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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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CURTICE-BURNS FOODS, INC.
(NAME OF SUBJECT COMPANY)
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CURTICE-BURNS FOODS, INC.
(NAME OF PERSON FILING STATEMENT)
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CLASS A COMMON STOCK, PAR VALUE $.99 PER SHARE
CLASS B COMMON STOCK, PAR VALUE $.99 PER SHARE
(TITLES OF CLASSES OF SECURITIES)
231382102
231382201
(CUSIP NUMBER OF CLASSES OF SECURITIES)
------------------------
MR. J. WILLIAM PETTY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CURTICE-BURNS FOODS, INC.
90 LINDEN PLACE, P.O. BOX 681
ROCHESTER, NY 14603
(716) 383-1850
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON
FILING STATEMENT)
With copies to:
RICHARD HALL, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NY 10019
(212) 474-1000
________________________________________________________________________________
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Curtice-Burns Foods, Inc., a New York
corporation (the 'Company'), and the principal executive offices of the Company
are located at 90 Linden Place, P.O. Box 681, Rochester, New York 14603. The
titles of the classes of equity securities to which this Statement applies are
the Class A Common Stock, par value $.99 per share (the 'Class A Shares'), and
the Class B Common Stock, par value $.99 per share, of the Company (the 'Class B
Shares' and, together with the Class A Shares, the 'Shares').
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the proposed tender offer disclosed in the press
release of the Company issued today, a copy of which is attached as Exhibit 1 to
this Schedule 14D-9, by PF Acquisition Corp., a New York corporation (the
'Purchaser') and a wholly owned subsidiary of Pro-Fac Cooperative, Inc., a New
York cooperative corporation ('Pro-Fac'), to purchase all the outstanding Shares
at a price of $19.00 per Share (the 'Offer Price'), net to the seller in cash
(the 'Offer'). The Offer is being made by the Purchaser pursuant to, and is
subject to the terms and conditions set forth in, an Agreement and Plan of
Merger, dated as of September 27, 1994 (the 'Merger Agreement'), among Pro-Fac,
the Purchaser and the Company, a copy of which is attached as Exhibit 2 to this
Schedule 14D-9. After termination or expiration of the Offer, upon the terms and
subject to the conditions set forth in the Merger Agreement and in accordance
with the New York Business Corporation Law (the 'BCL'), the Purchaser shall be
merged with and into the Company (the 'Merger'), and all the outstanding Shares
(other than any Shares owned by the Company or by any subsidiary of the Company
or by Pro-Fac, the Purchaser or any other subsidiary of Pro-Fac or dissenting
shareholders who have perfected appraisal rights under New York law), shall be
converted into the right to receive the Offer Price in cash without interest,
or, if no Shares are purchased by the Purchaser pursuant to the Offer, the
highest price per Share offered by the Purchaser pursuant to the Offer (the
'Merger Consideration'), as more fully described in Item 3(b)(2) below.
The principal executive offices of the Purchaser are located at 90 Linden
Oaks Office Park, Rochester, New York 14603.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b)(1) Certain information with respect to material contracts, agreements,
arrangements and understandings between the Company and certain of its directors
and executive officers is set forth in the Company's Proxy Statement dated
October 21, 1993, a copy of the relevant portions of which is attached as
Exhibit 3 to this Schedule 14D-9 and incorporated herein by reference.
Pursuant to the Merger Agreement, the Company has agreed to terminate its
existing stock option plan. See the 'Merger Agreement -- Agreements with Respect
to Employee Matters' in Item 3(b)(2) below.
Charles Brosius, a director of the Company, is also the Vice Chairman of
the Board of Directors of Agway Inc. ('Agway'), the beneficial owner of
approximately 99% of the Class B Shares and approximately 14% of the Class A
Shares. Donald Pease, Chairman of the Board of Directors of the Company, and
Vyron Chapman, Carl Smith and Christian Wolff, each of whom is a director of the
Company, are also directors of Agway. Courtney Burdette, John Norris and Peter
O'Neill, each of whom is a director of the Company, are full-time officers and
employees of Agway. Charles Saul, who was a director of the Company until
September 8, 1994, is currently President of Agway. Carl Whittemore, who was a
director of the Company until September 14, 1994, is a full-time employee of
Agway. From time to time, the Company purchases certain products and services
(principally petroleum) from Agway and its subsidiaries at competitive prices,
and Agway purchases certain products (principally frozen foods) from the Company
at competitive prices. During fiscal 1994, the Company's purchases from Agway
and its subsidiaries amounted to approximately $1.2 million and Agway's
purchases from the Company amounted to approximately $29,000.
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Robert Call, Jr., a director of the Company, is also a director and the
President of Pro-Fac. Mr. Call is nominated to the Board of Directors of the
Company pursuant to the Integrated Agreement dated as of June 27, 1992 (the
'Integrated Agreement'), between Pro-Fac and the Company. See Item 3(b)(2) below
for a discussion of certain other provisions of the Integrated Agreement. Mr.
Call owns, indirectly, approximately 1.7% of the common stock of Pro-Fac and,
directly and indirectly, approximately 2.6% of the preferred stock of Pro-Fac.
Mr. Call's brother, Richard C. Call, is a director of Agway. Robert and Richard
Call, through a controlled corporation, My-T Acres, Inc., sell certain
agricultural products to Pro-Fac. The prices paid to My-T Acres, Inc., by
Pro-Fac for products delivered are identical to prices paid to all others for
like produce. Pro-Fac paid My-T Acres, Inc., $2,038,000 for products delivered
during fiscal 1994.
Roy Myers, who is a director and Executive Vice President of the Company,
is the General Manager and chief executive officer of Pro-Fac and is appointed
to fill such position pursuant to the Integrated Agreement. Mr. Myers does not
receive any compensation from Pro-Fac for acting as its General Manager.
Pursuant to the By-laws of Pro-Fac and the Integrated Agreement, each of
the Company and Agway has the right to nominate one director to the Board of
Directors of Pro-Fac. In accordance with these provisions, Messrs. Pease and
Wolff served as directors of Pro-Fac until June 1994, when each of them resigned
as a director of Pro-Fac.
(b)(2) Certain pending litigation between the Company and Pro-Fac is
described in Item 4 below.
The following is a summary of certain provisions of the Merger Agreement,
the Agreement dated as of September 27, 1994 (the 'Stockholder Agreement'),
among Pro-Fac, the Purchaser and Agway Holdings, Inc. ('AHI'), the Integrated
Agreement, the letter agreement dated November 11, 1993 (the 'Agway Letter'),
among the Company, Agway, Agway Financial Corporation and AHI, the agreement
dated as of April 29, 1993 (the 'Agway Release'), among Agway, AHI and the
Company, and the agreement dated as of August 16, 1994 (the 'Arbitration
Agreement'), between the Company and Pro-Fac. Such summary is qualified in its
entirety by reference to the full text of the Merger Agreement, the Stockholder
Agreement, the Integrated Agreement, the Agway Letter, the Agway Release and the
Arbitration Agreement, copies of which are attached as Exhibits 2, 4, 5, 6, 7
and 8 to this Schedule 14D-9, respectively, and which are incorporated herein by
reference.
MERGER AGREEMENT
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares pursuant to
the Offer is subject to the following conditions, among others: (i) there shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer that number of Shares which would represent at least 90% of the
outstanding Class A Shares and 90% of the outstanding Class B Shares (the
'Minimum Tender Condition'), (ii) the expiration of any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act (the 'HSR Act'), (iii) receipt by
Pro-Fac of financing sufficient to consummate the Offer and the Merger on the
terms contemplated by the Merger Agreement (the 'Financing Condition'), (iv) the
absence of any orders or other legal restraints or prohibitions that, directly
or indirectly, prohibit or would delay materially the Purchaser from purchasing
or paying for Shares pursuant to the Offer, (v) the absence of material
proceedings challenging the Merger Agreement or the Stockholder Agreement or
seeking to prohibit, prevent or materially delay, or alter any of the terms of,
the transactions contemplated by the Merger Agreement or the Stockholder
Agreement, (vi) the accuracy of the representations and warranties of the
Company and AHI set forth in the Merger Agreement and the Stockholder Agreement,
respectively, (vii) the performance by the Company and AHI of their respective
obligations set forth in the Merger Agreement and the Stockholder Agreement,
(viii) receipt by Pro-Fac of certain consents, filings, approvals and waivers
from third parties required to consummate the Offer and the Merger and (ix)
receipt by Pro-Fac of evidence of the termination of the contracts, agreement
and other arrangements between the Company and its financial advisors. Pursuant
to the terms of the Merger Agreement, Pro-Fac and the Purchaser have expressly
reserved the right to waive any of the conditions to the Offer and to make any
change in the terms or conditions of the Offer; provided, however, that without
the consent of the Company, the Purchaser may not (i) reduce the number of
Shares subject to
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the Offer, (ii) reduce the price per Share to be paid pursuant to the Offer,
(iii) add to or amend in a manner adverse to the holders of Shares the
conditions to the Offer, (iv) except as provided below, extend the Offer, (v)
change the form of consideration payable in the Offer, (vi) amend the Offer in
any way such that the holders of Class A Shares receive consideration that
differs from the consideration received by holders of Class B Shares or (vii)
accept for payment Shares that do not represent, in the aggregate, at least 58%
of all the outstanding Class A Shares, at least a majority of all the
outstanding Class B Shares and at least two-thirds of all the outstanding
Shares, in each case on a fully diluted basis. The Purchaser may, without the
consent of the Company (and, in the case of clauses (i) and (ii) below, shall,
unless the Company otherwise consents), (i) extend the Offer if at any scheduled
expiration date of the Offer any condition to the Purchaser's obligation to
purchase Shares is not satisfied, to allow additional time for such condition to
be satisfied or waived, except that if the Financing Condition is the only
condition not satisfied at any scheduled expiration date of the Offer and the
Purchaser has entered into definitive documents for its financing, the Offer may
not be extended pursuant to this clause to any date that is later than five
business days after the Purchaser's signing of the last of such definitive
documents to be signed, (ii) as required by any rule, regulation, interpretation
or position of the Securities and Exchange Commission and (iii) for any reason
for up to 15 business days beyond the latest expiration date that would
otherwise be permitted, so long as the Offer is not extended (unless due to a
rule, regulation, interpretation or position of the Commission) beyond December
15, 1994, and any extension is not reasonably likely to result in any of the
conditions (other than any condition irrevocably waived in writing by Pro-Fac
and the Purchaser) to the Purchaser's obligations to purchase Shares not being
satisfied at the proposed new scheduled expiration date of the Offer.
Subject to the terms and conditions of the Offer and the Merger Agreement,
the Purchaser shall, and Pro-Fac shall cause the Purchaser to, pay for all
Shares validly tendered and not withdrawn that the Purchaser becomes obligated
to purchase as soon as practicable after the expiration of the Offer.
Under the Merger Agreement, the Company has waived its rights under its
Restated Certificate of Incorporation to purchase Class B Shares to be sold to
the Purchaser pursuant to the Offer.
The Merger. The Merger Agreement provides that, upon the terms (but subject
to the conditions) set forth in the Merger Agreement, the Purchaser shall be
merged with and into the Company. In the Merger, each issued and outstanding
Share (other than any Share owned by the Company, Pro-Fac or any of their
subsidiaries and other than Shares as to which appraisal rights have been
perfected under New York law) shall be converted into the right to receive the
Merger Consideration. The Merger Agreement provides that the Merger shall be
consummated as soon as practicable after the satisfaction or waiver of the
conditions to the Merger and shall become effective upon filing of a certificate
of Merger with the Secretary of State of New York or at such later time as shall
be specified in the Certificate of Merger (the 'Effective Time of the Merger').
Board Representation. The Merger Agreement provides that, promptly upon the
acceptance of any Shares for payment pursuant to the Offer, the number of
directors constituting the Board of Directors of the Company shall be reduced to
seven and the Purchaser shall be entitled to designate such number of directors
on the Company's Board of Directors as shall constitute a majority thereof. The
Company has agreed that, subject to applicable law, it shall take all action
requested by the Purchaser necessary to cause the Purchaser's designees to be
elected to the Company's Board of Directors. Following the election of the
Purchaser's designees to the Company's Board of Directors and until the
Effective Time of the Merger, the Company's Board of Directors shall have at
least three members who were directors on September 27, 1994, or who have been
designated by such members (the 'Independent Directors') and who are not
officers of the Company or officers or directors of Pro-Fac. Until the Effective
Time of the Merger, any termination or amendment of the Merger Agreement,
extension of time for performance or waiver under the Merger Agreement by the
Company shall require the approval of a majority of the Independent Directors.
The Merger Agreement provides that the officers of the Company immediately prior
to the Effective Time of the Merger shall be the initial officers of the Company
following the Merger, each to hold office until his or her respective successors
are duly elected and qualified, except that the Chairman of the Company's Board
of Directors and, at the request of Pro-Fac or the Purchaser, any officer of the
Company who would be entitled, under the terms of any severance or similar plan,
to receive severance benefits upon such officer's voluntary departure
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from the Company upon completion of the Merger, shall tender their resignation
immediately following the Effective Time of the Merger.
Shareholders Meeting. The Merger Agreement provides that, if required by
applicable law, the Company shall call a meeting of its shareholders for the
purpose of obtaining the approval required in connection with the transactions
contemplated by the Merger Agreement. Under the Merger Agreement, at any such
meeting Pro-Fac and the Purchaser are required to vote all Shares owned by them
in favor of approval of the Merger Agreement and the Merger.
If the Minimum Tender Condition is satisfied and the Purchaser purchases
Shares pursuant to the Offer, the Purchaser shall be the owner of at least 90%
of each class of the outstanding Shares, enabling it to effect the Merger
without the approval of any other shareholder of the Company. If the Purchaser
does not own at least 90% of each class of the outstanding Shares, the Company
is required to call a meeting of the shareholders of the Company to approve the
Merger.
The Merger Agreement provides that if, at any time after acceptance of
Shares for payment pursuant to the Offer, the Purchaser owns more than 90% of
the outstanding Class B Shares, and (i) the Purchaser owns less than 90% of the
outstanding Class A Shares, the Company shall forthwith issue to the Purchaser
such number of Class A Shares as shall be sufficient to cause the Purchaser to
own at least 90% of the outstanding Class A Shares or (ii) the Purchaser owns
90% or more of the outstanding Class A Shares, the Company shall at the
Purchaser's request issue to the Purchaser additional Class A Shares, in each
case in exchange for an equivalent number of Class B Shares surrendered by the
Purchaser to the Company. The effect of this provision would be to facilitate
Pro-Fac in effecting the Merger without the authorization of the other
shareholders of the Company even if the Purchaser acquires less than 90% of the
Class A Shares pursuant to the Offer.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the Company, Pro-Fac and the Purchaser. These
include representations and warranties by the Company with respect to corporate
existence and power, capitalization, corporate authorization, non-contravention,
filings with the Commission, financial statements, material liabilities, absence
of certain changes, litigation, employee benefits, taxes, finders' fees,
compliance with law, environmental matters, material contracts and intellectual
property.
Pro-Fac and the Purchaser have also made certain representations and
warranties with respect to corporate existence and power, corporate
authorization, non-contravention, filings with the Commission, financial
statements, material liabilities, absence of certain changes, litigation,
finders' fees, material contracts, title to properties and financing.
Conduct of Business Pending the Merger. In the Merger Agreement, the
Company has agreed that, during the period from the date of the Merger Agreement
to the Effective Time of the Merger, or, if earlier, the consummation of the
Offer, the Company and its subsidiaries shall carry on their respective business
in the usual, regular and ordinary course, in substantially the same manner as
conducted in the past, and to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with third parties with whom they have business dealings.
The Company has further agreed that, until the Effective Time of the Merger, or,
if earlier, the consummation of the Offer, neither the Company or any of its
subsidiaries shall, among other things: (i) except for regularly quarterly
dividends not in excess of $.16 per Share with customary record and payment
dates, declare, set aside or pay any dividends on or make any other distribution
with respect to Shares of its capital stock (provided that the Company may not
set as the record date for a dividend a date earlier than November 15, 1994),
(ii) offer, issue or sell any Shares of its capital stock (other than the
issuance of Class A Shares pursuant to the exercise of stock options outstanding
on September 27, 1994, in accordance with their terms), (iii) amend its charter
or by-laws, (iv) acquire or agree to acquire any material assets, except for
purchases of inventory and other assets in the ordinary course of business
consistent with past practice, (v) sell, mortgage or otherwise encumber any of
its properties or assets, except for sales in the ordinary course of business
consistent with past practice of inventory or assets no longer used or usable by
the Company, (vi) incur any indebtedness for borrowed money, except for
short-term borrowings consistent with past practice and obligations to Pro-Fac,
(vii) make or agree to make any capital expenditures, except for those approved
in the Company's amended capital budget for 1994 and except for certain
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emergency items, (viii) enter into any agreement, contract, transaction or
commitment other than in the ordinary course of business consistent with past
practice and, if material to the Company, other than on terms reasonably
acceptable to Pro-Fac or (ix) enter into any agreement that limits the freedom
of the Company or any of its subsidiaries to compete in any line of business or
with any person or in any area.
The Company and Pro-Fac have agreed that they shall not take any action
that would result in, or omit to take any action, the omission of which would
result in (i) any of the representations and warranties of the Company or
Pro-Fac, as applicable, becoming untrue or (ii) any of the conditions to the
Merger set forth in the Merger Agreement not being satisfied.
The Company has agreed to give Pro-Fac and its representatives access to
the offices, properties, books and records of the Company and its Subsidiaries
and to furnish Pro-Fac with other information concerning its business,
properties and personnel as Pro-Fac may reasonably request.
Subject to the terms and conditions of the Merger Agreement, each of
Pro-Fac, the Purchaser and the Company has agreed to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by the
Merger Agreement. Pro-Fac and the Purchaser have agreed to take all reasonable
actions necessary, proper or advisable to obtain as promptly as practicable
financing sufficient to consummate the Offer and the Merger.
Agreements with Respect to Employee Matters. Under the Merger Agreement,
the Company has agreed to take such action as shall be necessary to adjust the
terms of all outstanding employee stock options to provide that each such option
outstanding immediately prior to the effective time of the Merger shall be
vested and exercisable. The Company may discharge such obligation with respect
to 144,180 options that were issued in March and June of 1993 and not by their
terms currently vested by causing such options to terminate without the
requirement of any payment by the Company immediately prior to the Effective
Time of the Merger and the Company shall do so with respect to any such options
held by any director of the Company (other than Messrs. Call and Myers); and
Pro-Fac and the Company agreed to jointly approach each other holder of any such
option to consent to any such termination. Each director of the Company who
holds any of such 144,180 options has consented to such termination. The
Company's employee stock option plan shall terminate as of the Effective Time of
the Merger.
Under the Merger Agreement, Pro-Fac has agreed to cause the Company to
maintain in effect the deferred compensation agreements with respect to current
and past directors and employees as in effect on September 27, 1994. Pro-Fac
shall cause the Company to provide, for at least one year after the Effective
Time of the Merger, or, if earlier, the consummation of the Offer, benefits to
employees of the Company and its subsidiaries that are no less favorable in the
aggregate to such employees than those in effect on the date of the Merger
Agreement, subject to certain limitations. Under the Merger Agreement, following
the Effective Time of the Merger, or, if earlier, the consummation of the Offer,
the Company shall, and Pro-Fac shall cause the Company to, honor all retirement
and severance-related benefits provided to the employees of the Company.
Other Offers. Pursuant to the Merger Agreement, the Company has agreed that
the Company and its subsidiaries, and the officers, directors, employees and
agents of the Company and its subsidiaries, shall not, directly or indirectly,
solicit, initiate or encourage any Takeover Proposal (as defined below) or
engage in negotiation with or disclose any nonpublic information relating to the
Company to any person. Under the Merger Agreement, the Company is required to
terminate any and all existing discussions or negotiations with any person
(other than Pro-Fac) relating to any Takeover Proposal.
Notwithstanding the previous paragraph, to the extent required by the
fiduciary obligations of the Board of Directors of the Company, as determined in
good faith by a majority of the disinterested members thereof based on the
written advice of the Company's outside counsel, (i) the Company may, in
response to an unsolicited request therefor, participate in discussions or
negotiations with, and furnish information with respect to the Company to, any
person who a majority of the disinterested directors of the Company believes
intends to submit a Takeover Proposal and has the financial ability to make a
Superior Takeover Proposal (as defined below) and (ii) the Board of Directors of
the Company may
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approve or recommend a Superior Takeover Proposal (and, in connection therewith,
withdraw or modify its approval or recommendation of the Offer or the Merger).
Under the Merger Agreement, a 'Takeover Proposal' means any proposal for a
merger or other business combination involving the Company or any proposal or
offer to acquire a controlling equity interest in any voting securities of, or a
substantial portion of the assets of, the Company. The Merger Agreement defines
a 'Superior Takeover Proposal' as a bona fide Takeover Proposal made by a third
party that a majority of the disinterested members of the Board of Directors of
the Company determines in its good faith judgment to be more favorable to the
Company's shareholders than the Offer and the Merger, for which financing, to
the extent required, is then committed or the subject of 'highly confident'
letters issued by reputable, nationally recognized investment banking firms and
that is not subject to any condition requiring the sale by the Company of any
material asset unless a reputable, financially capable person has agreed, or
entered into a letter of intent, subject only to customary conditions to
purchase such asset on terms that would satisfy such condition. In determining
whether a member of the Board of Directors of the Company is disinterested for
purposes of the Merger Agreement, he or she shall be 'disinterested' unless he
or she is an executive officer of the Company or Pro-Fac or an executive officer
or director of Agway.
The Company has agreed to promptly advise Pro-Fac of any Takeover Proposal
or any inquiry with respect to or which could lead to any Takeover Proposal and
to the identity of the person making any such Takeover Proposal or inquiry. In
addition, the Company is required to keep Pro-Fac fully informed of the status
and the details of any such Takeover Proposal or inquiry and to provide copies
of all such proposals, together with any financing commitments, 'highly
confident' letters, letters of intent and other relevant documents.
The Merger Agreement provides that the Company may enter into an agreement
with respect to any Superior Takeover Proposal and, in connection therewith,
terminate the Merger Agreement, provided that any termination of the Merger
Agreement by the Company in connection with a Superior Takeover Proposal shall
not take effect unless the agreement for such Superior Takeover Proposal shall
have been entered into within five business days of the Company giving notice to
Pro-Fac of its termination of the Merger Agreement. In the event of the
termination of the Merger Agreement in connection with a Superior Takeover
Proposal, the Company would be required to pay certain fees and reimburse
certain expenses of Pro-Fac (see 'Termination' and 'Fees and Expenses' below).
Indemnification and Insurance. Pursuant to the Merger Agreement, Pro-Fac
and the Purchaser have agreed that rights to indemnification for acts or
omissions occurring prior to the Effective Time of the Merger now existing in
favor of the current or former directors or officers of the Company and its
subsidiaries shall continue in full force and effect in accordance with their
terms for a period of not less than six years. In addition, the Merger Agreement
requires Pro-Fac to maintain for a period of not less than three years the
Company's current directors' and officers' insurance and indemnification policy,
subject to certain limitations.
Release. From and after the Effective Time of the Merger, or, if earlier,
the consummation of the Offer, Pro-Fac and the Company shall release each
director, officer, employee, agent and advisor of the Company from any and all
claims to the extent arising out of or based upon the Integrated Agreement or
the transactions leading up to the Merger Agreement, subject to certain
limitations in the case of alleged breaches of the Integrated Agreement arising
after the date of the Merger Agreement. In addition, from and after the
Effective Time of the Merger, or, if earlier, the consummation of the Offer,
Pro-Fac shall release and discharge the Company from any and all claims to the
extent arising or based upon the Integrated Agreement or the transactions
leading up to the Merger Agreement.
Neither the Company nor Pro-Fac has waived any rights or claims against the
other with respect to the Integrated Agreement, except as described (and subject
to the limitations set forth) in the previous paragraph. Accordingly, if neither
the Offer nor the Merger is consummated, the Company expects that the
arbitration proceedings described in Item 4 below would continue.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to consummate the Merger are subject to the
satisfaction or waiver of the following conditions: (i) the approval of the
Merger Agreement by the shareholders of the Company in accordance with
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applicable law, if such vote is required, (ii) the expiration of any applicable
waiting period under the HSR Act and (iii) the absence of any orders or other
legal restraints or prohibitions preventing the consummation of the Merger or
significant proceedings challenging the Merger Agreement or seeking to prohibit,
prevent or materially delay the transactions contemplated by the Merger
Agreement. In addition, unless the Purchaser shall have accepted Shares for
payment pursuant to the Offer, the obligations of Pro-Fac and the Purchaser to
effect the Merger are further subject to the following conditions, among others:
(i) the accuracy of the representations and warranties of the Company set forth
in the Merger Agreement, (ii) the performance by the Company of its obligations
as set forth in the Merger Agreement (iii) receipt by Pro-Fac of certain
consents, filings, approvals, or waivers from third parties required to
consummate the Merger, (iv) receipt by Pro-Fac of financing sufficient to
consummate the Merger on the terms contemplated by the Merger Agreement, and (v)
receipt by Pro-Fac of evidence of termination of the contracts, agreements and
other arrangements between the Company and its financial advisors. Unless the
Purchaser shall have accepted Shares for payment pursuant to the Offer, the
obligation of the Company to effect the Merger is further subject to the
following conditions: (i) the accuracy of the representations and warranties of
Pro-Fac and the Purchaser set forth in the Merger Agreement, and (ii)
performance by Pro-Fac and the Purchaser of their obligations set forth in the
Merger Agreement.
Termination. The Merger Agreement may be terminated by (i) the mutual
written consent of Pro-Fac and the Company, (ii) either Pro-Fac or the Company,
(A) unless the Purchaser shall have accepted Shares for payment pursuant to the
Offer, upon a vote of the Company's shareholders to approve the Merger
Agreement, the required approval is not obtained, (B) unless the Purchaser shall
have accepted Shares for payment pursuant to the Offer, the Merger shall not
have been consummated on or before February 28, 1995, unless due to the wilful
and material breach of the Merger Agreement by the party seeking to terminate
the Merger Agreement or (C) an order, decree or ruling shall have been issued
permanently enjoining, restraining or otherwise prohibiting the Merger, (iii)
the Company, if its Board of Directors shall have withdrawn or modified its
approval or recommendation of the Merger Agreement in connection with a Superior
Takeover Proposal, (iv) Pro-Fac, if (A) the Company's Board of Directors shall
have withdrawn or modified in a manner adverse to Pro-Fac or the Purchaser its
approval or recommendation of the Merger Agreement or approved or recommended a
Superior Takeover Proposal, (B) the Company shall have entered into an agreement
with respect to a Superior Takeover Proposal or (C) the Board of Directors of
the Company shall have resolved to do any of the foregoing, (v) Pro-Fac, unless
the Purchaser shall have accepted Shares for payment pursuant to the Offer, if
any order, decree or ruling shall have been issued that would, in the reasonable
judgment of Pro-Fac, have a material adverse effect on the business of the
Company, (vi) Pro-Fac or the Company, if the Purchaser shall not have accepted
Shares for payment pursuant to the Offer within ten business days after
expiration of the Offer and (vii) Pro-Fac or the Company, if the Purchaser shall
not have accepted Shares pursuant to the Offer by 10:00 a.m. New York time on
December 16, 1994 (provided that the Company shall not have the right to
terminate the Merger Agreement pursuant to clause (vi) or (vii) above if at the
time of expiration of the Offer the Minimum Tender Condition shall not have been
satisfied and, at least five business days prior to the expiration of the Offer,
the Purchaser shall have publicly disclosed that it has executed definitive
agreements or otherwise has commitments reasonably satisfactory to the Company
for financing that would be sufficient to consummate the Offer and the Merger on
the terms contemplated by the Merger Agreement). In the event of termination of
the Merger Agreement, the Merger Agreement shall become void and have no effect,
without any liability or obligation on the part of Pro-Fac, the Purchaser or the
Company except to the extent that such termination results from the wilful and
material breach of the Merger Agreement by any party and except for provisions
relating to confidentiality and certain other matters and, in certain events,
the Company would be required to pay certain fees and reimburse certain expenses
of Pro-Fac (see 'Fees and Expenses' below).
Fees and Expenses. All fees and expenses incurred in connection with the
Merger, the Merger Agreement and the transactions contemplated by the Merger
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Merger is consummated, except in the case of a wilful and material
breach of the Merger Agreement and except as set forth in the following two
paragraphs.
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Pursuant to the Merger Agreement, the Company is required pay Pro-Fac a
termination fee of $2,500,000 if the Merger Agreement is terminated (i) in
connection with a Superior Takeover Proposal, (ii) by Pro-Fac if the Board of
Directors of the Company shall have withdrawn or modified in an manner adverse
to Pro-Fac or the Purchaser its approval or recommendation of the Offer or the
Merger unless (A) such withdrawal or modification shall have resulted primarily
from facts not known to the Board of Directors of the Company on the date of the
Merger Agreement or developments occurring after the date of the Merger
Agreement and (B) at the time of such withdrawal or modification there shall not
be pending any Takeover Proposal (other than by Pro-Fac) or (iii) by Parent if
the Board of Directors of the Company shall have withdrawn or modified in a
manner adverse to Pro-Fac or the Purchaser its recommendation of the Offer or
the Merger and within one year from such termination any person (other than
Pro-Fac) acquires a controlling equity interest in the voting securities, or
substantially all the assets, of the Company or engages in any merger or other
business combination with the Company (an 'Alternative Transaction').
In addition, if the Merger Agreement is terminated (i) in circumstances in
which a termination fee is due pursuant to the immediately preceding paragraph,
(ii) by Parent if the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to Pro-Fac or the Purchaser its approval or
recommendation of the Offer or the Merger or (iii) for the failure to receive
the approval of the shareholders of the Company or for the breach of the Merger
Agreement by the Company and, in the case of this clause (iii), within two years
from such termination any person (other than Pro-Fac) who had previously
indicated its interest in making or had been approached to make a Takeover
Proposal consummates an Alternative Acquisition, then the Company is required
under the Merger Agreement to reimburse Pro-Fac for all fees and expenses
incurred by Pro-Fac prior to the termination date in connection with the Merger
Agreement and the transactions contemplated thereby, up to a maximum
reimbursement of $3,000,000. Pro-Fac has advised the Company that Pro-Fac's
expenses to date, including those expenses incurred on the date of execution of
the Merger Agreement, exceed $3,000,000.
Any amounts paid by the Company to Pro-Fac pursuant to the two preceding
paragraphs shall be excluded from the determinations under the Integrated
Agreement for amounts due from the Company to Pro-Fac, or from Pro-Fac to the
Company, pursuant to the profit-sharing provisions of the Integrated Agreement.
See the discussion of the Integrated Agreement below.
STOCKHOLDER AGREEMENT
Pursuant to the Stockholder Agreement, AHI has agreed to tender all its
Shares pursuant to the Offer within five business days after the commencement of
the Offer. However, AHI may decline to tender or may, upon one business day's
notice, withdraw the tender of any and all Shares if (i) the amount or form of
consideration is less than cash in the amount of $19 per Share net to AHI, or
(ii) the Merger Agreement is terminated. The Purchaser has agreed that it will
not accept for payment less than 44% of the Class A Shares (other than the
Shares held by Agway) outstanding at the time of acceptance. In addition, should
AHI withdraw its Shares prior to the expiration of the Offer, the Purchaser
shall have an option to purchase such Shares at a price of $19 per Share.
Pro-Fac and the Purchaser have agreed not to exercise such option unless the
Purchaser is simultaneously accepting, or has previously accepted, for payment
pursuant to the Offer at least 44% of the outstanding Class A Shares.
If the Purchaser does not accept Shares for payment pursuant to the Offer
but the Merger Agreement is not terminated, AHI has agreed to vote, if
necessary, its Shares in favor of the Merger Agreement at any meeting of the
Shareholders of the Company. In addition, Agway has agreed that, so long as the
Merger Agreement is in effect, it will not solicit, or participate in
discussions relating to, the sale of the Company to any other purchaser.
Pursuant to the Stockholder Agreement, Pro-Fac and the Purchaser have
agreed to, and to cause the Company to, release and discharge Agway, AHI and
each director, officer, employee, agent and advisor of Agway and AHI from all
claims arising out of or based upon the Integrated Agreement and transactions
leading up to the Merger (including the auction process) with certain specified
exceptions.
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This release will take effect upon the Effective Time of the Merger, or, if
earlier, the consummation of the Offer or the purchase of Shares pursuant to the
option described above.
