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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
--------------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
AUGUST 2, 1998 1-13933
[VLASIC LOGO]
NEW JERSEY 52-2067518
STATE OF INCORPORATION I.R.S. EMPLOYER IDENTIFIED NO.
VLASIC PLAZA
SIX EXECUTIVE CAMPUS
CHERRY HILL, NEW JERSEY 08002-4112
PRINCIPAL EXECUTIVE OFFICES
TELEPHONE NUMBER: 609-969-7100
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, NO PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF ACT: NONE
-----------------------------------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
AS OF OCTOBER 2, 1998, THE AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY
NON-AFFILLIATES OF THE REGISTRANT WAS $854,712,395. THERE WERE 45,488,319 SHARES
OF COMMON STOCK OUTSTANDING AS OF OCTOBER 2, 1998.
PORTIONS OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED OCTOBER
20, 1998, FOR THE ANNUAL MEETING OF SHAREOWNERS TO BE HELD ON DECEMBER 1, 1998,
ARE INCORPORATED BY REFERENCE INTO PART III. PORTIONS OF THE ANNUAL REPORT TO
SHAREOWNERS FOR THE FISCAL YEAR ENDED AUGUST 2, 1998 ARE INCORPORATED BY
REFERENCE INTO PARTS I AND II.
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PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
Vlasic Foods International Inc. (the "Company") is made up of a number of
different food businesses acquired over time by Campbell Soup Company
("Campbell"). These businesses were assembled into a new public company on March
30, 1998. Campbell shareowners received one share of the Company's common stock
for every ten shares of Campbell capital stock on that date.
The Company manufactures and markets high-quality, branded convenience
food products in three operating segments: Frozen Food Operations, Grocery
Products Operations and Agricultural Products Operations.
- Frozen Food Operations. The frozen foods segment manufactures
frozen dinners and other frozen foods and accounted for
approximately 40%, 40% and 39% of our net sales in fiscal 1998, 1997
and 1996. The frozen foods segment derives the largest portion of
its earnings from manufacturing frozen dinners, breakfasts and pot
pies and marketing them in the U.S. and Canada under the Swanson
brand name.
- Grocery Products Operations. The grocery products segment
manufactures and distributes a diverse portfolio of food products in
the U.S., the U.K., Germany and Argentina; mostly with leading
national or regional market positions. The grocery products segment
accounted for approximately 35%, 36% and 37% of our net sales in
fiscal 1998, 1997 and 1996, primarily from sales of pickles,
relishes and other products marketed under the Vlasic brand in the
U.S.
- Agricultural Products Operations. Our agricultural products segment
produces mainly (a) fresh mushrooms and (b) frozen cooked beef,
canned meats and frozen and chilled cuts of beef. We also perform
certain contract manufacturing services. Our agricultural products
segment accounted for approximately 25%, 24% and 24% of our net
sales in each of fiscal 1998, 1997 and 1996.
PRODUCTS AND MARKETS
FROZEN FOOD OPERATIONS
We manufacture and market frozen food products in the U.S., primarily
frozen dinners, pot pies and breakfasts, under the Swanson, Hungry Man, Great
Starts and Fun Feast brands. In addition, we market frozen food products in
Canada, primarily frozen dinners and pot pies, under the Swanson and Hungry Man
brands. We also manufacture and distribute a variety of frozen food products in
the U.K. under our Freshbake brand.
The Swanson brand is the leading national brand of frozen, traditional
dinners in the U.S., with approximately 31% of the $1.3 billion frozen dinner
market. In addition, Swanson frozen pot pies are the market leader in their
product category with approximately 30% of the $290 million frozen pot pie
market. Overall, we are the nation's third largest producer of frozen dinners
and entrees, pot pies and breakfasts, with 12% of this $4.6 billion market.
Our U.K. operations manufacture and distribute frozen foods such as
sausages, pies and savory-filled pastries under our Freshbake brand, as well as
the private label brands of certain customers. Our primary customers are retail
grocery chains and foodservice operators such as restaurants and cafeterias.
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GROCERY PRODUCTS OPERATIONS
The main product offerings of our grocery products businesses are pickles
and relishes, barbecue sauce and international grocery products.
Pickles and Relishes. Our Vlasic brand is the leading national retail
brand of jarred, shelf-stable pickles with approximately 39% of the $597 million
U.S. national retail market. We also manufacture and sell jarred, shelf-stable
pickles under the Milwaukee's brand, and relishes, peppers and sauerkraut under
the Vlasic and Milwaukee's brand names. We sell shelf-stable pickles and other
condiments to foodservice customers, including quick service restaurants such as
McDonald's.
Barbecue Sauce. Our Open Pit barbecue sauce is the leading retail brand of
barbecue sauce in the Midwest U.S., with a 30% market share in this region.
International Grocery Products. We operate consumer foods businesses in
the U.K., Germany and Argentina. In the U.K., we produce pickles, canned beans
and vegetables under our SonA and Rowats brands, which we distribute through the
retail and foodservice channels. We also manufacture private label brand grocery
products for large supermarket chains.
In Germany, we do not manufacture foods but instead distribute a variety
of branded consumer food products under our Kattus and other brands. We believe
that we are one of the largest distributors of specialty foods in Germany. Our
customers include most German grocery chains, where we actively manage and
merchandise shelf space for our distributed brands. We also distribute select
third party branded food products.
We manufacture and distribute retail grocery products in Argentina under
our Swift brand, including canned meat pate products, hot dogs and hamburgers.
We export limited quantities to other countries in South America under various
other brands.
AGRICULTURAL PRODUCTS OPERATIONS
We are one of the largest producers of fresh mushrooms in the U.S. and one
of the leading exporters of processed beef products in Argentina.
Mushrooms. We own and operate eight mushroom farms across the U.S. Our
mushroom sales account for approximately 12% of the U.S. fresh mushroom market,
which makes us one of the largest fresh mushroom operations in the U.S.
Approximately 95% of the mushrooms we grow are traditional white button
mushrooms. The rest are fancy mushrooms, such as portobello and cremini
mushrooms.
Processed Beef Products. Our Swift-Armour operations in Argentina produce
chilled and frozen beef, frozen cooked beef and canned corned beef, which are
sold mainly to wholesale customers such as manufacturers and foodservice
customers. We are among the largest exporters of frozen cooked beef and canned
corned beef in Argentina, selling to more than 60 countries around the world.
Contract Packing. We manufacture frozen foods for Campbell for its
foodservice business under the terms of a co-pack agreement expiring on March
29, 2000. Approximately 35% of the production volume of our Omaha, Nebraska
facilities are devoted to this contract.
Campbell is a major purchaser of our mushrooms and beef pursuant to supply
agreements expiring on July 30, 2000. Sales to Campbell of mushrooms accounted
for approximately 38% of our total mushroom sales in fiscal 1998 and sales to
Campbell of frozen cooked beef accounted for approximately 17% of Swift-Armour's
fiscal 1998 net sales.
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MARKETING, SALES AND DISTRIBUTION
We manage the sales and distribution of our products based on the channels
through which they are sold. Combined sales to Campbell of frozen foods, beef
and mushrooms accounted for 11% of net sales in fiscal 1998. None of our other
customers accounted for 10% or more of net sales in fiscal 1998.
We use an independent broker sales force to sell frozen foods and grocery
products in the U.S. and Canada to grocery chains and wholesalers. In some
instances, we sell directly to mass merchandisers and club stores. We use
commercial carriers to distribute these products from our manufacturing
facilities directly to our customers or third party warehouses. Historically,
our frozen foods and grocery products have been sold through the same brokers.
While the delivery of domestic retail grocery products has been integrated into
a single system, frozen foods are delivered separately because of the need for
refrigeration during shipping. Brokers also sell frozen foods to frozen foods
distributors and grocery products to grocery distributors, both of which in turn
sell and deliver the products to smaller grocery chains and retailers. We sell
mushrooms through a dedicated team of produce salespeople and deliver them
refrigerated to our customers by a combination of commercial carriers and our
own transport, depending on location.
In the U.K., we operate a dedicated sales organization to market our
products to our retail and foodservice customers. We sell frozen and grocery
products marketed under the Freshbake, SonA and Rowats brands, as well as
customer own label products, directly to retail and foodservice customers or
through wholesalers. Our distribution business in Germany uses a direct store
distribution system that delivers products to the stores and physically stocks
their shelves. In Argentina, our sales force sells frozen, chilled and grocery
products to large grocery chains, wholesalers and independent distributors. We
use commercial carriers to deliver these products.
COMPETITION
We face intense competition in each of our product lines. We compete with
other producers of similar products on the basis of product quality, price,
customer service, effective promotional activities and the ability to identify
and satisfy emerging consumer preferences. Our ability to grow our business
could be impacted by the relative effectiveness of and competitive response to
our new products efforts, product innovation and new advertising. In addition,
from time to time, we experience price pressure in certain markets as a result
of competitors' pricing practices. Although we compete in a highly competitive
industry for representation in the retail food and foodservice channels, we
believe that our brand strength in our various markets has resulted in a strong
competitive position.
INGREDIENTS
We believe that sources of raw materials used in the frozen food
businesses are readily available. Our frozen foods business uses beef produced
by our Swift-Armour operations in Argentina as well as beef and poultry we
obtain from third party suppliers.
Our grocery products businesses rely primarily on cucumbers, peppers and
other produce supplied by third party growers. We purchase many of these
ingredients during the warmer growing seasons, when they are readily available
and are of top quality. We buy from a variety of growers, and alternate sources
of supply are readily available. However, factors beyond our control such as
weather and general growing conditions may cause prices and quality to
fluctuate.
In the agricultural products segment, we purchase beef carcasses and fresh
mushrooms from third parties to fulfill seasonal requirements.
Prices of raw materials can fluctuate due to a number of factors,
including changes in crop size, cattle cycles, government-sponsored agricultural
programs and weather conditions during the growing and harvesting seasons.
Recent adverse weather conditions in Argentina, coupled with a rebuilding cattle
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cycle, have resulted in a decrease in the availability of beef and higher cattle
costs in our agricultural products segment. Although we enter into advance
commodity purchase agreements from time to time, increases in raw material costs
could have a material adverse effect on our businesses, financial condition or
results of operations.
We purchase a variety of packaging materials, which we believe are readily
available from a number of suppliers.
SEASONALITY OF THE BUSINESS
Sales of frozen foods and mushrooms tend to be marginally higher during
the cold weather months. Sales of pickles, relishes and barbecue sauce, tend to
be higher in the summer months. The majority of pickles are packed during a
season extending from May through September.
TRADEMARKS AND PATENTS
We own many popular trademarks registered in various countries, including
Vlasic, Hungry Man, Sandwich Stackers, Great Starts, Open Pit, Freshbake, SonA,
Rowats, Kattus and Swift. All of our trademarks are very important to the Vlasic
Businesses. We protect our trademarks by obtaining registrations where
appropriate and aggressively opposing any infringement.
We also have a perpetual, royalty-free license to use the Swanson
trademark for certain frozen foods, as well as the right to continue to sell
fresh mushrooms under the Campbell's brand for a transition period of up to
three years from March 30, 1998. These license agreements contain standard
provisions, including those dealing with quality control and termination upon,
among other things, material breach and bankruptcy.
Although we own a number of patents covering manufacturing processes, we
do not believe the Vlasic businesses depend on any of these patents to a
material extent.
RESEARCH AND DEVELOPMENT
Our research and development is conducted at multiple sites within and
outside the U.S. The research and development organization consists of
approximately 64 people. About 46 people are located in the U.S. and the rest
are located outside the U.S. Expenditures for research and development in fiscal
1998, 1997 and 1996 were $7.9 million, $8.6 million and $8.1 million.
GOVERNMENTAL REGULATION
We are extensively regulated by the federal Food and Drug Administration
(FDA), the U.S. Department of Agriculture (USDA) and other federal, state and
local authorities in the U.S. Outside the U.S., we are regulated by the
regulatory authorities of countries in which we have operations. Such
authorities regulate the processing, packaging, storage, distribution and
labeling of our products and periodically inspect our processing facilities and
products. We believe that we are in substantial compliance with all governmental
laws and regulations.
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ENVIRONMENTAL MATTERS
We are subject to numerous federal, state and local environmental laws and
regulations of the U.S. and other countries in which we have operations. Laws
and regulations relating to worker health and workplace safety also apply to our
operations.
As is the case with many companies, we face exposure to actual or
potential claims or lawsuits involving environmental matters. We believe that
any liabilities resulting from this exposure, after taking into consideration
amounts already provided for, should not have a material adverse effect on our
businesses, financial position, or results of operations. Of course, we cannot
predict what environmental or occupational health and safety laws and
regulations will be enacted in the future or the amount of future expenditures
we may be required to make in order to comply with such new laws. We believe
that our operations are in substantial compliance with existing environmental
and occupational health and safety regulations.
EMPLOYEES
Our work force consists of approximately 8,500 employees. Of the total
number of employees, approximately 7,900 are engaged in manufacturing,
approximately 150 are engaged in marketing and sales and approximately 450 are
engaged in administration.
Our U.S. work force consists of approximately 4,900 employees,
approximately 3,200 of whom are represented by collective bargaining agreements
with various unions. Such collective bargaining agreements expire on various
dates. Outside of the U.S., our work force consists of approximately 3,600
employees, the substantial majority of whom are represented by unions. A
prolonged work stoppage or strike at any facility with union employees could
have a material adverse effect on our businesses, financial condition or results
of operations. In addition, there can be no assurance that upon the expiration
of existing collective bargaining or similar agreements new agreements will be
reached without union action or that any such new agreements will be on terms
satisfactory to us.
WORKING CAPITAL
For information relating to the company's cash and other working capital
items, see pages 15 through 24 of the company's 1998 Annual Report in the
section entitled "Management's Discussion and Analysis of Results of Operations
and Financial Condition", which are incorporated herein by reference.
SEGMENT AND GEOGRAPHIC AREA INFORMATION
For information with respect to the revenue, operating profitability and
identifiable assets attributable to the company's operating segments and foreign
operations, see pages 32 to 33 of the 1998 Annual Report in the section of the
Notes to Consolidated Financial Statements entitled "Segment and Geographic Area
Information", which is incorporated herein by reference.
RECENT DEVELOPMENTS
For information relating to recent developments, see page 24 of the 1998
Annual Report in the section entitled, "Management's Discussion and Analysis of
Results of Operations and Financial Condition" which is incorporated herein by
reference.
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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
From time to time, the company makes oral and written statements that may
constitute "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the SEC in its rules,
regulations and releases. The company desires to take advantage of the "safe
harbor" provisions in the Act for forward-looking statements made from time to
time, including, but not limited to, the forward-looking statements made in the
1998 Annual Report, including the Chairman's and the President and Chief
Executive Officer's Letter to Shareowners (pages 1 to 12), and Management's
Discussion and Analysis (pages 15 to 24) and other statements made in this Form
10-K and in other filings with the SEC.
The company cautions readers that any such forward-looking statements made
by or on behalf of the company are based on management's current expectations
and beliefs but are not guarantees of future performance. Actual results could
differ materially from those expressed or implied in the forward-looking
statements. Important facts that could cause such differences include, but are
not limited to:
- the impact of strong competitive response to the company's efforts
to leverage its brand power with product innovation and new
advertising;
- the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer
acceptance;
- the company's ability to achieve the gains anticipated from its cost
productivity programs;
- the company's ability to achieve the forecasted savings related to
the restructuring program discussed in Management's Discussion and
Analysis;
- the company's ability to find a buyer to purchase the company's
German gourmet food distribution business at a price considered
appropriate to complete the divestiture in 1999;
- the market risks associated with financial instruments which may be
subject to unforeseen economic changes, such as currency exchange
rates, inflation rates and recessionary trends;
- the impact of unforeseen economic and political changes in
international markets where the company competes such as currency
exchange rates, inflation rates, recession, foreign ownership
restrictions and other external factors over which the company has
no control;
- the company's ability to maintain capital expenditures within the
forecast limits, which are based on assumptions about infrastructure
requirements;
- the company's ability to continue to comply with covenants and the
terms of the renegotiated credit facility;
- the company's ability to implement newly purchased information
technology systems by the targeted completion date;
- the impact of Year 2000 issues associated with the Company's
business and information systems and embedded technology as well as
the information technology of its vendors, suppliers, service
providers and customers.
Vlasic has no intention of or obligation to update forward-looking statements
even if new information, future events or other circumstances make them
incorrect or misleading.
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ITEM 2. PROPERTIES
We currently own or lease 17 principal production facilities in the U.S.,
the U.K. and Argentina. Our corporate headquarters is leased. We believe that
these facilities are suitable for our operations and provide sufficient capacity
to meet our requirements for the foreseeable future. The chart below lists the
location and principal products produced at our key production facilities.
<TABLE>
<CAPTION>
FACILITY LOCATION PRINCIPAL PRODUCTS
----------------- ------------------
<S> <C>
FROZEN FOODS
Fayetteville, Arkansas Frozen Foods
Omaha, Nebraska Frozen Foods
Salford, England Frozen Foods
Glasgow, Scotland Frozen Foods
GROCERY PRODUCTS
Bridgeport, Michigan Pickles and Condiments
Imlay City, Michigan Pickles and Condiments
Millsboro, Delaware Pickles and Condiments
Stratford, England Pickles, Canned Beans and Vegetables
AGRICULTURAL PRODUCTS
Blandon, Pennsylvania Mushrooms
West Chicago, Illinois Mushrooms
Brighton, Indiana Mushrooms
Dublin, Georgia Mushrooms
Fennville, Michigan Mushrooms
Hillsboro, Texas Mushrooms
Jackson, Ohio Mushrooms
Pescadero, California Mushrooms
Rosario, Argentina Processed Beef
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company, in the ordinary course of business, is involved in various
legal proceedings. We are, however, not aware of any pending claims or
litigation the outcome of which would have a material adverse effect on our
business, financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF VLASIC
The following list of executive officers as of October 2, 1998, is
included herein as an item in Part I of this Form 10-K:
<TABLE>
<CAPTION>
DATE FIRST
ELECTED
NAME PRESENT TITLE AGE OFFICER
---- ------------- --- -------
<S> <C> <C> <C>
Robert F. Bernstock (1) President and Chief Executive Officer 47 1998
Norma B. Carter (2) Vice President, General Counsel and Corporate Secretary 51 1998
Mitchell P. Goldstein (3) Vice President - Strategic Planning and Corporate
Development
President - Vlasic Farms, Inc. 38 1998
Murray S. Kessler (4) Vice President
President - Swanson Division 39 1998
William R. Lewis (5) Vice President and Chief Financial Officer 56 1998
Mark I. McCallum (6) Vice President
President - Grocery Division 43 1998
Carlos Oliva Funes (7) Vice President
President - Swift Armour S.A. Argentina 55 1998
Rolf B. Richter (8) Vice President
President - Europe 44 1998
</TABLE>
(1) Mr. Bernstock was most recently an Executive Vice President of Campbell
Soup Company. He joined Campbell in March 1985 and was elected Corporate
Vice President and President for U.S. Soup (1990), then was promoted to
President of Campbell Soup Company, Ltd. in Canada (1992), President
International Soup (1993), President of International Grocery (1994) and
President of U.S. Grocery (1996).
(2) Ms. Carter served in the Legal Department of Campbell Soup Company since
January 1981, most recently as Vice President - Legal.
(3) Mr. Goldstein was named President of Vlasic Farms, Inc. in June 1998.
Prior to joining Vlasic, Mr. Goldstein served as the head of Strategic
Planning for the Specialty Foods division of Campbell Soup Company. Prior
to that, Mr. Goldstein served as the Director of Strategic Planning for
the U.S. Grocery Division of Campbell. He joined Campbell in March 1995 as
Director of Strategic Planning at the corporate level, where he helped
develop the company's strategic growth plan. Prior to that, Mr. Goldstein
worked with Mercer Management Consulting for eleven years, most recently
as a Vice President and Partner.
(4) Prior to joining Vlasic, Mr. Kessler served as General Manager for the
Swanson division of Campbell Soup Company. Prior to that, he served as the
Vice President of Sales and Marketing for the Pace Foods division of
Campbell. He joined Campbell in December 1986 and was promoted through
various positions, including Vice President of Sauces and Vice President -
National Sales Manager for the Meal Enhancement Group of Campbell.
(5) Prior to joining Vlasic, Mr. Lewis served as the Chief Financial Officer
of 3D Ultrasound, Inc., Air & Water Technologies Corporation, and other
similar assignments in association with Allen & Company. Prior to that,
Mr. Lewis was Chief Financial Officer of Nutri/System, Inc., Simplicity
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Holdings, Inc. and the Culbro Corporation. He has also served as Vice
President and Treasurer for Columbia Pictures, Inc. and in various
financial positions with PepsiCo Inc.
(6) Mr. McCallum was named President of the Grocery Division in June 1998.
Prior to joining Vlasic, Mr. McCallum served Campbell Soup Company as
General Manager for the Mushroom, Open Pit and the Canadian Swanson Frozen
businesses. Prior to that, he served as Vice President and General Manager
for the Sanwa, Campbell's Fresh and the Prepared Foods divisions of
Campbell. He joined Campbell in January 1993 as the General Manager for
Campbell Australia and progressed to become the Managing Director for
Campbell Asia in Hong Kong.
(7) Mr. Oliva Funes was named President of Swift-Armour in 1983 and in 1989
was appointed Vice President of Campbell Soup Company. Mr. Oliva Funes
served as Chairman for the Argentine Meat Packers Association from
1992-1995, and is now the Vice Chairman. He is a member of the Argentine
Chamber of Commerce and the Argentine Management Council.
(8) Prior to joining Vlasic, Mr. Richter served Campbell Soup Company as the
Managing Director for the frozen and Stratford-Upon-Avon businesses in the
United Kingdom and for the Kattus business in Germany. Prior to that, he
served in various positions with Campbell including Managing Director of
the Frozen Division in the United Kingdom; General Manager for the Ramen
Division; Vice President and General Manager at Campbell Canada for Frozen
Foods and Foodservice; and General Manager - Grocery Group. Mr. Richter
joined Campbell in 1985.
There is no family relationship among any of the company's executive officers or
between any such officer and any director of Vlasic. Executive officers of
Vlasic will be elected at the December 1, 1998 meeting of the Board of
Directors.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREOWNER
MATTERS
Vlasic's Common Stock is listed and principally traded on the New York
Stock Exchange. On October 2, 1998, there were 19,793 holders of record of
Vlasic Common Stock. The market price with respect to Vlasic's Common Stock is
set forth on page 45 of the 1998 Annual Report in the section of the Notes to
Consolidated Financial Statements entitled "Quarterly Data (unaudited)" which is
incorporated herein by reference. We currently anticipate that no cash dividends
will be paid on the Vlasic Common Stock in the foreseeable future, in order to
conserve cash for the repayment of debt, future acquisitions and capital
expenditures.
ITEM 6. SELECTED FINANCIAL DATA
The information called by this Item is set forth on page 48 of the 1998
Annual Report in the section entitled "Selected Financial Data" which is
incorporated herein by reference. Such information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto of the company
included in Item 8 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information presented on pages 15 through 24 of the 1998 Annual Report
in the section entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" is incorporated herein by reference. The
information presented on page 14 of the 1998 Annual Report in the section
entitled "Pro Forma Statements of Earnings (unaudited)" is incorporated herein
by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information presented on pages 21 and 22 of the 1998 Annual Report in
the section entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS
The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated September 16, 1998, appearing on pages 25 to
47 of the accompanying 1998 Annual Report to Shareowners are incorporated
by reference in this Form 10-K Annual Report. With the exception of the
aforementioned information and the information incorporated in Items 5, 6, 7, 7A
and 9, the 1998 Annual Report to Shareowners is not to be deemed filed as part
of this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Directors and Executive
Officers Stock Ownership Reports" set forth on pages 2 through 4 and page 8 of
Vlasic's Notice of Annual Meeting and Proxy Statement dated October 20, 1998
(the "1998 Proxy Statement") are incorporated herein by reference.
The information required by this Item relating to the executive officers of
Vlasic is set forth in Part I of this Report on pages 8 and 9 under the
heading "Executive Officers of Vlasic".
ITEM 11. EXECUTIVE COMPENSATION
The information set forth on pages 8 through 15 of the 1998 Proxy
Statement in the section entitled "Compensation of Executive Officers" is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth at pages 6 through 8 of
the 1998 Proxy Statement in the sections entitled "Ownership of Directors and
Executive Officers" and "Principal Shareowners" and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
- Consolidated Statements of Earnings for 1998, 1997 and 1996
- Consolidated Balance Sheets as of August 2, 1998 and August 3, 1997
- Consolidated Statements of Cash Flows for 1998, 1997, and 1996
- Consolidated Statements of Shareowners' Equity for 1998, 1997, and 1996
- Notes to Consolidated Financial Statements
- Report of Independent Accountants
The foregoing Financial Statements are incorporated into Part II, Item 8
of this Report by reference to pages 25 through 47 of the 1998 Annual
Report.
2. Financial Statement Schedules
None.
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3. Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
-- -----------
<S> <C>
3.1 Vlasic's Amended and Restated Certificate of Incorporation, as amended
through March 30, 1998, was filed with the Securities and Exchange
Commission ("SEC") with Vlasic's Form 10 dated March 5, 1998, and is
incorporated herein by reference.
3.2 Vlasic's Amended and Restated By-Laws, effective March 30, 1998, were
filed with the SEC with Vlasic's Form 10 dated March 5, 1998, and are
incorporated herein by reference.
9.1 Major Stockholders' Voting Trust Agreement dated June 2, 1990, as
amended, was filed with the SEC with Vlasic's Form 10 dated March 5,
1998, and is incorporated herein by reference.
10.1 Transition Services Agreement between Campbell Soup Company and Vlasic
Foods International Inc., effective March 30, 1998, was filed with the
SEC with Vlasic's Form 10 dated March 5, 1998, and is incorporated herein
by reference.
10.2 Benefits Sharing Agreement between Campbell Soup Company and Vlasic Foods
International Inc., effective March 30, 1998, was filed with the SEC with
Vlasic's Form 10 dated March 5, 1998, and is incorporated herein by
reference.
10.3 Swanson Trademark License Agreement between Campbell Soup Company and
Vlasic Foods International Inc., effective March 30, 1998, was filed with
the SEC with Vlasic's Form 10 dated March 5, 1998, and is incorporated
herein by reference.
10.4 Technology Sharing Agreement between Campbell Soup Company and Vlasic
Foods International Inc., effective March 30, 1998, was filed with the
SEC with Vlasic's Form 10 dated March 5, 1998, and is incorporated herein
by reference.
10.5 Tax Sharing and Indemnification Agreement between Campbell Soup Company
and Vlasic Foods International Inc., effective March 30, 1998, was filed
with the SEC with Vlasic's Form 10 dated March 5, 1998, and is
incorporated herein by reference.
10.6 Amended and Restated Credit Agreement dated as of September 30, 1998
among Vlasic Foods International Inc., the banks party hereto, Morgan
Guaranty Trust Company of New York and The Chase Manhattan Bank, as
agents.
10.7* Personal Choice, a supplemental compensation program for Vlasic
Executives, as amended.
10.8* Deferred Compensation Plan effective March 30, 1998.
10.9* 1998 Long-Term Incentive Plan effective March 30, 1998.
10.10* Annual Incentive Plan effective March 30, 1998.
10.11* Director Compensation Plan effective March 30, 1998.
10.12* Mid-Career Hire Pension Agreement for Robert F. Bernstock, President and
Chief Executive Officer, dated March 30, 1998 was filed with the SEC with
Vlasic's Form 10-Q for the Quarter ended May 3, 1998, and is incorporated
herein by reference.
10.13* Severence Protection Agreement dated June 22, 1998, with Robert F.
Bernstock, President and Chief Executive Officer.
13.1 Pages 13 through 48 of Vlasic's 1998 Annual Report to Shareowners for
the fiscal year ended August 2, 1998.
21.1 Subsidiaries of Vlasic.
23.1 Consent of Independent Accountants.
24.1 Power of Attorney.
24.2 Certified copy of the resolution of Vlasic's Board of Directors
authorizing signatures pursuant to a power of attorney.
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by Vlasic during the fourth
quarter of fiscal 1998.
* Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 14(c) of this report.
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Vlasic has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: October 20, 1998 VLASIC FOODS INTERNATIONAL INC.
By: /s/ William R. Lewis
---------------------
William R. Lewis
Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Vlasic and in
the capacity and on the date indicated.
Date: October 20, 1998
/s/ William R. Lewis /s/ Joseph Adler
- --------------------------- ---------------------------
William R. Lewis Joseph Adler
Vice President Vice President - Controller
and Chief Financial Officer
<TABLE>
<S> <C> <C> <C>
Donald J. Keller Chairman and Director }
Robert F. Bernstock President, Chief Executive }
Officer and Director } By: /s/ Norma B. Carter
Robert T. Blakely Director ----------------
Morris A. Cohen Director } Vice President, General Counsel and
Richard L. Huber Director } Corporate Secretary
Lawrence C. Karlson Director )
Shaun F. O'Malley Director }
}
</TABLE>
14
<PAGE> 1
EXECUTION COPY
EXHIBIT 10.6
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
SEPTEMBER 30, 1998
among
VLASIC FOODS INTERNATIONAL INC.
THE BANKS PARTY HERETO
THE CHASE MANHATTAN BANK,
AS SYNDICATION AGENT
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS ADMINISTRATIVE AGENT AND COLLATERAL AGENT
Arranged by
J.P. MORGAN SECURITIES INC.
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Accounting Terms and Determinations...........................28
SECTION 1.03. Types of Borrowings...........................................29
ARTICLE 2
LOANS
SECTION 2.01. Commitments to Lend...........................................29
SECTION 2.02. Notice of Committed Borrowing.................................30
SECTION 2.03. Money Market Borrowings.......................................31
SECTION 2.04. Notice to Banks; Funding of Loans.............................35
SECTION 2.05. Notes.........................................................36
SECTION 2.06. Maturity of Loans.............................................36
SECTION 2.07. Interest Rates................................................36
SECTION 2.08. Fees..........................................................40
SECTION 2.09. Optional Termination or Reduction of Commitments..............41
SECTION 2.10. Method of Electing Interest Rates.............................41
SECTION 2.11. Optional Prepayments..........................................43
SECTION 2.12. Mandatory Prepayments.........................................44
SECTION 2.13. General Provisions as to Payments.............................45
SECTION 2.14. Funding Losses................................................46
SECTION 2.15. Computation of Interest and Fees..............................46
SECTION 2.16. Regulation D Compensation.....................................47
SECTION 2.17. Asset Securitization..........................................47
SECTION 2.18. Release of Security Interests in Assets Being Sold............47
SECTION 2.19. Release of Security Interests on Security Release Date........48
SECTION 2.20. Additional Guaranteed Obligations and Additional
Company Secured Obligations......................................48
ARTICLE 3
CONDITIONS
SECTION 3.01. Conditions to Effectiveness...................................49
SECTION 3.02. Consequences of Effectiveness.................................51
SECTION 3.03. Conditions to Borrowings......................................51
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power.................................52
<PAGE> 3
PAGE
----
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention....................................................52
SECTION 4.03. Binding Effect................................................52
SECTION 4.04. Security Interests............................................52
SECTION 4.05. Financial Information.........................................52
SECTION 4.06. Litigation....................................................53
SECTION 4.07. Compliance with ERISA.........................................53
SECTION 4.08. Environmental Matters.........................................54
SECTION 4.09. Taxes.........................................................54
SECTION 4.10. Subsidiaries..................................................54
SECTION 4.11. No Regulatory Restrictions on Borrowing.......................54
SECTION 4.12. Full Disclosure...............................................55
SECTION 4.13. Information as to Equity Interests and Instruments Owned
by the Vlasic Companies..........................................55
SECTION 4.14. Year 2000 Compliance..........................................55
ARTICLE 5
COVENANTS
SECTION 5.01. Information...................................................56
SECTION 5.02. Maintenance of Property; Insurance............................59
SECTION 5.03. Conduct of Business and Maintenance of Existence..............60
SECTION 5.04. Compliance with Laws..........................................60
SECTION 5.05. Inspection of Property, Books and Records.....................60
SECTION 5.06. Use of Proceeds...............................................61
SECTION 5.07. Guarantees by Future Domestic Subsidiaries....................61
SECTION 5.08. Future Assets to Be Added to Collateral.......................61
SECTION 5.09. Mergers and Sales of Assets...................................62
SECTION 5.10. Negative Pledge...............................................63
SECTION 5.11. Limitation on Indebtedness....................................64
SECTION 5.12. Subsidiary Debt Limitation....................................65
SECTION 5.13. Debt/EBITDA Ratio.............................................65
SECTION 5.14. Fixed Charge Coverage Ratio...................................65
SECTION 5.15. Restricted Payments...........................................65
SECTION 5.16. Capital Expenditures..........................................66
SECTION 5.17. Reinvestment of Asset Sale Proceeds and Casualty
Proceeds.........................................................66
SECTION 5.18. Cash Consideration for Asset Sales............................67
SECTION 5.19. Investments and Acquisitions..................................68
SECTION 5.20. Transactions with Affiliates..................................68
SECTION 5.21. Certain Amendments............................................69
ii
<PAGE> 4
PAGE
----
SECTION 5.22. Limitations on Restrictions Affecting Subsidiaries............69
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default.............................................70
SECTION 6.02. Notice of Default.............................................72
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization.................................73
SECTION 7.03. Action by Agents..............................................73
SECTION 7.04. Consultation with Experts.....................................73
SECTION 7.05. Liability of Agents...........................................73
SECTION 7.06. Indemnification...............................................74
SECTION 7.07. Credit Decision...............................................74
SECTION 7.08. Successor Agents..............................................74
SECTION 7.09. Agents' Fees..................................................75
SECTION 7.10. Syndication Agent.............................................75
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair......75
SECTION 8.02. Illegality....................................................76
SECTION 8.03. Increased Cost and Reduced Return.............................77
SECTION 8.04. Taxes.........................................................78
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate...........80
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices.......................................................80
SECTION 9.02. No Waivers....................................................81
SECTION 9.03. Expenses; Indemnification.....................................81
SECTION 9.04. Sharing of Set-offs...........................................81
SECTION 9.05. Amendments and Waivers........................................82
SECTION 9.06. Successors and Assigns........................................82
SECTION 9.07. No Reliance on Margin Stock...................................84
SECTION 9.08. Governing Law; Submission to Jurisdiction.....................84
iii
<PAGE> 5
SECTION 9.09. Counterparts; Integration.....................................84
SECTION 9.10. WAIVER OF JURY TRIAL..........................................84
COMMITMENT SCHEDULE
RATIO-BASED PRICING SCHEDULE
RATINGS-BASED PRICING SCHEDULE
SCHEDULE 1.01 - List of Spin-Off Agreements
SCHEDULE 5.11 - Debt Outstanding at August 30, 1998
EXHIBIT A - Form of Note
EXHIBIT B - Money Market Quote Request
EXHIBIT C - Invitation for Money Market Quotes
EXHIBIT D - Money Market Quote
EXHIBIT E - Opinion of Counsel for the Company
EXHIBIT F - Opinion of Special Counsel for the Administrative Agent
EXHIBIT G - Form of Assignment and Assumption Agreement
EXHIBIT H - Subsidiary Guaranty Agreement
EXHIBIT I - Security Agreement
iv
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 30, 1998
among VLASIC FOODS INTERNATIONAL INC., the BANKS party hereto, THE CHASE
MANHATTAN BANK, as Syndication Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Administrative Agent and Collateral Agent.
WHEREAS, the Company (as defined below), Campbell Soup Company, the
Banks party hereto, The Chase Manhattan Bank, as Syndication Agent, and Morgan
Guaranty Trust Company of New York, as Administrative Agent, are parties to a
Credit Agreement dated as of February 20, 1998 (the "EXISTING CREDIT
AGREEMENT");
WHEREAS, the Company has reduced the Commitments under the Existing
Credit Agreement pro rata from an aggregate amount of $750,000,000 to an
aggregate amount of $650,000,000;
WHEREAS, the undersigned parties wish, upon satisfaction of the
conditions set forth in Section 3.01, to amend the Existing Credit Agreement to,
among other things, (i) classify a pro rata portion of each Bank's outstanding
Loans as Term Loans (which Term Loans will initially be in the aggregate
principal amount of $100,000,000); (ii) classify the remaining portion of each
Bank's Commitment as a Revolving Credit Commitment (which Revolving Credit
Commitments will initially be in the aggregate amount of $550,000,000); (iii)
modify certain financial covenants; and (iv) increase the rates of interest and
fees payable by the Company; and
WHEREAS, for the convenience of the parties hereto, the undersigned
parties wish to restate the Existing Credit Agreement as so amended (which
restatement thereof is set forth in this Agreement);
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
<PAGE> 7
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"ADJUSTED CD RATE" has the meaning set forth in Section 2.07(b).
"ADJUSTED CONSOLIDATED EBITDA" means, for any period, Consolidated
EBITDA for such period adjusted, if such period ends in Fiscal 1999, by adding
one of the following amounts: (i) if such period ends at the end of the first
Fiscal Quarter of Fiscal 1999, $35,300,000, (ii) if such period ends at the end
of the second Fiscal Quarter of Fiscal 1999, $38,300,000, (iii) if such period
ends at the end of the third Fiscal Quarter of Fiscal 1999, $29,600,000 and (iv)
if such period ends at the end of the fourth Fiscal Quarter of Fiscal 1999,
$4,600,000.
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New
York in its capacity as Administrative Agent for the Banks hereunder, and its
successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Company) duly
completed by such Bank.
"AFFILIATE" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Company (a "Controlling
Person") or (ii) any Person (other than the Company or a Subsidiary) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" means possession, directly or indirectly, of the
power to vote 10% or more of any class of voting securities of a Person or to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"AGENT" means the Administrative Agent or the Collateral Agent.
"AGREEMENT" means, when used with respect to this agreement, this
Amended and Restated Credit Agreement as amended from time to time.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"APPLICABLE PRICING SCHEDULE" means the Ratio-Based Pricing Schedule
attached hereto; provided that if on any day the Company has a Corporate Rating
2
<PAGE> 8
by S&P, Moody's or both and application of the Ratings-Based Pricing Schedule
attached hereto would result in a higher Facility Fee Rate, Euro-Dollar Margin
or CD Margin, then the "Applicable Pricing Schedule" for such day with respect
to the Facility Fee Rate, Euro-Dollar Margin or CD Margin, as the case may be,
shall be the Ratings-Based Pricing Schedule.
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSET ACQUISITION" means any transaction, or any series of related
transactions, consummated after the Effective Date, by which one or more Vlasic
Companies directly or indirectly acquires any ongoing business or all or
substantially all of the assets of any Person or division thereof, whether
through purchase of assets, merger or otherwise.
"ASSET SALE" means any sale, lease or other disposition (including
any such transaction effected by way of merger or consolidation) by any Person
of any asset, including without limitation any sale-leaseback transaction,
whether or not involving a capital lease, but excluding (i) dispositions of
inventory or obsolete, worn out or unnecessary equipment, in each case in the
ordinary course of business, (ii) dispositions of Temporary Cash Investments and
cash payments otherwise permitted under this Agreement and (iii) dispositions by
any Vlasic Company to another Vlasic Company.
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means a Committed Loan which bears interest at the
rate applicable to Base Rate Loans pursuant to the applicable Notice of
Committed Borrowing or Notice of Interest Rate Election or the provisions of
Article 8.
"BASE RATE MARGIN" means:
(a) for each day during the period from and including October 1,
1998 to but excluding January 1, 1999, a rate per annum equal to 0.375%;
3
<PAGE> 9
(b) for each day during the period from and including January 1,
1999 to but excluding April 1, 1999:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
0.250%; and
(ii) otherwise, a rate per annum equal to 0.500%;
(c) for each day during the period from and including April 1, 1999
to but excluding July 1, 1999:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
0.250%;
(ii) if the Partial Refinancing shall have been completed and
the Company shall not have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
0.500%; and
(iii) otherwise, a rate per annum equal to 1.000%;
(d) for each day during the period from and including July 1, 1999
to but excluding the Grid Pricing Commencement Date:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
0.250%;
(ii) if the Partial Refinancing shall have been completed and
the Company shall not have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
0.500%; and
(iii) otherwise, a rate per annum equal to 1.250%; and
(e) for each day on and after the Grid Pricing Commencement Date, a
rate per annum determined in accordance with the Applicable Pricing Schedule.
"BORROWING" has the meaning set forth in Section 1.03.
4
<PAGE> 10
"CAMPBELL" means Campbell Soup Company, a New Jersey corporation,
and its successors.
"CAMPBELL CLOSING DATE" means the date on which the Campbell Loans
were made.
"CAMPBELL LOANS" means loans in the aggregate principal amount of
$500,000,000 made to Campbell under the Existing Credit Agreement and assumed by
the Company upon consummation of the Spin-Off.
"CASUALTY PROCEEDS" means (i) any insurance proceeds received by any
Domestic Vlasic Company under any property insurance policy or (ii) any award or
other compensation with respect to any condemnation of property (or any transfer
or disposition of property in lieu of condemnation) received by any Domestic
Vlasic Company.
"CD BASE RATE" has the meaning set forth in Section 2.07(b).
"CD LOAN" means a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of Interest
Rate Election.
"CD MARGIN" means:
(a) for each day during the period from and including October 1,
1998 to but excluding January 1, 1999, a rate per annum equal to 1.500%;
(b) for each day during the period from and including January 1,
1999 to but excluding April 1, 1999:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.375%; and
(ii) otherwise, a rate per annum equal to 1.625%;
(c) for each day during the period from and including April 1, 1999
to but excluding July 1, 1999:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.375%;
5
<PAGE> 11
(ii) if the Partial Refinancing shall have been completed and
the Company shall not have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.625%; and
(iii) otherwise, a rate per annum equal to 2.125%;
(d) for each day during the period from and including July 1, 1999
to but excluding the Grid Pricing Commencement Date:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.375%;
(ii) if the Partial Refinancing shall have been completed and
the Company shall not have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.625%; and
(iii) otherwise, a rate per annum equal to 2.375%; and
(e) for each day on and after the Grid Pricing Commencement Date, a
rate per annum determined in accordance with the Applicable Pricing Schedule.
"CD RATE" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD REFERENCE BANKS" means The Chase Manhattan Bank, Morgan Guaranty
Trust Company of New York and Wachovia Bank, N.A.
"COLLATERAL ACCOUNTS" has the meaning set forth in Section 1 of the
Security Agreement.
"COLLATERAL AGENT" means Morgan Guaranty Trust Company of New York,
in its capacity as Collateral Agent for the Secured Parties under the Collateral
Documents, and its successors in such capacity.
"COLLATERAL DOCUMENTS" means the Security Agreement, the Security
Agreement Supplements, the Intellectual Property Security Agreements and all
other supplemental or additional security agreements, mortgages or similar
instruments delivered pursuant hereto or thereto, but excluding any UCC
financing statements.
6
<PAGE> 12
"COMBINED BASIS", when used with respect to determining any amount,
means that such amount is to be determined by combining the relevant amounts for
each of the Company's businesses in the same manner and with the same pro-forma
adjustments as were used in preparing the Company's combined pro-forma financial
statements included in the Form 10.
"COMMITTED LOAN" means a Revolving Loan or a Term Loan.
"COMMITMENT" means, with respect to any Bank at any time, an amount
equal to the sum of its Revolving Credit Commitment and the aggregate
outstanding principal amount of its Term Loans at such time.
"COMMITMENT SCHEDULE" means the Commitment Schedule attached
hereto.
"COMPANY" means Vlasic Foods International Inc., a New Jersey
corporation, and its successors.
"COMPANY CLOSING DATE" means the date on which the Company assumed
the Campbell Loans pursuant to the Existing Credit Agreement.
"COMPANY'S SHARE" means, at any date, with respect to the Debt or
interest expense of any Minority-Owned Affiliate, a percentage of such Debt or
interest expense equal to the percentage of the outstanding aggregate equity
interests (other than preferred stock) in such Minority-Owned Affiliate held at
such date by the Company and its Subsidiaries.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
additions to property, plant and equipment and other capital expenditures of the
Company and its Consolidated Subsidiaries for such period, as the same are or
would in accordance with GAAP be set forth in a consolidated statement of cash
flows of the Company and its Consolidated Subsidiaries for such period,
excluding any amount (i) paid with proceeds from the sale of assets being
replaced by the assets acquired as a result of such capital expenditures or (ii)
paid (or reasonably expected to be paid) with the proceeds of casualty
insurance, condemnation awards and the like.
"CONSOLIDATED DEBT" means, at any date, the sum of (i) the Debt of
the Company and its Consolidated Subsidiaries, determined on a consolidated
basis as of such date, and (ii) the Company's Share of the Debt of each
Minority-Owned Affiliate.
7
<PAGE> 13
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Earnings for such period plus, to the extent deducted in determining
Consolidated Net Earnings for such period, the aggregate amount of (i)
Consolidated Interest Expense, (ii) income tax expense and (iii) depreciation,
amortization and other similar non-cash charges (including, without limitation,
a write-off or write-down of assets); provided that, for any period or portion
of a period before the Spin-Off Date, "Consolidated EBITDA" shall be determined
on a Combined Basis.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum of
(i) the interest expense of the Company and its Consolidated Subsidiaries,
determined on a consolidated basis for such period, and (ii) the Company's Share
of the interest expense of each Minority-Owned Affiliate; provided that, for any
period or portion of a period before the Spin-Off Date, the interest expense of
the Company and its Consolidated Subsidiaries referred to in clause (i) shall be
determined on a Combined Basis.
"CONSOLIDATED NET EARNINGS" means, for any period, the net earnings
of the Company and its Consolidated Subsidiaries, determined on a consolidated
basis for such period, adjusted to exclude the effect of any extraordinary or
other non-recurring gain (but not loss); provided that, for any period or
portion of a period before the Spin-Off Date, "Consolidated Net Earnings" shall
be determined on a Combined Basis.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company in
its consolidated financial statements if such statements were prepared as of
such date.
"CONTINUING DIRECTOR" means (i) any individual who was a director of
the Company on August 2, 1998 and (ii) any individual who becomes a director of
the Company after August 2, 1998 and is elected or nominated for election as a
director of the Company by a majority of the individuals who were Continuing
Directors immediately before such election or nomination.
"CORPORATE RATING" means a credit rating by Moody's or S&P for the
Company's senior unsecured long-term debt securities without third-party credit
enhancement.
"CREDIT EXPOSURE" means, with respect to any Bank at any time, the
sum of (i) its Revolving Credit Exposure at such time plus (ii) the aggregate
outstanding principal amount of its Term Loans at such time.
8
<PAGE> 14
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person, and (vii) all Debt of others Guaranteed by such
Person.
"DEBT/EBITDA RATIO" means, at the end of any Fiscal Quarter, the
ratio of (i) Consolidated Debt at the end of such Fiscal Quarter to (ii)
Adjusted Consolidated EBITDA for the period of four consecutive Fiscal Quarters
then ended.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DESIGNATED AFFILIATE" means (i) Bennett Dorrance, (ii) Mary Alice
Malone, (iii) the June 2, 1990 Voting Trust described in the Form 10 or (iv) any
group of Persons (within the meaning of Section 13 or 14 of the Exchange Act)
which includes one or more of the foregoing.
"DESIGNATED INTEREST RATE AGREEMENTS" means the interest rate swap
agreements listed on Schedule 2 to the Security Agreement and any other interest
rate swap agreement or interest rate cap and floor agreement that is between the
Company and a Bank and is designated by the Company, in a notice to the
Collateral Agent, as a Designated Interest Rate Agreement for purposes of the
Financing Documents.
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<PAGE> 15
"DESIGNATED LETTER OF CREDIT" means a letter of credit issued by a Bank
and designated by the Company, in a notice to the Collateral Agent, as a
Designated Letter of Credit for purposes of the Financing Documents.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Administrative Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on the
one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"DOMESTIC LOANS" means CD Loans or Base Rate Loans or both.
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(b).
"DOMESTIC SUBSIDIARY" means any Subsidiary that is not a Foreign
Subsidiary.
"DOMESTIC VLASIC COMPANIES" means the Company and its Domestic
Subsidiaries.
"EFFECTIVE DATE" means the date on which this Agreement becomes
effective pursuant to Section 3.01.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment or the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company, are treated as a single employer under Section
414 of the Internal Revenue Code.
