandlord under paragraph 3.02(a) above for each "Sublease Year", as defined in paragraph 3.04 below, exceed said Building Taxes payable during the Tax Base Year as hereinafter defined. The term "Tax Base Year" for purposes of this Sublease shall mean the tax year 1996-1997 for school taxes and the tax year 1996 for all other building taxes, as set forth in the Agreement of Lease by and between P.B. Associates, L.P. and Sublandlord dated March 15, 1996. At the beginning of each Sublease Year, Sublandlord will submit to Subtenant Sublandlord's estimate of the increases in Building Taxes for the following Sublease Year. Within ten (10) days after receipt of such estimate, (and thereafter on the first day of each month without invoice) Subtenant shall pay to Sublandlord an amount equal to one-twelfth (1/12) of Subtenant's Allocable Share of such estimated increase. At the end of each Sublease Year or partial Sublease Year, Sublandlord will furnish to Subtenant a statement setting forth the actual Building Taxes payable during such Sublease Year, comparing such actual Building Taxes with the Building Taxes for the Tax Base Year and also comparing Subtenant's Allocable Share of the increase as estimated by Sublandlord and paid by Subtenant with Subtenant's Allocable Share of the actual increase in Building Taxes for such Sublease Year. Any overpayment or underpayment by Subtenant shall be promptly adjusted by payment within fifteen (15) days of the balance of any underpayment for such year by Subtenant to Sublandlord, or by Sublandlord to Subtenant of the balance of any overpayment for such year, or at Sublandlord's election by 9 Page 119 of 141 applying such overpayment by Subtenant as a credit to the next succeeding monthly installments of increases in Building Taxes, or to offset any then existing monetary default by Subtenant under this Sublease. A copy of a tax bill or assessment bill submitted by Sublandlord to Subtenant shall at all times be sufficient evidence of the amount of Building Taxes levied or assessed against the property to which such bill relates. (c) Subtenant shall at all times be responsible for and pay, before delinquency, all municipal, county, state or federal taxes assessed against its leasehold interest or any fixtures, furnishings, equipment, stock-in-trade or other personal property of any kind owned, installed or used in or on the Premises. (d) Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge and/or assessment (other than a tax on net rental income or franchise tax) upon or against the rents payable by Subtenant to Sublandlord, or upon or against the Building or the Building Common Areas, either by way of substitution for or in addition to any existing tax on land or buildings or otherwise, Subtenant shall be responsible for and shall pay Subtenant's Allocable Share of such tax, excise, surcharge and/or assessment in the manner provided in subparagraph (b) above. (e) Sublandlord may seek a reduction in the assessed valuation (for real estate tax purposes) of the Building in which the Premises are situate by administrative or legal proceeding. Subtenant shall pay to Sublandlord Subtenant's Allocable Share of Sublandlord's costs for said proceedings including but not limited to, special counsel, counsel's reimbursable expenses, and special appraisers if required. In the event that the assessed valuation of the Building is reduced as aforementioned or in any other manner, all future computations of Subtenant's Allocable Share of Building Taxes shall be made with respect to the new assessed valuation. Upon receipt of any refund resulting from any proceeding for which Subtenant has paid Subtenant's Allocable Share of Sublandlord's costs and has paid Subtenant's Allocable Share of excess Building Taxes under paragraph 3.02(b) above, Sublandlord shall recompute the amount that would have been due from Subtenant and pay to Subtenant the amount by which Building Taxes originally paid by Subtenant exceed such recomputed amount. 3.03 PAST DUE RENT. If, during the term of this Sublease, Subtenant shall fail to pay any installment of Fixed Rent or additional rent or any other charge hereunder when the same is due and payable, Subtenant shall pay to Sublandlord, in addition to such installment of Fixed Rent or additional rents or any other charge, without notice or demand by Sublandlord, a sum equal to four percent (4%) of the payment due, said additional sum payable as herein required being the agreed liquidated damages for Subtenant's late payment of any installment not paid when due. If Subtenant's failure to pay any such installment continues for more than thirty (30) days from the original date such installment was due, Sublandlord shall have the right to impose as additional liquidated damages a sum equal to ten percent (10%) of the amount then due. Nothing contained in this paragraph 3.03 shall be construed to be a limitation of or in substitution of Sublandlord's rights and remedies under Article 13. Any payments by Subtenant to 10 Page 120 of 141 Sublandlord shall first be applied to satisfy any past due rent charges under this Section before being applied for any other purposes. 3.04 DEFINITION OF SUBLEASE YEAR AND PARTIAL SUBLEASE YEAR. The term "Sublease Year" is defined to mean a period of twelve (12) consecutive calendar months, the first full Sublease Year commencing on the first day of January following the Term Commencement Date, and each succeeding Sublease Year commencing on the anniversary of the commencement of the first full Sublease Year. Any portion of the term which is less than a Sublease Year shall be deemed a "Partial Sublease Year", and computations requiring proration shall be prorated on a per diem basis using a 365-day year. ARTICLE 4 ALTERATIONS 4.01 ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Subtenant shall not make any alterations, additions or improvements in or to the Premises without the prior written consent of Sublandlord, which consent will not be unreasonably withheld or delayed. Subtenant shall not make nor permit any defacement, injury or waste in, to or about the Premises or any part of the Building. Subtenant agrees that any improvements as may be installed within the Premises by Subtenant pursuant to this paragraph 4.01 shall, at the option of Sublandlord, remain as part of the Premises at the expiration of the Sublease or any extension or renewal thereof. Sublandlord, however, shall have the right to require Subtenant to remove any alterations, additions or improvements so made. Subtenant shall, at its expense, repair