The Stockholder Agreement terminates automatically upon termination of the
Merger Agreement.
INTEGRATED AGREEMENT
The Integrated Agreement consists of five sections: operations financing;
marketing; facilities financing; management; and settlement.
Pursuant to the operations financing provisions, Pro-Fac is required,
subject to limited exceptions, to lend all its funds to the Company. The Company
is required to pay interest on these loans at rates that vary depending upon the
source from which Pro-Fac derived such funds. As of June 25, 1994, the Company's
outstanding long-term debt due to Pro-Fac (including current portion) was
approximately $92.0 million and short-term debt due to Pro-Fac was approximately
$11.5 million, and the Company made interest payments to Pro-Fac during fiscal
1994 of approximately $15.6 million.
Pursuant to the marketing provisions, Pro-Fac agrees to sell and deliver to
the Company, and the Company agrees to process and market, crops of the type and
in the amounts set forth in the profit plan approved each year by the boards of
directors of Pro-Fac and the Company. Broadly speaking, the Company pays Pro-Fac
the purchase price for those crops purchased through Pro-Fac, the commercial
market value of such crops, which is defined as the weighted average of the
prices paid by other commercial processors for similar crops sold under
pre-season contract or in the open market in the same or competing market area.
During fiscal 1994, the Company paid to Pro-Fac approximately $59.2 million as
the commercial market value for crops purchased pursuant to the Integrated
Agreement.
Pursuant to the facilities financing provisions, the Company pays rent for
the use of the fixed and intangible assets leased to it by Pro-Fac. The rental
payments are equal to the amortization of the leased assets plus any other costs
such as taxes and utilities which may be incurred by Pro-Fac associated with the
ownership of the facilities. As of June 25, 1994, the book value of the fixed
and intangible assets leased to the Company pursuant to the Integrated Agreement
was approximately $166.2 million, and the Company made financing and
amortization payments to Pro-Fac during fiscal 1994 of approximately $43.8
million. In addition, the Company pays or receives an adjustment based upon the
earnings or losses of the Company on all products determined according to a
formula which reflects the respective adjusted equity investments of the two
companies. For fiscal 1994, the amount of this adjustment was a payment by the
Company to Pro-Fac of approximately $16.9 million (although there is a pending
disagreement between the Company and Pro-Fac as to the correctness of this
payment).
Pursuant to the management provisions, Pro-Fac employs the Company to
supervise and manage the business of Pro-Fac, in accordance with general
policies formulated and approved by the Board of Directors of Pro-Fac. The chief
executive officer of the Company, with the approval of the Board of Directors of
Pro-Fac, hires and discharges or transfers the General Manager of Pro-Fac (the
chief executive officer of Pro-Fac). The current General Manager of Pro-Fac, Roy
Myers, and the current chief financial officer of Pro-Fac, William Rice, are the
Executive Vice President and the Senior Vice President, Finance and
Administration, respectively, of the Company.
The Integrated Agreement extends to 1997, and provides for two successive
renewals, each for a term of five years at the option of the Company. The
Company has the right, at any time upon 60 days' written notice to Pro-Fac, to
purchase the assets to which Pro-Fac holds title pursuant to the Integrated
Agreement, together with Pro-Fac's interest in certain of the Company's
intangible assets, in each case, at the book value thereof. Upon exercise of
such option, the Agreement would automatically terminate. Upon termination, the
Company would be required to repay to Pro-Fac all outstanding indebtedness due
to Pro-Fac. Provisions of the Integrated Agreement also allow Pro-Fac, with
sufficient notice, to accelerate the repayment of outstanding debt under certain
circumstances. In the arbitration proceedings currently pending between the
Company and Pro-Fac, Pro-Fac has asserted, among other matters, (1) that Pro-Fac
is entitled to a 50% share of the profits from the consummation of any
acquisition with Dean Foods Company; (2) that the Company cannot terminate the
Integrated Agreement at all or not before, at the earliest, June 1996; and (3)
that the book value of Pro-Fac's assets
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for the purpose of calculating the buyout price under the Integrated Agreement
should not take into account specified write-downs by the Company of those
assets. See Item 4 below for a further discussion of these arbitration
proceedings.
AGWAY LETTER
Pursuant to the Agway Letter, Agway agreed that, for so long as the Company
was actively engaged in the process of seeking buyers for all the Shares, Agway
would not pursue a separate sale of its equity interest in the Company or seek
to be paid a higher price for its Shares than the price to be paid per Share to
the other holders of Shares.
AGWAY RELEASE
Pursuant to the Agway Release, each of Agway and AHI, on the one hand, and
the Company, on the other hand, released the directors and officers of the other
from all claims for, upon or by reason of any matter arising out of or relating
to any proposed transaction which may result in a change of control of the
Company.
ARBITRATION AGREEMENT
Pursuant to the Arbitration Agreement, the Company and Pro-Fac agreed to a
schedule that would govern the conduct of the pending arbitration proceedings
between Pro-Fac and the Company (see Item 4 below) in the event that the Merger
Agreement is terminated. Pursuant to the Merger Agreement, the Company and
Pro-Fac agreed to the postponement of the schedule originally set forth in the
Arbitration Agreement. As so amended, certain preliminary matters with respect
to the arbitration proceedings will commence on November 15, 1994, or the first
date prior thereto on which Pro-Fac or the Purchaser is in breach in any
material respect of its obligations under the Merger Agreement, including its
obligations to use reasonable efforts to obtain financing. Subject to the
following paragraph, under the Arbitration Agreement, as amended by the Merger
Agreement, the arbitration hearing would be completed within three and one-half
months of the later of the termination of the Merger Agreement and eight weeks
after commencement of such preliminary matters. The parties agreed jointly to
instruct the arbitrators to render a decision expeditiously, but no later than
three weeks following the conclusion of the hearing.
The Arbitration Agreement becomes void if the Merger Agreement is
terminated by Pro-Fac as a result of the breach thereof by the Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
BACKGROUND
In the second half of 1992, representatives of Agway, the Company and
Pro-Fac held informal discussions concerning the possible sale of Agway's
interest in the Company.
In February 1993, Agway, which, through AHI, owns approximately 99% of the
Class B Shares and approximately 14% of the Class A Shares, formally notified
the Company that it was considering the potential sale of its interest in the
Company and requested the assistance of the Company in connection with that
sale. Pursuant to the Company's certificate of incorporation, the Company has a
right of first refusal with respect to any sale by Agway of its Class B Shares.
Accordingly, the Board of Directors of the Company formed a special committee
(the 'Special Committee'), consisting of John Blazin, Virginia Ford and Carl
Tiedemann, directors of the Company who are not affiliated with Agway, to review
any transactions involving the sale by Agway of its Class B Shares.
A number of meetings were then held among representatives of the Company,
the Special Committee, Agway and Pro-Fac and their respective advisors
concerning the possible acquisition by Pro-Fac of Agway's Shares or of all the
Shares. In late May and early June 1993, the parties discussed the possible
acquisition by Pro-Fac of all the outstanding Class B Shares for $17 per Share
in cash, conditioned upon, among other things, the distribution to the holders
of the Class A Shares of the
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hardlines business of the Nalley's Fine Foods division of the Company (the
'Nalley's Business'). In late July 1993, Pro-Fac proposed to acquire all the
outstanding Class B Shares for $22 per Share in cash and all the outstanding
Class A Shares for $20 per Share in cash, subject to the sale of the Nalley's
Business to a third party for at least $217 million, the approval of the Board
of Directors of Pro-Fac, the approval of the Springfield Bank for Cooperatives
('Springfield Bank'), the approval of the holders of the Class A Shares and
receipt of a fairness opinion from Dillon, Read & Co. Inc. ('Dillon Read'),
Pro-Fac's financial advisor. In early August 1993, Pro-Fac revised that proposal
to increase the price for the Class A Shares to $22 per Share in cash. That
proposal was withdrawn by Pro-Fac after discussions with its Board of Directors
and Dillon Read.
In fiscal 1993, the Board of Directors of the Company adopted a
restructuring program involving, among other matters, an increased focus by the
Company on a more limited number of product lines and an attempt by the Company
to move to a true low-cost producer status. In connection with this program, the
Company incurred restructuring charges of approximately $61.0 million (before
dividing with Pro-Fac and before taxes). Included in these restructuring charges
were the writedown of assets and other charges associated with the Company's
Hiland Potato Chip and meat snacks businesses, of which approximately $29.2
million was allocated to reduce the book value of assets subject to the
Integrated Agreement. Pro-Fac disputed whether such charges should be taken into
account in determining the amounts due to Pro-Fac upon termination of the
Integrated Agreement unless and until such businesses were sold with the consent
of Pro-Fac. Ultimately, Pro-Fac did consent to the sale of the Company's Hiland
and meat snacks businesses, but the Company and Pro-Fac agreed that the amount
due to Pro-Fac upon termination of the Integrated Agreement would be determined
as if such businesses had not been sold.
At its meeting held on August 9 and 10, 1993, the Board of Directors of the
Company authorized the management of the Company, with the advice of financial
and legal advisors, to pursue various strategic alternatives for the Company.
These alternatives included continuing negotiations with Pro-Fac relative to
Pro-Fac gaining control of the business; the possible sale of the entire equity
of the Company to a third party; and the implementation by the Company of
additional restructuring actions that might have included recapitalizing the
Company to terminate the Integrated Agreement and buy out Pro-Fac. Between
August 1993 and November 1993, while discussions continued with Pro-Fac,
representatives of the Company and Agway, together with their respective
financial and legal advisors, reviewed potential restructuring and
recapitalization transactions involving the Company, including the possible
issuance by the Company of high-yield debt to provide funds to the Company
sufficient to terminate the Integrated Agreement and buy out Pro-Fac. In late
August 1993, Pro-Fac submitted a revised proposal to acquire all the Shares for
$19 per Share in cash, subject to the sale of the Nalley's Business for at least
$217 million, but also providing for possible additional consideration per Share
in certain circumstances.
By early November 1993, management of the Company and Agway concluded that
the sale of the entire equity interest in the Company at an acceptable price
would likely provide more certain value to the Company's shareholders than
pursuing a recapitalization of the Company involving a buy-out of Pro-Fac, among
other reasons, because of the assertion by Pro-Fac that the Company might not
have the right to terminate the Integrated Agreement at all in connection with
such a transaction and the disagreement between the Company and Pro-Fac as to
the amount payable to Pro-Fac upon termination of the Integrated Agreement. On
November 11, 1993, the Board of Directors of the Company authorized the
management of the Company, together with the Company's financial advisors,
Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ') and Goldman, Sachs &
Co. ('Goldman Sachs', and, together with DLJ, the 'Financial Advisors'), and the
Company's counsel, actively to solicit proposals for the acquisition of all the
outstanding Shares. Pro-Fac had advised the Company that it wished to develop a
joint proposal to acquire the Company with a separate buyer of the Nalley's
Business. Through January 1994, the Financial Advisors, on behalf of the
Company, approached over 30 corporations, businesses and other persons who, in
the judgment of the Financial Advisors, might have an interest in the
acquisition of the entire Company, the Nalley's Business or the businesses of
the Company excluding the Nalley's Business. These potential acquirors included
strategic buyers, primarily corporations with other interests in the food
processing industry, as well as financial buyers such as leveraged buy-out
funds. In February 1994, a number of potential acquirors, including Pro-Fac,
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submitted preliminary indications of interest with respect to an acquisition
transaction involving the Company.
Management of the Company discussed with Pro-Fac the possibility that any
acquiror of the Company would not wish to continue the existing pattern of crop
purchases from Pro-Fac. In March 1994, the Company advised Pro-Fac that, in view
of the possibility that the Company might be acquired by a third party, Pro-Fac
should not rely on the Company to purchase any crops from Pro-Fac or its growers
in calendar 1995 and beyond, and the Company recommended that Pro-Fac terminate
its obligations to purchase crops from its growers beyond the 1994 growing
season. In response to that recommendation, Pro-Fac asserted that the Company
did not have the right unilaterally to terminate its obligation to purchase
crops from Pro-Fac. While the Company does not agree with this assertion by
Pro-Fac, the Company notified Pro-Fac that it would not commit to purchase a
substantial portion of the crops historically purchased from Pro-Fac in the 1995
growing season. As a result, Pro-Fac gave notice to its effected members
terminating Pro-Fac's obligation to purchase those crops beginning next year.
In March 1994, the Company requested definitive acquisition proposals from
potential acquirors. On April 21, 1994, the Company received acquisition
proposals, including proposals from Dean Foods Company ('Dean Foods'), Hormel
Foods Corporation ('Hormel') and Pro-Fac that were considered the most viable
proposals in terms of price and certainty of closing. The proposal from Dean
Foods was for the acquisition of specified assets of the Company's Comstock
Michigan Fruit, New York vegetables, Southern Frozen Foods and Brooks Foods
divisions, and the assumption of specified liabilities, for $290 million in
cash. The proposal from Hormel was for the acquisition of Nalley's Business,
including the assumption of specified liabilities, for $140 million in cash. The
proposal from Pro-Fac was for the acquisition of all the outstanding Shares for
$17 per Share in the form of subordinated notes, subject to reduction for the
cost of terminating outstanding employee stock options (which would have
resulted in a net stated price for the Shares of $16.87 per Share). Pro-Fac's
proposal also stated that Pro-Fac would endeavor to obtain financing, and to
sell certain assets of the Company, to permit Pro-Fac to pay cash for the Shares
in lieu of all or a part of the subordinated notes.
With respect to the Pro-Fac proposal, the Company encouraged Pro-Fac to
amend its proposal to offer cash rather than subordinated notes, to increase the
price payable per Share and to eliminate certain contingencies associated with
that proposal. With respect to the proposals from Dean Foods and Hormel, the
Company reviewed whether the liquidation of the Company through a series of
asset sales would realize greater value for the shareholders of the Company than
the acquisition of all the Shares in a single transaction. By the middle of May,
the Company had concluded that, in light of tax and other issues, a purchase of
assets rather than outstanding Shares would not result in sufficient net value
available to the shareholders of the Company. Accordingly, the Company requested
Dean Foods and Hormel to work together to structure a proposal whereby Dean
Foods would offer to purchase all the outstanding Shares and subsequently sell
the Nalley's Business to Hormel.
On May 31, 1994, Dean Foods submitted a revised proposal pursuant to which
it offered to purchase all the outstanding Shares for a maximum of $20 per Share
in cash, subject to the satisfactory resolution of specified contingencies,
including an agreement with Pro-Fac for the termination of the Integrated
Agreement for an amount equal to the book value (determined in accordance with
generally accepted accounting principles) of the assets owned by Pro-Fac and
used by the Company in its business, the negotiation of a definitive agreement
for the sale of the Nalley's Business to Hormel, clearance of the transaction by
appropriate government agencies, negotiation of a definitive agreement and
approval of any transaction by the shareholders of the Company. On June 7, 1994,
Pro-Fac submitted a revised proposal pursuant to which it offered to purchase
all the outstanding Shares for a net price of $16.87 per Share in cash, after
reduction for the cost of terminating outstanding employee stock options. This
revised proposal from Pro-Fac was also subject to a number of contingencies,
including financing, the negotiation of a definitive agreement for the sale of
the Nalley's Business to Hormel and the receipt of approval for the acquisition
from the members of Pro-Fac.
At a meeting held on June 8, 1994, the Board of Directors of the Company
voted to pursue the proposal submitted by Dean Foods and instructed management
of the Company to commence negotiations with Pro-Fac toward an agreement
settling the outstanding disputes between the Company
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and Pro-Fac to permit the acquisition proposal by Dean Foods to proceed. In June
1994, a number of meetings and telephone conversations were held between the
Company, Agway and Pro-Fac and their respective legal advisors with a view
toward commencing negotiation of a settlement of the outstanding disputes
between the Company and Pro-Fac. In addition, the Company requested a meeting
with the Board of Directors of Pro-Fac to discuss these outstanding disputes. On
June 28, 1994, representatives of the Company and Dean Foods made presentations
to a special committee of the Board of Directors of Pro-Fac and also to the full
Board of Directors of Pro-Fac with respect to these matters and the benefits to
Pro-Fac and its members from the acquisition of the Company by Dean Foods. Over
the course of these meetings and conversations, the Company concluded that any
negotiated settlement of the outstanding disputes between the Company and
Pro-Fac would be difficult to reach in a reasonable time. Accordingly, the Board
of Directors of the Company authorized the commencement of arbitration
proceedings by the Company against Pro-Fac under the Integrated Agreement.
On July 11, 1994, the Company commenced arbitration proceedings against
Pro-Fac under the Integrated Agreement, seeking, among other relief, a
declaration confirming the Company's right to terminate the Integrated Agreement
and to purchase the assets owned by Pro-Fac but used by the Company in the
conduct of its business upon tender of the book value thereof (determined in
accordance with generally accepted accounting principles, that is, after taking
into account the restructuring charge taken by the Company on June 1993), a
declaration confirming the effect of termination of the Integrated Agreement and
a declaration confirming that the Company did not have any obligations under the
Integrated Agreement to purchase crops except as set forth in the fiscal 1995
profit plan (that is, other than for the 1994 growing season). The Company also
sought an award of damages in an amount to be determined by the arbitrators, but
in no event less than the difference in value between the Dean Foods $20 per
Share proposal and the market price per Share following any public announcement
that the Dean Foods proposal had been withdrawn. On August 2, 1994, the Company
filed a petition in the Supreme Court of New York for an order compelling
Pro-Fac to proceed with the arbitration. On August 4, 1994, Pro-Fac served the
Company with Pro-Fac's response and counter-demand for arbitration, asserting
that Pro-Fac was entitled to a 50% share of the profits from the consummation of
the pending acquisition proposal from Dean Foods, which share Pro-Fac calculated
to be greater than $5.75 per share, that the Company could not terminate the
Integrated Agreement at all or until, at the earliest, June 1996, that the book
value of Pro-Fac's assets for the purposes of calculating the price at which the
Company may buy those assets and to terminate the Integrated Agreement should
not take into account the write-downs by the Company of those assets in June
1993, that the Company was in default under the Integrated Agreement for
improper termination of crops and that the Company was in default under the
Integrated Agreement for failing to manage the business of Pro-Fac. Pro-Fac also
claimed damages that it estimated at more than $50 million.
On August 5, 1994, the Company received a letter from Pro-Fac setting forth
a revised proposal by Pro-Fac to acquire all the outstanding Shares for $19 per
Share in cash. The revised Pro-Fac proposal did not contemplate the sale of the
Nalley's Business to a third party, but was subject to obtaining financing in
the form of senior debt financing and funds from the sale of high-yield
subordinated debt securities. The proposal was still subject to the approval of
the members of Pro-Fac. At a regularly scheduled meeting held on August 8, 1994,
the Board of Directors of the Company elected not to take any definitive action
with respect to this revised proposal until a number of contingencies involving
that proposal had been clarified or resolved. In particular, the Board of
Directors of the Company instructed the management of the Company to permit
Pro-Fac and its potential financing sources to perform additional due diligence
with respect to the Company, to facilitate the issuance of a bank commitment
letter and a 'highly confident' letter for the financing required by Pro-Fac, if
Pro-Fac would enter into an agreement to expedite the pending arbitration
proceedings in the event that a definitive merger agreement was entered into
between the Company and Pro-Fac but no acquisition transaction with Pro-Fac was
consummated. On August 16, 1994, the Company and Pro-Fac entered into the
Arbitration Agreement (described in Item 3(b)(2) above) and Pro-Fac and its
potential financing sources commenced a review of the business and finances of
the Company.
On September 2, 1994, Pro-Fac submitted a further revised proposal to
acquire all the outstanding Shares for $19 per Share in cash. Pro-Fac stated
that its members had approved its acquisition proposal, but the proposal
remained subject to financing, including the sale of high-yield subordinated
debt. At a
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telephonic meeting held on September 8, 1994, the Board of Directors of the
Company reviewed this proposal and again deferred taking any definitive action.
However, the Board of Directors directed the management of the Company, together
with the Company's counsel, to work with Pro-Fac to resolve certain outstanding
issues with respect to the form of merger agreement suggested by Pro-Fac.
Pro-Fac and Dean Foods were each requested to make their last and best
offers by 5:00 p.m., New York time, on September 15. Dean Foods did not revise
its proposal by that time. Pro-Fac did not revise the financial terms of its
proposal, but it continued to work with the Company and its financial and legal
advisors to resolve outstanding issues with respect to its proposal.
The Board of Directors of the Company considered the Pro-Fac and Dean Foods
proposal at meetings held on September 19 and September 27, 1994. The Board of
Directors of the Company was presented with drafts of the Merger Agreement and
Stockholder Agreement. The Board of Directors of the Company was also presented
with a commitment letter dated September 2, 1994, from Springfield Bank to
Pro-Fac, setting forth Springfield Bank's commitment to provide the Purchaser
with (1) a term loan in an aggregate principal amount of $80 million, (2) a term
loan facility in an aggregate principal amount of $120 million and (3) a
seasonal loan facility in an aggregate principal amount of up to $86 million to
assist in the financing the acquisition by Pro-Fac and the Purchaser of the
Company. The commitment of Springfield Bank was expressed to be conditioned
upon, among other matters, (a) the execution of definitive documentation, (b)
the absence of any material adverse change into the business of the Company and
(c) receipt by the Purchaser of gross proceeds of not less than $160 million
from an offering of subordinated debt. The Board was also advised that Pro-Fac
would receive a form of letter from Dillon Read (which was reviewed with the
Board), stating that such firm was highly confident of its ability to place up
to $160 million aggregate principal amount of senior subordinated debt to
finance the acquisition of the Company. That letter was subject to the following
conditions, among others: (1) absence of any material adverse change in the
business of the Company since June 25, 1994, (2) the terms of any senior
financing for the acquisition of the Company being acceptable to Dillon Read
(and such letter confirmed that the terms and structure contemplated by the
commitment letter from Springfield Bank was acceptable to Dillon Read on a
preliminary basis), (3) agreement on the terms of the subordinated debt, (4)
satisfactory continuing due diligence, (5) reasonable time to market the
subordinated debt and (6) presence of satisfactory market conditions. Copies of
the commitment letter from Springfield Bank and the 'highly confident' letter
from Dillon Read, as executed, are attached to the Schedule 14D-9 as Exhibits 9
and 10, respectively.
Management of the Company discussed with the Board the likely future
financial performance of the Company, including the effects on that performance
of the continuing disputes with Pro-Fac and the pending arbitration proceedings.
The Financial Advisors reviewed the financial terms of the Pro-Fac proposal and
the Dean Foods proposal. The Financial Advisors also reviewed certain financial
analyses with respect to the Pro-Fac proposal and discussed the proposed
financing, as described in the commitment letter of Springfield Bank and the
form of 'highly confident' letter from Dillon Read. The Company's legal advisors
discussed with the Board the form of the Merger Agreement that Pro-Fac had
proposed.
At the meeting of the Board of Directors of the Company held on September
27, 1994, DLJ rendered its opinion that, based upon and subject to certain
considerations and assumptions, the consideration to be received by the holders
of Class A Shares pursuant to the Offer and the Merger was fair to such holders,
from a financial point of view, and Goldman Sachs rendered its opinion that,
based upon and subject to certain considerations and assumptions, the $19 per
Share in cash to be received by the holders of Class B Shares pursuant to the
Offer and the Merger was fair to such holders. Copies of the written opinions
dated September 27, 1994, of DLJ and Goldman Sachs provided to the Board of
Directors of the Company and containing the assumptions made, procedures
followed, matters considered and limits of their review are filed as Exhibits 11
and 12 to the Schedule 14D-9, and are incorporated herein by reference. THE FULL
TEXT OF SUCH OPINIONS SHOULD BE READ IN CONJUNCTION WITH THIS STATEMENT.
At a meeting held on September 27, 1994 (at which all directors of the
Company, other than Messrs. Call and Myers, were present), the Board of
Directors of the Company approved and adopted the Merger Agreement, approved the
Offer, the Merger, the Stockholder Agreement and the
14
<PAGE>
transactions contemplated by the Merger Agreement and the Stockholder Agreement
and determined that the terms of the Offer and the Merger were fair to and in
the best interests of the shareholders of the Company and recommended that the
shareholders of the Company accept the Offer and tender their Shares to the
Purchaser pursuant to the Offer. One director, J. William Petty, abstained from
the vote approving the Merger Agreement and another director, John Blazin, voted
against approval of the Merger Agreement. Mr. Petty advised the Board of
Directors that he abstained from the vote approving the Merger Agreement because
he believed that Pro-Fac had taken inappropriate positions regarding the
Integrated Agreement that prevented the Company from consummating a merger with
Dean Foods. Mr. Petty also advised the Board that he believed that a merger with
Dean Foods offered greater opportunities for the Company's management and
employees. Mr. Blazin advised the Board that he voted against approval of the
Merger Agreement because of the contingencies to consummating a transaction with
Pro-Fac and for the reasons similar to those indicated by Mr. Petty in
abstaining from the vote.
The Merger Agreement and the Stockholder Agreement were executed on the
evening of September 27, 1994, and the transaction was publicly announced on
September 28, 1994.
RECOMMENDATION OF THE BOARD
At its meeting held on September 27, 1994, as discussed above, the Board of
Directors of the Company approved and adopted the Merger Agreement, approved the
Offer, the Merger, the Stockholder Agreement and the transactions contemplated
by the Merger Agreement and the Stockholder Agreement and determined that the
terms of the Offer and the Merger were fair to and in the best interests of the
shareholders of the Company and recommended that the shareholders of the Company
accept the Offer and tender their Shares to the Purchaser pursuant to the Offer.
In making its recommendations to the shareholders of the Company with respect to
the Offer and the Merger, the Board of Directors of the Company considered a
number of factors. These factors included, without limitation, the following:
1. The current conditions and trends in the food processing industry,
including those relating to competition, overcapacity, ongoing
consolidation within the industry and consolidation among the principal
customers of the Company.
2. The financial condition, results of operations and the cash flows
of the Company, both on an historical and on a prospective basis, including
the opportunities available to the Company for improving results through
cost reductions and further restructuring.
3. The current stock market conditions and historical market prices
and trading volumes for the Shares, including the relationship of the Offer
Price to the current and historical market prices for the Shares and to the
likely range of prices within which the Shares would trade in the absence
of speculation concerning a possible acquisition transaction.
4. Agway's expressed desire to dispose of its investment in the
Company.
5. Various possible alternatives, including the possibility of
continuing to pursue the acquisition proposal from Dean Foods for all the
outstanding Shares for a maximum of $20 per Share in cash. The factors
considered by the Board of Directors in comparing the proposed transaction
with Pro-Fac to the acquisition proposal from Dean Foods included the fact
that, despite repeated efforts to negotiate a settlement agreement with
Pro-Fac to permit the Dean Foods proposal to proceed, Pro-Fac was unwilling
to negotiate such an agreement involving the termination of the Integrated
Agreement and that, in order for the shareholders of the Company to receive
the maximum $20 per Share in the Dean Foods proposal, the Company would
need to be completely successful in the pending arbitration proceedings,
which was not certain. The Board also considered the fact that the
acquisition proposal from Dean Foods could not be consummated until the
pending arbitration proceedings were completed, whereas the proposed
transaction with Pro-Fac contemplated consummation as promptly as
practicable, but not later than December 15, if the conditions to the Offer
were met, and it was not possible to predict when the pending arbitration
proceedings would in fact be completed; the fact that the acquisition
proposal from Dean Foods was contingent upon
15
<PAGE>
the sale of the Nalley's Business to Hormel on terms acceptable to Dean
Foods, and that no assurance could be given that Hormel would remain
interested in purchasing the Nalley's Business at its previously indicated
price during whatever period was required to complete the arbitration
proceedings; the fact that Pro-Fac had made substantial claims for damages
against the Company in the arbitration proceedings, and although the
Company believes such claims are without merit, no assurance could be given
that an arbitration panel would agree with the Company; and the risks
associated with the operation of the business of the Company during any
protracted dispute with Pro-Fac.
6. The fact that the Company and the Financial Advisors had sought
proposals to acquire the Company from numerous potential acquirors, that
the Board's willingness to pursue the $20 per Share proposal from Dean
Foods had been publicly known since June, that Pro-Fac's $19 per Share
proposal had been publicly known since early August and that the Company
had not received acquisition proposals more attractive than the current
Pro-Fac and Dean Foods proposals.
7. The fact that the Company would have the benefit of the expedited
arbitration schedule set forth in the Arbitration Agreement should the
acquisition transaction with Pro-Fac not be consummated for any reason
other than the breach of the Merger Agreement by the Company.
8. The conditions to consummation of the Offer and the Merger,
including the condition that Pro-Fac receive financing sufficient to
consummate the Offer and the Merger, the commitment letter received by
Pro-Fac from Springfield Bank to provide senior bank financing for the
Offer and the Merger and the letter from Dillon Read that it was highly
confident that it would be able to arrange the $160 million in subordinated
debt financing necessary to consummate the Offer and Merger.
9. The presentations made by the management of the Company and the
Financial Advisors at the meeting of the Board of Directors held on
September 19 and 27, 1994; the opinion of DLJ that, based upon and subject
to certain considerations and assumptions, as of September 27, 1994, the
consideration to be received by the holders of Class A Shares pursuant to
the Offer and the Merger was fair to such holders, from a financial point
of view; and the opinion of Goldman Sachs that, based upon and subject to
certain considerations and assumptions, as of September 27, 1994, the $19
per Class B Share in cash to be received by the holders of Class B Shares
pursuant to the Offer and the Merger was fair to such holders. Copies of
the written opinions dated September 27, 1994, of DLJ and Goldman Sachs
delivered to the Board of Directors of the Company which set forth the
assumptions made, procedures followed, matters considered and limits of
their review are filed as Exhibits 11 and 12 to the Schedule 14D-9, and are
incorporated herein by reference. THE FULL TEXT OF SUCH OPINIONS SHOULD BE
READ IN CONJUNCTION WITH THIS STATEMENT.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
In February 1993, DLJ was engaged by the Special Committee to act as its
exclusive financial advisor for 12 months. From February to November 1993, DLJ
received $400,000 for its services to the Special Committee.
In November 1993, the Company also retained DLJ to act as a financial
advisor to the Company in connection with certain potential transactions
involving the Company. Under the terms of DLJ's engagement, the Company is
required to pay to DLJ (a) a fee of $150,000 per three-month period, the first
such payment to be due on January 24, 1994, for the three-month period
commencing October 24, 1993 (of which $450,000 has been paid to date), (b) a fee
of $500,000, payable upon the delivery of the opinion described in Item 4 above,
and (c) an additional cash fee equal to 0.6% of the aggregate consideration
(defined as the total consideration paid for the equity securities of the
Company, plus the principal amount of all indebtedness for borrowed money,
including capital lease obligations and any additional amounts due to Pro-Fac)
in connection with the Offer and the Merger, subject to a credit for fees paid
pursuant to clauses (a) and (b) above and to a credit for $300,000 previously
paid to DLJ for services to the Special Committee. Assuming consummation of the
Offer and the Merger on the terms contemplated in the Merger Agreement, the
Company currently estimates that the amount of such additional fee due to DLJ
(after credits) would be $1.9 million.
16
<PAGE>
In February 1993, Goldman Sachs was retained by Agway to act as its
financial advisor in connection with its consideration of various matters,
including the potential sale by Agway of its Shares. From February to November
1993, Goldman Sachs received $250,000 for its services to Agway.
In November 1993, with Agway's consent, the Company retained Goldman Sachs
to act as a financial advisor to the Company in connection with, among other
matters, the potential sale of the Company. In connection with this consent,
Agway and Goldman Sachs agreed that Goldman Sachs would not be entitled to any
fees from Agway if Goldman Sachs received a transaction fee from the Company in
accordance with its engagement agreement with the Company. Under the terms of
Goldman Sachs' engagement by the Company, the Company is required to pay to
Goldman Sachs (a) a fee of $100,000 for the calendar quarter ended September 30,
1993, (b) a fee of $100,000 per calendar quarter commencing with the calendar
quarter ending December 31, 1993 (of which $300,000 has been paid to date), (c)
a fee of $500,000, payable upon delivery of the opinion described in Item 4
above, and (d) an additional cash fee equal to 0.6% of the aggregate
consideration (defined as the total consideration paid for the equity securities
of the Company, plus the principal amount of all indebtedness for borrowed
money, including capital lease obligations and any additional amounts due to
Pro-Fac) in connection with the Offer and the Merger, subject to a credit for
fees paid pursuant to clauses (a), (b) and (c) above. Assuming consummation of
the Offer and the Merger on the terms contemplated by the Merger Agreement, the
Company currently estimates that the amount of such additional fee due to
Goldman Sachs (after credits) would be approximately $2.3 million.