"EQUITY INTEREST" means (i) in the case of a corporation, any shares of
its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof or (v) any warrant, option or other right to acquire any Equity Interest
described in the foregoing clauses (i), (ii), (iii) and (iv).
"EQUITY ISSUANCE" means any issuance or sale by any Vlasic Company of
any Equity Interest in such Vlasic Company, other than (i) any issuance or sale
of such Equity Interests to any Domestic Vlasic Company and (ii) the issuance of
any Equity Interest in the Company pursuant to the exercise of employee stock
options.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
"EURO-DOLLAR MARGIN" means:
(a) for each day during the period from and including October 1, 1998
to but excluding January 1, 1999, a rate per annum equal to 1.375%;
11
<PAGE> 17
(b) for each day during the period from and including January 1, 1999
to but excluding April 1, 1999:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.250%; and
(ii) otherwise, a rate per annum equal to 1.500%;
(c) for each day during the period from and including April 1, 1999 to
but excluding July 1, 1999:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.250%;
(ii) if the Partial Refinancing shall have been completed and
the Company shall not have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.500%; and
(iii) otherwise, a rate per annum equal to 2.000%;
(d) for each day during the period from and including July 1, 1999 to
but excluding the Grid Pricing Commencement Date:
(i) if the Partial Refinancing shall have been completed and
the Company shall have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.250%;
(ii) if the Partial Refinancing shall have been completed and
the Company shall not have issued Subordinated Debt in an aggregate
principal amount of at least $200,000,000, a rate per annum equal to
1.500%; and
(iii) otherwise, a rate per annum equal to 2.250%; and
(e) for each day on and after the Grid Pricing Commencement Date, a
rate per annum determined in accordance with the Applicable Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.07(c) on the basis of a London Interbank Offered Rate.
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<PAGE> 18
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of
The Chase Manhattan Bank, Morgan Guaranty Trust Company of New York and
Wachovia Bank, N.A.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"EVENTS OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"EXISTING CREDIT AGREEMENT" has the meaning set forth in the heading of
this Agreement.
"FACILITY FEE RATE" means:
(a) for each day during the period from and including October 1, 1998
to but excluding January 1, 1999, a rate per annum equal to 0.375%;
(b) for each day during the period from and including January 1, 1999
to but excluding the Grid Pricing Commencement Date:
(i) if the Partial Refinancing shall have been completed and the
Company shall have issued Subordinated Debt in an aggregate principal
amount of at least $200,000,000, a rate per annum equal to 0.250%; and
(ii) otherwise, a rate per annum equal to 0.500%; and
(c) for each day on and after the Grid Pricing Commencement Date, a
rate per annum determined in accordance with the Applicable Pricing Schedule.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal
13
<PAGE> 19
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Morgan Guaranty Trust Company of New York on
such day on such transactions as determined by the Administrative Agent.
"FINANCIAL OFFICER" means the chief financial officer, chief accounting
officer or treasurer of the Company.
"FINANCIAL PREVIEW" means the Financial Preview dated August 14, 1998
that was provided to the Administrative Agent and the Banks.
"FINANCING DOCUMENTS" means this Agreement (including the Schedules and
Exhibits hereto), the Notes, the Subsidiary Guaranty Agreements and the
Collateral Documents.
"FISCAL QUARTER" means a fiscal quarter of the Company.
"FISCAL YEAR" means a fiscal year of the Company. A Fiscal Year is
identified by the calendar year in which it ends (e.g., "Fiscal 1999" is the
Fiscal Year that ends on August 1, 1999).
"FIXED CHARGE COVERAGE RATIO" means, at the end of any Fiscal Quarter,
the ratio of Adjusted Consolidated EBITDA for the period of four consecutive
Fiscal Quarters then ended to Consolidated Interest Expense for such period of
four consecutive Fiscal Quarters.
"FIXED RATE BORROWING" means a Borrowing comprised of Fixed Rate
Loans.
"FIXED RATE LOANS" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the rate
applicable to Base Rate Loans pursuant to Section 8.01) or any combination of
the foregoing.
"FOREIGN SUBSIDIARY" means any Subsidiary that (i) is organized under
the laws of a jurisdiction outside the United States and (ii) conducts
substantially all of its operations outside the United States, other than any
such Subsidiary that
14
<PAGE> 20
is (whether as a matter of law, pursuant to an election by such Subsidiary or
otherwise) treated as a partnership in which any Domestic Vlasic Company is a
partner or as a branch of any Domestic Vlasic Company for United States income
tax purposes.
"FORM 10" means the Company's report on Form 10, as filed with the SEC
pursuant to the Exchange Act on March 5, 1998 (which report includes the
Information Statement).
"GAAP" has the meaning set forth in Section 1.02.
"GRID PRICING COMMENCEMENT DATE" means the first day after the end of
Fiscal 1999 on which the Company shall have delivered to the Administrative
Agent a certificate of a Financial Officer setting forth the Company's
good-faith estimate of the Debt/EBITDA Ratio at the end of Fiscal 1999.
"GROUP OF LOANS" or "GROUP" means at any time a group of Revolving
Loans or a group of Term Loans, in either case consisting of (i) all such Loans
which are Base Rate Loans at such time, (ii) all such Loans which are
Euro-Dollar Loans having the same Interest Period at such time or (iii) all such
Loans which are CD Loans having the same Interest Period at such time; provided
that, if a Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it had not been so
converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise), (ii) to reimburse a
bank for amounts drawn under a letter of credit for the purpose of paying such
Debt or (iii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
15
<PAGE> 21
"GUARANTEED OBLIGATIONS" has, with respect to each Domestic Subsidiary
party to a Subsidiary Guaranty Agreement, the meaning set forth in such
Subsidiary Guaranty Agreement.
"GUARANTEED PARTIES" means the holders from time to time of the
Guaranteed Obligations.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives and
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 9.03.
"INFORMATION STATEMENT" means the draft of the Information Statement
furnished to the Banks with respect to the Spin-Off included in the Form 10.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" has the meaning set forth in
Section 1 of the Security Agreement.
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Company may
elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(2) with respect to each CD Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified
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<PAGE> 22
in the applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180
days thereafter, as the Company may elect in such notice; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(3) with respect to each Money Market LIBOR Loan, the period commencing on
the date of borrowing specified in the applicable Notice of Borrowing and ending
such whole number of months thereafter as the Company may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 30 days)
as the Company may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
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<PAGE> 23
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or otherwise
(but not including any demand deposit).
"KATTUS SALE" means the transfer or sale by the Company of
substantially all of the assets and/or quotas of its wholly-owned subsidiaries,
Theodor Kattus GmbH and Campbell Grocery Products GmbH, to a third party.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Company or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LIEN GRANTORS" has the meaning set forth in Section 1 of the Security
Agreement.
"LOAN" means a Revolving Loan, a Money Market Loan or a Term Loan,
and "LOANS" means Revolving Loans, Money Market Loans or Term Loans or
any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(c).
"MATERIAL ADVERSE EFFECT" means (i) any material adverse effect on the
business, financial position or results of operations of the Vlasic Companies,
considered as a whole, (ii) any material adverse effect on the validity, binding
effect or enforceability of any Financing Document or (iii) any material adverse
effect on the validity, perfection or priority of any Lien on any of the
Collateral created or purportedly created under the Collateral Documents.
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<PAGE> 24
"MATERIAL DEBT" means Debt (except Debt outstanding hereunder) of one
or more Vlasic Companies, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding $10,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"MINORITY-OWNED AFFILIATE" means any Person (other than a Subsidiary)
in which the Company and its Subsidiaries hold at least 20% of the aggregate
outstanding equity interests of any class.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.03(d)(ii).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan made or to be made by a
Bank pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Administrative Agent; provided that any Bank may from time to time by
notice to the Company and the Administrative Agent designate separate Money
Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may require.
"MONEY MARKET LIBOR LOAN" means a loan made or to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the rate
applicable to Base Rate Loans pursuant to Section 8.01).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(d)(ii).
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of
19
<PAGE> 25
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Equity
Issuance or incurrence of Debt, an amount equal to the cash proceeds received by
any Vlasic Company from or in respect of such Asset Sale, Equity Issuance or
incurrence of Debt (including any cash proceeds received as income or other
proceeds of any noncash proceeds of any Asset Sale), less (x) any expenses
reasonably incurred by any Vlasic Company in respect of such Asset Sale, Equity
Issuance or incurrence of Debt and (y) in the case of an Asset Sale, (i) the
amount of any Debt secured by a Lien on any asset disposed of in such Asset Sale
and discharged from the proceeds thereof and (ii) any taxes actually paid or to
be payable by any Vlasic Company (as reasonably estimated by a senior financial
or accounting officer of the Company, giving effect to the overall tax position
of the Company) in respect of such Asset Sale.
"NOTES" means promissory notes of the Company, substantially in the
form of Exhibit A hereto, evidencing the obligations of the Company to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined
in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.10(c).
"ORGANIZATIONAL DOCUMENTS" means (i) with respect to any corporation,
its certificate or articles of incorporation, by-laws and other constitutional
documents, including the certificate of designation for any series of its
preferred stock, (ii) with respect to any limited liability company, its
articles of organization and operating agreement, or other comparable documents
however named, and (iii) with respect to any partnership, its partnership
agreement.
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTIAL REFINANCING" means the prepayment of Revolving Loans pursuant
to Section 2.12(b) with the Net Cash Proceeds from the issuance of $200,000,000
aggregate principal amount of Debt and the concurrent pro rata
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<PAGE> 26
reduction of the Revolving Credit Commitments by an aggregate amount equal to
such Net Cash Proceeds.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ASSET ACQUISITION" means an Asset Acquisition if all the
following are true:
(i) the business or assets being acquired are not being
acquired principally for the purpose of engaging in a line of business
in which no Vlasic Company was engaged on the Effective Date;
(ii) the value of the consideration for such Asset
Acquisition, together with the aggregate value of the consideration for
all prior Permitted Asset Acquisitions and Permitted Investments, is
not greater than $250,000,000;
(iii) all Debt incurred or assumed to finance such Asset
Acquisition or to pay amounts required to be paid as a direct result of
such Asset Acquisition shall be Permitted Acquisition Debt;
(iv) at the time of such Asset Acquisition, the ratio of the
amount of Permitted Acquisition Debt incurred or assumed in connection
with such Asset Acquisition to the Target's EBITDA does not exceed 4.25
to 1;
(v) after giving effect to such Asset Acquisition and any
Loans the proceeds of which will be used for such acquisition, the
Company will have unused Revolving Credit Commitments of at least
$20,000,000; and
(vi) no Event of Default shall have occurred and be continuing
immediately after giving effect to such Asset Acquisition.
"PERMITTED ACQUISITION DEBT" means Debt incurred to finance a Permitted
Asset Acquisition or Permitted Investment or to pay amounts required to be paid
as a direct result of a Permitted Asset Acquisition or Permitted Investment;
provided that the cumulative aggregate principal amount of Permitted Acquisition
Debt incurred by the Vlasic Companies after the Effective Date shall not exceed
$100,000,000.
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<PAGE> 27
"PERMITTED ASSET SECURITIZATION" has the meaning set forth in Section
2.17(a).
"PERMITTED INTERCOMPANY DEBT" means Debt owed by any Vlasic Company to
any other Vlasic Company; provided that at all times until the Security
Interests are released pursuant to Section 18 of the Security Agreement, all
such Debt owing to any Domestic Vlasic Company is (i) maintained in the form of
open account balances in which the Collateral Agent has a first priority,
perfected security interest or (ii) is evidenced by Instruments (as defined in
the Security Agreement) delivered to the Collateral Agent pursuant to Section
4(c) of the Security Agreement.
"PERMITTED INVESTMENT" means the acquisition (after the Effective Date)
by a Vlasic Company of any Equity Interest in another Person if all the
following are true:
(i) such Person is not principally engaged in a line of
business in which no Vlasic Company was engaged on the Effective Date;
(ii) such Person will, after such acquisition, be a Subsidiary
of the Company;
(iii) the value of the consideration for such acquisition,
together with the aggregate value of the consideration for all prior
Permitted Asset Acquisitions and Permitted Investments, is not greater
than $250,000,000;
(iv) all Debt incurred or assumed to finance such acquisition
or to pay amounts required to be paid as a direct result of such
acquisition shall be Permitted Acquisition Debt;
(v) at the time of such acquisition, the ratio of the Target's
Debt to the Target's EBITDA does not exceed 4.25 to 1;
(vi) after giving effect to such acquisition and any Loans the
proceeds of which will be used for such acquisition, the Company will
have unused Revolving Credit Commitments of at least $20,000,000; and
(vii) no Event of Default shall have occurred and be
continuing immediately after giving effect to such acquisition.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
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"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"QUARTERLY DATES" means each March 31, June 30, September 30 and
December 31.
"REFERENCE BANKS" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REINVESTABLE PROCEEDS" has the meaning set forth in Section 5.17.
"RELEVANT ASSET" has the meaning set forth in Section 5.17.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
Credit Exposures at such time.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock other than mandatorily redeemable preferred stock)
or (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the Company's capital stock or (b) any option,
warrant or other right to acquire shares of the Company's capital stock (but not
including payments of principal, premium (if any) or interest made pursuant to
the terms of convertible debt securities prior to conversion).
"REVOLVING CREDIT COMMITMENT" means the portion of each Bank's
Commitment that is classified as a Revolving Credit Commitment, such portion
being (i) with respect to each Bank listed on the Commitment Schedule, the
amount set forth therein opposite the name of such Bank under the heading
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<PAGE> 29
"Revolving Credit Commitment" and (ii) with respect to any Assignee of a
Revolving Credit Commitment, the amount of the transferor Bank's Revolving
Credit Commitment assigned to such Assignee pursuant to Section 9.06(c), in each
case as such amount may be reduced from time to time pursuant to Section 2.09 or
2.12 or changed as a result of an assignment pursuant to Section 9.06(c).
"REVOLVING CREDIT EXPOSURE" means, as to any Bank at any time:
(i) the amount of its Revolving Credit Commitment (whether
used or unused); or
(ii) if the Revolving Credit Commitments have terminated in their
entirety, the aggregate outstanding principal amount of its Revolving
Loans and Money Market Loans at such time.
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but not including the Termination Date.
"REVOLVING LOAN" means a loan made by a Bank under this Agreement
(other than a Term Loan or a Money Market Loan); provided that, if any such loan
or loans (or portions thereof) are combined or subdivided pursuant to a Notice
of Interest Rate Election, the term "REVOLVING LOAN" shall refer to the combined
principal amount resulting from such combination or to each of the separate
principal amounts resulting from such subdivision, as the case may be.
"SEC" means the Securities and Exchange Commission.
"SECURED OBLIGATIONS" has, with respect to each Lien Grantor, the
meaning set forth in the Security Agreement.
"SECURED PARTIES" has the meaning set forth in Section 1 of the
Security Agreement.
"SECURITY AGREEMENT" means a Security Agreement substantially in the
form of Exhibit I among the Collateral Agent and the Lien Grantors, as amended
and/or supplemented from time to time.
"SECURITY AGREEMENT SUPPLEMENT" has the meaning set forth in Section
1 of the Security Agreement.
"SECURITY INTERESTS" has the meaning set forth in Section 1 of the
Security Agreement.
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"SECURITY RELEASE DATE" has the meaning set forth in Section 1 of the
Security Agreement.
"SENIOR" means, with respect to any Debt of the Company, that such Debt
is not Subordinated.
"SENIOR OBLIGATIONS" means (i) all principal of all Loans outstanding
from time to time hereunder, all interest (including without limitation Post-
Petition Interest (as defined in the Security Agreement)) on such Loans and all
other amounts (including without limitation reasonable attorneys' fees and
disbursements) now or hereafter payable by the Company pursuant to any Financing
Document, (ii) all obligations of the Company under Designated Interest Rate
Agreements, (iii) all obligations of the Company to reimburse an issuing bank
for amounts drawn under a Designated Letter of Credit or to pay fees or other
amounts to such issuing bank in connection with such Designated Letter of Credit
and (iv) any other obligation designated by the Company prior to the Security
Release Date as an additional Secured Obligation of the Company pursuant to
Section 2.20 of the Credit Agreement.
"SOVEREIGN" means (i) the central or federal executive or legislative
governmental authority of a country or (ii) any agency or instrumentality of
such governmental authority (including any central bank or central monetary
authority) to the extent the obligations of such agency or instrumentality are
fully backed by the general taxing power of such governmental authority.
"SPIN-OFF" means the distribution by Campbell of 100% of the capital
stock of the Company to shareowners of Campbell substantially in the manner
described in the Information Memorandum.
"SPIN-OFF AGREEMENTS" means the agreements listed on Schedule 1.01
hereto, in each case complying in all material respects with the description
thereof in the Information Statement.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies.
"SUBORDINATED" means Debt of the Company that satisfies the following
conditions:
(i) such Debt is unsecured and is not guaranteed by any
Subsidiary;
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(ii) no payment of the principal of such Debt is due prior to
August 31, 2003;
(iii) the covenants in respect of such Debt will be no more
restrictive than the covenants under this Agreement and the events of
default in respect of such Debt will be no more extensive than the
Events of Default; provided that a payment default in respect of such
Debt may be an Event of Default in respect of such Debt;
(iv) in the event of a bankruptcy, insolvency, liquidation,
reorganization, dissolution or other winding-up or similar event with
respect to the Company, the Senior Obligations must be paid in full
before any payment is made with respect to the principal of, premium,
if any, interest or other amounts, if any, payable in respect of such
Debt; and
(v) no cash payments may be made with respect to such Debt
during the continuance of a payment default with respect to any of the
Senior Obligations and, during the continuance of any other Event of
Default, no payment may be made with respect to such Debt until such
Event of Default is cured (or if not cured, until such Event of Default
has been continuing for more than 179 days after the Administrative
Agent notifies the Company that payments on such Debt are to be
suspended until such Event of Default is cured).
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"SUBSIDIARY GUARANTY AGREEMENT" means a Subsidiary Guaranty Agreement
substantially in the form of Exhibit H hereto.
"SUPER-MAJORITY BANKS" means, at any time, Banks having more than 75%
of the Credit Exposures at such time.
"SYNDICATION AGENT" means The Chase Manhattan Bank, in its capacity as
syndication agent for this credit facility.
"TARGET" means (i) a Person (other than a Vlasic Company) in which any
Vlasic Company acquires or proposes to acquire an Equity Interest after the
Effective Date or (ii) a business being acquired by a Vlasic Company or a Person
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<PAGE> 32
(other than a Vlasic Company) or division thereof selling all or substantially
all of its assets to a Vlasic Company, as the case may be.
"TARGET'S DEBT" means, in connection with any acquisition of an Equity
Interest in a Target by a Vlasic Company, an amount equal to the sum of (i) the
Debt of the Target and its consolidated Subsidiaries (if any), determined on a
consolidated basis as of the date of such acquisition, and (ii) any Debt
incurred or to be incurred by any Vlasic Company, the Target or any Subsidiary
of the Target to finance such acquisition and/or to make any payments of
pre-existing Debt required as a result of such acquisition, less the principal
amount of any Debt referred to in clause (i) above that is to be repaid with the
proceeds of Debt referred to in clause (ii) above.
"TARGET'S EBITDA" means (a) in connection with any acquisition of an
Equity Interest in a Target by a Vlasic Company, the Target's consolidated net
income for the most recent period of twelve months for which financial
statements of the Target are available and (b) in connection with any Asset
Acquisition, the net income attributable to the operations of the Target for the
most recent period of twelve months for which financial statements of the Target
are available (in the case of both clauses (a) and (b) above, adjusted to
exclude the effect of any extraordinary or other non-recurring gain, but not
loss) plus, in the case of both clauses (a) and (b) above, to the extent
deducted in determining such consolidated net income for such period, the
aggregate amount of (i) interest expense, (ii) income tax expense and (iii)
depreciation, amortization and other similar non-cash charges (including,
without limitation, a write-off or write-down of assets).
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct
obligations of the United States or any agency thereof or obligations guaranteed
by the United States or any agency thereof, (ii) commercial paper rated at least
A-1 by S&P and at least P-1 by Moody's, (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized or licensed under the laws of the
United States or any State thereof and has capital, surplus and undivided
profits aggregating at least $1,000,000,000, (iv) repurchase agreements with
respect to securities described in clause (i) above entered into with an office
of a bank or trust company meeting the criteria specified in clause (iii) above,
(v) securities issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States or by any political subdivision
or taxing authority thereof, and rated, in the case of long-term securities, at
least AA by S&P and Aa2 by Moody's, or, in the case of short-term securities, at
least SP1 by S&P and either MIG1 or VMIG1 by Moody's; (vi) direct obligations of
any foreign Sovereign recognized by the United States whose unguaranteed,
unsecured and otherwise unsupported long-term Sovereign U.S. dollar-denominated
debt
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obligations are rated at least AA by S&P and Aa2 by Moody's, (vii) time deposits
with, including certificates of deposit issued by, any bank or trust company
which is organized or licensed under the laws of any foreign country recognized
by the United States which has capital, surplus and undivided profits
aggregating at least $1,000,000,000 (or the equivalent thereof in another
currency) or (viii) shares of any money market or mutual fund, substantially all
of the assets of which are invested in securities and instruments of the types
set forth in clauses (i) through (vii) above, provided in each case that such
Investment matures within one year after it is acquired by the Company or a
Subsidiary.
"TERM LOANS" means the Loans (or portions thereof) classified as term
loans pursuant to Section 2.01(b).
"TERMINATION DATE" means February 20, 2003, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case the
Termination Date shall be the next preceding Euro-Dollar Business Day.
"UCC" has the meaning set forth in Section 1 of the Security Agreement.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"VLASIC COMPANIES" means the Company and its Subsidiaries.
"VLASIC FOODS BUSINESSES" means (i) with respect to any period prior to
the Spin-Off, the businesses to be owned by the Company following the Spin-Off,
as described on page 1 of the Information Statement, and (ii) with respect to
any period after the Spin-Off, the businesses of the Company and its
Subsidiaries.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
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required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants), with the combined financial statements of the
Company included in the Information Statement ("GAAP"); provided that, if the
Company notifies the Administrative Agent that the Company wishes to amend any
provision hereof to eliminate the effect of any change in generally accepted
accounting principles on the operation of such provision (or if the
Administrative Agent notifies the Company that the Required Banks wish to amend
any provision hereof for such purpose), then the Company's compliance with such
provision shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such provision is amended in a manner satisfactory to the Company
and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans by one or more Banks made or to be made to the Company
pursuant to Article 2 in each case on the same day, all of which Loans are of
the same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period. Borrowings are classified for purposes of
this Agreement either by reference to the pricing of Loans comprising such
Borrowing (e.g., a "EURO-DOLLAR BORROWING" is a Borrowing comprised of
Euro-Dollar Loans and a "CD BORROWING" is a Borrowing comprised of CD Loans) or
by reference to the provisions of Article 2 under which participation therein is
determined (i.e., a "COMMITTED BORROWING" is a Borrowing under Section 2.01 in
which all Banks participate in proportion to their Revolving Credit Commitments,
while a "MONEY MARKET BORROWING" is a Borrowing under Section 2.03 in which the
Bank participants are determined on the basis of their bids).
ARTICLE 2
LOANS
SECTION 2.01. Commitments to Lend. (a) Each Bank severally agrees, on
the terms and conditions set forth in this Agreement, to make loans to the
Company pursuant to this Section from time to time during the Revolving Credit
Period; provided that, immediately after each such loan is made:
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(i) the aggregate outstanding principal amount of such Bank's
Revolving Loans shall not exceed its Revolving Credit Commitment; and
(ii) the aggregate outstanding principal amount of all
Revolving Loans and Money Market Loans shall not exceed the aggregate
amount of the Revolving Credit Commitments.
Each Borrowing under this Section shall be in an aggregate amount of (x) in the
case of a Base Rate Borrowing, $500,000 or any larger multiple thereof or (y) in
the case of a Fixed Rate Borrowing, $5,000,000 or any larger multiple of
$1,000,000 (except that any Borrowing under this Section may be in the aggregate
amount then available within the limitations in the foregoing proviso) and shall
be made from the several Banks ratably in proportion to their respective
Revolving Credit Commitments. Within the foregoing limits, the Company may
borrow under this Section, prepay Revolving Loans to the extent permitted by
this Agreement and reborrow at any time during the Revolving Credit Period under
this Section.
(b) On the Effective Date, the Company shall deliver to the
Administrative Agent a notice specifying a Group of Euro-Dollar Loans (or
portion thereof) in the aggregate outstanding principal amount of $100,000,000
to be classified as Term Loans on the Effective Date. If only a portion of a
Group of Euro-Dollar Loans is so specified, such portion shall be allocated
ratably among the Loans comprising such Group. All outstanding Committed Loans
(or portions thereof) not so classified as Term Loans shall be classified as
Revolving Credit Loans on the Effective Date. Loans classified as Term Loans
pursuant to this subsection may be prepaid to the extent permitted by this
Agreement but are not revolving in nature and once repaid may not be reborrowed.
SECTION 2.02. Notice of Committed Borrowing. The Company shall give the
Administrative Agent notice (a "NOTICE OF COMMITTED BORROWING") not later than
(x) 12:00 Noon (New York City time) on the date of each Base Rate Borrowing, (y)
10:30 A.M. (New York City time) on the second Domestic Business Day before each
CD Borrowing and (z) 10:30 A.M. (New York City time) on the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
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(c) whether the Loans comprising such Borrowing are to bear
interest initially at the rate applicable to Base Rate Loans, a CD Rate
or a Euro-Dollar Rate; and
(d) in the case of a CD Borrowing or a Euro-Dollar Borrowing,
the duration of the initial Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period.
SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. At
any time during the Revolving Credit Period, if the Company's Corporate Rating
is Baa3 or better by Moody's or BBB- or better by S&P at such time, the Company
may, as set forth in this Section, request the Banks to make offers to make
Money Market Loans to the Company. The Banks may, but shall have no obligation
to, make such offers and the Company may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Company wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto so as to be received not
later than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business
Day prior to the date of Borrowing proposed therein, in the case of a LIBOR
Auction or (y) the Domestic Business Day next preceding the date of Borrowing
proposed therein, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Company and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction;
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000;
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period; and
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate.
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The Company may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Company and the Administrative Agent may agree) of any
other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Administrative Agent shall send to the Banks by
telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Company to each Bank to submit Money Market Quotes offering to
make the Money Market Loans to which such Money Market Quote Request relates in
accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New
York City time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or date as the Company and the
Administrative Agent shall have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Administrative Agent or such
affiliate notifies the Company of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and
6, any Money Market Quote so made shall be irrevocable except with the written
consent of the Administrative Agent given on the instructions of the Company.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
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(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount
(w) may be greater than or less than the Revolving Credit
Commitment of the quoting Bank, (x) must be $5,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as
to the principal amount of Money Market Loans for which offers
being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate (the
"MONEY MARKET MARGIN") offered for each such Money Market
Loan, expressed as a percentage (specified to the nearest
1/10,000th of 1%) to be added to or subtracted from such base
rate,
(D) in the case of an Absolute Rate Auction, the rate
of interest per annum (specified to the nearest 1/10,000th of
1%) (the "MONEY MARKET ABSOLUTE RATE") offered for each such
Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by
subsection (d)(ii) above,
(B) contains qualifying, conditional or similar
language,
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market
Quotes, or
(D) arrives after the time set forth in subsection
(d)(i).
(e) Notice to the Company. The Administrative Agent shall promptly
notify the Company of the terms of (x) any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) any Money Market Quote
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that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Company shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by the Company. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Company and the Administrative Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), the Company shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to subsection (e). In the case of acceptance, such
notice (a "NOTICE OF MONEY MARKET BORROWING") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Company may accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market
Borrowing must be $5,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be;
(iv) the Company may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement; and
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(v) immediately after such Money Market Borrowing is made, the
aggregate outstanding principal amount of all Revolving Loans and Money
Market Loans shall not exceed the aggregate amount of the Revolving
Credit Commitments.
(g) Allocation by Administrative Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market Absolute Rates, as
the case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent may
deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Company.
(b) Not later than (i) 1:30 P.M. (New York City time) on the date of
each Base Rate Borrowing and (ii) 12:00 Noon (New York City time) on the date of
each CD Borrowing or Euro-Dollar Borrowing, each Bank participating therein
shall make available its share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Administrative Agent at its
address referred to in Section 9.01. Unless the Administrative Agent determines
that any applicable condition specified in Article 3 has not been satisfied, the
Administrative Agent will make the funds so received from the Banks available to
the Company at the Administrative Agent's aforesaid address.
(c) Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not make available
to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsection (b) of this Section and the Administrative Agent may, in reliance
upon such assumption, make a corresponding amount available to the Company on
such date. If and to the extent that such Bank shall not have so made such share
available to the Administrative Agent, such Bank and the Company severally agree
to repay to the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Company until the day such amount is
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repaid to the Administrative Agent, at (i) in the case of the Company, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay such corresponding amount to
the Administrative Agent, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Company's obligation to repay the Loans of
each Bank shall be evidenced by a single Note payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Company and the Administrative
Agent, request that the Company's obligation to repay such Bank's Loans of a
particular type be evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate modifications to
reflect the fact that it evidences solely Loans of the relevant type. Each
reference in this Agreement to the "Note" of such Bank shall be deemed to refer
to and include any or all of such Notes, as the context may require.
(c) Each Bank shall record the date, amount and type of each Loan made
by it, and the date and amount of each payment of principal made with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding; provided that a Bank's failure to make (or any error
in making) any such recordation or endorsement shall not affect the Company's
obligations hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Company so to endorse its Note and to attach to and make a
part of such Note a continuation of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall mature,
and the principal amount thereof shall be due and payable, on the Termination
Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the sum of
the Base
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Rate Margin (if any) for such day plus the Base Rate for such day. Such interest
shall, subject to subsection (f) below, be payable quarterly in arrears on each
Quarterly Date and, with respect to the principal amount of any Base Rate Loan
converted to a CD Loan or a Euro-Dollar Loan, on the day such principal amount
is so converted. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause 2(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall, subject to subsection (f) below, be payable
for each Interest Period on the last day thereof and, if such Interest Period is
longer than 90 days, at intervals of 90 days after the first day thereof. Any
overdue principal of or interest on any CD Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 1% plus
the rate applicable to Base Rate Loans for such day.
The "ADJUSTED CD RATE" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ] *
ACDR =
----------- + AR
[ 1.00 -DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------
* The fraction in brackets being rounded upward, if necessary, to the
next higher 1/100th of 1%.
The "CD BASE RATE" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100th of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value
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from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"DOMESTIC RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"ASSESSMENT RATE" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall, subject to subsection (f) below, be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than three months, at intervals of three months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16th of
1%) of the respective rates per annum at which deposits in dollars are offered
to each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
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<PAGE> 44
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next higher
1/100th of 1%) by dividing (x) the average (rounded upward, if necessary, to the
next higher 1/16th of 1%) of the respective rates per annum at which one day
(or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than three months as the
Administrative Agent may select) deposits in dollars in an amount approximately
equal to such overdue payment due to each of the Euro-Dollar Reference Banks are
offered to such Euro-Dollar Reference Bank in the London interbank market for
the applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a)
or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 1%
plus the rate applicable to Base Rate Loans for such day) and (ii) the sum of 1%
plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan immediately before such payment was due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 1%
plus the rate applicable to Base Rate Loans for such day.
(f) The Administrative Agent shall determine each interest rate and
Facility Fee Rate hereunder. With respect to any interest or fees accrued and
payable in the period from and including the Grid Pricing Commencement Date to
and including the date the Company delivers financial statements with respect to
Fiscal 1999 pursuant to Section 5.01(a), interest and fees shall be calculated
and shall be payable on the basis of the Company's good faith estimate of the
Debt/EBITDA Ratio at the end of Fiscal 1999; provided that if the correct amount
of such interest and fees (determined by reference to the Debt/EBITDA Ratio at
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<PAGE> 45
the end of Fiscal 1999) shall be greater than the amount theretofore paid by the
Company, the Company shall, within three Business Days after receipt of notice
from the Administrative Agent specifying the additional interest and fees to be
paid, pay such additional interest and fees to the Administrative Agent for the
account of the Banks. The Administrative Agent shall give prompt notice of each
rate determined by it to the Company and the participating Banks, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Reference Banks or, if
none of such quotations is available on a timely basis, the provisions of
Section 8.01 shall apply.
SECTION 2.08. Fees. (a) Facility Fees. The Company shall pay to the
Administrative Agent, for the account of the Banks ratably in proportion to
their Credit Exposures, a facility fee calculated for each day at the Facility
Fee Rate for such day on the aggregate amount of the Credit Exposures on such
day. Such facility fee shall accrue for each day from and including October 1,
1998 to but excluding the day on which the Credit Exposures are reduced to zero.
Such fees shall be payable quarterly in arrears on each Quarterly Payment Date
and on the day on which the Revolving Credit Commitments terminate in their
entirety (and, if later, on the day on which the Credit Exposures are reduced to
zero).
(b) Upfront Fees.
(i) On the Effective Date, the Company shall pay to the
Administrative Agent, for the account of each Bank, a fee equal to
0.15% of such Bank's Credit Exposure on the Effective Date.
(ii) If the Partial Refinancing shall not have been completed
before January 1, 1999, the Company shall, on January 4, 1999, pay to
the Administrative Agent for the account of each Bank an additional fee
equal to 0.10% of such Bank's Credit Exposure on January 1, 1999.
(iii) If the Partial Refinancing shall not have been completed
before July 1, 1999, the Company shall, on July 1, 1999, pay to the
Administrative Agent for the account of each Bank an additional fee
equal to 0.25% of such Bank's Credit Exposure on such date.
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<PAGE> 46
SECTION 2.09. Optional Termination or Reduction of Commitments. (a)
During the Revolving Credit Period, the Company may, upon at least three
Domestic Business Days' notice to the Administrative Agent, (i) terminate the
Revolving Credit Commitments at any time, if no Revolving Loans or Money Market
Loans are outstanding at such time, or (ii) ratably reduce from time to time by
an aggregate amount of $10,000,000 or a larger multiple of $1,000,000, the
aggregate amount of the Revolving Credit Commitments in excess of the aggregate
outstanding principal amount of all Revolving Loans and Money Market Loans. The
Administrative Agent shall give prompt notice to the Banks of any such
termination or reduction of the Revolving Credit Commitments.
(b) Unless previously terminated, the Revolving Credit Commitments
shall terminate in their entirety on the Termination Date.
SECTION 2.10. Method of Electing Interest Rates. (a) Each Euro-Dollar
Loan made before the Effective Date that remains outstanding after the Effective
Date shall, subject to Articles 6 and 8, continue to bear interest, until the
end of the Interest Period applicable to it on the Effective Date at the
applicable rate established under the Existing Credit Agreement, except that (i)
for each day on and after the Effective Date, the applicable Euro-Dollar Margins
shall be those specified in this Agreement and (ii) the interest rate applicable
to such Loans shall be subject to change after the Effective Date as provided in
subsection (c) of this Section. The foregoing sentence shall also apply to any
such outstanding Loans (or portions thereof) that are reclassified as Term Loans
on the Effective Date. Any Base Rate Loans outstanding on the Effective Date
shall continue as Base Rate Loans until they are repaid or converted to CD Loans
or Euro-Dollar Loans as provided in subsection (c) of this Section.
(b) The Loans included in each Committed Borrowing made by the Company
on or after the Effective Date shall bear interest initially at the type of rate
specified by the Company in the applicable Notice of Committed Borrowing.
(c) The Company may from time to time elect to change or continue the
type of interest rate borne by each outstanding Group of Loans (subject in each
case to the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Company may elect
to convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Company may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day
or to Euro-Dollar Loans as of any Euro-Dollar Business Day or may elect
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<PAGE> 47
to continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.14 in the case of any such conversion effective on
any day other than the last day of the then current Interest Period
applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Company may
elect to convert such Loans to Base Rate Loans or CD Loans as of any
Euro-Dollar Business Day or may elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, subject to Section
2.14 in the case of any such conversion effective on any day other than
the last day of the then current Interest Period applicable to such
Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent not later than 10:00 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective (unless the relevant
Loans are to be converted to Domestic Loans of the other type or are CD Loans to
be continued as CD Loans for an additional Interest Period, in which case such
notice shall be delivered to the Administrative Agent not later than 10:00 A.M.
(New York City time) on the second Domestic Business Day before such conversion
or continuation is to be effective). A Notice of Interest Rate Election may, if
it so specifies, apply to only a portion of the aggregate principal amount of
the relevant Group of Loans; provided that (i) such portion is allocated ratably
among the Loans comprising such Group and (ii) the portion to which such Notice
applies, and the remaining portion to which it does not apply, are each (except
in the case of Base Rate Loans) $5,000,000 or any larger multiple of $1,000,000.
(d) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans being converted are to be Fixed
Rate Loans, the duration of the next succeeding Interest Period
applicable thereto; and
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<PAGE> 48
(iv) if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(e) Upon receipt of a Notice of Interest Rate Election from the
Company pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Company. If the Company fails to deliver a timely
Notice of Interest Rate Election to the Administrative Agent for any Group of CD
Loans or Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans
on the last day of the then current Interest Period applicable thereto.
SECTION 2.11. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Loans to Section 2.14, the Company may (i) upon delivering notice to
the Administrative Agent not later than 12:00 Noon (New York City time) on the
on the date of prepayment, prepay any Base Rate Loans (or any Money Market
Borrowing bearing interest at the rate applicable to Base Rate Loans pursuant to
Section 8.01), (ii) upon delivering notice to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the third Domestic Business Day prior to
the date of prepayment, prepay any Group of CD Loans and (iii) upon delivering
notice to the Administrative Agent not later than 11:00 A.M. (New York City
time) on the third Euro-Dollar Business Day prior to the date of prepayment,
prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or
from time to time in part in amounts aggregating (x) $500,000 or any larger
multiple thereof in the case of Base Rate Loans or (y) $5,000,000 or any larger
multiple of $1,000,000 in the case of CD Loans or Euro-Dollar Loans, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Group.
(b) Except as provided in subsection (a) above, the Company may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share (if any) of such prepayment and such notice
shall not thereafter be revocable by the Company.
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SECTION 2.12. Mandatory Prepayments. (a) Asset Sales. If after the
Effective Date any Domestic Vlasic Company receives any Net Cash Proceeds of any
Asset Sale, the Company shall prepay (subject to subsection (e) below) an
aggregate principal amount of Loans equal to 100% of such Net Cash Proceeds
(excluding any portion thereof reinvested as permitted by Section 5.17). Within
one Domestic Business Day after the closing of any such Asset Sale, the Net Cash
Proceeds received at such closing shall be deposited in a Collateral Account and
held in such Collateral Account until such Net Cash Proceeds (or an amount equal
thereto) are reinvested as permitted by Section 5.17 or applied to prepay Loans.
(b) Incurrence of Debt. If after the Effective Date any Vlasic Company
receives any Net Cash Proceeds from the incurrence of any Debt that is not
permitted by any clause of Section 5.11 other than clause (c) thereof, the
Company shall prepay (subject to subsection (e) below) an aggregate principal
amount of Loans equal to 100% of such Net Cash Proceeds.
(c) Equity Issuances. If after the Effective Date (i) any Domestic
Vlasic Company receives any Net Cash Proceeds from any Equity Issuance and (ii)
at the time of such receipt, the average of the Debt/EBITDA Ratios set forth in
the two officer's certificates then most recently delivered pursuant to Section
5.01(c) is equal to or higher than 4:1, the Company shall prepay (subject to
subsection (e) below) an aggregate principal amount of Loans equal to 50% of
such Net Cash Proceeds.
(d) Casualty Proceeds. If after the Effective Date, any Domestic
Vlasic Company receives any Casualty Proceeds, the Company shall prepay (subject
to subsection (e) below) an aggregate principal amount of Loans equal to 100% of
such Casualty Proceeds (excluding any portion thereof reinvested as permitted by
Section 5.17). Promptly upon receipt of any such Casualty Proceeds, such
Casualty Proceeds shall be deposited in a Collateral Account and held in such
Collateral Account until such Casualty Proceeds (or an amount equal thereto) are
reinvested as permitted by Section 5.17 or applied to prepay Loans.
(e) Timing of Prepayment. Each prepayment required by subsection (a)
or (d) of this Section shall be made within the time specified in Section 5.17.
Each prepayment required by subsection (b) or (c) of this Section shall be made
within two Domestic Business Days after any Vlasic Company (or the Collateral
Agent) receives the relevant Net Cash Proceeds. Notwithstanding the foregoing,
if the aggregate principal amount of the Loans required to be prepaid on any
date pursuant to this Section is less than $5,000,000, such prepayment shall be
deferred until the aggregate principal amount of the Loans required to be
prepaid pursuant to this Section (including such deferred amounts) is not less
than $5,000,000.
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(f) Allocation of Prepayments. Each prepayment of the Loans required
under this Section shall be applied first to the Revolving Loans until they are
repaid in full and then to the Term Loans until they are repaid in full.
(g) Interest. Each prepayment of principal of the Loans under this
Section shall be made together with interest accrued on the amount prepaid to
the date of payment.
(h) Notice of Prepayment. The Company shall give the Administrative
Agent, before 11:00 A.M. (New York City time) on the third Domestic Business Day
immediately preceding the date of each mandatory prepayment, a prepayment notice
specifying the date and amount of such prepayment and describing the event or
events which require such prepayment to be made. Upon receiving such prepayment
notice, the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share of such prepayment.
(i) Reduction of Revolving Credit Commitments. Concurrently with any
mandatory prepayment of Revolving Credit Loans pursuant to this Section, the
Revolving Credit Commitments shall be ratably reduced by an aggregate amount
equal to the amount of such prepayment; provided that no such reduction of the
Revolving Credit Commitments shall be required if and to the extent that such
mandatory prepayment is made with Net Cash Proceeds received in respect of the
Kattus Sale.
(j) Amendments and Waivers. The dates and amounts of any prepayments
that may be required pursuant to this Section are not presently ascertainable
and are not intended to be dates "fixed" for any such payment for purposes of
Section 9.05(iii). Accordingly, the provisions of this Section may be amended or
waived with the consent of the Company and the Required Banks.
SECTION 2.13. General Provisions as to Payments. (a) The Company shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 9.01 and without
reduction by reason of any set-off or counterclaim. The Administrative Agent
will promptly distribute to each Bank its ratable share of each such payment
received by the Administrative Agent for the account of the Banks. Whenever any
payment of principal of, or interest on, the Domestic Loans or of fees shall be
due on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment thereof shall
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<PAGE> 51
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the Money Market Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Company before the date on which any payment is due to the Banks hereunder
that the Company will not make such payment in full, the Administrative Agent
may assume that the Company has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount
equal to the amount then due to such Bank. If and to the extent that the Company
shall not have so made such payment, each Bank shall repay to the Administrative
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the day such amount is distributed to such
Bank until the day such Bank repays such amount to the Administrative Agent, at
the Federal Funds Rate.
SECTION 2.14. Funding Losses. If the Company makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.07(d), or if the Company fails to
borrow, prepay, convert or continue any Fixed Rate Loans after notice has been
given to any Bank in accordance with Section 2.04(a), 2.10(e), 2.11(c) or
2.12(h), the Company shall reimburse each Bank within 15 days after demand for
any resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or conversion or
failure to borrow, prepay, convert or continue; provided that such Bank shall
have delivered to the Company a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
SECTION 2.15. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed
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on the basis of a year of 360 days and paid for the actual number of days
elapsed (including the first day but excluding the last day).
SECTION 2.16. Regulation D Compensation. Each Bank may require the
Company to pay, contemporaneously with each payment of interest on each of such
Bank's Euro-Dollar Loans, additional interest on such Euro-Dollar Loan at a rate
per annum determined by such Bank up to but not exceeding the excess of (i) (A)
the applicable London Interbank Offered Rate divided by (B) one minus the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank wishing to require payment of such additional interest (x) shall
so notify the Company and the Administrative Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after the giving of
such notice, and (y) shall notify the Company at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar Loans of
the amount then due it under this Section.
SECTION 2.17. Asset Securitization. (a) No Vlasic Company shall sell or
otherwise dispose of its accounts receivable before the Security Release Date.
If any Vlasic Company sells or otherwise disposes of its accounts receivable on
or after the Security Release Date (a "PERMITTED ASSET SECURITIZATION"), the
Company shall, within three Euro-Dollar Business Days after any net cash
proceeds are received from the lenders or purchasers of securities in such
Permitted Asset Securitization, ratably reduce the Revolving Credit Commitments
by an aggregate amount equal to such net cash proceeds.
(b) Concurrently with each reduction of the Revolving Credit
Commitments pursuant to subsection (a), the Company shall prepay Revolving Loans
in the manner provided in Section 2.11, to the extent (if any) required so that
no Bank has Revolving Loans outstanding in an aggregate principal amount in
excess of its Revolving Credit Commitment as so reduced.
SECTION 2.18. Release of Security Interests in Assets Being Sold. The
Administrative Agent shall from time to time instruct the Collateral Agent to
(and the Collateral Agent shall) release specific assets (but not all or
substantially all the Collateral) from the Security Interests pursuant to
Section 18 of the Security Agreement if:
(i) the Administrative Agent shall have received a written
request for such release signed by a Financial Officer stating that (x)
the assets to be released are being sold, (y) the sale thereof does not
violate
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Section 2.17, 5.09 or 5.18 and (z) immediately before and immediately
after such sale, no Event of Default shall have occurred and be
continuing;
(ii) arrangements satisfactory to the Administrative Agent
have been made so that such release will become effective concurrently
with the closing of such sale; and
(iii) in the case of an Asset Sale, arrangements satisfactory
to the Administrative Agent have been made to deposit an amount equal
to the Net Cash Proceeds payable at the closing of such Asset Sale in a
cash collateral account and apply it to prepay Loans as required by
Section 2.12.
SECTION 2.19. Release of Security Interests on Security Release Date.
At any time on or after the Security Release Date, the Company may request the
Administrative Agent to instruct the Collateral Agent to release the Collateral
from the Security Interests pursuant to Section 18 of the Security Agreement.
Promptly upon receiving such request, the Administrative Agent shall confirm
that the Security Release Date has occurred and, if it has, shall instruct the
Collateral Agent to release all the Collateral from the Security Interests.
SECTION 2.20. Additional Guaranteed Obligations and Additional Company
Secured Obligations. (a) The Company may from time to time designate its
obligations to any Bank under any interest rate swap agreement or any interest
rate cap and floor agreement (collectively, "INTEREST RATE AGREEMENTS") as an
additional Guaranteed Obligation and as an additional Secured Obligation of the
Company for purposes of the Financing Documents by delivering to the
Administrative Agent and the Collateral Agent (i) a certificate signed by a
Financial Officer identifying such interest rate agreement, stating that it is
designated as a Designated Interest Rate Agreement for purposes of the Financing
Documents and specifying the Bank that is the counterparty to such interest rate
agreement and (ii) a copy of such agreement.
(b) The Company may from time to time designate its obligation to
reimburse any Bank for drawings under a letter of credit issued by such Bank as
an additional Guaranteed Obligation and as an additional Secured Obligation of
the Company for purposes of the Financing Documents by delivering to the
Administrative Agent and the Collateral Agent a certificate signed by a
Financial Officer identifying such letter of credit and specifying the amount
available to be drawn thereunder, stating that it is designated as a Designated
Letter of Credit for purposes of the Financing Documents and specifying the Bank
that issued such letter of credit.
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(c) The Company may from time to time, with the prior written consent
of the Administrative Agent and Collateral Agent (which in each case shall not
be unreasonably withheld) and the Super-Majority Banks (which consent shall be
in their sole discretion), designate any other obligation of the Company as an
additional Guaranteed Obligation or an additional Secured Obligation of the
Company or both for purposes of the Financing Documents by delivering to the
Administrative Agent and the Collateral Agent a certificate signed by a
Financial Officer identifying the obligation so designated, stating that such
obligation is designated as a Guaranteed Obligation and/or Secured Obligation of
the Company for purposes of the Financing Documents and specifying the name and
address of the holder of such obligation or of a trustee, agent or similar
representative designated to supply information with respect to such additional
Guaranteed Obligation or Secured Obligation to the Administrative Agent pursuant
to the relevant Subsidiary Guaranty Agreement and/or to the Collateral Agent as
contemplated by Section 20 of the Security Agreement.