or cause to be repaired any damage to the Premises caused by such removal. ARTICLE 5 USE OF PREMISES 5.01 USE OF PREMISES. Subtenant agrees to use the Premises for general office purposes and for no other purpose whatsoever. Subtenant further agrees to comply with the rules and regulations set forth in Exhibit "B" attached hereto and made a part hereof, and with such reasonable modifications thereof and additions thereto as Sublandlord may hereafter from time to time make for the Building and the Building Common Areas. ARTICLE 6 OPERATING COSTS 6.01 DEFINITIONS. The term "Operating Costs" shall be deemed to include the costs, as incurred by Sublandlord, of operating and maintaining the Building and the Building Common Areas, including, but without limiting the generality of the foregoing, the cost of: management fees that Sublandlord is obligated to pay in connection with the management and leasing of the Building, janitorial and cleaning services (which shall be deemed to include labor, materials and supplies for cleaning any office space in the Building, whether or not subleased to 11 Page 121 of 141 subtenants, including the Premises); insurance premiums, repairs to the Building and roof; painting and caulking; refinishing; glass repair; the maintenance and repair of lighting, utilities, sanitary control facilities, and heating, ventilating and air-conditioning systems and equipment; removal of snow, ice, trash, waste and refuse in compliance with any and all recycling laws, rules and regulations imposed by the municipality in which the Building is located; fire and security protection; the cost, as reasonably amortized by Sublandlord, with annual interest at the prime rate in existence at the time of completion of the improvement, of any capital improvement made after calendar year 1997 in compliance with the requirements of any federal, state or local law or governmental regulation; maintenance, replacement and rental of signs and equipment; depreciation of the capital cost of any machinery and equipment used in connection with the operation and maintenance of the Building Common Areas; repair and/or replacement of on-site water lines, sanitary and storm sewer lines; personnel costs and management fee; holiday and other decorations; and related costs to implement such services. Operating Costs shall not include franchise or income taxes imposed on Sublandlord, or the cost to Sublandlord for any work or service performed in any instance for any subtenant (including Subtenant) at the cost of such subtenant, or the cost of improvements performed for subtenants as Sublandlord's work. 6.02 SUBTENANT TO SHARE INCREASES IN OPERATING COSTS. (a) The "Base Year Period" of this Sublease shall be defined as twelve (12) consecutive calendar months commencing on June 1, 1996 and ending May 31, 1997, pursuant to the original Lease Agreement by and between P.B. Associates, L.P. and Sublandlord dated March 15, 1996. (b) Subtenant agrees to pay to Sublandlord, as additional rent, monthly (or less frequently as Sublandlord shall determine) within ten (10) days after receipt of Sublandlord's estimate therefor (and thereafter on the first day of each month without invoice) an amount equal to one-twelfth (1/12) of Subtenant's Allocable Share of the estimated amount by which Operating Costs for each "Sublease Year" exceed the Operating Costs for the "Base Year Period." (c) Following the end of each "Sublease Year" (or Partial Sublease Year), Sublandlord shall furnish to Subtenant a comparative statement showing Subtenant's Allocable Share of the Operating Costs during such year and the amounts paid by Subtenant (based on Sublandlord's estimate of increases in Operating Costs) attributable to such year. Any overpayment or underpayment by Subtenant shall be promptly adjusted by payment, within fifteen (15) days, of the balance of any underpayment for such year by Subtenant to Sublandlord, or by Sublandlord to Subtenant of the balance of any overpayment for such year, or at Sublandlord's election by applying such overpayment by Subtenant as a credit to succeeding monthly installments of increases in Operating Costs, or to offset any then existing monetary default by Subtenant under this Sublease. Sublandlord and Subtenant shall use their best efforts 12 Page 122 of 141 to minimize such costs of operation, management and maintenance in a manner consistent with generally accepted office building practices. ARTICLE 7 REPAIRS 7.01 REPAIRS. Subtenant shall give to Sublandlord prompt notice of any damage to, or defective condition in any part of or appurtenance to the Building's plumbing, electrical, heating, air-conditioning or other systems serving, located in, or passing through the Premises. Subject to the provisions of Article 10, Subtenant shall, at Subtenant's own expense, keep the Premises, including everything therein (except the heating and air-conditioning systems), in good order, condition and repair during the term. Subtenant, at Subtenant's expense, shall comply with all laws or ordinances, and all rules and regulations of all governmental authorities and of all insurance company directives at any time in force, applicable to the Premises or to Subtenant's use thereof, except that Subtenant shall not hereby be under any obligation to comply with any law, ordinance, rule or regulation requiring any structural alteration of or in connection with the Premises, unless such alteration is required by reason of a condition which has been created by, or at the instance of, Subtenant, or is required by reason of a breach of any of Subtenant's covenants and agreements hereunder. All repairs, the estimated cost of which exceeds $500.00, made by Subtenant shall be made using contractors approved by Sublandlord, which approval shall not be unreasonably withheld. If Subtenant fails or neglects to comply with any laws or ordinances, rules and regulations of any governmental authority or insurance company directives as herein required of Subtenant, then Sublandlord or its agents may enter the Premises and make said repairs and comply with any laws or ordinances, or the rules and regulations of any governmental authority or insurance company directives at the cost and expense of the Subtenant and in case Subtenant fails to pay therefor upon notice within five (5) days thereafter, the said cost and expenses shall be added to the next month's installment of Fixed Rent and be due and payable as such or Sublandlord may deduct the same from any balance remaining in Sublandlord's hands. This provision is in addition to the right of Sublandlord to terminate this Sublease by reason of default on the part of Subtenant. 