In addition, the Company has agreed to reimburse the Financial Advisors for
certain out-of-pocket expenses, if any, whether or not any transaction is
consummated, and to indemnify the Financial Advisors and certain related persons
against certain liabilities in connection with their engagement, including
certain liabilities under the federal securities laws.
Each Financial Advisor has provided certain investment banking services to
the Company from time to time for which it has received customary compensation.
In the ordinary course of its business, each Financial Advisor may trade the
equity securities of the Company for its own account and for the accounts of
customers and may, therefore, at any time hold a long or short position in such
securities.
The Company has engaged MacKenzie Partners, Inc. to provide investor
relations and related services in connection with the Offer and the Merger, for
which Mackenzie Partners, Inc., will receive customary compensation.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to the shareholders of the Company on its behalf concerning the
Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the last 60 days by the Company or any executive officer,
director, affiliate or subsidiary of the Company, other than the exercise by Mr.
Petty in September 1994 of options to purchase 4,557 Class A Shares for $11 per
Share (which options would otherwise have lapsed).
(b) To the best of the Company's knowledge, all directors and executive
officers of the Company currently intend to tender their Shares pursuant to the
Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as described in Item 4 above, no negotiation is being undertaken
or is underway by the Company in response to the Offer that relates to or would
result in: (1) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company; (2) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (3) a tender offer for, or other acquisition of securities by or of the
Company; or (4) any material change in the present capitalization or dividend
policy of the Company.
17
<PAGE>
(b) Except as described in Items 3 and 4 above, there are no transactions,
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Section 912 of the BCL limits the ability of a New York corporation (such
as the Company) to engage in business combinations with 'interested
shareholders' (defined as a beneficial owner of 20% or more of the outstanding
voting stock of such corporation) unless, among other things, the board of
directors of such corporation has given its prior approval to the applicable
business combination or to the transaction that resulted in such shareholder
being an 'interested shareholder'. Prior to the execution of the Merger
Agreement and Stockholder Agreement and prior to the commencement of the Offer,
the Board of Directors of the Company approved the Merger Agreement, the
Stockholder Agreement and the acquisition of shares by the Purchaser pursuant to
the Offer and, therefore, Section 912 of the BCL is inapplicable to the Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 -- Press release issued by the Company on September 28, 1994.
Exhibit 2 -- Agreement and Plan of Merger, dated as of September 27, 1994,
among Pro-Fac, the Purchaser and the Company.
Exhibit 3 -- Extracts from the Proxy Statement of the Company dated October
21, 1993.
Exhibit 4 -- Stockholder Agreement dated as of September 27, 1994, among
Pro-Fac, the Purchaser and AHI.
Exhibit 5 -- Integrated Agreement dated as of June 26, 1992, between the
Company and Pro-Fac.
Exhibit 6 -- Letter Agreement dated as of November 11, 1993, among the
Company, Agway, AHI and Agway Financial Corporation.
Exhibit 7 -- Agreement dated as of April 29, 1993, among Agway, AHI and the
Company.
Exhibit 8 -- Agreement dated as of August 16, 1994, between the Company and
Pro-Fac.
Exhibit 9 -- Commitment letter dated September 2, 1994, from Springfield
Bank to Pro-Fac (without all attachments), and the amendment thereto dated
September 16, 1994.
Exhibit 10 -- Letter dated September 27, 1994, from Dillon Read to Pro-Fac.
Exhibit 11 -- Opinion dated September 27, 1994, of DLJ.*
Exhibit 12 -- Opinion dated September 27, 1994, of Goldman Sachs.*
Exhibit 13 -- Form of letter dated September 28, 1994, to be sent to the
shareholders of the Company.*
- ------------
* Copy sent to shareholders of the Company.
18
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
CURTICE-BURNS FOODS, INC.
By /s/ WILLIAM PETTY
...................................
NAME: J. WILLIAM PETTY
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: September 28, 1994
19
<PAGE>
EXHIBIT 1
CURTICE BURNS BOARD VOTES TO ACCEPT ACQUISITION OFFER
FROM PRO-FAC COOPERATIVE FOR $19 PER SHARE
ROCHESTER, NEW YORK, September 28, 1994...The Board of
Directors of Curtice-Burns Foods, Inc. (AMEX:CBI) today
announced that it has accepted an offer from Pro-Fac
Cooperative to acquire all outstanding shares of Curtice
Burns stock for $19 per share in cash and that Curtice Burns
has entered into a definitive merger agreement with Pro-Fac.
Pro-Fac will make a cash tender offer for all
outstanding shares of Curtice Burns Class A and Class B
common stock for $19 per share. The tender offer will
commence no later than October 4, 1994. Following the
successful completion of this tender offer, Curtice Burns
will be merged with a subsidiary of Pro-Fac. Each share of
Curtice Burns not previously purchased by Pro-Fac will be
converted into the right to receive $19 in cash.
Pro-Fac has advised Curtice Burns that it expects to
complete its tender offer prior to November 15. In the
merger agreement, Curtice Burns has agreed not to pay a
dividend for the current quarter with a record date earlier
than November 15. If the tender offer has not been
completed by November 15, the Curtice Burns Board of
Directors will consider whether a dividend should be
declared for the current quarter.
<PAGE>
2
Pro-Fac's tender offer is subject to certain
conditions, including the valid tender of shares
representing 90% of each class of common stock of Curtice
Burns, receipt by Pro-Fac of financing sufficient to permit
it to consummate the offer and other customary conditions.
Agway Inc., the holder of approximately 99% of the Class B
common stock and 14% of the Class A common stock, has agreed
with Pro-Fac to tender all its shares if a majority of the
Class A shares not held by Agway are tendered. Curtice
Burns has, in the merger agreement, required Pro-Fac to
exchange shares of Class B common stock for shares of
Class A common stock if necessary to meet the minimum 90%
condition to the offer.
Financing for the Pro-Fac offer and to refinance
existing bank debt is to be obtained through approximately
$200 million of senior bank financing from Springfield Bank
for Cooperatives, which has committed such financing, and
from the issuance of up to $160 million in senior
subordinated debt securities through Pro-Fac's investment
bank, Dillon, Read & Co. Inc. Dillon Read has delivered a
letter stating that it is highly confident that it will be
able to arrange such subordinated debt financing.
After a review of Pro-Fac's offer, the Curtice Burns
Board of Directors voted in favor of the tender offer and
<PAGE>
3
related merger and determined that the terms are fair to and
in the best interests of Curtice Burns shareholders. The
Curtice Burns Board recommends that its shareholders accept
Pro-Fac's offer and tender their shares.
Curtice Burns' Chairman, Donald Pease, said, 'Our Board
is pleased to have concluded the merger agreement with
Pro-Fac. Notwithstanding our recent disputes, Curtice Burns
and our controlling shareholder, Agway, are glad to be in
agreement with Pro-Fac and at the same time see that a fair
price is paid to our Class A and Class B shareholders.'
As required by the merger agreement with Pro-Fac,
Curtice Burns is terminating all ongoing discussions between
Curtice Burns and Dean Foods Company, which had previously
proposed to acquire Curtice Burns for a maximum of $20 per
share in cash, subject to certain contingencies.
J. William Petty, President and Chief Executive Officer
of Curtice Burns, said, 'The merger agreement with Pro-Fac
is the result of an intensive evaluation of strategic
alternatives to provide enhanced value to Curtice Burns
shareholders, which began in early 1993. This past June,
when we announced that our Board of Directors had decided to
pursue a maximum $20 per share proposal from Dean Foods, we
believed that the Dean Foods transaction offered the best
potential value for our shareholders, compared with the
<PAGE>
4
$16.87 per share offer Pro-Fac had proposed at that time.
The Dean Foods proposal was conditioned on a resolution of
the disputes between Curtice Burns and Pro-Fac regarding
rights under the Integrated Agreement between the two
companies as well as the sale of the Curtice Burns Nalley's
business. After extensive efforts, it has become clear that
resolution of the disagreements with Pro-Fac would only be
resolved through arbitration proceedings. Pro-Fac
subsequently increased its offer to $19 a share, a
significant increase from its original proposal of $16.87
per share, and our board concluded that this transaction not
only provides a fair price for Curtice Burns shares, but is
also the only transaction likely to be consummated in the
near future.
'I would like to extend sincere thanks from myself and
the entire Curtice Burns Board to Dean Foods and its
management for the considerable time and effort they have
put into trying to develop a transaction with Curtice Burns.
Dean Foods is an excellent company with fine people.'
Roy Myers, General Manager for Pro-Fac Cooperative,
said, 'Pro-Fac greatly appreciates the substantial time and
effort put in by the Curtice-Burns' Board and the many
Curtice Burns' employees involved in the process. Pro-Fac
looks forward to continuing to work with the Curtice Burns
<PAGE>
5
employees and continuing the thirty year relationship of the
two companies.'
Curtice Burns Foods processes and markets 21 product
lines of regional branded, private label and foodservice
products through seven autonomously managed divisions
located throughout the United States and Western Canada.
<PAGE>
EXHIBIT 2
============================================================
AGREEMENT AND PLAN OF MERGER
Among
PRO-FAC COOPERATIVE, INC.,
PF ACQUISITION CORP.
and
CURTICE-BURNS FOODS, INC.
Dated as of September 27, 1994
============================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
The Offer
SECTION 1.01 The Offer . . . . . . . . . . . . . . . . 2
SECTION 1.02 Company Actions . . . . . . . . . . . . . 4
ARTICLE II
The Merger
SECTION 2.01. The Merger . . . . . . . . . . . . . . . 6
SECTION 2.02. Closing . . . . . . . . . . . . . . . . . 6
SECTION 2.03. Effective Time . . . . . . . . . . . . . 6
SECTION 2.04. Effects of the Merger . . . . . . . . . . 7
SECTION 2.05. Certificate of Incorporation and
By-laws . . . . . . . . . . . . . . . . 7
SECTION 2.06. Directors . . . . . . . . . . . . . . . . 7
SECTION 2.07. Officers . . . . . . . . . . . . . . . . 7
ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock . . . . . . . . . 8
SECTION 3.02. Exchange of Certificates . . . . . . . . 9
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the
Company . . . . . . . . . . . . . . . . 11
SECTION 4.02. Representations and Warranties of
Parent and Sub . . . . . . . . . . . . 28
<PAGE>
Contents, 2
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business . . . . . . . . . . . 35
ARTICLE VI
Additional Agreements
SECTION 6.01. Shareholder Approval; Preparation of
Proxy Statement . . . . . . . . . . . . 39
SECTION 6.02. Access to Information; Confidentiality . 40
SECTION 6.03. Reasonable Efforts; Notification . . . . 40
SECTION 6.04. Stock Options . . . . . . . . . . . . . . 42
SECTION 6.05. Benefit Plans . . . . . . . . . . . . . . 43
SECTION 6.06. Indemnification . . . . . . . . . . . . . 44
SECTION 6.07. Fees and Expenses . . . . . . . . . . . . 45
SECTION 6.08. Public Announcements . . . . . . . . . . 46
SECTION 6.09. Real Estate Taxes . . . . . . . . . . . . 47
SECTION 6.10. Appraisals . . . . . . . . . . . . . . . 47
SECTION 6.11. Integrated Agreement . . . . . . . . . . 47
SECTION 6.12. Other Offers . . . . . . . . . . . . . . 47
SECTION 6.13. No Waiver . . . . . . . . . . . . . . . . 48
SECTION 6.14. Release . . . . . . . . . . . . . . . . . 48
SECTION 6.15. Directors . . . . . . . . . . . . . . . . 49
SECTION 6.16. Exchange of Class B Common Stock for
Class A Common Stock . . . . . . . . . 50
SECTION 6.17. Stockholder Agreement . . . . . . . . . . 50
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . 51
SECTION 7.02. Conditions to Obligations of Parent
and Sub . . . . . . . . . . . . . . . . 52
SECTION 7.03. Conditions to Obligation of the Company . 53
<PAGE>
Contents, 3
ARTICLE VIII
Board Actions
SECTION 8.01. Board Actions . . . . . . . . . . . . . . 54
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.01. Termination . . . . . . . . . . . . . . . 55
SECTION 9.02. Effect of Termination . . . . . . . . . . 58
SECTION 9.03. Amendment . . . . . . . . . . . . . . . . 58
SECTION 9.04. Extension; Waiver . . . . . . . . . . . . 58
SECTION 9.05. Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . 59
ARTICLE X
General Provisions
SECTION 10.01. Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . 59
SECTION 10.02. Notices . . . . . . . . . . . . . . . . 59
SECTION 10.03. Definitions . . . . . . . . . . . . . . 61
SECTION 10.04. Interpretation . . . . . . . . . . . . . 62
SECTION 10.05. Counterparts . . . . . . . . . . . . . . 62
SECTION 10.06. Entire Agreement; No Third-Party
Beneficiaries; Effect on
Arbitration Agreement . . . . . . . . 62
SECTION 10.07. Governing Law . . . . . . . . . . . . . 63
SECTION 10.08. Assignment . . . . . . . . . . . . . . . 63
SECTION 10.09. Enforcement . . . . . . . . . . . . . . 63
Exhibit A Conditions of the Offer
Exhibit B Certificate of Incorporation of
Surviving Corporation
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of
September 27, 1994, among PRO-FAC COOPERATIVE
INC., a New York cooperative corporation
('Parent'), PF ACQUISITION CORP., a New York
corporation and a wholly owned subsidiary of
Parent ('Sub'), and CURTICE-BURNS FOODS,
INC., a New York corporation (the 'Company').
WHEREAS the respective Boards of Directors of
Parent, Sub and the Company have approved the acquisition of
the Company by Parent on the terms and subject to the
conditions of this Agreement;
WHEREAS in furtherance of such acquisition, Parent
proposes to causes Sub to make a tender offer (as it may be
amended from time to time as permitted hereunder, the
'Offer') to purchase all the issued and outstanding shares
of Class A Common Stock, par value $.99 per share, of the
Company (the 'Class A Common Stock') and Class B Common
Stock, par value $.99 per share, of the Company (the 'Class
B Common Stock' and, together with the Class A Common Stock,
the 'Common Stock'), at a price per share of Common Stock of
$19.00 net to the seller in cash, upon the terms and subject
to the conditions of this Agreement; and the Board of
Directors of the Company has adopted resolutions approving
the Offer and the Merger (as hereinafter defined) and
recommending that the Company's shareholders accept the
Offer and, if necessary, vote in favor of the Merger;
WHEREAS the respective Boards of Directors of
Parent, Sub and the Company have approved the merger of Sub
into the Company as set forth below (the 'Merger'), upon the
terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of
Common Stock not owned directly or indirectly by Parent or
the Company, except shares of Common Stock held by persons
who object to the Merger and comply with all the provisions
of New York law concerning the right of holders of Common
Stock to dissent from the Merger and require appraisal of
their shares of Common Stock ('Dissenting Shareholders'),
shall be converted into the right to receive the per share
consideration paid pursuant to the Offer, or, if no shares
of Common Stock are purchased pursuant to the Offer, the
highest price per share offered by Sub in the Offer; and
2
<PAGE>
WHEREAS Parent, Sub and the Company desire to make
certain representations, warranties, covenants and
agreements in connection with the Offer and the Merger and
also to prescribe various conditions to the Offer and the
Merger.
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties agree as follows:
ARTICLE I
The Offer
SECTION 1.01. The Offer. (a) Subject to the
provisions of this Agreement, as promptly as practicable but
in no event later than five business days from the date of
public announcement of the terms of this Agreement, Sub
shall, and Parent shall cause Sub to, commence the Offer.
The obligation of Sub to, and of Parent to cause Sub to,
accept for payment, and pay for, any shares of Common Stock
tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (any of which may, subject
to the next sentence, be waived by Sub in its sole
discretion) and to the terms and conditions set forth in
this Agreement. Sub expressly reserves the right to modify
the terms of the Offer, except that, without the consent of
the Company, Sub shall not (i) reduce the number of shares
of Common Stock subject to the Offer, (ii) reduce the price
per share of Common Stock to be paid pursuant to the Offer,
(iii) add to or amend in a manner adverse to the holders of
shares the conditions set forth in Exhibit A, (iv) except as
provided in the next sentence, extend the Offer, (v) change
the form of consideration payable in the Offer, (vi) amend
the Offer in any way such that holders of Class A Common
Stock receive consideration that differs from the
consideration received by holders of Class B Common Stock or
(vii) accept for payment shares of Common Stock that do not
represent, in the aggregate, at least 58% of all the
outstanding shares of Class A Common Stock, at least a
majority of all the outstanding shares of Class B Common
Stock and at least two-thirds of all the outstanding shares
of Common Stock, in each case on a fully diluted basis.
Notwithstanding the foregoing, Sub may, without the consent
of the Company (and, in the cases of clauses (i) and (ii)
below, shall, unless the Company otherwise consents),
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(i) extend the Offer if at any scheduled expiration date of
the Offer any condition to Sub's obligation to purchase
shares of Common Stock (other than the condition described
in clause (iii) of the first sentence of Exhibit A) shall
not be satisfied, to allow additional time for such
condition to be satisfied or waived, (ii) extend the Offer
if at any scheduled expiration date of the Offer the
condition described in clause (f) of the second sentence of
Exhibit A shall exist, to allow additional time to cause
such condition no longer to exist (provided that, if Parent
or Sub has signed definitive agreements for financing that
would be sufficient to consummate the Offer and the Merger
on the terms contemplated by this Agreement, Sub may not
extend the Offer pursuant to this clause (ii) to a date that
is more than five business days after the date of signing of
the last such definitive agreement to be signed),
(iii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and
Exchange Commission (the 'SEC') or the staff thereof
applicable to the Offer and (iv) extend the Offer for any
reason for a period of not more than 15 business days beyond
the latest expiration date that would otherwise be permitted
under clause (i), (ii) or (iii) of this sentence; provided,
however, that Sub may not extend the Offer pursuant to
clause (i), (ii) or (iv) of this sentence (A) to a date
later than December 15, 1994, or (B) if such extension would
be reasonably likely to result in any of the conditions
(other than any condition irrevocably waived in writing by
Parent and Sub prior to such extension) to Sub's obligations
to purchase shares of Common Stock not being satisfied at
the proposed new scheduled expiration date of the Offer.
Subject to the terms and conditions of the Offer and this
Agreement, Sub shall, and Parent shall cause Sub to, pay for
all shares of Common Stock validly tendered and not
withdrawn pursuant to the Offer that Sub becomes obligated
to purchase pursuant to the Offer as soon as practicable
after the expiration of the Offer.
(b) As soon as practicable on the date of
commencement of the Offer, Parent and Sub shall file with
the SEC a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and the documents therein
pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the 'Offer Documents'),
shall hand deliver a copy of the Offer Documents to the
Company at its principal executive office, shall give the
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telephonic notice required by SEC Rule 14d-3(a)(3) to the
American Stock Exchange (if practicable prior to the opening
of such Exchange) and shall mail a copy of the Offer
Documents to the American Stock Exchange by means of first-
class mail. Each of Parent, Sub and the Company shall
promptly correct any information provided by it for use in
the Offer Documents if and to the extent that such
information shall have become false or misleading in any
material respect, and each of Parent and Sub further agrees
to take all steps necessary to cause the Offer Documents as
so corrected to be filed with the SEC and to be disseminated
to the Company's shareholders, in each case as and to the
extent required by applicable Federal securities laws.
Parent and Sub shall provide the Company and its counsel in
writing with any comments Parent, Sub or their counsel may
receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
SECTION 1.02. Company Actions. (a) The Company
hereby approves of and consents to the Offer and represents
that the Board of Directors of the Company, at a meeting
duly called and held, has duly approved this Agreement, the
Offer and the Merger (including for the purposes of Section
912 of the New York Business Corporation Law (the 'BCL'))
and the Agreement, dated as of the date hereof (the
'Stockholder Agreement'), among Parent, Sub and Agway
Holdings, Inc. ('AHI'), determined that the terms of the
Offer and the Merger are fair to, and in the best interests
of, the Company and the Company's shareholders, recommended
that the Company's shareholders accept the Offer and tender
their shares pursuant to the Offer, approved the
transactions contemplated by this Agreement and the
Stockholder Agreement and waived the Company's rights under
Article 4(d) of the Company's certificate of incorporation
with respect to shares of Class B Common Stock to be sold to
and purchased by Sub pursuant to the Offer. The Company
further represents that Donaldson, Lufkin & Jenrette
Securities Corporation ('DLJ') and Goldman, Sachs & Co.
('Goldman Sachs' and, together with DLJ, the 'Advisors')
have each delivered to the Board of Directors of the Company
its written opinion that, in the case of DLJ, the
consideration to be received by holders of shares of Class A
Common Stock of the Company pursuant to the Offer and the
Merger is fair to such holders from a financial point of
view, and in the case of Goldman Sachs, the $19 per share of
Class B Common Stock in cash to be received by the holders
of shares of Class B Common Stock in the Offer and the
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Merger is fair to such holders. The Company has been
advised that all its directors and executive officers
currently intend to tender their Shares pursuant to the
Offer.
(b) As soon as practicable on the date the
recommendation of the Company with respect to the Offer is
first published or sent or given to the shareholders of the
Company, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer (such Schedule 14D-9, as amended from
time to time, the 'Schedule 14D-9') containing the
determinations and recommendations regarding the Offer
described in Section 1.02(a), shall hand deliver a copy of
the Schedule 14D-9 to Sub at its principal office, shall
give the telephonic notice required by SEC Rule 14d-9(a)(2)
to the American Stock Exchange (if possible prior to the
opening of the market), shall mail a copy of the Schedule
14D-9 to the American Stock Exchange by means of first-class
mail and shall mail the Schedule 14D-9 to the shareholders
of the Company. Each of the Company, Parent and Sub shall
promptly correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any
material respect, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to the Company's
shareholders, in each case as and to the extent required by
applicable Federal securities laws. The Company shall
provide Parent and its counsel in writing with any comments
the Company or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer, the Company
shall cause its transfer agent to furnish Sub promptly with
mailing labels containing the names and addresses of the
record holders of Common Stock as of a recent date and of
those persons becoming record holders subsequent to such
date, together with copies of all lists of shareholders,
security position listings and computer files and all other
information in the Company's possession or control regarding
the record and beneficial owners of Common Stock, and shall
furnish to Sub such information and assistance (including
updated lists of shareholders, security position listings
and computer files) as Parent may reasonably request in
communicating the Offer to the Company's shareholders.
Subject to the requirements of applicable law, and except
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for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate
the Merger, until the consummation of the Merger Parent and
Sub shall hold in confidence the information contained in
any such labels, listings and files, shall use such
information only in connection with the Offer and the Merger
and, if this Agreement shall be terminated, shall, upon
request, deliver to the Company all copies of such
information then in their possession.
ARTICLE II
The Merger
SECTION 2.01. The Merger. Upon the terms and
subject to the conditions set forth in this Agreement, and
in accordance with the BCL, Sub shall be merged with and
into the Company at the Effective Time of the Merger (as
defined in Section 2.03). Following the Merger, the
separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation (the
'Surviving Corporation') and shall succeed to and assume all
the rights and obligations of Sub in accordance with the
BCL.
SECTION 2.02. Closing. The closing of the Merger
(the 'Closing') shall take place at 10:00 a.m. on a date to
be specified by the parties, which (subject to satisfaction
or waiver of the conditions set forth in Sections 7.02 and
7.03) shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in
Section 7.01 (the 'Closing Date'), at the offices of
Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue,
New York, N.Y. 10019, unless another date or place is agreed
to in writing by the parties hereto.
SECTION 2.03. Effective Time. As soon as practi-
cable following the satisfaction or waiver of the conditions
set forth in Article VII, the parties shall file a certifi-
cate of merger or other appropriate documents (in any such
case, the 'Certificate of Merger') executed in accordance
with the relevant provisions of the BCL and shall make all
other filings or recordings required under the BCL, it being
understood that if Sub then owns at least 90% of the
outstanding shares of each class of Common Stock the Merger
shall be effected under the procedures permitted by
Section 905 of the BCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with
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the New York Secretary of State, or at such other time as
Sub and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective
being the 'Effective Time of the Merger').
SECTION 2.04. Effects of the Merger. The Merger
shall have the effects set forth in the BCL, including
Section 906 thereof.
SECTION 2.05. Certificate of Incorporation and
By-laws. (a) The Certificate of Incorporation of the
Surviving Corporation shall be amended, to the extent
necessary, to read as provided in Exhibit B, until there-
after changed or amended as provided therein or by applica-
ble law.
(b) The By-laws of Sub as in effect at the
Effective Time of the Merger shall be the By-laws of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 2.06. Directors. The directors of Sub at
the Effective Time of the Merger shall be the directors of
the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. With the exception of
the Company's Chairman of the Board, the officers of the
Company at the Effective Time of the Merger shall be the
officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be; provided, however, that the Chairman of the Board and,
at the request of Parent or Sub, any officer who would be
entitled, under the terms of any severance or similar plan,
to receive severance benefits upon such officer's voluntary
departure from the Company upon completion of the Merger,
shall tender their resignations immediately following the
Effective Time of the Merger.
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ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Stock. As of the
Effective Time of the Merger, by virtue of the Merger and
without any action on the part of the holder of any shares
of Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and
outstanding share of the capital stock of Sub shall be
converted into and become one fully paid and nonassess-
able share of Common Stock, par value $0.01 per share,
of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent
Owned Stock. Each share of Common Stock that is owned
by the Company or by any subsidiary of the Company and
each share of Common Stock that is owned by Parent, Sub
or any other subsidiary of Parent shall automatically
be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange
therefor.
(c) Conversion of Common Stock. Subject to
Sections 3.01(b) and 3.01(d), each issued and
outstanding share of Common Stock shall be converted
into the right to receive from Parent the cash price
per share of Common Stock paid pursuant to the Offer
or, if no shares of Common Stock are purchased pursuant
to the Offer, the highest price per share offered by
Sub in the Offer (the 'Merger Consideration'). As of
the Effective Time of the Merger, all such shares of
Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing
any such shares of Common Stock shall cease to have any
rights with respect thereto, except the right to
receive the Merger Consideration without interest.
(d) Shares of Dissenting Shareholders. Notwith-
standing anything in this Agreement to the contrary,
any issued and outstanding shares of Common Stock held
by a Dissenting Shareholder shall not be converted as
described in Section 3.01(c) but shall become the right
to receive such consideration as may be determined to
be due to such Dissenting Shareholder pursuant to the
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<PAGE>
laws of the State of New York; provided, however, that
the shares of Common Stock outstanding immediately
prior to the Effective Time of the Merger and held by a
Dissenting Shareholder who shall, after the Effective
Time of the Merger, withdraw his demand for appraisal
or lose his right of appraisal, in either case pursuant
to the BCL, shall be deemed to be converted as of the
Effective Time of the Merger, into the right to receive
the Merger Consideration. The Company shall give
Parent (i) prompt notice of any written demands for
appraisal of shares of Common Stock received by the
Company and (ii) the opportunity to direct all negotia-
tions and proceedings with respect to any such demands.
The Company shall not, without the prior written
consent of Parent, voluntarily make any payment with
respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
SECTION 3.02. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time of the
Merger, Parent shall select a bank or trust company to act
as exchange agent (the 'Exchange Agent') for the exchange of
the Merger Consideration upon surrender of certificates
representing Common Stock.
(b) Parent To Provide Merger Consideration.
Parent shall take all steps to provide to the Exchange Agent
promptly after the Effective Time of the Merger all the
funds payable in exchange for the outstanding shares of
Common Stock pursuant to Section 3.01.
(c) Exchange Procedure. As soon as reasonably
practicable after the Effective Time of the Merger, the
Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the
Effective Time of the Merger represented outstanding shares
of Common Stock (the 'Certificates') whose shares were
converted into the right to receive the Merger Consideration
pursuant to Section 3.01, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall
be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effect-
ing the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Parent, together with such
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<PAGE>
letter of transmittal, duly executed, and such other docu-
ments as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration into which the
shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to
Section 3.01 and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of
ownership of Common Stock which is not registered in the
transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate
so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time
after the Effective Time of the Merger to represent only the
right to receive upon such surrender the Merger
Consideration, without interest, into which the shares of
Common Stock theretofore represented by such Certificate
shall have been converted pursuant to Section 3.01. No
interest will be paid or will accrue on the Merger
Consideration upon the surrender of any Certificate.
(d) No Further Ownership Rights in Common Stock.
All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of
Common Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a
record date prior to the Effective Time of the Merger which
may have been declared or made by the Company on such shares
of Company Common Stock in accordance with the terms of this
Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time of the Merger and have
not been paid prior to surrender, and there shall be no
further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Common
Stock which were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time
of the Merger, Certificates are presented to the Surviving
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Corporation for any reason, they shall be canceled and
exchanged as provided in this Article III.
(e) No Liability. None of Parent, Sub, the
Company or the Exchange Agent shall be liable to any person
in respect of any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have
been surrendered prior to three years after the Effective
Time of the Merger (or immediately prior to such earlier
date on which any payment pursuant to this Article III would
otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 4.01(d))), the
payment in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of
the Company. The Company represents and warrants to Parent
and Sub as follows:
(a) Organization, Standing and Corporate Power.
Each of the Company and each of its subsidiaries is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corpo-
rate power and authority to carry on its business as
now being conducted, except where the failure to be so
organized, existing or in good standing or to have such
power would not, individually or in the aggregate, have
a material adverse effect on the Company. Each of the
Company and each of its subsidiaries is duly qualified
or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so
qualified or licensed (individually or in the
aggregate) would not have a material adverse effect on
the Company. The Company has delivered to Parent
complete and correct copies of its Certificate of
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Incorporation and By-laws and the certificates of
incorporation and by-laws of its subsidiaries, in each
case as amended to the date of this Agreement.
(b) Subsidiaries. The disclosure schedule
previously delivered by the Company to Parent (the
'Disclosure Schedule') lists each subsidiary of the
Company. All the outstanding shares of capital stock
of each such subsidiary have been validly issued and
are fully paid and nonassessable and, except as set
forth in the Disclosure Schedule, are owned by the
Company, by another subsidiary of the Company or by the
Company and another such subsidiary, free and clear of
all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever
(collectively, 'Liens'), except as set forth in the
Disclosure Schedule. Except for the capital stock of
its subsidiaries and except for the ownership interests
set forth in the Disclosure Schedule, the Company does
not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, part-
nership, joint venture or other entity.
(c) Capital Structure. The authorized capital
stock of the Company consists of 10,125,000 shares of
Class A Common Stock and 4,050,000 shares of Class B
Common Stock. At the close of business on
September 27, 1994, (i) 6,633,129 shares of Class A
Common Stock and 2,056,876 shares of Class B Common
Stock were issued and outstanding, (ii) no shares of
Common Stock were held by the Company in its treasury
and (iii) 474,153 shares of Class A Common Stock were
reserved for issuance pursuant to options outstanding
under the Stock Plans (as defined in Section 6.04).
Except as set forth above, at the close of business on
September 27, 1994, no shares of capital stock or other
voting securities of the Company were issued, reserved
for issuance or outstanding. There are no outstanding
stock appreciation rights which were not granted in
tandem with a related Employee Stock Option (as defined
in Section 6.04). All outstanding shares of capital
stock of the Company are, and all shares which may be
issued pursuant to the Stock Plans (as defined in
Section 6.04) will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are not any bonds,
debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or
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<PAGE>
exchangeable for, securities having the right to vote)
on any matters on which shareholders of the Company may
vote. Except as set forth above, as of the date of
this Agreement, there are not any securities, options,
warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Company or
any of its subsidiaries, directly or indirectly, to
offer, issue, deliver or sell, or cause to be offered,
issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of
any of its subsidiaries or obligating the Company or
any of its subsidiaries, directly or indirectly, to
offer, issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking (other than this
Agreement). As of the date of this Agreement, there
are not any outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock
of the Company or any of its subsidiaries (other than
this Agreement).
(d) Authority; Noncontravention. The Company has
the requisite corporate power and authority to enter
into this Agreement and, subject, in the case of the
Merger, to approval of this Agreement by the Required
Company Shareholder Vote (as defined in
Section 4.01(m)) (except as otherwise permitted by
Section 905 of the BCL), to consummate the transactions
contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the
consummation by the Company of the transactions contem-
plated by this Agreement have been duly authorized by
all necessary corporate action on the part of the
Company, subject, in the case of the Merger, to
approval of this Agreement by the Required Company
Shareholder Vote (except as otherwise permitted by
Section 905 of the BCL). This Agreement has been duly
executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforce-
able against the Company in accordance with its terms.