ARTICLE 3
CONDITIONS
SECTION 3.01. Conditions to Effectiveness. This Agreement shall become
effective when all of the following conditions shall have been satisfied:
(a) the Administrative Agent shall have received from each of
the Company, the Collateral Agent and the Required Banks either a
counterpart of this Agreement signed by such party or facsimile or
other written evidence satisfactory to the Administrative Agent
confirming that such party has signed a counterpart thereof;
(b) the Administrative Agent shall have received a counterpart
of a Subsidiary Guaranty Agreement signed by each Domestic Subsidiary;
(c) the Administrative Agent shall have received a counterpart
of the Security Agreement, signed by the Collateral Agent, the Company
and each Domestic Subsidiary, and the Company shall have made
arrangements satisfactory to the Administrative Agent for the delivery
to the Collateral Agent of stock certificates evidencing all the
capital stock listed on Schedule 1 to the Security Agreement and
required to be pledged pursuant to Section 4(a) thereof (together with
signed stock powers relative to such certificates) not later than 2
Domestic Business Days after the Effective Date;
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(d) the Administrative Agent shall have received a counterpart
of each Intellectual Property Security Agreement listed on Schedule 3
to the Security Agreement, signed by the appropriate Lien Grantor
listed on such Schedule 3;
(e) the Collateral Agent shall have received all signed UCC
financing statements reasonably requested by the Collateral Agent to
perfect the Security Interests in the Collateral;
(f) the Administrative Agent shall have received notice from
the Company as required by Section 2.01(b), specifying the Loans (or
portions thereof) to be classified as Term Loans on the Effective Date;
(g) the Administrative Agent shall have received an opinion of
the General Counsel of the Company dated the Effective Date,
substantially in the form of Exhibit E hereto, and covering such
additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request;
(h) the Administrative Agent shall have received an opinion of
Davis Polk & Wardwell, special counsel for the Administrative Agent,
dated the Effective Date, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(i) the representations and warranties of the Domestic Vlasic
Companies contained in this Agreement and the other Financing Documents
shall be true on and as of the Effective Date;
(j) no Default shall have occurred and be continuing under
this Agreement; and
(k) the Administrative Agent shall have received all documents
it may reasonably request relating to the existence of each Domestic
Vlasic Company, the corporate authority for and the validity of each
Financing Document, the creation and perfection of the Security
Interests contemplated by the Collateral Documents and any other
matters relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
Promptly after this Agreement becomes effective, the Administrative Agent shall
notify the Company and the Banks thereof, and such notice shall be conclusive
and binding on all parties hereto.
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SECTION 3.02. Consequences of Effectiveness. (a) When this Agreement
becomes effective, the Existing Credit Agreement will be automatically amended
and restated, without further action by any of the parties hereto, to read in
full as set forth in this Agreement.
(b) On and after the Effective Date, the rights and obligations of the
parties to this Agreement shall be governed by the provisions of this Agreement
and the other Financing Documents. The rights and obligations of the parties to
the Existing Credit Agreement with respect to the period prior to the Effective
Date (and any liability that Campbell may have with respect to the
representations and warranties made by it in or pursuant to the Existing Credit
Agreement) shall continue to be governed by the provisions of the Existing
Credit Agreement as in effect prior to the Effective Date (except that the Base
Rate Margin, CD Margin, Euro-Dollar Margin and Facility Fee Rate provided for
herein shall apply on and after October 1, 1998). Interest Periods applicable to
Loans outstanding on the Effective Date shall not be broken solely by reason of
the effectiveness hereof, and unpaid interest and facility fees accrued to the
Effective Date under the Existing Credit Agreement shall (subject to the
foregoing change in rates as of October 1, 1998) be payable together with
interest and facility fees accrued hereunder on and after the Effective Date
(but without duplication) on the dates specified herein.
SECTION 3.03. Conditions to Borrowings. The obligation of any Bank to
make any Loan to the Company on the occasion of any Borrowing on or after the
Effective Date is subject to the satisfaction of the following conditions:
(a) this Agreement shall have become effective on or before
November 1, 1998;
(b) the Administrative Agent shall have received a Notice of
Borrowing as required by Section 2.02 or 2.03, as the case may be;
(c) immediately after such Borrowing, no Default shall have
occurred and be continuing; and
(d) the representations and warranties of the Domestic Vlasic
Companies contained in this Agreement and the other Financing Documents
shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company that the conditions specified in clauses (c) and (d) of this Section
are satisfied on the date of such Borrowing.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. Each Vlasic Company is a
corporation, limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has all corporate or other
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Vlasic Company of
the Financing Documents to which it is a party are within its corporate or other
powers, have been duly authorized by all necessary corporate or other action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its Organizational Documents or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon it or result in the creation or imposition of any Lien (other than
Liens created by the Collateral Documents) on any of its assets.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Company, and each other Financing Document when
executed and delivered by any Domestic Vlasic Company as contemplated herein or
therein will constitute a valid and binding obligation of such Vlasic Company,
in each case enforceable in accordance with its terms except as the same may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION 4.04. Security Interests. On and at all times after the
Effective Date, the Collateral Documents will create valid Security Interests in
the Collateral from time to time covered or purportedly covered thereby. Such
Security Interests will be perfected and/or recorded as to each item of
Collateral when or promptly after it is included in the Collateral, and will be
prior to all other Liens (except Liens permitted by Section 5.10) on such item
of Collateral until the applicable Security Interest is released pursuant to
Section 18 of the Security Agreement.
SECTION 4.05. Financial Information. (a) The consolidated balance
sheet of the Company and its Subsidiaries as of August 2, 1998 and the related
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consolidated statements of earnings, of cash flows and of shareowners' equity
for the Fiscal Year then ended, reported on by Price Waterhouse LLP and
delivered to the Banks, fairly present, in conformity with generally accepted
accounting principles, the consolidated financial position of the Vlasic Foods
Businesses as of such date and their consolidated results of operations and cash
flows for such Fiscal Year.
(b) The pro forma consolidated balance sheet of the Company and its
Subsidiaries as of August 2, 1998 and the related pro forma consolidated
statements of earnings, of cash flows and of shareowners' equity for the Fiscal
Year then ended, copies of which have been delivered to the Banks, would fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Vlasic Foods Businesses as of such date
and their consolidated results of operations and cash flows for such Fiscal Year
if the Campbell Loans had been assumed by the Company at the beginning of such
Fiscal Year.
(c) There has been no material adverse change since August 2, 1998
in the business, financial position or results of operations of the Vlasic Foods
Businesses, considered as a whole, as compared with the consolidated balance
sheet as of August 2, 1998 referred to in subsection (a) above and the earnings
statement and free cash flow projections for Fiscal 1999 included in the
Financial Preview.
SECTION 4.06. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Company threatened against or
affecting, the Company or any of its Subsidiaries (or any prior owner of any of
the Vlasic Foods Businesses) before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility of an
adverse decision which (i) could have a Material Adverse Effect or (ii) in any
manner draws into question the validity or enforceability of any Financing
Document or Spin-Off Agreement.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Internal
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Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.08. Environmental Matters. In the ordinary course of their
businesses, the prior owners of the Vlasic Foods Businesses reviewed the effect
of Environmental Laws on the business, operations and properties of the Vlasic
Foods Businesses, and after the Spin-Off Date the Company has and will continue
to review the effect of Environmental Laws on the business, operations and
properties of the Company and its Subsidiaries. In the course of such reviews,
such prior owners and the Company have identified and evaluated, and the Company
will continue to identify and evaluate, associated liabilities and costs
(including, without limitation, any capital or operating expenditures required
for clean-up or closure of properties presently or previously owned, any capital
or operating expenditures required to achieve or maintain compliance with
environmental protection standards imposed by law or as a condition of any
license, permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations conducted thereat, any costs or
liabilities in connection with off-site disposal of wastes or Hazardous
Substances, and any actual or potential liabilities to third parties, including
employees, and any related costs and expenses). On the basis of these reviews,
the Company has reasonably concluded that such associated liabilities and costs,
including the costs of compliance with Environmental Laws, are unlikely to have
a Material Adverse Effect.
SECTION 4.09. Taxes. The Company and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Company or any
Subsidiary. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Company, adequate.
SECTION 4.10. Subsidiaries. The Company owns, free and clear of
Liens, all outstanding Equity Interest in each of its Subsidiaries and all
shares of capital stock included in such Equity Interests are validly issued,
fully paid and non-assessable.
SECTION 4.11. No Regulatory Restrictions on Borrowing. The Company is
not (i) an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company within the meaning of the Public Utility Holding
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Company Act of 1935, as amended, or (iii) otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
SECTION 4.12. Full Disclosure. All information (other than
projections) heretofore furnished by the Company to the Administrative Agent or
any Bank for purposes of or in connection with this Agreement or any transaction
contemplated hereby does not, and all such information hereafter furnished by
the Company to the Administrative Agent or any Bank will not, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were or will be made, not misleading. The projections included in the
Financial Preview were based on reasonable assumptions and as of their date
represented an estimate of the future performance of the Company and its
Subsidiaries that was no better than the Company's best estimate thereof at such
date.
SECTION 4.13. Information as to Equity Interests and Instruments
Owned by the Vlasic Companies. (a) Schedule 1 to the Security Agreement sets
forth a correct and complete list, as of the close of business on the Effective
Date, identifying each Subsidiary, its jurisdiction of organization, its
outstanding Equity Interests, the owner thereof and the percentage thereof owned
by such owner.
(b) Schedule 1 to the Security Agreement also sets forth a correct
and complete list, as of the close of business on the Effective Date, of all
Equity Interests in Persons (other than Subsidiaries) owned by the Domestic
Vlasic Companies, the jurisdiction of organization thereof, the owner thereof
and the percentage thereof owned by such owner.
(c) As of the close of business on the Effective Date, no Debt
(including Permitted Intercompany Debt) owed to any Domestic Vlasic Company is
evidenced by an instrument (as such term is defined in the UCC) that is not
pledged to the Collateral Agent pursuant to the Security Agreement.
SECTION 4.14. Year 2000 Compliance. Before the Effective Date, the
Company initiated, and from time to time after the Effective Date, the Company
will continue, a review and assessment of all areas within its and its
Subsidiaries' businesses and operations (including those affected by material
suppliers and material vendors) that could be adversely affected by the "Year
2000 Problem" (that is, the risk that computer applications used by it or any of
its Subsidiaries (or their respective material suppliers and material vendors)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999). Before
the Effective Date, the Company did, and after the Effective Date, the Company
will continue to, develop a plan and timeline for addressing the Year 2000
Problem on a timely basis and
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from time to time implement that plan in accordance with that timetable. The
Company reasonably believes that (i) all computer applications (including those
of its suppliers and vendors) that are material to its or any of its
Subsidiaries' businesses and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000, except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect, and (ii) the cost to the Company of
addressing the Year 2000 Problem will not have a Material Adverse Effect.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Bank has any Credit Exposure
or any interest or fee payable under any Financing Document remains unpaid:
SECTION 5.01. Information. The Company will deliver to the
Administrative Agent, with a copy for each of the Banks:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year, (i) a consolidated and consolidating balance
sheet of the Company and its Consolidated Subsidiaries as of the end
of such Fiscal Year, (ii) the related consolidated and consolidating
statement of earnings of the Company and its Consolidated
Subsidiaries for such Fiscal Year and (iii) the related consolidated
statements of cash flows and of shareowners' equity of the Company
and its Consolidated Subsidiaries for such Fiscal Year, all such
consolidated statements reported on by independent public accountants
of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year,
(i) a consolidated and consolidating balance sheet of the Company and
its Consolidated Subsidiaries as of the end of such Fiscal Quarter,
(ii) the related consolidated and consolidating statement of earnings
for such Fiscal Quarter, (iii) the related consolidated and
consolidating statement of earnings for the portion of the Fiscal
Year ended at the end of such Fiscal Quarter and (iv) the related
consolidated statement of cash flows for the portion of the Fiscal
Year ended at the end of such Fiscal Quarter;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) of this Section, a
certificate of
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the chief financial officer or chief accounting officer of the
Company (i) setting forth in reasonable detail the calculations
required to establish (x) whether the Company was in compliance with
the requirements of Sections 5.10 to 5.19, inclusive, on the date of
such financial statements and (y) if the certificate is delivered
after July 31, 1999, the Debt/EBITDA Ratio at the date of such
financial statements and (ii) stating whether any Default exists on
the date of such certificate and, if any Default then exists, setting
forth the details thereof and the action which the Company is taking
or proposes to take with respect thereto;
(d) at least 15 days before the beginning of each Fiscal Year, the
Company's operating budget and projections for such Fiscal Year,
which shall contain such information and be in such form as shall be
satisfactory to the Administrative Agent and shall be based on
reasonable assumptions that as of their date shall represent an
estimate of the future performance of the Company and its
Subsidiaries that is no better than the Company's best estimate
thereof at such time;
(e) within 30 days after the end of each of the first two four-week
accounting periods in each Fiscal Quarter (except the first such
four-week accounting period in each Fiscal Year), a consolidated
statement of earnings of the Company and its Consolidated
Subsidiaries for such period and for the year-to-date, in each case
compared to the projections for such period and year-to-date
delivered pursuant to clause (d) above;
(f) within five days after any Financial Officer obtains knowledge
of any Default, if such Default is then continuing, a certificate of
a Financial Officer setting forth the details thereof and the action
which the Company is taking or proposes to take with respect thereto;
(g) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) filed by the Company with the
SEC;
(h) promptly upon the mailing thereof to the shareowners of the
Company generally, copies of all annual reports to shareowners and
proxy statements so mailed;
(i) as soon as reasonably practicable after any Financial Officer
obtains knowledge of the commencement of, or a threat of the
commencement of, an action, suit or proceeding against or affecting
the Company or any of its Subsidiaries (or any prior owner of any of
the
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Vlasic Foods Businesses) before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which (i) could have a Material
Adverse Effect or (ii) in any manner draws into question the validity
or enforceability of any Financing Document or Spin-Off Agreement, a
certificate of a Financial Officer setting forth the nature of such
pending or threatened action, suit or proceeding and such additional
information with respect thereto as may be reasonably requested by
the Administrative Agent;
(j) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which
might constitute grounds for a termination of such Plan under Title
IV of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be
given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in
respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code, a copy of
such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from
any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan which has
resulted or could result in the imposition of a Lien or the posting
of a bond or other security, a certificate of a Financial Officer
setting forth details as to such occurrence and action, if any, which
the Company or applicable member of the ERISA Group is required or
proposes to take; and
(k) from time to time such additional information regarding the
financial position or business of any Vlasic Company as the
Administrative Agent, at the request of any Bank, may reasonably
request.
Information required to be delivered pursuant to clauses (a), (b), (g) and (h)
above shall be deemed to have been delivered on the date on which the Company
provides notice to the Banks that such information has been posted on the
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Company's website on the Internet at the website address listed on the signature
pages hereof, at sec.gov/edaux/searches.htm or at another website identified in
such notice and accessible by the Banks without charge; provided that (i) such
notice may be included in a certificate delivered pursuant to clause (c) above
and (ii) the Company shall deliver paper copies of the information referred to
in clauses (a), (b), (g) and (h) above to any Bank which requests such delivery.
SECTION 5.02. Maintenance of Property; Insurance. (a) The Company
will keep, and will cause each Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Company will, and will cause each Subsidiary to, either (i)
carry insurance (either in the name of the Company or in such Subsidiary's own
name) with financially sound and responsible insurance companies to the extent
reasonably available or (ii) maintain self-insurance, on all their respective
properties and with respect to product liability, in each case against at least
such risks as (and subject to no greater risk retention than) are usually
insured against in the same general area by similarly sized companies of
established repute engaged in the same or a similar business.
(c) On or before the Effective Date, the Company shall (i) cause the
Collateral Agent to be named as an additional insured and loss payee on each
property insurance policy maintained by any Domestic Vlasic Company and (ii)
deliver to the Administrative Agent and the Collateral Agent a certificate from
the Company's insurance broker (A) showing the amount of insurance coverage for
the Domestic Vlasic Companies as of such date, (B) certifying that such coverage
satisfies the requirements of subsection (b) above and (C) with respect to each
property insurance policy maintained by any Domestic Vlasic Company, certifying
that such policy includes an effective waiver by the insurer of all claims for
insurance premiums against all loss payees and additional insureds and all
rights of subrogation against all loss payees and additional insureds and that
no cancellation, reduction in amount or material change in coverage thereof
shall be effective until at least 30 days after receipt by such additional
insured and loss payee of written notice thereof.
(d) The Company will furnish to the Banks, upon request from the
Administrative Agent, information presented in reasonable detail as to the
insurance carried by the Vlasic Companies or the self-insurance maintained by
them. Before the Company or any Subsidiary cancels, fails to renew or makes any
material change in the coverage of any material insurance policy, the Company
shall notify the Administrative Agent thereof. Within five days of the receipt
by the Company or any Subsidiary from any insurer of a notice of
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cancellation, nonrenewal or material change in coverage of any material
insurance policy, the Company shall notify the Administrative Agent thereof.
(e) If the Secured Obligations of the Domestic Vlasic Companies are
secured by real property pursuant to Section 5.08(a)(iv), the Company shall, and
shall cause its Domestic Subsidiaries to, maintain such insurance with
financially sound and responsible insurance companies as may be reasonably
requested by the Administrative Agent (at the request of the Required Banks) to
protect the value of the assets securing such Secured Obligations.
(f) If any Vlasic Company fails to maintain any insurance policy
required to be maintained under this Section, the Collateral Agent shall have
the right to maintain such policy or obtain a comparable policy, and in either
case pay the premiums therefor. If the Collateral Agent maintains or obtains any
such policy and pays the premiums therefor, the Company will reimburse the
Collateral Agent upon demand for its expenses in connection therewith, including
interest thereon for each day at a rate per annum equal to the sum of 1% plus
the rate applicable to Base Rate Loans for such day.
SECTION 5.03. Conduct of Business and Maintenance of Existence. The
Vlasic Companies will continue to engage in business of the same general type as
now conducted by the Vlasic Companies. Each Vlasic Company will preserve, renew
and keep in full force and effect its existence and its rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in this Section shall prevent any merger, consolidation or transfer
of assets permitted by Section 5.09.
SECTION 5.04. Compliance with Laws. The Company will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except (i) where the necessity of compliance
therewith is contested in good faith by appropriate proceedings and (ii) where
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.05. Inspection of Property, Books and Records. The Company
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries shall be made of all dealings and
transactions in relation to its business and activities. The Company will
permit, and will cause each Subsidiary to permit, representatives of any Bank at
such Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers,
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employees and independent public accountants, all at such reasonable times and
as often as may reasonably be requested; provided that, unless a Default shall
have occurred and be continuing, such Bank shall have given a Financial Officer
at least three Domestic Business Days' notice of such visit, examination and/or
discussion and a reasonable opportunity to participate therein in person or
through a designated representative.
SECTION 5.06. Use of Proceeds. The Company will use the proceeds of
the Loans (other than the Campbell Loans) for general corporate purposes,
including acquisitions. None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any "margin stock" within the meaning of Regulation U.
SECTION 5.07. Guarantees by Future Domestic Subsidiaries. If any
Person becomes a Domestic Subsidiary after the Effective Date, the Company will,
within five Domestic Business Days after such Person becomes a Domestic
Subsidiary, (i) cause such Domestic Subsidiary to guarantee the Company's
obligations hereunder pursuant to a Subsidiary Guaranty Agreement and (ii)
deliver to the Administrative Agent such legal opinions and other documents as
the Administrative Agent may reasonably request relating to the existence of
such Domestic Subsidiary, the corporate or other authority for and validity of
its Subsidiary Guaranty Agreement and any other matters relevant thereto, all in
form and substance satisfactory to the Administrative Agent.
SECTION 5.08. Future Assets to Be Added to Collateral. (a) Unless the
Security Release Date shall have occurred, the Company shall:
(i) within five Domestic Business Days after any Person
becomes a Domestic Subsidiary, cause all Equity Interests in such
Person owned by the Vlasic Companies to be pledged under the Security
Agreement;
(ii) within five Domestic Business Days after any Person
becomes a Foreign Subsidiary, cause all Equity Interests in such
Person owned by the Vlasic Companies (but not more than 66% of the
outstanding voting Equity Interests in such Person) to be pledged
under the Security Agreement;
(iii) within five Domestic Business Days after any Person
becomes a Domestic Subsidiary, (A) cause such Domestic Subsidiary to
sign and deliver a Security Agreement Supplement granting a Lien or
Liens on substantially all the personal property included in its
assets (with the exceptions set forth in the proviso at the end of
Section 3 of the
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Security Agreement and such other exceptions as the Agents shall have
approved in writing) to the Collateral Agent to secure its Secured
Obligations and (B) cause such Domestic Subsidiary to comply with the
provisions thereof and of the Security Agreement; and
(iv) on or before July 1, 1999 (unless the Partial Refinancing
shall have been completed before July 1, 1999), further secure, and
cause each Domestic Vlasic Company to further secure, its Secured
Obligations by Liens on substantially all its real property (with
such exceptions as the Agents shall have approved in writing) and to
deliver to the Collateral Agent all such mortgages, deeds of trust,
leasehold mortgages and other documents, together with the
appropriate UCC forms for any related fixture filings, as shall be
required (or reasonably requested by the Collateral Agent) to grant,
record, perfect and protect such Liens, all in form and substance
reasonably satisfactory to the Collateral Agent.
(b) Whenever any Equity Interest, real property or other asset is
added to the Collateral pursuant to this Section, the Company shall deliver to
the Administrative Agent such legal opinions and other documents as the
Administrative Agent may reasonably request relating to the existence of the
relevant Lien Grantor, the corporate or other authority for and validity of the
Collateral Documents applicable thereto, the creation and perfection (or due
recordation) of the Lien purportedly created thereby, the name of the legal
owner of any such real property and the accuracy of the legal description
thereof, and any other matters relevant thereto, all in form and substance (and
from counsel) reasonably satisfactory to the Administrative Agent.
SECTION 5.09. Mergers and Sales of Assets. (a) The Company will not
(i) consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, all or any substantial part of its
assets to any other Person; provided that the Company may merge with another
Person if (x) the Company is the corporation surviving such merger and (y)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing.
(b) No Domestic Subsidiary will (i) consolidate or merge with or
into any other Person or (ii) sell, lease or otherwise transfer, directly or
indirectly, all or any substantial part of its assets to any Person; provided
that any Domestic Subsidiary may consolidate or merge with, or transfer its
assets to, the Company or any other Domestic Subsidiary if, immediately after
giving effect to such transaction, no Default shall have occurred and be
continuing.
(c) No Foreign Subsidiary will (i) consolidate or merge with or into
any other Person or (ii) sell, lease or otherwise transfer, directly or
indirectly, all or
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any substantial part of its assets to any Person; provided that any Foreign
Subsidiary may consolidate or merge with, or transfer its assets to, any other
Vlasic Company if, immediately after giving effect to such transaction, no
Default shall have occurred and be continuing.
(d) Notwithstanding the restrictions in the foregoing subsections of
this Section, nothing in this Section shall prohibit any Permitted Asset
Securitization.
SECTION 5.10. Negative Pledge. No Vlasic Company will create, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except:
(i) Liens existing on February 20, 1998 securing Debt
outstanding on February 20, 1998 in an aggregate principal amount not
exceeding $10,000,000;
(ii) Liens created pursuant to the Collateral Documents;
(iii) any Lien existing on any asset of any Person at the time
such Person becomes a Subsidiary and not created in contemplation of
such event;
(iv) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of
acquiring, constructing or improving such asset; provided that such
Lien attaches to such asset concurrently with or within 180 days
after the acquisition, construction or improvement thereof;
(v) any Lien on any asset of any Person existing at the time
such Person is merged or consolidated with or into a Vlasic Company
and not created in contemplation of such event;
(vi) any Lien existing on any asset prior to the acquisition
thereof by a Vlasic Company and not created in contemplation of such
acquisition;
(vii) any Lien created for the direct or indirect benefit of
the purchasers or lenders in connection with any Permitted Asset
Securitization after the Security Release Date;
(viii) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the
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foregoing provisions of this Section; provided that such Debt is not
increased and is not secured by any additional assets;
(ix) any Lien arising in the ordinary course of its business
which (1) does not secure any Debt, any Derivatives Obligation or any
obligation to reimburse a bank for amounts drawn under a letter of
credit and (2) does not secure any single obligation (or class of
obligations having a common cause) in an amount exceeding
$20,000,000;
(x) any Lien in favor of the Company or any Lien created by a
Subsidiary in favor of a Domestic Subsidiary; and
(xi) any other Lien; provided that the aggregate amount
secured by all Liens excluded pursuant to this clause (xi) shall not
exceed $2,000,000.
SECTION 5.11. Limitation on Indebtedness. No Vlasic Company will
incur or at any time be liable with respect to any Debt except:
(a) Debt outstanding on August 30, 1998 not exceeding
$18,400,000 in aggregate principal amount and identified on Schedule
5.11 hereto and refinancings thereof; provided that the principal
amount thereof is not increased beyond the amount outstanding
thereunder on August 30, 1998;
(b) Debt incurred or assumed under this Agreement;
(c) Debt incurred after the Effective Date, to the extent that
the Net Cash Proceeds thereof are to be applied to prepay Loans as
required by Section 2.12(b);
(d) Permitted Intercompany Debt;
(e) Permitted Acquisition Debt;
(f) Debt of the Target of any Permitted Investment (subject to
the limit in clause (v) of the definition of "Permitted Investment");
(g) Debt incurred by Foreign Subsidiaries to finance their
working capital needs;
(h) Debt secured by Liens permitted by Section 5.10; and
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(i) Debt of the Vlasic Companies not otherwise permitted by
this Section incurred after the Effective Date in an aggregate
principal amount at any time outstanding not to exceed $2,000,000.
SECTION 5.12. Subsidiary Debt Limitation. Total Debt of all Domestic
Subsidiaries (excluding Debt owed by a Domestic Subsidiary to another Domestic
Vlasic Company) will at no time exceed $20,000,000.
SECTION 5.13. Debt/EBITDA Ratio. At the end of each Fiscal Quarter
specified below, the Debt/EBITDA Ratio will not be higher than the ratio
specified for such Fiscal Quarter below:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
First Fiscal Quarter of Fiscal 1999 5.25 to 1
Second Fiscal Quarter of Fiscal 1999 6.00 to 1
Third Fiscal Quarter of Fiscal 1999 5.00 to 1
Fourth Fiscal Quarter of Fiscal 1999 4.00 to 1
and each Fiscal Quarter thereafter
</TABLE>
SECTION 5.14. Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter specified below, the Fixed Charge Coverage Ratio will not be lower than
the ratio specified for such Fiscal Quarter below:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
-------------- -----
<S> <C>
First Fiscal Quarter of Fiscal 1999 3.00 to 1
Second Fiscal Quarter of Fiscal 1999 2.50 to 1
Third Fiscal Quarter of Fiscal 1999 2.60 to 1
Fourth Fiscal Quarter of Fiscal 1999 2.80 to 1
Each Fiscal Quarter thereafter 3.00 to 1
</TABLE>
SECTION 5.15. Restricted Payments. No Vlasic Company will declare or
make any Restricted Payment before the end of Fiscal 1999. No Vlasic Company
will declare or make any Restricted Payment thereafter unless the Partial
Refinancing shall have been completed and, immediately after giving effect to
such Restricted Payment, (i) no Default would exist and (ii) the aggregate of
all Restricted Payments declared or made after the completion of the Partial
Refinancing does not exceed 25% of the consolidated net earnings of the Company
and its Consolidated Subsidiaries for the period from August 2, 1998 through the
end of the then most recent Fiscal Quarter (treated for this purpose as a single
accounting period).
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SECTION 5.16. Capital Expenditures. Consolidated Capital Expenditures
will not, for any Fiscal Year listed below, exceed the amount indicated for such
Fiscal Year:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1999 $52,000,000
2000 $58,000,000
2001 $63,000,000
2002 $65,000,000
2003 $68,000,000
</TABLE>
SECTION 5.17. Reinvestment of Asset Sale Proceeds and Casualty
Proceeds. If any Domestic Vlasic Company receives any Net Cash Proceeds of an
Asset Sale or any Casualty Proceeds (collectively, "REINVESTABLE PROCEEDS"), the
Company may elect to defer the related prepayment of Loans that would otherwise
be required by Section 2.12(a) or 2.12(d), by delivering notice of such election
to the Administrative Agent at least one Domestic Business Day before such
prepayment would otherwise be required. If the Company elects to defer such
prepayment, such Reinvestable Proceeds shall be deposited in the appropriate
Collateral Accounts established pursuant to Section 6 of the Security Agreement
and applied as follows:
(i) such Reinvestable Proceeds will be released by the
Collateral Agent from time to time, at the Company's request in
accordance with Section 6 of the Security Agreement, either (x) to
repair or replace (or to reimburse a Vlasic Company for amounts
previously spent to repair or replace) the asset in respect of which
such Reinvestable Proceeds were received (the "RELEVANT ASSET") or
(y) to prepay Loans pursuant to Section 2.12(a) or 2.12(d), as
applicable; provided that the Company shall not request the release
of any Reinvestable Proceeds if an Event of Default shall have
occurred and be continuing, and the Collateral Agent shall not
release any Reinvestable Proceeds if it shall have received notice
from the Administrative Agent of the occurrence of an Event of
Default and such notice shall not have been rescinded;
(ii) if within 90 days after such Reinvestable Proceeds were
received, the Company shall not have either (x) applied the full
amount of such Reinvestable Proceeds pursuant to clause (i) above or
(y) notified the Administrative Agent that it is committed to expend
the full amount of the remaining Reinvestable Proceeds to repair or
replace the Relevant Asset, the amount by which such Reinvestable
Proceeds exceeds the aggregate amount so applied or committed shall
be applied within two Domestic
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Business Days after the end of such 90-day period to prepay Loans
pursuant to Section 2.12(a) or Section 2.12(d), as applicable;
(iii) any amount of Reinvestable Proceeds retained in a
Collateral Account after the foregoing 90-day period because the
Company has notified the Administrative Agent that it is committed to
expend such amount to repair or replace the Relevant Asset may be
retained in such Collateral Account and applied pursuant to clause
(i) above for a period ending twelve months after the Relevant Asset
was sold, damaged, condemned or transferred in lieu of condemnation;
and
(iv) any Reinvestable Proceeds remaining in a Collateral
Account at the end of such twelve-month period shall be applied,
within two Domestic Business Days thereafter, to prepay Loans
pursuant to Section 2.12(a) or 2.12(d), as applicable.
SECTION 5.18. Cash Consideration for Asset Sales. (a) No Vlasic
Company will make any Asset Sale or series of related Asset Sales for which the
aggregate consideration received by the Vlasic Companies exceeds $5,000,000,
unless in each case:
(x) the consideration to be received by the Vlasic Companies
is, in the opinion of a Financial Officer, not less than the fair
market value of the assets being sold; and
(y) at least 75% (or 50% in the case of the Kattus Sale) of
such consideration is paid in cash at the closing of such Asset Sale;
provided that, for purposes of this Section, the amount of (A) any liabilities
(as shown on the most recent financial statements of the Company and its
Consolidated Subsidiaries delivered to the Banks pursuant to Section 5.01(a) or
(b)) that are assumed by the transferee of any such assets and (B) any
securities or other obligations received from such transferee that are
immediately converted by such Vlasic Company into cash (or as to which such
Vlasic Company has received, at or before the consummation of such sale, a
commitment (which may be subject to customary conditions) from a nationally
recognized investment, merchant or commercial bank to convert such securities or
other obligations into cash within 90 days after the consummation of such sale
and which are thereafter actually converted into cash within such 90-day period)
will be deemed to be cash (but will not be deemed to be Net Cash Proceeds until
converted to cash).
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SECTION 5.19. Investments and Acquisitions. No Vlasic Company will
make any Asset Acquisition or hold, make or acquire any Investment in any
Person other than:
(a) any Investment in a Person which is a Subsidiary on the
Effective Date;
(b) Temporary Cash Investments;
(c) Permitted Asset Acquisitions and Permitted Investments;
(d) any debt obligation constituting all or part of the
consideration received for assets sold by a Vlasic Company if,
immediately after such debt obligation is acquired, the aggregate
outstanding principal amount of all debt obligations held by the
Vlasic Companies as permitted by this clause (d) does not exceed
$10,000,000;
(e) any Investment in a trust or other entity created for
purposes of any Permitted Asset Securitization after the Security
Release Date; and
(f) Investments not otherwise permitted by the foregoing
clauses of this Section if, immediately after each such Investment is
made or acquired, the aggregate book value of all Investments
permitted by this clause (f) does not exceed $5,000,000.
For purposes of clauses (d) and (f) above, the amount of each Investment shall
be deemed to be the original amount invested less any principal repaid or
capital returned, but not less than zero.
SECTION 5.20. Transactions with Affiliates. No Vlasic Company will,
directly or indirectly, (i) pay any funds to or for the account of any
Affiliate, (ii) make any investment in any Affiliate (whether by acquisition of
stock or indebtedness, by loan, advance, transfer of property, guarantee or
other agreement to pay, purchase or service, directly or indirectly, any Debt,
or otherwise), (iii) lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to any Affiliate, or (iv) participate in, or effect any
transaction with any Affiliate, except in each case on an arms-length basis on
terms at least as favorable to such Vlasic Company as could have been obtained
from a third party that was not an Affiliate; provided that the foregoing
provisions of this Section shall not prohibit any such Person from declaring or
paying any lawful dividend or other payment ratably in respect of all its
capital stock of the relevant class so long as, after giving effect thereto, no
Default shall have occurred and be continuing.
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SECTION 5.21. Certain Amendments. No Vlasic Company will amend its
Organizational Documents or any of the Spin-Off Agreements in any manner which
could adversely affect the rights of the Agents or the Banks under the Financing
Documents or their ability to enforce the same.
SECTION 5.22. Limitations on Restrictions Affecting Subsidiaries. No
Vlasic Company will enter into, or suffer to exist, any agreement (other than
the Financing Documents) which prohibits or limits the ability of any Subsidiary
to (i) pay dividends or make other distributions or pay any Debt owed to any
other Vlasic Company, (ii) make loans or advances to any other Vlasic Company or
(iii) create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, to secure
its Secured Obligations; provided that the foregoing shall not prohibit any such
prohibition or limitation contained in:
(a) any document relating to Debt secured by a Lien permitted
by Section 5.10, insofar as the provisions thereof limit grants of
junior liens on the assets securing such Debt;
(b) any document relating to Debt of Foreign Subsidiaries
permitted by Section 5.11(a) or (g);
(c) any operating lease or capital lease, insofar as the
provisions thereof limit grants of a security interest in, or other
assignments of, the related leasehold interest to any other Person;
and
(d) if a Person becomes a Subsidiary of the Company after the
Effective Date, any agreement that is binding on such Person and was
not entered into in contemplation of its becoming a Subsidiary,
insofar as such agreement limits such Person's ability to take any
action described in clause (i), (ii) or (iii) of this Section,
provided that either:
(1) such limitation is terminated within 60 days
after such Person becomes a Subsidiary or
(2) not more than 5% of Consolidated EBITDA for any
period of four consecutive Fiscal Quarters ending after
such Person becomes a Subsidiary (determined on a pro forma
basis assuming that all Persons that are Subsidiaries at
the end of such period were Subsidiaries at the beginning
of such period) is attributable, in the aggregate, to
Persons that become Subsidiaries after the Effective Date
and remain subject to such limitations more than 60 days
after becoming Subsidiaries.
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ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall occur and be continuing:
(a) the Company shall (i) fail to pay when due any principal
of any Loan or (ii) fail to pay, within 5 days after the date when
due, any interest on any Loan or any fee or other amount payable
hereunder;
(b) the Company shall fail to observe or perform any covenant
contained in Section 5.01(f) or Sections 5.07 to 5.18, inclusive or
the Company or any Domestic Subsidiary shall fail to observe or
perform any covenant contained in Section 5(a), (b) or (j) of the
Security Agreement;
(c) the Company or any Domestic Subsidiary shall fail to
observe or perform any covenant or agreement contained in this
Agreement or any other Financing Document (other than those covered
by clause (a) or (b) above) for 30 days after notice thereof has been
given to the Company by the Administrative Agent at the request of
any Bank;
(d) any representation, warranty, certification or statement
made by the Company or any Domestic Subsidiary in this Agreement or
any other Financing Document or in any certificate, financial
statement or other document delivered by the Company pursuant hereto
or thereto shall prove to have been incorrect in any material respect
when made (or deemed made pursuant to the last sentence of Section
3.03);
(e) any Vlasic Company shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action to
authorize any of the foregoing;
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(f) an involuntary case or other proceeding shall be commenced
against any Vlasic Company seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property,
and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against any Vlasic Company under the federal
bankruptcy laws as now or hereafter in effect;
(g) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $10,000,000 which it
shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal
from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could
cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $10,000,000;
(h) a judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against any Vlasic Company and such
judgment or order shall continue unsatisfied and unstayed for a
period of 30 days;
(i) one or more Vlasic Companies shall fail to repay Material
Debt at the maturity thereof;
(j) any event or condition shall occur which results in the
acceleration of the maturity of Material Debt or enables or, with the
giving of notice or lapse of time or both, would enable, the holders
of Material Debt or any Person acting on their behalf to accelerate
the maturity thereof;
(k) any Lien created by the Collateral Documents shall at any
time fail to constitute a valid and perfected Lien on all of the
Collateral
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purported to be subject to such Lien, subject to no prior or equal
Lien, or any Vlasic Company shall so assert in writing, or any
provision of any Subsidiary Guaranty Agreement shall cease to be in
full force and effect or any Vlasic Company, or any Person acting on
behalf of any Vlasic Company, shall so assert in writing; or
(l) (i) any person or group of persons (within the meaning of
Section 13 or 14 of the Exchange Act), other than a Designated
Affiliate, shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the SEC under said Act) of 25%
or more of the outstanding shares of common stock of the Company,
(ii) the Designated Affiliates, collectively, shall have beneficial
ownership (within the meaning of said Rule 13d-3) of 49% or more of
the outstanding shares of common stock of the Company or (iii)
Continuing Directors shall cease to constitute a majority of the
Company's board of directors;
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Revolving Credit
Commitments, by notice to the Company terminate the Revolving Credit Commitments
and they shall thereupon terminate, and (ii) if requested by Banks holding more
than 50% of the aggregate principal amount of the Loans, by notice to the
Company declare the Loans (together with accrued interest thereon) to be, and
the Loans shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company; provided that if any Event of Default specified in
clause (e) or (f) above occurs with respect to the Company, then without any
notice to the Company or any other act by the Administrative Agent or the Banks,
the Revolving Credit Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Company.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Company under Section 6.01(c) promptly upon being requested to do
so by any Bank and shall thereupon notify all the Banks thereof.
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ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. (a) Each Bank
irrevocably appoints and authorizes the Administrative Agent to take such action
as Administrative Agent on its behalf and to exercise such powers under the
Financing Documents as are delegated to the Administrative Agent by the terms
thereof, together with all such powers as are reasonably incidental thereto.
(b) Each Bank irrevocably appoints and authorizes the Collateral
Agent to take such action as Collateral Agent on its behalf and to exercise such
powers under the Financing Documents as are delegated to the Collateral Agent by
the terms thereof, together with all such powers as are reasonably incidental
thereto.
SECTION 7.02. Agents and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under the Financing Documents as
any other Bank and may exercise or refrain from exercising the same as though it
were not an Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with any Vlasic Company or Campbell or any Subsidiary or
affiliate of any Vlasic Company or Campbell as if it were not an Agent.
SECTION 7.03. Action by Agents. The obligations of each Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Administrative Agent shall not be required to
take any action with respect to any Default except as expressly provided in
Article 6, and the Collateral Agent shall not be required to take any action
with respect to any Default except as expressly provided in the Security
Agreement.
SECTION 7.04. Consultation with Experts. Each Agent may consult with
legal counsel (who may be counsel for any Vlasic Company), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. None of the Agents, their
respective affiliates and their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by such Agent in
connection herewith (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct. None
of the Agents, their respective affiliates and their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any
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statement, warranty or representation made in connection with the Financing
Documents or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of any Vlasic Company; (iii) the satisfaction of
any condition specified in Article 3, except, in the case of the Administrative
Agent, receipt of items required to be delivered to the Administrative Agent; or
(iv) the validity, effectiveness or genuineness of any Financing Document or any
other instrument or writing furnished in connection therewith. Neither Agent
shall incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties. Without limiting the generality of the
foregoing, the use of the term "AGENT" in this Agreement with reference to the
Agents is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom and is intended to create or
reflect only administrative relationships between independent contracting
parties.
SECTION 7.06. Indemnification. The Banks shall, ratably in accordance
with their respective Credit Exposures, indemnify the Administrative Agent, the
Collateral Agent, the Syndication Agent, their respective affiliates and the
directors, officers, agents and employees of the foregoing (to the extent not
reimbursed by the Company) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with any Financing Document or any
action taken or omitted by such indemnitees thereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Syndication Agent, the
Administrative Agent, the Collateral Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Syndication Agent, the
Administrative Agent, the Collateral Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agents. The Administrative Agent may resign
at any time by giving notice thereof to the Banks and the Company. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
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within 30 days after the retiring Administrative Agent gives notice of
resignation, then the retiring Administrative Agent may, on behalf of the Banks,
appoint a successor Administrative Agent which shall be a commercial bank
organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $50,000,000. Upon
the acceptance of its appointment as Administrative Agent by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Administrative Agent hereunder. The Collateral Agent may resign as provided in
the Security Agreement.
SECTION 7.09. Agents' Fees. The Company shall pay to each Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Company and such Agent.
SECTION 7.10. Syndication Agent. Nothing in this Agreement shall
impose upon the Syndication Agent, in its capacity as such, any duty or
responsibility whatsoever.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are not being
offered to the Reference Banks in the relevant market for such
Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having
50% or more of the aggregate principal amount of the affected Loans
advise the Administrative Agent that the Adjusted CD Rate or the
London Interbank Offered Rate, as the case may be, as determined by
the Administrative Agent will not adequately and fairly reflect the
cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as
the case may be, for such Interest Period,
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the Administrative Agent shall forthwith give notice thereof to the
Company and the Banks, whereupon until the Administrative Agent
notifies the Company that the circumstances giving rise to such
suspension no longer exist, (i) the obligations of the Banks to make
CD Loans or Euro-Dollar Loans, as the case may be, or to continue or
convert outstanding Loans as or into CD Loans or Euro-Dollar Loans,
as the case may be, shall be suspended and (ii) each outstanding CD
Loan or Euro-Dollar Loan, as the case may be, shall be converted into
a Base Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Company notifies the Administrative
Agent at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall
instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate
Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from
and including the first day to but excluding the last day of the
Interest Period applicable thereto at the rate applicable to Base
Rate Loans for such day.
SECTION 8.02. Illegality. If, on or after February 20, 1998, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Administrative Agent, the Administrative Agent
shall forthwith give notice thereof to the other Banks and the Company,
whereupon until such Bank notifies the Company and the Administrative Agent that
the circumstances giving rise to such suspension no longer exist, the obligation
of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into
Euro-Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of
such Bank then outstanding shall be converted to a Base Rate Loan either (a) on
the last day of the then current Interest Period applicable to such Euro-Dollar
Loan if such Bank may lawfully continue to maintain and fund such Loan to such
day or (b) immediately if such Bank shall determine that it may not lawfully
continue to maintain and fund such Loan to such day.
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<PAGE> 82
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) February 20, 1998, in the case of any Committed Loan or any obligation to
make Committed Loans or (y) the date of the related Money Market Quote, in the
case of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify or
deem applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
(i) with respect to any CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment (excluding, with respect to any CD Loan,
any such requirement reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate
Loans and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan, or to reduce the amount of any sum received or receivable by such Bank (or
its Applicable Lending Office) under this Agreement or under its Notes with
respect thereto, by an amount deemed by such Bank to be material, then, within
15 days after demand by such Bank (with a copy to the Administrative Agent), the
Company shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after February 20, 1998,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from
77
<PAGE> 83
time to time, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), the Company shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the
Administrative Agent of any event of which it has knowledge, occurring after
February 20, 1998, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by any
Vlasic Company pursuant to any Financing Document, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and each Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or Agent (as the case may be) is
organized or in which its principal executive office is located or, in the case
of each Bank, in which its Applicable Lending Office is located and (ii) in the
case of each Bank, any United States withholding tax imposed on such payments,
but only up to the rate (if any) at which United States withholding tax would
apply to such payments to such Bank at the time such Bank first becomes a party
to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to any Financing Document or from the
execution or delivery of, or otherwise with respect to, any Financing Document.
(b) Any and all payments by the Company to or for the account of any
Bank or Agent under any Financing Document shall be made without deduction for
any Taxes or Other Taxes; provided that, if the Company shall be required by law
to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
such Bank or Agent (as the case may be) receives an amount equal to the
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<PAGE> 84
sum it would have received had no such deductions been made, (ii) the Company
shall make such deductions, (iii) the Company shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law and (iv) the Company shall furnish to the Administrative Agent,
at its address referred to in Section 9.01, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Company agrees to indemnify each Bank and each Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be paid within 15 days after such Bank or
Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Company (but
only so long as such Bank remains lawfully able to do so), shall provide the
Company and the Administrative Agent with Internal Revenue Service form 1001 or
4224, as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Bank is entitled to benefits under an income tax
treaty to which the United States is a party which exempts the Bank from United
States withholding tax or reduces the rate of withholding tax on payments of
interest for the account of such Bank or certifying that the income receivable
pursuant to this Agreement is effectively connected with the conduct of a trade
or business in the United States.
(e) For any period with respect to which a Bank has failed to
provide the Company or the Administrative Agent with the appropriate form
pursuant to Section 8.04(d) (unless such failure is due to a change in treaty,
law or regulation occurring subsequent to the date on which such form originally
was required to be provided), such Bank shall not be entitled to indemnification
under Section 8.04(b) or 8.04(c) with respect to Taxes imposed by the United
States; provided that if a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, becomes subject to Taxes because of its failure
to deliver a form required hereunder, the Company shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Company is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will change the
79
<PAGE> 85
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate. If
(i) the obligation of any Bank to make, or convert outstanding Loans to,
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank
has demanded compensation under Section 8.03 or 8.04 with respect to its CD
Loans or Euro-Dollar Loans and the Company shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Administrative Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Company that the circumstances giving
rise to such suspension or demand for compensation no longer exist, all Loans
which would otherwise be made by such Bank as (or continued as or converted
into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base
Rate Loans (on which interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks). If such Bank notifies the
Company that the circumstances giving rise to such notice no longer apply, the
principal amount of each such Base Rate Loan shall be converted into a CD Loan
or Euro-Dollar Loan, as the case may be, on the first day of the next
succeeding Interest Period applicable to the related CD Loans or Euro-Dollar
Loans of the other Banks.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Company, the Administrative Agent or the Collateral Agent, at its
address or facsimile number set forth on the signature pages hereof, (y) in the
case of any Bank, at its address or facsimile number set forth in its
Administrative Questionnaire, (z) or in the case of any party, at such other
address or facsimile number as such party may hereafter specify for the purpose
by notice to the Administrative Agent and the Company. Each such notice, request
or other communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this
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<PAGE> 86
Section; provided that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by any Agent or any
Bank in exercising any right, power or privilege under any Financing Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay
(i) all reasonable out-of-pocket expenses of the Agents, including reasonable
fees and disbursements of special counsel for the Administrative Agent, in
connection with the preparation and administration of this Agreement or any
other Financing Document, any waiver or consent hereunder or any amendment
hereof or thereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agents and
each Bank, including (without duplication) the fees and disbursements of outside
counsel and the allocated cost of inside counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Company agrees to indemnify each Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, settlement costs and the
reasonable fees and disbursements of counsel, which may be incurred by such
Indemnitee in connection with any investigative, administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party thereto)
brought or threatened relating to or arising out of any Financing Document or
the Commitments hereunder or any actual or proposed use of proceeds of the
Loans; provided that no Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to any Loan held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of principal and interest due
with respect to any Loan held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the
relevant Loans held by
81
<PAGE> 87
the other Banks, and such other adjustments shall be made, as may be required so
that all such payments of principal and interest with respect to the Loans held
by the Banks shall be shared by the Banks pro rata; provided that nothing in
this Section shall impair the right of any Bank to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such exercise to
the payment of indebtedness of the Company or Campbell, as applicable, other
than its indebtedness hereunder. Each of the Company and Campbell agrees, to the
fullest extent it may effectively do so under applicable law, that any holder of
a participation in a Loan, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Company or Campbell, as applicable, in the amount
of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement, the Notes or the Campbell Global Note may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the Company
and the Required Banks (and, if the rights or duties of the Administrative Agent
or Campbell are affected thereby, by the Administrative Agent or Campbell, as
the case may be); provided that no such amendment or waiver shall, unless signed
by all the Banks, (i) increase or decrease the Commitment of any Bank (except
for a ratable decrease in the Commitments of all Banks) or subject any Bank to
any additional obligation, (ii) reduce the principal of or rate of interest on
any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for the
termination of any Commitment, (iv) change the percentage of the Credit
Exposures or of the aggregate unpaid principal amount of Loans or the number of
Banks, which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement or (v) change any of
the provisions contained in Section 9.04, 9.05 or 9.06(a).