7.02 HAZARDOUS MATERIALS. Subtenant shall, at all times, comply with all local and federal laws, rules and regulations governing the use, handling and disposal of Hazardous Materials in the Premises including, but not limited to Section 1004 of the Federal Reserve Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903) and any additions, amendments, or modifications thereto. As used herein, the term "Hazardous Materials" shall mean any hazardous or toxic substance, material or waste including but not limited to petroleum products, which is, or becomes, regulated by any local or state government authority in which the Premises is located or the United States Government. Sublandlord and its agents shall have the right, but not the duty, to inspect the Premises at any time to determine whether Subtenant is complying with the terms of this Section. If Subtenant is not in compliance 13 Page 123 of 141 with this Section, Sublandlord shall have the right to immediately enter upon the Premises and take whatever actions reasonably necessary to comply including, but not limited to, the removal of the Premises of any Hazardous Materials and the restoration of the Premises to a clean, neat, attractive, healthy and sanitary condition. Subtenant shall pay all such costs incurred by Sublandlord within ten (10) days of receipt of a bill therefor. ARTICLE 8 INDEMNITY 8.01 INDEMNIFICATION BY SUBTENANT. Subtenant does hereby indemnify Sublandlord (and such other persons as are in privity of estate with Sublandlord) and save it harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrence in, upon or at the Premises, from or out of the occupancy or use by Subtenant of the Premises and/or the Building Common Areas or any part thereof, or occasioned wholly or in part by any act or omission of Subtenant, its agents, contractors, employees, lessees or concessionaires. In case Sublandlord (and such other persons as are in privity of estate with Sublandlord) shall, without fault on its part, be made a party to any litigation commenced by or against Subtenant, then Subtenant agrees to protect and hold Sublandlord harmless and to pay all costs, expenses and reasonable attorney's fees incurred or paid by Sublandlord in connection with such litigation. Subtenant agrees also to pay all costs, expenses, and reasonable attorney's fees that may be incurred or paid by Sublandlord in enforcing the covenants and agreements in this Sublease. ARTICLE 9 INSURANCE 9.01 LIABILITY INSURANCE. At all times during the term of this Sublease, Subtenant shall, at its sole cost and expense, maintain personal injury and property damage liability insurance, naming the Sublandlord as an additional insured party, against claims for personal injury, death or property damage occurring on, in or about the Premises during the term of this Sublease of not less than One Million Dollars ($1,000,000.00) with respect to personal injury, death or property damage, and including general liability coverage. In the event that Subtenant shall not have delivered to Sublandlord a certificate evidencing such insurance on or before the Term Commencement Date and fifteen (15) days prior to the expiration dates of each expiring policy, Sublandlord may obtain such insurance as it may reasonably require to protect its interest, and the cost for such policies shall be paid by Subtenant to Sublandlord as additional rent upon demand. 9.02 ALL RISKS AND DIFFERENCE IN CONDITIONS INSURANCE. At all times during the term of this Sublease, Sublandlord shall keep the Building insured for the benefit of Sublandlord against loss or damage by risks now or hereafter embraced by "All Risks" and against such other 14 Page 124 of 141 risks as Sublandlord from time to time reasonably may designate in amounts sufficient to prevent Sublandlord from becoming a co-insurer. 9.03 WAIVER OF SUBROGATION. Each party hereto hereby waives on behalf of the insurers of such party's property, any and all claims or rights of subrogation of any such insurer against the other party hereto for loss of or damage to the property so insured other than loss or damage resulting from the willful act of such other party, and each party hereby agrees to maintain insurance upon its property, it being understood, however, (a) that such waiver shall be ineffective as to any insurer whose policy of insurance does not authorize such waiver, (b) that it shall be the obligation of each party seeking the benefit of the foregoing waiver to request the other party (i) to submit copies of its insurance, and (ii) in case such waiver results in an additional charge from the insurer thereunder, the additional charge for such waiver shall be paid by the party requesting the benefit of said waiver; and (c) that no party shall be liable to the other under clause (b) hereof except for willful failure to comply with any request pursuant to said clause (b). 9.04 SUBTENANT'S PROPERTY. At all times during the term of this Sublease, Subtenant shall, at Subtenant's sole cost and expense, carry "all-risk" insurance coverage for Subtenant's trade fixtures, furnishings, equipment and other personal property of Subtenant. ARTICLE 10 FIRE AND OTHER CASUALTIES 10.01 UNTENANTABILITY. If the Premises are made untenantable in whole or in part by fire or other casualty, the Fixed Rent, additional rent and other charges, until repairs shall be made or the Sublease terminated as hereinafter provided, shall be apportioned on a per diem basis according to the part of the Premises which is usable by Subtenant, if, but only if, such fire or other casualty not be caused by Subtenant's fixtures or equipment or by fault or negligence of Subtenant, its contractors, agents or employees. If such damage shall be so extensive that the Premises cannot be restored by Sublandlord within a period of nine (9) months, either party shall have the right to cancel this Sublease by notice to the other given at any time within thirty (30) days after the date of such damage. In the event of giving effective notice pursuant to this paragraph, this Sublease and the term and the estate hereby granted shall expire on the date fifteen (15) days after the giving of such notice as fully and completely as if such date were the date hereinbefore set for the expiration of the term of this Sublease. If this Sublease is not so terminated, Sublandlord will promptly (taking into account the time necessary to obtain required permits and approvals and the time necessary to effectuate a satisfactory settlement with Sublandlord's insurance company) restore the damage insured by Sublandlord pursuant to paragraph 9.02. Subtenant hereby expressly waives the provisions of Section 227 of the New York Real Property Law and agrees that the foregoing provisions of this paragraph 10.01 shall govern and control in lieu thereof. 