The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of
this Agreement will not, conflict with, or result in
any violation of, or default (with or without notice or
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<PAGE>
lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the
properties or assets of the Company or any of its
subsidiaries under, (i) subject, in the case of the
Merger, to approval of this Agreement by the Required
Company Shareholder Vote, the Certificate of
Incorporation or By-laws of the Company or the
comparable charter or organizational documents of any
of its subsidiaries, (ii) subject to the receipt of the
consents specifically listed in Items 3 and 5 of the
Disclosure Schedule, any loan or credit agreement,
note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or
license applicable to the Company or any of its
subsidiaries or their respective properties or assets
or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its
subsidiaries or their respective properties or assets,
other than, in the case of clause (ii) or (iii), any
such conflicts, violations, defaults, rights or Liens
that individually or in the aggregate would not
(x) have a material adverse effect on the Company,
(y) impair the ability of the Company to perform its
obligations under this Agreement or (z) prevent, enjoin
or materially delay the consummation of or alter the
terms of any of the transactions contemplated by this
Agreement. No consent, approval, order or authoriza-
tion of, or registration, declaration or filing with,
any Federal, state or local government or any court,
administrative or regulatory agency or commission or
other governmental authority or agency, domestic or
foreign (a 'Governmental Entity'), is required by or
with respect to the Company or any of its subsidiaries
in connection with the execution and delivery of this
Agreement by the Company or the consummation by the
Company of the transactions contemplated by this
Agreement, except for (i) the filing of a premerger
notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the 'HSR Act'), (ii) the filing with the SEC of (w)
the Schedule 14D-9, (x) the Information Statement (as
defined in Section 4.01(f)), (y) a proxy statement or
information statement relating to the approval by the
Company's shareholders of this Agreement, if such
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approval is required by law (as amended or supplemented
from time to time, the 'Proxy Statement'), and (z) such
reports under Section 13(a) of the Securities Exchange
Act of 1934, as amended (the 'Exchange Act'), as may be
required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the
filing of the Certificate of Merger with the New York
Secretary of State and appropriate documents with the
relevant authorities of other states in which the
Company is qualified to do business, (iv) such notices,
filings and consents as may be required under the
Illinois Responsible Property Transfer Act of 1988 and
the Indiana Responsible Property Transfer Law, (v) such
filings as may be required in connection with the taxes
described in Section 6.09, (vi) the filings required by
Article 16 of the BCL and (vii) such other consents,
approvals, orders, authorizations, registrations,
declarations and filings as are specifically set forth
in the Disclosure Schedule.
(e) SEC Documents; Financial Statements;
Undisclosed Liabilities. The Company has filed, as and
when required, all required reports, schedules, forms,
statements and other documents with the SEC since
June 25, 1994 (the 'SEC Documents'). As of their
respective dates, the SEC Documents complied in all
material respects with the requirements of the
Securities Act of 1933 (the 'Securities Act') or the
Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. Except to the
extent that information contained in any SEC Document
has been revised or superseded by a later Company Filed
SEC Document (as defined in Section 4.01(g)), none of
the SEC Documents contains any untrue statement of a
material fact or omits to state any material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the circum-
stances under which they were made, not misleading.
The financial statements of the Company included in the
SEC Documents comply as to form in all material
respects with applicable accounting requirements and
the published rules and regulations of the SEC with
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respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated
in the notes thereto) and fairly present the
consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit
adjustments). The consolidated balance sheet for the
Company and its subsidiaries as of June 25, 1994,
contained in the Disclosure Schedule fairly presents
the consolidated financial position of the Company and
its consolidated subsidiaries as of that date (subject
to annual year-end audit adjustments). Except as set
forth in the Company Filed SEC Documents or in the
Disclosure Schedule, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or
otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance
sheet of the Company and its consolidated subsidiaries
or in the notes thereto and which, individually or in
the aggregate, could reasonably be expected to have a
material adverse effect on the Company.
(f) Information Supplied. None of the informa-
tion supplied or to be supplied by the Company for
inclusion or incorporation by reference in the Offer
Documents or the information statement to be filed by
the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the
'Information Statement') and none of the information in
the Schedule 14D-9 or, if approval of this Agreement by
the shareholders of the Company is required by law, the
Proxy Statement, will, in the case of the Offer
Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents,
the Schedule 14D-9 and the Information Statement are
filed with the SEC or published, sent or given to the
Company's shareholders, or, in the case of any Proxy
Statement, at the date the Proxy Statement is filed
with the SEC or at the time the Proxy Statement is
first mailed to the Company's shareholders or at the
time of the meeting of the Company's shareholders held
to vote on approval of this Agreement, contain any
17
<PAGE>
untrue statement of a material fact or omit to state
any material fact required to be stated therein or
necessary in order to make the statements therein, in
light of the circumstances under which they are made,
not misleading (except that no representation or
warranty is made by the Company with respect to
information supplied by Parent or Sub for inclusion in
the Schedule 14D-9, the Information Statement or the
Proxy Statement). The Schedule 14D-9, the Information
Statement and any Proxy Statement will comply as to
form in all material respects with the requirements of
the Exchange Act and the rules and regulations there-
under.
(g) Absence of Certain Changes or Events. Except
as disclosed in the SEC Documents filed and publicly
available prior to the date of this Agreement (the
'Company Filed SEC Documents') or the Disclosure
Schedule, since the date of the most recent financial
statements included in the Company Filed SEC Documents,
the Company and its subsidiaries have conducted their
business only in the ordinary course in all material
respects, and there has not been (i) any material
adverse change, or any event or condition which could
reasonably be expected to result in a material adverse
change, in the Company, other than changes, events or
conditions after the date hereof relating to any
violation of or default under the Company Finance
Documents (as defined in Section 10.03) unless such
violation or default (A) is a default in the payment
when due of any interest on or principal of the
indebtedness thereunder or (B) results in an
acceleration of the maturity of the indebtedness
thereunder or the taking of any action by the lenders
under the Company Finance Documents to realize on the
collateral securing such indebtedness, (ii) subject to
Section 5.01(a)(i), except for the regular quarterly
dividends not in excess of $.16 per share of Common
Stock with customary record and payment dates, any
declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital
stock, (iii) any split, combination or reclassification
of any of its capital stock or any issuance or the
authorization of any issuance of any other securities
in respect of, in lieu of or in substitution for shares
of its capital stock (other than pursuant to this
Agreement), (iv) (A) any granting by the Company or any
18
<PAGE>
of its subsidiaries to any director, officer or
employee of the Company or any of its subsidiaries of
any increase in compensation or benefits, except in the
ordinary course of business consistent with prior
practice or as was required under employment agreements
in effect as of the date of this Agreement and listed
in the Disclosure Schedule, (B) any granting by the
Company or any of its subsidiaries to any such
director, officer or employee of any increase in
severance or termination pay or similar benefit, except
as was required under employment, severance or
termination agreements or plans in effect as of the
date of this Agreement and listed in the Disclosure
Schedule or (C) any entry by the Company or any of its
subsidiaries into any employment, deferred
compensation, severance or termination agreement or
other similar agreement (or any amendment to any such
existing agreement) with any such director, officer or
employee, (v) any damage, destruction or loss, whether
or not covered by insurance, that has or could have a
material adverse effect on the Company, (vi) any change
in accounting methods, principles or practices by the
Company or its subsidiaries, except insofar as may have
been required to ensure compliance with generally
accepted accounting principles, (vii) prior to the date
of this Agreement, any (A) incurrence, assumption or
guarantee by the Company or any of its subsidiaries of
any indebtedness, other than in the ordinary course of
business in amounts and on terms consistent with past
practices, (B) issuance or sale of any securities
convertible into or exchangeable for debt securities of
the Company or any of its subsidiaries or (C) issuance
or sale of options or other rights to acquire from the
Company or any of its subsidiaries, directly or
indirectly, debt securities of the Company or any of
its subsidiaries or any securities convertible into or
exchangeable for any such debt securities, (viii) prior
to the date of this Agreement, any creation or
assumption by the Company or any of its subsidiaries of
any Lien on any material asset, other than in the
ordinary course of business consistent with past
practices or as required by the Company Finance
Documents, (ix) prior to the date of this Agreement,
any making of any loan, advance or capital contribution
to or investment in any person other than loans,
advances or capital contributions to or investments in
(A) wholly owned subsidiaries of the Company made in
the ordinary course of business consistent with past
19
<PAGE>
practice, (B) Parent and (C) directors, officers and
employees of the Company and its subsidiaries made in
the ordinary course of business consistent with past
practice, (x) prior to the date of this Agreement, any
transaction or commitment made, or any contract or
agreement entered into, by the Company or any of its
subsidiaries that is material to the Company, other
than those contemplated by this Agreement, or (xi) any
agreement or arrangement made by the Company or any of
its subsidiaries to take any action which, if taken
prior to the date hereof, would have made any
representation or warranty in this Section 4.01(g)
untrue or incorrect in any material respect.
(h) Litigation. Except as disclosed in the
Company Filed SEC Documents or in the Disclosure
Schedule, there is no investigation by any Governmental
Entity, suit, action or proceeding pending or, to the
knowledge of the Company, threatened against or affect-
ing the Company or any of its subsidiaries or any of
their respective properties or assets (and the Company
is not aware of any basis for any such investigation,
suit, action or proceeding) that, individually or in
the aggregate, could reasonably be expected to (i) have
a material adverse effect on the Company, (ii) impair
the ability of the Company to perform its obligations
under this Agreement or (iii) prevent, enjoin or
materially delay the consummation of or alter the terms
of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunc-
tion, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of
its subsidiaries having, or which, insofar as reason-
ably can be foreseen, in the future would have, any
such effect.
(i) Absence of Changes in Benefit Plans. Except
(i) as disclosed in the Company Filed SEC Documents,
(ii) as contemplated by Section 6.04(a) and (iii) for
the change to the KES Plan (as defined in
Section 6.05(b)) expressly contemplated by the
Disclosure Schedule, since the date of this Agreement,
there has not been any adoption or amendment in any
material respect by the Company or any of its
subsidiaries of any collective bargaining agreement or
any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock,
20
<PAGE>
retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan,
arrangement or understanding (whether or not legally
binding) providing benefits to any current or former
employee, officer or director of the Company or any of
its subsidiaries (collectively, 'Benefit Plans').
Except as disclosed in the Company Filed SEC Documents
or in the Disclosure Schedule, there exist no
employment, consulting, severance, termination or
indemnification agreements, arrangements or
understandings, written or oral, between the Company or
any of its subsidiaries and any current or former
officer, director, employee or consultant of the
Company or any of its subsidiaries which require
aggregate annual payments or total payments over the
life of such agreement, arrangement or understanding to
such officer, director, employee or consultant in
excess of $25,000 or $40,000, respectively, other than
any such agreement, arrangement or understanding
terminable without penalty by the Company or the
applicable subsidiary upon not more than one month's
notice. The Company has delivered to Parent a true and
complete copy of each such agreement and an accurate
summary of each such other arrangement or
understanding.
(j) ERISA Compliance. (i) The Disclosure
Schedule contains a list and brief description of all
'employee pension benefit plans' (as defined in
Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ('ERISA')), 'employee welfare
benefit plans' (as defined in Section 3(1) of ERISA)
and all other Benefit Plans maintained, or contributed
to, by the Company or any of its subsidiaries for the
benefit of any current or former employees, officers or
directors of the Company or any of its subsidiaries.
The Company has delivered to Parent true, complete and
correct copies of (w) each Benefit Plan (or, in the
case of any unwritten Benefit Plans, descriptions
thereof), (x) the most recent annual report on Form
5500 filed with the Internal Revenue Service with
respect to each Benefit Plan (if any such report was
required), (y) the most recent summary plan description
for each Benefit Plan for which such summary plan
description is required and (z) each trust agreement
and group annuity contract relating to any Benefit
Plan.
21
<PAGE>
(ii) Except as disclosed
in the Disclosure Schedule, all Benefit Plans that are
employee benefit pension plans (each, a 'Pension Plan')
have been the subject of determination letters from the
Internal Revenue Service to the effect that such Pension
Plans are qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the
Internal Revenue Code of 1986, as amended (the 'Code'),
and no such determination letter has been revoked nor,
to the knowledge of the Company, has revocation been
threatened, nor has any such Pension Plan been amended
since the date of its most recent determination letter
or application therefor in any respect that would
adversely affect its qualification or materially
increase its costs.
(iii) The Company has
furnished to Parent the most recent actuarial report or
valuation with respect to each Pension Plan subject to
Title IV of ERISA, other than any Pension Plan that is a
'multiemployer plan' (as such term is defined in Section
4001(a)(3) of ERISA; collectively, the 'Multiemployer
Pension Plans'). The information supplied to the actuary
by the Company for use in preparing those reports or
valuations was true and correct in all material
respects. None of the Pension Plans has an
'accumulated funding deficiency' (as such term is
defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived. Parent has received a
true and complete copy of the most recent actuarial
report prepared by the Company's actuaries. The
assumptions used in such actuarial report and applied
in making such determination were, and continue to be,
reasonable. None of the Company, any of its
subsidiaries, any officer of the Company or any of its
subsidiaries or any of the Benefit Plans which are
subject to ERISA, including the Pension Plans, any
trusts created thereunder or any trustee or administra-
tor thereof, has engaged in a 'prohibited transaction'
(as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject the Com-
pany, any of its subsidiaries or any officer of the
Company or any of its subsidiaries to the tax or
penalty on prohibited transactions imposed by such
Section 4975 or to any liability under Section 502(i)
or (1) of ERISA. Neither any of such Benefit Plans nor
any of such trusts has been terminated, nor has there
22
<PAGE>
been any 'reportable event' (as that term is defined in
Section 4043 of ERISA) with respect thereto, during the
last five years. Neither the Company nor any of its
subsidiaries has suffered or otherwise caused a 'com-
plete withdrawal' or a 'partial withdrawal' (as such
terms are defined in Sections 4203 and Section 4205,
respectively, of ERISA) since the effective date of
such Sections 4203 and 4205 with respect to any of the
Multiemployer Pension Plans.
(iv) With respect to any
Benefit Plan that is an employee welfare benefit plan,
except as disclosed in the Disclosure Schedule, (x) no
such Benefit Plan is unfunded or funded through a 'welfare
benefits fund', as such term is defined in Section 419(e)
of the Code and (y) each such Benefit Plan that is a
'group health plan', as such term is defined in Section
5000(b)(1) of the Code, complies with the applicable
requirements of Section 4980B(f) of the Code.
(k) Taxes. Except as set forth in the Disclosure
Schedule, each of the Company and each of its
subsidiaries has timely filed all tax returns and
reports required to be filed by it and has paid (or the
Company has paid on its behalf) all taxes required to
be paid by it, and the most recent financial statements
contained in the Company Filed SEC Documents reflect an
adequate reserve for all taxes payable by the Company
and its subsidiaries for all taxable periods and
portions thereof through the date of such financial
statements. No deficiencies for any taxes have been
proposed, asserted or assessed against the Company or
any of its subsidiaries, and no requests for waivers of
the time to assess any such taxes are pending. The
Federal income tax returns of the Company and each of
its subsidiaries consolidated in such returns have been
examined by and settled with the United States Internal
Revenue Service for all years through 1988. As used in
this Agreement, 'taxes' shall include all Federal,
state, local and foreign income, property, sales,
excise and other taxes, tariffs or governmental charges
of any nature whatsoever and all penalties and interest
with respect thereto. The Disclosure Schedule sets
forth the Company's most recent estimate of the basis,
as defined in Section 1012 of the Code, as of
December 24, 1993, of the Company's assets (by asset
categories). Such estimate was made in good faith,
applying reasonable assumptions.
23
<PAGE>
(l) No Excess Parachute Payments. Except as set
forth in the Disclosure Schedule, any amount that could
be received (whether in cash or property or the vesting
of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer
or director of the Company or any of its affiliates who
is a 'disqualified individual' (as such term is defined
in proposed Treasury Regulation Section 1.280G-1) under
any employment, severance or termination agreement,
other compensation arrangement or Benefit Plan cur-
rently in effect would not be characterized as an
'excess parachute payment' (as such term is defined in
Section 280G(b)(1) of the Code). Except as set forth
in the Disclosure Schedule, no 'covered employee' (as
such term is defined in Section 162(m) of the Code) of
the Company or any of its subsidiaries is entitled to,
or as a result of the transactions contemplated hereby
or of a change in control of the Company would be
entitled to, 'applicable employee remuneration' (as
such term is defined in Section 162(m) of the Code) not
deductible by reason of Section 162(m) of the Code.
(m) Voting Requirements. In the event
Section 905 of the BCL does not eliminate the need for
the approval and adoption by the shareholders of the
Company of this Agreement and the plan of merger
included herein, the affirmative votes of (i) the
holders of two-thirds of the outstanding shares of
Class A Common Stock and Class B Common Stock, voting
as one class, (ii) the holders of a majority of the
outstanding shares of the Class A Common Stock and
(iii) the holders of a majority of the outstanding
shares of the Class B Common Stock approving this
Agreement (the 'Required Company Shareholder Vote') are
the only votes of the holders of any class or series of
the Company's capital stock necessary to consummate the
Merger.
(n) State Takeover Statutes. The Board of
Directors of the Company has approved the Offer, the
Merger and this Agreement, and such approval is suffi-
cient to render inapplicable to the Offer, the Merger,
this Agreement and the transactions contemplated by
this Agreement the provisions of Section 912 of the
BCL. To the best of the Company's knowledge, other
than Article 16 and Section 912 of the BCL, no state
takeover statute or similar statute or regulation
applies or purports to apply to the Offer, the Merger,
24
<PAGE>
this Agreement or any of the transactions contemplated
by this Agreement.
(o) Brokers; Schedule of Fees and Expenses. No
broker, investment banker, financial advisor or other
person, other than the Advisors, is entitled to any
broker's, finder's, financial advisor's or other
similar fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The
Company has provided to Parent true and complete copies
of its agreements with the Advisors.
(p) Compliance with Laws. (i) Each of the
Company and its subsidiaries has in effect all Federal,
state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ('Permits')
necessary for it to own, lease or operate its
properties and assets and to carry on its business as
now conducted, and there has occurred no default under
any such Permit, except for the absence of Permits and
for defaults under Permits which absence or defaults,
individually or in the aggregate, could not reasonably
be expected to have a material adverse effect on the
Company. Except as disclosed in the Company Filed SEC
Documents, the Company and its subsidiaries are in
compliance with all applicable statutes, laws,
ordinances, regulations, rules, judgments, decrees or
orders of any Governmental Entity, except for possible
noncompliance which, individually or in the aggregate,
could not reasonably be expected to have a material
adverse effect on the Company.
(ii) The Company has provided
Parent with certain environmental materials relating to the
facilities and operations of the Company and its
subsidiaries, which materials are identified in the
Disclosure Schedule (the 'Environmental Materials').
Except as set forth in the Disclosure Schedule, (A) neither
the Company nor any of its subsidiaries have received any
written communication from a Governmental Entity that
alleges that the Company or any subsidiary is not in
compliance in any material respect with any
Environmental Laws, (B) each of the Company and its
subsidiaries hold, and are in compliance with, all
Permits required for the Company and its subsidiaries
to conduct their respective businesses under
25
<PAGE>
Environmental Laws, and are in compliance with all
Environmental Laws, except for the absence of such
Permits and incidents of noncompliance which absence or
noncompliance, individually or in the aggregate, could
not reasonably be expected to have a material adverse
effect on the Company, and (C) the Company has no
knowledge of any environmental materials, events or
facts or information other than as set forth in the
Disclosure Schedule which disclose or could reasonably
be expected to give rise to an environmental liability
which would have a material adverse effect on the
Company. As used in this Agreement, the term
'Environmental Laws' means, as of the Closing Date, any
applicable treaties, laws, regulations, enforceable
requirements, orders, decrees or judgments issued,
promulgated or entered into by any Governmental Entity,
which relate to (A) pollution or protection of the
environment or (B) Hazardous Materials (as hereinafter
defined) generation, storage, use, handling, disposal
or transportation including the Comprehensive
Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. 9601 et seq.
('CERCLA'), the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. 6901 et seq., the Federal
Water Pollution Control Act, as amended, 33 U.S.C.
1251 et seq., the Clean Air Act of 1970, as amended,
42 U.S.C. 7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C. 2601 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. 1801 et
seq., and any similar or implementing state or local
law, and all amendments or regulations promulgated
thereunder. As used in this Agreement, the term
'Hazardous Materials' means all explosive or regulated
radioactive materials or substances, hazardous or toxic
substances, wastes or chemicals, petroleum or petroleum
distillates, asbestos or asbestos containing materials,
and all other materials or chemicals regulated pursuant
to any Environmental Law, including materials listed in
49 C.F.R. 172.101 and materials defined as hazardous
pursuant to Section 101(14) of CERCLA.
(q) Contracts; Debt Instruments. (i) Neither
the Company nor any of its subsidiaries is in violation
of or in default under (nor does there exist any
condition which upon the passage of time or the giving
of notice would cause such a violation of or default
under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession,
26
<PAGE>
franchise, license or any other contract, agreement,
arrangement or understanding, to which it is a party or
by which it or any of its properties or assets is
bound, except as set forth in the Disclosure Schedule
and except for violations or defaults that would not,
individually or in the aggregate, result in a material
adverse effect on the Company.
(ii) Set forth in the
Disclosure Schedule is (x) a list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other
agreements and instruments pursuant to which any
indebtedness of the Company or any of its subsidiaries in
an aggregate principal amount in excess of $1,000,000 is
outstanding or may be incurred and (y) the respective
principal amounts outstanding thereunder, in each case as
of February 26, 1994. The Company has provided to Parent
a true and complete copy of all such documents and
instruments. For purposes of this Agreement,
'indebtedness' shall mean, with respect to any person,
without duplication, (A) all obligations of such person
for borrowed money, or with respect to deposits or
advances of any kind to such person, (B) all
obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (C) all
obligations of such person upon which interest charges
are customarily paid, (D) all obligations of such
person under conditional sale or other title retention
agreements relating to property purchased by such
person, (E) all obligations of such person issued or
assumed as the deferred purchase price of property or
services (excluding obligations of such person to
creditors for raw materials, inventory, services and
supplies incurred in the ordinary course of such
person's business), (F) all capitalized lease
obligations of such person, (G) all obligations of
others secured by any lien on property or assets owned
or acquired by such person, whether or not the
obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or
currency hedging transactions (valued at the
termination value thereof), (I) all letters of credit
issued for the account of such person (excluding
letters of credit issued for the benefit of suppliers
to support accounts payable to suppliers incurred in
the ordinary course of business) and (J) all guarantees
and arrangements having the economic effect of a
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<PAGE>
guarantee of such person of any indebtedness of any
other person.
(iii) Set forth in the
Disclosure Schedule is a list of (A) any letter of intent,
agreement in principle, other understanding or agreement in
effect on the date hereof for the future sale, lease or
other disposition by the Company or any of its subsidiaries
of any assets, except for sales of inventory or assets
no longer used or useful in the conduct of its
business, in each case in the ordinary course and
consistent with past practice, (B) any letter of
intent, agreement in principle, other understanding or
agreement in effect on the date hereof to which the
Company or any of its subsidiaries is a party and that
substantially limits the freedom of the Company or any
of its subsidiaries to (1) compete in any line of
business or with any person or in any area or which
would so limit the freedom of the Company or any
subsidiaries after the Effective Time of the Merger
(other than any such agreement that has been in effect
for longer than seven years if the Company and all its
subsidiaries are currently in material compliance with
such agreement) or (2) sell, lease or otherwise dispose
of any significant portion of the assets of the Company
(determined on a consolidated basis) or (C) any other
agreement in effect on the date hereof not made in the
ordinary course of business and material to the Company
under which the Company or any of its subsidiaries has
material unperformed obligations, if entered into less
than seven years prior to the date hereof, or, with
respect to such agreements entered into before such
date, would, if entered into as of the date hereof, be
considered made not in the ordinary course. The
Company has provided the Parent with a true and
complete copy of all such contracts and agreements.
(r) Title to Properties. (i) Except as set
forth in the Disclosure Schedule, each of the Company
and each of its subsidiaries has good and marketable
title to, or valid leasehold interests in, all its
properties and assets, except for such as are no longer
used or useful in the conduct of its businesses or as
have been disposed of in the ordinary course of
business and except for defects in title, easements,
restrictive covenants and similar encumbrances or
impediments that, in the aggregate, do not and will not
materially interfere with its ability to conduct its
28
<PAGE>
business as currently conducted. All such assets and
properties, other than assets and properties in which
the Company or any of its subsidiaries has leasehold
interests, are free and clear of all Liens other than
those set forth in the Disclosure Schedule and except
for Liens that, in the aggregate, do not and will not
materially interfere with the ability of the Company
and its subsidiaries to conduct their respective
businesses, as currently conducted.
(ii) Except as set forth in
the Disclosure Schedule, each of the Company and each of
its subsidiaries has complied in all material respects with
the terms of all material leases to which it is a party
and under which it is in occupancy, and all such leases
are in full force and effect. Each of the Company and
each of its subsidiaries enjoys peaceful and
undisturbed possession under all such material leases.
(s) Intellectual Property. The Company and its
subsidiaries own, or are validly licensed or otherwise
have the right to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights, copyrights
and other proprietary intellectual property rights and
computer programs (collectively, 'Intellectual Property
Rights') which are material to the conduct of the
business of the Company and its subsidiaries as
currently conducted. The Disclosure Schedule sets
forth a description of all Intellectual Property Rights
which are material to the conduct of the business of
the Company and its subsidiaries as currently
conducted. Except as set forth in the Disclosure
Schedule, no claims are pending or, to the knowledge of
the Company, threatened that the Company or any of its
subsidiaries is infringing or otherwise adversely
affecting the rights of any person with regard to any
Intellectual Property Right. To the knowledge of the
Company, except as set forth in the Disclosure
Schedule, no person is infringing the rights of the
Company or any of its subsidiaries with respect to any
Intellectual Property Right.
29
<PAGE>
SECTION 4.02. Representations and Warranties of
Parent and Sub. Parent and Sub represent and warrant to the
Company as follows:
(a) Organization, Standing and Corporate Power.
Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated and has
the requisite corporate power and authority to carry on
its business as now being conducted, except where the
failure to be so organized, existing or in good
standing or to have such power would not, individually
or in the aggregate, have a material adverse effect on
Parent. Parent has provided the Company with complete
and correct copies of its and Sub's Certificate of
Incorporation and By-laws.
(b) Capital Structure. The authorized capital
stock of Parent consists of 5,000,000 shares of
Preferred Stock, par value $25 per share, and
5,000,000 shares of common stock, par value $5 per
share. At the close of business on September 19, 1994,
(i) 2,043,493 shares of Parent Common Stock and
2,623,604 shares of Parent Preferred Stock were issued
and outstanding. As of the date of this Agreement, the
authorized capital stock of Sub consists of
10,000 shares of common stock, par value $0.01 per
share, all of which have been validly issued, are fully
paid and nonassessable and are owned by Parent free and
clear of any Liens.
(c) Authority; Noncontravention. Parent and Sub
have all requisite corporate power and authority to
enter into this Agreement and to consummate the trans-
actions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and
constitutes a valid and binding obligation of such
party, enforceable against such party in accordance
with its terms. The execution and delivery of this
Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compli-
ance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or
30
<PAGE>
both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under,
(i) the certificate of incorporation or by-laws of
Parent or Sub or the comparable charter or
organizational documents of any other subsidiary of
Parent, (ii) subject to the receipt of the consents
specifically listed in Items 3 and 5 of the Disclosure
Schedule, any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
applicable to Parent or Sub or their respective
properties or assets or (iii) subject to the
governmental filings and other matters referred to in
the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable
to Parent, Sub or any other subsidiary of Parent or
their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights or Liens that individually
or in the aggregate would not (x) have a material
adverse effect on Parent, (y) impair the ability of
Parent and Sub to perform their respective obligations
under this Agreement or (z) prevent, enjoin or
materially delay the consummation of or alter the terms
of any of the transactions contemplated by this
Agreement. No consent, approval, order or
authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or
with respect to Parent, Sub or any other subsidiary of
Parent in connection with the execution and delivery of
this Agreement or the consummation by Parent or Sub, as
the case may be, of any of the transactions
contemplated by this Agreement, except for (i) the
filing of a premerger notification and report form
under the HSR Act, (ii) the filing with the SEC of
(x) the Offer Documents and (y) such reports under
Sections 13 and 16 of the Exchange Act as may be
required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the
filing of the Certificate of Merger with the New York
Secretary of State and appropriate documents with the
relevant authorities of other states in which the
Company is qualified to do business, (iv) such filings
as may be required in connection with the taxes
described in Section 6.09, (v) such notices, filings
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and consents as may be required under the Illinois
Responsible Property Transfer Act of 1988 and the
Indiana Responsible Property Transfer Law, (vi) the
filings required by Article 16 of the BCL and
(vii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings
as may be required under the 'takeover' or 'blue sky'
laws of various states. Neither Parent nor any of its
Affiliates or Associates (as each such term is defined
in Section 912 of the BCL) is, at the date of execution
and delivery of this Agreement, an Interested
shareholder (as such term is defined in 912 of the BCL)
of the Company.
(d) SEC Documents; Financial Statements;
Undisclosed Liabilities. Parent has filed, as and when
required, all required reports, forms and other
documents with the SEC since June 26, 1993 (the 'Parent
SEC Documents'). As of their respective dates, the
Parent SEC Documents complied in all material respects
with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of
the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the
circumstances under which they were made, not mis-
leading. Except to the extent that information
contained in any Parent SEC Document has been revised
or superseded by a later Parent Filed SEC Document (as
defined in Section 4.02(f)), none of the Parent SEC
Documents contains any untrue statement of a material
fact or omits to state any material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. The financial
statements of Parent included in the Parent SEC
Documents comply as to form in all material respects
with applicable accounting requirements and the
published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with
generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis
during the periods involved and fairly present the
consolidated financial position of Parent and its
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consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Parent Filed
SEC Documents, neither Parent nor any of its
subsidiaries has any material liabilities or
obligations required by generally accepted accounting
principles to be recognized or disclosed on a
consolidated balance sheet of Parent and its consoli-
dated subsidiaries or in the notes thereto and which,
individually or in the aggregate, would have a material
adverse effect on Parent.
(e) Information Supplied. None of the informa-
tion supplied or to be supplied by Parent or Sub for
inclusion or incorporation by reference in the
Schedule 14D-9 or, if approval of this Agreement by the
shareholders of the Company is required by law, the
Proxy Statement, and none of the information in the
Offer Documents or the Information Statement will, in
the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the
Offer Documents, the Schedule 14D-9, and the
Information Statement are filed with the SEC or
published, sent or given to the Company's shareholders,
or, in the case of the Proxy Statement, at the date any
Proxy Statement is first mailed to the Company's
shareholders or at the time of the meeting of the
Company's shareholders held to vote on approval of this
Agreement, contain any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading (except that no
representation or warranty is made by Parent or Sub
with respect to information supplied by the Company for
inclusion in the Offer Documents or the Information
Statement). The Offer Documents will comply as to form
in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except
as disclosed in the Parent SEC Documents filed and
publicly available prior to the date of this Agreement
(the 'Parent Filed SEC Documents') or the Disclosure
Schedule, since the date of the most recent financial
statements contained in the Parent Filed SEC Documents,
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Parent has conducted its business only in the ordinary
course and there has not been (i) any material adverse
change, or any event or condition which could
reasonably be expected to result in a material adverse
change, in Parent, (ii) except for regular annual
dividends (in an amount determined in a manner
consistent with Parent's past practice) with customary
record and payment dates, any declaration, setting
aside or payment of any dividend or distribution
(whether in cash, stock or property) with respect to
any of Parent's capital stock, (iii) any split,
combination or reclassification of any of its capital
stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock
or (iv) any change in accounting methods, principles or
practices by Parent, except insofar as may have been
disclosed in the Parent SEC Documents or required to
ensure compliance with generally accepted accounting
principles.
(g) Litigation. Except as disclosed in the
Parent Filed SEC Documents or in the Disclosure
Schedule, there is no investigation by any Governmental
Entity, suit, action or proceeding pending or, to the
knowledge of Parent, threatened against or affecting
Parent or any of its subsidiaries or any of their
respective properties or assets that, individually or
in the aggregate, could reasonably be expected to
(i) have a material adverse effect on Parent,
(ii) impair in any material respect the ability of
Parent to perform its obligations under this Agreement
or (iii) prevent, enjoin or materially delay the
consummation of or alter the terms of any of the
transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding
against Parent or any of its subsidiaries having, or
which is reasonably likely to have, any such effect.