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither Campbell nor
the Company may assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all the Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Revolving
Credit Commitment or any or all of its Loans. In the event of any such grant by
a Bank of a participating interest to a Participant, whether or not upon notice
to the Company and the Administrative Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, and the Company and the Agents
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<PAGE> 88
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Vlasic Companies under the Financing Documents including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of any Financing Document; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of
Section 9.05 without the consent of the Participant. The Company agrees that
each Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits of Article 8 and Sections 2.14 and 2.16 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and its Note, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit G hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Company
(which consent shall not unreasonably be withheld); provided that no such
consent shall be required (i) if the Assignee is Bank or an affiliate of a Bank
or (ii) an Event of Default has occurred and is continuing; and provided further
that such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Administrative Agent
and the Company shall make appropriate arrangements so that a new Note is issued
to the Assignee, if required to evidence the Loans (or portions thereof)
assigned to and/or made by the Assignee. In connection with any such assignment,
the transferor Bank shall pay to the Administrative Agent an administrative fee
for processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States or a state thereof, it shall
deliver to the Company and the Administrative Agent certification as to
exemption from
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<PAGE> 89
deduction or withholding of United States federal income taxes in accordance
with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Company's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.07. No Reliance on Margin Stock. Each of the Banks
represents to the Administrative Agent and each of the other Banks that it in
good faith is not relying upon any "margin stock" (as defined in Regulation U)
as collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Company hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to the
Financing Documents or the transactions contemplated hereby. The Company
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement and any
amendment hereto may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement constitutes the entire
agreement and understanding among the parties hereto and supersedes any and all
prior agreements and understandings, oral or written, relating to the subject
matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
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<PAGE> 90
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
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<PAGE> 91
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
VLASIC FOODS INTERNATIONAL INC.
By: /s/ William R. Lewis By: /s/ Robert F. Bernstock
------------------------- -------------------------------
Name: William R. Lewis Name: Robert F. Bernstock
Title: Vice President and CFO Title: President and CEO
Address: Vlasic Plaza
6 Executive Campus
Cherry Hill, NJ 08002-4112
Facsimile: 609-969-7151
Website: www.vlasic.com
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Kathryn Sayko-Yanes
------------------------------
Name: Kathryn Sayko-Yanes
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Carol A. Ulmer
------------------------------
Name: Carol A. Ulmer
Title: Vice President
BANK OF AMERICA NT&SA
By: /s/ W.L. Hess
------------------------------
Name: W.L. Hess
Title: M.D.
<PAGE> 92
BANK OF MONTREAL
By: /s/ Sharron P. Walsh
------------------------------
Name: Sharron P. Walsh
Title: Director
BARCLAYS BANK PLC
By: /s/ K. Machie
------------------------------
Name: K. Machie
Title: Director
CITIBANK, N.A.
By: /s/ Robert M. Spencer
------------------------------
Name: Robert M. Spencer
Title: Attorney in Fact
DEUTSCHE BANK AG NEW YORK
and/or CAYMAN ISLANDS
BRANCHES
By: /s/ Stephan A. Wiedemann
------------------------------
Name: Stephan A. Wiedemann
Title: Director
By: /s/ Hans-Josef Thiele
------------------------------
Name: Hans-Josef Thiele
Title: Director
<PAGE> 93
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ Tom Dao
Name: Tom Dao
Title: Corporate Banking Officer
FLEET NATIONAL BANK
By: /s/Christopher W. Criswell
Name: Christopher W. Criswell
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/Donald G. Cassidy, Jr.
Name: Donald G. Cassidy, Jr.
Title: FIRST VICE PRESIDENT
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Vicky Zift
Name: Vicky Zift
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Adam T. Ogburn
Name: ADAM T. OGBURN
Title: VICE PRESIDENT
<PAGE> 94
THE BANK OF NEW YORK
By: /s/ W.C. Parrcci
Name: W.C. Parrcci
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Stephen Lockhart
Name: Stephen Lockhart
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ Kathleen E. Strong
Name: Kathleen E. Strong
Title: S.V.P.
SUNTRUST BANK, ATLANTA
By: /s/ W. David Wisdom
Name: W. David Wisdom
Title: Group Vice President
By: /s/ Robert R. Cowan
Name: Robert R. Cowan
Title: Operations Officer
<PAGE> 95
WESTDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK
BRANCH
By: /s/ Andreas Schroeter
Name: ANDREAS SCHROETER
Title: DIRECTOR
By: /s/ Walter T. Duffy III
Name: WALTER T. DUFFY III
Title: Associate
BANCA NAZIONALE DEL LAVORO
S.p.A.-NEW YORK BRANCH
By: /s/ Giulio Giovine
Name: Giulio Giovine
Title: Vice President
By: /s/ Leonardo Valentini
Name: Leonardo Valentini
Title: First Vice President
THE CHASE MANHATTAN BANK, as
Syndication Agent
By: /s/ Carol A. Ulmer
Name: CAROL A. ULMER
Title: VICE PRESIDENT
<PAGE> 96
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
REVOLVING
BANK CREDIT COMMITMENT TERM LOANS COMMITMENT
---- ----------------- ---------- ----------
<S> <C> <C> <C>
Morgan Guaranty Trust Company of New York $51,333,333.34 $9,333,333.34 $60,666,666.68
The Chase Manhattan Bank $51,333,333.34 $9,333,333.34 $60,666,666.68
Bank of America NT&SA $33,733,333.34 $6,133,333.34 $39,866,666.68
Bank of Montreal $33,733,333.34 $6,133,333.34 $39,866,666.68
Barclays Bank PLC $33,733,333.34 $6,133,333.34 $39,866,666.68
Citibank, N.A. $33,733,333.33 $6,133,333.33 $39,866,666.66
Deutsche Bank AG New York and/or Cayman Islands $33,733,333.33 $6,133,333.33 $39,866,666.66
Branches
The First National Bank of Chicago $33,733,333.33 $6,133,333.33 $39,866,666.66
Fleet National Bank $33,733,333.33 $6,133,333.33 $39,866,666.66
Mellon Bank, N.A. $33,733,333.33 $6,133,333.33 $39,866,666.66
PNC Bank, National Association $33,733,333.33 $6,133,333.33 $39,866,666.66
Wachovia Bank, N.A. $33,733,333.33 $6,133,333.33 $39,866,666.66
The Bank of New York $25,666,666.67 $4,666,666.67 $30,333,333.34
The Bank of Nova Scotia $18,333,333.33 $3,333,333.33 $21,666,666.66
First Union National Bank $18,333,333.33 $3,333,333.33 $21,666,666.66
SunTrust Bank, Atlanta $18,333,333.33 $3,333,333.33 $21,666,666.66
Westdeutsche Landesbank Girozentrale New York $18,333,333.33 $3,333,333.33 $21,666,666.66
Branch
Banca Nazionale del Lavoro S.p.A.- New York Branch $11,000,000.00 $2,000,000.00 $13,000,000.00
-------------- ------------- --------------
TOTAL $550,000,000.00 $100,000,000.00 $650,000,000.00
- -----
</TABLE>
<PAGE> 97
RATIO-BASED PRICING SCHEDULE
For any day on or after the Grid Pricing Commencement Date, each of
"FACILITY FEE RATE", "EURO-DOLLAR MARGIN", "CD MARGIN" and "BASE RATE MARGIN"
means the rate per annum set forth below in the applicable row opposite such
term and in the column corresponding to the "Pricing Level" that applies for
such day.
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V Level VI Level VII
<S> <C> <C> <C> <C> <C> <C> <C>
Facility Fee Rate 0.085% 0.100% 0.150% 0.175% 0.250% 0.250% 0.500%
Euro-Dollar Margin 0.250% 0.350% 0.550% 0.700% 1.125% 1.250% 1.500%
CD Margin 0.375% 0.475% 0.675% 0.825% 1.250% 1.375% 1.625%
Base Rate Margin 0 0 0 0 0.125% 0.250% 0.500%
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"APPLICABLE DEBT/EBITDA RATIO" means, on any day, the Debt/EBITDA Ratio
at the end of the most recently ended Fiscal Quarter for which the Company has
delivered financial statements pursuant to Section 5.01(a) or 5.01(b); provided
that (i) if a Default exists under Section 5.01(a), 5.01(b) or 5.01(c) on any
such day, the Applicable Debt/EBITDA Ratio for such day shall be deemed to be
greater than 4.0 to 1 and (ii) subject to the foregoing clause (i), the
Debt/EBITDA Ratio at the end of Fiscal 1999 shall apply for any day from and
including the Grid Pricing Commencement Date to but excluding the date the
Company delivers financial statements with respect to the first Fiscal Quarter
of Fiscal 2000 pursuant to Section 5.01(b).
"LEVEL I PRICING" applies for any day if, on such day, the Applicable
Debt/EBITDA Ratio is less than 1.5 to 1.
"LEVEL II PRICING" applies for any day if, on such day, the Applicable
Debt/EBITDA Ratio is greater than or equal to 1.5 to 1 but less than 2.0 to 1.
"LEVEL III PRICING" applies for any day if, on such day, the Applicable
Debt/EBITDA Ratio is greater than or equal to 2.0 to 1 but less than 2.5 to 1.
"LEVEL IV PRICING" applies for any day if, on such day, the Applicable
Debt/EBITDA Ratio is greater than or equal to 2.5 to 1 but less than 3.0 to 1.
"LEVEL V PRICING" applies for any day if, on such day, the Applicable
Debt/EBITDA Ratio is greater than or equal to 3.0 to 1 but less than 3.5 to 1.
<PAGE> 98
"LEVEL VI PRICING" applies for any day if, on such day, the Applicable
Debt/EBITDA Ratio is greater than or equal to 3.5 to 1 but less than 4.0 to 1.
"LEVEL VII PRICING" applies for any day if, on such day, no other
Pricing Level applies.
"PRICING LEVEL" refers to the determination of which of Level I, Level
II, Level III, Level IV, Level V, Level VI or Level VII Pricing applies for any
day.
<PAGE> 99
RATINGS-BASED PRICING SCHEDULE
Each of "FACILITY FEE RATE", "EURO-DOLLAR MARGIN" and "CD MARGIN"
means, for any day, the rate per annum set forth below in the applicable row
opposite such term and in the column corresponding to the "Pricing Level" that
applies for such day:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facility Fee Rate 0.085% 0.100% 0.125% 0.150% 0.250%
- --------------------------------------------------------------------------------------------------------------------
Euro-Dollar Margin
If Utilization is less than or equal to 33% 0.200% 0.200% 0.200% 0.350% 0.625%
If Utilization is > 33% 0.250% 0.250% 0.250% 0.400% 0.675%
- --------------------------------------------------------------------------------------------------------------------
CD Margin
If Utilization is less than or equal to 33% 0.325% 0.325% 0.325% 0.475% 0.750%
If Utilization is > 33% 0.375% 0.375% 0.375% 0.525% 0.800%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings, subject to the concluding paragraphs of this Schedule:
"LEVEL I PRICING" applies for any day if, on such day, the Company's
long-term debt is rated A- or higher by S&P or A3 or higher by Moody's.
"LEVEL II PRICING" applies for any day if, on such day, (i) the
Company's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by
Moody's and (ii) Level I Pricing does not apply.
"LEVEL III PRICING" applies for any day if, on such day, (i) the
Company's long-term debt is rated BBB or higher by S&P or Baa2 or higher by
Moody's and (ii) neither Level I Pricing nor Level II Pricing applies.
"LEVEL IV PRICING" applies for any day if, on such day, (i) the
Company's long-term debt is rated BBB- or higher by S&P or Baa3 or higher by
Moody's and (ii) none of Level I Pricing, Level II Pricing and Level III Pricing
applies.
"LEVEL V PRICING" applies for any day if, on such day, no other Pricing
Level applies.
"PRICING LEVEL" refers to the determination of which of Level I, Level
II, Level III, Level IV or Level V Pricing applies for any day.
<PAGE> 100
"UTILIZATION" means, for any day, the percentage which the aggregate
outstanding principal amount of the Loans represents of the aggregate amount of
the Commitments at the close of business on such day.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the Company
without third-party credit enhancement, and any rating assigned to any other
debt security of the Company shall be disregarded. The rating in effect on any
day is that in effect at the close of business on such day.
Split ratings shall be treated as follows:
(i) If the Company is split-rated and the ratings differential is one
level, the higher of the two ratings will apply (e.g., A-/Baa1 results
in Level I Pricing and BBB+/Baa2 results in Level II Pricing).
(ii) If the Company is split-rated and the ratings differential is
more than one level, the midpoint of the two ratings (or, if there is
no midpoint, the higher of two intermediate ratings) shall be used
(e.g., A-/Baa2 results in Level II Pricing and A-/Baa3 results in
Level II Pricing).
<PAGE> 101
SCHEDULE 1.01
LIST OF SPIN-OFF AGREEMENTS
Distribution Agreement between Campbell and the Company
Benefits Sharing Agreement between Campbell and the Company
Tax Sharing and Indemnification Agreement between Campbell and the Company
Trademark License Agreements between Campbell and the Company
Technology Sharing Agreement between Campbell and the Company
Transition Services Agreement between Campbell and the Company
Supply Agreements between Campbell and the Company
Contract Manufacturing ("Co-Pack") Agreements between Campbell and the
Company
<PAGE> 102
SCHEDULE 5.17
DEBT OUTSTANDING AT AUGUST 30, 1998
<TABLE>
<CAPTION>
DEBTOR AMOUNT EXCHANGE RATE US$ OR EQUIVALENT
<S> <C> <C> <C>
Campbell Grocery Products DM 2,280,000 (short-term) 1.7585 $1,297,000
GmbH and Theodor Kattus DM 3,017,000 (long-term) 1.7585 $1,716,000
GmbH
Freshbake Foods Limited (pound sterling)1,582,000 1.6806 $2,658,000
Swift Armour Sociedad $11,939,000
Anonima Argentina
Capitalized Leases (current $369,000
portion)
Capitalized Leases (long-term $382,000
portion)
TOTAL $18,361,000
</TABLE>
<PAGE> 103
EXHIBIT A
FORM OF NOTE
New York, New York
___________ __, 199_
For value received, VLASIC FOODS INTERNATIONAL INC., a New Jersey
corporation (the "COMPANY"), promises to pay to the order of
______________________ (the "BANK"), for the account of its Applicable Lending
Office, the unpaid principal amount of (i) the Loan (if any) made by the Bank to
Campbell Soup Company on the Campbell Closing Date and assumed by the Company on
the Company Closing Date and (ii) each Loan made by the Bank to the Company
after the Company Closing Date, in each case pursuant to the Credit Agreement
referred to below, on the maturity date provided for in the Credit Agreement,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company. The Company promises to pay interest on the
unpaid principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans evidenced hereby, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make (or any error in making)
any such recordation or endorsement shall not affect the obligations of the
Company hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement dated
as of February 20, 1998 among the Company, Campbell Soup Company, the Banks
party thereto, The Chase Manhattan Bank, as Syndication Agent, and Morgan
Guaranty Trust Company of New York, as Administrative Agent (as the same may be
amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are used herein with the same meanings. The Bank is entitled to the
benefits of the Credit Agreement and reference is made to the Credit Agreement
for provisions for the prepayment hereof and the acceleration of the maturity
hereof.
<PAGE> 104
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
VLASIC FOODS INTERNATIONAL INC.
By: ____________________________
Name:
Title:
<PAGE> 105
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
AMOUNT OF TYPE OF AMOUNT OF MATURITY NOTATION
DATE LOAN LOAN PRINCIPAL REPAID DATE MADE BY
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 106
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York (the "ADMINISTRATIVE AGENT")
From: VLASIC FOODS INTERNATIONAL INC.
Re: Amended and Restated Credit Agreement dated as of September 30, 1998,
as amended (the "CREDIT AGREEMENT") among Vlasic Foods International
Inc., the Banks party thereto, The Chase Manhattan Bank, as Syndication
Agent, and Morgan Guaranty Trust Company of New York, as Administrative
Agent and Collateral Agent.
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: ________________________
PRINCIPAL AMOUNT(1) INTEREST PERIOD(2)
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
VLASIC FOODS INTERNATIONAL INC.
By:
Name:
Title:
- --------
(1) Amount must be $5,000,000 or a larger multiple of $1,000,000.
(2) Not less than one month (LIBOR Auction) or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE> 107
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Vlasic Foods International Inc.
(the "COMPANY")
Pursuant to Section 2.03 of the Amended and Restated Credit Agreement
dated as of September 30, 1998, as amended, among the Company, the Banks party
thereto, The Chase Manhattan Bank, as Syndication Agent, and the undersigned, as
Administrative Agent and Collateral Agent, we are pleased on behalf of the
Company to invite you to submit Money Market Quotes to the Company for the
following proposed Money Market Borrowing(s):
Date of Borrowing: ________________________
PRINCIPAL AMOUNT(1) INTEREST PERIOD(2)
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Administrative Agent
By:
Authorized Officer
- --------
(1) Amount must be $5,000,000 or a larger multiple of $1,000,000.
(2) Not less than one month (LIBOR Auction) or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE> 108
EXHIBIT D
FORM OF MONEY MARKET QUOTE
[Date]
To: Morgan Guaranty Trust Company of New York, as Administrative Agent
From: [Name of Bank]
Re: Money Market Quote to Vlasic Foods International Inc. (the "COMPANY")
In response to your invitation on behalf of the Company dated _______,
19__, we hereby make the following Money Market Quote on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. Date of Borrowing: (1)
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT(1) INTEREST PERIOD(2) [MONEY MARKET MARGIN(3)] [ABSOLUTE RATE(4)]
<S> <C> <C> <C>
$
$
</TABLE>
[provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $____________.](2)
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Amended and
Restated Credit Agreement dated as of September 30, 1998, as amended, among the
Company, the Banks party thereto, The Chase Manhattan Bank, as Syndication
Agent, and yourselves, as Administrative Agent and Collateral Agent, irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
- --------
(1) As specified in the related Invitation.
<PAGE> 109
[NAME OF BANK]
Dated: By:
Authorized Officer
<PAGE> 110
1. Principal amount bid for each Interest Period may not exceed principal amount
required. Specify aggregate limitation if the sum of the individual offers
exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000
or a larger multiple of $1,000,000.
2. Not less than one month or not less than 30 days, as specified in the related
Invitation. No more than five bids are permitted for each Interest Period.
3. Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000th of 1%)
and specify whether "PLUS" or "MINUS".
4. Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 1
EXHIBIT 10.7
- -----------------------------
PERSONAL CHOICE
PROGRAM
IN RECOGNITION OF YOUR
LEADERSHIP
- -----------------------------
Vlasic Foods International depends on you for a great many things. Our
shareowners look to you to guide the Company through increasingly challenging
times. Your employees count on you to set the direction, tone, and example for
how we do business. All of this takes time and dedication.
To reward you for your contributions to the Company, Vlasic offers Personal
Choice. It signals the Company's appreciation for your leadership and
commitment, and is designed to help you make your life a little easier to
manage.
This brochure offers a brief description of what Personal Choice offers and how
it works. Please spend a few minutes reviewing the information, then take
advantage of the Program by doing something special for yourself or your family.
PROGRAM OVERVIEW
- -----------------------------
Personal Choice is a special program that is available only to the executive
team of Vlasic Foods International at Levels 40 and above. Your participation in
the Program is a reflection of your key position in the Company and all the
unique challenges that come with it.
Personal Choice provides you with supplemental compensation above and beyond all
other compensation you receive as a Vlasic executive. The amount of supplemental
compensation that you are awarded depends on your position and level of
responsibility.
FLEXIBILITY AND EASE OF
ADMINISTRATION ARE KEY
- -----------------------------
Personal Choice gives you the flexibility to choose how your supplemental
compensation is spent. Under this approach, you tailor the program to fit your
lifestyle, preferences, and needs. In this way, the Company's contribution is
applied toward those items that you and your family value most.
Personal Choice requires no receipts or paperwork on your part. You will simply
receive payments in quarterly installments.
You may use your Personal Choice payment for any personal expenditure(s) you
choose. A menu of sample expenditures are shown on the following page.
PERSONAL CHOICE
PROGRAM - SAMPLE MENU
- -----------------------------
- - Auto Purchase or Lease
- - Auto Security System
- - Childcare (You may also want to take
advantage of Vlasic's Dependent Care
Spending Account benefit.)
- - Dining/University Club
- - Exercise Equipment
- - Financial Planning or Tax Preparation
- - Health/Fitness Consultant or Club
Membership
- - Home Computers
- - Home or Lawn Maintenance Services
- - Legal Services
- - Personal Excess Liability Insurance
- - Residential Security System or Service
<PAGE> 2
- - Spousal/Family Club Memberships
- -----------------------------
YOUR PERSONAL CHOICE
PAYMENTS
- -----------------------------
Timing:
In the middle of each fiscal quarter (mid-September, mid-December, mid-March and
mid-June), the Company will make a lump-sum payment to you equal to 25% of your
Personal Choice annual award. These payments will be net of the applicable tax
withholdings.
Taxes:
The Personal Choice payment you will receive each quarter is taxable, which
means that according to current tax law:
- - The gross amount of your payments will be included as taxable income on your
W-2 statement each year, and
- - Your actual payments will be net of tax withholdings, including 28% federal
(the supplemental rate), as well as the applicable state and local taxes.
(Keep in mind: Certain amounts may be deductible on your income return for the
year in which you pay them - for example, the amount you pay for income tax
preparation.)
IF YOUR ASSIGNMENT CHANGES
- -----------------------------
If you are already a participant in the Program and your level changes or if you
become newly eligible for participation, your payment will be prorated according
to the date your status changes (rounded to the nearest month).
If you retire or terminate during the year, your last payment under the Program
will be prorated according to your date of termination (rounded to the nearest
month).
Note: Your Personal Choice payments are not included as compensation in the
calculation of pensionable earnings or any other pay-related benefits.
IF YOU HAVE QUESTIONS
- -----------------------------
If you have questions at any time about the Personal Choice Program, please
contact the Vlasic Compensation Department.
- -----------------------------
The material in this brochure is presented to you by Vlasic Foods International
for informational purposes only. It is designed to help you understand the
Personal Choice supplemental compensation program for Vlasic Foods International
executives, but it creates no contract or binding obligation between you and
Vlasic Foods International. The final decision as to your eligibility for
Personal Choice is at the discretion of Vlasic Foods International. The Program
is subject to change from time to time, and may be discontinued at any time, at
the sole discretion of the Company.
PERSONAL
CHOICE
A SPECIAL PROGRAM
FOR EXECUTIVES
<PAGE> 3
[VLASIC FOODS INTERNATIONAL LOGO]
<PAGE> 1
EXHIBIT 10.8
- --------------------------------------------------------------------------------
VLASIC FOODS INTERNATIONAL INC.
-------------------
DEFERRED COMPENSATION PLAN
-------------------
Dated: March 30, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
I. DEFINITIONS.................................................................1
II. ELIGIBILITY AND PARTICIPATION...............................................3
III. CONTRIBUTIONS...............................................................4
IV. FORFEITURE..................................................................5
V. PLAN ADMINISTRATION.........................................................5
VI. CLAIMS PROCEDURE............................................................5
VII. AMENDMENT AND TERMINATION...................................................6
VIII. CHANGE IN CONTROL...........................................................6
IX. MISCELLANEOUS..............................................................10
</TABLE>
- i -
<PAGE> 3
VLASIC FOODS INTERNATIONAL INC.
DEFERRED COMPENSATION PLAN
(Effective March 30, 1998)
This is the Vlasic Foods International Inc. Deferred
Compensation Plan, which is designed to provide eligible employees with an
additional method of planning for retirement. The Plan is intended to be an
"unfunded" plan maintained for the purpose of providing deferred compensation
for a select group of management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended.
ARTICLE I
DEFINITIONS
The following words and phrases, as used in the Plan, shall
have these meanings:
SECTION 1.1 "ACCOUNT BALANCE" means the total amount of a Participant's
Contributions that are credited to a bookkeeping account, including hypothetical
income, gains and losses credited thereto.
SECTION 1.2 "ADDITIONAL EMPLOYER MATCHING CONTRIBUTION" has the meaning
set forth in the Savings Plan.
SECTION 1.3 "ANNUAL INCENTIVE PLAN" means the Vlasic Foods International
Inc. Annual Incentive Plan.
SECTION 1.4 "AWARD" means an award under the Vlasic Foods International
Inc. Annual Incentive Plan, an approved Employer sales incentive compensation
program, or any other Employer incentive program that is authorized for
eligibility by the Plan Administrator.
SECTION 1.5 "BENEFICIARY" means the person whom the Participant designates
to receive any unpaid portion of the Participant's AccoUnt Balance should the
Participant's death occur before the Participant receives the entire Account
Balance. If the Participant does not designate a Beneficiary, his or her
Beneficiary shall be his or her spouse if he or she is married at the time of
death, or his or her estate if he or she is unmarried at the time of death.
SECTION 1.6 "BOARD OF DIRECTORS" means the board of directors of Vlasic.
SECTION 1.7 "CAMPBELL" means Campbell Soup Company and any Campbell
subsidiary.
SECTION 1.8 "CAUSE" means the termination of a Participant's employment by
reason of his or her engaging in conduct that constitutEs willful gross
misconduct that is demonstrably and materially injurious to his or her employer,
monetarily or otherwise, misappropriation of funds, willful and material
misrepresentation to the directors or officers of his or her employer, gross
<PAGE> 4
negligence in the performance of the Participant's duties having a material
adverse effect on the business, operations, assets, properties or financial
condition of Vlasic or a Subsidiary, or entering into competition with Vlasic or
a Subsidiary. No act, nor failure to act, on the Participant's part shall be
considered "willful" unless he or she has acted, or failed to act, with an
absence of good faith and without a reasonable belief that his or her action or
failure to act was in the best interest of Vlasic and its Subsidiaries.
SECTION 1.9 "CODE" means the Internal Revenue Code of 1986, as amended.
SECTION 1.10 "COMPENSATION" means:
(a) For purposes of the Salary Deferral Program, all amounts
that are treated as wages for Federal income tax withholding under section
340l(a) of the Code for the Plan Year plus amounts that would be paid to the
Executive during the year but for the Executive's election under a cash or
deferred arrangement described in section 401(k) of the Code or a cafeteria plan
described in section 125 of the Code. Notwithstanding the preceding sentence,
Compensation shall not include:
(i) an Award under any incentive plan sponsored by
the Employer,
(ii) contributions by the Employer to this or any
other plan or plans for the benefit of its employees, except as otherwise
expressly provided in this Plan, or
(iii) amounts identified by the Employer as expense
allowances or reimbursements regardless of whether such amounts are treated as
wages under the Code.
(b) For purposes of the Supplemental Savings Program, the
meaning set forth in the Savings Plan.
SECTION 1.11 "CONTRIBUTION" means an amount deferred under the Plan
pursuant to a Participant's election, or credited to a ParticipAnt under Article
III, and credited to a Participant's Account Balance. No money or other assets
shall actually be set aside or contributed to such Account Balance.
SECTION 1.12 "EFFECTIVE DATE" means March 30, 1998.
SECTION 1.13 "EMPLOYER" means Vlasic and any Subsidiary that the Plan
Administrator designates as an Employer under the Plan.
SECTION 1.14 "EXECUTIVE" means an employee of the Employer who, for any
Plan Year, is:
(a) classified as "exempt" under the Fair Labor Standards Act
of 1938, as amended;
(b) a "highly compensated employee" within the meaning of
section 414(q) of the Code; and
-2-
<PAGE> 5
(c) designated by the Plan Administrator as eligible to
participate in the Plan.
SECTION 1.15 "IRS COMPENSATION LIMIT" means the annual dollar limit
prescribed under section 401(a)(17) of the Code.
SECTION 1.16 "LTIP" means the Vlasic 1998 Long-Term Incentive Plan.
SECTION 1.17 "PARTICIPANT" means an Executive who elects to participate in
the Plan.
SECTION 1.18 "PLAN" means the Deferred Compensation Plan, as amended, and
that consists of the Salary Deferral Program, the Supplemental Savings Program,
the LTIP Deferral Program and the Annual Incentive Plan Deferral Program.
SECTION 1.19 "PLAN ADMINISTRATOR" means the Compensation and Organization
Committee of the Board of Directors, or its delegate or successor.
SECTION 1.20 "PLAN YEAR" means the period beginning on [Distribution Date]
and ending December 31, 1998 and each 12-month period thereafter beginning
January 1 and ending December 31.
SECTION 1.21 "PROGRAMS" are described in Section 2.1.
SECTION 1.22 "SAVINGS PLAN" means the Vlasic Foods International Inc.
Savings and 401(k) Plan for Salaried Employees.
SECTION 1.23 "SUBSIDIARY" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or indirectly by Vlasic.
SECTION 1.24 "VLASIC" means Vlasic Foods International Inc.
SECTION 1.25 "VLASIC GROUP" means Vlasic and all of its Subsidiaries on
and after the Effective Date.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
SECTION 2.1 ELIGIBILITY. Each Executive may elect to participate in one or more
of the following Programs under the Plan pursuant to the respective eligibility
requirements indicated:
(a) Salary Deferral Program, LTIP Deferral Program, Annual
Incentive Program. Each Executive shall be eligible to participate in the Salary
Deferral Program, the LTIP Deferral Program and the Annual Incentive Plan
Deferral Program.
(b) Supplemental Savings Program. Each Executive: (i) who
participates in the Savings Plan, (ii) whose annual Compensation, as defined in
Section 1.10(b), from the Employer exceeds the IRS Compensation Limit and (iii)
whose rate of contribution to the Savings Plan
-3-
<PAGE> 6
meets or exceeds the amount determined in advance by the Plan Administrator, may
elect to participate in the Supplemental Savings Program.
SECTION 2.2 EXECUTIVES OUTSIDE THE UNITED STATES. Notwithstanding any
other provision of the Plan to the contrary, an Executive whO is subject to tax
outside of the United States is not eligible to participate in any feature of
the Plan unless his or her participation has been approved in advance by the
Plan Administrator.
SECTION 2.3 PARTICIPATION. Any Executive eligible under this Article II
shall become a Participant immediately upon enrolling as A Participant by the
method required by the Plan Administrator. An individual shall remain a
Participant until all amounts credited to the Participant's Account Balance have
been distributed to the Participant or his or her Beneficiary.
ARTICLE III
CONTRIBUTIONS
SECTION 3.1 SALARY DEFERRAL PROGRAM. On behalf of a Participant in the Salary
Deferral Program, the Employer shall contribute to his or her Account Balance:
(i) an amount equal to that portion of the Participant's Compensation that he or
she has elected to defer and (ii) with respect to a Participant who has elected
to defer Compensation pursuant to the Salary Deferral Program and who has also
elected to defer amounts under the Savings Plan, an amount equal to the matching
contribution the Employer would have made to the Savings Plan based on the
portion of Compensation the Participant defers under the Plan.
SECTION 3.2 SUPPLEMENTAL SAVINGS PROGRAM. On behalf of a Participant in
the Supplemental Savings Program, the Employer shall contribute to his or her
Account Balance: (i) an amount equal to 2 1/2% of the difference between the
Participant's Compensation above the IRS Compensation Limit and the IRS
Compensation Limit itself; provided, however, that no amount shall be credited
hereunder for any period during which a Participant in the Supplemental Savings
Program is not also an active participant in the Savings Plan, (ii) such
additional amount as the Employer, in its sole discretion, may determine and
(iii) with respect to a Participant as to whom the Employer is prohibited,
because of Code limitations, from contributing a full Additional Employer
Matching Contribution, an amount equal to the contribution so prohibited.
SECTION 3.3 LTIP DEFERRAL PROGRAM. On behalf of a Participant who
participates in the LTIP, the Employer shall contribute to his Or her Account
Balance an amount equal to that portion of an eligible LTIP Award that the
Participant has elected to defer under the Plan.
SECTION 3.4 ANNUAL INCENTIVE PLAN DEFERRAL PROGRAM. On behalf of a
Participant who participates in the Annual Incentive Plan, the Employer shall
contribute to his or her Account Balance an amount equal to that portion of an
eligible Annual Incentive Plan Award that the Participant has elected to defer
under the Plan.
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ARTICLE IV
FORFEITURE
Prior to a Change in Control, a Participant who is discharged for
Cause as determined by the Employer shall, unless otherwise determined by the
Plan Administrator in connection with the termination of his or her employment,
lose any right to receive payment of his or her Account Balance.
ARTICLE V
PLAN ADMINISTRATION
SECTION 5.1 GENERAL. The Plan shall be administered by the Plan Administrator.
The Plan Administrator shall establish procedures and rules regarding the timing
of deferral elections, the time period for deferral, the forms of distribution,
the availability of death benefits, the measurement units for valuing Account
Balances, the transfer of Account Balances among measurement units, the
statements of Account Balances, the time and manner of payment of Account
Balances, and other administrative items for the Plan.
SECTION 5.2 PLAN INTERPRETATION. The Plan Administrator shall have the
authority and responsibility to interpret and construe the Plan and to decide
all questions arising thereunder, including without limitation, questions of
eligibility for participation, eligibility for Contributions, the amount of
Account Balances and the timing of the distribution thereof, and shall have the
authority to deviate from the literal terms of the Plan to the extent it shall
determine to be necessary or appropriate to operate the Plan in compliance with
the provisions of applicable law.
SECTION 5.3 RESPONSIBILITIES AND REPORTS. The Plan Administrator may
pursuant to a written instruction name other persons to carrY out specific
responsibilities. The Plan Administrator shall be entitled to rely conclusively
upon all tables, valuations, certificates, opinions and reports that are
furnished by any accountant, controller, counsel, or other person employed or
engaged for such purposes.
ARTICLE VI
CLAIMS PROCEDURE
SECTION 6.1 DENIAL OF CLAIM FOR BENEFITS. Any denial by the Plan Administrator
of a claim for benefits under the Plan by a Participant or Beneficiary shall be
stated in writing by the Plan Administrator and delivered or mailed to the
Participant or Beneficiary. The Plan Administrator shall furnish the claimant
with notice of the decision not later than 90 days after receipt of the claim,
unless special circumstances require an extension of time for processing the
claim. If such an extension of time for processing is required, written notice
of the extension shall be furnished to the claimant prior to the termination of
the initial 90 day period. In no event shall such extension exceed a period of
90 days from the end of such initial period. The extension notice
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shall indicate the special circumstances requiring an extension of time and the
date by which the Plan Administrator expects to render the final decision. The
notice of the Plan Administrator's decision shall be written in a manner
calculated to be understood by the claimant and shall include (i) the specific
reasons for the denial, including, where appropriate, references to the Plan,
(ii) any additional information necessary to perfect the claim with an
explanation of why the information is necessary, and (iii) an explanation of the
procedure for perfecting the claim.
SECTION 6.2 APPEAL OF DENIAL. The claimant shall have 60 days after
receipt of written notification of denial of his or her claim in which to file a
written appeal with the Plan Administrator. As a part of any such appeal, the
claimant may submit issues and comments in writing and shall, on request, be
afforded an opportunity to review any documents pertinent to the perfection of
his or her claim. The Plan Administrator shall render a written decision on the
claimant's appeal ordinarily within 60 days after receipt of notice thereof but,
in no case, later than 120 days.
ARTICLE VII
AMENDMENT AND TERMINATION
Vlasic reserves the right to amend or modify the Plan at any time by
action of the Plan Administrator and each Employer reserves the right to
terminate the Plan as to its employees at any time by action of its board of
directors. Notwithstanding the foregoing, no such amendment, modification or
termination shall reduce any Participant's Account Balance as of the date of
such amendment, modification or termination.
ARTICLE VIII
CHANGE IN CONTROL
SECTION 8.1 PROVISIONS. Notwithstanding anything contained in the Plan to the
contrary, the provisions of this Article VIII shall govern and supersede any
inconsistent terms or provisions of the Plan.
SECTION 8.2 DEFINITION OF "CHANGE IN CONTROL". For purposes of the Plan
"Change in Control" means any of the following events:
(a) The acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Section 13(d) or Section
14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of twenty-five percent (25%) or more of the combined voting power of
Vlasic's then outstanding voting securities (the "Voting Securities"); provided,
however, that for purposes of this Section 8.2(a), the Voting Securities
acquired directly from Vlasic by any Person shall be excluded from the
determination of such Person's Beneficial ownership of Voting Securities (but
such Voting Securities shall be included in the calculation of the total number
of Voting Securities then outstanding); or
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(b) The individuals who, as of the later of April 1, 1998 or
the first date that the membership of the Board of Directors reaches seven (7),
are members of the Board of Directors (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds of the Board of Directors; provided,
however, that if the election, or nomination for election by Vlasic's
shareowners, of any new Director was approved by a vote of at least two-thirds
of the Incumbent Board, such new Director shall, for purposes of the Plan, be
considered as a member of the Incumbent Board; or
(c) Approval by shareowners of Vlasic of (i) a merger or
consolidation involving Vlasic if the shareowners of Vlasic, immediately before
such merger or consolidation, do not own, directly or indirectly, immediately
following such merger or consolidation, more than eighty percent (80%) of the
combined voting power of the outstanding Voting Securities of the corporation
resulting from such merger or consolidation in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger or
consolidation or (ii) a complete liquidation or dissolution of Vlasic or an
agreement for the sale or other disposition of all or substantially all of the
assets of Vlasic; or
(d) Acceptance by shareowners of Vlasic of shares in a share
exchange if the shareowners of Vlasic, immediately before such share exchange,
do not own, directly or indirectly, immediately following such share exchange,
more than eighty percent (80%) of the combined voting power of the outstanding
Voting Securities of the corporation resulting from such share exchange in
substantially the same proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because twenty-five percent (25%) or more of the then outstanding
Voting Securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by Vlasic or any
of its subsidiaries, (ii) any entity that, immediately prior to such
acquisition, is entirely owned (directly or indirectly) by shareowners of Vlasic
in the same proportions as their ownership of stock in Vlasic immediately prior
to such acquisition, (iii) any "Grandfathered Dorrance Family shareowner" (as
hereinafter defined) or (iv) any Person who has acquired such Voting Securities
directly from any Grandfathered Dorrance Family shareowner but only if such
Person has executed an agreement that is approved by two-thirds of the Board of
Directors and pursuant to which such Person has agreed that he or she (or they)
will not increase his or her (or their) Beneficial Ownership (directly or
indirectly) to thirty percent (30%) or more of the outstanding Voting Securities
(the "Standstill Agreement") and only for the period during which the Standstill
Agreement is effective and fully honored by such Person. For purposes of this
Section, "Grandfathered Dorrance Family shareowner" means at any time a
"Dorrance Family shareowner" (as hereinafter defined) who or which is at the
time in question the Beneficial Owner solely of (v) Voting Securities
beneficially owned by such individual on April 1, 1998, (w) Voting Securities
acquired directly from Vlasic, (x) Voting Securities acquired directly from
another Grandfathered Dorrance Family shareowner, (y) Voting Securities that are
also Beneficially Owned by other Grandfathered Dorrance Family shareowners at
the time in question, and (z) Voting Securities acquired after April 1, 1998
other than directly from Vlasic or from another Grandfathered Dorrance Family
shareowner by any "Dorrance Grandchild" (as
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hereinafter defined); provided that the aggregate amount of Voting Securities so
acquired by each such Dorrance Grandchild shall not exceed five percent (5%) of
the Voting Securities outstanding at the time of such acquisition. A "Dorrance
Family shareowner" who or which is at the time in question the Beneficial Owner
of Voting Securities that are not specified in clauses (v), (w), (x), (y) and
(z) of the immediately preceding sentence shall not be a Grandfathered Dorrance
Family shareowner at the time in question. For purposes of this Section,
"Dorrance Family shareowners" means individuals who are descendants of the late
Dr. John T. Dorrance, Sr. and/or the spouses, fiduciaries and foundations of
such descendants. A "Dorrance Grandchild" means as to each particular grandchild
of the late Dr. John T. Dorrance, Sr., all of the following taken collectively:
such grandchild, such grandchild's descendants and/or the spouses, fiduciaries
and foundations of such grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
outstanding Voting Securities as a result of the acquisition of Voting
Securities by Vlasic that, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Person; provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by Vlasic, and after such share acquisition by Vlasic, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities that
increases the percentage of the then outstanding Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.
SECTION 8.3 DEFINITION OF "TERMINATION FOLLOWING A CHANGE IN CONTROL." For
purposes of the Plan, "Termination Following a Change In Control" means a
termination of employment:
(a) initiated by the employer of the Participant, other than
for Cause; or
(b) initiated by the Participant following one or more of the
following events:
(i) an assignment to the Participant of any duties
materially inconsistent with, or a reduction or change by his or her employer
in the nature or scope of the authority, duties or responsibilities of the
Participant from those assigned to or held by the Participant immediately prior
to the Change in Control;
(ii) any removal of the Participant from the positions
held immediately prior to the Change in Control, except in connection with
promotions to positions of greater responsibility and prestige;
(iii) any reduction by his or her employer in the
Participant's compensation as in effect immediately prior to the Change in
Control or as the same may be increased thereafter;
(iv) revocation or any modification of any employee
benefit plan, or any action taken pursuant to the terms of any such plan, that
materially reduces the opportunity of the Participant to receive benefits under
any such plan;
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(v) a transfer or relocation of the site of employment
of the Participant immediately preceding the Change in Control, without the
Participant's express written consent, to a location more than fifty (50) miles
distant therefrom, or that is otherwise an unacceptable commuting distance from
the Participant's principal residence at the date of the Change in Control; or
(vi) a requirement that the Participant undertake
business travel to an extent substantially greater than the Participant's
business travel obligations immediately prior to the Change in Control.
SECTION 8.4 CHANGE IN CONTROL YEAR. For purposes of the Plan, "Change in
Control Year" means a fiscal year of Vlasic in which a Change in Control occurs.
SECTION 8.5 ACCRUED BENEFIT; TRUST ARRANGEMENT.
(a) Upon a Change in Control, the benefits accrued as if invested in
Vlasic common stock shall be converted into a cash equivalent amount equal to
the greater of (i) the highest price per share of such stock (a "Share") paid to
holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest fair market
value per Share during the ninety (90) day period ending on the date of a Change
in Control multiplied by the number of Shares of Vlasic stock credited to a
Participant's Account Balance under the Plan. The resulting cash equivalent
amount shall promptly be credited to (i) the remaining hypothetical investments
in the Participant's Account Balance, in the same relative proportions as those
hypothetical investments or (ii) if an Participant's Account Balance was
credited entirely in the hypothetical Vlasic Stock fund, the most conservative
hypothetical investment.
(b) Not later than a Change in Control, Vlasic and each of the other
Employers shall contribute to a trust arrangement described in Section 9.8 cash,
marketable securities or other property having a fair market value in an amount
equal to the sum of the amounts, determined by an actuary selected by Vlasic and
satisfactory to a majority of the Participants, using reasonable assumptions,
that will be sufficient to fund fully the Employer's obligations to pay the full
amount of all benefits to which the Participants (and their Beneficiaries) may
become entitled pursuant to the Plan.
SECTION 8.6 AMENDMENT OR TERMINATION.
(a) This Article VIII shall not be amended or terminated at any
time.
(b) For a period of two (2) years following a Change in Control, the
Plan shall not be terminated or amended in any way, nor shall the manner in
which the Plan is administered be changed in a way that adversely affects the
Executive's right to existing or future Employer-provided benefits or
contributions provided hereunder.
(c) Any amendment or termination of the Plan prior to a Change in
Control that (i) is at the request of a third party who has indicated an
intention or taken steps reasonably
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calculated to effect a Change in Control or (ii) otherwise arises in connection
with or in anticipation of a Change in Control, shall be null and void and shall
have no effect whatsoever.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NO EMPLOYMENT CONTRACT. The establishment or existence of the Plan
shall not confer upon any individual the right to be continued as an employee.
The Employer expressly reserves the right to discharge any employee whenever in
its judgment its best interests so require.
SECTION 9.2 NON-ALIENATION. No amounts payable under the Plan shall be
subject in any manner to anticipation, assignment, or voluntary or involuntary
alienation.
SECTION 9.3 GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of New Jersey to The extent not preempted
by federal law.
SECTION 9.4 WITHHOLDING. The Employer shall withhold from any benefits
payable under the Plan all federal, state and local income taxes or other taxes
required to be withheld pursuant to applicable law.
SECTION 9.5 INCAPACITY. If the Plan Administrator, in its sole discretion,
deems a Participant or Beneficiary who is eligible to receive any payment
hereunder to be incompetent to receive the same by reason of age, illness or any
infirmity or incapacity of any kind, the Plan Administrator may direct the
Employer to apply such payment directly for the benefit of such person, or to
make payment to any person selected by the Plan Administrator to disburse the
same for the benefit of the Participant or Beneficiary. Payments made pursuant
to this Section shall operate as a discharge, to the extent thereof, of all
liabilities of the Employer, the Plan Administrator and the Plan to the person
for whose benefit the payments are made.
SECTION 9.6 NUMBER. For purposes of the Plan, the singular shall include
the plural, and vice versa.
SECTION 9.7 BINDING UPON SUCCESSORS. The liabilities under the Plan shall
be binding upon any successor, assign or purchaser of tHe Employer or any
purchaser of substantially all of the assets of the Employer.
SECTION 9.8 TRUST ARRANGEMENT. All benefits under the Plan represent an
unsecured promise to pay by the Employer. The Plan shall be unfunded and the
benefits hereunder shall be paid only from the general assets of the Employer
resulting in the Executives having no greater rights than the Employer's other
general creditors. Notwithstanding the foregoing, Section 8.5(b) shall be given
full effect in the event of a Change in Control and nothing herein shall prevent
or prohibit the Employer from establishing a trust or other arrangement for the
purpose of providing for the payment of the benefits payable under the Plan at
any other time.
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IN WITNESS WHEREOF, Vlasic Foods International Inc. has caused this Plan
to be duly executed as of March 30, 1998.
[CORPORATE SEAL] VLASIC FOODS INTERNATIONAL INC.
<TABLE>
<S> <C>
Attest: By:
------------------------- ------------------------------------
Secretary President and Chief Executive
Officer
</TABLE>
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EXHIBIT 10.9
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VLASIC FOODS INTERNATIONAL INC.
-------------------
1998 LONG-TERM INCENTIVE PLAN
-------------------
Dated: ______________, 1998
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<PAGE> 2
VLASIC FOODS INTERNATIONAL INC.
1998 LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
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<S> <C>
I. PURPOSE AND EFFECTIVE DATE.............................................1
II. DEFINITIONS............................................................1
III. ADMINISTRATION.........................................................4
IV. AWARDS.................................................................5
V. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS............................6
VI. RESTRICTED STOCK AWARDS................................................9
VII. UNRESTRICTED VLASIC STOCK AWARDS......................................11
VIII. AWARD OF PERFORMANCE UNITS............................................11
IX. DEFERRAL OF CERTAIN PAYMENTS..........................................13
X. MISCELLANEOUS PROVISIONS..............................................13
XI. CHANGE IN CONTROL OF THE COMPANY......................................15
</TABLE>
<PAGE> 3
ARTICLE I
PURPOSE AND EFFECTIVE DATE
SECTION 1.1 PURPOSE. The purpose of the Plan is to provide financial incentives
for selected employees of the Vlasic Foods International Group, thereby
promoting the long-term growth and financial success of the Vlasic Foods
International Group by (i) attracting and retaining employees of outstanding
ability, (ii) strengthening the Vlasic Foods International Group's capability to
develop, maintain, and direct a competent management team, (iii) providing an
effective means for selected employees to acquire and maintain ownership of
Vlasic Stock, (iv) motivating employees to achieve long-range Performance Goals
and objectives, and (v) providing incentive compensation opportunities
competitive with those of other major corporations.