15 Page 125 of 141 10.02 LOSS OF PROPERTY AND WATER DAMAGE. Sublandlord shall not be responsible to Subtenant for any loss or theft of property in or from the Premises, or for any loss or theft or damage of or to any property left with any employee of Sublandlord, however occurring. Sublandlord shall not be liable for any damage caused by water, rain, snow or ice, or by breakage, stoppage or leakage of water, gas, heating, air-conditioning, sewer or other pipes or conduits, or arising from any other cause, in, upon, about or adjacent to the Premises or the Building. ARTICLE 11 EMINENT DOMAIN 11.01 EMINENT DOMAIN. (a) In the event that title to the whole or any part of the Premises shall be lawfully condemned or taken in any manner for any public or quasi-public use, this Sublease and the term and estate hereby granted shall forthwith cease and terminate as of the date of vesting of title, and Sublandlord shall be entitled to receive the entire award, Subtenant hereby assigning to Sublandlord Subtenant's interest therein, if any. (b) In the event that title to a part of the Building other than the Premises shall be so condemned or taken, and if in the opinion of Sublandlord, the Building should be restored in such a way as to alter the Premises materially, Sublandlord may terminate this Sublease and the term and estate hereby granted by notifying Subtenant of such termination within sixty (60) days following the date of vesting of title, and this Sublease and the term and estate hereby granted shall expire on the date specified in the notice of termination, which date shall be not less than sixty (60) days after the giving of such notice, as fully and completely as if such date were the date hereinbefore set for the expiration of the term of this Sublease, and the Fixed Rent, additional rent, and other charges hereunder shall be apportioned as of such date. In such event, Subtenant shall not be entitled to any portion of Sublandlord's award hereunder, if any, nor shall Subtenant have any claim against Sublandlord for the value of the unexpired portion of the term. ARTICLE 12 BANKRUPTCY AND DEFAULT PROVISIONS 12.01 CONDITIONAL LIMITATIONS. This Sublease and the demised term are subject to the limitation that if, at any time prior to or during the term, any one or more of the following events (herein called an "event of default") shall occur, that is to say: (a) If Subtenant shall make an assignment for the benefit of its creditors; or (b) If the subleasehold estate hereby created shall be taken on execution or by other process of law; or 16 Page 126 of 141 (c) If any petition shall be filed against Subtenant in any court, whether or not pursuant to any statute of the United States or of any State, in any bankruptcy, reorganization, composition, extension, arrangement, or insolvency proceedings, and Subtenant shall thereafter be adjudicated bankrupt, or such petition shall be approved by the court, or the court shall assume jurisdiction of the subject matter and if such proceedings shall not be dismissed within ninety (90) days after the institution of the same, or if any such petition shall be so filed by the Subtenant; or (d) If in any proceedings a receiver or trustee be appointed for Subtenant's property, and such receivership or trusteeship shall not be vacated or set aside within ninety (90) days after the appointment of such receiver or trustee; or (e) If Subtenant shall vacate or abandon the Premises and permit the same to remain unoccupied or closed for business for more than thirty (30) days; or (f) If Subtenant shall fail to pay any installment of the Fixed Rent or any part thereof when the same shall become due and payable, and such failure shall continue for ten (10) days after notice from Sublandlord; or (g) If Subtenant shall fail to pay any other charge required to be paid by Subtenant hereunder, and such failure shall continue for ten (10) days after notice thereof from Sublandlord to Subtenant; or (h) If Subtenant shall fail to perform or observe any other requirement of this Sublease (not hereinbefore in this paragraph specifically referred to) on the part of Subtenant to be performed or observed, and such failure shall continue for thirty (30) days after notice thereof from Sublandlord to Subtenant; then, upon the happening of any one or more of the aforementioned events of default, and the expiration of the period of time prescribed above, Sublandlord may give Subtenant a notice (hereinafter called "notice of termination") of its intention to end the term of this Sublease at the expiration of five (5) days from the date of service of such notice of termination, and at the expiration of such five (5) days, this Sublease and the term hereof, as well as all of the right, title and interest of Subtenant hereunder, shall wholly cease and expire in the same manner and with the same force and effect as if the date of expiration of such five (5) day period were the date originally specified herein for the expiration of this Sublease and the demised term, and Subtenant shall then quit and surrender the Premises to Sublandlord, but Subtenant shall remain liable as hereinafter provided in Section 12.02. If the Sublandlord shall not be permitted to terminate this Sublease as hereinabove provided because of Title 11 of the United States Code, as amended, related to Bankruptcy (the "Bankruptcy Code"), then Subtenant or any trustee for Subtenant agrees promptly, within no more than fifteen (15) days after the request of Sublandlord to the 17 Page 127 of 141 Bankruptcy Court, to assume or reject this Sublease , and Subtenant agrees not to seek or request any extension or adjournment of any application to assume or reject this Sublease so made by Sublandlord. In such event, Subtenant or any trustee for Subtenant may only assume this Sublease if it (1) cures or provides adequate assurance that the trustee will promptly cure any default hereunder, (2) compensates or provides adequate assurance that the Subtenant will promptly compensate Sublandlord for any actual pecuniary loss to Sublandlord resulting from Subtenant's default, and (3) provides adequate assurance of future performance under this Sublease by Subtenant. In no event after the assumption of this Sublease by Subtenant or any trustee for Subtenant shall any then existing default remain uncured for a period in excess of ten (10) days. Adequate assurance of future performance of this Sublease shall include, without limitation, adequate assurance (a) of the source of the Fixed Rent required to be paid to Sublandlord hereunder, and (b) that the assumption or any permitted assignment of this Sublease will not constitute a breach of any provision of this Sublease. 