(h) Brokers. No broker, investment banker,
financial advisor or other person, other than Dillon,
Read & Co. Inc., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission
in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on
behalf of Parent or Sub.
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(i) Contracts; Debt Instruments. Neither Parent
nor any of its subsidiaries is in violation of or in
default under (nor does there exist any condition which
upon the passage of time or the giving of notice would
cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture,
lease or other contract, agreement, arrangement or
understanding, to which it is a party or by which it or
any of its properties or assets is bound, except for
violations or defaults that could not, individually or
in the aggregate, reasonably be expected to result in a
material adverse effect on Parent.
(j) Title to Properties. Parent and its
subsidiaries have good and marketable title to, or
valid leasehold interests in, all their material
properties and assets, except as otherwise indicated in
the Disclosure Schedule or for such as are no longer
used or useful in the conduct of its businesses or as
have been disposed of in the ordinary course of
business and except for defects in title, easements,
restrictive covenants and similar encumbrances or
impediments that, in the aggregate, do not and will not
materially interfere with its ability to conduct its
business as currently conducted. All such material
properties and assets, other than properties and assets
in which Parent or any of its subsidiaries has
leasehold interests, and other than as reflected in the
Disclosure Schedule are free and clear of all Liens,
except for Liens that, in the aggregate, do not and
will not materially interfere with the ability of
Parent and its subsidiaries to conduct business as
currently conducted.
(k) Financing. Parent and Sub have funds avail-
able on hand or available pursuant to binding
commitments or 'highly confident' letters from
financing sources sufficient to consummate the Offer
and the Merger on the terms contemplated by this
Agreement, and, at the Effective Time of the Merger,
Parent and Sub will have available all of the funds
necessary (x) to repay the indebtedness outstanding
under the Commercial Bank Credit Agreement (as defined
in Section 10.03(b)), (y) to perform their respective
obligations under this Agreement and (z) to pay all the
related fees and expenses in connection with the
foregoing. Parent has provided to the Company true and
correct copies of all commitment letters, 'highly
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confident' letters and other evidence satisfactory to
the Company that Parent has such sufficient funds.
Parent and Sub shall use all commercially reasonable
efforts to complete and satisfy all conditions to
lending under such finance commitments.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Conduct
of Business by the Company. During the period from the date
of this Agreement to the Effective Time of the Merger, or,
if earlier, the consummation of the Offer, the Company
shall, and shall cause its subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business
organizations, keep available the services of their current
officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that
their goodwill and ongoing businesses shall be unimpaired at
the Effective Time of the Merger. Without limiting the
generality of the foregoing, during the period from the date
of this Agreement to the Effective Time of the Merger, or,
if earlier, the consummation of the Offer, except as set
forth in the Disclosure Schedule, the Company shall not, and
shall not permit any of its subsidiaries to:
(i) (x) except for regular quarterly dividends not
in excess of $.16 per share of Common Stock with
customary record and payment dates, declare, set aside
or pay any dividends on, or make any other
distributions in respect of, any of its capital stock,
other than dividends and distributions by any direct or
indirect wholly owned subsidiary of the Company to its
parent (provided that the Company shall not set as the
record date for a dividend a date earlier than
November 15, 1994), (y) split, combine or reclassify
any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock
or (z) purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any
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rights, warrants or options to acquire any such shares
or other securities;
(ii) offer, issue, deliver,
sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or
convertible securities (other than (x) the issuance of
Common Stock upon the exercise of Employee Stock Options
outstanding on the date of this Agreement in accordance
with their present terms and (y) the issuance of shares of
Class A Common Stock on a one for one basis in connection
with any requested conversion of outstanding shares of
Class B Common Stock to shares of Class A Common Stock
by the holders of Class B Common Stock);
(iii) amend its certificate of
incorporation, by-laws or other comparable charter or
organizational documents;
(iv) acquire or agree to
acquire (x) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation,
partnership, joint venture, association or other business
organization or division thereof or (y) any assets that
are material, individually or in the aggregate, to the
Company and its subsidiaries, taken as a whole, except
purchases of inventory and other assets in the ordinary
course of business consistent with past practice;
(v) except as required by the Company's Finance
Documents (as in effect on the date hereof, true and
complete copies of which have been delivered to Parent)
in the case of any property of the Company (including
after-acquired property) in which the Company is
obligated to deliver to the secured party thereunder a
security interest or mortgage or except as permitted by
the Company's Finance Documents (as in effect on the
date hereof) with respect to capitalized lease
obligations or purchase money debt, mortgage or other-
wise encumber or subject to any Lien (other than any
Lien arising by operation of law) or, except for sales
in the ordinary course of business consistent with past
practice of inventory or assets no longer used or
usable by the Company or such subsidiary, sell, lease
or otherwise dispose (or enter into any letter of
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intent, agreement in principle, other understanding or
commitment to sell, lease or otherwise dispose) of any
of its properties or assets;
(vi) (y) incur any indebtedness
for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or
warrants or other rights to acquire, directly or indirectly,
any debt securities of the Company or any of its
subsidiaries or any securities convertible into or
exchangeable for debt securities of the Company or any of
its subsidiaries, guarantee any debt securities of another
person, enter into any 'keep well' or other agreement
to maintain any financial statement condition of
another person or enter into any arrangement having the
economic effect of any of the foregoing, except for
(A) short-term borrowings incurred in the ordinary
course of business consistent with past practice if
pursuant to or permitted by the Company Finance
Documents (as in effect on the date hereof) and
(B) indebtedness to Parent, or (z) make any loans,
advances or capital contributions to, or investments
in, any other person, other than to or in (A) the Com-
pany or any direct or indirect wholly owned subsidiary
of the Company made in the ordinary course of business
consistent with past practice, (B) Parent and
(C) directors, officers and employees of the Company
and its subsidiaries made in the ordinary course of
business consistent with past practice so long as such
loans and advances do not, as to any one director,
officer or employee, exceed $10,000 and such loans and
advances do not, as to all such loans and advances,
exceed $50,000 in aggregate;
(vii) make or agree to make any
capital expenditures except as have been set forth in the
Company's approved capital budget for 1994, as amended
prior to the date hereof by the Boards of Directors of
Parent and the Company; provided, however, that (A) the
Company may make any necessary or appropriate capital
expenditures resulting from the fire at the Southern
Frozen Foods plant in Montezuma, GA, to the extent such
expenditures are (I) permitted or required by paragraphs
18 and 19 of the Integrated Agreement (as defined in
Section 6.07(d)) or (II) are made out of the proceeds
of insurance payments or are reasonably expected by the
Company to be reimbursed by insurance, and (B) the
Company or its subsidiaries may make emergency capital
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expenditures, not exceeding $25,000 as to any single
emergency, in accordance with the Company's Corporate
Policy Manual concerning capital expenditures and
consistent with past practice;
(viii) make any material tax
election (unless required by law) or settle or compromise
any material income tax liability;
(ix) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes
thereto) of the Company included in the Company Filed
SEC Documents, disclosed in the Disclosure Schedule or
incurred in the ordinary course of business consistent
with past practice, or waive the benefits of, or agree
to modify in any manner, any confidentiality, stand-
still or similar agreement to which the Company or any
of its subsidiaries is a party;
(x) enter into any agreement, contract,
transaction or commitment other than in the ordinary
course of business consistent with past practice and,
if material to the Company, other than on terms
reasonably acceptable to Parent;
(xi) enter into any agreement,
contract, transaction or commitment that limits the freedom
of the Company or any of its subsidiaries to compete in
any line of business or with any person or in any area
or which would so limit the freedom of the Company or
any subsidiaries after the Effective Time of the
Merger; or
(xii) authorize any of, or
commit or agree to take any of, the foregoing actions.
(b) Other Actions. The Company and Parent shall
not, and shall not permit any of their respective subsidi-
aries to, take any action that would result in, or omit to
take any action the omission of which would result in
(i) any of the representations and warranties of such party
set forth in this Agreement that are qualified as to
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materiality becoming untrue, (ii) any of such representa-
tions and warranties that are not so qualified becoming
untrue in any material respect (except for the
representations and warranties in Sections 4.01(c) and (g)
that are not so qualified, which shall not be permitted to
become untrue in any respect) or (iii) except as
contemplated by Section 8.01(a), any of the conditions to
the Merger set forth in Article VII not being satisfied.
(c) Notwithstanding any provision of this
Section 5.01 or any other Section of this Agreement or of
the Integrated Agreement to the contrary, the Company's
Board of Directors may declare, and the Company may pay, a
cash dividend not in excess of $.16 per share of Common
Stock with a record date therefor on or after November 15,
1994, and prior to December 31, 1994.
ARTICLE VI
Additional Agreements
SECTION 6.01. Shareholder Approval; Preparation
of Proxy Statement. (a) If approval of this Agreement by
the shareholders of the Company is required by law, the
Company shall, following the expiration or consummation of
the Offer, duly call, give notice of, convene and hold a
meeting of its shareholders (the 'Company Shareholders
Meeting') for the purpose of approving this Agreement and
the transactions contemplated by this Agreement. The
Company shall, through its Board of Directors, recommend to
its shareholders approval of this Agreement and the
transactions contemplated by this Agreement, except to the
extent that the Board of Directors of the Company shall have
withdrawn or modified its approval or recommendation of this
Agreement or the Merger as contemplated by Section 8.01(a).
Notwithstanding the foregoing, if Sub shall own at least 90%
of the outstanding shares of each class of Common Stock, and
provided the conditions set forth in Section 7.01 shall have
been satisfied or waived, the parties shall take all
necessary and appropriate action to cause the Merger to
become effective simultaneously with or as soon as
practicable after acceptance of shares of Common Stock for
payment pursuant to the Offer without the approval of the
shareholders of the Company in accordance with Section 905
of the BCL.
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(b) If approval of this Agreement by the
shareholders of the Company is required by law, as promptly
as practicable following expiration or consummation of the
Offer, the Company shall prepare and file with the SEC the
Proxy Statement. The Company shall use its best efforts to
cause the Proxy Statement to be mailed to the Company's
shareholders as promptly as practicable after such filing.
(c) If approval of this Agreement by the
shareholders of the Company is required by law, Parent shall
cause all shares of Common Stock owned by it, Sub or any
other subsidiary of Parent to be voted in favor of the
approval of this Agreement.
SECTION 6.02. Access to Information; Confiden-
tiality. The Company shall, and shall cause each of its
subsidiaries to, afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal busi-
ness hours during the period prior to the Effective Time of
the Merger to all their respective properties, books, con-
tracts, commitments, personnel and records and, during such
period, the Company shall, and shall cause each of its sub-
sidiaries to, furnish promptly to Parent (i) a copy of each
report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements
of Federal or state securities laws and (ii) all other
information concerning its business, properties and
personnel as Parent may reasonably request. Parent shall
hold, and shall cause its Representatives (as defined in the
Confidentiality Agreement dated February 16, 1994 (the
'Confidentiality Agreement'), between the Company and
Parent) to hold, any Evaluation Material (as defined in the
Confidentiality Agreement) in confidence in accordance with
the terms of the Confidentiality Agreement and, in the event
of termination of this Agreement for any reason, Parent
shall promptly return or destroy, and cause to be returned
or destroyed, all Evaluation Material in accordance with the
terms of the Confidentiality Agreement.
SECTION 6.03. Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, unless, as contemplated by
Section 8.01(a), the Board of Directors of the Company
approves or recommends a superior takeover proposal, each of
the parties shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in
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doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious
manner practicable, the Offer, the Merger and the other
transactions contemplated by this Agreement, including
(i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities
and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and
the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining
of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of any of the
transactions contemplated by this Agreement, including
seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or
reversed, and (iv) the execution and delivery of any addi-
tional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of,
this Agreement. In connection with and without limiting the
foregoing, the Company and its Board of Directors shall
(A) cooperate and cause its officers to cooperate with and
assist Parent and Sub in obtaining financing, of the nature
described in the commitment letters and 'highly confident'
letters referred to in Section 4.02(k), sufficient to
consummate the Offer and the Merger, and to complete the
Offer and the Merger, on the terms contemplated by this
Agreement, (B) take all action necessary to ensure that no
state takeover statute or similar statute or regulation
(other than Article 16 of the BCL) is or becomes applicable
to the Offer, the Merger, this Agreement or any of the other
transactions contemplated by this Agreement and (C) if any
state takeover statute or similar statute or regulation
(other than Article 16 of the BCL) becomes applicable to the
Offer, the Merger, this Agreement or any other transaction
contemplated by this Agreement, take all action necessary to
ensure that the Offer, the Merger and the other transactions
contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such
statute or regulation on the Offer, the Merger and the other
transactions contemplated by this Agreement. Without
limiting the foregoing, Parent and Sub shall take all
reasonable actions necessary, proper or advisable to obtain
as promptly as practicable financing, consistent with the
terms of the commitment letters and 'highly confident'
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letters referred to in Section 4.02(k) or otherwise
satisfactory to Parent and Sub, sufficient to consummate the
Offer and the Merger on the terms contemplated by this
Agreement. Notwithstanding the foregoing, the Board of
Directors of the Company shall not be prohibited from taking
any action permitted by Section 8.01(a) or Section 9.01(c).
(b) The Company shall give prompt notice to
Parent, and Parent or Sub shall give prompt notice to the
Company, of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in
any material respect, (ii) the failure by it to comply with
or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under
this Agreement, (iii) any written notice or other
communication from any person alleging that the consent of
such person is or may be required in connection with the
transactions contemplated by this Agreement or (iv) any
notice or other communication from any Governmental Entity
in connection with the transactions contemplated by this
Agreement; provided, however, that no such notification
shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
SECTION 6.04. Stock Options. (a) As soon as
practicable following the date of this Agreement, the Board
of Directors of the Company (or, if appropriate, any commit-
tee administering the Stock Plans) shall adopt such resolu-
tions or take such other actions as are required to adjust
the terms of all outstanding employee stock options to
purchase shares of Common Stock ('Employee Stock Options')
heretofore granted under any stock option or stock purchase
plan, program or arrangement of the Company (collectively,
the 'Stock Plans') to provide that each Employee Stock
Option outstanding immediately prior to the Effective Time
of the Merger shall be vested and exercisable. The Company
may discharge its obligations under this Section 6.04(a)
with respect to the 144,180 Employee Stock Options that were
issued in March and June 1993 and not by their terms
currently vested by causing such Employee Stock Options to
terminate without the requirement of any payment by the
Company immediately prior to the Effective Time of the
Merger and the Company shall do so with respect to any such
options held by any director of the Company (other than
Messrs. Call and Myers); and Parent and the Company shall
jointly approach each other holder of any such option to
consent to such termination.
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(b) The Stock Plans shall terminate as of the
Effective Time of the Merger, and the provisions in any
other Benefit Plan providing for the issuance, transfer or
grant of any capital stock of the Company or any interest in
respect of any capital stock of the Company shall be deleted
as of the Effective Time of the Merger, and the Company
shall ensure that following the Effective Time of the Merger
no holder of an Employee Stock Option or any participant in
any Stock Plan or other Benefit Plan shall have any right
thereunder to acquire any capital stock of the Company or
the Surviving Corporation.
SECTION 6.05. Benefit Plans. (a) Parent shall
cause the Surviving Corporation to maintain in effect the
deferred compensation agreements with current and past
directors and employees as in effect on the date of this
Agreement. Parent shall cause the Surviving Corporation to
provide, for at least one year after the Effective Time of
the Merger, or, if earlier, the consummation of the Offer,
benefits to employees of the Company and its subsidiaries
that are no less favorable in the aggregate to such
employees than those in effect on the date of this
Agreement; provided, however, that neither Parent nor the
Surviving Corporation shall be obligated (i) to provide or
maintain such benefits to the extent they exceed, in the
aggregate, benefits generally provided to employees engaged
in similar industries and working in similar markets or in
competing markets or to the extent the provision or
maintenance thereof could reasonably likely be expected to
materially adversely affect the Surviving Corporation,
(ii) to offer such benefits to persons hired upon or after
the Effective Time of the Merger or the consummation of the
Offer, as applicable, (iii) to offer such benefits to the
extent such benefits would have expired, by their terms,
absent an agreement otherwise or (iv) to provide any
employees of the Company or its subsidiaries with any stock
options or other rights to acquire stock or with monetary or
other benefits in lieu of the right to receive stock options
or such other rights.
(b) Without limiting the generality of
Section 6.05(a), after the consummation of the Offer the
Company and, after the Effective Time of the Merger, the
Surviving Corporation shall, and Parent shall cause the
Company and the Surviving Corporation to, honor and perform
or discharge when due all the obligations of the Company
under the Company's Key Executive Severance Plan (the 'KES
Plan'), the Company's Non-Qualified Profit-Sharing Plan, the
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Company's Deferred Profit Sharing Plan, the Company's
Supplemental Executive Retirement Plan, the Company's
Management Incentive Plan and the agreements listed under
the heading 'Executive Agreements' in Item 5 of the
Disclosure Schedule, in each case as in effect on the date
of execution of this Agreement. The Company and Parent
acknowledge that the Effective Time of the Merger (or, if
earlier, the consummation of the Offer) shall constitute a
'Change of Control' and a 'Special Change of Control' within
the meaning of the KES Plan (and therefore also of any of
the other benefit plans and agreements listed above that
incorporates such definitions from the KES Plan), as in
effect on the date hereof, and that such 'Change of Control'
and 'Special Change of Control' shall take place at such
time. This Section 6.05(b) is intended to be for the
benefit of, and may be enforced by, each person entitled to
participate in any of the benefit plans and agreements
listed above.
SECTION 6.06. Indemnification. Parent and Sub
agree that all rights to indemnification for acts or
omissions occurring prior to the Effective Time of the
Merger now existing in favor of the current or former
directors or officers of the Company and its subsidiaries as
provided in their respective certificates of incorporation
or by-laws shall survive the Merger and shall continue in
full force and effect in accordance with their terms for a
period of not less than six years from the Effective Time of
the Merger. Parent shall cause to be maintained for a
period of not less than three years from the Effective Time
of the Merger the Company's current directors' and officers'
insurance and indemnification policy to the extent that it
provides coverage for events occurring prior to the
Effective Time of the Merger (the 'D&O Insurance') for all
persons who are directors and officers of the Company on the
date of this Agreement, so long as the annual premium
therefor would not be in excess of $100,000 per year (the
'Maximum Premium'). If the existing D&O Insurance cannot be
maintained (because such policy is obtained through Agway
Inc.), expires, is terminated or canceled during such three-
year period, Parent shall use all reasonable efforts to
cause to be obtained as much D&O Insurance as can be
obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous than the existing D&O
Insurance.
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SECTION 6.07. Fees and Expenses. (a) Except in
the case of a wilful and material breach of this Agreement
by the other party or as otherwise set forth in this
Section 6.07, all fees and expenses incurred in connection
with the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not
the Merger is consummated. Prior to the Effective Time of
the Merger or, if earlier, the consummation of the Offer,
the Company shall not incur or pay any such fees and
expenses other than (i) fees and expenses required to be
paid under the terms of its agreements with the Advisors
(and only at or after the times required by such
agreements), (ii) fees and expenses of other agents and
advisors and (iii) reasonable fees and expenses not payable
to agents and advisors, in each case unless otherwise
approved by Parent.
(b) The Company shall pay Parent a termination
fee of $2,500,000 if this Agreement is terminated (i) in
connection with a superior takeover proposal, (ii) by Parent
pursuant to Section 9.01(d) if the Board of Directors of the
Company or any committee thereof shall have withdrawn or
modified, or resolved to withdraw or modify, in a manner
adverse to Parent or Sub its approval or recommendation of
the Offer, the Merger or this Agreement unless (A) such
withdrawal or modification shall have resulted primarily
from facts not known to the Board of Directors on the date
of this Agreement or developments occurring after the date
of this Agreement and (B) at the time of such withdrawal or
modification there shall not be pending any takeover
proposal (as defined in Section 8.01(a)) (other than by
Parent) made after the date of this Agreement or (iii) by
Parent pursuant to Section 9.01(d) and, in the case of this
clause (iii), within one year from such termination any
person (other than Parent or one of its subsidiaries)
acquires a controlling equity interest in the voting
securities, or substantially all the assets, of the Company
or engages in any merger or other business combination with
the Company (an 'Alternative Acquisition') (unless any
termination fee shall have previously been paid pursuant to
clause (i) or (ii) above). Such payment shall be paid in
immediately available funds, promptly, but in no event later
than five business days, after the termination of this
Agreement or, in the case of a payment pursuant to
clause (iii) above, after such Alternative Acquisition.
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(c) Notwithstanding anything to the contrary
contained herein, if this Agreement is terminated (i) in
circumstances in which a termination fee is due pursuant to
Section 6.07(b), (ii) by Parent pursuant to Section 9.01(d)
or (iii) pursuant to Section 9.01(b)(i) or 9.01(b)(ii) (if
due to the Company's breach) and, in the case of this
clause (iii), within two years from such termination, any
person (or an affiliate thereof) (other than Parent or one
of its subsidiaries) who, between April 1, 1993, and the
date of such termination, had made, indicated to the Board
of Directors of the Company or any committee thereof, to the
chief executive officer or chief financial officer of the
Company or to either Advisor its interest in making or was
approached by the Company to make, a takeover proposal
consummates an Alternative Acquisition, then the Company
shall reimburse Parent for all fees and expenses incurred by
Parent prior to the termination date (including the
reasonable fees and expenses of Parent's counsel and
financial advisors and any institutions that have prior to
the date hereof made a commitment to provide financing to
Parent, Sub or the Surviving Corporation for the
transactions contemplated hereby) in connection with this
Agreement and the transactions contemplated hereby, up to a
maximum reimbursement of $3,000,000.
(d) Notwithstanding anything to the contrary in
the Integrated Agreement (the 'Integrated Agreement') dated
as of June 27, 1992, between Parent and the Company, any
amounts payable by the Company pursuant to Section 6.07(b)
or 6.07(c) shall not be taken into account for the purposes
of determining any amounts due from the Company to Parent,
or from Parent to the Company, pursuant to paragraphs 48
through 52 of the Integrated Agreement.
SECTION 6.08. Public Announcements. Parent and
Sub, on the one hand, and the Company, on the other hand,
shall consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any
press release or other public statements with respect to the
transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make
any such public statement prior to such consultation, except
as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the
initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the
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form agreed to by the parties hereto prior to the execution
of this Agreement.
SECTION 6.09. Real Estate Taxes. Parent and Sub
agree that the Surviving Corporation shall pay the New York
State Real Property Transfer Tax, the New York State Real
Property Transfer Gains Tax, the Pennsylvania Realty
Transfer Tax, and the Washington State Excise Tax on Real
Estate Sales (collectively, the 'Gains Taxes'), if any, and
any penalties or interest with respect to the Gains Taxes,
payable in connection with the consummation of the Merger
without any offset, deduction, counterclaim or deferment of
price to be paid for Common Stock in the Merger. The
Company shall cooperate with Parent and Sub in the filing of
any returns with respect to the Gains Taxes, including
supplying in a timely manner a complete list of all real
property interests held by the Company that are located in
the applicable state and any information with respect to
such property that is reasonably necessary to complete such
returns. The portion of the consideration to be received by
holders of Common Stock in connection with the Merger that
is allocable to the real property of the Company and its
subsidiaries in the applicable state shall be determined by
Parent and the Company or, if they are unable to agree, an
independent appraiser selected by Parent and the Company.
The shareholders of the Company shall be deemed to have
agreed to be bound by the allocation established pursuant to
this Section 6.09 in the preparation of any return with
respect to the Gains Taxes.
SECTION 6.10. Appraisals. Prior to the Effective
Time of the Merger, Parent shall have the right to conduct
or have conducted on its behalf appraisals of all or part of
such assets and businesses of the Company and its
subsidiaries as Parent may reasonably request.
SECTION 6.11. Integrated Agreement. Prior to the
Effective Time of the Merger, the Company shall not
terminate or take any action to terminate the Integrated
Agreement between the Company and the Parent.
SECTION 6.12. Other Offers. From the date
hereof, neither the Company, any of its subsidiaries nor any
officer, director, employee or any agent of the Company or
any of its subsidiaries shall, directly or indirectly,
(i) solicit, initiate or (subject to Section 8.01(a))
encourage any takeover proposal or (ii) subject to
Section 8.01(a), engage in negotiation with or disclose any
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nonpublic information relating to the Company or any of its
subsidiaries or afford access to the properties, books or
records of the Company or any of its subsidiaries to any
person (other than Parent) that has made or that the Company
has reason to believe is considering making a takeover
proposal. The Company shall, and shall cause its
subsidiaries to, terminate any and all existing discussions
or negotiations with any person (other than Parent) relating
to any takeover proposal. The Company shall not be
responsible for any breach of this Section 6.12 by Roy
Myers, Robert Call, Jr., or any employee of the Company
involved primarily in managing the business of Parent or any
other employee of the Company acting at the request of any
of the foregoing.
SECTION 6.13. No Waiver. By entering into and
delivering this Agreement, neither the Company nor Parent
has, and neither of them shall be deemed to have, waived any
of its rights or claims against the other with respect to
the Integrated Agreement or otherwise or to have agreed with
the characterization of any arrangement, obligation, dispute
or claim involving the Company and Parent disclosed in the
Disclosure Schedule.
SECTION 6.14. Release. From and after the
Effective Time of the Merger, or, if earlier, the
consummation of the Offer, (i) Parent, the Company and the
Surviving Corporation (each a 'Releasor') shall release and
discharge each director, officer, employee, agent and
advisor of the Company (each, a 'Releasee') from any and all
claims, demands, causes of action, actions, suits,
proceedings and liabilities of any nature whatsoever
(collectively, 'Claims') that may exist at such time in
favor of any such Releasor against any such Releasee to the
extent arising out of or based upon (A) the Integrated
Agreement, including the write-down by the Company of
certain assets at the end of fiscal 1993 and in the first
half of fiscal 1995, the actions by the Company in
connection with the termination by Parent in March 1994 of
certain crops, the management by the Company of the business
of Parent prior to the date hereof or the inclusion of
certain 'change-of-control' expenses in the profits of the
Company for fiscal 1994 to be shared with Parent pursuant to
the Integrated Agreement, or (B) the transactions leading up
to this Agreement; provided, however, that the foregoing
release shall not apply to any Claim to the extent such
Claim (I) arises after the date of this Agreement,
(II) either (x) is based upon behavior of the applicable
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Releasee that is not generally consistent with the behavior
of such Releasee prior to the date hereof or (y) is based
upon any action taken by such Releasee, or failure by such
Releasee to take any action, with intentional disregard for
what such Releasee in good faith believes to be the rights
of Parent under the Integrated Agreement (it being agreed
that any action or failure to take action consistent with
such Releasee's understanding of the advice (written or
oral) of counsel shall be deemed to have been without
intentional disregard for what such Releasee in good faith
believes to be the rights of Parent), and (III) is made in
writing by Parent to such Releasee promptly upon Parent or
Sub becoming aware of facts giving rise to such Claim if
they so became aware prior to the Effective Time of the
Merger or, if earlier, the consummation of the Offer (it
being acknowledged by Parent and Sub that neither the
Company nor any Releasee concedes that a Claim made that is
consistent with this proviso is necessarily a valid claim
against any Releasee, none of whom is a party to the
Integrated Agreement); and (ii) Parent shall release and
discharge the Company from any and all claims, demands,
causes of action, actions, suits, proceedings and
liabilities of any nature whatsoever that may exist in favor
of Parent against the Company to the extent arising out of
or based upon the Integrated Agreement or the transactions
leading up to this Agreement.
SECTION 6.15. Directors. Promptly upon the
acceptance of any shares of Common Stock for payment
pursuant to the Offer, the number of directors constituting
the Board of Directors of the Company shall be reduced to
not less than seven, and Sub shall be entitled to designate
such number of directors on the Board of Directors of the
Company as shall give Sub, subject to compliance with
Section 14(f) of the Exchange Act, majority representation
on such Board of Directors, and the Company shall, at such
time, cause Sub's designees to be elected to the Board of
Directors of the Company. Notwithstanding the foregoing, if
Sub's designees are appointed or elected to the Board of
Directors of the Company, (a) immediately following such
appointment or election the Board of Directors of the
Company shall also include at least three directors who are
directors on the date hereof and who are approved by the
Board of Directors of the Company immediately prior to such
appointment or election (the 'Independent Directors') and
(b) if the number of Independent Directors shall be reduced
below three for any reason whatsoever, (i) any remaining
Independent Directors (or Independent Director, if there
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shall be only one remaining) shall be entitled to designate
persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of this Agreement or (ii)
if no Independent Directors then remain, the other directors
shall designate three persons to fill such vacancies who
shall not be officers, shareholders or affiliates of the
Company, Parent or Sub, and such persons shall be deemed to
be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election,
including mailing to its shareholders an Information
Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. This Section 6.15 shall terminate upon the
Effective Time of the Merger.
SECTION 6.16. Exchange of Class B Common Stock
for Class A Common Stock. If, at any time on or after the
acceptance for payment of shares pursuant to the Offer, Sub
shall own more than 90% of the outstanding shares of Class B
Common Stock, and (i) Sub shall own less than 90% of the
outstanding shares of Class A Common Stock, the Company
shall forthwith issue to Sub such number of shares of
Class A Common Stock as shall be sufficient to cause Sub to
own at least 90% of the outstanding shares of Class A Common
Stock or (ii) Sub shall own 90% or more of the outstanding
shares of Class A Common Stock, the Company shall at Sub's
request issue to Sub additional shares of Class A Common
Stock, in each case in exchange for an equivalent number of
shares of Class B Common Stock surrendered by Sub to the
Company; provided, however, that the foregoing exchange
shall only be effected to the extent that the surrender of
such shares of Class B Common Stock shall not result in Sub
owning less than 90% of the outstanding shares of Class B
Common Stock after giving effect to such surrender.
SECTION 6.17. Stockholder Agreement. Parent and
Sub shall not exercise the option granted by AHI pursuant to
the Stockholder Agreement unless Sub is simultaneously
accepting, or has previously accepted, for payment pursuant
to the Offer at least 44% of the outstanding shares of Class
A Common Stock.
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ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obliga-
tion To Effect the Merger. The respective obligation of
each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Shareholder Approval. If required by
applicable law, this Agreement shall have been approved
and adopted by the Required Company Shareholder Vote.
(b) HSR Act. The waiting period (and any
extension thereof) applicable to the Merger under the
HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction
or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in
effect, no proceeding challenging this Agreement or
seeking to prohibit, prevent or materially delay, or
alter any of the terms of, the transactions
contemplated hereby shall have been instituted by any
Governmental Entity and be pending and no other
proceeding challenging this Agreement or seeking to
prohibit, prevent or materially delay, or alter any of
the terms of, the transactions contemplated hereby
shall have been instituted by any other person and be
pending if, in the written opinion of counsel for the
party seeking to invoke this condition, such other
proceeding is reasonably likely to have a material
adverse affect on the Company; provided, however, that
each of the parties shall have used its reasonable best
efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any
injunction or other order that may be entered.
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SECTION 7.02. Conditions to Obligations of Parent
and Sub. Unless Sub shall have accepted shares of Common
Stock for payment pursuant to the Offer, the obligations of
Parent and Sub to effect the Merger are further subject to
the following conditions:
(a) Representations and Warranties. The repre-
sentations and warranties of the Company set forth in
this Agreement that are qualified as to materiality
shall be true and correct, and the representations and
warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in
all material respects (except that the representations
and warranties in Sections 4.01(c) and 4.01(g) shall be
true and correct in all respects), in each case as of
the date of this Agreement and as of the Closing Date,
as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement, and Parent
shall have received a certificate signed on behalf of
the Company by the chief executive officer and the
chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company.
The Company shall have performed in all material
respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date,
and Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer
and the chief financial officer of the Company to such
effect.
(c) Employee Stock Options. Other than the
144,180 Employee Stock Options granted in March and
June 1993 that are not by their terms currently vested,
each Employee Stock Option shall have been exercised or
terminated.
(d) Consents. Parent shall have received, or be
satisfied that it will receive, any consents, filings,
approvals or waivers from third parties required to
consummate the Merger, other than such consents,
filings, approvals or waivers the absence of which
would not, individually or in the aggregate, have a
material adverse effect on the operation of the
business of the Company after the Effective Time of the
Merger substantially in the manner now conducted.