SECTION 1.2. EFFECTIVE DATE AND EXPIRATION OF PLAN. The Plan was approved
by Campbell Soup Company, as the sole shareowner of Vlasic Foods International
Inc. and is effective March 30, 1998. Unless earlier terminated by the Board
pursuant to Section 10.3, the Plan shall terminate on the tenth anniversary of
its Effective Date. No Award shall be made pursuant to the Plan after its
termination date, but exercise and payment of Awards made prior to the
termination date may extend beyond that date.
ARTICLE II
DEFINITIONS
The following words and phrases, as used in the Plan, shall have
these meanings:
SECTION 2.1 "AWARD" means, individually or collectively, any Option, SAR,
Restricted Stock, unrestricted Vlasic Stock or Performance Unit Award.
SECTION 2.2. "BOARD" means the Board of Directors of the Company.
SECTION 2.3. "CAMPBELL CONVERSION AWARD" means an award under the Campbell
Soup Company 1994 Long-Term Incentive Plan ("Campbell Plan") that terminates
solely by reason of the spin-off of the Company from Campbell Soup Company and
is converted to a replacement Award under the Plan. The replacement Award shall
have the same aggregate Option Price, cover the same aggregate fair market value
of Vlasic Stock and continue the vesting schedule and other provisions of the
award under the Campbell Plan that it replaces.
SECTION 2.4. "CAUSE" means the termination of a Participant's employment
by reason of his or her engaging in conduct that constitutes willful gross
misconduct that is demonstrably and materially injurious to his or her employer,
monetarily or otherwise, misappropriation of funds, willful and material
misrepresentation to the directors or officers of his or her employer, gross
negligence in the performance of the Participant's duties having a material
adverse effect on the
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business, operations, assets, properties or financial condition of the Company
or a Subsidiary, or entering into competition with the Company or a Subsidiary.
No act, nor failure to act, on the Participant's part shall be considered
"willful" unless he or she has acted, or failed to act, with an absence of good
faith and without a reasonable belief that his or her action or failure to act
was in the best interest of the Company and its Subsidiaries.
SECTION 2.5. "CODE" means the Internal Revenue Code of 1986, as amended.
SECTION 2.6. "COMMITTEE" means the Compensation and Organization Committee
of the Board. All members of the Committee shall be "Outside Directors," as
defined or interpreted for purposes of Section 162(m) of the Code, and
"Disinterested Persons," within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "1934 Act").
SECTION 2.7. "COMPANY" means Vlasic Foods International Inc. and its
successors and assigns.
SECTION 2.8. "DEFERRED COMPENSATION PLAN" means the Vlasic Foods
International Inc. Deferred Compensation Plan.
SECTION 2.9. "DIRECTOR" means a member of the Board.
SECTION 2.10. "EFFECTIVE DATE" means March 30, 1998.
SECTION 2.11. "EMPLOYEE" means a person who is a regular salaried employee
of the Vlasic Foods International Group and who, in the opinion of the
Committee, is a key employee whose performance can contribute to the success of
the Company or a Subsidiary.
SECTION 2.12. "FAIR MARKET VALUE" means, as of any specified date, an
amount equal to the mean between the reported high and low prices of Vlasic
Stock on the New York Stock Exchange composite tape on the specified date.
SECTION 2.13. "FISCAL YEAR" means the fiscal year of the Company, which is
the 52- or 53-week period ending on the Sunday closest to July 31.
SECTION 2.14. "HIGHLY COMPENSATED EMPLOYEE" means an Employee who is
determined by the Committee to be a member of a select group of management or
highly compensated employees for purposes of Section 201(2) of the Employee
Retirement Income Security Act of 1974, as amended.
SECTION 2.15. "INCENTIVE STOCK OPTION" means an option within the meaning
of Section 422 of the Code.
SECTION 2.16. "NONQUALIFIED STOCK OPTION" means an Option granted under
the Plan other than an Incentive Stock Option.
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SECTION 2.17. "OPTION" means either a Nonqualified Stock Option or an
Incentive Stock Option to purchase Vlasic Stock.
SECTION 2.18. "OPTION PRICE" means the price at which Vlasic Stock may be
purchased under an Option as provided in Section 5.4 or in the case of an SAR
awarded under Section 5.8, the Fair Market Value of Vlasic Stock on the date the
SAR is awarded.
SECTION 2.19. "PARTICIPANT" means an Employee to whom an Award has been
made under the Plan.
SECTION 2.20. "PERFORMANCE GOALS" means goals established by the Committee
pursuant to Section 4.5.
SECTION 2.21. "PERFORMANCE PERIOD" means a period of time over which
performance is measured.
SECTION 2.22. "PERFORMANCE UNIT" means the unit of measure determined
under Article VIII by which is expressed the value of a Performance Unit Award.
SECTION 2.23. "PERFORMANCE UNIT AWARD" means an Award granted under
Article VIII.
SECTION 2.24. "PERSONAL REPRESENTATIVE" means the person or persons who,
upon the death, disability, or incompetency of a Participant, shall have
acquired, by will or by the laws of descent and distribution or by other legal
proceedings, the right to exercise an Option or the right to any Restricted
Stock Award or Performance Unit Award theretofore granted or made to such
Participant.
SECTION 2.25. "PLAN" means the Vlasic Foods International Inc. 1998
Long-Term Incentive Plan.
SECTION 2.26. "RESTRICTED PERFORMANCE STOCK" means Vlasic Stock subject to
Performance Goals provided in Section 4.5.
SECTION 2.27. "RESTRICTED STOCK" means Vlasic Stock subject to the terms
and conditions provided in Article VI and includes Restricted Performance Stock.
SECTION 2.28. "RESTRICTED STOCK AWARD" means an Award granted under
Article VI.
SECTION 2.29. "RESTRICTION PERIOD" means a period of time determined under
Section 6.2 during which Restricted Stock is subject to the terms and conditions
provided in Section 6.3.
SECTION 2.30. "SAR" means a stock appreciation right granted under Section
5.8.
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SECTION 2.31. "STATEMENT" means a written confirmation of an Award under
the Plan furnished to the Participant.
SECTION 2.32. "SUBSIDIARY" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or indirectly by the
Company.
SECTION 2.33. "VLASIC FOODS INTERNATIONAL GROUP" means the Company and all
of its Subsidiaries on and after the Effective Date.
SECTION 2.34. "VLASIC STOCK" means common stock of the Company.
ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE TO ADMINISTER. The Plan shall be administered by the
Committee. The Committee shall have full power and authority to interpret and
administer the Plan and to establish and amend rules and regulations for its
administration. The Committee's decisions shall be final and conclusive with
respect to the interpretation of the Plan and any Award made under it.
A majority of the members of the Committee shall constitute a quorum for
the conduct of business at any meeting. The Committee shall act by majority vote
of the members present at a duly convened meeting, which may include a meeting
by conference telephone call held in accordance with applicable law. Action may
be taken without a meeting if written consent thereto is given in accordance
with applicable law.
SECTION 3.2. POWERS OF COMMITTEE.
(a) Subject to the provisions of the Plan, the Committee
shall have authority, in its discretion, to determine those Employees who shall
receive an Award, the time or times when such Award shall be made, the vesting
schedule, if any, for the Award and the type of Award to be granted, whether an
Incentive Stock Option or a Nonqualified Stock Option shall be granted, the
number of shares to be subject to each Option and Restricted Stock Award, and
the value of each Performance Unit.
(b) The Committee shall determine and set forth in an Award
Statement the terms of each Award, including such terms, restrictions, and
provisions as shall be necessary to cause certain options to qualify as
Incentive Stock Options. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Statement relating
to an Award, in such manner and to the extent the Committee shall determine in
order to carry out the purposes of the Plan. The Committee may, in its
discretion, accelerate (i) the date
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<PAGE> 7
on which any Option or SAR may be exercised, (ii) the date of termination of the
restrictions applicable to a Restricted Stock Award, or (iii) the end of a
Performance Period under a Performance Unit Award, if the Committee determines
that to do so will be in the best interests of the Company and the Participants
in the Plan.
ARTICLE IV
AWARDS
SECTION 4.1 AWARDS. Awards under the Plan shall consist of Incentive Stock
Options, Nonqualified Stock Options, SARs, Restricted Stock, unrestricted Vlasic
Stock and Performance Units. All Awards shall be subject to the terms and
conditions of the Plan and to such other terms and conditions consistent with
the Plan as the Committee deems appropriate. Awards under a particular section
of the Plan need not be uniform and Awards under two or more sections may be
combined in one Statement. Any combination of Awards may be granted at one time
and on more than one occasion to the same Employee. Awards of Performance Units
and Restricted Performance Stock shall be earned solely upon attainment of
Performance Goals and the Committee shall have no discretion to increase such
Awards.
SECTION 4.2. ELIGIBILITY FOR AWARDS. An Award may be made to any Employee
selected by the Committee. In making this selection and in determining the form
and amount of the Award, the Committee may give consideration to the functions
and responsibilities of the respective Employee, his or her present and
potential contributions to the success of the Vlasic Foods International Group,
the value of his or her services to the Vlasic Foods International Group, and
such other factors deemed relevant by the Committee.
SECTION 4.3. SHARES AVAILABLE UNDER THE PLAN. The Vlasic Stock to be
offered under the Plan pursuant to Options, SARs, Performance Unit Awards, and
Restricted Stock and unrestricted Vlasic Stock Awards will be authorized but
unissued Vlasic Stock or Vlasic Stock previously issued and outstanding and
reacquired by the Company. Subject to adjustment under Section 10.2, (i) no more
than 5,800,000 shares of Vlasic Stock shall be issuable upon exercise of
Options, SARs, or pursuant to Performance Unit Awards, Restricted Stock or
unrestricted Vlasic Stock Awards granted under the Plan, and (ii) no less than
80% of such shares of Vlasic Stock shall be issuable upon exercise of Options..
Any shares of Vlasic Stock tendered in exercise of an Option or subject to an
Option that for any reason is canceled or terminated without having been
exercised, or any shares of Restricted Stock which are forfeited, shall again be
available for Awards under the Plan. Shares subject to an Option canceled upon
the exercise of an SAR shall not again be available for Awards under the Plan.
SECTION 4.4. LIMITATION ON AWARDS. The maximum aggregate dollar value of
Restricted Stock and Performance Units awarded to any Employee with respect to a
Performance Period or Restriction Period may not exceed $5,000,000 for each
fiscal year included in such Performance Period or Restriction Period. The
maximum number of shares for which Options may be granted
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to any Participant in any one fiscal year shall not exceed 2,000,000 shares. The
foregoing dollar value and share limits shall not apply to Restricted Stock,
Performance Units and Options attributable to a Campbell Conversion Award.
SECTION 4.5. GENERAL PERFORMANCE GOALS. Prior to the beginning of a
Performance Period the Committee will establish, in writing, Performance Goals
for the Company and its various operating units and its Subsidiaries. The goals
will be comprised of specified annual levels of one or more performance criteria
as the Committee may deem appropriate. Such goals may include, but shall not be
limited to, earnings per share, net earnings, operating earnings, unit volume,
net sales, market share, balance sheet measurements, revenue, cash flow, cash
return on assets, shareowner return, return on equity, return on capital or
other value-based performance measures. The Committee may disregard or offset
the effect of any special charges or gains, the cumulative effect of a change in
accounting, or the effect of other expenses or losses that are unusual in nature
or infrequent in occurrence, in determining the attainment of Performance Goals.
Awards may also be payable when Company performance, as measured by one or more
of the above criteria, as compared to peer companies, meets or exceeds an
objective target established by the Committee.
ARTICLE V
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
SECTION 5.1 AWARD OF STOCK OPTIONS. The Committee may, from time to time,
subject to Section 3.2(b) and other provisions of the Plan and such terms and
conditions as the Committee may prescribe, award Incentive Stock Options and
Nonqualified Stock Options to any Employee. Awards of Incentive Stock Options
and Nonqualified Stock Options must be separate and not in tandem.
SECTION 5.2. PERIOD OF OPTION.
(a) An Option granted under the Plan shall be exercisable
only in accordance with the vesting schedule approved by the Committee. After
the waiting period, the Option may be exercised at any time during the term of
the Option, in whole or in installments, as specified in the related Statement.
Subject to Section 5.6, the duration of each Option shall not be more than ten
years from the date of grant.
(b) Except as provided in Section 5.6, an Option may not be
exercised by a Participant unless such Participant is then, and continually
(except for sick leave, United States military service, or other approved leave
of absence) after the grant of the Option has been, an employee of the Vlasic
Foods International Group.
SECTION 5.3. STATEMENT. Each Option shall be evidenced by a Statement.
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SECTION 5.4. OPTION PRICE, EXERCISE AND PAYMENT. The Option Price of
Vlasic Stock under each Option shall be determined by the Committee but shall be
a price not less than 100 percent of the Fair Market Value of Vlasic Stock at
the date such Option is granted, as determined by the Committee. The Board shall
establish the Option Price for each Option attributable to a Campbell Conversion
Award. Options shall not be repriced.
Options may be exercised from time to time by giving notice to the
Company, or the agent of the Company, specifying the number of shares to be
purchased. The notice of exercise shall be accompanied by payment in full of the
Option Price in cash or the Option Price may be paid in whole or in part through
the transfer to the Company of shares of Vlasic Stock.
In the event such Option Price is paid in whole or in part with shares of
Vlasic Stock, the portion of the Option Price so paid shall be equal to the Fair
Market Value, as of the date of exercise of the Option, of such shares or if the
date of exercise is not a trading day the Fair Market Value of the shares on the
immediately preceding trading day. The Company shall not issue or transfer
Vlasic Stock upon exercise of an Option until the Option Price is fully paid.
The Participant may satisfy any amounts required to be withheld by the Company
under applicable federal, state and local tax laws in effect from time to time,
by electing to have the Company withhold a portion of the shares of Vlasic Stock
to be delivered for the payment of such taxes.
SECTION 5.5. LIMITATIONS ON INCENTIVE STOCK OPTIONS. Each provision of the
Plan and each Option Statement relating to an Incentive Stock Option shall be
construed so that each Incentive Stock Option shall be an incentive stock option
as defined in Section 422 of the Code, and any provisions of the Option
Statement thereof that cannot be so construed shall be disregarded.
SECTION 5.6. TERMINATION OF EMPLOYMENT. Unless otherwise specifically
provided in the terms of a Statement, the following provisions will govern the
ability of a Participant to exercise any outstanding Options following the
Participant's termination of employment with the Vlasic Foods International
Group:
(a) If the employment of a Participant with the Vlasic Foods
International Group is terminated for reasons other than (i) death or
disability, (ii) discharge for Cause, (iii) retirement, or (iv) resignation, the
Participant may exercise an Option, except an Incentive Stock Option, at any
time within three years after such termination, to the extent of the number of
shares covered by such Option that were exercisable at the date of such
termination; except that an Option shall not be exercisable on any date beyond
the expiration of such three-year period or the expiration date of such Option,
whichever occurs first.
(b) If the employment of a Participant with the Vlasic Foods
International Group is terminated for Cause, any Options of such Participant
shall expire and any rights thereunder shall terminate immediately. Any Option
of a Participant whose service is terminated by resignation may be exercised at
any time within three months of such resignation to the extent that the number
of shares covered by such Option were exercisable at the date of such
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resignation, except that an Option shall not be exercisable on any date beyond
the expiration date of such Option.
(c) Should a Participant die or become disabled either while
in the employ of the Vlasic Foods International Group or after termination of
such employment (other than discharge for Cause), the Option rights of such
deceased or disabled Participant may be exercised by his or her Personal
Representative at any time within three years after the Participant's date of
death or disability to the extent of the number of shares covered by such Option
that were exercisable at the date of such death or disability, except that an
Option shall not be so exercisable on any date beyond the expiration date of
such Option.
If a Participant who was granted a Nonqualified Stock Option should die
within 180 days of the expiration date of such Option, and if on the date of
death the Participant was then entitled to exercise such Option, and if the
Option expires without being exercised, the Personal Representative of the
Participant shall receive in settlement a cash payment from the Company of a sum
equal to the amount, if any, by which the Fair Market Value (determined on the
expiration date of the Option) of Vlasic Stock subject to the Option exceeds the
Option Price.
(d) Any Option of a Participant whose service is terminated
while eligible to retire under the Company's tax qualified pension plan or such
a pension plan of any affiliated company at the date of such termination may be
exercised at any time up to 10 years after such termination, as determined by
the Committee, except that an Option shall not be exercisable on any date beyond
the expiration date of such Option. In the event the Participant's employment
with the Vlasic Foods International Group terminates prior to the vesting of all
Options, and if the Participant is eligible to retire, as described above, any
installment or installments not then exercisable shall become fully exercisable
as of the effective date of such termination.
SECTION 5.7. SHAREOWNER RIGHTS AND PRIVILEGES. A Participant shall have no
rights as a shareowner with respect to any shares of Vlasic Stock covered by an
Option until the issuance of shares to the Participant.
SECTION 5.8. AWARD OF SARs.
(a) At any time prior to six months before an Option's
expiration date, the Committee may award to the Participant an SAR related to
the Option. The Committee may also award SARs that are unrelated to any Option.
(b) The SAR shall represent the right to receive payment of
an amount not greater than the spread, if any, by which the Fair Market Value of
the Vlasic Stock on the trading day immediately preceding the date of exercise
of the SAR exceeds the Option Price.
(c) SARs awarded under the Plan shall be evidenced by a
Statement between the Company and the Participant.
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(d) The Committee may prescribe conditions and limitations on
the exercise or transferability of any SAR. SARs may be exercised only when the
value of a share of Vlasic Stock exceeds the Option Price. Such value shall be
determined in the manner specified in Section 5.8(b).
(e) An SAR shall be exercisable only by notice to the
Company. However, an SAR shall in no event be exercisable during the first six
months of its term, except in the event of death or disability of the
Participant prior to the expiration of such six-month period.
(f) All SARs shall automatically be exercised on the last
trading day prior to their expiration, so long as the Fair Market Value of a
share of Vlasic Stock exceeds the Option Price, unless prior to such day the
holder instructs the Treasurer of the Company otherwise in writing. Such Fair
Market Value shall be determined in the manner specified in Section 5.8(b).
(g) Payment of the amount to which a Participant is entitled
upon the exercise of an SAR shall be made in cash, Vlasic Stock, or partly in
cash and partly in Vlasic Stock at the discretion of the Committee. The shares
shall be valued in the manner specified in Section 5.8(b).
(h) At any time when a Participant is, in the judgment of the
Corporate Secretary of the Company, subject with respect to Vlasic Stock to
Section 16 of the 1934 Act, in the event the Committee has not determined the
form in which a SAR will be paid (i.e., cash, shares of Vlasic Stock, or any
combination thereof), any election to exercise such right in whole or in part
for cash shall be subject to the subsequent consent thereto, or disapproval
thereof, by the Committee in its sole discretion.
(i) Each SAR shall expire on a date determined by the
Committee at the date of grant of the Award.
ARTICLE VI
RESTRICTED STOCK AWARDS
SECTION 6.1 AWARD OF RESTRICTED STOCK.
(a) The Committee may make a Restricted Stock Award to any
Participant, subject to this Article VI and to such other terms and conditions
as the Committee may prescribe.
(b) Each certificate for Restricted Stock may be registered
in book-entry form or may be registered in the name of the Participant and
deposited by him or her, together with a stock power endorsed in blank, with the
Company, unless the Participant is a Highly Compensated Employee and has elected
to defer pursuant to Section 9.1.
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SECTION 6.2. RESTRICTION PERIOD. At the time of making a Restricted Stock
Award, the Committee shall establish the Restriction Period applicable to such
Award. The Committee may establish different Restriction Periods from time to
time and each Restricted Stock Award may have a different Restriction Period, in
the discretion of the Committee. Restriction Periods, when established for each
Restricted Stock Award, shall not be changed except as permitted by Section 6.3.
SECTION 6.3. OTHER TERMS AND CONDITIONS. Vlasic Stock, when awarded
pursuant to a Restricted Stock Award, will be represented by a book-entry
notation or a stock certificate registered in the name of the Participant who
receives the Restricted Stock Award, unless the Participant is eligible for and
has elected to defer pursuant to Article IX. Such certificate shall be deposited
with the Company as provided in Section 6.1(b). The Participant shall be
entitled to receive dividends during the Restriction Period and shall have the
right to vote such Vlasic Stock and all other shareowner's rights, with the
exception that (i) the Participant will not be entitled to delivery of a stock
certificate during the Restriction Period, (ii) the Company will retain custody
of the certificate, if any, during the Restriction Period, and (iii) a breach of
a restriction or a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award will cause a forfeiture of the
Restricted Stock Award. The Participant may satisfy any amounts required to be
withheld by the Company under applicable federal, state and local tax laws in
effect from time to time, by electing to have the Company withhold a portion of
the Restricted Stock Award to be delivered for the payment of such taxes. The
Committee may, in addition, prescribe additional restrictions, terms, or
conditions upon or to the Restricted Stock Award, including performance
restrictions in accordance with Section 4.5.
SECTION 6.4. RESTRICTED STOCK AWARD STATEMENT. Each Restricted Stock Award
shall be evidenced by a Statement.
SECTION 6.5. TERMINATION OF EMPLOYMENT. The Committee may, in its sole
discretion, establish rules pertaining to the Restricted Stock Award in the
event of termination of employment (by retirement, disability, death, or
otherwise) of a Participant prior to the expiration of the Restriction Period.
SECTION 6.6. PAYMENT FOR RESTRICTED STOCK. Restricted Stock Awards may be
made by the Committee under which the Participant shall not be required to make
any payment for the Vlasic Stock or, in the alternative, under which the
Participant, as a condition to the Restricted Stock Award, shall pay all (or any
lesser amount than all) of the Fair Market Value of the Vlasic Stock, determined
as of the date the Restricted Stock Award is made. If the latter, such purchase
price shall be paid as provided in the Statement.
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ARTICLE VII
UNRESTRICTED VLASIC STOCK AWARDS
SECTION 7.1 The Committee may make awards of unrestricted Vlasic Stock to
Employees in recognition of outstanding achievements or as an award for
Employees who receive Restricted Stock Awards when Performance Goals are
exceeded.
SECTION 7.2. Each Award of unrestricted Vlasic Stock shall be registered
in the name of the Participant and immediately be delivered to him or her or may
be noted as unrestricted in the book-entry records.
ARTICLE VIII
AWARD OF PERFORMANCE UNITS
SECTION 8.1 AWARD OF PERFORMANCE UNITS. The Committee may award Performance
Units to any Participant. Each Performance Unit shall represent the right of a
Participant to receive an amount equal to the value of the Performance Unit,
determined in the manner established by the Committee at the time of Award.
SECTION 8.2. PERFORMANCE PERIOD. At the time of each Performance Unit
Award, the Committee shall establish, with respect to each such Award, a
Performance Period during which performance shall be measured. There may be more
than one Award in existence at any one time, and Performance Periods may differ.
SECTION 8.3. PERFORMANCE MEASURES. Performance Units shall be awarded to a
Participant contingent upon the attainment of Performance Goals in accordance
with Section 4.5.
SECTION 8.4. PERFORMANCE UNIT VALUE. Each Performance Unit shall have a
maximum dollar value established by the Committee at the time of the Award.
Performance Units earned will be determined by the Committee in respect of a
Performance Period in relation to the degree of attainment of Performance Goals.
The measure of a Performance Unit may, in the discretion of the Committee, be
equal to the Fair Market Value of one share of Vlasic Stock.
SECTION 8.5. AWARD CRITERIA. In determining the number of Performance
Units to be granted to any Participant, the Committee shall take into account
the Participant's responsibility level, performance, potential, cash
compensation level, other incentive awards, and such other considerations as it
deems appropriate.
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SECTION 8.6. PAYMENT.
(a) Following the end of a Performance Period, a Participant
holding Performance Units will be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Units, based on the achievement
of the Performance Goals for such Performance Period, as determined by the
Committee.
(b) Payment of Performance Units shall be made in cash,
whether payment is made at the end of the Performance Period or, in the case of
a Highly Compensated Employee, is deferred pursuant to Section 9.1, except that
Performance Units which are measured using Vlasic Stock shall be paid in Vlasic
Stock. Payment shall be made in a lump sum or in installments and shall be
subject to such other terms and conditions as shall be determined by the
Committee.
SECTION 8.7. TERMINATION OF EMPLOYMENT.
(a) A Performance Unit Award shall terminate for all purposes
if the Participant does not remain continuously in the employ of the Vlasic
Foods International Group at all times during the applicable Performance Period,
except as may otherwise be determined by the Committee.
(b) In the event that a Participant holding a Performance
Unit ceases to be an employee of the Vlasic Foods International Group following
the end of the applicable Performance Period but prior to full payment according
to the terms of the Performance Unit Award, payment shall be made in accordance
with terms established by the Committee for the payment of such Performance
Unit.
SECTION 8.8. PERFORMANCE UNIT STATEMENTS. Performance Unit Awards shall be
evidenced by Performance Unit Statements.
ARTICLE IX
DEFERRAL OF CERTAIN PAYMENTS
A Participant who is a Highly Compensated Employee may elect
to defer all or a portion of any related earned Performance Units, Restricted
Stock or gain on any exercised Option pursuant to the terms of the Deferred
Compensation Plan. The value of the Performance Units, Restricted Stock or
Option gain so deferred shall be transferred to the Deferred Compensation Plan
and held in an account under that plan established for the Participant.
Participants who are subject to tax in a foreign country are not eligible to
defer payment of Performance Units, Restricted Stock or Option gain unless a
deferral election has been approved for the Participant by the Company.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 LIMITS AS TO TRANSFERABILITY. With the prior approval of the
Committee, an Option may, at the election of the Participant, be transferred to
the spouse or a descendant of the Participant, or a trust for the benefit of the
spouse or descendants. Unless otherwise provided by the Committee, however, no
SAR, share of Restricted Stock, or Performance Unit under the Plan shall be
transferable by the Participant otherwise than by will or, if the Participant
dies intestate, by the laws of descent and distribution. All Awards other than
Options that are transferred in accordance with the foregoing provisions shall
be exercisable or received during the Participant's lifetime only by such
Participant or his Personal Representative. Any transfer contrary to this
Section 10.1 will nullify the Option, SAR, Performance Unit, or share of
Restricted Stock..
SECTION 10.2. ADJUSTMENTS UPON CHANGES IN STOCK. In case of any
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, or any other changes in the
corporate structure or shares of the Company, appropriate adjustments may be
made by the Committee (or if the Company is not the surviving corporation in any
such transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and kind
of shares and the price per share subject to outstanding Options or that may be
issued under outstanding Restricted Stock Awards or pursuant to unrestricted
Vlasic Stock Awards. Appropriate adjustments may also be made by the Committee
in the terms of any Awards under the Plan, to reflect such changes and to modify
any other terms of outstanding Awards on an equitable basis, including
modifications of Performance Goals and changes in the length of Performance
Periods.
SECTION 10.3. AMENDMENT, SUSPENSION, AND TERMINATION OF PLAN.
(a) The Board may suspend or terminate the Plan or any
portion thereof at any time, and may amend the Plan from time to time in such
respects as the Board may deem advisable in order that any Awards thereunder
shall conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company. No such
amendment, suspension, or termination shall alter or impair any outstanding
Options, SARs, shares of Restricted Stock, or Performance Units without the
consent of the Participant adversely affected thereby.
(b) With the consent of the Participant adversely affected
thereby, the Committee may amend or modify any outstanding Options, Restricted
Stock Awards, or Performance Unit Awards in any manner to the extent that the
Committee would have had the authority under the Plan initially to award such
Options, SARs, Restricted Stock Awards, or Performance Unit Awards as so
modified or amended, including without limitation, to change the date or dates
as of which such Options or SARs may be exercised, to remove the restrictions
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on shares of Restricted Stock, or to modify the manner in which Performance
Units are determined and paid.
SECTION 10.4. NONUNIFORM DETERMINATIONS. The Committee's determinations
under the Plan, including without limitation, (i) the determination of the
Employees to receive Awards, (ii) the determination of Highly Compensated
Employees eligible to defer Performance Units or Restricted Stock, (iii) the
form, amount, and timing of such Awards, (iv) the terms and provisions of such
Awards and (v) the Statements evidencing the same, need not be uniform and may
be made by it selectively among Employees who receive, or who are eligible to
receive, Awards under the Plan, whether or not such Employees are similarly
situated.
SECTION 10.5. GENERAL RESTRICTION. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee shall determine that
(i) the listing, registration, or qualification of the shares of Vlasic Stock
subject or related thereto upon any securities exchange or under any state or
federal law, (ii) the consent or approval of any government or regulatory body,
or (iii) an agreement by the Participant with respect thereto, is necessary or
desirable, then such Award shall not become exercisable in whole or in part
unless such listing, registration, qualification, consent, approval, or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
SECTION 10.6. NO RIGHT TO EMPLOYMENT. Neither the action of the Company in
establishing the Plan, nor any action taken by it or by the Board or the
Committee under the Plan, nor any provision of the Plan, shall be construed as
giving to any person the right to be retained in the employ of the Company or
any Subsidiary.
SECTION 10.7. TRUST ARRANGEMENT. All benefits under the Plan represent an
unsecured promise to pay by the Company and its Subsidiaries. The Plan shall be
unfunded and the benefits hereunder shall be paid only from the general assets
of the Company or its respective Subsidiaries, resulting in the Participants
having no greater rights than the general creditors of the Company or such
Subsidiaries. Notwithstanding the foregoing, nothing herein shall prevent or
prohibit the Company or the respective Subsidiaries from establishing a trust or
other arrangement for the purpose of providing for the payment of the benefits
payable under the Plan at any time.
ARTICLE XI
CHANGE IN CONTROL OF THE COMPANY
SECTION 11.1 CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan
to the contrary, the provisions of this Article XI shall govern and supersede
any inconsistent terms or provisions of the Plan.
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SECTION 11.2. DEFINITION OF "ADJUSTED FAIR MARKET VALUE." For purposes of
the Plan, "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per share of Vlasic Stock paid to
holders of the shares of Vlasic Stock in any transaction (or series of
transactions) constituting or resulting in a Change in Control or (ii) the
highest Fair Market Value of a share of Vlasic Stock during the 90 day period
ending on the date of a Change in Control.
SECTION 11.3. DEFINITION OF "CHANGE IN CONTROL YEAR." For purposes of the
Plan, "Change in Control Year" means a fiscal year of the Company in which a
Change in Control occurs.
SECTION 11.4. DEFINITION OF "CHANGE IN CONTROL". For purposes of the Plan
"Change in Control" means any of the following events:
(a) The acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Section 13(d) or Section
14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding voting securities (the "Voting Securities");
provided, however, that for purposes of this Section 11.4(a), the Voting
Securities acquired directly from the Company by any Person shall be excluded
from the determination of such Person's Beneficial ownership of Voting
Securities (but such Voting Securities shall be included in the calculation of
the total number of Voting Securities then outstanding); or
(b) The individuals who, as of the later of April 1, 1998 or
the first date that the membership of the Board reaches seven (7), are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's shareowners, of any new Director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
Director shall, for purposes of the Plan, be considered as a member of the
Incumbent Board; or
(c) Approval by shareowners of the Company of (i) a merger or
consolidation involving the Company if the shareowners of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly, immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding Voting Securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company; or
(d) Acceptance by shareowners of the Company of shares in a
share exchange if the shareowners of the Company, immediately before such share
exchange, do not own, directly or indirectly, immediately following such share
exchange, more than eighty percent (80%) of the combined voting power of the
outstanding Voting Securities of the corporation
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resulting from such share exchange in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately before such share
exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because twenty-five percent (25%) or more of the then outstanding
Voting Securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company or
any of its subsidiaries, (ii) any entity that, immediately prior to such
acquisition, is entirely owned (directly or indirectly) by shareowners of the
Company in the same proportions as their ownership of stock in the Company
immediately prior to such acquisition, (iii) any "Grandfathered Dorrance Family
shareowner" (as hereinafter defined) or (iv) any Person who has acquired such
Voting Securities directly from any Grandfathered Dorrance Family shareowner but
only if such Person has executed an agreement that is approved by two-thirds of
the Board and pursuant to which such Person has agreed that he or she (or they)
will not increase his or her (or their) Beneficial Ownership (directly or
indirectly) to thirty percent (30%) or more of the outstanding Voting Securities
(the "Standstill Agreement") and only for the period during which the Standstill
Agreement is effective and fully honored by such Person. For purposes of this
Section, "Grandfathered Dorrance Family shareowner" means at any time a
"Dorrance Family shareowner" (as hereinafter defined) who or which is at the
time in question the Beneficial Owner solely of (v) Voting Securities
beneficially owned by such individual on April 1, 1998, (w) Voting Securities
acquired directly from the Company, (x) Voting Securities acquired directly from
another Grandfathered Dorrance Family shareowner, (y) Voting Securities that are
also Beneficially Owned by other Grandfathered Dorrance Family shareowners at
the time in question, and (z) Voting Securities acquired after April 1, 1998
other than directly from the Company or from another Grandfathered Dorrance
Family shareowner by any "Dorrance Grandchild" (as hereinafter defined);
provided that the aggregate amount of Voting Securities so acquired by each such
Dorrance Grandchild shall not exceed five percent (5%) of the Voting Securities
outstanding at the time of such acquisition. A "Dorrance Family shareowner" who
or which is at the time in question the Beneficial Owner of Voting Securities
that are not specified in clauses (v), (w), (x), (y) and (z) of the immediately
preceding sentence shall not be a Grandfathered Dorrance Family shareowner at
the time in question. For purposes of this Section, "Dorrance Family
shareowners" means individuals who are descendants of the late Dr. John T.
Dorrance, Sr. and/or the spouses, fiduciaries and foundations of such
descendants. A "Dorrance Grandchild" means as to each particular grandchild of
the late Dr. John T. Dorrance, Sr., all of the following taken collectively:
such grandchild, such grandchild's descendants and/or the spouses, fiduciaries
and foundations of such grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
that, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the
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Subject Person; provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Voting Securities
by the Company, and after such share acquisition by the Company, the Subject
Person becomes the Beneficial Owner of any additional Voting Securities that
increases the percentage of the then outstanding Voting Securities Beneficially
Owned by the Subject Person, then a Change in Control shall occur.
SECTION 11.5. EFFECT OF CHANGE IN CONTROL ON OPTIONS AND SARS. Upon a
Change in Control, (a) all Options and SARs outstanding on the date of such
Change in Control shall become immediately and fully exercisable and (b) any
Participant who may be subject to liability under Section 16(b) of the 1934 Act,
will be permitted to surrender for cancellation for a period of 60 days
commencing after the later of such Change in Control or the expiration of six
months from the date of grant, any Option or SAR (or portion of an Option or
SAR), to the extent not yet exercised and the Participant will be entitled to
receive a cash payment in an amount equal to the excess, if any, in respect of
each Option or SAR surrendered, (i)(A) except as described in clause (B) below,
the greater of (x) the Fair Market Value, on the date preceding the date of
surrender of the shares subject to the Option or SAR (or portion thereof)
surrendered or (y) the Adjusted Fair Market Value of the Shares subject to the
Option or SAR (or portion thereof) surrendered or (B) in the case of an
Incentive Stock Option or an SAR issued in connection with an Incentive Stock
Option, the Fair Market Value, on the date preceding the date of surrender, of
the Shares subject to the Option or SAR (or portion thereof) surrendered, over
(ii) the aggregate purchase price for such Shares under the Option or SAR.
SECTION 11.6. EFFECT OF CHANGE IN CONTROL ON RESTRICTED STOCK. Upon a
Change in Control, all restrictions upon any shares of Restricted Stock other
than Restricted Stock that is subject to performance related restrictions
("Performance Restricted Stock") shall lapse immediately and all such shares
shall become fully vested in the Participant and shall promptly be delivered to
the Participant.
SECTION 11.7. EFFECT OF CHANGE IN CONTROL ON PERFORMANCE RESTRICTED STOCK
AND PERFORMANCE UNITS.
(a) Upon a Change in Control, the Participant shall (i)
become vested in, and restrictions shall lapse on, the greater of (A) fifty
percent (50%) of the Performance Restricted Stock or Performance Units or (B) a
pro rata portion of such Performance Restricted Stock based on the portion of
the Performance Period that has elapsed to the date of the Change in Control and
the aggregate vesting percentage determined pursuant to this clause (B) shall be
applied to vesting first such awards granted the earliest in time preceding the
Change in Control (the "Vested Performance Awards") and (ii) be entitled to
receive (X) in respect of all Performance Units that become vested as a result
of a Change in Control, a cash payment within 30.days after such Change in
Control equal to the product of the then current value of a Performance Unit
multiplied by the number of Performance Units that become vested in accordance
with this Section 11.7 and (Y) in respect of all shares of Performance
Restricted Stock that become vested as a result of a Change in Control, the
prompt delivery of such shares.
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<PAGE> 20
(b) With respect to any shares of Performance Restricted
Stock or Performance Units that do not become vested pursuant to Section 11.7(a)
(the "Continuing Awards"), such shares or units (or the proceeds thereof) shall
continue to be outstanding for the remainder of the applicable Performance
Period (as if such shares or units were the only shares or units granted in
respect of each such Performance Period) and subject to the applicable Award
Criteria as modified below.
SECTION 11.8. AMENDMENT OR TERMINATION.
(a) This Article XI shall not be amended or terminated at any
time if any such amendment or termination would adversely affect the rights of
any Participant under the Plan.
(b) For a period of 24 months following a Change in Control,
the Plan shall not be terminated (unless replaced by a comparable long-term
incentive plan) and during such period the Plan (or such replacement plan) shall
be administered in a manner such that Participants will be provided with
long-term incentive awards producing reward opportunities generally comparable
to those provided prior to the Change in Control. Any amendment or termination
of the Plan prior to a Change in Control that (i) was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control, shall be null and void and shall have no
effect whatsoever.
(c) Following a Change in Control, the Plan shall be amended
as necessary to make appropriate adjustments to the Award Criteria for the
Continuing Awards for (i) any negative effect that the costs and expenses
incurred by the Company and its Subsidiaries in connection with the Change in
Control may have on the achievement of Performance Goals under the Plan and (ii)
any changes to the Company and/or its Subsidiaries (including, but not limited
to, changes in corporate structure, capitalization and increased interest
expense as a result of the incurrence or assumption by the Company of
acquisition indebtedness) following the Change in Control so as to preserve the
reward opportunities and Award Criteria for comparable performance under the
Plan as in effect on the date immediately prior to the Change in Control.
IN WITNESS WHEREOF, Vlasic Foods International Inc. has
caused this Plan to be duly executed as of March 30, 1998.
[CORPORATE SEAL] VLASIC FOODS INTERNATIONAL INC.
Attest: By:
---------------------- ---------------------------
Secretary President and Chief Executive
Officer
-18-
<PAGE> 1
EXHIBIT 10.10
- --------------------------------------------------------------------------------
VLASIC FOODS INTERNATIONAL INC.
-------------------
ANNUAL INCENTIVE PLAN
-------------------
Dated: March 30, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
VLASIC FOODS INTERNATIONAL INC.
ANNUAL INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- -----
<S> <C>
I. PURPOSE AND EFFECTIVE DATE.............................................1
II. DEFINITIONS............................................................1
III. ADMINISTRATION.........................................................2
IV. PARTICIPATION..........................................................3
V. AWARDS.................................................................3
VI. LIMITATIONS............................................................4
VII. AMENDMENT, SUSPENSION OR TERMINATION OF
THE PLAN IN WHOLE OR IN PART...........................................4
VIII. CHANGE IN CONTROL OF THE COMPANY.......................................5
IX. MISCELLANEOUS..........................................................8
</TABLE>
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<PAGE> 3
ARTICLE I
PURPOSE AND EFFECTIVE DATE
SECTION 1.1. PURPOSE. The purpose of the Plan is to provide annual financial
incentives for selected employees of the Vlasic Foods International Group,
thereby promoting the growth and financial success of the Vlasic Foods
International Group by (i) attracting and retaining employees of outstanding
ability, (ii) strengthening the Vlasic Foods International Group's capability to
develop, maintain, and direct a competent management team, (iii) motivating
employees to achieve Performance Goals and objectives, and (iv) providing
incentive compensation opportunities competitive with those of other major
corporations.
SECTION 1.2. EFFECTIVE DATE AND EXPIRATION OF PLAN. The Plan was approved
by Campbell Soup Company, as the sole shareholder of Vlasic Foods International
Inc., and is effective March 30, 1998, which shall be the Effective Date. Unless
earlier terminated by the Board, the Plan shall continue indefinitely.
ARTICLE II
DEFINITIONS
The following words and phrases, as used in the Plan, shall have these
meanings:
SECTION 2.1. "BOARD" means the Board of Directors of the Company.
SECTION 2.2. "CAUSE" means the termination of a Participant's employment
by reason of his or her engaging in conduct that constitutes willful gross
misconduct that is demonstrably and materially injurious to the Company or a
Subsidiary, monetarily or otherwise, misappropriation of funds, willful and
material misrepresentation to the directors or officers of his or her employer,
gross negligence in the performance of the Participant's duties having a
material adverse effect on the business, operations, assets, properties or
financial condition of the Company or a Subsidiary, or entering into competition
with the Company or a Subsidiary. No act, nor failure to act, on the
Participant's part shall be considered "willful" unless he or she has acted, or
failed to act, with an absence of good faith and without a reasonable belief
that his or her action or failure to act was in the best interest of the Company
and its Subsidiaries.
SECTION 2.3. "CODE" means the Internal Revenue Code of 1986, as amended.
SECTION 2.4. "COMMITTEE" means the Compensation and Organization Committee
of the Board. All members of the Committee shall be "Outside Directors," as
defined or interpreted for purposes of Section 162(m) of the Code, and
"Disinterested Persons," within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "1934 Act").
SECTION 2.5. "COMPANY" means Vlasic Foods International Inc. and its
successors and assigns.
<PAGE> 4
SECTION 2.6. "DEFERRED COMPENSATION PLAN" means the Vlasic Foods
International Inc. Deferred Compensation Plan.
SECTION 2.7. "ELIGIBLE EMPLOYEE" means a person who is a regular salaried
employee of the Vlasic Foods International Group and who, in the opinion of the
Committee, is a key employee whose performance can contribute to the success of
the Company or a Subsidiary.
SECTION 2.8. "FAMILY MEMBER" means the spouse, a child, a stepchild, a
parent, a brother or a sister of the Participant, or any other person in such
class of relationship to the Participant as the Committee may approve.
SECTION 2.9. "PERFORMANCE GOALS" means the goals established by the
Committee pursuant to Section 5.1.
SECTION 2.10. "PARTICIPANT" means a person to whom an award of incentive
compensation has been made under the Plan.
SECTION 2.11. "PRESIDENT" means the President of the Company.
SECTION 2.12. "SUBSIDIARY" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or indirectly by the
Company.
SECTION 2.13. "VLASIC FOODS INTERNATIONAL GROUP" means the Company and all
of its Subsidiaries on and after the Effective Date.
ARTICLE III
ADMINISTRATION
SECTION 3.1. ADMINISTRATION. The Plan shall be administered by the Committee or
its delegate or successor. The Committee shall have all necessary powers to
administer and interpret the Plan, such powers to include the authority to
select Eligible Employees to whom awards may be granted under the Plan and to
determine the amount of any award of incentive compensation to be granted to any
Eligible Employee.
SECTION 3.2. COMMITTEE AUTHORITY. The Committee shall have full power and
authority to adopt such rules, regulations and instruments for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable. The Committee's interpretations of the Plan, and
all actions taken and determinations made by the Committee pursuant to the
powers vested in it hereunder, shall be conclusive and binding on all parties
concerned, including the Company, its shareowners and any employee of the
Company or a Subsidiary.
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<PAGE> 5
ARTICLE IV
PARTICIPATION
Participants in the Plan shall be selected by the Committee from
among Eligible Employees, based upon such criteria as the Committee may from
time to time determine.
ARTICLE V
AWARDS
SECTION 5.1. ESTABLISHMENT OF PERFORMANCE GOALS. Prior to the beginning of each
fiscal year after the Effective Date, the Committee shall establish, in writing,
Performance Goals for the Company and its various operating units and its
Subsidiaries. The goals shall be comprised of specified annual levels of one or
more performance criteria as the Committee may deem appropriate. Such goals may
include, but shall not be limited to, earnings per share, net earnings,
operating earnings, unit volume, net sales, market share, balance sheet
measurements, revenue, cash flow, cash return on assets, shareowner return,
return on equity, return on capital or other value-based performance measures.
The Committee may disregard or offset the effect of any special charges or
gains, the cumulative effect of a change in accounting, or the effect of other
expenses or losses that are unusual in nature or infrequent in occurrence, in
determining the attainment of Performance Goals. Awards may also be made payable
when Company performance, as measured by one or more of the above criteria, as
compared to peer companies, meets or exceeds an objective target established by
the Committee.
SECTION 5.2. ESTABLISHMENT OF AWARD CATEGORIES. Prior to the beginning of
each fiscal year of the Company, the Committee shall determine the classes of
employees eligible to receive awards of incentive compensation based upon job
grade and salary levels or such other procedures for eligibility for awards as
the Committee may deem desirable. The class of employees determined to be
eligible for awards shall not change after the close of the fiscal year.
SECTION 5.3. ESTABLISHMENT OF AWARD AMOUNTS. After the close of the fiscal
year, the Committee may fix a maximum aggregate dollar amount that may be
granted for awards for that fiscal year. The amounts of awards to be granted
with respect to particular employees within the eligible classes may be
determined after the close of the fiscal year under procedures established by
the Committee.
SECTION 5.4. GRANT OF AWARDS. The Committee shall, in granting awards to
particular Eligible Employees for any fiscal year, take into consideration:
(a) the performance of the Company or the organizational unit
employing the Eligible Employee based upon attainment of Performance Goals;
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<PAGE> 6
(b) as among Participants, the contribution of the
Participant during the fiscal year to the success of the Company, including the
Participant's (i) position and level of responsibility, (ii) business unit,
division or department achievements, and (iii) management assessment of
individual performance.
No award or awards may be granted to any Participant for any fiscal year that
exceeds in the aggregate $3,000,000. The Committee shall have no discretion
to increase such awards.
SECTION 5.5. COMMITTEE DISCRETION. The Committee shall have complete
discretion with respect to the determination of the Eligible Employees to whom
awards of incentive compensation shall be granted and the granting of such
awards.
SECTION 5.6. PAYMENT OF AWARDS. Incentive compensation awards made
pursuant to Article V shall be paid entirely in cash as soon as possible after
grant approval, unless the Participant is eligible for and has elected to defer
receipt of a portion or all of such award in accordance with the terms of the
Deferred Compensation Plan.
ARTICLE VI
LIMITATIONS
SECTION 6.1. RIGHTS NOT ABSOLUTE. No person shall at any time have any right to
be granted an award hereunder for any fiscal year, and no person shall have
authority to enter into an agreement committing the Company to make or pay an
award, nor shall any person have authority to make any representation or
warranty on behalf of the Company with respect thereto.
SECTION 6.2. PARTICIPANT RIGHTS LIMITED TO PLAN. Participants receiving
awards shall have no rights to such awards except as set forth in this Plan and
the Deferred Compensation Plan.
SECTION 6.3. NO RIGHT TO CONTINUED EMPLOYMENT. Neither the action of the
Company in establishing the Plan, nor any action taken by it or by the Board or
the Committee under the Plan, nor any provision of the Plan, shall be construed
as giving to any person the right to be retained in the employ of the Company or
any Subsidiary.
ARTICLE VII
AMENDMENT, SUSPENSION OR TERMINATION
OF THE PLAN IN WHOLE OR IN PART
The Board may amend, suspend or terminate the Plan in whole or in part;
but it may not affect adversely rights or obligations with respect to awards
theretofore made.