12.02 SUBLANDLORD'S REMEDIES. (a) If this Sublease shall be terminated as provided in paragraph 12.01, Sublandlord or Sublandlord's agents or employees may immediately or at any time thereafter re-enter the Premises and remove therefrom Subtenant, its agents, employees, licensees, and any subtenants and other persons, firms or corporations, and all or any of its or their property therefrom either by summary dispossess proceedings or by any suitable action or proceeding at law or by force or otherwise, without being liable to indictment, prosecution or damages therefore, and repossess and enjoy the Premises, together with all alterations, additions and improvements thereto. (b) In case of any such termination, re-entry or dispossession by summary proceedings or otherwise, the rents and all other charges required to be paid up to the time of such termination, re-entry or dispossession, shall be paid by Subtenant, and Subtenant shall also pay to Sublandlord all expenses which Sublandlord may then or thereafter incur for legal expenses, attorneys' fees, brokerage commissions and all other costs paid or incurred by Sublandlord for restoring the Premises to good order and condition and for altering and otherwise preparing the same for reletting thereof. Sublandlord may, at any time and from time to time, relet the Premises, in whole or in part, for any rental then obtainable either in its own name or as agent of Subtenant, for a term or terms which, at Sublandlord's option, may be for the remainder of the then current term of this Sublease or for any longer or shorter period. (c) If this Sublease be terminated as aforesaid, Subtenant nevertheless covenants and agrees, notwithstanding any entry or re-entry by Sublandlord, whether by summary proceedings, termination, or otherwise, to remain liable for all rent and additional rent due under this Sublease and all cost expenses and attorneys' fees to enforce this Sublease . At its option, Sublandlord may accelerate the payment of all Fixed Rent and additional rent due hereunder to be immediately due and payable. In the event the Premises be relet by Sublandlord, Subtenant shall be entitled to a credit in the net amount of rent received by Sublandlord in 18 Page 128 of 141 reletting the Premises after deduction of all expenses and costs incurred or paid as aforesaid in reletting the Premises and in collecting the rent in connection therewith. As an alternative, at the election of Sublandlord, Subtenant shall pay to Sublandlord as damages, such a sum as at the time of such termination represents the amount of the then present value of the total Fixed Rent and additional rent and other benefits which would have accrued to Sublandlord under this Sublease for the remainder of the term (including all renewal terms whether or not Subtenant had elected to renew) if the Sublease terms had been fully complied with by Subtenant. (d) No failure by Sublandlord to insist upon the strict performance of any covenant, agreement, term or condition of this Sublease or to exercise any right or remedy consequent upon the breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such covenant, agreement, term or condition. No waiver of any breach shall affect or alter this Sublease, but each and every covenant, agreement, term and condition of this Sublease shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. No payment by Subtenant or receipt by Sublandlord of a lesser amount than the monthly installments of rent or additional rent stipulated in this Sublease shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or letter accompanying a check for payment of rent be deemed any accord and satisfaction, and Sublandlord may accept such check or payment without prejudice to Sublandlord's right to recover the balance of such rent or to pursue any other remedy provided by this Sublease. (e) Each right or remedy of Sublandlord provided for in this Sublease shall be cumulative and shall be in addition to every other right or remedy provided for in this Sublease, or now or hereafter existing at law or in equity or by statute or otherwise. ARTICLE 13 MECHANIC'S LIENS 13.01 MECHANIC'S LIENS. Subtenant agrees to pay when due all sums of money that may become due for, or purporting to be due for, any labor, services, materials, supplies or equipment alleged to have been furnished or to be furnished to or for Subtenant in, upon or about the Premises and/or Sublandlord's interest therein. ARTICLE 14 MORTGAGES, ASSIGNMENTS AND SUBLEASES 14.01 LIMITATION ON SUBTENANT'S RIGHTS. Except as hereinafter otherwise provided, during the term of this Sublease, neither this Sublease nor the interest of Subtenant in this Sublease , or in any sublease, or in any rentals under any sublease shall be sold, assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation of law or otherwise, unless Sublandlord's prior written consent is obtained in each case, nor shall the Premises be sublet in any case unless such prior written consent is obtained. 19 Page 129 of 141 Any assignment, mortgage, pledge, sublease or hypothecation of this Sublease, or of the interest of Subtenant hereunder, without full compliance with any and all requirements set forth in this Sublease shall be a breach of this Sublease and a default hereunder, shall be null and void, and shall confer no rights upon any third party. ARTICLE 15 SUBORDINATION OF SUBLEASE 15.01 SUBORDINATION TO MORTGAGES AND GROUND LEASES. This Sublease and all the rights of Subtenant hereunder and shall be subject and subordinate to the lien of any ground or underlying Leases and to any mortgage or mortgages, whether fee or leasehold mortgages, which may now or hereafter affect the Premises or the Building or the land under the Building, and to all renewals, modifications, consolidations, replacements and extensions thereof, and advances thereunder. Specifically, this Sublease is subordinate to the Agreement of Lease by and between P.B. Associates, L.P. as Landlord, and S.B. Ashley Management Corporation (formerly Sibley Real Estate Services, Inc.) as Tenant, dated March 15, 