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(e) Financing. Parent shall have received
financing sufficient to consummate the Merger on the
terms contemplated by this Agreement.
(f) Advisors' Termination. Parent shall have
received evidence, reasonably satisfactory to it, of
the termination of the contracts, agreements and other
arrangements between the Company and each Advisor,
terminating as of the Effective Time of the Merger all
of the Company's (or any successor's) obligations
thereunder, except the obligations to make the expense
reimbursements and other payments in connection with
the Offer and the Merger required by the agreements
previously delivered to Parent and referred to in
Section 4.01(o), and the indemnification and
contribution obligations for services performed before
the Effective Time of the Merger, as set out in such
agreements previously delivered to Parent.
(g) Other Documents. The Parent shall have
received all other documents it may reasonably request
relating to the existence of the Company and its
corporate authority for this Agreement, all in form and
substance reasonably satisfactory to the Parent.
SECTION 7.03. Conditions to Obligation of the
Company. Unless Sub shall have accepted shares of Common
Stock for payment pursuant to the Offer, the obligation of
the Company to effect the Merger is further subject to the
following conditions:
(a) Representations and Warranties. The
representations and warranties of Parent and Sub set
forth in this Agreement that are qualified as to
materiality shall be true and correct, and the
representations and warranties of Parent and Sub set
forth in this Agreement that are not so qualified shall
be true and correct in all material respects, in each
case as of the date of this Agreement and as of the
Closing Date, as though made on and as of the Closing
Date, except as otherwise contemplated by this
Agreement, and the Company shall have received a
certificate signed on behalf of each of Parent and Sub
by the chief executive officer and the chief financial
officer of such entity to such effect.
(b) Performance of Obligations of the Parent and
Sub. Each of Parent and Sub shall have performed in
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all material respects all obligations required to be
performed by it under this Agreement at or prior to the
Closing Date, and the Company shall have received a
certificate signed on behalf of each of Parent and Sub
by the chief executive officer and the chief financial
officer of such entity to such effect.
ARTICLE VIII
Board Actions
SECTION 8.01. Board Actions. (a) Notwith-
standing any other provision of this Agreement to the
contrary, to the extent required by the fiduciary obliga-
tions of the Board of Directors of the Company, as deter-
mined in good faith by a majority of the disinterested
members thereof based on the written advice of the Company's
outside counsel:
(i) the Company may, in response to an unsolicited
request therefor, participate in discussions or
negotiations with, or furnish information with respect
to the Company pursuant to a customary confidentiality
agreement (as determined by the Company's outside
counsel) to, any person who a majority of such
disinterested directors believes (A) intends to submit
a takeover proposal and (B) has the financial ability
to make (or the ability to obtain financing for) a
superior takeover proposal (for purposes of this
Agreement, 'takeover proposal' means any proposal for a
merger or other business combination involving the
Company or any proposal or offer to acquire in any
manner, directly or indirectly, a controlling equity
interest in any voting securities of, or a substantial
portion of the assets of, the Company, other than the
transactions contemplated by this Agreement); and
(ii) the Board of Directors of the Company may
approve or recommend (and, in connection therewith,
withdraw or modify its approval or recommendation of
this Agreement, the Offer or the Merger) a superior
takeover proposal and the Company may enter into an
agreement with respect to such superior takeover
proposal (for purposes of this Agreement, 'superior
takeover proposal' means a bona fide takeover proposal
made by a third party (A) that a majority of the
disinterested members of the Board of Directors of the
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Company determines in its good faith judgment (based on
the advice of the Company's independent financial
advisor) to be more favorable to the Company's
shareholders than the Offer and the Merger, (B) for
which financing, to the extent required, is then
committed or the subject of 'highly confident' letters
issued by reputable, nationally recognized investment
banking firms and (C) that is not subject to any
condition requiring the sale by the Company of any
material asset unless a reputable, financially capable
person has agreed, or entered into a letter of intent,
subject only to customary conditions to purchase such
asset on terms that would satisfy such condition).
(b) The Company promptly shall advise Parent
orally and in writing of any takeover proposal or any
inquiry with respect to or which could lead to any takeover
proposal and the identity of the person making any such
takeover proposal or inquiry. The Company shall keep Parent
fully informed of the status and details of any such take-
over proposal or inquiry and shall provide copies of all
such proposals, together with any financing commitments,
'highly confident' letters, letters of intent and other
relevant documents.
(c) For purposes of this Section 8.01, a member
of the Board of Directors of the Company shall be
'disinterested' unless he or she is an executive officer of
the Company or Parent or an executive officer or director of
Agway Inc.
ARTICLE IX
Termination, Amendment and Waiver
SECTION 9.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time of the
Merger, whether before or after approval of the transactions
contemplated by this Agreement, by the shareholders of the
Company:
(a) by mutual written consent of Parent and the
Company;
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(b) by notice from either Parent or the Company to
the other:
(i) unless Sub shall have accepted shares of
Common Stock for payment pursuant to the Offer,
if, upon a vote at a duly held Company
Shareholders Meeting or any adjournment thereof,
the required approval of the shareholders of the
Company shall not have been obtained as
contemplated by Section 6.01(a);
(ii) unless Sub shall
have accepted shares of Common Stock for payment
pursuant to the Offer, if the Merger shall not have
been consummated on or before February 28, 1995,
unless the failure to consummate the Merger is the
result of a wilful and material breach of this
Agreement by the party seeking to terminate this
Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order,
decree, ruling or action restraining, enjoining or
otherwise prohibiting the consummation of the Merger
or the calling or holding of the Company Shareholders
Meeting; or
(iii) if any
Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(c) by notice to Parent from the Company if the
Board of Directors of the Company shall have
(i) withdrawn or modified its approval or
recommendation of this Agreement, the Offer or the
Merger, as contemplated by Section 8.01(a)(ii), or
(ii) determined to enter into an agreement with respect
to a superior takeover proposal as contemplated by
Section 8.01(a); provided, however, that, in either
case, the Company shall have entered into a binding
agreement with respect to such superior takeover
proposal within five business days of its notice to
Parent of such termination (and, if the Company shall
not have done so, such notice of termination shall be
null and void and any amounts paid to Parent or Sub
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pursuant to Section 6.07 shall be promptly returned by
Parent to the Company);
(d) by notice to the Company from Parent
if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a
manner adverse to Parent or Sub its approval or
recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any superior
takeover proposal, (ii) the Company shall have entered
into any agreement with respect to any superior
takeover proposal (other than a confidentiality
agreement as contemplated by Section 8.01(a)(i)) or
(iii) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the
foregoing;
(e) unless Sub shall have accepted shares of
Common Stock for payment pursuant to the Offer, by
notice to the Company from Parent if any Governmental
Entity shall have issued an order, decree or ruling
that (i) shall have become final and unappealable and
(ii) would, in the reasonable judgment of Parent, have
a material adverse effect on the operation after the
Effective Time of the Merger of the business of the
Company and its subsidiaries substantially in the
manner now conducted;
(f) by notice from either Parent or the Company to
the other if Sub shall not have accepted shares of
Common Stock for payment pursuant to the Offer within
ten business days after expiration of the Offer;
provided, however, that such notice shall have been
given within 15 business days after expiration of the
Offer; and
(g) by notice from either Parent or the Company to
the other if Sub shall not have accepted shares of
Common Stock for payment pursuant to the Offer by
10:00 a.m., New York time, on December 16, 1994;
provided, however, that the Company shall not have the right
to terminate this Agreement pursuant to clause (f) or (g)
above if (i) at the time of expiration of the Offer the
Minimum Tender Condition (as defined in Exhibit A) shall not
have been satisfied and (ii) at least five business days
prior to the time of expiration of the Offer, Sub shall have
publicly disclosed that it has executed definitive
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agreements or otherwise has commitments reasonably
satisfactory to the Company, subject only to customary
closing conditions, for financing that would be sufficient
to consummate the Offer and the Merger on the terms
contemplated by the Agreement.
SECTION 9.02. Effect of Termination. In the
event of termination of this Agreement by either the Company
or Parent as provided in Section 9.01, this Agreement shall
forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Sub or the
Company, other than the provisions of Section 4.01(o),
Section 4.02(h), the last sentence of Section 6.02,
Section 6.05, Section 6.07, Section 6.14, Section 6.15, this
Section 9.02 and Article X and except to the extent that
such termination results from the wilful and material breach
by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement;
provided, however, that if the Offer is not consummated
prior to termination of this Agreement, Sections 6.05, 6.14
and 6.15 shall not survive such termination.
SECTION 9.03. Amendment. This Agreement may be
amended by the parties at any time before or after any
required approval of the transactions contemplated by this
Agreement by the shareholders of the Company; provided,
however, that, after any such approval, there shall not be
made any amendment that by law requires further approval by
such shareholders without the further approval of such
shareholders. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the
parties.
SECTION 9.04. Extension; Waiver. At any time
prior to the Effective Time of the Merger, the parties may
(a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive
any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) subject to the proviso of
Section 9.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of those rights.
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<PAGE>
SECTION 9.05. Procedure for Termination, Amend-
ment, Extension or Waiver. A termination of this Agreement
pursuant to Section 9.01, an amendment of this Agreement
pursuant to Section 9.03 or an extension or waiver pursuant
to Section 9.04 shall, in order to be effective, require
(a) in the case of Parent, Sub or the Company, action by its
Board of Directors or the duly authorized designee of its
Board of Directors and (b) in the case of the Company,
action by a majority of the members of the Board of
Directors of the Company who were members thereof on the
date of this Agreement and remain as such hereafter or the
duly authorized designee of such members; provided, however,
that in the event that Sub's designees are appointed or
elected to the Board of Directors of the Company as provided
in Section 6.15, after the acceptance for payment of shares
of Common Stock pursuant to the Offer and prior to the
Effective Time of the Merger, the affirmative vote of a
majority of the Independent Directors, in lieu of the vote
required pursuant to clause (b) above, shall be required to
(i) amend or terminate this Agreement by the Company,
(ii) exercise or waive any of the Company's rights or
remedies under this Agreement or (iii) extend the time for
performance of Parent's and Sub's respective obligations
under this Agreement.
ARTICLE X
General Provisions
SECTION 10.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in
this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Effective Time of the
Merger, or, if earlier, the consummation of the Offer. This
Section 10.01 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance
after the Effective Time of the Merger.
SECTION 10.02. Notices. All notices, requests,
claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses
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(or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to
Pro-Fac Cooperative, Inc.
90 Linden Place
P.O. Box 682
Rochester, New York 14603
Attention: Roy A. Myers
Fax: (716) 383-1606
Harris Beach & Wilcox
The Granite Building
130 East Main Street
Rochester, New York 14604-1687
Attention: Thomas M. Hampson
Fax: (716) 232-6925
and
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Scott F. Smith
Fax: (212) 841-1010
(b) if to the Company, to
Curtice-Burns Foods, Inc.
90 Linden Place
Rochester, New York 14603
Attention: Mr. J. William Petty
Fax: (716) 383-0719
61
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with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Alan C. Stephenson, Esq.
Fax: (212) 474-3700
SECTION 10.03. Definitions. For purposes of this
Agreement:
An 'affiliate' of any person means another person
that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person.
'Company Finance Documents' means, collectively,
(1) the Credit Agreement dated as of September 4, 1992,
as amended (the 'Commercial Bank Credit Agreement'),
among the Company, The Chase Manhattan Bank, N.A.
('Chase'), as agent, and the banks party thereto (the
'Commercial Banks'), (2) the Guaranty dated July 2,
1990, as amended, between the Company and Springfield
Bank for Cooperatives ('Springfield') pursuant to which
the Company has agreed to guarantee the obligations of
Parent, under (A) the Master Agreement dated October 8,
1981, as amended, (B) the Seasonal Loan Agreement dated
December 10, 1992, as amended, (C) the Seasonal Loan
Agreement (Letters of Credit) dated February 9, 1993,
as amended, and (D) various Term Loan Agreements dated
various dates, each as amended and including future
Term Loan Agreements, (3) the related agreements
securing such obligations of the Company, including (I)
each of the Security Agreement and the Trademark
Collateral Assignment and Agreement, each dated as of
September 1, 1993, among the Company, Chase and the
Commercial Banks and (II) the Security Agreement dated
as of September 1, 1993, between the Company and
Springfield and (4) the other agreements related to any
of the agreements referred to in the foregoing clauses
(1), (2) and (3), which agreements are listed in the
Disclosure Schedule.
'Material adverse change' or 'material adverse
effect' means, when used in connection with the Company
or Parent, any change or effect (or any development
62
<PAGE>
that, insofar as can reasonably be foreseen, is likely
to result in any change or effect) that is materially
adverse to the business, properties, assets, condition
(financial or otherwise), results of operations or
prospects of the Company and its subsidiaries, taken as
a whole, or Parent and its subsidiaries, taken as a
whole, as the case may be.
A 'person' means an individual, corporation,
partnership, joint venture, association, trust, unin-
corporated organization or other entity.
A 'subsidiary' of any person means another person,
an amount of the voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no
such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by
such first person.
SECTION 10.04. Interpretation. When a reference
is made in this Agreement to a Section, such reference shall
be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. Whenever the words 'include', 'includes' or
'including' are used in this Agreement, they shall be deemed
to be followed by the words 'without limitation'.
SECTION 10.05. Counterparts. This Agreement may
be executed in one or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 10.06. Entire Agreement; No Third-Party
Beneficiaries; Effect on Arbitration Agreement. (a) This
Agreement (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the
subject matter of this Agreement, other than the agreement
with respect to arbitration dated August 16, 1994, between
the Company and Parent (the 'Arbitration Agreement') and the
Confidentiality Agreement, and (ii) except for the
provisions of Article III and Sections 6.05(b), 6.06 and
63
<PAGE>
6.14, is not intended to confer upon any person other than
the parties any rights or remedies hereunder.
(b) Notwithstanding anything to the contrary in
the Arbitration Agreement, (i) the references in the
Schedule to the Arbitration Agreement to 'signing Merger
Agreement' and to 'signing' shall be construed as references
to November 15, 1994, or the first date prior thereto on
which Parent or Sub shall be in breach in any material
respect of its obligations hereunder, including the
penultimate sentence of Section 6.03, and (ii) the
Arbitration Agreement shall be null and void if this
Agreement shall have been terminated pursuant to Section
9.01(b)(ii) (if the Merger shall not have been consummated
due to the Company's breach of this Agreement).
SECTION 10.07. Governing Law. This Agreement
shall be governed by, and construed in accordance with, the
laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of
conflict of laws thereof.
SECTION 10.08. Assignment. Neither this
Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part,
by operation of law or otherwise by any of the parties
without the prior written consent of the other parties,
except that Sub may assign its rights and obligations
hereunder to any other wholly owned subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 10.09. Enforcement. The parties agree
that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the
terms and provisions of this Agreement in any court of the
United States located in the State of New York or in New
York state court, this being in addition to any other remedy
to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Federal court
located in the State of New York or any New York state court
in the event any dispute arises out of this Agreement or any
64
<PAGE>
of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring
any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court
other than a Federal or state court sitting in the State of
New York or a New York state court.
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first
written above.
PRO-FAC COOPERATIVE, INC.,
by
/s/ Roy Myers
Name: Roy A. Myers
Title: General Manager
PF ACQUISITION CORP.,
by
/s/ Roy Myers
Name: Roy A. Myers
Title: President
CURTICE-BURNS FOODS, INC.,
by
/s/ William Petty
Name: J. William Petty
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or
this Agreement, Sub shall not be required to accept for
payment or, subject to any applicable rules and regulations
of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered
shares of Common Stock after the termination or withdrawal
of the Offer), to purchase or pay for any shares of Common
Stock tendered pursuant to the Offer unless (i) there shall
have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of shares of Common
Stock which would represent at least 90% of the shares of
Class A Common Stock and 90% of the shares of Class B Common
Stock outstanding at the time of expiration of the Offer
(the 'Minimum Tender Condition'), (ii) any waiting period
under the HSR Act applicable to the purchase of shares of
Common Stock pursuant to the Offer shall have expired or
been terminated and (iii) Parent or Sub shall have received
financing sufficient to consummate the Offer and the Merger
on the terms contemplated by this Agreement. Furthermore,
notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to commence the Offer
(and, if the Offer shall have commenced, Sub may terminate
or (subject to Section 1.01(a) of this Agreement) amend the
Offer) if any of the conditions set forth in clauses (a),
(b) or (d) below shall exist or if the Company is in
material breach of its obligations hereunder, nor shall Sub
be required to accept for payment or, subject as aforesaid,
to pay for any shares of Common Stock and Sub may terminate
or (subject to Section 1.01(a)) amend the Offer, if, at any
scheduled expiration date of the Offer or following the
expiration of the Offer but before the acceptance of such
shares for payment or the payment therefor, any of the
following conditions shall exist:
(a) any temporary restraining order, preliminary
or permanent injunction or other order shall have been
issued by any court of competent jurisdiction, or any
other legal restraint or prohibition shall be in
effect, that, directly or indirectly, prohibits or
delays materially Sub from purchasing or paying for
shares of Common Stock pursuant to the Offer, or
consummation of the Merger, any proceeding challenging
this Agreement or the Stockholder Agreement or seeking
to prohibit, prevent or materially delay, or alter any
of the terms of, the transactions contemplated hereby
or thereby shall have been instituted by any
66
<PAGE>
Governmental Entity and be pending or any other
proceeding challenging this Agreement or the
Stockholder Agreement or seeking to prohibit, prevent
or materially delay, or alter any of the terms of, the
transactions contemplated hereby, shall have been
instituted by any other person and be pending if, in
the written opinion of counsel for the party seeking to
invoke this condition, such other proceeding is
reasonably likely to have a material adverse effect on
the Company; provided, however, that Parent and Sub
shall have used their reasonable best efforts to
prevent the entry of such injunction or other order and
to appeal as promptly as possible any injunction or
other order that may be entered;
(b) any of the representations and warranties of
the Company set forth in this Agreement that are
qualified as to materiality, or set forth in
Section 4.01(c) or 4.01(g), or any of the
representations and warranties of AHI set forth in the
Stockholder Agreement, shall not be true and correct or
any of the other representations and warranties set
forth in this Agreement shall not be true and correct
in all material respects; in each case as if each such
representation and warranty were made as of such time;
(c) the Company or AHI shall have breached or
failed to perform when required in any material respect
any obligation required to be performed by it under
this Agreement or the Stockholder Agreement;
(d) this Agreement shall have been terminated in
accordance with its terms, or the Offer shall have been
amended or terminated with the consent of the Company;
(e) Parent shall not have received, or not be
satisfied that it shall receive, all consents, filings,
approvals or waivers from third parties required to
consummate the Offer or the Merger, other than such
consents, filings, approvals or waivers the absence of
which would not, individually or in the aggregate, have
a material adverse effect on the operation of the
business of the Company in the manner now conducted; or
(f) Parent shall not have received evidence,
reasonably satisfactory to it, of the termination of
the contracts, agreements and other arrangements
between the Company and each Advisor terminating as of
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<PAGE>
the Effective Time of the Merger all of the Company's
(or any successor's) obligations thereunder, except the
obligations to make the expense reimbursements and
other payments in connection with the Offer and the
Merger required by the agreements previously delivered
to Parent and referred to in Section 4.01(o), and the
indemnification and contribution obligations for
services performed before the Effective Time of the
Merger, as set out in such agreements previously
delivered to Parent.
The foregoing conditions are for the sole benefit
of Sub and Parent and may be asserted by Sub or Parent
regardless of the circumstances giving rise to such
condition or (subject to Section 1.01(a)) may be waived by
Sub and Parent in whole or in part at any time and from time
to time in their sole discretion. The failure by Parent,
Sub or any other affiliate of Parent at any time to exercise
any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a
waiver with respect to any other facts and circumstances and
each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
<PAGE>
EXHIBIT B
Certificate of Incorporation of
Surviving Corporation
FIRST. The name of the corporation is Curtice-
Burns Foods, Inc.
SECOND. The purpose of the corporation is to
engage in any lawful act or activity for which corporations
may be organized under the Business Corporation Law of the
State of New York but not to engage in any act or activity
requiring the consent or approval of any state official,
department, board, agency or other body without such consent
or approval first being obtained.
THIRD. The office of the corporation in the State
of New York is to be located in the County of Monroe.
FOURTH. The aggregate number of shares which the
corporation shall have authority to issue is 10,000 common
shares of the par value of $.01 per share.
FIFTH. The Secretary of State of the State of New
York is designated as agent of the corporation upon whom
process in any action or proceeding against it may be
served. The address to which the Secretary of State shall
mail a copy of any process against the corporation served
upon him is in care of Curtice-Burns Foods, Inc., 90 Linden
Place, P.O. Box 681, Rochester, New York 14603, Attention:
Corporate Secretary.
SIXTH. By-laws of the corporation may be adopted,
amended or repealed by the Board of Directors of the
corporation by the vote of a majority of the directors
present at a meeting of the Board of Directors at which a
quorum is present, subject to the power of the holders of
stock having voting power thereon to alter, amend or repeal
the By-laws adopted by the Board of Directors.
SEVENTH. No holder of shares of any class of the
corporation, now or hereafter authorized, shall as such
holder have any preferential or preemptive right to
subscribe for, purchase or receive any shares of the
corporation of any class, now or hereafter authorized, or
any options or warrants for such shares, or any rights to
subscribe for or purchase such shares, or any bonds,
debentures, notes or other securities convertible into or
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<PAGE>
exchangeable for such shares, which may at any time be
issued, sold or offered for sale by the corporation.
EIGHTH. To the fullest extent permitted by the
Business Corporation Law of the State of New York as the
same exists or may hereafter be amended, no director shall
be personally liable to the corporation or any of its
shareholders for damages for any breach of duty as a
director; provided, however, that the foregoing provision
shall not eliminate or limit the liability of a director if
a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of
law or that he personally gained in fact a financial profit
or other advantage to which he was not legally entitled or
that his acts violated Section 719 of the Business
Corporation Law of the State of New York.
NINTH. The corporation reserved the right to
amend, alter, change or repeal any provision contained in
this Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors and officers are
subject to this reserved power.
<PAGE>
EXHIBIT 3
EXTRACTS FROM THE PROXY STATEMENT
OF THE COMPANY DATED OCTOBER 21, 1993
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below indicates as of July 31, 1993,
those persons who are known by the Company to be the
beneficial owners of more than 5 percent of either the
Company's Class A or Class B common stock. Beneficial
ownership refers to voting and/or investment authority with
respect to the Company's stock:
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
<S> <C> <C> <C>
Class A Common Agway Holdings 899,447(2) 13.7%
Stock . . . . Inc.(1)
1100 N. Market Street
Wilmington, Delaware
19801
Class B Common Agway Holdings Inc.(1) 2,036,643(2) 98.8%
Stock . . . . 1100 N. Market Street
Wilmington, Delaware
19801
</TABLE>
____________________
(1) Agway Holdings Inc. is a wholly-owned subsidiary of Agway
Inc. Agway is a farm supply business operated as a
cooperative for its members and other patrons in the
Northeastern United States.
(2) Agway Holdings Inc. has sole voting and investment power
with respect to these shares.
2
<PAGE>
The following table sets forth the ownership of
the Company's Class A common stock as it pertains to the
directors and those officers listed in the compensation on
page 11.
Stock Ownership Officers and Directors
(Number of Shares)
<TABLE>
<CAPTION>
Relative
or Exercisable
Personal Joint Spouse Options Total
<S> <C> <C> <C> <C> <C>
John F. Blazin . . . 100 0 0 100
Charles C. Brosius . 0 11,254 0 11,254
Courtney B. Burdette 49 0 0 49
Robert V. Call, Jr. 450 0 0 450
Vyron M. Chapman . . 200 0 0 200
Virginia M. Ford . . 106 0 0 106
Patrick D. Lindenbach 982 1 0 2,622 3,605
. . . . . . . . . . .
David J. McDonald . 22,465 0 563 14,726 37,754
Tommy L. Murray . . 0 0 0 2,600 2,600
Roy A. Myers . . . . 0 11,599 0 4,914 16,513
<PAGE>
John L. Norris . . . 0 75 0 75
Donald E. Pease . . 1,962 505 0 2,467
J. William Petty . . 229 6,113 1 9,394 15,737
William D. Rice . . 5,784 0 0 5,121 10,905
Carl D. Smith . . . 0 3,300 0 3,300
Carl H. Tiedemann . 6,075 0 0 6,075
Carleton E. 50 0 0 50
Whittemore . . . . .
Christian F. Wolff, 146 0 0 146
Jr. . . . . . . . . .
Totals . . . . 38,598 32,847 564 39,377 111,386
</TABLE>
No director or officer owns more than 1 percent of
Class A stock. No director or officer owns any Class B
stock.
As of October 7, 1993, there were 3,459 holders of
the Class A common stock and 66 holders of the Class B
common stock of the Company. As of that date, there were
6,575,787 shares of Class A common stock and 2,060,702
shares of Class B common stock outstanding.
3
<PAGE>
ELECTION OF DIRECTORS
At the meeting, it is proposed to elect a Board of
sixteen (16) directors, each to serve until the next Annual
Meeting and/or until a successor is elected and qualified.
It is intended that, if no contrary specification
is made, the person named in the proxy card will vote for
the election of the nominees named below. If any of these
persons should decline election or should by reason of any
unexpected occurrence not be able to serve, the persons
named in the proxy card may exercise discretionary authority
to vote for a substitute or substitutes. Fourteen nominees
are presently serving as Directors of the Company and were
elected by the shareholders, Mr. Burdette is nominated for
the first time and Mr. Saul, who previously served as
director, is nominated to return to the Board.
The names of the nominees and certain information
about them, as furnished by the nominees, are set forth
below. Unless otherwise indicated below, as to shares which
are shown as owned 'Personally,' the nominee has sole voting
and investment power over such shares, even though another
name, such as a broker, appears in the Company's records; as
to shares listed as 'Shared,' voting and investment powers
are deemed to be shared by the nominee. Shares which are
jointly owned or owned by members of the nominee's family
sharing the same home as the nominee are listed as 'Shared.'
Beneficial ownership of the Company's shares was determined
as of August 5, 1993. Except as otherwise stated, no
nominee owns in excess of 1 percent of the Class A shares of
the Company. No nominee owns any Class B shares of the
Company.
For election by the holders of Class A common stock:
JOHN F. BLAZIN
Mr. Blazin, 59 years of age, a Curtice Burns
director since 1992, has been President and Chief Executive
Officer of Kelley-Clarke, Inc. since May 1992. Prior to
that he served as President of the Northern California
Division of Kelley-Clarke since 1978. Kelley-Clarke is one
of the largest food broker organizations in the nation.
Mr. Blazin recently served as National Chairman of the
National Food Brokers Association. Class A shares
owned: Personally, 100.
4
<PAGE>
VIRGINIA M. FORD
Ms. Ford, 58 years of age, a Curtice Burns
director since 1991, is President and owner of Ford Research
Services, Inc., which she founded in 1982. Her consumer
research firm specializes in marketing consulting and the
design of research projects, as well as supervising the
field service aspect of the research. She is a board member
of the National Marketing Research Association. Class A
shares owned: Personally, 106.
DAVID J. MCDONALD
Mr. McDonald, 65 years of age, a Curtice Burns
director since 1979, had been President and Chief Executive
Officer of the Company from July 1985 to March 8, 1993. He
was Executive Vice President of the Company from
February 1982 to June 1985 and formerly served as Vice
President from March 1981 to February 1982 and as President
of the Company's Nalley's Fine Foods division from July 1975
until March 1981. Class A shares owned: Personally, 50,862
(includes exercisable options to purchase 28,397 shares
under the Company's 1980 and 1990 Stock Option Plans);
shared, 563.
J. WILLIAM PETTY
Mr. Petty, 61 years of age, a Curtice Burns
director since 1986, President and Chief Executive Officer
of the Company since March 1993, had been Executive Vice
President since July 1985. As Executive Vice President, he
served also as President of the Company's Nalley's Fine
Foods division 1985-1990 and as President of the Company's
Comstock Michigan Fruit division 1990-1993. Joined the
Company in 1983 as President of the Nalley's Fine Foods
division. Most of his career has been spent in the food
business with Curtice Burns, Proctor & Gamble and Campbell
Soup (where he was successively President of the Champion
Valley Farms division), Vice President of the Bakery
division of Pepperidge Farms, and President of the
Pepperidge Farms division), Class A shares
owned: Personally, 26,635 (includes exercisable options to
purchase 26,406 shares under the Company's 1980 and 1990
Stock Option Plan); shared, 6,114.
5
<PAGE>
CARL H. TIEDEMANN
Mr. Tiedemann, 67 years of age, a Curtice Burns
director since 1974, has been a General Partner of Tiedemann
Investment Group, an investment banking and asset management
firm, since August 1980. He was President of Donaldson,
Lufkin & Jenrette, Inc., an investment banking firm, from
June 1975 through July 1980. He is a director of Alltel
Corporation and Piedmont Management Co. Class A shares
owned: Personally, 6,075.
For election by the holders of Class B common stock:
CHARLES C. BROSIUS
Mr. Brosius, 63 years of age, a Curtice Burns
director since 1989, is a mushroom farmer (Charles C.
Brosius, Inc., West Grove, Pennsylvania). He has been Vice
Chairman of Agway Inc. since October 1991 and a director of
Agway Inc. since 1986. Class A shares owned: Shared,
11,254.
COURTNEY B. BURDETTE
Mr. Burdette, 53 years of age, a Curtice Burns
director since 1993, is Senior Vice President, Cooperative
Relations, Agway Inc. since July 1992. He was Vice
President Energy Group, Vice President of Corporate
Personnel and President of Agway Energy Products 1990 to
1992, and Director of Corporate Development of Agway 1987 to
1990. Class A shares owned: Personally, 49.
ROBERT V. CALL, JR.
Mr. Call, 67 years of age, a Curtice Burns
director since 1986, is a vegetable, fruit, and grain farmer
(My-T Acres, Inc., Batavia, New York). He has been the
President of Pro-Fac Cooperative, Inc. since 1986, having
served as Treasurer from 1973 to 1984. He is a director of
Pro-Fac Cooperative, Inc. Class A shares owned:
Personally, 450.
VYRON M. CHAPMAN
Mr. Chapman, 60 years of age, a Curtice Burns
director since 1987, is a vegetable farmer (Chapman Farms,
Cassville, New York). He has been a director of Agway Inc.
since 1985. Class A shares owned: Personally, 200.
6
<PAGE>
ROY A. MYERS
Mr. Myers, 62 years of age, a Curtice Burns
director since 1987, has been Executive Vice President of
the Company since July 1987. He formerly served as Vice
President--Operations from June 1985 to July 1987 and as
Vice President from September 1983 to June 1985. He has
been General Manager of Pro-Fac Cooperative, Inc. since
July 1987, having served as Assistant General Manager from
September 1983 to June 1987. Class A shares
owned: Personally, 15,849 (includes exercisable options to
purchase 15,849 shares under the Company's 1980 and 1990
Stock Option Plans); shared, 11,599.
JOHN L. NORRIS
Mr. Norris, 50 years of age, a Curtice Burns
director since 1989, is Group Vice President, Consumer
Group, Agway Inc. From July 1990 to June 1992 he had been
Vice President, Distribution division of Agway Inc. From
July 1988 to July 1990, Mr. Norris was Vice President,
Financial Services Group of Agway Inc. He served as Region
Manager for Distribution Services of Agway Inc. from 1985 to
July 1988 and prior to that served as Marketing Manager of
the Country Foods division of Agway Inc. Class A shares
owned: Shared, 75.
DONALD E. PEASE
Mr. Pease, 57 years of age, a Curtice Burns
director since 1979, elected Chairman of the Board in
June 1989, is a dairyman (Pease Farms, Susquehanna,
Pennsylvania). He has been a director of Agway Inc. since
1972, and is also a director of Pro-Fac Cooperative, Inc.
Class A shares owned: Personally, 1,962; shared, 505.
CHARLES F. SAUL
Mr. Saul, 60 years of age, has been President,
Chief Executive Officer and General Manager of Agway since
February 1992. He was Assistant General Manager from
December 1991 to February 1992, Chief Operating Officer from
April 1991 to December 1991, Group Vice President, Energy
Group of Agway Inc. from July 1988 to April 1991; Group Vice
President, Food Group of Agway Inc. from July 1987 to
July 1988; Vice President, Food Group of Agway Inc. from
June 1981 to July 1987, and held various positions of
7
<PAGE>
management at Agway from 1976 to 1981. Curtice Burns
director 1979 to 1991. Class A shares owned: Shared, 547.