-4-
<PAGE> 7
ARTICLE VIII
CHANGE IN CONTROL OF THE COMPANY
SECTION 8.1. CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan
to the contrary, the provisions of this Article VIII shall govern and supersede
any inconsistent terms or provisions of the Plan.
SECTION 8.2. DEFINITION OF "CHANGE IN CONTROL YEAR." For purposes of the
Plan, "Change in Control Year" means a fiscal year of the Company in which a
Change in Control occurs.
SECTION 8.3. DEFINITION OF "CHANGE IN CONTROL". For purposes of the Plan
"Change in Control" means any of the following events:
(a) The acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Section 13(d) or Section
14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding voting securities (the "Voting Securities");
provided, however, that for purposes of this Section 8.3(a), the Voting
Securities acquired directly from the Company by any Person shall be excluded
from the determination of such Person's Beneficial Ownership of Voting
Securities (but such Voting Securities shall be included in the calculation of
the total number of Voting Securities then outstanding); or
(b) The individuals who, as of the later of April 1, 1998 or
the first date that the membership of the Board reaches seven (7), are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's shareowners, of any new Director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
Director shall, for purposes of the Plan, be considered as a member of the
Incumbent Board; or
(c) Approval by shareowners of the Company of (i) a merger or
consolidation involving the Company if the shareowners of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly, immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding Voting Securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company; or
(d) Acceptance by shareowners of the Company of shares in a
share exchange if the shareowners of the Company, immediately before such share
exchange, do not own, directly or indirectly, immediately following such share
exchange, more than eighty percent (80%) of the combined voting power of the
outstanding Voting Securities of the corporation
-5-
<PAGE> 8
resulting from such share exchange in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately before such share
exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty-five percent (25%) or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by the
Company or any of its subsidiaries, (ii) any entity that, immediately prior
to such acquisition, is entirely owned (directly or indirectly) by
shareowners of the Company in the same proportions as their ownership of
stock in the Company immediately prior to such acquisition, (iii) any
"Grandfathered Dorrance Family shareowner" (as hereinafter defined) or (iv)
any Person who has acquired such Voting Securities directly from any
Grandfathered Dorrance Family shareowner but only if such Person has executed
an agreement that is approved by two-thirds of the Board and pursuant to
which such Person has agreed that he or she (or they) will not increase his
or her (or their) Beneficial Ownership (directly or indirectly) to thirty
percent (30%) or more of the outstanding Voting Securities (the "Standstill
Agreement") and only for the period during which the Standstill Agreement is
effective and fully honored by such Person. For purposes of this Section,
"Grandfathered Dorrance Family shareowner" means at any time a "Dorrance
Family shareowner" (as hereinafter defined) who or which is at the time in
question the Beneficial Owner solely of (v) Voting Securities beneficially
owned by such individual on April 1, 1998, (w) Voting Securities acquired
directly from the Company, (x) Voting Securities acquired directly from
another Grandfathered Dorrance Family shareowner, (y) Voting Securities that
are also Beneficially Owned by other Grandfathered Dorrance Family
shareowners at the time in question, and (z) Voting Securities acquired after
April 1, 1998 other than directly from the Company or from another
Grandfathered Dorrance Family shareowner by any "Dorrance Grandchild" (as
hereinafter defined); provided that the aggregate amount of Voting Securities
so acquired by each such Dorrance Grandchild shall not exceed five percent
(5%) of the Voting Securities outstanding at the time of such acquisition. A
"Dorrance Family shareowner" who or which is at the time in question the
Beneficial Owner of Voting Securities that are not specified in clauses (v),
(w), (x), (y) and (z) of the immediately preceding sentence shall not be a
Grandfathered Dorrance Family shareowner at the time in question. For
purposes of this Section, "Dorrance Family shareowners" means individuals who
are descendants of the late Dr. John T. Dorrance, Sr. and/or the spouses,
fiduciaries and foundations of such descendants. A "Dorrance Grandchild"
means as to each particular grandchild of the late Dr. John T. Dorrance, Sr.,
all of the following taken collectively: such grandchild, such grandchild's
descendants and/or the spouses, fiduciaries and foundations of such
grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
that, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person; provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional
-6-
<PAGE> 9
Voting Securities that increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
SECTION 8.4. DEFINITION OF "TERMINATION FOLLOWING A CHANGE IN CONTROL."
For purposes of the Plan, "Termination Following a Change in Control" means a
termination of employment:
(a) initiated by the employer of the Participant, other than
for Cause; or
(b) initiated by the Participant following one or more of the
following events:
(i) an assignment to the Participant of any duties
materially inconsistent with, or a reduction or change by his or her employer in
the nature or scope of the authority, duties or responsibilities of the
Participant from those assigned to or held by the Participant immediately prior
to the Change in Control;
(ii) any removal of the Participant from the positions
held immediately prior to the Change in Control, except in connection with
promotions to positions of greater responsibility and prestige;
(iii) any reduction by his or her employer in the
Participant's compensation as in effect immediately prior to the Change in
Control or as the same may be increased thereafter;
(iv) revocation or any modification of any employee
benefit plan, or any action taken pursuant to the terms of any such plan, that
materially reduces the opportunity of the Participant to receive benefits under
any such plan;
(v) a transfer or relocation of the site of employment of
the Participant immediately preceding the Change in Control, without the
Participant's express written consent, to a location more than fifty (50) miles
distant therefrom, or that is otherwise an unacceptable commuting distance from
the Participant's principal residence at the date of the Change in Control; or
(vi) a requirement that the Participant undertake
business travel to an extent substantially greater than the Participant's
business travel obligations immediately prior to the Change in Control.
SECTION 8.5. EFFECT OF CHANGE IN CONTROL. During any Change in Control
Year, each Eligible Employee who is a Participant on the date immediately prior
to the Change in Control (a) who has a Termination Following a Change in Control
prior to the end of the Change in Control Year or (b) who is in the employ of
the Company or any Subsidiary on the last day of the Change in Control Year,
shall be entitled to receive, within 30 days thereafter, a cash payment equal to
the greater of (x) his or her target award for the Change in Control Year or (y)
the
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<PAGE> 10
average of the awards paid or payable under the Plan for the two most recent
fiscal years ended prior to the Change in Control Year (the "Award"); provided,
however that the amount of the Award to be paid to each Participant as provided
in clause (a) above shall be multiplied by a fraction, the numerator of which
shall be the number of calendar days from and including the first day of the
Change in Control Year through and including the date the Participant's
employment is terminated and the denominator of which shall be 365; provided
further, however, that the Award to be paid to any Participant who is a party to
an individual severance agreement shall be reduced by the amount of any
equivalent bonus payment made under such an individual agreement.
SECTION 8.6. CONTINUATION OF THE PLAN. For a period of two years following
a Change in Control, the Plan shall not be terminated or amended in any way
(including, but not limited to, restricting or limiting any Eligible Employee's
right to participate in the Plan), nor shall the manner in which the Plan is
administered be changed in a way that adversely affects the level of
participation or reward opportunities of any Participant; provided, however,
that the Plan shall be amended as necessary to make appropriate adjustments for
(a) any negative effect that the costs and expenses incurred by the Company and
its Subsidiaries in connection with the Change in Control may have on the
benefits payable under the Plan and (b) any changes to the Company and/or its
Subsidiaries (including, but not limited to, changes in corporate structure,
capitalization and increased interest expense as a result of the incurrence or
assumption by the Company of acquisition indebtedness) following the Change in
Control so as to preserve the reward opportunities and performance targets for
comparable performance under the Plan as in effect on the date immediately prior
to the Change in Control.
SECTION 8.7. AMENDMENT OR TERMINATION.
(a) This Article XIII shall not be amended or terminated at
any time.
(b) Any amendment or termination of the Plan prior to a
Change in Control that (i) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change in Control
or (ii) otherwise arose in connection with or in anticipation of a Change in
Control, shall be null and void and shall have no effect whatsoever.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NO EMPLOYMENT CONTRACT. The establishment or existence of the Plan
shall not confer upon any individual the right to be continued as an employee.
The employer expressly reserves the right to discharge any employee whenever in
its judgment its best interests so require.
SECTION 9.2. NON-ALIENATION. No amounts payable under the Plan shall be
subject in any manner to anticipation, assignment, or voluntary or involuntary
alienation.
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<PAGE> 11
SECTION 9.3. GOVERNING LAW. This Plan shall be governed by and construed
in accordance with the laws of the State of New Jersey to the extent not
preempted by federal law.
SECTION 9.4. WITHHOLDING. The employer shall withhold from any benefits
payable under the Plan all federal, state and local income taxes or other taxes
required to be withheld pursuant to applicable law.
SECTION 9.5. INCAPACITY. If the Committee, in its sole discretion, deems a
Participant who is eligible to receive any payment hereunder to be incompetent
to receive the same by reason of age, illness or any infirmity or incapacity of
any kind, the Committee may direct the employer to apply such payment directly
for the benefit of such person, or to make payment to any person selected by the
Committee to disburse the same for the benefit of the Participant. Payments made
pursuant to this Section shall operate as a discharge, to the extent thereof, of
all liabilities of the employer, the Committee and the Plan to the person for
whose benefit the payments are made.
SECTION 9.6. NUMBER. For purposes of the Plan, the singular shall include
the plural and vice versa.
SECTION 9.7. BINDING UPON SUCCESSORS. The liabilities under the Plan shall
be binding upon any successor, assign or purchaser of the employer or any
purchaser of substantially all of the assets of the employer.
SECTION 9.8. TRUST ARRANGEMENT All benefits under the Plan represent an
unsecured promise to pay by the Company and Subsidiaries. The Plan shall be
unfunded and the benefits hereunder shall be paid only from the general assets
of the Company and its respective Subsidiaries, resulting in the Participants
having no greater rights than the general creditors of the Company or such
Subsidiaries. Notwithstanding the foregoing, nothing herein shall prevent or
prohibit the Company or the respective Subsidiaries from establishing a trust or
other arrangement for the purpose of providing for the payment of the benefits
payable under the Plan at any time.
IN WITNESS WHEREOF, Vlasic Foods International, Inc. has caused
this Plan to be duly executed as of March 30, 1998.
[CORPORATE SEAL] VLASIC FOODS INTERNATIONAL INC.
Attest: By:
------------------------ --------------------------------
Secretary President and Chief Executive
Officer
-9-
<PAGE> 1
EXHIBIT 10.11
- --------------------------------------------------------------------------------
VLASIC FOODS INTERNATIONAL INC.
-----------------
DIRECTOR COMPENSATION PLAN
-----------------
Dated: March 30, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
DIRECTOR COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C> <C>
I. PURPOSES...............................................................1
II. DEFINITIONS............................................................1
III. ADMINISTRATION.........................................................3
IV. SHARES SUBJECT TO THE PLAN.............................................3
V. GRANT OF OPTIONS.......................................................4
VI. RESTRICTED STOCK AWARDS................................................6
VII. UNRESTRICTED STOCK AWARDS..............................................7
VIII. DEFERRAL OF RECEIPT OF CASH COMPENSATION...............................7
IX. CHANGE IN CONTROL OF THE COMPANY.......................................8
X. AMENDMENTS AND TERMINATION............................................11
XI. GENERAL PROVISIONS....................................................11
</TABLE>
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<PAGE> 3
ARTICLE I
PURPOSES
The purposes of the Plan are to attract and retain the
services of experienced and knowledgeable directors of Vlasic Foods
International Inc., to encourage such directors to acquire a proprietary
interest in the growth and performance of the Company, and to provide them with
an opportunity to defer receipt of cash compensation to which they become
entitled as directors, thus enhancing the value of the Company for the benefit
of its shareowners.
The Plan shall become effective on March 30, 1998, upon
approval by Campbell Soup Company as sole shareowner of the Company. With
respect to new grants, the Plan shall terminate on March 30, 2008. With respect
to outstanding Options, the Plan shall terminate on the date on which all
outstanding Options have expired or terminated.
ARTICLE II
DEFINITIONS
The following words and phrases, as used in the Plan, shall
have these meanings:
SECTION 2.1. "AWARD" means, individually or collectively, any Option, Restricted
Stock Award, or Unrestricted Stock Award.
SECTION 2.2. "BENEFICIARY" means the person that the Eligible Director
designates to receive any unpaid portion of the Eligible Director's Deferred
Account balance should the Eligible Director's death occur before the Eligible
Director receives the entire Deferred Account balance. If the Eligible Director
does not designate a Beneficiary, his or her Beneficiary shall be his or her
spouse if he or she is married at the time of death, or his or her estate if he
or she is unmarried at the time of death.
SECTION 2.3. "BOARD" means the Board of Directors of the Company.
SECTION 2.4. "CAUSE" means the termination of an Eligible Director's
membership on the Board by reason of his or her engaging in conduct that
constitutes willful gross misconduct that is demonstrably and materially
injurious to the Company, monetarily or otherwise, misappropriation of funds,
willful and material misrepresentation to the directors, gross negligence in the
performance of the Eligible Director's duties having a material adverse effect
on the business, operations, assets, properties or financial condition of the
Company, or entering into competition with the Company. No act, nor failure to
act, on the Eligible Director's part shall be considered "willful" unless he or
she has acted, or failed to act, with an absence of good faith and without a
reasonable belief that his or her action or failure to act was in the best
interest of the Company and its affiliates.
SECTION 2.5. "CODE" means the Internal Revenue Code of 1986, as amended.
<PAGE> 4
SECTION 2.6. "COMPANY" means Vlasic Foods International Inc.
SECTION 2.7. "COMPENSATION" for purposes of Article VIII means all amounts
paid to an Eligible Director in exchange for services rendered to the Company as
a member of the Board, excluding amounts paid in the form of Options pursuant to
the terms of the Plan.
SECTION 2.8. "DEFERRED ACCOUNT" means the bookkeeping investment accounts
to which amounts of deferred Compensation are credited, including earnings
credited thereon.
SECTION 2.9. "EFFECTIVE DATE" means March 30, 1998.
SECTION 2.10. "ELIGIBLE DIRECTOR" means each member of the Board who is
not an employee of the Company or any of the Company's subsidiaries (as defined
in section 424(f) of the Code).
SECTION 2.11. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
SECTION 2.12. "FAIR MARKET VALUE" means, as of any specified date, an
amount equal to the mean between the reported high and low prices of Vlasic
Stock on the New York Stock Exchange composite tape on the specified date.
SECTION 2.13. "GRANT DATE" means the date on which an Option is granted.
If such date is not a business day, then the Grant Date shall be the following
business day.
SECTION 2.14. "OPTION" means any right granted to an Optionee allowing
such Optionee to purchase Shares at such price or prices and during such period
or periods as are set forth in the Plan. All Options shall be non-qualified
options and shall not be qualified for the favorable tax treatment afforded
under section 422 of the Code.
SECTION 2.15. "OPTIONEE" means an Eligible Director who is granted an
Option under the Plan.
SECTION 2.16. "PERSONAL REPRESENTATIVE" means the person or persons who,
upon the death, disability, or incompetency of an Optionee, shall have acquired,
by will or by the laws of descent and distribution or by other legal
proceedings, the right to exercise an Option theretofore granted to such
Optionee.
SECTION 2.17. "PLAN" means the Vlasic Foods International Inc. Director
Compensation Plan.
SECTION 2.18. "RESTRICTED STOCK AWARD" means an Award granted under
Article VI.
SECTION 2.19. "RESTRICTION PERIOD" means a period of time determined under
Section 6.2 during which Restricted Stock is subject to the terms and conditions
provided under Section 6.3.
SECTION 2.20. "SHARES" means shares of Vlasic Stock.
SECTION 2.21. "STATEMENT" means a written confirmation of an Award under
the Plan furnished to the Participant.
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SECTION 2.22. "UNRESTRICTED STOCK AWARD" means an Award granted under
Article VII.
SECTION 2.23. "VLASIC STOCK" means the common stock of the Company.
ARTICLE III
ADMINISTRATION
Subject to the terms of the Plan, the Board shall have full
and exclusive power to interpret the provisions and supervise the administration
of the Plan.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
SECTION 4.1. TOTAL NUMBER. Subject to adjustment as provided in this Section 4.1
and Section 4.4, (i) the total number of Shares as to which Options may be
granted under the Plan, or that may be the subject of Restricted or Unrestricted
Stock Awards grants under the Plan, shall be 350,000 Shares, and (ii) no less
than 80% of such Shares shall be issuable upon exercise as Options. Any Shares
issued pursuant to Options and other Awards hereunder may consist, in whole or
in part, of authorized but unissued Vlasic Stock or Vlasic Stock previously
issued and outstanding and reacquired by the Company.
SECTION 4.2. REDUCTION IN NUMBER OF SHARES AVAILABLE.
(a) The grant of an Option or a Restricted or Unrestricted
Stock Award shall reduce the number of Shares as to which Awards may be granted
by the number of Shares subject to such Option or Restricted or Unrestricted
Stock Award.
(b) Any Shares issued by the Company through the assumption
or substitution of outstanding grants of an acquired company shall not reduce
the Shares available for grants under the Plan.
SECTION 4.3. INCREASE IN NUMBER OF SHARES AVAILABLE. The lapse,
expiration, cancellation or other termination of an Option that has not been
fully exercised or of another Award shall increase the number of Shares
available for an Award by the number of Shares that have not been issued upon
exercise of such Option or the number of Shares no longer subject to such other
Award. In addition, any Shares tendered in exercise of an Option shall again be
available for Awards under the Plan.
SECTION 4.4. OTHER ADJUSTMENTS. In case of any reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering, or any other changes in the corporate structure
or shares of the Company, appropriate adjustments may be made by the Board (or
if the Company is not the surviving corporation in any such transaction, the
board of directors of the surviving corporation) in the aggregate number and
kind of shares subject to the Plan, and the number and kind of shares and the
price per share subject to outstanding Options or that may be issued under
outstanding Restricted Stock Awards or
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pursuant to Unrestricted Stock Awards. Appropriate adjustments may also be made
by the Committee in the terms of any Option Letter or Awards under the Plan, to
reflect such changes and to modify any other terms of outstanding Option Letter
or Awards on an equitable basis.
ARTICLE V
GRANT OF OPTIONS
SECTION 5.1. GRANT OF OPTIONS. On March 30, 1998 and each succeeding March 30
thereafter, each Eligible Director shall be granted an Option to acquire that
number of Shares such that the estimated present value of the Option, calculated
using the Black-Scholes option pricing model, shall equal $40,000 on that Grant
Date.
SECTION 5.2. PRO-RATA GRANT OF OPTIONS.
(a) Within ten (10) business days of the date an Eligible
Director is initially elected to membership on the Board, the Company shall
grant an Option to acquire the applicable number of Shares determined under
Section 5.1 multiplied by a fraction the numerator of which is the number of
months remaining from the date of such election until the subsequent March 30
and the denominator of which is twelve (12).
(b) Any fractional Options resulting from such calculations
shall be rounded up to the nearest whole number.
SECTION 5.3. VESTING. The right to exercise any Option will vest
cumulatively over three years of the rate at 30%, 60% and 100%, respectively on
the first three anniversaries of the Grant Date.
SECTION 5.4. OPTION PRICE. The purchase price per Share purchasable under
an Option shall be 100% of the Fair Market Value of a Share on the Grant Date.
SECTION 5.5. OPTION PERIOD. Each Option granted shall expire 10 years from
its Grant Date, and shall be subject to earlier termination as hereinafter
provided.
SECTION 5.6. TRANSFERABILITY. An Option may, at the election of the
Eligible Director, be transferred to the spouse or a descendant of the Eligible
Director, or a trust for the benefit of the spouse or descendants. In addition,
Options shall be transferable by will or the laws of descent and distribution.
Any transfer contrary to this Section 5.6 will nullify the Option.
SECTION 5.7. EXERCISE.
(a) If the Board service of an Eligible Director is
terminated for reasons other than (i) death, (ii) discharge for Cause, (iii)
retirement, or (iv) resignation, the Eligible Director may exercise an Option at
any time within three years after such termination, to the extent of the number
of Shares covered by such Option that were exercisable at the date of such
termination; except that an Option shall not be exercisable on any date beyond
the expiration of such three-year period or the expiration date of such Option,
whichever occurs first.
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(b) If the Board service of an Eligible Director is
terminated for Cause, any Options of such Eligible Director shall expire and any
rights thereunder shall terminate immediately. Any Option of an Eligible
Director whose Board service is terminated by resignation may be exercised at
any time within three months of such resignation, to the extent that the number
of Shares covered by such Option were exercisable at the date of such
resignation; except that an Option shall not be exercisable on any date beyond
the expiration date of such Option.
(c) Should an Eligible Director die either while a member of
the Board or after termination of Board service (other than removal for Cause),
the Option rights of such deceased Eligible Director may be exercised by his or
her Personal Representative at any time within three years after the Eligible
Director's death, to the extent of the number of Shares covered by such Option
that were exercisable at the date of such death; except that an Option shall not
be so exercisable on any date beyond the expiration date of such Option.
If an Eligible Director who was granted an Option should die
within 180 days of the expiration date of such Option, and if on the date of
death the Eligible Director was then entitled to exercise such Option, and if
the Option expires without being exercised, the Personal Representative of the
Eligible Director shall receive in settlement a cash payment from the Company of
a sum equal to the amount, if any, by which the Fair Market Value (determined on
the expiration date of the Option) of Vlasic Stock subject to the Option exceeds
the Option Price.
(d) Any Option of an Eligible Director whose Board service
terminates after age 55 and five (5) years of Board service shall become fully
vested on such termination date and may be exercised at any time up to three
years after such termination, as determined by the Board, except that an Option
shall not be exercisable on any date beyond the expiration date of such Option.
SECTION 5.8. METHOD OF EXERCISE. Any Option may be exercised by the
Optionee in whole or in part at such time or times and by such methods as the
Board may specify. The applicable Statement may provide that the Optionee may
make payment of the Option price in cash, Shares, or such other consideration as
the Board may specify, or any combination thereof, having a Fair Market Value on
the exercise date equal to the total Option price.
SECTION 5.9. ISSUANCE OF CERTIFICATES; PAYMENT OF CASH. Only whole Shares
shall be issuable upon exercise of Options. Any right to a fractional Share
shall be satisfied in cash. Upon payment to the Company of the option price, the
Company shall deliver to the Optionee a certificate for the number of whole
Shares, or a book-entry notation, and a check for the Fair Market Value on the
date of exercise of any fractional share to which the Optionee is entitled.
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ARTICLE VI
RESTRICTED STOCK AWARDS
SECTION 6.1. AWARD OF RESTRICTED STOCK.
(a) The Board may make a Restricted Stock Award to any
Eligible Director, subject to this Article VI and to such other terms and
conditions as the Board may prescribe.
(b) Each certificate for Restricted Stock shall be registered
in the name of the Eligible Director and deposited by him or her, together with
a stock power endorsed in blank, with the Company.
SECTION 6.2. RESTRICTION PERIOD. At the time of making a Restricted Stock
Award, the Board shall establish the Restriction Period applicable to such
Award. The Board may establish different Restriction Periods from time to time
and each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Board. A Restriction Period shall not be changed except as
permitted by Section 6.3.
SECTION 6.3. OTHER TERMS AND CONDITIONS. Vlasic Stock, when awarded
pursuant to a Restricted Stock Award, will be represented by a book-entry
notation or a stock certificate registered in the name of the Eligible Director
who receives the Restricted Stock Award. Such certificate, if any, shall be
deposited with the Company as provided in Section 6.1(b). The Eligible Director
shall be entitled to receive dividends during the Restriction Period and shall
have the right to vote such Vlasic Stock and shall have all other shareowner's
rights, with the exception that (i) the Eligible Director will not be entitled
to delivery of a stock certificate during the Restriction Period, (ii) the
Company will retain custody of the certificate, if any, during the Restriction
Period, and (iii) a breach of the restriction or a breach of the terms and
conditions established by the Board pursuant to the Restricted Stock Award will
cause a forfeiture of the Restricted Stock Award. The Eligible Director may
satisfy his or her obligations under applicable federal, state and local tax
laws in effect from time to time, by electing to have the Company withhold a
portion of the Restricted Stock Award to be delivered for the payment of such
taxes. The Board may, in its sole discretion, prescribe additional restrictions,
terms or conditions upon or to the Restricted Stock Award from time to time.
SECTION 6.4. RESTRICTED STOCK AWARD STATEMENT. Each Restricted Stock Award
shall be evidenced by a Restricted Stock Award Statement.
SECTION 6.5. PAYMENT FOR RESTRICTED STOCK. Restricted Stock Awards may be
made by the Board under which the Eligible Director shall not be required to
make any payment for the Vlasic Stock or, in the alternative, under which the
Eligible Director, as a condition to the Restricted Stock Award, shall pay all
(or any lesser amount than all) of the Fair Market Value of the Vlasic Stock,
determined as of the date the Restricted Stock Award is made. If the latter,
such purchase price shall be paid in cash as provided in the Restricted Stock
Award Statement.
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ARTICLE VII
UNRESTRICTED STOCK AWARDS
SECTION 7.1. The Board may make an Unrestricted Stock Award to an Eligible
Director in recognition of outstanding achievement or as an award for an
Eligible Director who receives a Restricted Stock Award when performance goals,
as may be established by the Board or its delegate from time to time, are
exceeded.
SECTION 7.2. Each certificate or book-entry notation for unrestricted
Vlasic Stock shall be registered in the name of the Participant and immediately
be delivered to him or her.
ARTICLE VIII
DEFERRAL OF RECEIPT OF CASH COMPENSATION
SECTION 8.1. ELECTION TO DEFER RECEIPT OF DIRECTOR'S COMPENSATION. Subject to
the rules and procedures established by the Board, an Eligible Director may
elect to defer receipt of all or a portion of any cash Compensation payable to
him or her. The amount of Compensation so deferred shall be credited to a
Deferred Account established for the Eligible Director. An Eligible Director who
is subject to tax in a foreign jurisdiction shall not be eligible to defer
receipt of Compensation unless a deferral election has been approved by the
Board, or its delegate.
SECTION 8.2. ADMINISTRATION OF DEFERRED ACCOUNTS. The Board, or its
delegate, shall establish rules and procedures regarding the timing of deferred
elections, the time period for deferral, the maximum number of annual
installment payments, the measurement units for valuing Deferred Accounts,
transfer of the balances in Deferred Accounts among measurement units,
statements of Deferred Accounts, the time and manner of payment of Deferred
Accounts, and other administrative items for Deferred Accounts.
SECTION 8.3. PAYMENT IN EVENT OF DEATH. If the Eligible Director dies
(before or after his or her retirement), any portion of his or her Deferred
Account then unpaid shall be paid to the Beneficiary named in the most recent
Beneficiary designation filed with the Corporate Secretary of the Company or, in
the absence of such designation, paid to, or as directed by, his or her Personal
Representative, in such one or more installments as the Eligible Director may
have elected, subject to the rules and procedures established by the Board.
SECTION 8.4. CONDITIONS OF PAYMENT OF DEFERRED ACCOUNTS. Prior to a Change
in Control (as defined in Section 9.2), an Eligible Director who is removed for
Cause by action of the shareowners of the Company or as otherwise determined by
the Board shall, unless otherwise determined by such shareowners or the Board,
respectively, in connection with the termination of Board service, lose any
right to receive payment of his or her Deferred Account.
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ARTICLE IX
CHANGE IN CONTROL OF THE COMPANY
SECTION 9.1. CONTRARY PROVISIONS. Notwithstanding anything contained in the Plan
to the contrary, the provisions of this Article IX shall govern and supersede
any inconsistent terms or provisions of the Plan.
SECTION 9.2. DEFINITION OF "CHANGE IN CONTROL". For purposes of the Plan
"Change in Control" means any of the following events:
(a) The acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Section 13(d) or Section
14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding voting securities (the "Voting Securities");
provided, however, that for purposes of this Section 9.2(a), the Voting
Securities acquired directly from the Company by any Person shall be excluded
from the determination of such Person's Beneficial ownership of Voting
Securities (but such Voting Securities shall be included in the calculation of
the total number of Voting Securities then outstanding); or
(b) The individuals who, as of the later of April 1, 1998 or
the first date that the membership of the Board reaches seven (7), are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's shareowners, of any new Director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
Director shall, for purposes of the Plan, be considered as a member of the
Incumbent Board; or
(c) Approval by shareowners of the Company of (i) a merger or
consolidation involving the Company if the shareowners of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly, immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding Voting Securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company; or
(d) Acceptance by shareowners of the Company of shares in a
share exchange if the shareowners of the Company, immediately before such share
exchange, do not own, directly or indirectly, immediately following such share
exchange, more than eighty percent (80%) of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such share
exchange in substantially the same proportion as their ownership of the Voting
Securities outstanding immediately before such share exchange.
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<PAGE> 11
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because twenty-five percent (25%) or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by the
Company or any of its subsidiaries, (ii) any entity that, immediately prior to
such acquisition, is entirely owned (directly or indirectly) by shareowners of
the Company in the same proportions as their ownership of stock in the Company
immediately prior to such acquisition, (iii) any "Grandfathered Dorrance Family
shareowner" (as hereinafter defined) or (iv) any Person who has acquired such
Voting Securities directly from any Grandfathered Dorrance Family shareowner but
only if such Person has executed an agreement that is approved by two-thirds of
the Board and pursuant to which such Person has agreed that he or she (or they)
will not increase his or her (or their) Beneficial Ownership (directly or
indirectly) to thirty percent (30%) or more of the outstanding Voting Securities
(the "Standstill Agreement") and only for the period during which the Standstill
Agreement is effective and fully honored by such Person. For purposes of this
Section, "Grandfathered Dorrance Family shareowner" means at any time a
"Dorrance Family shareowner" (as hereinafter defined) who or which is at the
time in question the Beneficial Owner solely of (v) Voting Securities
beneficially owned by such individual on April 1, 1998, (w) Voting Securities
acquired directly from the Company, (x) Voting Securities acquired directly from
another Grandfathered Dorrance Family shareowner, (y) Voting Securities that are
also Beneficially Owned by other Grandfathered Dorrance Family shareowners at
the time in question, and (z) Voting Securities acquired after April 1, 1998
other than directly from the Company or from another Grandfathered Dorrance
Family shareowner by any "Dorrance Grandchild" (as hereinafter defined);
provided that the aggregate amount of Voting Securities so acquired by each such
Dorrance Grandchild shall not exceed five percent (5%) of the Voting Securities
outstanding at the time of such acquisition. A "Dorrance Family shareowner" who
or which is at the time in question the Beneficial Owner of Voting Securities
that are not specified in clauses (v), (w), (x), (y) and (z) of the immediately
preceding sentence shall not be a Grandfathered Dorrance Family shareowner at
the time in question. For purposes of this Section, "Dorrance Family
shareowners" means individuals who are descendants of the late Dr. John T.
Dorrance, Sr. and/or the spouses, fiduciaries and foundations of such
descendants. A "Dorrance Grandchild" means as to each particular grandchild of
the late Dr. John T. Dorrance, Sr., all of the following taken collectively:
such grandchild, such grandchild's descendants and/or the spouses, fiduciaries
and foundations of such grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company that, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially Owned by
the Subject Person; provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company, the
Subject Person becomes the Beneficial Owner of any additional Voting Securities
that increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall occur.
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SECTION 9.3. EFFECT OF CHANGE IN CONTROL ON OPTIONS. Upon a Change in
Control, (a) all Options outstanding on the date of such Change in Control shall
become immediately and fully exercisable and (b) any Eligible Director who may
be subject to liability under Section 16(b) of the Exchange Act, will be
permitted to surrender for cancellation for a period of sixty (60) days
commencing after the later of such Change in Control or the expiration of six
months from the Grant Date, any Option (or portion of an Option), to the extent
not yet exercised and the Eligible Director will be entitled to receive a cash
payment in an amount equal to the excess, if any, in respect of each Option
surrendered, (i) the greater of (x) the Fair Market Value, on the date preceding
the date of surrender of the Shares subject to the Option (or portion thereof)
surrendered or (y) the Fair Market Value of the Shares subject to the Option (or
portion thereof) surrendered, over (ii) the aggregate purchase price for such
Shares under the Option.
SECTION 9.4. EFFECT OF CHANGE IN CONTROL OR RESTRICTED STOCK AWARDS. Upon
a Change in Control, the Eligible Director shall (i) become vested in, and
restrictions shall lapse on, the greater of (A) fifty percent (50%) of the
Restricted Stock Award or (B) a pro rata portion of such Restricted Stock Award
based on the portion of the Restriction Period that has elapsed to the date of
the Change in Control and the aggregate vesting percentage determined pursuant
to this clause (B) shall be applied to vesting first such awards granted the
earliest in time preceding the Change in Control (the "Vested Performance
Awards") and (ii) be entitled to receive the prompt delivery of such shares.
SECTION 9.5. EFFECT OF CHANGE IN CONTROL ON DEFERRED ACCOUNTS.
(a) Upon a Change in Control, the benefits accrued as if
invested in Vlasic Stock shall be converted into a cash equivalent amount equal
to the greater of (i) the highest price per share of such stock paid to holders
of Vlasic Stock in any transaction (or series of transactions) constituting or
resulting in a Change in Control or (ii) the highest fair market value per Share
during the ninety (90) day period ending on the date of a Change in Control
multiplied by the number of Shares of Vlasic Stock credited to an Eligible
Director's Deferred Account under the Plan. The resulting cash equivalent amount
shall promptly be credited to (i) the remaining hypothetical investments in the
Eligible Director's Deferred Account, in the same relative proportions as those
hypothetical investments or (ii) if an Eligible Director's Deferred Account was
credited entirely in the hypothetical Vlasic Stock fund, the most conservative
hypothetical investment.
(b) Upon an Eligible Director's termination of Board service
following a Change in Control for any reason (other than for Cause, as
determined by the Board or the shareowners of the Company) within two years
following a Change in Control, the Company shall pay in a lump sum cash payment
the value of his or her Deferred Account (together with any interest or
investment earnings accrued thereon to the date of payment).
SECTION 9.6. AMENDMENT OR TERMINATION. This Article IX shall not be
amended or terminated at any time if any such amendment or termination would
adversely affect the rights of any Eligible Director under the Plan.
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ARTICLE X
AMENDMENTS AND TERMINATION
SECTION 10.1. BOARD AUTHORITY. The Board may amend, alter, or terminate the
Plan, but no amendment, alteration, or termination shall be made (i) that would
impair or adversely affect the rights of an Eligible Director under an
outstanding Award without the Eligible Director's consent or (ii) without the
approval of the shareowners if such approval is necessary to comply with any
tax, exchange or regulatory requirement.
SECTION 10.2. PRIOR SHAREOWNER AND OPTIONEE APPROVAL. Notwithstanding any
provision of this Plan to the contrary, in the event that amendments to the Plan
are required in order that the Plan or any other stock-based compensation plan
of the Company comply with the requirement of any exchange, the Code or rule
issued under the Exchange Act, the Board is authorized to make such amendments
without the consent of the affected Eligible Director or the shareowners of the
Company.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. COMPLIANCE WITH REGULATIONS. All certificates for Shares delivered
under the Plan pursuant to the exercise of any Option shall be subject to such
stock transfer orders and other restrictions as the Board may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any exchange upon which the Shares are then listed, and any
applicable federal or state securities law, and the Board may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions. The Company shall not be required to issue or deliver any Shares
under the Plan prior to the completion of any registration or qualification of
such Shares under any federal or state law, or under any ruling or regulation of
any governmental body or exchange that the Board in its sole discretion shall
deem to be necessary or appropriate.
SECTION 11.2. OTHER PLANS. Nothing contained in the Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
shareowner approval if such approval is required by applicable law or the rules
of any exchange on which Vlasic Stock is then listed; any such arrangements may
be either generally applicable or applicable only in specific cases.
SECTION 11.3. CONFORMITY WITH LAW. If any provision of the Plan is or
becomes or is deemed invalid, illegal, or unenforceable in any jurisdiction, or
would disqualify the Plan or any Award under any law deemed applicable by the
Board, such provision shall be construed or deemed amended in such jurisdiction
to conform to applicable laws or if it cannot be construed or deemed amended
without, in the determination of the Board, materially altering the intent of
the Plan, it shall be stricken and the remainder of the Plan shall remain in
full force and effect
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SECTION 11.4. INSUFFICIENT SHARES. In the event there are insufficient
Shares remaining to satisfy all of the Awards under Article V, Article VI and
Article VII made on the same day, such Awards shall be reduced pro-rata.
SECTION 11.5. NO RIGHT TO CONTINUANCE AS A DIRECTOR. Neither the action of
the Company in establishing the Plan, nor the granting of an Award shall be
deemed (i) to create any obligation on the part of the Board to nominate any
director for reelection by the Company's shareowners or (ii) to be evidence of
any agreement or understanding, express or implied, that the Eligible Director
has a right to continue as a director for any period of time or at any
particular rate of compensation.
SECTION 11.6. TRUST ARRANGEMENT. All benefits under the Plan represent an
unsecured promise to pay by the Company. The Plan shall be unfunded and the
benefits hereunder shall be paid only from the general assets of the Company
resulting in the Eligible Directors having no greater rights than the Company's
other general creditors. Notwithstanding the foregoing, nothing herein shall
prevent or prohibit the Company from establishing a trust or other arrangement
for the purpose of providing for the payment of the benefits payable under the
Plan at any time.
IN WITNESS WHEREOF, Vlasic Foods International Inc. has
caused this Plan to be duly executed as of March 30, 1998.
[CORPORATE SEAL] VLASIC FOODS INTERNATIONAL INC.
Attest: By:
----------------------- ----------------------------------
Secretary President and Chief Executive
Officer
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EXHIBIT 10.13
SEVERANCE PROTECTION AGREEMENT
THIS AGREEMENT is made as of the 22nd day of June, 1998, by and between
Vlasic Foods International Inc. (the "Company") and Robert F. Bernstock (the
"Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists
and that the threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has, as recommended and approved by the Compensation
and Organization Committee, determined that it is essential and in the best
interest of the Company and its shareowners to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and
to ensure Executive's continued dedication and efforts in such event without
undue concern for Executive's personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, particularly in the event of a threat or the occurrence of a
Change in Control, the Company desires to enter into this Agreement with the
Executive to provide the Executive with certain benefits in the event
Executive's employment is terminated as a result of, or in connection with, a
Change in Control and to provide the Executive with certain other benefits
whether or not the Executive's employment is terminated.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of June 22,
1998, and shall continue in effect until the third anniversary of such date;
provided however, that commencing on the second anniversary of such date and
on each anniversary thereafter, the term of this Agreement shall
automatically be extended for one (1) year unless either the Company or the
Executive shall have given written notice to the other at least ninety (90)
days prior thereto that the term of this Agreement shall not be so extended;
and provided further, that notwithstanding any such notice by the Company not
to extend, the term of this Agreement shall not expire prior to the
expiration of twenty-four (24) months after the occurrence of a Change in
Control.
2. Definitions.
2.1 Cause. For purposes of this Agreement only, a termination
for "Cause" is a termination evidenced by a resolution adopted in good faith
by two-thirds of the Board that: (a) the Executive intentionally and
continually failed to substantially perform Executive's duties with the
Company (other than a failure resulting from the Executive's incapacity due
to physical or mental illness) which failure continued for a period of at
least thirty (30) days after a written notice of demand for substantial
performance has been delivered to the Executive specifying the manner in
which the Executive has failed to substantially perform; or (b) the Executive
engaged in conduct that constitutes willful gross misconduct that is
demonstrably and materially
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injurious to the Company, monetarily or otherwise, misappropriated funds,
made one or more willful and material misrepresentations to the directors or
officers of the Company, was grossly negligent in the performance of the
Executive's duties having a material adverse effect on the business,
operations, assets, properties or financial condition of the Company, or
entered into competition with the Company; provided however, that no
termination of the Executive's employment shall be for Cause as set forth in
clause (b) above until (x) there shall have been delivered to the Executive a
copy of a written notice setting forth that the Executive was guilty of the
conduct set forth in clause (b) and specifying the particulars thereof in
detail, and (y) the Executive shall have been provided an opportunity to be
heard by the Board (with the assistance of the Executive's counsel if the
Executive so desires). No act, nor failure to act, on the Executive's part,
shall be considered "willful" unless Executive has acted, or failed to act,
with an absence of good faith and without a reasonable belief that
Executive's action or failure to act was in the best interest of the
Company. Notwithstanding anything contained in this Agreement to the
contrary, no failure to perform by the Executive after a Notice of
Termination is given by the Executive shall constitute Cause for purposes of
this Agreement.
2.2 Change in Control. For purposes of this Agreement, a
"Change in Control" shall mean any of the following events:
(a) The acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities (the "Voting
Securities"), provided however, that for purposes of this Section 2.2a, the
Voting Securities acquired directly from the Company by any Person shall be
excluded from the determination of such Person's Beneficial Ownership of
Voting Securities (but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then outstanding); or
(b) The individuals who, as of the later of April 1, 1998
or the first date that the membership of the Board reaches seven (7), are
members of the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board; provided however, that if the
election, or nomination for election by the Company's shareowners, of any new
director was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes of this Agreement, be considered
as a member of the Incumbent Board; or
(c) Approval by shareowners of the Company of: (i) a
merger or consolidation involving the Company if the shareowners of the
Company, immediately before such merger or consolidation, do not own,
directly or indirectly, immediately following such merger or consolidation,
more than eighty percent (80%) of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such merger
or consolidation in substantially the same proportion as their ownership of
the Voting Securities immediately before such merger or consolidation; or
(ii) a complete liquidation or dissolution of the Company or an agreement for
the sale or other disposition of all or substantially all of the assets of
the Company; or
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(d) Acceptance by shareowners of the Company of shares in
a share exchange if the shareowners of the Company, immediately before such
share exchange, do not own, directly or indirectly, immediately following
such share exchange, more than eighty percent (80%) of the combined voting
power of the outstanding Voting Securities of the corporation resulting from
such share exchange in substantially the same proportion as their ownership
of the Voting Securities outstanding immediately before such share exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because twenty-five percent (25%) or more of the then
outstanding Voting Securities is acquired by: (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its subsidiaries; (ii) any entity that,
immediately prior to such acquisition, is entirely owned (directly or
indirectly) by shareowners of the Company in the same proportions as their
ownership of stock in the Company immediately prior to such acquisition;
(iii) any "Grandfathered Dorrance Family shareowner" (as hereinafter
defined); or (iv) any Person who has acquired such Voting Securities directly
from any Grandfathered Dorrance Family shareowner but only if such Person has
executed an agreement that is approved by two-thirds of the Board and
pursuant to which such Person has agreed that he or she (or they) will not
increase his or her (or their) Beneficial Ownership (directly or indirectly)
to thirty percent (30%) or more of the outstanding Voting Securities (the
"Standstill Agreement") and only for the period during which the Standstill
Agreement is effective and fully honored by such Person. For purposes of
this Section, "Grandfathered Dorrance Family shareowner" means at any time a
"Dorrance Family shareowner" (as hereinafter defined) who or which is at the
time in question the Beneficial Owner solely of (v) Voting Securities
beneficially owned by such individual on April 1, 1998, (w) Voting Securities
acquired directly from the Company, (x) Voting Securities acquired directly
from another Grandfathered Dorrance Family shareowner, (y) Voting Securities
that are also Beneficially Owned by other Grandfathered Dorrance Family
shareowners at the time in question, and (z) Voting Securities acquired after
April 1, 1998 other than directly from the Company or from another
Grandfathered Dorrance Family shareowner by any "Dorrance Grandchild" (as
hereinafter defined); provided that the aggregate amount of Voting Securities
so acquired by each such Dorrance Grandchild shall not exceed five percent
(5%) of the Voting Securities outstanding at the time of such acquisition. A
"Dorrance Family shareowner" who or which is at the time in question the
Beneficial Owner of Voting Securities that are not specified in clauses (v),
(w), (x), (y) and (z) of the immediately preceding sentence shall not be a
Grandfathered Dorrance Family shareowner at the time in question. For
purposes of this Section, "Dorrance Family shareowners" means individuals who
are descendants of the late Dr. John T. Dorrance, Sr. and/or the spouses,
fiduciaries and foundations of such descendants. A "Dorrance Grandchild"
means as to each particular grandchild of the late Dr. John T. Dorrance, Sr.,
all of the following taken collectively: such grandchild, such grandchild's
descendants and/or the spouses, fiduciaries and foundations of such
grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by the
Company that, by reducing the number of Voting Securities
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<PAGE> 4
outstanding, increases the proportional number of shares Beneficially Owned
by the Subject Person; provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the acquisition of Voting
Securities by the Company, and after such share acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Voting
Securities that increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
(e) Notwithstanding anything contained in this Agreement
to the contrary, if the Executive's Termination Date (as defined in Section
6) is within one year prior to a Change in Control and the Executive
reasonably demonstrates that such termination (1) was at the request of a
Third Party (as defined in Section 2.4(b)) who effectuates a Change in
Control or (2) otherwise occurred in connection with or in anticipation of, a
Change in Control, then for all purposes of this Agreement, the date of a
Change in Control shall mean the date immediately prior to the date of such
termination of the Executive's employment.
2.3 Disability. For purposes of this Agreement only,
"Disability" shall mean a physical or mental infirmity which impairs the
Executive's ability to substantially perform the Executive's duties under
this Agreement for a period of one hundred eighty (180) consecutive days.
2.4 (a) Good Reason. For purposes of this Agreement, "Good
Reason" shall mean the occurrence after a Change in Control of any of the
events or conditions described in Subsections (1) through (10) hereof:
(1) an assignment to the Executive of any duties
materially inconsistent with, or a reduction or change by the Company in the
nature or scope of the authority, duties or responsibilities of the Executive
from those assigned to or held by the Executive immediately prior thereto;
(2) any removal of the Executive from the positions
held immediately prior to the Change in Control, except in connection with
promotions to positions of greater responsibility and prestige;
(3) any reduction by the Company in the Executive's
compensation as in effect immediately prior to the Change in Control or as
the same may be increased thereafter;
(4) revocation or any modification of any employee
benefit plan, or any action taken pursuant to the terms of any such plan,
that materially reduces the opportunity of the Executive to receive benefits
under any such plan;
(5) a transfer or relocation of the site of
employment of the Executive immediately preceding the Change in Control,
without the Executive's express written consent, to a location more than
fifty (50) miles distant therefrom, or that is otherwise an unacceptable
commuting distance from the Executive's principal residence at the date of
the Change in Control;
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(6) a requirement that the Executive undertake
business travel to an extent substantially greater than the Executive's
business travel obligations immediately prior to the Change in Control;
(7) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company;
(8) any material breach by the Company of any
provision of this Agreement;
(9) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the terms of
Section 2.1; or
(10) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any successor or assign of the
Company to assume and agree to perform this Agreement, as contemplated in
Section 8 hereof.
(b) Any event or condition described in this Section
2.4(a)(1) through (10) which occurs prior to a Change in Control but which
the Executive reasonably demonstrates: (i) was at the request of a third
party who has indicated an intention or taken steps reasonably calculated to
effect a Change in Control (a "Third Party"); or (ii) otherwise arose in
connection with or in anticipation of a Change in Control, shall constitute
Good Reason for purposes of this Agreement notwithstanding that it occurred
prior to the Change in Control.
(c) The Executive's right to terminate his employment
pursuant to this Section 2.4 shall not be affected by his incapacity due to
physical or mental illness.
2.5 Window Period. For purposes of this Agreement, "Window
Period" shall mean the thirty (30) day period beginning one year after a
Change in Control.
3. Obligations of the Executive. The Executive agrees that in the
event any person or group attempts a Change in Control, the Executive will
not voluntarily terminate employment with the Company without Good Reason:
(a) until such attempted Change in Control terminates; or (b) if a Change in
Control shall occur, until ninety (90) days following such Change in
Control. For purposes of the foregoing subsection (a), Good Reason shall be
determined as if a Change in Control had occurred when such attempted Change
in Control became known to the Board.
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4. Severance and Benefits.