1996, and any amendment or modification thereof. Subtenant will not do, suffer or permit any act, happening or occurrence or any condition to occur or remain which may be prohibited under the terms or provisions of any ground or underlying sublease or mortgage to which this Sublease is subject or which will create a default thereunder except that Subtenant shall not be obligated to pay the principal indebtedness or any installment thereof or interest thereon. ARTICLE 16 ENTRY TO PREMISES 16.01 ENTRY TO PREMISES BY SUBLANDLORD. Sublandlord shall have the right to enter the Premises at all reasonable times after notice for the purposes of: (a) inspecting the same, and/or (b) making any repairs to the Premises and performing any work therein that may be necessary by reason of Subtenant's default under the terms of this Sublease continuing beyond any applicable period of grace, and/or (c) exhibiting the Premises for the purpose of sale, ground sublease or mortgage. ARTICLE 17 NOTICES AND CERTIFICATES 20 Page 130 of 141 17.01 NOTICES AND CERTIFICATES. Any notice, statement, certificate, request or demand required or permitted to be given under this Sublease shall be in writing sent either by an overnight express mail service (such as Federal Express) or by registered or certified mail, postage prepaid, return receipt requested, addressed, as the case may be, to Sublandlord at the address shown at the beginning of this Sublease, with a copy to Diana B. Foti, Esq., Evans & Fox, LLP, 95 Allens Creek Road, Suite 103, Rochester, New York 14618 and to Subtenant at the address shown at the beginning of this Sublease until the Term Commencement Date of the Sublease and thereafter to the address of the Premises or to such other addresses as Sublandlord or Subtenant shall designate in the manner herein provided. Such notice, statement, certificate, request or demand shall be deemed to have been given on the date mailed as aforesaid by such express mail service or on the date deposed in any post office or branch post office regularly maintained by the United States Government, except for notice of change of address or revocation of a prior notice, which shall only be effective upon receipt or refusal to accept receipt of such notice. 17.02 CERTIFICATE BY SUBTENANT. Within fifteen (15) days after request by Sublandlord, Subtenant, from time to time and without charge, shall deliver to Sublandlord or to a person, firm or corporation, specified by Sublandlord, a duly executed and acknowledged instrument certifying: (a) that this Sublease is unmodified and in full force and effect, or if there has been any modification, that the Sublease is in full force and effect, as modified, and identifying the date of any such modification, and (b) whether Subtenant knows or does not know, as the case may be, of any default by Sublandlord in the performance by Sublandlord of the terms, covenants, and conditions of this Sublease, and specifying the nature of such defaults, if any, and (c) whether or not there are any then existing setoffs or defenses by Subtenant to the enforcement by Sublandlord of the terms, covenants, and conditions of this Sublease and any modification thereof, and if so, specifying them, and (d) the date to which the Fixed Rent has been paid. ARTICLE 18 COVENANT OF QUIET ENJOYMENT 18.01 COVENANT OF QUIET ENJOYMENT. Subtenant, subject to the terms and provisions of this Sublease, on payment of the rent and observing, keeping and performing all the terms and provisions of this Sublease on its part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold and enjoy the Premises during the term hereof on and after the Term Commencement Date without hindrance or ejection by Sublandlord and any 21 Page 131 of 141 persons lawfully claiming under Sublandlord, subject nevertheless to the terms and conditions of this Sublease and to any ground or underlying lease or sublease and/or mortgage(s); but it is understood and agreed that this covenant, and any and all other covenants of Sublandlord contained in this Sublease shall be binding upon Sublandlord and its successors only with respect to breaches occurring during its and their respective ownership of Sublandlord's interest hereunder. ARTICLE 19 SERVICES 19.01 SERVICES. During the term of this Sublease, while Subtenant is not in default hereunder, Sublandlord shall furnish to the Premises electricity, lighting, heating, ventilating, air conditioning, elevator service and water to the plumbing fixtures, if any, on Monday through Friday from 8:00 a.m. to 6:00 p.m. and on Saturday from 8:30 a.m. to 1:00 p.m., principal legal holidays excepted. Sublandlord shall also furnish janitorial services consisting of cleaning floors, removing waste paper each business day and window cleaning. 19.02 INTERRUPTION OF SERVICE. No diminution or abatement of rent or other compensation shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the Premises, the Building or its appurtenances. There shall be no diminution or abatement of rent or any other compensation for interruption or curtailment of any service or utility herein expressly or impliedly agreed to be furnished by Sublandlord when such interruption or curtailment shall be due to accident, alterations, repairs (desirable or necessary), or to inability or difficulty in securing supplies or labor, or to some other cause not resulting from gross negligence on the part of Sublandlord. No such interruption or curtailment shall be deemed a constructive eviction. Subtenant agrees that Sublandlord shall not be responsible for interruption of utility service caused by any utility company or governmental regulatory agency. ARTICLE 20 CERTAIN RIGHTS TO SUBLANDLORD 20.01 CERTAIN RIGHTS RESERVED TO SUBLANDLORD. Sublandlord reserves the following rights: (a) To name the Building and to change the name or street address of the Building; (b) To install - and maintain a sign or signs on the exterior or interior of the Building; (c) During the last ninety (90) days of the term, or during or prior to that time if Subtenant vacates the Premises, to decorate, remodel, repair, alter or otherwise prepare the 22 Page 132 of 141 Premises for reoccupancy, including the placing of a notice of reasonable size on or in the Premises offering the Premises "For Rent" or "For Sublease," all without affecting Subtenant's obligation to pay rental for the Premises; (d) To constantly have pass keys to the Premises; (e) At any time in the event of an emergency, or otherwise at reasonable times, to take any and all measures, including