CARL D. SMITH
Mr. Smith, 58 years of age, a Curtice Burns
director since 1989, is a potato and grain corn farmer
(Hillacre Farms, Corinna, Maine). He has been a director of
Agway Inc. since 1984. Class A shares owned: Shared,
3,300.
CARLETON E. WHITTEMORE, JR.
Mr. Whittemore, 50 years of age, a Curtice Burns
director since 1991, is Senior Vice President, Information
Services, Agway Inc. From August 1988 to November 1990 he
was Vice President of the Farm and Home division of Agway
Inc.; from May 1987 to August 1988 he was Director of Farm
and Home Services; and from August 1988 to July 1992 he was
Vice President Corporate Development. Prior to 1987 he held
various management positions in the Farm and Home division
of Agway Inc. Class A shares owned: Personally, 50.
CHRISTIAN F. WOLFF, JR.
Mr. Wolff, 68 years of age, a Curtice Burns
director since 1985, is a dairyman (Pen-Col Farms,
Millville, Pennsylvania). He has been a director of Agway
Inc. since 1982. He is a director of Pro-Fac Cooperative,
Inc. Class A shares owned: Personally, 146.
There are no family relationships between any
director, executive officer, or any person nominated or
chosen by the Company to become a director or executive
officer.
COMMITTEES OF THE BOARD OF DIRECTORS
The Chairman of the Board and President are
ex-officio members of all committees. The Board of
Directors has the following standing committees:
Finance Committee:
The Finance Committee recommends to the Board of
Directors the engagement of independent auditors and reviews
the plan and results of the annual audit. The Committee
8
<PAGE>
reviews any non-audit services performed by the auditing
firm as well as reviewing the internal control
recommendations resulting from the audit. The Committee
approves financial policies, borrowing and dividend actions.
The Committee met five times during the year.
Mr. Brosius serves as chairman of the Committee. Other
members of the Committee are Messrs. Call, O'Neill (resigned
March 1993), Petty and Tiedemann. When the Finance
Committee is serving as an audit committee, Mr. Petty is
excused from its proceedings.
Human Resources Committee:
This committee is responsible for setting policies
for approval by the full Board of Directors in the areas of
hiring and compensation and in this capacity reviews annual
salary and wage plans, and senior management compensation
and incentive plans. This committee also administers the
Company's Stock Option and Installment Stock Purchase Plans.
The Human Resources Committee met four times
during the fiscal year. The Chairman is Mr. Smith. Other
committee members are Messrs. Chapman and Whittemore.
Public Responsibility Committee:
This committee reviews transactions between the
Company and related parties to ensure that they are at arm's
length. Also, the Committee reviews subjects such as the
environment, labeling requirements, consumer concerns and
other aspects of the Company's public relationships with its
various constituencies.
This committee met three times during the fiscal
year. Mr. Wolff serves as chairman of the Committee. Other
members of the Committee are Ms. Ford and Messrs. Myers and
Norris.
Nominating Committee:
The Nominating Committee recommends to the Board
of Directors nominees for election as directors of the
Company. The Committee considers the qualifications of
proposed nominees and the recommendations of major
shareholders and management and evaluates the performance of
incumbent directors in determining those persons to be
nominated for election by the shareholders. The Nominating
9
<PAGE>
Committee will consider nominations recommended by
shareholders. Any such recommendation should be made in
writing and mailed to: Chairman, Nominating Committee,
Curtice-Burns Foods, Inc., 90 Lincoln Place, P.O. Box 681,
Rochester, New York 14603.
Agway Inc., which through its subsidiary Agway
Holdings Inc., owns approximately 99 percent of the
Company's Class B shares, is consulted with respect to the
nomination of directors since the holders of the Class B
stock are entitled to elect 11 of the 16 directors.
The Nominating Committee, consisting of
Mr. Chapman as Chairman and Messrs. Brosius, Smith, Pease,
O'Neill and Wolff, met once during fiscal 1993.
Board of Directors:
The Board of Directors met six times during fiscal
1993, and all of the directors attended more than 75 percent
of the aggregate of the total number of Board meetings and
the total number of meetings held by all committees of the
Board on which they served.
Non-employee Board members who are either Pro-Fac
Agway directors receive an annual stipend of $2,800 per
year, plus a $200 per diem for attending Board or Committee
meetings. During fiscal 1993, all outside directors,
Messrs. Blazin and Tiedemann and Ms. Ford, received $15,000
in addition to $500 per day. The Chairman of the Board
receives a fixed amount in lieu of the standard attendance
fees and annual stipend. During fiscal 1993, Mr. Pease
received $21,500 for the fiscal year as Chairman of the
Board. Directors who are also officers of the Company or
Agway are not paid directors' fees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has a contractual relationship with
Pro-Fac Cooperative, Inc. ('Pro-Fac'), an agricultural
cooperative which, since its organization, has supplied a
substantial portion of the raw food products processed by
the Company from crops grown by its approximately 725
members.
The relationship between Pro-Fac and the Company
is governed by an Agreement consisting of four sections:
10
<PAGE>
Operations Financing, Marketing, Facilities Financing, and
Management, which extends to 1997, and provides for two
successive five-year renewals at the option of the Company.
Curtice Burns has the right, at any time upon 60-day written
notice to Pro-Fac, to purchase the assets to which Pro-Fac
holds title pursuant to the Agreement, together with
Pro-Fac's interest in certain of the Company's intangible
assets, in each case at the book value thereof. Upon
exercise of such option, the Agreement would automatically
terminate. Upon termination, the Company would be required
to repay to Pro-Fac all outstanding indebtedness due to
Pro-Fac.
Revenues received by Pro-Fac under the Agreement
for the year ended June 26, 1993 include: commercial market
value of crops delivered, $59,800,000; interest income,
$16,515,000; and a loss from profit sharing provisions of
$21,800,000. In addition, Pro-Fac received facility
financing amortization payments of $53,826,000.
Under the Agreement, the Company's Board of
Directors is obligated to nominate a designee of Pro-Fac
(currently Mr. Call) for annual election to the Company's
Board of Directors, and a designee of the Company (currently
Mr. Pease) is elected to the Board of Directors of Pro-Fac.
Pro-Fac, under the operations financing section of
the Agreement with the Company, lends the Company all
available funds not currently necessary for its own
operations. Short-term debt under this Agreement averaged
$39,444,000 for fiscal 1993 and was $12,000,000 at June 26,
1993. Long-term debt averaged $70,230,000 for fiscal 1993
and was $78,648,000 at June 26, 1993. Interest paid on
these loans and interest on funds used for leased assets is
the same as the cost of the funds to Pro-Fac. For fiscal
1993, interest rates on short-term and long-term debt
averaged 4.6 percent and 7.0 percent, respectively. At
June 26, 1993, the interest rate on the short-term and
long-term debt was 4.32 percent and 6.22 percent,
respectively.
Mr. Call served as director of the Company during
the past year and is also President, director, and member of
Pro-Fac. Mr. Pease, Chairman and a director of the Company,
is also a director of Pro-Fac. Mr. Wolff, a director of the
Company, is also a director of Pro-Fac. As a member of
Pro-Fac, Mr. Call sold certain agricultural products to
Pro-Fac during the year. (Mr. Call conducts business with
11
<PAGE>
Pro-Fac through My-T Acres, Inc., a controlled corporation).
The prices paid to Mr. Call by Pro-Fac for products
delivered were identical to prices paid to all others for
like produce. Pro-Fac paid My-T Acres, Inc., $1,467,000 for
products delivered during the fiscal year ended June 26,
1993. Mr. Myers, an executive officer and director of the
Company, and Mr. Rice and Ms. Bartalo, executive officers of
the Company, serve as officers of Pro-Fac.
The Company has no understanding or arrangements
with Agway to purchase, process, or market produce grown by
Agway members who are not members of Pro-Fac, or to purchase
other products manufactured or distributed by Agway. From
time to time the Company purchases certain products and
services (principally petroleum) from Agway and its
subsidiaries at competitive prices; and Agway purchases
certain products (principally frozen foods) from the Company
at competitive prices. During the fiscal year ended
June 26, 1993, the Company's purchases from Agway and its
subsidiaries amounted to approximately $1,321,000 and
Agway's purchases from the Company amounted to approximately
$359,000. Messrs. Brosius, Burdette, Norris, and Whittemore
are officer of Agway; Messrs. Brosius, Chapman, Pease, Smith
and Wolff are directors of Agway. As of July 15, 1993, all
officers and directors of the Company as a group, including
all nominees for election, beneficially owned eight shares
or less than .1 percent of Agway's common stock.
As authorized by New York law and in accordance
with the policy of that state, the Company has obtained
insurance through Agway from Federal Insurance Company
insuring the Company against any obligation it incurs as a
result of its indemnification of its officers and directors,
and insuring such officers and directors for liability
against which they may not be indemnified by the Company.
This insurance has a term expiring on March 17, 1994, at an
annual cost of approximately $38,000. As of this date, no
sums have been paid to any officers or directors of the
Company under this indemnification insurance contract.
The following table shows the cash compensation
and certain other components of the compensation of the
chief executive officers and the four (4) other most highly
compensated Executive Officers of the Company fiscal years
ended June 26, 1993, June 26, 1992, and June 28, 1991.
12
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Compensation(1) Long-term
Name and Principal Salary Compensation
Position Year Bonus(2) Awards Options(3)
<S> <C> <C> <C>
J. William Petty . . . 1993 $322,498$148,739 66,800
Chief Executive Officer 1992 283,134 73,803 11,785
and Director 1991 262,336 11,700
David J. McDonald . . 1993 $336,492 $78,134 46,700
Retired Chief Executive 1992 316,769 23,716
Officer and Director 1991 290,000 13,100
Tommy L. Murray . . . 1993 $160,800 $13,272 9,800
President Snack Group 1992 153,695 68,851 0
1991 146,376 57,403 6,500
Patrick D. Lindenbach 1993 $166,779$102,152 12,700
Executive Vice 1992 145,206 84,569 1,154
President
1991 122,000 58,755 5,400
Roy A. Myers . . . . . 1993 $219,969 $35,943 18,200
Executive Vice 1992 211,467 3,460
President
and Director 1991 199,786 9,000
William D. Rice . . . 1993 $222,700 $36,389 19,500
Senior Vice President 1992 215,494 3,403
Secretary and Treasurer 1991 196,615 9,400
</TABLE>
____________________
(1) No named Executive Officer has received personal
benefits during the listed years in excess of the
lesser of $50,000 or 10 percent of annual salary.
(2) Pursuant to the Management Incentive Plan of the
Company (the 'Incentive Plan'), additional compensation
13
<PAGE>
is paid if justified by the activities of the officers
and employees eligible under the Incentive Plan and by
the earnings of the Company and of Pro-Fac Cooperative,
Inc. ('Pro-Fac').
(3) Fiscal 1992 options are net of cancelled options as
follows:
<TABLE>
<CAPTION>
Granted Cancelled
Shares Per Share Shares Per Share
<S> <C> <C> <C> <C>
J. William Petty . . 23,485 $10.25 11,700 $15.375
David J. McDonald . 36,816 10.25 13,100 15.375
Tommy L. Murray . . 6,500 10.25 6,500 15.375
Patrick D. Lindenbach 6,554 10.25 5,400 15.375
Roy A. Myers . . . . 12,460 10.25 9,000 15.375
William D. Rice . . 12,803 10.25 9,400 15.375
</TABLE>
Retirement Plans
The Company's Master Salaried Retirement Plan (the
'Pension Plan') provides defined retirement benefits for its
officers and all salaried and clerical personnel. The
compensation upon which the pension benefits are determined
is included in the salary column of the 'summary
compensation table'.
For retirement before age 65, the annual benefits
are reduced by an amount for each year prior to age 65 at
which such retirement occurs so that if retirement occurs at
age 55, the benefits are 70 percent of those payable at
age 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of
Remuneration Service
<S> <C> <C> <C> <C> <C>
15 20 25 30 35
$125,000 22,809 29,836 36,844 43,887 51,170
150,000 28,059 36,836 45,594 54,387 63,420
175,000 33,309 43,836 54,344 64,887 75,670
200,000 38,559 50,836 63,094 75,387 87,920
225,000 43,809 57,836 71,844 85,887 100,170
250,000 46,086 60,872 75,638 90,440 105,482
</TABLE>
14
<PAGE>
The benefits listed on the Pension Plan Table are
not subject to any deduction for Social Security.
The approximate number of years of credited
participation under the Company's Pension Plan as of
June 26, 1993, of the Executive Officers listed in the
compensation table on page 11 are as follows: J. William
Petty-9, David J. McDonald-16, Tommy L. Murray-3, Patrick D.
Lindenbach-4, Roy A. Myers-31 and William D. Rice-21.
On January 28, 1992, the Company adopted a
Supplemental Retirement Plan which serves to provide a small
group of employees with the same retirement benefit they
would have received from the Company's Master Salaried
Retirement Plan under the career average base pay formula,
but for changes required under the 1986 Tax Reform Act and
the compensation limitation under Section 401(a)(17) of the
Internal Revenue Code, which was indexed for inflation to
$235,840 on January 1, 1993.
The Company also maintains a Supplemental
Executive Retirement Plan ('SERP') to ensure that key
executives affected by joining the Company at mid-career
will receive levels of retirement income reasonably related
to their service and compensation, and reflecting their
contribution to the success of the Company.
Presently the SERP includes as participants
Mr. McDonald and Mr. Petty. The Plan ensures that
participants will receive, from all past and current
employment sources, a minimum aggregate benefit of
50 percent of Final Average Base Salary upon retirement at
age 65 with decreasing amounts as early as age 62, but no
SERP benefit if retirement occurs prior to age 62. Final
Average Base Salary is defined as the average of the highest
three consecutive years' salary, including cash incentive
bonuses. Retirement benefits for SERP participants will be
paid from a combination of five sources: The Master
Salaried Retirement Plan of the Company, the interest income
available from the accumulations in the Company's Deferred
Profit Sharing Plan, primary benefits under Social Security,
any pension plans from previous employment, and finally, an
increment paid by the SERP from the Company's general funds
to bring the aggregate benefits to the prescribed level.
The SERP is not tax qualified and is not subject to the
various maximum benefit limitations prescribed in ERISA and
the 1986 Tax Reform Act. The total projected annual
benefits payable under this supplement plan to Mr. McDonald
15
<PAGE>
and Mr. Petty at age 65 at current compensation levels are
as follows: D. J. McDonald $56,238; J. W. Petty $129,196.
Change of Control Provisions of Severance and Other Benefit
Plans
The Company has adopted a Change of Control
Severance Plan concerning certain key employees and
Executive Officers (the 'Plan'). The Plan provides salary
and benefit continuation to designated executives (including
the named executives listed in the compensation table with
the exception of Mr. McDonald) in the event their employment
is terminated within a specified period after a change of
control of the Company, as such term is defined in the Plan.
The Plan has a term of one year; however, if a
change in control occurs within that one-year period, the
Plan will remain in existence for two years after the date
of the change of control. The Plan cannot be terminated
within two years after a change of control or during any
period of time when the Company has knowledge that a third
person has taken steps reasonably calculated to effect a
change of control. The Plan provides for salary and benefit
continuation upon termination other than for cause within
the two-year period following a Change of Control as
follows: one year of salary and benefit continuation for
Messrs. Petty, Myers and Rice; two years of salary and
benefit continuation for the other designated executives
including Messrs. Murray and Lindenbach, or until the
executive obtains other employment at an annual salary not
less than 75 percent of his annual salary at termination,
whichever occurs first.
Under the terms of the Agreement, Mr. Petty would
be entitled to a minimum supplemental retirement benefit
equal to 50 percent of his current salary, less all other
sources of retirement income including his supplemental
retirement benefit, if any, under the Curtice Burns Foods
Supplemental Executive Retirement Plan. Messrs. Myers and
Rice would be entitled to a supplemental retirement benefit
equal to the benefit they would receive from the Curtice
Burns Foods Master Salaried Retirement Plan if they continue
working until age 65 at their current salary level, less
their actual retirement benefit from this Plan. In all
cases, the supplemental retirement benefits begin at the end
of the salary and benefit continuation period. Also, upon a
Change of Control all stock options granted prior to
16
<PAGE>
February 18, 1993 would become exercisable. However, with
the exception of Mr. Petty's stock options, the vesting of
stock options will only accelerate to the extent that such
acceleration shall not result in an excise tax under the
Internal Revenue Code.
If any excise tax is imposed on Mr. Petty in
respect to payments under these agreements and the
accelerated vesting of stock options, the Company will pay
to Mr. Petty an amount that will net him the same sum as he
would have retained if the excise tax did not apply.
The Profit Sharing Plan and the Incentive Plan
also contain a change of control provision pursuant to
which, in the event of a change of control of the Company,
participants in such plan who are terminated within two
years following a change in control are entitled to benefits
earned under such plan for the fiscal year of their
termination on a pro rata basis for the part of the year
they were employed.
Executive Stock Option Plans
Under the Company's 1980 Executive Stock Option
Plan ('1980 Plan') and 1990 Executive Stock Option Plan
('1990 Plan'), options to purchase the Company's Class A
shares may be granted to senior management employees of the
Company and its subsidiaries. The following table shows the
individual grants to the named Executive Officers of stock
options during the fiscal year ended June 26, 1993. There
are no stock appreciation or other rights issued in tandem
with options under the 1980 Plan or the 1990 Plan.
OPTION GRANTS IN FISCAL YEAR 1993
<TABLE>
<CAPTION>
% of
Total Grant
Options Exercise Date
Options Granted to or Expiration Present
Name Granted Employees Base Date Value(2)
(1) in Price
Fiscal $/Share
Year
<S> <C> <C> <C> <C> <C>
J. William Petty 66,800 24.9% $14.625 3/27/03 $285,900
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
David J. 46,700 17.4% 14.625 3/27/03 200,000
McDonald . . .
Tommy L. Murray 9,800 3.7% 14.625 3/27/03 41,800
Patrick D. 12,700 4.7% 14.625 3/27/03 54,300
Lindenbach . .
Roy A. Myers . 18,200 6.8% 14.625 3/27/03 77,900
William D. Rice 19,500 7.3% 14.625 3/27/03 83,600
</TABLE>
___________________________
(1) The stock options listed in this column become
exercisable over a five-year period and have a ten-year
term. None of these options are currently exercisable.
These stock options were granted at a price equal to
the fair market value of the shares on the date
immediately preceding the grant date. Generally, these
stock options expire at the end of the stock option
holder's employment. However, in the case of a stock
option held by an employee whose employment terminates
due to retirement or total disability, the employee may
exercise the stock option within five years of the date
of total disability or retirement, not to exceed ten
years from the grant date. In case of death of the
employee, his or her estate may exercise the stock
option within twelve months of the date of death.
(2) The values shown are based upon the Black-Scholes
option valuation model. The estimated values under the
model are based on arbitrary assumptions as to
variables such as interest rates, stock price
volatility and future dividend yield. The actual
value, if any, an executive may realize will depend on
the excess of the stock price over the exercise price
on the date the option is exercised, so there is no
assurance the value realized will be at or near the
value estimated by the Black-Scholes model.
It is important to note that no gain is possible
without an increase in the stock price which will
benefit stockholders commensurately. The hypothetical
values shown in this table are not intended to forecast
possible future appreciation of the price of the
Company's stock. Actual gains, if any, on stock
exercises and common stock holdings will be dependent
18
<PAGE>
on overall market conditions and on the future
performance of the Company andy its common stock.
The following table provides information on
options exercised during Fiscal 1993 by the named Executive
Officers and unexercised stock options held as of the end of
the fiscal year.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1993
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Number Unexercised In-the Money
of Options at Options at
Shares Value Fiscal Year End* Fiscal Year End(2)
Name Acquired Realized Exercisable/ Exercisable/
on (1) Unexercisable Unexercisable
Exercise
<S> <C> <C> <C> <C>
J. William 9,113 $78,736 26,406 - 82,106 $30,407 - $33,466
Petty . .
David J. 7,595 34,297 28,397 - 70,309 34,974 - 52,463
McDonald
Tommy L. 0 0 10,803 - 14,611 6,175 - 9,262
Murray .
Patrick D. 0 0 9,844 - 17,543 6,227 - 9,338
Lindenbach
Roy A. 6,145 32,226 5,849 - 26,891 11,6790 - 17,755
Myers . .
William D. 6,075 29,160 16,056 - 28,397 12,162 - 18,244
Rice . .
_______________________
</TABLE>
* Fair market value of the Company stock on June 26, 1993
was $12.63.
(1) Value realized equals fair market value on the date of
exercise, less the exercise price, times the number of
shares acquired.
19
<PAGE>
(2) Value of unexercised options equals the fair market
value of the share underlying in-the-money options at
June 26, 1993 ($12.63), less exercise price, times the
number of options outstanding.
EXHIBIT 4
AGREEMENT
AGREEMENT, dated as of September 27, 1994 (the 'Agreement'), among Pro-Fac
Cooperative, Inc., a New York cooperative corporation ('Pro-Fac'), PF
Acquisition Corp., a New York corporation and a wholly owned subsidiary of
Pro-Fac ('Buyer'), and Agway Holdings, Inc., a Delaware corporation ('Agway'),
and a wholly owned subsidiary of Agway Inc., a Delaware corporation.
WHEREAS, Pro-Fac, Buyer, and Curtice Burns Foods, Inc., a New York
corporation (the 'Company'), propose to enter into an Agreement and Plan of
Merger dated the date hereof (the 'Acquisition Agreement') which provides, among
other things, that Buyer shall commence an offer (the 'Offer', which term shall
include any amendment thereof not in violation of the Acquisition Agreement) to
purchase any and all of the issued and outstanding shares of the Company's Class
A Common Stock, par value $.99 per share ('Class A Common Stock'), and Class B
Common Stock ('Class B Common Stock'), par value $.99 per share, and shall merge
with and into the Company (the 'Merger'), in each case upon the terms and
subject to the conditions set forth in the Acquisition Agreement (any term used
herein without definition shall have the definition ascribed thereto in the
Acquisition Agreement);
WHEREAS, Agway owns 899,447 shares of Class A Common Stock and 2,036,643
shares of Class B Common Stock (the 'Agway Shares');
WHEREAS, as a condition to the willingness of Pro-Fac and Buyer to enter
into the Acquisition Agreement, and as an inducement to them to do so, Agway has
agreed for the benefit of Pro-Fac and Buyer to tender the Agway Shares, and any
other shares of Class A Common Stock or Class B Common Stock at any time during
the term of this Agreement held by Agway, in response to the Offer on the terms
and conditions contained in this Agreement; and
WHEREAS, the Board of Directors of the Company has approved this Agreement,
the Acquisition Agreement, the Offer and the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement the parties hereby agree as
follows:
ARTICLE I
TENDER OFFER AND OPTION
SECTION 1.1. Tender of Shares. (a) Within five business days of the
commencement by the Buyer of the Offer, Agway shall tender to the depositary
(the 'Depositary') designated in the Offer to Purchase (the 'Offer to Purchase')
distributed by the Buyer in connection with the Offer (i) a letter of
transmittal with respect to the Agway Shares and any other shares of Class A
Common Stock or Class B Common Stock held by Agway (whether or not currently
held by Agway, the Agway Shares and such other shares being referred to herein
as the 'Shares'), complying with the terms of the Offer to Purchase, together
with instructions directing the Depositary to make payment for such Shares
directly to Agway (but if such Shares are not accepted
1
<PAGE>
for payment and are to be returned pursuant to the Offer to Purchase, to return
such Shares to Agway), (ii) the certificates representing the Shares and (iii)
all other documents or instruments required to be delivered pursuant to the
terms of the Offer to Purchase (such documents in clauses (i) through (iii)
collectively being hereinafter referred to as the 'Tender Documents').
(b) Agway will not, subject to applicable law, withdraw the tender
effected in accordance with Section 1.1(a); provided, however, that (i)
Agway may decline to tender, or may withdraw, any and all Shares if (A) the
amount or form of consideration to be paid for such Shares is less than
cash in the amount of $19.00 per Share, net to Agway or (B) the Acquisition
Agreement is terminated and (ii) Agway shall give Buyer at least one
business day's prior notice of any withdrawal of Shares.
SECTION 1.2. Option. (a) Agway hereby irrevocably grants Buyer an option
(the 'Option'), exercisable only upon the events and subject to the conditions
set forth herein, to purchase all the Shares at a purchase price of $19 per
Share, net to Agway.
(b) Subject to the conditions set forth in Section 1.3, Buyer may
exercise the Option in whole at any time or from time to time on or after
the date (if any) on which Agway withdraws any or all of the Shares from
the tender made pursuant to Section 1.1 hereof. Buyer shall exercise the
Option by delivering notice thereof to Agway, specifying the date, time and
place for the closing of such purchase. The closing of the purchase of
Shares pursuant to this Section 1.2 (the 'Closing') shall take place on the
date, at the time and at the place specified in such notice; provided, that
if at such date any of the conditions specified in Section 1.3 shall not
have been satisfied (or waived), Buyer may postpone the Closing until a
date within five business days after such conditions are satisfied.
(c) At the Closing, Agway will deliver to Buyer (in accordance with
Buyer's instructions) the certificates representing the Shares being
purchased pursuant to Section 1.2(b), duly endorsed or accompanied by stock
powers duly executed in blank. At such Closing, Buyer shall deliver to
Agway a certified or bank cashier's check payable to or upon the order of
Agway in an amount equal to the number of Shares being purchased at such
Closing multiplied by $19.
(d) The Option will terminate upon termination of the Acquisition
Agreement.
SECTION 1.3. Conditions. The obligation of Agway to sell Shares at the
Closing is subject to the following conditions:
(a) Buyer shall, on or prior to the date of such Closing, have
accepted or simultaneously be accepting for payment at least 44% of the
shares of Class A Common Stock outstanding at the time of such acceptance
(not including any shares of Class A Common Stock held by Agway) pursuant
to the Offer;
(b) such Shares shall have been withdrawn from the tender made
pursuant to Section 1.1; provided that Buyer shall have no Option with
respect to Shares withdrawn pursuant to Section 1.1(b)(i);
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(c) all waiting periods under the HSR Act applicable to such exercise
shall have expired or been terminated; and
(d) there shall be no preliminary or permanent injunction or other
order, decree or ruling issued by any Governmental Entity, nor any statute,
rule, regulation or order promulgated or enacted by any Governmental Entity
prohibiting, or otherwise restraining, such exercise of the Option.
SECTION 1.4. No Purchase. Buyer may allow the Offer to expire without
accepting for payment or paying for any Shares, as set forth in the Offer to
Purchase, and may allow the Option to terminate without purchasing all or any
Shares pursuant to the exercise thereof. If any Shares are not accepted for
payment in accordance with the terms of the Offer to Purchase or purchased
pursuant to the Option, they shall be returned to Agway, whereupon they shall
continue to be held by Agway subject to the terms and conditions of this
Agreement.
ARTICLE II
CONSENT AND VOTING
Agway hereby revokes any and all previous proxies granted with respect to
the Shares. By entering into this Agreement, Agway hereby consents to the
Acquisition Agreement and the transactions contemplated thereby, including the
Merger (as defined in the Acquisition Agreement). So long as the Acquisition
Agreement is in effect, Agway hereby agrees to vote all Shares now or hereafter
owned by Agway in favor of the Acquisition Agreement, the Merger and the
transactions contemplated thereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF AGWAY
Agway represents, warrants and covenants to Pro-Fac and the Buyer that:
SECTION 3.1. Ownership. Agway is the sole, true, lawful and beneficial
owner of the Shares with no restrictions on voting rights or rights of
disposition pertaining to the Shares. Agway will convey good and valid title to
the Shares being purchased pursuant to the Offer, the Merger or the Option, as
the case may be, free and clear of any and all claims, liens, charges,
encumbrances and security interests. None of the Shares is subject to any voting
trust or other agreement or arrangement with respect to the voting of such
Shares. Until this Agreement is terminated, Agway shall not, directly or
indirectly, sell, exchange, encumber, assign or otherwise transfer or dispose
of, or agree to or solicit any of the foregoing, or grant any right or power to
any person which limits Agway's sole power to vote, sell, assign, transfer,
encumber or otherwise dispose of the Shares or otherwise directs Agway with
respect to the Shares. Agway agrees to notify
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Pro-Fac and Buyer promptly and to provide all details requested by Pro-Fac or
Buyer if Agway or any of its affiliates shall be approached or solicited,
directly or indirectly, by any person with respect to any of the foregoing.
SECTION 3.2. Non-Contravention. The execution, delivery and performance by Agway
of this Agreement and the consummation of the transactions contemplated hereby
(i) are within Agway's powers, have been duly authorized by all necessary action
(including any consultation, approval or other action by or with any other
person), (ii) require no action by or in respect of, or filing with, any
governmental body, agency, official or authority (except as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or the Securities
Exchange Act of 1934), and (iii) do not and will not contravene or constitute a
default under, or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Agway or to a loss of any benefit of
Agway under, any provision of applicable law or regulation or of any agreement,
judgment, injunction, order, decree, or other instrument binding on Agway or
result in the imposition of any lien on any asset of Agway.
SECTION 3.3. Binding Effect. This Agreement has been duly executed and delivered
by Agway and is the valid and binding agreement of Agway, enforceable against it
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditor's
rights generally.
SECTION 3.4. Total Shares. The Agway Shares are the only Shares beneficially
owned as of the date hereof by Agway and Agway owns no option to purchase or
right to subscribe for or otherwise acquire any securities of the Company and
has no other interest in or voting rights with respect to any securities of the
Company.
SECTION 3.5. Finder's Fees. No investment banker, broker or finder is entitled
to a commission or fee from Buyer or the Company in respect of this Agreement
based upon any arrangement or agreement made by or on behalf of Agway, except as
otherwise provided in the Acquisition Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PRO-FAC AND BUYER
Pro-Fac and Buyer represent, warrant and covenant to Agway:
SECTION 4.1. Corporate Power and Authority. Pro-Fac and Buyer have all
requisite corporate power and authority to enter into this Agreement and to
perform their obligations hereunder. The execution, delivery and performance by
Pro-Fac and Buyer of this Agreement and the consummation by Pro-Fac and Buyer of
the transactions contemplated hereby have been duly authorized by the board of
directors of Pro-Fac and Buyer and no other corporate action on the part of
Pro-Fac or Buyer is necessary to authorize the execution, delivery or
performance by Pro-Fac or
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Buyer of this Agreement and the consummation by Pro-Fac and Buyer of the
transactions contemplated hereby.
SECTION 4.2. Binding Effect. This Agreement has been duly executed and delivered
by Pro-Fac and Buyer and is a valid and binding agreement of Pro-Fac and Buyer,
enforceable against each of them in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally.
SECTION 4.3. Acquisition for Buyer's Account. Any Shares to be acquired upon
consummation of the Offer or upon exercise of the Option will be acquired by
Buyer for its own account and not with a view to the public distribution thereof
and will not be transferred except in compliance with the Securities Act of
1933.