4.1 If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twenty-four (24)
months following a Change in Control, the Executive shall be entitled to the
following compensation and benefits:
(a) If the Executive's employment with the Company shall
be terminated (1) by the Company for Cause or Disability, (2) by reason of
the Executive's death, or (3) by the Executive other than for Good Reason or
other than during the Window Period, the Company shall pay the Executive all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date, including: (i) base salary; (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date; and (iii) vacation
pay (collectively, "Accrued Compensation"). In addition to the foregoing, if
the Executive's employment is terminated by the Company for Disability or by
reason of the Executive's death, the Company shall pay to the Executive or
his beneficiaries an amount equal to the "Pro Rata Bonus" (as hereinafter
defined). The "Pro Rata Bonus" is an amount equal to the Bonus Amount (as
hereinafter defined) multiplied by a fraction the numerator of which is the
number of days in such fiscal year through the Termination Date and the
denominator of which is 365. The term "Bonus Amount" shall mean the greater
of: (x) the Executive's target bonus under the Vlasic Foods International
Inc. Annual Incentive Plan for the fiscal year in which the Termination Date
occurs; or (y) average of the annual bonuses paid or payable during the two
full fiscal years ended prior to the Termination Date. Executive's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs and practices then in effect.
(b) If the Executive's employment with the Company shall
be terminated (other than by reason of death): (1) by the Company other than
for Cause or Disability; (2) by the Executive for Good Reason; or (3) by the
Executive for any reason whatsoever (other than death) during the Window
Period, the Executive shall be entitled to the following:
(i) The Company shall pay the Executive all
Accrued Compensation and a Pro-Rata Bonus (each as defined in Section 4.1(a)).
(ii) The Company shall pay the Executive as
severance pay and in lieu of any further compensation for periods subsequent
to the Termination Date, in a single payment an amount (the "Severance
Amount") in cash equal to three (3) times the sum of: (A) the greater of the
Executive's annual base salary in effect at any time during the 90-day period
prior to the Change in Control ("Base Salary") or at any time thereafter; and
(B) the Bonus Amount. Notwithstanding the foregoing, if the Executive has
attained at least age 63 on the Termination Date the Severance Amount to be
paid under this Subsection (ii) shall be the amount described in the
preceding sentence multiplied by a fraction (which in no event shall be less
than one-fourth) the numerator of which shall be the number of months (for
this purpose any partial month shall be considered as a whole month)
remaining until the Executive's 65th birthday (but in no event shall be less
than 6) and the denominator of which shall be 24 and if
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<PAGE> 7
the Executive has attained at least age 65 on the Termination Date the Severance
Amount to be paid under this Subsection (ii) shall be the amount described in
the preceding sentence multiplied by one-fourth.
(iii) For a number of months equal to the lesser
of (A) 30 or (B) the number of months remaining until the Executive's 65th
birthday (the "Continuation Period"), the Company shall at its expense
continue on behalf of the Executive and his dependents and beneficiaries the
life insurance, disability, medical, dental and hospitalization benefits
provided (x) to the Executive at any time during the 90-day period prior to
the Change in Control or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including deductibles and
costs) provided in this Section 4.1(b)(iii) during the Continuation Period
shall be no less favorable to the Executive and his dependents and
beneficiaries than the most favorable of such coverages and benefits during
any of the periods referred to in clauses (x) and (y) above. The Company's
obligation hereunder with respect to the foregoing benefits shall be limited
to the extent that the Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may reduce the
coverage of any benefits it is required to provide the Executive hereunder as
long as the aggregate coverages and benefits of the combined benefit plans is
no less favorable to the Executive than the coverages and benefits required
to be provided hereunder. This Subsection (iii) shall not be interpreted so
as to limit any benefits to which the Executive, his dependents or
beneficiaries may be entitled under any of the Company's employee benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits.
(iv) The Company shall pay in a single payment an
amount in cash equal to the excess of (A) the Supplemental Retirement Benefit
(as defined below) had (w) the Executive remained employed by the Company for
an additional two and one-half complete years of credited service (or until
the Executive's 65th birthday if earlier), (x) the Executive's annual
compensation during such period been equal to his Base Salary and the Bonus
Amount, (y) the Company and/or the Subsidiary or Division made employer
contributions to each defined contribution plan in which the Executive was a
participant at the Termination Date (in an amount equal to the amount of such
contribution for the plan year immediately preceding the Termination Date)
and (z) the Executive had been fully (100%) vested in his benefit under each
retirement plan in which the Executive was a participant, over (B) the lump
sum actuarial equivalent of the aggregate retirement benefit the Executive is
actually entitled to receive under such retirement plans. For purposes of
this Subsection (iv), the "Supplemental Retirement Benefit" shall mean the
lump sum actuarial equivalent of the aggregate retirement benefit the
Executive would have been entitled to receive under the Company's
supplemental and other retirement plans including, but not limited to, the
Vlasic Foods International Inc. Retirement and Pension Plan for Salaried
Employees, Vlasic Foods International Inc. Supplemental Retirement Benefit
Program (collectively referred to as the "Retirement Plan"), the Vlasic Foods
International Inc. Savings and 401(k) Plan for Salaried Employees and the
Vlasic Foods International Inc. Supplemental Savings Program. For purposes
of this Subsection (iv), the "actuarial equivalent" shall be determined in
accordance with the actuarial assumptions used for the calculation of
benefits under the Retirement Plan as applied prior to the Termination Date
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in accordance with such plan's past practices. This Subsection (iv) shall not be
interpreted so as to limit any benefits to which the Executive, his dependents
or beneficiaries may be entitled under any of the Company's employee benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits.
(v) The outstanding incentive awards (including restricted
stock and performance shares or units, stock options or stock appreciation
rights) granted to the Executive under the Vlasic Foods International Inc.
1998 Long-Term Incentive Plan or under any subsequent incentive plan or
arrangement, shall vest and any restrictions thereon shall lapse as follows:
(i) all such incentive awards (other than performance related awards) shall
vest or become exercisable immediately and any restrictions thereon shall
lapse; and (ii) any performance related awards shall vest or become
exercisable and any restrictions thereon shall lapse on a pro-rata portion of
such awards based on the portion of the relevant performance period that has
expired as of the Termination Date (but in no event shall such performance
related award vest, become exercisable or restrictions lapse with respect to
less than 50% of the total outstanding awards, any additional vesting to
apply to those awards which have been outstanding the longest), and (B) the
Executive shall have the right to require the Company to purchase, for cash,
any shares of unrestricted stock or shares purchased upon exercise of any
options, at a price equal to the fair market value of such shares on the date
of purchase by the Company. To the extent that, due to a Change in Control,
Executive is entitled to a greater level of benefits or compensation (which
includes but is not limited to a vesting schedule more favorable to
Executive) under the terms of any Vlasic Foods International Inc. incentive
or deferred compensation plan, as compared to this provision, the terms of
the Vlasic Foods International Inc. incentive or deferred compensation plan
will govern.
(c) The amounts provided for in Sections 4.1(a) and
4.1(b)(i), (ii), (iv) and (v) shall be paid within thirty (30) days after the
Executive's Termination Date. The Company may withhold from all payments due
to Executive under this Agreement all taxes or other withholdings which the
Company reasonably believes are required to be withheld under applicable
federal, state or local law
(d) The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 4.1(b)(iii).
4.3 The severance pay and benefits provided for in Sections
4.1(a) and 4.1(b)(i) and (ii) shall be in lieu of any other severance pay to
which the Executive may be entitled under any Company severance plan, program
or arrangement.
5. Notice of Termination. Following a Change in Control, any
purported termination of the Executive's employment by the Company or by the
Executive shall be communicated by written Notice of Termination to the
other. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which indicates the specific termination provision
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in this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. For purposes of this Agreement, no
such purported termination shall be effective without such Notice of
Termination.
6. Termination Date. "Termination Date" shall mean in the case of
the Executive's death, his date of death, and in all other cases, the date
specified in the Notice of Termination subject to the following:
(a) If the Executive's employment is terminated by the Company
for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that in the case of
Disability the Executive shall not have returned to the full-time performance
of his duties during such period of at least thirty (30) days; and
(b) If the Executive's employment is terminated for Good
Reason, or if the Executive delivers a Notice of Termination during the
Window Period, the date specified in the Notice of Termination shall not be
more than sixty (60) days from the date the Notice of Termination is given to
the Company.
7. Certain Additional Payments by the Company. (a) Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 7) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7 (c), all
determinations required to be made under this Section 7, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Company's public accounting firm (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and
the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the
Change in Control, the Company shall appoint another nationally recognized
public accounting firm reasonably acceptable to Executive to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7,
shall be paid by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7 (c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Executive is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to
be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
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representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 7 (c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and provided further, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7 (c), the Executive becomes
entitled to receive, and receives, any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
Section 7 (c) ) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 7 (c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
8. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns and the Company shall
require any successor or assign to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
The term "the Company" as used herein shall include such successors and
assigns. The term "successors and assigns" as used herein shall mean a
corporation or other entity acquiring all or substantially all the assets and
business of the Company (including this Agreement) whether by operation of
law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Executive, his beneficiaries or
legal representatives, except by
11
<PAGE> 12
will or by the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal personal
representative.
9. Fees and Expenses. The Company shall pay all legal fees and
related expenses (including the costs of experts, evidence and counsel)
incurred by the Executive as they become due as a result of: (a) the
Executive's termination of employment (including all such fees and expenses,
if any, incurred in contesting or disputing any such termination of
employment); (b) the Executive seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which the Executive is or may be entitled to
receive benefits; or (c) the Executive's hearing before the Board as
contemplated in Section 2.1 of this Agreement; provided however, that the
circumstances set forth in clauses (a) and (b) (other than as a result of the
Executive's termination of employment under circumstances described in
Section 2.2(d)) occurred within twenty-four (24) months following a Change in
Control.
10. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last given
by each party to the other, provided that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been
received on the date of delivery thereof or on the third business day after
the mailing thereof, except that notice of change of address shall be
effective only upon receipt.
11. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or reduce such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Provided,
to the extent that the Executive receives benefits under this Agreement, he
or she is not entitled to severance pay under any other severance plan,
policy or arrangement of the Company, including specifically the Severance
Protection Program. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan or program of the Company or
any of its subsidiaries shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
12. Settlement of Claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Executive or others.
13. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by
12
<PAGE> 13
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
14. Employment Status. This Agreement does not constitute a contract
of employment or impose on the Company any obligation to retain the
Executive, or any obligation on the Executive to remain in the employment of
the Company.
15. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey without
giving effect to the conflict of laws principles thereof. Each party hereto
consents to the subject matter and in personam jurisdiction and venue in the
United States District Court of New Jersey. In the event it is determined
that the United States District Court of New Jersey should lack subject
matter jurisdiction for any reason, the parties consent to the jurisdiction
and venue in a court of competent jurisdiction in Camden County in the State
of New Jersey.
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersede all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
ATTEST: VLASIC FOODS INTERNATIONAL INC.
By:
- ------------------------------- -----------------------------------
Secretary Vice President - Human Resources
EXECUTIVE
By:
-----------------------------------
13
<PAGE> 1
EXHIBIT 13.1
FINANCIAL TABLE OF CONTENTS VLASIC FOODS INTERNATIONAL
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Pro Forma Financial Information 14
- ---------------------------------------------------------------------
Management's Discussion and Analysis of Results
of Operations and Financial Condition 15
- ---------------------------------------------------------------------
Consolidated Statements of Earnings 25
- ---------------------------------------------------------------------
Consolidated Balance Sheets 26
- ---------------------------------------------------------------------
Consolidated Statements of Cash Flows 27
- ---------------------------------------------------------------------
Consolidated Statements of Shareowners' Equity 28
- ---------------------------------------------------------------------
Notes to Consolidated Financial Statements 29
- ---------------------------------------------------------------------
Report of Management 46
- ---------------------------------------------------------------------
Report of Independent Accountants 47
- ---------------------------------------------------------------------
Selected Financial Data 48
- ---------------------------------------------------------------------
</TABLE>
13
<PAGE> 2
PRO FORMA STATEMENTS VLASIC FOODS INTERNATIONAL
OF EARNINGS (UNAUDITED)
- --------------------------------------------------------------------------------
Vlasic's Pro Forma Statements of Earnings presented below produce more
meaningful comparisons as both years include interest expense for a full year on
a pro forma basis, as compared to the historical Statements of Earnings which
only include significant interest expense after the spin-off date of March 30,
1998. The pro forma information assumes the spin-off occurred at the beginning
of fiscal 1997. However, the pro forma information is not necessarily indicative
of results that would have occurred if Vlasic had been an independent Company
since the beginning of fiscal 1997 or of future results. The unaudited Pro Forma
Statements of Earnings of Vlasic should be read in conjunction with the
historical financial statements of Vlasic and the notes thereto.
<TABLE>
<CAPTION>
AUGUST 2, August 3,
FISCAL YEARS ENDED 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(in thousands except per share amounts)
Net sales $ 1,357,274 $ 1,508,285
- ---------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold 978,025 1,048,433
Marketing and selling expenses 245,119 266,475
Administrative and other expenses 69,043 64,116
Special charges(1) 42,450 12,634
- ---------------------------------------------------------------------------------------------------------------------
1,334,637 1,391,658
- ---------------------------------------------------------------------------------------------------------------------
Pro Forma Earnings:
Earnings (loss) before interest and taxes 22,637 116,627
Interest expense, net(2) 38,613 40,120
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) before taxes (15,976) 76,507
Provision for income taxes 7,750 25,860
- ---------------------------------------------------------------------------------------------------------------------
Pro forma earnings (loss) $ (23,726) $ 50,647
=====================================================================================================================
Pro Forma Earnings Per Share assuming dilution $ (0.52) $ 1.10
Weighted average shares outstanding assuming dilution(3) (4) 45,458 45,941
</TABLE>
(1) Pro Forma and historical earnings include the impact of special charges in
both years. In fiscal 1998 special charges totaled $42.5 million before taxes or
$.80 per share as follows: the impairment loss on assets held for sale of $14.4
million or $.32 per share in the fourth quarter and year ended fiscal 1998; and
a restructuring charge of $28.1 million before tax, $21.8 million after tax, or
$.48 per share, in the third quarter and year ended fiscal 1998. In fiscal 1997,
there was a restructuring charge of $12.6 million before tax, $7.8 million after
tax or $.17 per share.
(2) Pro Forma Earnings gives effect for interest expense on debt assumed as of
the spin-off date as if it were outstanding for the entire period prior to
spin-off at an assumed 7% interest rate. The related tax impact of the pro forma
interest expense is included within the provision for income taxes. Pro Forma
Earnings excludes the expense related to the cumulative effect of accounting
change of $600 recorded during the three months ended February 1, 1998.
(3) Excludes potentially dilutive shares in fiscal 1998 as the result would be
antidilutive.
(4) Weighted average shares assuming dilution for fiscal 1997 reflects
outstanding stock option grants during the periods.
14
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
- --------------------------------------------------------------------------------
INTRODUCTION
Effective March 30, 1998, one share of Vlasic Foods International Inc.
(the Company or Vlasic) common stock was distributed to Campbell Soup Company
(Campbell) shareowners for every ten shares of Campbell capital stock in a
tax-free distribution. At the time of the distribution, Vlasic began operations
as a separate independent publicly-owned company.
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity of Vlasic for
the fiscal years ended August 2, 1998, August 3, 1997, and July 28, 1996.
Results of the periods presented may not necessarily be indicative of the
results of operations that would have occurred if the Company had operated
independently throughout the periods shown or of the Company's future
performance as an independent company. The following discussion of results of
operations and liquidity and capital resources should be read in conjunction
with the consolidated financial statements and the related notes thereto
appearing elsewhere.
RESULTS OF OPERATIONS
Overview
Net sales for fiscal 1998 were $1.4 billion, a decrease of 10% from fiscal
1997 (or down 8.3% from fiscal 1997 on a comparable 52 week basis). The net loss
of $6.4 million for fiscal 1998 represents an $84.5 million decrease in earnings
from fiscal 1997. The fiscal 1998 net loss includes:
- the 1998 fourth quarter special charge of $14.4 million for the
impairment loss on assets of the German gourmet food distribution
business held for sale;
- the 1998 third quarter restructuring charge of $28.1 million ($21.8
million after tax or $0.48 per share); and
- several unusual and transition charges totaling $17.5 million ($11.2
million after tax or $0.24 per share) including start-up costs
associated with new technology at the pickle production facilities,
increased marketing costs in the German gourmet foods business,
information technology development charges and transition service
charges from Campbell which overlap Vlasic's administrative expenses
until Vlasic's infrastructure is completed.
Fiscal 1998 was also impacted by the second quarter fiscal 1998 cumulative
effect of an accounting change of $0.6 million after tax for the adoption of
Emerging Issues Task Force (EITF) Issue 97-13, "Accounting for Costs Incurred in
Connection with Consulting Contract that Combines Business Process Reengineering
and Information Technology Transformation." Fiscal 1997 was impacted by a first
quarter fiscal 1997 restructuring charge of $12.6 million ($7.8 million after
tax). Excluding the after-tax restructuring charges of $21.8 million and $7.8
million from fiscal 1998 and 1997, respectively, the $14.4 impairment loss and
the accounting change, net earnings declined $55.5 million or 65% to $30.4
million in fiscal 1998.
The historical financial statements reflect minimal interest expense prior
to the spin-off as there was no allocation of interest expense on Campbell's net
investment. Subsequent to the spin-off, interest expense includes interest on
the $500 million of debt assumed from Campbell as well as the debt related to
the increase in working capital. Management believes the pro forma financial
information appearing on page 14 provides more meaningful comparisons.
15
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
Assuming that the spin-off had been consummated as of the beginning of
fiscal 1997, pro forma net interest expense would have been approximately $38.6
million and pro forma net loss would have been approximately $23.7 million or
$0.52 per share for fiscal 1998. Pro forma net loss for fiscal 1998 includes
special charges after tax of $36.2 million or $0.80 a share. Pro forma interest
expense would have been $40.1 million and pro forma net earnings would have been
$50.6 million or $1.10 per share assuming dilution for fiscal 1997. Pro Forma
net earnings for fiscal 1997 include a restructuring charge of $7.8 million or
$0.17 per share.
Consolidated Statements of Earnings
The following table sets forth certain items in Vlasic's consolidated
statements of earnings as percentages of its net sales for the fiscal periods
indicated:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------------
Cost of products sold 72.0% 69.5% 70.3%
Marketing and selling expenses 18.1% 17.7% 17.1%
Administrative expenses 4.7% 3.5% 3.6%
Research and development expenses 0.6% 0.6% 0.6%
Other (income) expense -0.2% 0.2% 0.0%
Special charges 3.1% 0.8% 2.5%
- --------------------------------------------------------------------------------------------
Total costs and expenses 98.3% 92.3% 94.1%
- --------------------------------------------------------------------------------------------
Earnings before interest and taxes 1.7% 7.7% 5.9%
============================================================================================
</TABLE>
Fiscal 1998 Compared to Fiscal 1997
Net sales of $1.4 billion in fiscal 1998 decreased 10% from fiscal 1997
(down 8.3% from fiscal 1997 on a comparable 52 week basis). The sales decrease
was primarily due to lower sales in the Swanson U.S. frozen food and Vlasic
pickle businesses. The decreased volumes were driven about equally by a
reduction of retail inventories in connection with the Company's efforts to
align shipments with consumption and by reduced consumption linked to a lack of
product innovation and advertising support. Declines in exports from Argentina
as well as the UK frozen and German gourmet foods businesses contributed to the
decline in net sales.
Cost of products sold as a percentage of net sales increased by 2.5 points
to 72.0% in fiscal 1998, up from 69.5% in fiscal 1997, as a result of the
highest cattle costs in over a decade in Argentina and start up costs associated
with new technology at the pickle plants and lower absorption, offset by
benefits of continuing manufacturing efficiency programs.
Marketing and selling expenses as a percentage of net sales increased in
fiscal 1998 to 18.1% from 17.7% in fiscal 1997, principally due to increased
selling expense for Swanson U.S frozen food.
Administrative expenses, as a percentage of net sales, increased 1.2
points in fiscal 1998 to 4.7% from 3.5% in fiscal 1997, as a result of
duplicative transition related costs and initial costs related to the
development of the Company's information technology infrastructure.
16
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
Research and development expenses, as a percentage of net sales, were
unchanged in fiscal 1998 compared to fiscal 1997.
Other (income) expense in fiscal 1998 was $2.9 million income compared to
$2.4 million expenses in fiscal 1997. The variance is principally attributable
to reduced expense associated with the long-term incentive plan.
See the discussion below for special charges.
Earnings before interest and taxes as a percentage of net sales were 1.7%
in fiscal 1998 compared to 7.7% in fiscal 1997. Excluding the third quarter
fiscal 1998 and the first quarter fiscal 1997 restructuring charges and the
fourth quarter 1998 impairment loss, earnings before interest and taxes would
have been 4.8% of net sales in fiscal 1998 compared to 8.6% in fiscal 1997. The
decrease was driven by:
- lower consumption linked to lack of innovation and advertising
support;
- the alignment of shipments with consumption;
- higher cattle costs in Argentina;
- poor results in the German gourmet foods distribution business;
- transition charges including overlapping payroll and benefits
administrative costs and duplication of information technology,
research and development, customer service and accounting services;
- costs incurred in the development of an independent information
technology system;
- start-up costs associated with new technology at our Vlasic pickle
plants; and
- increased marketing costs in the German gourmet foods distribution
business.
The historical financial statements reflect minimal interest expense prior
to the spin-off as there was no allocation of interest expense on Campbell's net
investment. Subsequent to the spin-off, interest expense includes interest on
the $500 million of debt assumed from Campbell as well as the debt related to
the increase in working capital. Management believes the pro forma financial
information appearing on page 14 provides more meaningful comparisons.
Excluding 1998 and 1997's restructuring charges and impairment loss, the
effective tax rates would have been 41.5% and 33.0%, respectively. The higher
tax rate in fiscal 1998 is driven by losses in Germany which generate no tax
benefit and lower earnings in Argentina where the effective tax rates are
reduced by export rebates and other tax incentives which lower taxable income.
A valuation allowance is recorded as a reduction to Vlasic's estimate of
the deferred tax assets relating to non-U.S. tax loss carryforwards due to the
uncertainty of the ultimate realization of future benefits from such assets.
These deferred tax assets pertain to Vlasic's operations in Argentina, frozen
business in the U.K. and gourmet distribution business in Germany. The
uncertainty surrounding the use of U.K. tax loss carryforwards stems from
significant tax law restrictions regarding their use. Moreover, the limited tax
loss carryforward periods and exclusion from current taxable income of export
rebates create uncertainty about whether Vlasic will be able to utilize its tax
loss carryforwards from operations in Argentina. Finally, the German tax loss
carryforwards are not expected to be utilized prior to the sale of the business.
Fiscal 1997 Compared to Fiscal 1996
Net sales of $1.5 billion in fiscal 1997 increased 0.6% from fiscal 1996
(down 1.3% from fiscal 1996 on a comparable 52 week basis). Volume declines
offset higher selling prices, and changes in foreign currency rates had no
impact. Overall volume was flat (down 1.9% on a comparable 52 week basis) as
strong growth in
17
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
Swanson U.S. (particularly frozen dinners), contract manufacturing for Campbell
Foodservice and fresh mushrooms was more than offset by declines in the German
foods distribution business, Argentine frozen cooked beef and Vlasic pickles.
Cost of products sold as a percentage of net sales improved in fiscal 1997
by 0.8 points from 70.3% to 69.5%. Productivity gains in Swanson, Freshbake in
the U.K. and Vlasic pickles as well as the benefit of higher selling prices were
mitigated by higher mushroom and beef costs and lower margins in Germany.
Marketing and selling expenses increased in fiscal 1997 to 17.7% of net
sales from 17.1% in fiscal 1996. The principal cause was higher trade spending
for Swanson U.S.
Administrative and research and development expenses, as a percentage of
net sales, were down 0.1 points in fiscal 1997 to 3.5% and 0.6%, respectively.
Other expenses, net, increased by $2.3 million in fiscal 1997 due to
higher accruals for long-term incentive plan charges related to the increase in
the market price of Campbell stock.
See the discussion below for special charges.
The effective income tax rate was 32.4% in fiscal 1997 compared to 31.0%
in fiscal 1996. Excluding restructuring charges, the rate was 33.0% in fiscal
1997 and 33.3% in fiscal 1996.
Special Charges
During the fourth quarter of fiscal 1998, management designed and began to
implement a program to pursue asset reduction and cost improvement
opportunities. As part of that plan the Company decided to sell its Kattus
gourmet foods distribution business in Germany and began to actively seek
buyers. The Company expects to complete the sale of the business during fiscal
1999. The carrying value of the assets held for sale was reduced to fair value
based on estimates of selling values less costs to sell. Fourth quarter 1998
earnings include the $14.4 million charge to reduce assets held for sale to fair
value of which approximately $10 million represents a charge for goodwill
impairment with the balance of the charge recorded against the other long lived
assets. Net sales for the business to be disposed of approximated $70,034,
$83,635 and $105,499 in 1998, 1997 and 1996, respectively. Earnings (loss)
before interest and taxes excluding restructuring charges and the impairment
loss approximated ($6,725), ($2,657) and $5,575 in 1998, 1997 and 1996,
respectively.
A special charge of $28.1 million ($21.8 million after tax) was recorded
in the third quarter of fiscal 1998 to cover the costs of a restructuring
program. The restructuring program was designed to improve operational
efficiency by closing certain U.S. and European administrative offices and
production facilities. The worldwide workforce will be reduced by approximately
425 administrative and operational positions. The restructuring charge included
approximately $11.6 million primarily related to severance and employee benefit
costs that will be paid in cash. The balance of the restructuring charge,
amounting to $16.5 million, related to non-cash charges for losses on the
disposition of plant assets. The fiscal 1998 restructuring program is expected
to result in approximately $9 million in aggregate savings in fiscal 1999
primarily from reductions in plant overhead and depreciation and employee
salaries and benefits.
A special charge of $12.6 million ($7.8 million after tax) was recorded in
the first quarter of fiscal 1997 to cover the costs of a restructuring program.
The restructuring program was designed to improve operational efficiency by
closing various U.S. pickle facilities and reducing approximately 50
administrative and operational positions from the worldwide workforce. The
restructuring charge included approximately $4.6 million in cash charges,
primarily related to severance and employee benefit costs substantially all of
which was paid by the end of the first quarter of fiscal 1998. The balance of
the restructuring charge, amounting to $8.0 million, related to non-cash charges
for losses on the disposition of plant assets. The program was completed during
the first quarter of fiscal 1998. The fiscal 1997 restructuring program resulted
in approximately $10 million in aggregate
18
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
savings in fiscal 1997 and fiscal 1998 from reductions in employee salaries and
benefits, plant overhead and depreciation.
Results by Segment
The following table sets forth certain segment information for the fiscal
periods indicated:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Net Sales
Frozen Foods $ 541,436 $ 614,467 $ 583,384
Grocery Products 477,395 538,684 561,154
Agricultural Products 347,872 366,113 369,088
Eliminations (9,429) (10,979) (14,659)
- ------------------------------------------------------------------------------------------------------
Total $ 1,357,274 $ 1,508,285 $ 1,498,967
======================================================================================================
Earnings Before Interest and Taxes
Frozen Foods $ 31,469 $ 56,268 $ 15,885
Grocery Products (2,517) 49,513 53,748
Agricultural Products (6,315) 10,846 19,337
- ------------------------------------------------------------------------------------------------------
Total $ 22,637 $ 116,627 $ 88,970
======================================================================================================
</TABLE>
Fiscal 1998 Compared to Fiscal 1997
Net sales of the frozen foods segment decreased 11.9% in fiscal 1998
compared to fiscal 1997 (down 10.2% on a comparable 52 week basis) to $541.4
million. The decrease was driven by the lower Swanson U.S volume related to
aligning shipments with consumption as well as decreased consumption driven by
lack of product innovation and lower advertising. Excluding the fiscal 1998 and
1997 restructuring charges, this segment's earnings before interest and taxes
decreased 30.2%, driven by lower sales volumes.
Net sales of the grocery products segment decreased 11.4% in fiscal 1998
compared to fiscal 1997 (down 9.7% on a comparable 52 week basis) to $477.4
million. The decrease was primarily driven by lower Vlasic pickle volume related
to aligning shipments with consumption as well as decreased consumption driven
by lack of product innovation and lower advertising. This segment also
experienced lower volume in the German gourmet foods business and Argentina.
Excluding the fiscal 1998 and 1997 restructuring charges and the 1998 impairment
loss, this segment's earnings before interest and taxes decreased 49.8% in
fiscal 1998 driven by the decline in sales, start-up costs associated with new
technology at the pickle plants and an increase in German marketing costs.
Net sales of the agricultural products segment decreased 5.0% in fiscal
1998 compared to fiscal 1997, (down 3.2% on a comparable 52 week basis) to
$347.9 million. This segment incurred a loss of $6.3 million in fiscal 1998
compared to earnings before interest and taxes of $10.8 million in fiscal 1997.
The improvements in mushroom production costs in fiscal 1998 were not
significant enough to offset the higher cattle costs in Argentina.
19
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
Fiscal 1997 Compared to Fiscal 1996
Net sales of the frozen foods segment increased 5% in fiscal 1997 (up 3.5%
on a comparable 52 week basis) to $614.5 million mainly due to increases in
Swanson U.S. and Freshbake in the U.K., which contributed equally to the
increase. Also, Swanson Canada registered a double-digit increase. This
segment's earnings before interest and taxes more than doubled in fiscal 1997 to
$56.3 million. Excluding restructuring charges from fiscal 1997 and fiscal 1996,
earnings before interest and taxes increased 20%, led by a double-digit gain in
Swanson U.S. (driven by improved productivity and lower manufacturing costs
resulting from prior-year restructuring programs) and by continued improvement
in manufacturing costs for Freshbake in the U.K.
Net sales of the grocery products segment decreased 4% in fiscal 1997
(down 6.3% on a comparable 52 week basis) to $538.7 million, driven principally
by weakness in the German foods distribution business. This weakness was
principally caused by difficulties in the transition to a new management
information system. These difficulties caused the unit to be unable to receive,
process and deliver a substantial number of orders for a period of time.
Management believes the difficulties have been corrected and that the business
is working to regain lost distribution. The fiscal 1997 net sales of most other
businesses included in this segment approximated those for fiscal 1996 (down
2.3% on a comparable 52 week basis). This segment's earnings before interest and
taxes decreased 8% in fiscal 1997 to $49.5 million. Excluding restructuring
charges from fiscal 1997 and fiscal 1996, earnings before interest and taxes
increased 3% as a 25% increase in Vlasic pickle earnings was largely offset by
the poor volume performance of the German foods distribution business, which
went from a profit in fiscal 1996 to a loss in fiscal 1997. Open Pit barbecue
sauce, Argentine retail and the U.K. pickle, canned bean and vegetable declined
in fiscal 1997.
Sales of the agricultural products segment declined 1% in fiscal 1997
(down 2.9% on a comparable 52 week basis) to $366.1 million. Reduced overall
demand for beef products in Europe and reduced beef shipments to Campbell were
offset by increased contract manufacturing for Campbell Foodservice and
increased fresh mushroom sales. This segment's earnings before interest and
taxes declined 44% in fiscal 1997 to $10.8 million from $19.3 million in fiscal
1996. The decline was due in approximately equal parts to reduced sales of
frozen cooked beef and unfavorable mushroom costs.
LIQUIDITY AND CAPITAL RESOURCES
As of the spin-off, Vlasic assumed $500 million of borrowings outstanding
under a five-year $750 million unsecured revolving credit facility with a
commercial bank syndicate (restricted to $625 million during the waiver period
and subsequently reduced to $650 million, see discussion below). At August 2,
1998, $557 million was outstanding under the credit facility with $68 million
available to support the Company's capital requirements including working
capital needs and capital expenditures. Vlasic anticipates that its operating
cash flow, together with available borrowings under its credit facility, will be
sufficient to meet its working capital requirements, capital expenditure
requirements and interest service requirements on its debt obligations.
In the 1998 third quarter 10-Q the Company indicated it did not expect to
be in compliance with certain financial ratio requirements as of the fiscal year
ending August 2, 1998 due to higher than anticipated transition charges and
lower than anticipated projected earnings. Prior to August 2, 1998, the Company
received a unanimous waiver from the revolving credit facility bank syndicate
covering the particular financial ratios. The waiver was designed to permit the
Company and the bank syndicate time to reach agreement on an amendment to the
revolving credit facility. The waiver period is effective until November 1,
1998. The waiver required the payment of a fee, an increase in both the interest
rate and facility fee paid to the banks, and limits on the amount of permissible
borrowings under the facility and total borrowings. A covenant for the waiver
period was established for minimum net worth. The Company is in compliance with
the waiver's requirements.
20
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
All banks participating in the revolving credit facility have accepted the
amendment's basic term sheet. The Company believes that it will be able to
complete the amendment to the revolving credit facility by the expiration of the
waiver period. The amendment term sheet converts $100 million of the revolving
credit facility to a term loan having the same terms and maturities as the
revolving credit facility, and adjusts the financial ratios creating financial
flexibility and liquidity required to achieve current and projected business
plans.
The amendment term sheet:
- - requires the payment of a fee to the bank group,
- - increases both the interest rate and facility fee paid to the banks
effective October 1, 1998,
- - creates incentives for the Company to issue longer term debt,
- - imposes additional covenants, including, but not limited to, the
mandatory repayment of debt and the reduction of the commitment upon
the sale of assets and equity or incurrence of debt,
- - limits capital spending and restricts dividends and investments.
The Company is also pledging certain assets to secure the bank
indebtedness, which will be released upon attainment of certain credit rating
criteria. The amendment reduces the total size of the credit facility from $750
million (limited to $625 million during the waiver period) to $650 million, as
the Company does not anticipate requiring the additional liquidity.
Net cash provided by operating activities was $7.3 million in fiscal 1998
compared to $178.4 million in fiscal 1997. The variance in cash flow from
operations was driven by lower net earnings and changes in working capital. The
increase in working capital was attributed to an increase in receivables
resulting from trade receivables from Campbell previously eliminated as
intercompany balances and extended payment terms of certain receivables from the
government in Argentina, increased inventories primarily pickles and a decrease
in domestic marketing accruals.
Cash used in investing activities was principally for capital
expenditures. Capital expenditures were $62.3 million in fiscal 1998 compared to
$79.3 million in fiscal 1997. Capital expenditures were higher in the prior year
due to new capacity added to certain Vlasic pickle and Swanson frozen food
production facilities. Capital expenditures for fiscal year 1999 are not
expected to exceed $50 million. During the second quarter of fiscal 1998, Vlasic
acquired the SAFRA trademark and certain equipment for the canned spreadable
meats business in Argentina for $6.4 million.
Cash provided by financing activities was principally funded from $56.5
million of net borrowing under the credit facility. Such financing activities
were used primarily for working capital requirements.
MARKET RISK SENSITIVITY
The Company uses or is permitted to use financial instruments, including
fixed and variable rate debt, as well as swap, forward and option contracts to
finance its operations and to hedge interest rate and currency exposures. The
swap, forward and option contracts are entered into for periods consistent with
related underlying exposures and do not constitute positions independent of
those exposures. The Company does not enter into contracts for speculative
purposes, nor is it a party to any leveraged instrument.
The information below summarizes the Company's market risks associated
with debt obligations and other significant financial instruments outstanding as
of August 2, 1998. Fair values included herein have been determined based on
quoted market prices. The information presented below should be read in
conjunction with Note 21 and Note 22 to the Consolidated Financial Statements.
21
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
For debt obligations, the table presents principal cash flows and related
interest rates by fiscal year of maturity. Capital lease obligations of $0.8
million are not included in the table. Variable interest rates disclosed
represent the weighted average rates of the portfolio at the period end. For
interest rate swaps, the table presents notional amounts and related interest
rates by fiscal year of maturity.
Both domestically and internationally, the Company relies primarily on
bank borrowings to meet its funding requirements. In the United States, the
borrowings are supported by a credit facility of $750 million (limited to $625
million during the waiver period) reduced to $650 million under the amendment
term sheet.
<TABLE>
<CAPTION>
Debt 1999 2000 2001 2002 Thereafter Total Fair Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $ 207 $ 1,491 $ - $ - $ - $ 1,698 $ 1,751
Average interest rate 7 .42% 7.72%
- ------------------------------------------------------------------------------------------------------------------------------
Variable rate $ 11,959 557,000 $ 568,959 $ 568,959
Average interest rate 7 .81% 6.45% 6.48%
- ------------------------------------------------------------------------------------------------------------------------------
Interest Rate Swaps:
Variable to fixed(1) $ 150,000 $ 150,000 $ (385)
Average pay rate 5.87% 5.87%
Average receive rate 5.70% 5.70%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Hedges U.S. Bank borrowings.
The Company has a forward starting swap contract with a 10 year maturity
and a notional amount of $50 million which hedges a portion of the interest rate
risk associated with the planned issuance of longer term debt in fiscal 1999.
The forward starting swap will start in fiscal 1999, had a market value of $0.1
million as of August 2, 1998 and will be settled in cash on or about the time
longer term bonds are issued. The pay rate is 6.035% and the receive rate is
three-month LIBOR.
The table below provides information as of August 2, 1998 about the
Company's forward currency exchange contracts related to purchase commitments
denominated in foreign currencies. The table presents the contractual amount and
the related weighted average contract exchange rates for significant currency
contracts outstanding as of August 2, 1998. All contracts mature before January
1, 1999.
<TABLE>
<CAPTION>
Average
Contractual
Contract Exchange
US$ equivalent Amount Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Receive US$/ Pay DM $ 1,440 1.759
</TABLE>
The aggregate cost to settle all contracts was insignificant as of August 2,
1998.
YEAR 2000
The Year 2000 issue is the result of date-sensitive computer programs
using two digits rather than four to define the applicable year. If not
corrected, this could result in system failures or miscalculations leading to
significant disruptions in a Company's operations. Prior to our spin-off from
Campbell a worldwide information technology project was initiated to identify
areas impacted by Year 2000 issues. The purpose of this high-priority project is
to identify and remediate non-ready systems and devices before business
processes are affected. The Company has completed a global business impact
assessment and has plans for timely correcting, retiring,
22
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
replacing or updating non-ready systems. Vlasic has been aided in this effort by
the fact that it was only recently spun-off as an independent entity on March
30, 1998 and many of our business and information systems in the U.S. have been
newly purchased and implemented with Year 2000 compliant technology. The
implementation of newly purchased systems is targeted for completion by April 2,
1999 and is approximately 60% completed.
The actual work of remediating and testing those systems that are not new
has begun and is targeted for completion by December 31, 1998 for Vlasic
identified critical systems and July 31, 1999 for other systems. These phases of
the project are approximately 50% completed. Critical systems include business
planning and control process manufacturing, sales order billing and warehouse
management systems, that, if shut down or interrupted, could have a material
adverse effect on the Company's results of operations, financial condition and
cash flow. The Company is partnering with experienced systems integration and
Year 2000 vendors in the execution of the Year 2000 master plan.
The project has clear management responsibility, budgets, plans and
reporting requirements. Comprehensive budgets and a master plan have been
developed. Rigorous monthly project tracking and management reporting processes
are in place. The tracking process measures progress (plan versus actual) for
applications at a milestone level. The scope of the project covers information
technology systems, Company infrastructure, including plant floor devices, and
our service partners, including logistical operations. An assessment of our
global information technology infrastructure has been completed and engineers
are currently remediating the plant production facilities. Remediation of the
technology infrastructure is targeted for completion by October 31, 1999 and is
approximately 40% completed.
The Company will test all electronic interfaces with trading partners and
suppliers as part of the new system development project which are scheduled to
be completed by July 31, 1999. Additionally, questionnaires have been sent to
all major suppliers. Responses from suppliers are continually evaluated and
updated reports are being requested.
The Company reviewed the risks of Year 2000 issues and believe the risks
are minimized due to the policy of implementing standard tested and certified
Year 2000 systems after the spin-off. The completed risk analysis performed by
the independent engineers for plant non-information technology systems has not
identified any significant risks. Because the Company's Year 2000 compliance is
dependent upon key third parties also being Year 2000 compliant on a timely
basis, there can be no guarantee that the Company's efforts will prevent a
material adverse impact on its results of operations, financial condition and
cash flows. The possible consequences to the Company or its business partners
not being fully Year 2000 compliant include temporary plant closings, delays in
the delivery of finished products, delays in the receipt of key ingredients,
containers and packaging supplies, invoice and collection errors and inventory
and supply obsolescence. These consequences could have a material adverse impact
on the Company's results of operations, financial condition and cash flows if
the Company is unable to conduct its business in the ordinary course. The
Company believes that its readiness program should significantly reduce the
adverse effect any such disruptions may have.
Concurrently with the Year 2000 readiness measures described above, the
Company and its operating subsidiaries are developing contingency plans intended
to mitigate the possible disruption in business operations that may result from
the Year 2000 issue, and are developing cost estimates for such plans. Once
developed, contingency plans and related cost estimates will be continually
refined as additional information becomes available.
The anticipated costs associated with modifying current systems to be Year
2000 compliant will be expensed as incurred; such costs total $3 million of
which $1 million was incurred during fiscal 1998. While there can be no
assurance that the Company and its suppliers and customers will fully resolve
all Year 2000 issues, neither the estimated cost to become Year 2000
operationally effective nor the outcome of the Year 2000 problem is expected to
have a material impact on the Company's operations, liquidity or financial
position.
23
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VLASIC FOODS INTERNATIONAL
RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
RECENT DEVELOPMENTS
In June 1997, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting
comprehensive income in financial statements. In February 1998, the FASB issued
SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits." SFAS No. 132 revises employers' disclosures about pension and other
postretirement benefit plans. The Company will adopt these statements in Fiscal
1999. The adoption of these statements will not have a financial impact on the
Company.
In June 1998, the FASB issues SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement requires that entities recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company is not required to adopt the statement until Fiscal
2000. The Company is currently evaluating the effect that implementation of the
new standard will have on its results of operations and financial position.
FORWARD-LOOKING INFORMATION
This Annual Report and the Company's filings with the Securities and
Exchange Commission (the SEC) contain certain forward-looking statements within
the meaning of the Securities Act of 1933 and the Securities Exchange Act of
1934. This information is based on management's current view and assumptions
regarding future events and financial performance and is subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in this report and filings with the SEC. Important facts that could
cause such differences include, but are not limited to:
- - Completion of the German gourmet foods distribution business divestiture
in 1999 which is dependent on the Company's ability to find a buyer to
purchase the business at a price considered appropriate.
- - Market risks associated with financial instruments that may vary due to
the impact of unforeseen economic changes, such as currency exchange
rates, inflation rates and recessionary trends.
- - Continued compliance with the covenants and the terms of the renegotiated
credit facility.
- - The Company's ability to maintain capital expenditures within the
forecasted limits.
- - Impact of the Year 2000 issues associated with the Company's business and
information systems and embedded technology as well as the information
technology of its vendors, suppliers, service providers and customers.
- - Implementation of information technology systems by the targeted
completion dates.
- - Inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer
acceptance.
- - The Company's ability to achieve the forecasted savings related to the
restructuring program discussed in Management's Discussion and Analysis.
24
<PAGE> 13
CONSOLIDATED STATEMENTS OF EARNINGS VLASIC FOODS INTERNATIONAL
<TABLE>
<CAPTION>
1998 1997 1996
52 weeks 53 weeks 52 weeks
- ------------------------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C>
Net sales (including $154,764, $155,563 and $144,902
to related parties) $ 1,357,274 $ 1,508,285 $ 1,498,967
- ------------------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of products sold 978,025 1,048,433 1,053,348
Marketing and selling expenses 245,119 266,475 256,666
Administrative expenses 64,063 53,050 54,558
Research and development expenses 7,907 8,620 8,064
Other (income) expense (2,927) 2,446 159
Special charges 42,450 12,634 37,202
- ------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,334,637 1,391,658 1,409,997
- ------------------------------------------------------------------------------------------------------------------------
Earnings before interest and taxes 22,637 116,627 88,970
Interest expense 13,446 1,600 1,071
Interest income 388 588 329
- ------------------------------------------------------------------------------------------------------------------------
Earnings before taxes 9,579 115,615 88,228
Taxes on earnings 15,378 37,475 27,361
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of (5,799) 78,140 60,867
accounting change
Cumulative effect of accounting change (600) - -
- ------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (6,399) $ 78,140 $ 60,867
========================================================================================================================
Per share basic:
Loss before cumulative effect of accounting change $ (0.13)
Cumulative effect of accounting change (0.01)
- -------------------------------------------------------------------------------------
Net loss per share $ (0.14)
- -------------------------------------------------------------------------------------
Weighted average shares outstanding - basic 45,458
=====================================================================================
Per share assuming dilution:
Loss before cumulative effect of accounting change $ (0.13)
Cumulative effect of accounting change (0.01)
- -------------------------------------------------------------------------------------
Net loss per share $ (0.14)
- -------------------------------------------------------------------------------------
Weighted average shares outstanding assuming dilution 45,458 *
=====================================================================================
</TABLE>
* Excludes potentially dilutive shares as the result would be antidilutive.
See accompanying Notes to Consolidated Financial Statements.
25
<PAGE> 14
CONSOLIDATED BALANCE SHEETS VLASIC FOODS INTERNATIONAL
<TABLE>
<CAPTION>
AUGUST 2, August 3,
1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 16,333 $ 9,409
Accounts receivable 127,644 109,676
Inventories 183,763 163,852
Other current assets 25,200 12,339
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 352,940 295,276
- -----------------------------------------------------------------------------------------------------------------------
Plant assets, net 520,075 515,646
Other assets, principally intangible assets, net 86,258 84,186
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 959,273 $895,108
=======================================================================================================================
Current liabilities
Notes payable $ 12,535 $ 191
Payable to suppliers and others 121,210 123,101
Accrued liabilities 93,330 88,914
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 227,075 212,206
- -----------------------------------------------------------------------------------------------------------------------
Long-term debt 558,873 2,252
Deferred income taxes 19,673 36,815
Other liabilities 47,048 11,537
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 852,669 262,810
- -----------------------------------------------------------------------------------------------------------------------
Shareowners' equity
Preferred stock, no par value, authorized 4,000 shares; - -
none issued
Common stock, no par value; authorized 56,000 shares;
issued shares 45,488 137,473 -
Campbell net investment - 633,168
Accumulated deficit (25,115) -
Cumulative translation adjustments (5,754) (870)
- -----------------------------------------------------------------------------------------------------------------------
Total shareowners' equity 106,604 632,298
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareowners' equity $ 959,273 $895,108
=======================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
26
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS VLASIC FOODS INTERNATIONAL
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ (6,399) $ 78,140 $ 60,867
Non-cash charges to net earnings
Cumulative effect of accounting change 600 - -
Restructuring charges 28,050 12,634 37,202
Impairment loss 14,400 - -
Depreciation and amortization 45,125 44,808 45,585
Deferred income taxes (7,701) 9,199 (12,730)
Other, net (1,737) 1,515 1,220
Changes in working capital
Accounts receivable (17,213) 11,016 19,540
Inventories (19,263) 16,858 (1,422)
Other current assets and liabilities (28,514) 4,269 1,905
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,348 178,439 152,167
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of plant assets (62,273) (79,301) (59,053)
Sales of plant assets 6,424 8,431 4,318
Business acquired (6,350) - -
Other, net (1,101) 846 2,631
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (63,300) (70,024) (52,104)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term borrowings 98,542 - -
Repayment of long-term borrowings (42,000) (427) (425)
Short-term borrowings (repayments) 12,335 (17) (1,431)
Issuance of common stock 519 - -
Transactions with Campbell (6,500) (104,029) (94,555)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities 62,896 (104,473) (96,411)
- ----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (20) (86) 59
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 6,924 3,856 3,711
Cash and cash equivalents - beginning of period 9,409 5,553 1,842
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 16,333 $ 9,409 $ 5,553
==================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
27
<PAGE> 16
CONSOLIDATED STATEMENTS VLASIC FOODS INTERNATIONAL
OF SHAREOWNERS' EQUITY
<TABLE>
<CAPTION>
Issued
Common Stock Campbell Cumulative Total
--------------------------- Accumulated Net Translation Shareowners'
Shares Amount Deficit Investment Adjustment Equity
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at July 30, 1995 $ 692,745 $ 991 $ 693,736
1996 Net earnings 60,867 60,867
Translation adjustment (182) (182)
Net transactions with Campbell (94,555) (94,555)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at July 28, 1996 659,057 809 659,866
- ----------------------------------------------------------------------------------------------------------------------------------
1997 Net earnings 78,140 78,140
Translation adjustment (1,679) (1,679)
Net transactions with Campbell (104,029) (104,029)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at August 3, 1997 633,168 (870) 632,298
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings prior to spin-off 18,716 18,716
Net transactions with Campbell as of
the spin-off date:
Assumption of debt, pension and
postretirement obligations and
and net deferred tax liabilities (514,930) (514,930)
Contribution to capital of remaining
Campbell net investment $ 136,954 (136,954) -
Issuance of shares of common stock,
no par value, in connection with
the spin-off 45,455
Issuance of shares of common
stock as a result of
stock options 33 519 519
Net loss after the spin-off $ (25,115) (25,115)
Translation adjustments (4,884) (4,884)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 2, 1998 45,488 $ 137,473 $ (25,115) $ - $(5,754) $ 106,604
==================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
28
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS
- --------------------------------------------------------------------------------
(in thousands, except per share data)
1. VLASIC FOODS INTERNATIONAL SPIN-OFF FROM CAMPBELL SOUP COMPANY
On March 30, 1998, one share of Vlasic Foods International Inc. (the
Company or Vlasic), no par value common stock, was distributed to shareowners of
Campbell Soup Company (Campbell) for every ten shares of Campbell capital stock
held by such shareowners at the record date in a tax-free distribution. At the
time of distribution, the Company began operations as a separate independent
publicly-owned company.