inspections, repairs, alterations, additions and improvements to the Premises or to the Building, as may be necessary or desirable for the safety, protection or preservation of the Premises or the Building or the Sublandlord's interests, or as may be necessary or desirable in the operation or improvement of the Building or in order to comply with all laws, orders and requirements of governmental or other authority. (f) At any reasonable time and from time to time throughout the term of the Sublease to show the Premises to persons wishing to rent same or to purchase the Building. ARTICLE 21 MISCELLANEOUS PROVISIONS 21.01 HOLDOVER. Should Subtenant continue to occupy the Premises after the expiration of the term hereof, termination of this Sublease or after a forfeiture incurred, and if Sublandlord consents to such continued occupancy, such tenancy shall be from month to month, and such month-to-month tenancy shall be under all the terms, covenants and conditions of this Sublease, except at double the monthly rent reserved herein. 21.02 LIMITATION ON PERSONAL LIABILITY. (a) It is understood and agreed that Subtenant shall look solely to the estate and property of Sublandlord in the Building for the satisfaction of Subtenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Sublandlord in the event of any default or breach by Sublandlord with respect to any of the terms, covenants and conditions of this Sublease to be observed and/or performed by Sublandlord and any other obligation of Sublandlord created by or under this Sublease, and no other property or assets of Sublandlord or of its partners, beneficiaries, co-subtenants, shareholders, or principals (as the case may be) shall be subject to levy, execution or other enforcement procedures. (b) The term "Sublandlord" as used in subparagraph 21.02(a) above and throughout this Sublease, so far as covenants and agreements on the part of Sublandlord are concerned, shall be limited to mean and include only S.B. Ashley Management Corporation. Further, in the event of any transfer or transfers of the title to the Sublease and/or the Building, Sublandlord herein named (and in case of any subsequent transfers or conveyances, the then grantor), including each of its partners, beneficiaries, co-subtenants, shareholders, or principals (as the case may be), shall be automatically freed and relieved from and after the date of such 23 Page 133 of 141 transfer and conveyance of all liability as respects the performance of any covenants and agreements on the part of Sublandlord. Sublandlord or the grantor shall turn over to the grantee all monies and security, if any, then held by Sublandlord or such grantor on behalf of Subtenant, Sublandlord thereby being relieved of and from all responsibility for such monies and security, and shall assign to such grantee all right, title and interest of Sublandlord or such grantor thereto, it being intended that the covenants and agreements contained in this Sublease on the part of Sublandlord to be performed shall, subject as aforesaid, be binding on Sublandlord, its successors and assigns. 21.03 NO REPRESENTATIONS BY SUBLANDLORD. Sublandlord and Sublandlord's agents have made no representations or promises with respect to the Building, the land upon which the Building is erected or the Premises except as herein expressly set forth, and no rights, easements, or licenses are acquired by Subtenant by implication or otherwise except as expressly set forth in the provisions of this Sublease. 21.04 SUBLEASE BINDING. All covenants in this Sublease which are binding upon Subtenant shall be construed to be equally applicable to and binding upon Subtenant's agents, employees and others claiming the right to be in the Premises or in the Building through or under Subtenant. If more than one individual, firm or corporation shall join as Subtenant, the singular context shall be construed to be plural wherever necessary, and the covenants of Subtenant shall be the joint and several obligations of each party signing as Subtenant; and, when the parties signing as Subtenant are partners, it shall be the joint and several obligations of the firm and of the individual members thereof. 21.05 FORCE MAJEURE. The period of time during which either party is prevented or delayed in the performance or the making of any improvements or repairs or fulfilling any obligation other than the payment of Fixed Rent or additional rent required under this Sublease due to unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil commotion, Acts of God or the public enemy, governmental prohibitions or regulations or inability to obtain materials or labor by reason thereof, or other causes beyond such party's reasonable control, shall be added to such party's time for performance thereof, and such party shall have no liability by reason thereof. 21.06 ATTORNMENT BY SUBTENANT. If at any time during the term of this Sublease, the Building is sold through a mortgage foreclosure proceeding, or if Sublandlord hereunder shall be the holder of a leasehold estate covering premises which include the Premises and if such leasehold estate shall be cancelled or otherwise terminated prior to the expiration date thereof and prior to the expiration of the term of this Sublease, or in the event of the surrender thereof whether voluntary, involuntary or by operation of law, Subtenant shall make full and complete attornment to the purchaser at the foreclosure sale or to the lessor of such leasehold estate for the balance of the term of this Sublease upon the same covenants and conditions as are contained herein so as to establish direct privity between such purchaser or lessor and Subtenant and with the same force and effect as though this Sublease was made directly from such purchaser or 24 Page 134 of 141 lessor to Subtenant. Subtenant shall make all rent payments thereafter directly to such purchaser or lessor. 21.07 EFFECT OF CAPTIONS. The captions or legends on this Sublease are inserted only for convenient reference or identification of the particular paragraphs. They are in no way intended to describe, interpret, define or limit the scope, or extent or intent of this Sublease, or any paragraph or provision thereof. 22.08 EXECUTION IN COUNTERPARTS. This Sublease may be executed in one or more counterparts, any one or all of which shall constitute but one agreement. 