The historical financial statements of Vlasic reflect periods during which
Vlasic did not operate as a separate, independent company; certain estimates,
assumptions and allocations were made in preparing such financial statements.
Therefore, such historical financial statements do not necessarily reflect the
results of operations that would have existed had Vlasic been a separate,
independent company. The historical consolidated balance sheet of the Company as
of August 2, 1998 reflects the effects of the spin-off.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries. Significant intercompany
transactions are eliminated in consolidation.
Fiscal Year. Vlasic's fiscal year ends on the Sunday nearest July 31.
There were 52 weeks in Fiscal 1998 and 1996 and 53 weeks in fiscal 1997.
Cash and Cash Equivalents. All highly liquid debt instruments purchased
with an initial maturity of three months or less are classified as cash
equivalents.
Inventories. Substantially all domestic inventories are priced at the
lower of cost or market, with cost determined by the last-in, first-out (LIFO)
method. Other inventories are priced at the lower of average cost or market.
Plant Assets. Plant assets are stated at historical cost. Alterations and
major overhauls which extend the lives or increase the capacity of plant assets
are capitalized. The amounts for property disposals are removed from plant asset
and accumulated depreciation accounts and any resultant gain or loss is included
in earnings. Ordinary repairs and maintenance are charged to operating costs.
Depreciation. Depreciation provided in costs and expenses is calculated
using the straight-line method. Buildings and machinery and equipment are
depreciated over periods not exceeding 45 years and 15 years, respectively.
Accelerated methods of depreciation are used for income tax purposes in certain
jurisdictions.
Intangibles. Intangible assets consist principally of excess purchase
price over net assets of businesses acquired and trademarks. Intangibles are
amortized on a straight-line basis over periods not exceeding 40 years.
Asset Valuation. The recoverability of plant assets and intangibles is
periodically reviewed based principally on an analysis of cash flow.
Advertising. Advertising costs include the cost of working media (running
advertising on television, radio or in print), the cost of producing
advertising, and the cost of coupon insertion and distribution. Working media
and coupon insertion and distribution costs are expensed in the period the
advertising is run or the coupons are distributed. The cost of producing
advertising is expensed as of the first date the advertisements take place.
Advertising included in marketing and selling expenses was $16,297 in 1998,
$21,125 in 1997 and $19,303 in 1996. At August 2, 1998 and August 3, 1997, there
were no amounts of advertising included in assets in the balance sheets.
29
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
Income Tax. Deferred taxes are provided in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109.
Earnings Per Share. Earnings per share have been calculated in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per Share."
Weighted average shares outstanding assuming dilution reflects outstanding stock
option grants. For fiscal 1998, weighted average shares outstanding assuming
dilution excludes 513 shares relating to outstanding stock option grants as the
result would be antidilutive. Historical earnings per share prior to fiscal 1998
are not presented since Vlasic common stock was not part of the capital
structure of Campbell for the periods presented.
Use of Estimates. Generally accepted accounting principles require
management to make estimates and assumptions that affect assets and liabilities,
contingent assets and liabilities, and revenues and expenses. Actual results
could differ from those estimates.
3. RELATED PARTY TRANSACTIONS SUBSEQUENT TO THE SPIN-OFF
Vlasic sells to Campbell beef and mushrooms for use as ingredients in
Campbell's finished products and frozen foodservice finished product from its
agriculture products segment. Vlasic purchases from Campbell retail frozen food
finished products in Canada. These transactions are at negotiated prices.
Included in the Consolidated Statements of Earnings are sales to Campbell of
$154,764 in 1998, $155,563 in 1997, and $144,902 in 1996. Included in Costs of
product sold are purchases from Campbell of $24,696 in 1998, $26,255 in 1997,
and $27,310 in 1996.
Campbell and Vlasic entered into a multi-year agreement for the continued
(i) supply of beef and mushrooms, and production of frozen foodservice products
in the U.S. by Vlasic and (ii) production of frozen retail products in Canada
and Open Pit barbecue sauce in the U.S. by Campbell.
Vlasic entered into an agreement with Campbell for transitional services
such as administrative and support services for a period not to exceed twelve
months from the date of the spin-off. The transitional service agreement
provides that Vlasic pay a fee intended to approximate Campbell's cost to
provide such services. These fees amounted to $9,078 in 1998 for the four months
following the spin-off.
4. RELATED PARTY TRANSACTIONS PRIOR TO THE SPIN-OFF
Certain Vlasic businesses participated in Campbell's centralized cash
management system to finance operations. Cash deposits from Vlasic were
transferred to Campbell on a daily basis and Campbell funded Vlasic disbursement
bank accounts as required. Unpaid balances of checks were included in accounts
payable. No interest was charged on transactions with Campbell.
Campbell provided certain selling, general and administrative services to
Vlasic including finance, legal, systems, research and development, benefits,
facilities and shared sales and distribution support. These expenses were
allocated to Vlasic based on net sales, utilization or other methods which
management believes to be reasonable. These allocations were $33,601 in the
first eight months of 1998 prior to the spin-off, $51,288 in 1997 and $43,878 in
1996 and are included in the appropriate lines of the Consolidated Statements of
Earnings. The expenses allocated to Vlasic for these services are not
necessarily indicative of the expenses that would have been incurred if Vlasic
had been a separate, independent entity and had managed these functions.
Subsequent to the spin-off, Vlasic manages these functions.
Vlasic was included in the combined federal and certain state income tax
returns of Campbell prior to spin-off. Income tax expense was calculated as if
Vlasic had filed separate income tax returns for the entire fiscal year.
30
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
5. ADJUSTMENT OF ASSETS HELD FOR SALE TO FAIR VALUE
During the fourth quarter of fiscal 1998, management designed and began to
implement a program to pursue asset reduction and cost improvement
opportunities. As part of that plan, the Company decided to sell its Kattus
gourmet foods distribution business in Germany and began to actively seek
buyers. The Company expects to complete the sale of the business during fiscal
1999. The carrying value of the assets held for sale was reduced to fair value
based on estimates of selling values less costs to sell. Fourth quarter 1998
earnings include the $14.4 million charge against Special charges within the
Statements of Earnings to reduce assets held for sale to fair value of which
approximately $10 million represents a charge for goodwill impairment with the
balance of the charge recorded against the other long lived assets. Net sales
for the business to be disposed of approximated $70,034, $83,635 and $105,499 in
1998, 1997 and 1996, respectively. Earnings (loss) before interest and taxes
excluding restructuring charges and the impairment loss approximated ($6,725),
($2,657) and $5,575 in 1998, 1997 and 1996, respectively.
6. RESTRUCTURING CHARGES
<TABLE>
<CAPTION>
Loss on Asset Severance
Disposition and Benefits Other Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restructuring accrual $ 15,125 $ 13,354 $ 8,723 $ 37,202
1996 activity (782) (4,202) (2,674) (7,658)
- ---------------------------------------------------------------------------------------------------------
Balance at July 28, 1996 14,343 9,152 6,049 29,544
Restructuring accrual 7,991 3,253 1,390 12,634
1997 activity (16,810) (9,485) (6,049) (32,344)
- ---------------------------------------------------------------------------------------------------------
Balance at August 3, 1997 5,524 2,920 1,390 9,834
Restructuring accrual 16,500 8,200 3,350 28,050
1998 Activity (7,345) (4,169) (1,636) (13,150)
- ---------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 2, 1998 $ 14,679 $ 6,951 $ 3,104 $ 24,734
=========================================================================================================
</TABLE>
A special charge of $28,050 ($21,815 after tax) was recorded in the third
quarter of 1998 to cover the costs of a restructuring program. The restructuring
program was designed to improve operational efficiency by closing certain U.S.
and European administrative offices and production facilities and is expected to
be completed during the third quarter of 1999. The worldwide workforce will be
reduced by approximately 425 administrative and operational positions. The
restructuring charge included approximately $11.6 million primarily related to
severance and employee benefit costs which will be paid in cash. The balance of
the restructuring charge, amounting to $16.5 million, related to non-cash
charges for losses on the disposition of plant assets.
A special charge of $12,634 ($7,757 after tax) was recorded in the first
quarter of 1997 to cover the costs of a restructuring program. The restructuring
program was designed to improve operational efficiency by closing various pickle
facilities and reducing approximately 50 administrative and operational
positions from the worldwide workforce. The 1997 restructuring charge included
approximately $4.6 million in cash charges primarily related to severance and
employee benefit costs. The balance of the restructuring charge, amounting to
$8.0 million, related to non-cash charges for losses on the disposition of plant
assets. The program was completed during the first quarter of fiscal 1998. A
special charge of $37,202 ($22,842 after tax) was recorded in the fourth quarter
of 1996 to cover the costs of a restructuring program designed to improve
operational efficiency in the U.S. frozen food system by closing the Modesto
plant (a reduction of approximately 500 employees) and increasing production at
Omaha and Fayetteville and improve operational efficiency in the specialty foods
distribution business in Germany. The restructuring charge includes
approximately $22,077 in cash charges primarily related to severance and
employee benefit costs and $15,125 in non-cash charges for losses on disposition
of plant assets. The program was completed in fiscal 1997.
31
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
7. SEGMENT AND GEOGRAPHIC AREA INFORMATION
Vlasic groups its businesses in three operating segments: frozen foods,
grocery products and agricultural products. These operating segments are managed
as strategic units due to their distinct manufacturing processes, marketing
strategies and distribution channels. The FROZEN FOODS SEGMENT consists of
Swanson frozen foods in the U.S. and Canada and Freshbake frozen foods in the
U.K. The GROCERY PRODUCTS SEGMENT includes Vlasic retail and foodservice pickles
and condiments in the U.S., Open Pit barbecue sauce in the U.S., SonA and Rowats
pickles, canned beans and vegetables in the U.K., Kattus gourmet foods
distribution in Germany and Swift canned meat pates and other grocery products
in Argentina. The AGRICULTURAL PRODUCTS SEGMENT includes the U.S. fresh mushroom
business, chilled and frozen beef, frozen cooked beef and canned corned beef
exported from Argentina and contract manufacturing of frozen foodservice product
for Campbell's Foodservice in the U.S. Corporate expenses and assets have been
allocated to the segments.
<TABLE>
<CAPTION>
SEGMENT INFORMATION 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
Frozen Foods $ 541,436 $ 614,467 $ 583,384
Grocery Products 477,395 538,684 561,154
Agricultural Products 347,872 366,113 369,088
Eliminations (9,429) (10,979) (14,659)
- -------------------------------------------------------------------------------------------------------------------
Total $ 1,357,274 $ 1,508,285 $ 1,498,967
===================================================================================================================
Earnings Before Interest and Taxes
Frozen Foods $ 31,469 56,268 $ 15,885
Grocery Products (2,517) 49,513 53,748
Agricultural Products (6,315) 10,846 19,337
- -------------------------------------------------------------------------------------------------------------------
Total $ 22,637 $ 116,627 $ 88,970
===================================================================================================================
Total Assets
Frozen Foods $ 286,197 $ 259,132 $ 258,320
Grocery Products 374,178 369,922 373,793
Agricultural Products 298,898 266,054 291,218
- -------------------------------------------------------------------------------------------------------------------
Total $ 959,273 $ 895,108 $ 923,331
===================================================================================================================
Depreciation and Amortization
Frozen Foods $ 14,896 $ 13,614 $ 14,017
Grocery Products 14,636 16,061 16,255
Agricultural Products 15,593 15,133 15,313
- -------------------------------------------------------------------------------------------------------------------
Total $ 45,125 $ 44,808 $ 45,585
===================================================================================================================
Capital Expenditures
Frozen Foods $ 20,349 $ 35,576 $ 25,494
Grocery Products 19,356 29,399 16,381
Agricultural Products 22,568 14,326 17,178
- -------------------------------------------------------------------------------------------------------------------
Total $ 62,273 $ 79,301 $ 59,053
===================================================================================================================
</TABLE>
32
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
The following presents information about operations in different geographic
areas:
<TABLE>
<CAPTION>
GEOGRAPHIC INFORMATION 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
United States $ 883,288 $ 991,523 $ 963,896
Europe 276,679 306,210 305,274
South America 206,736 221,531 244,456
Eliminations (9,429) (10,979) (14,659)
- -----------------------------------------------------------------------------------------------------------------
Total $ 1,357,274 $ 1,508,285 $ 1,498,967
=================================================================================================================
Earnings Before Interest and Taxes
United States $ 62,436 $ 85,965 $ 48,979
Europe (36,803) 10,424 15,568
South America (2,996) 20,238 24,423
- -----------------------------------------------------------------------------------------------------------------
Total $ 22,637 $ 116,627 $ 88,970
=================================================================================================================
Total Assets
United States $ 480,983 $ 453,935 $ 448,080
Europe 216,794 205,496 212,961
South America 261,496 235,677 262,290
- -----------------------------------------------------------------------------------------------------------------
Total $ 959,273 $ 895,108 $ 923,331
=================================================================================================================
</TABLE>
Transfers between segments and geographic areas are recorded at cost plus
markup or at market. Identifiable assets are those assets, including goodwill,
which are identified with the operations in each segment or geographic region.
Contributions to earnings before interest and taxes include the impact of
special charges: the impairment loss on assets held for sale of $14.4 million or
$.32 per share in fiscal 1998 (with no associated tax effect); a restructuring
charge of $28.1 million before tax, $21.8 million after tax or $.48 per share,
in fiscal 1998, and a restructuring charge of $12.6 million before tax, $7.8
million after tax or $.17 per share in fiscal 1997. In fiscal 1996, the
restructuring charge was $37.2 million before tax, $22.8 million after tax. The
impact by segment is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Frozen Foods $ 9,700 $ 2,697 $ 33,202
Grocery Products 32,350 9,937 4,000
Agricultural Products 400 - -
- -------------------------------------------------------------------------------------------
Total $ 42,450 $ 12,634 $ 37,202
===========================================================================================
</TABLE>
33
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
8. PENSION PLANS AND RETIREMENT BENEFITS
Pension Plans. Substantially all U.S. employees participate in Vlasic
sponsored noncontributory defined benefit pension plans. Prior to the spin-off,
the participants in the plans were included in plans with similar benefits
sponsored by Campbell. Under an agreement with Campbell, the Company assumed
pension liabilities related to the active Vlasic participants, but not to
retirees from the U.S. Vlasic businesses. Campbell will transfer certain trust
assets, from its funded plans to Vlasic's plans based upon actuarial
determinations consistent with regulatory requirements. Benefits are generally
based on years of service and employees' compensation during the last years of
employment. All plans are funded and contributions are made in amounts not less
than minimum statutory funding requirements nor more than the maximum amount
that can be deducted for U.S. income tax purposes. Pension expense included the
following:
<TABLE>
<CAPTION>
Four months beginning March 30, 1998 to August 2, 1998
- --------------------------------------------------------------------------------
<S> <C>
Benefits earned during the year $ 1,291
Interest cost 1,666
Net amortization and deferrals (821)
Return on plan assets (1,026)
- --------------------------------------------------------------------------------
Total $ 1,110
================================================================================
</TABLE>
Net periodic U.S. pension expense allocated to Vlasic was $2,396 for the
first eight months of fiscal 1998 prior to the spin-off (resulting in total U.S.
pension expense of $3,506 in fiscal year 1998), $2,140 in fiscal year 1997 and
$3,428 in fiscal year 1996.
The funded status of the plans was as follows:
<TABLE>
<CAPTION>
AUGUST 2,
1998
- -----------------------------------------------------------------------------------
<S> <C>
Actuarial present value of benefit obligations:
Vested $ (47,780)
Non-vested (6,430)
- -----------------------------------------------------------------------------------
Accumulated benefit obligation (54,210)
Effect of projected future salary increases (22,810)
- -----------------------------------------------------------------------------------
Projected benefit obligation (77,020)
Plan assets at market value 69,140
- -----------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (7,880)
Unrecognized net (gain) or loss 7,193
Unrecognized prior service cost 2,934
Unrecognized net assets at transition (423)
- -----------------------------------------------------------------------------------
Prepaid pension expense $ 1,824
===================================================================================
Weighted average rates for principal actuarial assumptions were:
<CAPTION>
AUGUST 2,
1998
- -----------------------------------------------------------------------------------
<S> <C>
Discount rate 7.00%
Long-term rate of return on plan assets 9.75%
Weighted-average rate of compensation increase 4.25%
</TABLE>
34
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
Pension benefits for Vlasic's operations outside the U.S. are provided
principally through government plans and also to a lesser extent by Company
sponsored plans. Pension expense for operations outside the U.S. was $4,543 in
1998, $5,089 in 1997 and $5,993 in 1996.
Retiree Benefits. Vlasic provides postretirement benefits, including health
care and life insurance, to substantially all U.S. employees and their
dependents retiring after the spin-off. Employees who have 10 years of service
after the age of 45 and retire from Vlasic are eligible to participate in the
postretirement benefit plans.
Vlasic U.S. employees participate in these plans.
Postretirement benefit expense included the following:
<TABLE>
<CAPTION>
Four months beginning March 30, 1998 to August 2, 1998
- --------------------------------------------------------------------------
<S> <C>
Benefits earned during the year $ 727
Interest cost 481
Net amortization and deferrals (245)
- --------------------------------------------------------------------------
Total $ 963
==========================================================================
</TABLE>
Postretirement benefit expense allocated to Vlasic was $2,493 for the first
eight months of fiscal 1998 prior to the spin-off (resulting in total expense of
$3,456 in fiscal year 1998), $2,667 in fiscal year 1997 and $8,383 in fiscal
year 1996.
Accrued postretirement benefit liability included the following:
<TABLE>
<CAPTION>
August 2,
1998
- ------------------------------------------------------------------------
<S> <C>
Accumulated benefit obligation $ (24,786)
Unrecognized net (gain) or loss (7,707)
- ------------------------------------------------------------------------
Accrued postretirement benefit liability $ (32,493)
========================================================================
</TABLE>
The discount rate used to determine the accumulated postretirement benefit
obligation was 7% in 1998. The assumed healthcare cost trend rate used to
measure the accumulated postretirement benefit obligation was 4%. A
one-percentage-point change in the assumed healthcare cost trend rate would have
changed the 1998 accumulated postretirement benefit obligation by $2,517 and
postretirement benefit expense for the four month period ending August 2, 1998
by $609 . Obligations related to non-U.S. postretirement benefit plans are not
significant since these benefits are generally provided through
government-sponsored plans.
Savings Plans. Vlasic U.S. employees participate in Vlasic's savings plans
and formerly in Campbell's savings plans. After one year of continuous service,
Vlasic matches 50% of employee contributions up to five percent of compensation.
In 1998, 1997 and 1996 Campbell increased its contribution to 60% because
earnings goals were achieved. Amounts charged to Vlasic costs and expenses were
$2,382 in 1998, $2,671 in 1997,and $2,168 in 1996.
35
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
9. TAXES ON EARNINGS
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes:
Currently payable
Federal $ 16,340 $ 22,229 $ 29,457
State 4,285 3,521 4,371
Non-U.S. 2,454 2,526 6,263
- ------------------------------------------------------------------------------------------------------
23,079 28,276 40,091
- ------------------------------------------------------------------------------------------------------
Deferred
Federal (5,238) 7,258 (10,086)
State (2,835) 1,207 (1,677)
Non-U.S. 372 734 (967)
- ------------------------------------------------------------------------------------------------------
(7,701) 9,199 (12,730)
- ------------------------------------------------------------------------------------------------------
Total $ 15,378 $ 37,475 $ 27,361
======================================================================================================
Earnings (loss) before income taxes:
United States $ 41,037 $ 85,965 $ 48,979
Non-U.S. (31,458) 29,650 39,249
- ------------------------------------------------------------------------------------------------------
Total $ 9,579 $ 115,615 $ 88,228
======================================================================================================
</TABLE>
The following is a reconciliation of effective income tax rates with the U.S.
Federal statutory income tax rate:
<TABLE>
<CAPTION>
1998(1) 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes (net of federal benefit) 1.8% 2.6% 2.0%
Tax effect resulting from other international activities 3.9% -1.1% -1.7%
Tax loss carryforwards -0.8% -1.6% -
Nontaxable export rebate - -2.7% -4.9%
Other 1.6% 0.2% 0.6%
- ----------------------------------------------------------------------------------------------------------------
Effective income tax rate 41.5% 32.4% 31.0%
================================================================================================================
</TABLE>
(1) Excludes the impact of the fiscal 1998 restructuring charge and impairment
loss. The effective income tax rate including such items is 160.5%
36
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
Deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
AUGUST 2, August 3,
1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Depreciation $ 21,626 $ 30,992
Capitalized interest 7,637 7,459
Other 7,117 5,496
- -------------------------------------------------------------------------------------------------
Deferred tax liabilities 36,380 43,947
- -------------------------------------------------------------------------------------------------
Benefits and compensation 16,881 6,353
Restructuring accruals 5,395 3,717
Tax loss carryforwards 32,402 13,100
Other 3,134 4,409
- -------------------------------------------------------------------------------------------------
Deferred tax assets 57,812 27,579
Valuation allowance (23,033) (13,100)
- -------------------------------------------------------------------------------------------------
Deferred tax assets, net 34,779 14,479
- -------------------------------------------------------------------------------------------------
Net deferred tax liability $ 1,601 $ 29,468
=================================================================================================
</TABLE>
The Company has available net operating loss carryforwards in the United
States of approximately $25 million which expire in 2018. For income tax
purposes, certain non-U.S. subsidiaries of Vlasic have tax loss carryforwards of
approximately $66 million. Of these carryforwards, $41 million expire through
2003 and $25 million may be carried forward indefinitely. The current statutory
tax rates in these countries range from 31% to 57%.
A valuation allowance is recorded as a reduction to Vlasic's estimate of
the deferred tax assets relating to non-U.S. tax loss carryforwards due to the
uncertainty of the ultimate realization of future benefits from such assets.
These deferred tax assets pertain to Vlasic's operations in Argentina, frozen
business in the U.K. and gourmet distribution business in Germany. The
uncertainty surrounding the use of U.K. tax loss carryforwards stems from
significant tax law restrictions regarding their use . Moreover, the limited tax
loss carryforward periods and exclusion from current taxable income of export
rebates create uncertainty about whether Vlasic will be able to utilize its tax
loss carryforwards from operations in Argentina. Finally, the German tax loss
carryforwards are not expected to be utilized prior to the sale of the business.
Income taxes have not been accrued on undistributed earnings for non-U.S.
subsidiaries of $5.3 million. Such amounts are invested in operating assets and
are not expected to be remitted. If remitted, tax credits are available to
substantially reduce any additional taxes.
37
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
10. OTHER EXPENSES
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Campbell stock price related incentive programs $ 3,207 $ 8,628 $ 3,288
Amortization of intangible and other assets 2,738 2,764 2,691
Gain on asset sales (3,957) (8,179) (5,496)
Gains on fire insurance settlement (2,814) - -
Other, net (2,101) (767) (324)
- --------------------------------------------------------------------------------------------------------------------------
Total $ (2,927) $ 2,446 $ 159
==========================================================================================================================
</TABLE>
11. ACQUISITION
During the second quarter of fiscal 1998, Vlasic acquired the SAFRA
trademark and certain equipment for the canned spreadable meats business in
Argentina for $6,350. The acquisition was accounted for as a purchase
transaction and operations are included in the financial statements from the
date of acquisition. The trademark will be amortized over the period of expected
benefit - 40 years. Pro forma financial information would not have a material
effect on Vlasic's net sales or net earnings in 1998. The allocation of the
purchase price to assets acquired and liabilities assumed was based upon fair
value estimates - $5,850 was identified as an intangible asset (trademark) and
$500 was allocated to fixed assets.
12. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In the second quarter of fiscal 1998, the Company adopted the provisions of
the Emerging Issues Task Force (EITF) consensus resulting on Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation." The EITF reached a consensus that costs of business process
reengineering activities that are part of a systems development project are to
be expensed as incurred. Furthermore, the consensus ruling stipulates that the
unamortized balance of such previously capitalized business process
reengineering costs are to be written off as a cumulative effect of accounting
change as of the beginning of the quarter which includes November 20, 1997. The
Company previously capitalized certain consulting costs related to the purchase
and implementation of software for internal use. The cumulative effect of this
change in accounting principle is $600, net of an income tax benefit of
approximately $370.
13. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Customers $ 97,188 $ 99,407
Trade receivables from Campbell 9,058 -
Allowances for cash discounts and bad debts (5,055) (5,241)
- --------------------------------------------------------------------------------------------------------------------
101,191 94,166
Other 26,453 15,510
- --------------------------------------------------------------------------------------------------------------------
Total $ 127,644 $ 109,676
====================================================================================================================
</TABLE>
38
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
14. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials, containers and supplies $ 52,074 $ 54,828
Finished goods 144,044 129,088
- ------------------------------------------------------------------------------------------------
196,118 183,916
Less: Adjustment to LIFO basis (12,355) (20,064)
- ------------------------------------------------------------------------------------------------
Total $ 183,763 $ 163,852
================================================================================================
</TABLE>
Inventories for which the LIFO method of determining cost is used
represented approximately 62% of inventories in 1998 and 1997.
15. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Prepaid expenses $ 6,029 $ 4,448
Deferred taxes 18,058 7,347
Other 1,113 544
- -------------------------------------------------------------------------------------------------
Total $ 25,200 $ 12,339
=================================================================================================
</TABLE>
16. PLANT ASSETS
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 16,615 $ 19,715
Building 294,224 291,127
Machinery and equipment 538,228 510,283
Projects in progress 28,063 43,961
- -------------------------------------------------------------------------------------------------
877,130 865,086
Accumulated depreciation (357,055) (349,440)
- -------------------------------------------------------------------------------------------------
Total $ 520,075 $ 515,646
=================================================================================================
</TABLE>
Depreciation provided in costs and expenses was $42,387 in 1998, $42,044
in 1997 and $42,894 in 1996. Fiscal 1999 capital expenditures are not expected
to exceed $50 million.
39
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
17. OTHER ASSETS, PRINCIPALLY INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchase price in excess of net assets of businesses acquired (goodwill) $ 41,771 $ 53,977
Trademarks 19,850 14,000
Other intangibles 36,920 36,920
- ------------------------------------------------------------------------------------------------------------------------------
98,541 104,897
Accumulated amortization (21,106) (21,522)
- ------------------------------------------------------------------------------------------------------------------------------
Total intangible assets 77,435 83,375
Other assets 8,823 811
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 86,258 $ 84,186
==============================================================================================================================
</TABLE>
18. PAYABLES TO SUPPLIERS AND OTHERS
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade payables $ 94,053 $ 95,684
Payable to Campbell, net 19,287 -
Book overdrafts 7,870 27,417
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 121,210 $ 123,101
==============================================================================================================================
</TABLE>
On a temporary transition basis, Campbell pays certain bills for
Vlasic and is subsequently reimbursed by Vlasic. Book overdrafts represent
outstanding checks in excess of funds on deposit.
19. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Employee compensation and benefits $ 21,671 $ 23,788
Marketing 16,778 32,105
Restructuring 24,734 9,834
Interest 2,874 -
Other 27,273 23,187
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 93,330 $ 88,914
==============================================================================================================================
</TABLE>
20. OTHER LIABILITIES
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Postretirement benefits $ 32,493 $ -
Deferred compensation 7,721 8,137
Postemployment benefits 6,834 3,400
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 47,048 $ 11,537
==============================================================================================================================
</TABLE>
40
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
21. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Fiscal Year
Type Maturity Rate 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank borrowings 2003 6.45% $ 557,000
Other 2000 7.72% 1,491
Capital lease obligations Various Various 382
- ----------------------------------------------------------------------------------------------------------------------------
Total $ 558,873
============================================================================================================================
</TABLE>
As of the spin-off, Vlasic assumed $500 million of borrowings outstanding
under a five-year $750 million unsecured revolving credit facility. At August 2,
1998, $557 million was outstanding under the credit facility. The Company's
policy is to classify borrowings under the revolving credit facility as
long-term debt since the Company has the ability under its credit agreement, and
the intent, to maintain these obligations for longer than one year.
In the 1998 third quarter 10-Q the Company indicated it did not expect to
be in compliance with certain financial ratio requirements as of the fiscal year
ending August 2, 1998 due to higher than anticipated transition charges and
lower than anticipated projected earnings. Prior to August 2, 1998, the Company
received a unanimous waiver from the revolving credit facility bank syndicate
covering the particular financial ratios. The waiver was designed to permit the
Company and the bank syndicate time to reach agreement on an amendment to the
revolving credit facility. The waiver period is effective until November 1,
1998. The waiver required the payment of a fee, an increase in both the interest
rate and facility fee paid to the banks, and limits on the amount of permissible
borrowings under the facility and total borrowings. A covenant for the waiver
period was established for minimum net worth. The Company is in compliance with
the waiver's requirements.
All banks participating in the revolving credit facility have accepted the
amendment's basic term sheet. The amendment term sheet converts $100 million of
the revolving credit facility to a term loan having the same terms and
maturities as the revolving credit facility, and adjusts the financial ratios
creating financial flexibility. The amendment term sheet:
- - requires the payment of a fee to the bank group,
- - increases both the interest rate and facility fee paid to the banks
effective October 1, 1998,
- - creates incentives for the Company to issue longer term debt,
- - imposes additional covenants, including, but not limited to, the
mandatory repayment of debt and the reduction of the commitment upon the
sale of assets and equity or incurrence of debt,
- - limits capital spending and restricts dividends and investments.
The Company is also pledging certain assets to secure the bank
indebtedness, which will be released upon attainment of certain credit rating
criteria. The amendment reduces the total size of the credit facility from $750
million (limited to $625 million during the waiver period) to $650 million, as
the Company does not anticipate requiring the additional liquidity.
41
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
22. FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to enhance its
ability to manage risks, including interest rate and foreign currency, which
exist as part of its ongoing business operations. The Company does not enter
into contracts for speculative purposes, nor is it a party to any leveraged
derivative instrument. The use of derivative financial instruments is monitored
through regular communication with senior management and the utilization of
written guidelines.
The Company finances most its operations through debt instruments primarily
consisting of bank loans. The Company utilizes interest rate swap agreements to
reduce the potential exposure to interest rate movements and to achieve a
desired proportion of variable versus fixed rate debt. The amounts paid or
received on hedges related to debt are recognized as an adjustment to interest
expense. The notional amounts of interest rate swaps were $150 million at August
2, 1998. The cost to settle the swaps was $0.4 million at August 2, 1998.
The Company has a forward starting swap contract with a 10 year maturity
and a notional amount of $50 million which hedges a portion of the interest rate
risk associated with the planned issuance of longer term debt in fiscal 1999.
The amounts paid or received on hedges related to the planned debt issuance will
be recognized as an adjustment to interest expense. The forward starting swap
will start in fiscal 1999 and had a market value of $0.1 million as of August 2,
1998.
The Company utilizes foreign currency exchange contracts, including swap
and forward contracts, to hedge existing foreign currency exposures. Foreign
exchange gains and losses on derivative financial instruments are recognized and
offset foreign exchange gains and losses on the underlying exposures. A mix of
equity and local currency borrowing is used to finance foreign operations. At
August 2, 1998, the Company also had contracts to purchase or sell approximately
$1.4 million in foreign currency. The contracts are primarily for the Company's
German Kattus operation which buys products from various foreign entities. The
contracts all mature in 1999.
The Company is exposed to credit loss in the event of nonperformance by the
counterparties in swap and forward contracts. The Company minimizes its credit
risk on these transactions by only dealing with leading, credit-worthy financial
institutions having long-term credit ratings of "A" or better and, therefore,
does not anticipate non-performance. In addition, the contracts are distributed
among several financial institutions, thus minimizing credit risk concentration.
The carrying values of cash and cash equivalents, accounts and notes
receivable, accounts payable, and short-term and long-term debt approximate fair
value.
23. STOCK OPTIONS AND RESTRICTED STOCK
In connection with the spin-off from Campbell, Vlasic adopted the Vlasic
Foods Long-Term Incentive Plan (the Plan). Vlasic's employees who held vested
Campbell stock options as of the spin-off retained Campbell options to purchase
Campbell's capital stock in accordance with the grants' original terms and
conditions as long as they remain employees of Vlasic, except that the number of
options and exercise price were adjusted to preserve the inherent economic value
of the options taking into account the spin-off. Stock options held by Vlasic
employees which were not vested were converted into options to purchase Vlasic
stock. For each Campbell option that was converted to a Vlasic option, the
number of options and exercise price were converted based upon a formula that
preserved the inherent economic value and vesting and term provisions of
original Campbell options.
42
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
Under the Plan restricted stock and stock options may be granted to certain
officers and key employees. The Plan authorizes the issuance of up to 5.8
million shares of Vlasic common stock pursuant to the exercise of nonqualified
stock options. Options are granted at a price not less than the fair value of
the shares on the date of grant and expire not later than ten years after the
date of grant. Options vest over a three-year period. Vlasic's officers and key
employees participate in this plan.
Vlasic accounts for the stock option grants and restricted stock awards in
accordance with Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees" and related interpretations. Accordingly, no compensation
expense has been recognized in the Statements of Earnings because options are
granted at a price not less than the fair value of the shares on the date of the
grant. In 1997, Vlasic adopted the disclosure provisions of FASB Statement of
Financial Accounting Standards No.123 (SFAS 123) - "Accounting for Stock-Based
Compensation."
Had the compensation cost for the stock option plan been determined based
on the fair value at the grant dates for awards under the plan, consistent with
the alternative method set forth under SFAS 123, Vlasic's net earnings would
have been changed to the pro forma (for the purpose of applying SFAS 123)
amounts set forth below:
<TABLE>
<CAPTION>
1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Reported net loss $ (6,399)
Pro forma (for the purpose of applying SFAS 123) net loss $ (8,843)
Reported loss per share $ (0.14)
Pro forma (for the purpose of applying SFAS 123) loss per share $ (0.19)
</TABLE>
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1998:
<TABLE>
<CAPTION>
1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Risk-free interest rate 5.6%
Expected life of option 6 years
Expected volatility of Vlasic stock 27.0%
Expected dividend yield on Vlasic stock 0%
</TABLE>
The weighted-average fair value of options granted during 1998 is as
follows:
<TABLE>
<CAPTION>
1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Fair value of each option granted $ 8.72
Number of options granted 1,665
- ----------------------------------------------------------------------------------------------------------------
Total fair value of all options granted $ 14,519
================================================================================================================
</TABLE>
In accordance with SFAS 123, the weighted-average fair value of stock
options granted is required to be based on a theoretical statistical model in
accord with assumptions noted above. In actuality, because employee stock
options do not trade on a secondary exchange, employees receive no benefit and
derive no value from holding stock options under these plans without an increase
in the market price of Vlasic stock.
43
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
The following table summarizes the stock option transactions under the
Vlasic incentive plan:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Converted from Campbell as of the spin-off date, March 30, 1998 2,287 $ 15.02
Granted 1,665 22.66
Exercised (33) 12.87
- -------------------------------------------------------------------------------------------------------------------------
Outstanding, August 2, 1998 3,919 $ 18.29
=========================================================================================================================
</TABLE>
The following table summarizes information for options currently
outstanding at August 2, 1998:
<TABLE>
<CAPTION>
Options Outstanding Exercisable Options
------------------------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Prices Shares Life Price Shares Price
- -------------------------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
$9.71-13.70 1,488 8 yrs $ 12.99 680 $ 12.34
$17.13-19.87 766 9 yrs 19.06 227 19.07
$19.91-22.94 1,665 10 yrs 22.66
- ------------------------------------------------------------------------------------------------------------
$9.71-22.94 3,919 9 yrs $ 18.29 907 $ 14.03
============================================================================================================
</TABLE>
Restricted stock. In connection with the separation of Vlasic from
Campbell, restricted stock on which the earnings-based restriction period ends
in 1998 will be issued in the form of Campbell stock. Restricted stock for
Vlasic's employees with an earnings-based restriction period ending in 2000 were
canceled.
24. STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid $ 10,572 $ 1,600 $ 1,071
Interest received $ 388 $ 588 $ 329
Income taxes paid $ 23,079 $ 28,276 $ 40,091
</TABLE>
44
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL VLASIC FOODS INTERNATIONAL
STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(in thousands, except per share data)
25. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1998
First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 347,852 $ 375,317 $ 320,694 $ 313,411
Cost of products sold $ 251,340 $ 267,884 $ 231,457 $ 227,344
Net earnings (loss) $ 16,073 $ 18,238 $ (16,598) $ (24,112)
Earnings per share basic $ 0.35 $ 0.40 $ (0.37) $ (0.53)
Earnings per share basic assuming dilution $ 0.35 $ 0.40 $ (0.37)(1) $ (0.53)(1)
Market price
High 26 5/8 24 9/16
Low 21 7/8 16 9/16
</TABLE>
(1) Excludes potentially dilutive shares as the result would be antidilutive.
Net earnings (loss) includes the impact of special charges totaling $42.5
million before taxes or $.80 per share as follows: the impairment loss on
assets held for sale of $14.4 million or $.32 in the fourth quarter and year
ended fiscal 1998 and a restructuring charge of $28.1 million before tax, $21.8
million after tax or $.48 per share, in the third quarter and year ended fiscal
1998.
<TABLE>
<CAPTION>
1997
First Second Third Fourth
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 365,316 $ 384,860 $ 357,152 $ 400,957
Cost of products sold $ 258,518 $ 272,478 $ 248,967 $ 268,470
Net earnings $ 9,807 $ 19,708 $ 16,560 $ 32,065
</TABLE>
First quarter 1997 includes after-tax restructuring charges of $7,757.
Fourth quarter 1997 includes 14 weeks. See Note 2.
Net earnings per share calculations for each of the quarters are based on
the average shares outstanding for each period; consequently, the sum of the
quarters may not necessarily be equal to the full year net earnings per share
amount.
45
<PAGE> 34
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
The accompanying financial statements have been prepared by Vlasic
management in conformity with generally accepted accounting principles to
reflect the financial position of the Company and its operating results.
Financial information appearing throughout this Annual Report is consistent with
that in the financial statements. Management is responsible for the information
and representations in such financial statements, including the estimates and
judgements required for their preparation.
In order to meet its responsibility, management maintains a system of
internal controls designed to assure that assets are safeguarded and that
financial records properly reflect all transactions. The Company also maintains
an auditing function to periodically evaluate the adequacy and effectiveness of
such internal controls, as well as the Company's administrative procedures and
reporting practices.
The report of PricewaterhouseCoopers LLP, the Company's independent
accountants, covering their audit of the financial statements, is included in
this Annual Report. Their independent audit of the Company's financial
statements includes a review of the system of internal accounting controls to
the extent they consider necessary to evaluate the system as required by
generally accepted auditing standards. The Company's internal auditors report
directly to the Audit Committee of the Board of Directors, which is composed
entirely of Directors who are not officers or employees of the Company.
The Audit Committee meets periodically with the internal auditors, other
management personnel, and the independent accountants. The independent
accountants and the internal auditors have had, and continue to have, direct
access to the Audit Committee without the presence of other management
personnel, and have been directed to discuss the results of their audit work and
any matters they believe should be brought to the Committee's attention.
<TABLE>
<S> <C> <C>
Robert F. Bernstock William R. Lewis
President and Vice President and Joseph Adler
Chief Executive Officer Chief Financial Officer Vice President - Controller
</TABLE>
September 16, 1998
46
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareowners of Vlasic Foods International Inc.
In our opinion, the consolidated financial statements appearing on pages 25
through 45 of this Annual Report present fairly, in all material respects, the
financial position of Vlasic Foods International Inc. and its subsidiaries at
August 2, 1998 and August 3, 1997, and the results of their operations and their
cash flows for each of the three years in the period ended August 2, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards 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 the opinion expressed
above.
As discussed in Note 12 to the financial statements, the Company changed its
method of accounting for business process reengineering costs in 1998.
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
September 16, 1998
47
<PAGE> 36
SELECTED FINANCIAL DATA VLASIC FOODS INTERNATIONAL
<TABLE>
<CAPTION>
Fiscal Year 1998(1) 1997(2)(3) 1996(4) 1995 1994 1993(5)
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales $ 1,357,274 $ 1,508,285 $ 1,498,967 $ 1,504,318 $ 1,320,632 $ 1,340,531
Earnings (loss) before cumulative
effect of accounting change (5,799) 78,140 60,867 70,982 53,277 2,188
Cumulative effect of accounting
change (600) - - - - (39,500)
Net earnings (loss) (6,399) 78,140 60,867 70,982 53,277 (37,312)
Earnings (loss) per share basic(6) $ (0.14)
Weighted average shares
outstanding - basic 45,458
Earnings (loss) per share assuming
dilution(6) $ (0.14)
Weighted average shares
outstanding assuming dilution 45,458(8)
BALANCE SHEET DATA:
Total assets $ 959,273 $ 895,108 $ 923,331 $ 923,659 $ 855,411 $ 854,391
Long-term debt(7) 558,873 2,252 3,166 3,591 12,226 15,648
Shareowners' equity(7) 106,604 632,298 659,866 693,736 615,267 559,496
</TABLE>
(1) Includes after-tax special charges of $36,220, or $0.80 per share,
consisting of restructuring charges of $21,820 and an impairment loss of
$14,400. Also includes the cumulative effect of a change in accounting
principle for business process engineering costs of $600 or $0.01 per
share.
(2) Fiscal 1997 includes 53 weeks compared to 52 weeks in fiscal 1998 and
fiscal 1993 through fiscal 1996.
(3) Includes after-tax restructuring charges of $7,757.
(4) Includes after-tax restructuring charges of $22,842.
(5) Includes after-tax restructuring charges of $56,358. Also includes the
cumulative effect of change in accounting principle for postemployment
costs, postretirement and income taxes.
(6) Per share data for years prior to 1998 have not been presented because
Vlasic was not a publicly held company.
(7) At the March 30, 1998 spin-off, Vlasic assumed $500 million of long-term
debt from Campbell.
(8) Excludes potentially dilutive shares as the result would be antidilutive.
48
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF VLASIC
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY AND NAME
UNDER WHICH IT DOES BUSINESS JURISDICTION OF INCORPORATION
- ---------------------------- -----------------------------
<S> <C>
Aligar, Inc. Delaware
Deleco Grosshandels GmbH Germany
Cargal, Inc. Delaware
Freshbake Foods Limited Great Britain
Theodor Kattus GmbH Germany
Stratford-Upon-Avon Foods Limited Great Britain
Swift-Armour Sociedad Anonima Argentina Argentina
VF Brands, Inc. Delaware
Vlasic Farms, Inc. Ohio
Vlasic Foods Distribution Company Arkansas
Vlasic Foods Canada, Inc. Ontario
Vlasic Foods, Inc. Michigan
Vlasic International Brands Inc. Delaware
Vlasic International Sales Inc. New Jersey
Vlasic Standards, Inc. New Jersey
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-48343, No. 333-48345, No. 333-48347, No.
333-48349 and No. 333-48353) of Vlasic Foods International Inc. of our report
dated September 16, 1998 appearing on page 47 of the Annual Report to
Shareowners which is incorporated in this Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
October 19, 1998
<PAGE> 1
EHBIBIT 24.1
POWER OF ATTORNEY
FORM 10-K ANNUAL REPORT FOR FISCAL 1998
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Norma B. Carter, until December 31, 1998, their
true and lawful attorney-in-fact and agent, with full power of substitution and
revocation, for them and in their name, place and stead, in any and all
capacities, to sign Vlasic Foods International Inc.'s Form 10-K Annual Report to
the Securities and Exchange Commission for the fiscal year ended August 2, 1998,
and any amendments thereto, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
VLASIC FOODS INTERNATIONAL INC.
<TABLE>
<CAPTION>
<S> <C>
Signature Dated as of October 6, 1998
- --------- -----------------------------
- ------------------------------ -----------------------------
Robert T. Blakely Donald J. Keller
- ------------------------------ -----------------------------
Robert F. Bernstock Lawrence C. Karlson
- ------------------------------- -----------------------------
Morris A. Cohen Shaun F. O'Malley
- -------------------------------
Richard L. Huber
</TABLE>
<PAGE> 1
EHBIBIT 24.2
VLASIC FOODS INTERNATIONAL INC.
CERTIFICATION
I, the undersigned Secretary of Vlasic Foods International Inc., a New
Jersey corporation, certify that the attached document entitled
FORM 10-K ANNUAL REPORT
is a true copy of a resolution adopted by the Board of Directors of Vlasic Foods
International Inc. on October 6, 1998, and that the same is still in full force
and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Vlasic Foods International Inc. this 12th day of October, 1998.
Norma B. Carter
Corporate Secretary
<PAGE> 2
VLASIC FOODS INTERNATIONAL INC.
BOARD OF DIRECTORS RESOLUTION
October 6, 1998
* * *
FORM 10-K ANNUAL REPORT
RESOLVED, that the Form 10-K Annual Report for fiscal 1998 of Vlasic Foods
International Inc. in the form presented to this meeting, is hereby approved.
FURTHER RESOLVED, that the Vice President, General Counsel and Corporate
Secretary and the Vice President and Chief Financial Officer and the Vice
President - Controller of Vlasic Foods International Inc. are authorized to
execute the Form 10-K Annual Report for fiscal 1998 approved by this resolution
and to cause such Form 10-K to be filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, with such
modifications as may be required by the Commission or as may be desirable in the
opinion of such officers.
FURTHER RESOLVED, that each of the directors and the President and Chief
Executive Officer of Vlasic Foods International Inc. are each hereby authorized
to execute in their respective capacities, a power of attorney in favor of Norma
B. Carter designating her as the true and lawful attorney-in-fact and agent of
the signatory with full power and authority to execute and to cause to be filed
with the Securities and Exchange Commission the Form 10-K Annual Report for
fiscal 1998 with all exhibits and other documents in connection therewith as
such attorney-in-fact may deem necessary or desirable; and to do and perform
each and every act and thing necessary or desirable to be done in and about the
premises as fully to all intents and purposes as such officers and directors
could do themselves.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR THE YEAR ENDED AUGUST 2, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-02-1998
<PERIOD-START> AUG-04-1998
<PERIOD-END> AUG-02-1998
<CASH> 16,333
<SECURITIES> 0
<RECEIVABLES> 132,699
<ALLOWANCES> 5,055
<INVENTORY> 183,763
<CURRENT-ASSETS> 352,940
<PP&E> 877,130
<DEPRECIATION> 357,055
<TOTAL-ASSETS> 959,273
<CURRENT-LIABILITIES> 227,075
<BONDS> 571,408
0
0
<COMMON> 137,473
<OTHER-SE> (30,869)
<TOTAL-LIABILITY-AND-EQUITY> 959,273
<SALES> 1,357,274
<TOTAL-REVENUES> 1,357,274
<CGS> 978,025
<TOTAL-COSTS> 1,334,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,446
<INCOME-PRETAX> 9,579
<INCOME-TAX> 15,378
<INCOME-CONTINUING> (5,799)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (600)
<NET-INCOME> (6,399)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