22.09 LAW GOVERNING, EFFECT AND GENDER. This Sublease shall be construed in accordance with the laws of the State of New York and shall be binding upon the parties hereto and their respective legal representatives, successors and assigns except as expressly provided otherwise. Should any provisions of this Sublease require judicial interpretation, it is agreed that the court interpreting or construing the same shall not apply a presumption that the terms of any such provisions shall be more strictly construed against one party or the other by reason of the rule of construction that a document is to be construed most strictly against the party who itself or its agent prepared the same, it being agreed that the agents of all parties have participated in the preparation of this Sublease. Use of the neutral gender shall be deemed to include the masculine or feminine, as the sense requires. 22.10 BROKERAGE. Subtenant warrants that it has had no dealings with any broker or agent in connection with this Sublease and covenants and agrees to pay any commission, compensation or charge claimed by any real estate broker, salesman or agent with respect to this Sublease or the negotiation thereof, and Subtenant further covenants to hold harmless and indemnify Sublandlord from and against any and all costs, expense or liability in connection therewith. 22.11 COMPLETE AGREEMENT. This Sublease contains and embraces the entire Agreement between the parties hereto and it or any part of it may not be changed, altered, modified, limited, terminated, or extended orally or by any agreement between the parties unless such agreement be expressed in writing, signed and acknowledged by the parties hereto, their legal representatives, successors or assigns, except as may be expressly otherwise provided herein. 22.12 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this Sublease or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Sublease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term and provision of this Sublease shall be valid and be enforced to the fullest extent permitted by law. 25 Page 135 of 141 22.13 EXECUTION OF SUBLEASE BY SUBLANDLORD. The submission of this document for examination and negotiation does not constitute an offer to sublease, or a reservation of, or option for, the Premises and this document becomes effective and binding only upon the execution and delivery hereof by Sublandlord and by Subtenant. 26 Page 136 of 141 IN WITNESS WHEREOF, the parties hereto have executed this Sublease on the date first above written. SUBLANDLORD SUBTENANT ----------- --------- S.B. ASHLEY MANAGEMENT GENESEE CORPORATION CORPORATION By: /s/ Raymond H. Drake By: /s/ Mark W. Leunig ------------------- ---- ------------------------- Its: Executive Vice President Its: Senior Vice President ------------------------ ------------------------ 27 Page 137 of 141 EXHIBIT "A" ----------- TO AGREEMENT OF SUBLEASE BETWEEN S.B. ASHLEY MANAGEMENT CORPORATION (SUBLANDLORD) AND GENESEE CORPORATION (SUBTENANT) FLOOR PLAN (Premises) 28 Page 138 of 141 EXHIBIT "B" TO AGREEMENT OF SUBLEASE BETWEEN S.B. ASHLEY MANAGEMENT CORPORATION (SUBLANDLORD) AND GENESEE CORPORATION (SUBTENANT) RULES AND REGULATIONS EX-10.28 10 l89110aex10-28.txt EXHIBIT 10.28 1 Page 139 of 141 EXHIBIT 10-28 ------------- PLAN OF LIQUIDATION AND DISSOLUTION ----------------------------------- OF GENESEE CORPORATION This Plan of Liquidation and Dissolution (the "Plan") is intended to affect the complete, voluntary liquidation and dissolution of Genesee Corporation, a New York corporation (the "Corporation"), in accordance with Section 331 of the Internal Revenue Code and Article 10 of the New York Business Corporation Law ("BCL") in substantially the following manner: 1. This Plan shall be effective on the date (the "Effective Date") on which it is approved by the shareholders of the Corporation in accordance with the BCL. After the Effective Date, the following actions shall be taken: (a) The Corporation shall sell, exchange, lease or otherwise dispose of its assets, upon such terms and conditions and for such consideration as may be fixed from time to time by the Corporation's Board of Directors. (b) The Corporation shall collect or make provisions for the collection of accounts receivable, debts and claims owing it. (c) The Corporation shall (i) pay and discharge or make adequate provision for the payment and discharge of all debts, expenses, taxes and liabilities of the Corporation, (ii) withdraw from all jurisdictions in which the Corporation is qualified to do business, (iii) wind up its business and affairs, and (iv) complete the formal dissolution of the Corporation under the New York Business Corporation Law. (d) Subject to the payment of or the making of other provision for the debts, expenses, taxes and other liabilities of the Corporation, including contingent liabilities, all of the assets of the Corporation shall be distributed to or on behalf of its shareholders in accordance with their respective rights in one or a series of distributions, at any time or from time to time, before or after the formal dissolution of the Corporation, in cash or in kind, in any manner that the Board of Directors, in its discretion, may determine. 2. Implementation of this Plan shall be under the direction of the Board of Directors of the Corporation, which shall have full authority and discretion to carry out the provisions of this Plan or such other actions it deems appropriate, including without limitation amendment or abandonment of this Plan, whether prior or subsequent to the formal dissolution of the Corporation, without further shareholder action. 3. Subject to the direction of the Corporation's Board of Directors, the appropriate officers of the Corporation are hereby authorized to take any and all actions and to execute, deliver and file any and all agreements, documents or other instruments which are necessary or convenient to carry out this Plan, including without limitation the execution and filing with the New York Department of State of a certificate of dissolution. 2 Page 140 of 141 IN WITNESS WHEREOF, the undersigned does hereby certify that the foregoing is a true and correct copy of the Plan of Liquidation and Dissolution, that was approved by Class A shareholders of the Corporation on October 19, 2000. /s/ Mark W. Leunig ----------------------------------------------------- Mark W. Leunig, Corporate Secretary Date: October 19, 2000 --------------------------------------- EX-21 11 l89110aex21.txt EXHIBIT 21 1 Page 141 of 141 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT SUBSIDIARY STATE OF INCORPORATION GBC Liquidating Corp. New York Genesee Ventures, Inc. New York Ontario Foods, Incorporated New York -----END PRIVACY-ENHANCED MESSAGE-----