SECTION 4.4. Release of Claims. From and after the Effective Time of the Merger
(as defined in the Acquisition Agreement) or, if earlier, the purchase of Shares
pursuant to the Offer or the Option, Pro-Fac and Buyer shall and, after the
Merger, shall cause the Surviving Corporation and the Company (each a
'Releasor') to, release and discharge Agway, Agway Inc. and each director,
officer, employee, agent and advisor of Agway or Agway Inc. (each a 'Releasee')
from any and all claims, demands, causes of action, actions, suits, proceedings
and liabilities of any nature whatsoever (collectively, 'Claims') that may exist
at such time in favor of any such Releasor against any such Releasee to the
extent arising out of or based upon (a) the Integrated Agreement, including the
write-own by the Company of certain assets at the end of fiscal 1993 and in the
first half of fiscal 1995, the actions by the Company in connection with the
termination by Pro-Fac in March 1994 of certain crops, the management by the
Company of the business of Pro-Fac prior to the date hereof or the inclusion of
certain 'change-of-control' expenses in the profits of the Company for fiscal
1994 to be shared with Pro-Fac pursuant to the Integrated Agreement, or (b) the
transactions leading up to the Acquisition Agreement (including, but not limited
to, the auction process); provided, however, that the foregoing release shall
not apply to any Claim to the extent such Claim (i) arises after the date of
this Agreement, (ii) either (A) is based upon behavior of the applicable
Releasee that is not generally consistent with the behavior of such Releasee
prior to the date hereof or (ii) is based upon any action taken by such
Releasee, or failure by such Releasee to take any action, with intentional
disregard for what such Releasee in good faith believes to be the rights of
Pro-Fac under the Integrated Agreement (it being agreed that any action or
failure to take action consistent with such Releasee's understanding of the
advice (written or oral) of counsel shall be deemed to have been without
intentional disregard for what such Releasee in good faith believes to be the
rights of Pro-Fac), and (iii) is made in writing by Pro-Fac to such Releasee
promptly upon Pro-Fac or Buyer becoming aware of facts giving rise to such Claim
if they so became aware prior to the purchase of the Shares (whether or not
pursuant to the Merger, the Offer or the Option), it being acknowledged by
Pro-Fac and Buyer that neither Agway nor any Releasee concedes that a Claim made
that is consistent with this proviso is necessarily a valid claim against any
Releasee, none of whom is a party to the Integrated Agreement. In addition, each
Releasor promises and agrees that, to the extent within its control and except
as may be required by law, such Releasor will not initiate or participate in any
claim, complaint, or litigation arising out of or in connection with any Claim
released hereby.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Agreements of Agway. Agway hereby covenants and agrees that,
so long as the Acquisition Agreement is in effect:
(a) No Shopping. Agway shall not directly or indirectly (i) solicit,
initiate or encourage (or authorize any person to solicit, initiate or
encourage) any inquiry, proposal or offer from any person to acquire the
business, property or capital stock of the Company or any direct or
indirect subsidiary thereof, or any acquisition of a substantial equity
interest in, or a substantial amount of the assets of, the Company or any
direct or indirect subsidiary thereof, whether by merger, purchase of
assets, tender offer or other transaction or (ii) participate in any
discussion or negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or
participate in, facilitate or encourage any effort or attempt by any other
person to do or seek any of the foregoing, except as such participation or
cooperation shall be required as a result of the exercise by the Board of
Directors of the Company of its fiduciary duty consistent with and the
terms of the Acquisition Agreement. Agway shall promptly advise the Company
of the terms of any communications it or any of its affiliates may receive
relating to any of the foregoing.
(b) Adjustment Upon Changes in Capitalization or Merger. In the event
of any change in the Company's capital stock by reason of stock dividends,
stock splits, mergers, consolidations, recapitalizations, combinations,
conversions, exchanges of shares, extraordinary or liquidating dividends,
or other changes in the corporate or capital structure of the Company which
would have the effect of diluting or changing the Buyer's rights hereunder,
the number and kind of shares or securities subject to this Agreement and
the purchase price per Share (but not the total purchase price) shall be
appropriately and equitably adjusted so that the Buyer shall receive
pursuant to the Offer or the Option the number and class of shares or other
securities or property that the Buyer would have received in respect of the
Shares purchasable pursuant to the Offer or the Option if such purchase had
occurred immediately prior to such event. Agway shall request the Company
to take, and shall use reasonable efforts to take, such steps in connection
with such consolidation, merger, liquidation or other such action as may be
necessary to assure that the provisions hereof shall thereafter apply as
nearly as possible to any securities or property thereafter deliverable
pursuant to the Offer or the Option.
SECTION 5.2. Agreement of Buyer. Buyer covenants and agrees that if it
accepts any Shares pursuant to the Offer, it shall accept for payment under
the Offer at least 44% of the shares of Class A Common Stock (not including
Shares owned by Agway) outstanding at the time of such acceptance.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
SECTION 6.2. Further Assurances. Pro-Fac, Buyer and Agway will each execute
and deliver or cause to be executed and delivered all further documents and
instruments and use its best efforts to secure such consents and take all such
further action as may be reasonably necessary in order to consummate the
transactions contemplated hereby and by the Acquisition Agreement.
SECTION 6.3. Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations and
which may be required under any agreements, contracts, commitments, instruments,
understandings, arrangements or restrictions of any kind to which such party is
a party or by which such party is governed or bound, to consummate and make
effective the transactions contemplated by this Agreement.
SECTION 6.4. Specific Performance. Each party hereto agrees that the other
parties hereto may be irreparably damaged if for any reason such party failed to
perform any of its obligations under this Agreement, and that the non-breaching
party would not have an adequate remedy at law for money damages in such event.
Accordingly, each party shall be entitled to specific performance and injunctive
and other equitable relief to enforce the performance of this Agreement by each
other party. This provision is without prejudice to any other rights that a
party may have against any other party for any failure to perform its
obligations under this Agreement.
SECTION 6.5. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) to such party at its address set forth on the
signature page hereto.
SECTION 6.6. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares.
SECTION 6.7. Amendments; Termination. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. This Agreement will terminate
upon the termination of the Acquisition Agreement in accordance with its terms.
SECTION 6.8. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided, however, that Buyer may assign its
rights and obligations to another wholly owned subsidiary of Pro-Fac who is the
assignee of Buyer's rights under the Acquisition Agreement and provided,
further, that except as set forth in the prior clause, a party may not assign,
delegate or
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otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other parties hereto.
SECTION 6.9. Governing Law. This Agreement shall be construed in accordance with
and governed by the law of New York without giving effect to the principles of
conflicts of laws thereof.
SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PRO-FAC COOPERATIVE, INC.
By /s/ Roy Myers
------------------------------------
Title: General Manager
90 Linden Place
Rochester, New York 14603
PF ACQUISITION CORP.
By /s/ Roy Myers
------------------------------------
Title: President
90 Linden, Place
Rochester, New York 14603
AGWAY HOLDINGS INC.
By /s/ Peter O'Neill
------------------------------------
Title: Senior Vice President,
Finance and Control
c/o Agway Inc.
333 Butternut Drive
De Witt, New York 13214
Attention: Peter J. O'Neill
Senior Vice President
8
EXHIBIT 5
INTEGRATED AGREEMENT
Since 1961 the working relationship between
Curtice Burns Foods, Inc. ('Curtice Burns') and Pro-Fac
Cooperative, Inc. ('Pro-Fac') has been expressed in a series
of four inter-related agreements between them. Based upon
the experience of 30 years of operations it now is
appropriate to set forth in this Integrated Agreement the
assumptions and considerations on which those agreements are
based and to integrate and renew the agreements.
The members and patrons of Pro-Fac are active
growers who have joined together in their cooperative to
market their crops at a fair price and to try to achieve as
much stability and continuity as is possible in agriculture.
While Pro-Fac and its members and patrons have considerable
expertise in the growing of crops, they do not have such
expertise in the processing and sale of those crops in the
form of commercially viable processed food products.
Curtice Burns has long been engaged in the
processing, distribution and sale of processed foods, now on
a diversified geographical basis, but it lacks expertise in
the farming and growing of the crops on which it depends for
a reliable source of supply for its products.
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Pro-Fac and Curtice Burns have come together
because of the need of Pro-Fac to find a stable market for
crops grown by its members and patrons and because of the
need of Curtice Burns for a reliable supply of such crops.
While Curtice Burns believes that it has available to it
adequate funds to finance its own operations, in order to
process and market Pro-Fac products Curtice Burns requires
significant additional sources of financing in the form of
working capital and facilities necessary to give it the
capacity to provide a reliable and stable market for Pro-Fac
products. Consequently, the willingness of Curtice Burns to
enter into its relationship with Pro-Fac depends upon the
commitment of Pro-Fac to provide financing for Curtice Burns
from a variety of sources not directly available to Curtice
Burns. Pro-Fac provides such financing in order to achieve
its primary objective of a guaranteed and stable market for
crops grown by its members and patrons.
Since Pro-Fac and Curtice Burns have different
areas of expertise in the production and sale of food
products, as well as access to different sources of funds
necessary to conduct their operations, each retains its
independence for their mutual benefit.
This Integrated Agreement shall be for the fiscal
year of the parties beginning June 27, 1992 and for the
ensuing four additional fiscal years ending in June of 1997,
as well as for such further period as to which the parties
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may agree or for which the agreement may be extended in
accordance with paragraph 72.
OPERATIONS FINANCING
1. Loan of Funds. To the extent that funds
available to Pro-Fac are not invested in its ownership of
facilities or otherwise needed in the conduct of its own
business, Pro-Fac agrees to lend such funds to Curtice Burns
on terms and conditions herein provided. Curtice Burns
shall pay interest to Pro-Fac for the use of such funds as
provided in paragraphs 3, 4, 5 and 6, as well as the payment
described in paragraph 50.
2. Source of Funds to Be Lent to Curtice Burns.
Pro-Fac shall determine the source of funds which it lends
to Curtice Burns pursuant to this agreement. The following
is the present priority of funds derived from the sources
indicated for the use of funds by Pro-Fac to finance
ownership of its facilities and other aspects of its
business:
a. Common stock
b. Retains
C. Allocated tax paid reserve
d. Earned surplus
e. Preferred stock
f. Long-term debt
g. Seasonal debt
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It is anticipated that the sources of funds to be lent to
Curtice Burns will be in inverse order from that listed
above.
3. Loan of Equity Funds. The equity of Pro-Fac
shall be lent upon the following conditions:
a. Curtice Burns shall pay no interest on loans
of funds derived from the proceeds from the sale and
issuance of Pro-Fac common stock.
b. To the extent that Pro-Fac lends Curtice Burns
funds derived from the issuance of Pro-Fac preferred
stock and to the extent that such funds are not lent to
Curtice Burns but are used by Pro-Fac to pay for its
facilities, Curtice Burns shall annually pay interest
on such an aggregate amount at a rate equal to the
average interest rate paid by Pro-Fac and Curtice Burns
for term borrowing. All interest payable under this
paragraph shall be based upon the average amount of the
loans outstanding pursuant to this paragraph during the
year. To the extent that funds derived from retains
lent without interest pursuant to paragraph 5 mature
into preferred stock of Pro-Fac, Curtice Burns agrees
to pay interest on such funds as provided in this
paragraph for the full fiscal year in which such
preferred stock derived from retains is issued.
4. Loan of Proceeds from Pro-Fac Loans. To the
extent that Pro-Fac lends Curtice Burns funds derived from
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both seasonal and term loans to Pro-Fac from the Springfield
Bank for cooperatives or such other source from which Pro-
Fac may borrow and to the extent such funds are used by Pro-
Fac to pay for its facilities, Curtice Burns shall pay
interest on such funds at a rate equal to that payable by
Pro-Fac to the source from which Pro-Fac has obtained such
funds. To the extent necessary to enable Pro-Fac to obtain
funds, Curtice Burns agrees to guarantee repayment of all
loans obtained by Pro-Fac and further agrees to repay funds
borrowed from Pro-Fac at the termination of this agreement.
However, the amount Curtice Burns is so obligated to repay
to Pro-Fac shall be reduced by any amount Curtice Burns has
paid to any third party under its guaranty of Pro-Fac debt.
If by the terms of any agreement by which Pro-Fac has
obtained funds subsequently lent to Curtice Burns Pro-Fac
must repay such funds before the termination of this
agreement, then Curtice Burns shall repay such funds to Pro-
Fac in time to enable Pro-Fac to make such repayment.
5. Loan of Retained Funds. To the extent that
Pro-Fac lends Curtice Burns funds allocated to members of
Pro-Fac pursuant to retains but retained by Pro-Fac, Curtice
Burns shall not pay interest to Pro-Fac for the use of such
funds, except as provided in paragraph 3(b).
6. Loan of Allocated Tax Paid Reserves and Earned
Surplus. To the extent that Pro-Fac lends Curtice Burns
funds derived from the allocated tax paid reserves and from
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the earned surplus of Pro-Fac, Curtice Burns shall pay no
interest for the use of such funds for the first five fiscal
years following the fiscal year in which such funds
originated in Pro-Fac. Thereafter Curtice Burns shall pay
interest for the use of such funds on the same basis and at
the same rate as is payable for the use of funds derived
from the issuance of preferred stock as described in
paragraph 3(b).
7. Record of Loans. The amount and nature of the
indebtedness of Curtice Burns to Pro-Fac shall be as is set
forth and reflected from time to time on the books and
records of Curtice Burns and Pro-Fac; no promissory note or
notes shall be necessary to evidence such indebtedness.
8. Right to Recall Funds. Pro-Fac shall
determine and advise Curtice Burns at the end of each fiscal
year the amount of loans payable from Curtice Burns which
may reasonably be due currently so as to provide Pro-Fac
with current assets at least equivalent to its current
liabilities. Should Pro-Fac not receive through interest
payments as herein provided, or from other sources, funds
sufficient to meet its requirements for the conduct of its
business, then Curtice Burns shall, upon reasonable notice
from Pro-Fac, repay all or any portion of funds lent by Pro-
Fac to Curtice Burns as so requested, so as to provide Pro-
Fac with funds necessary to meet its legitimate business
purposes. In giving such notice, Pro-Fac shall provide
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Curtice Burns with as much advance notification as possible
so as to enable Curtice Burns to arrange for any refinancing
necessary for it to make such repayment.
9. Prepayment. Curtice Burns may, at its
election, pre-pay any funds borrowed from Pro-Fac upon
written notice Of not less than five days to Pro-Fac,
without penalty or premium, and any such prepayment in part
may be applied to such particular payments provided for
hereunder as Curtice Burns may designate.
10. Bond. Curtice Burns will obtain a blanket
bond insuring the interest of both Pro-Fac and Curtice Burns
as such interest may appear and providing coverage in an
amount satisfactory to the boards of directors of both
Curtice Burns and Pro-Fac for such employees of Curtice
Burns as shall handle moneys of Pro-Fac in behalf of Curtice
Burns. The expense of such bond shall be charged by Curtice
Burns as a direct sales, general and administrative expense.
FACILITIES FINANCING
11. Premises. In consideration of the financing
payments to be made to Pro-Fac by Curtice Burns as
hereinafter specified, Pro-Fac hereby makes available for
the use of Curtice Burns (which is hereinafter deemed to
include any subsidiary of Curtice Burns which shall be
designated by Curtice Burns to operate the facilities) all
real property owned by Pro-Fac, together with all buildings,
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plants, structures, improvements, water and sewer rights,
easements, and all rights of any sort or kind belonging or
appertaining thereto (such real property hereinafter
referred to as the 'Premises'). Unless specifically
excluded by resolution of the boards of directors of Pro-Fac
and Curtice Burns, the Premises shall also include any real
property subsequently acquired by Pro-Fac during the term of
this agreement.
12. Equipment. Pro-Fac hereby further makes
available for the use of Curtice Burns all fixtures, food
processing equipment, machinery, office equipment, motor
vehicles and all other equipment of every kind and
description owned by Pro-Fac now or hereafter attached to,
or now or hereafter used on or procured for use upon the
Premises or elsewhere (such personal property hereafter
referred to as the 'Equipment'). Unless specifically
excluded by resolution of the boards of directors of Pro-Fac
and Curtice Burns, the Equipment shall also include any
equipment subsequently acquired by Pro-Fac during the term
of this agreement. The Premises and the Equipment are
sometimes referred to in the aggregate as the 'Facilities'.
13. Facilities Financing Payments. The
Facilities are accounted for as capitalized lease assets
which will be depreciated by Curtice Burns. The parties
agree that the central purpose of this agreement is to
provide a security interest to Pro-Fac through its retention
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of title to the Facilities to assure the recovery by Pro-Fac
of all costs of acquisition, financing and associated
carrying costs involved with the Facilities. Curtice Burns
shall pay Facilities financing payments to Pro-Fac in an
amount equal to the total annual depreciation each year on
the Facilities determined on a straight line basis in
accordance with generally accepted accounting principles or
in some other fashion which is acceptable to Pro-Fac.
Curtice Burns further agrees to pay all taxes, charges for
water, utilities and assessments against the Facilities of
any sort, ordinary and extraordinary, which may be levied,
assessed or imposed upon the Facilities, accruing or
becoming due and payable during the term of this agreement
and the cost of insurance as provided in paragraph 15. It
is the intention of the parties that Pro-Fac shall receive
the Facilities financing payments free from all taxes,
charges, expenses or deductions of every description, and
that Curtice Burns shall pay all such items and expenses
which, except for the execution and delivery of this
agreement, would have been chargeable against the Facilities
and payable by Pro-Fac.
14. Interest on Default. Any payment accruing
under the provisions of this agreement which shall not be
paid when due shall bear interest at the judgment rate then
prevailing in the State of New York from the date it is
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payable under the terms of this agreement until it shall
have been paid by Curtice Burns to Pro-Fac.
15. Insurance. Curtice Burns shall procure and
maintain policies of insurance at its own cost and expense
insuring:
a. The interest in the Facilities of Pro-Fac,
Curtice Burns and any mortgagee thereof, against loss
or damage by fire, lightning, wind, hail, aircraft,
vehicles, smoke, explosion, riot or civil commotion.
The insurance coverage shall be for not less than the
full replacement cost of the Facilities (unless a
lesser coverage is approved by Pro-Fac upon
recommendation of Curtice Burns), with all proceeds of
insurance payable jointly to Pro-Fac and any such
mortgagee. The full replacement cost shall be -
determined annually or at such other intervals as may
be reasonable, either through periodic appraisals paid
for by Curtice Burns or through some other method of
valuation acceptable to both parties.
b. Pro-Fac and Curtice Burns from all claims,
demands or actions for injury to or death of any person
in an amount not less than $1,000,000.00 per occurrence
for bodily injury, including death, and property
damage, and not less than $1,000,000.00 annual
aggregate made by, or in behalf of, any person or
persons, firm or corporation arising from, related to
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or connected with the Facilities. In addition to the
foregoing minimum coverage, Curtice Burns shall also
obtain umbrella coverage against liability for personal
injury and property damage totalling not less than
$50 million which shall include full contractual
liability coverage.
c. Pro-Fac and Curtice Burns, in an amount which
shall be reasonably satisfactory to Pro-Fac, against
risks customarily covered by boiler and machinery
insurance and business interruption.
16. Form of Insurance. The insurance to be
obtained as herein provided shall be with companies and in
form, substance, and amount (where not stated above)
satisfactory to Pro-Fac and any mortgagee of Pro-Fac. The
aforesaid insurance shall not be subject to cancellation
except after at least 10 days prior written notice to Pro-
Fac and any mortgagee of Pro-Fac. The original insurance
policies (or certificates thereof satisfactory to Pro-Fac)
together with satisfactory evidence of payment of the
premiums thereon, shall be deposited with Pro-Fac at the
beginning of the term hereof, and renewals thereof shall be
similarly deposited not less than 30 days prior to the end
of the term of such coverage.
17. Waiver of Subrogation Rights. Whenever
(a) any loss, cost, damage or expense resulting from a fire,
explosion or any other casualty or occurrence is incurred by
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either of the parties to this agreement in connection with
the Facilities, and (b) such party is then covered in whole
or in part by insurance with respect to such loss, cost,
damage or expense, then the party so insured hereby releases
the other party from any liability it may have on account of
such loss, cost, damage or expense to the extent of any
amount recovered by reason of such insurance and waives any
right of subrogation which might otherwise exist in or
accrue to any person on account thereof.
18. Damage and Reconstruction. If the Equipment
or the buildings on the Premises shall be damaged or
partially destroyed by fire or any other cause at any time
during the term hereof, Curtice Burns shall forthwith
replace such equipment and cause the damage to the buildings
to be repaired with all reasonable dispatch, provided that
such replacement and repair are economically justifiable in
the judgment of the boards of directors of both Pro-Fac and
Curtice Burns. Should a building at any time on the
Premises be so damaged by fire or otherwise that repair or
restoration will be impracticable, then Curtice Burns shall
forthwith demolish and remove such damaged buildings and
proceed with the erection and construction of suitable
replacement buildings on the Premises. Any such necessary
repairs shall be made and such buildings replaced in
accordance with plans and specifications submitted by
Curtice Burns and approved by Pro-Fac. In order to pay for
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the cost of such repair or reconstruction, Curtice Burns
shall be entitled to obtain from Pro-Fac any sum received as
insurance for such damage (to the extent permitted by any
mortgagee of Pro-Fac which may have a right to such
insurance proceeds), which shall be paid to Curtice Burns as
hereinafter provided, to be held by Curtice Burns as a trust
fund for such repairs. Curtice Burns shall not be obligated
under this paragraph to make any repairs or undertake any
reconstruction beyond that which may be paid for through the
use of funds to be provided Curtice Burns by Pro-Fac for
such purpose pursuant to this paragraph. If the holder of
any mortgage on the Premises and Equipment shall require
that the proceeds of insurance policies be paid in reduction
or payment of such mortgage, then Pro-Fac covenants with
Curtice Burns to provide for the use of Curtice Burns as
aforesaid a sum equal to the amount of such insurance
proceeds so paid to any mortgagee. Pro-Fac shall, from time
to time, as certified by Curtice Burns and to an extent not
exceeding 80% of the value of the work, labor and material
entered into in the erection of such new buildings or the
repair of old buildings, pay over to Curtice Burns the
proceeds of insurance actually collected by Pro-Fac, or such
other funds in substitution thereof as Pro-Fac may be
required to provide Curtice Burns as hereinbefore provided.
The balance of such insurance proceeds or other funds shall
be paid by Pro-Fac to Curtice Burns after the buildings are
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fully repaired, completed and paid for. Curtice Burns shall
promptly pay construction cost or costs of repair when
incurred. Curtice Burns shall obtain adequate general
liability insurance protecting and indemnifying Pro-Fac from
claims or damages arising out of the repair or demolition of
any buildings on the premises and the erection and
construction of any new buildings.
19. Maintenance and Repair. The Facilities shall
during the term hereof be kept by Curtice Burns in good
order and repair at the sole cost and expense of Curtice
Burns. Curtice Burns will comply with all orders,
regulations, rules and requirements of every kind and nature
relating to the Facilities now or hereafter in effect, of
the federal, state, municipal, or other governmental
authorities, whether they be usual or unusual, ordinary or
extraordinary, and whether they or any of them relate to
structural changes or requirements of whatever nature, or to
changes or requirements incident to or as the result of, any
use or occupation thereof or otherwise. Should Curtice
Burns determine that compliance with any such order,
regulation, rule or requirement would be uneconomical and
that instead the parties should terminate active operation
of any portion of the Premises which would be affected
thereby, then Curtice Burns shall so recommend to Pro-Fac;
if the parties agree that such operation should be so
terminated rather than to contest or comply with such order,
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rule, regulation or requirement, then the parties agree to
terminate such operation forthwith upon such determination.
If following such recommendation by Curtice Burns Pro-Fac
does not agree thereto, then the matter shall be resolved by
arbitration under the procedure for arbitration as described
herein. Should the parties not agree that such operations
should be suspended, or should arbitration so determine,
then Curtice Burns will pay all cost and expenses incidental
to such compliance and will indemnify and save harmless Pro-
Fac from all expense by reason of any notices, orders,
violations or penalties filed against or imposed upon the
Premises or Equipment, or against Pro-Fac as owner thereof,
because of the failure of Curtice Burns to comply with this
covenant. However, Curtice Burns shall have the right to
contest or review any order issued against the Premises or
Equipment by legal proceeding or in such other manner as it
may deem advisable, and may have such order modified,
cancelled, removed or revoked without compliance therewith.
Any such action or proceeding instituted shall be conducted
promptly at the expense of Curtice Burns. The term 'legal
proceeding' as used herein shall be construed as including
appeals from judgments, decrees or orders. If and whenever
any such order shall become final and binding, Curtice Burns
shall then comply therewith with due diligence; in default
thereof by Curtice Burns, Pro-Fac may comply therewith, and
the cost expense of so doing may be paid by Pro-Fac and
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shall be charged against Curtice Burns, becoming due on the
next June 22 following such payment by Pro-Fac. In such
event, Pro-Fac shall have recourse to all the remedies
herein and conferred upon Pro-Fac in respect to the
collection of payments due hereunder or to the recovery of
the possession of the Premises and Equipment because of
default in any payment required of Curtice Burns.
20. Indemnity. Curtice Burns will protect,
indemnify and save harmless Pro-Fac from and against all
liabilities, obligations, claims, damages, penalties, causes
of action, costs and expenses (including without limitation
reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against Pro-Fac by reason of any
accident, injury to or death of persons or loss of or damage
to property of others occurring on or about the Premises or
any part thereof or the adjoining properties, sidewalks,
curbs, streets, or way. In case of any action, suit, or
proceeding brought against Pro-Fac by reason of any such
occurrence, Curtice Burns will, at its expense, resist and
defend such action, suit or proceeding, or cause it to be
resisted and defended by counsel approved by Pro-Fac.
21. Utilities. The cost of all utilities and
services, including but not limited to gas, water, sewer and
electricity, shall be paid by Curtice Burns.
22. Quiet Enjoyment. So long as Curtice Burns is
not in default under the covenants and agreements of this
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agreement, the quiet and peaceful enjoyment by Curtice Burns
of the Premises and Equipment shall not be disturbed or
interfered with by Pro-Fac or by any person claiming by,
through or under Pro-Fac. However, nothing herein shall
affect the rights of the holder of any mortgage or other
security interest given by Pro-Fac applicable to the
Premises or Equipment.
23. Subordination. This agreement and all rights
of Curtice Burns herein shall be subject and subordinate to
any mortgage or mortgages or any renewals or replacements
thereof which are now or may hereafter be placed on the
Premises and Equipment, and Curtice Burns agrees that at the
time of the placing of any such mortgage or renewal thereof
on the Premises or Equipment and at the request of Pro-Fac,
Curtice Burns will execute and deliver any further
instruments necessary to subordinate its rights under this
agreement to any such mortgage or renewal thereof. Pro-Fac
agrees that it will notify Curtice Burns of the execution
and delivery of any such mortgage and that it will, upon the
request of Curtice Burns, exhibit to Curtice Burns at least
5 days before the expiration of any default period provided
in such mortgage satisfactory evidence showing that interest
due thereunder and any installment of principal has been
paid. If at such time any installment of interest or
principal has not been paid in accordance with the terms of
said mortgage, Curtice Burns may pay the same, together with
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any interest accrued thereon, and the amount so paid by
Curtice Burns and the interest thereon at the judgment rate
then prevailing in the State of New York from the time of
payment shall be paid by Pro-Fac to Curtice Burns on demand,
or may be offset by Curtice Burns against any amount payable
hereunder until the whole amount thereof shall have been
repaid to Curtice Burns by Pro-Fac.
24. Default. The occurrence of any one of the
following events shall be considered an event of default by
Curtice Burns under this agreement:
a. Curtice Burns shall be adjudged a bankrupt, or
a decree or order approving, as properly filed, a
petition or answer asking reorganization of Curtice
Burns under the federal bankruptcy laws, or under the
laws of any state, shall be entered, and any such
decree or judgment or order shall not have been vacated
or stayed or set aside within 30 days from the date of
the entry or granting thereof; or
b. Curtice Burns shall file or admit the
jurisdiction of the court and the material allegations
contained in, any petition in bankruptcy, or any
petition pursuant or purporting to be pursuant to the
federal bankruptcy laws, or Curtice Burns shall
institute any proceedings for any relief of Curtice
Burns under any bankruptcy or insolvency laws or any
laws relating to the relief of debtors, readjustment of
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indebtedness, organization, arrangements, composition
or extension; or
c. Curtice Burns shall make any assignment for
the benefit of creditors or shall apply for or consent
to the appointment of a receiver for Curtice Burns or
any of the property of Curtice Burns; or
d. A decree or order appointing a receiver of the
property of Curtice Burns shall be made and such decree
or order shall not have been vacated, stayed or set
aside within 90 days from the date of entry or granting
thereof; or
e. Curtice Burns shall vacate the Premises or
abandon the same during the term hereof; or
f. Curtice Burns shall make default in any
payment required to be paid by Curtice Burns hereunder
when due as herein provided and such default shall
continue for 30 days after notice thereof in writing by
Pro-Fac to Curtice Burns; or
g. Curtice Burns shall make default in any of the
other covenants and agreements herein contained to be
kept, observed and performed by Curtice Burns, and such
default shall continue for 30 days after notice thereof
in writing by Pro-Fac to Curtice Burns.
25. Remedies. Upon the occurrence of any one or
more of such events of default, Pro-Fac may terminate this
agreement. Upon termination of this agreement, Pro-Fac may
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re-enter the Premises and take possession of the Premises
and the Equipment, with or without process of law, and Pro-
Fac shall not be liable for any damages resulting therefrom.
Such re-entry and repossession shall not work a forfeiture
of any amounts to be paid and the covenants to be performed
by Curtice Burns during the full term hereof. Upon such
repossession of the Premises, Pro-Fac shall be entitled to
recover as liquidated damages and not as a penalty a sum of
money equal to the value of the amounts provided herein to
be paid by Curtice Burns to Pro-Fac for the remainder of the
term hereof. Should Curtice Burns default in payment of any
taxes, water charges, assessments, or any other charges to
be paid by Curtice Burns pursuant to paragraph 13, Pro-Fac
may if it so desires pay the same, and the amount so paid,
with interest thereon at the judgment rate then prevailing
in the State of New York from the date of payment, shall be
added to the next payment to be made by Curtice Burns.
However, any such payment by Pro-Fac shall not be deemed to
waive or release the default in the payment thereof by
Curtice Burns, or the right of Pro-Fac immediately to
terminate this agreement and recover possession of the
Premises and Equipment by reason of such default as
hereinabove provided.
26. Remedies Cumulative. No remedy herein or
otherwise conferred upon or reserved to Pro-Fac shall be
considered to exclude or suspend any other remedy, but the
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same shall be cumulative and shall be in addition to every
other remedy given hereunder now or hereafter existing at
law or in equity or by statute, and every power and remedy
given by this agreement to Pro-Fac may be exercised from
time to time and as often as occasion may arise or as may be
deemed expedient. Neither the receipt of any payment after
default, nor any delay or omission of Pro-Fac to exercise
any right or power arising from any default, shall impair
any such right or power or shall be construed to be a waiver
of any such default or any acquiescence therein. Neither
the rights herein given to receive, collect, sue for or
distrain for any payments due hereunder or to enforce the
terms, provisions and conditions of this agreement, or to
prevent the breach or nonobservance thereof, or the exercise
of any such right or of any other right or remedy hereunder
or otherwise granted or arising, shall in any way affect or
impair the right or power of Pro-Fac to declare this
agreement ended, and to terminate this agreement as provided
for herein, because of any default in or breach of the
covenants, provisions or conditions of this agreement.
27. No Waiver. No waiver of any breach of any of
the covenants herein shall be construed, taken or held to be
a waiver of any other breach or waiver, acquiescence in or
consent to any further or succeeding breach of the same
covenant.
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28. Condemnation. If any part of any of the
Premises shall be condemned and as a result thereof the
balance of such Premises can be used by Curtice Burns, this
agreement shall not terminate and Curtice Burns, pursuant to
plans submitted by Pro-Fac and at the expense of Pro-Fac,
shall repair and restore the Premises and all improvements
thereon. Curtice Burns shall promptly and diligently
proceed to make a complete architectural unity of the
remainder of the improvements in accordance with such plans
as are first approved by Pro-Fac. Curtice Burns shall have
no right to any condemnation award applicable to the
Premises. Pro-Fac shall receive and hold in trust the
amount of the award relating to the improvements on the
Premises and shall (to the extent permitted by the holder of
any mortgage on the Premises which may be entitled to such
award) disburse such award to Curtice Burns to apply to the
cost of said repairing or restoration in accordance with the
procedure set forth in paragraph 18. If Curtice Burns does
not make a complete architectural unit of the remainder of
the improvements within a reasonable period after such
taking or condemnation then, in addition to whatever other
remedies Pro-Fac may have either under this agreement, at
law or in equity, Pro-Fac may retain the entire award, and
the total amount payable by Curtice Burns to Pro-Fac under
paragraph 18 shall be reduced by the amount of such award so
retained, prorated over the remaining payments due. Except
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as hereinbefore provided, there shall be no abatement or
reduction in any payment due from Curtice Burns because of
such taking or condemnation.
29. Right to Contest Tax Assessments. Curtice
Burns shall have the right to review by legal proceedings,
promptly instituted and conducted at the expense of Curtice
Burns, any taxes, assessments, water rates, or other charges
imposed upon or against the Premises or Equipment, and in
case any such taxes, assessments, water rates or other
charges shall, as a result of such proceedings or otherwise,
be reduced, cancelled, set aside or to any extent discharged
or modified, Curtice Burns shall pay any amount that shall
be finally assessed or imposed against the Premises or
Equipment or adjudicated to be due and payable on any such
disputed or contested items. The term 'legal proceedings'
as here used shall be construed to include appropriate
appeals from any judgments, decrees or orders.
30. No Warranty by Pro-Fac. Curtice Burns
accepts the Premises and Equipment in their present
condition and without any representation or warranty by Pro-
Fac as to the condition of the Premises and Equipment, or as
to the use or occupancy which may be made thereof. Pro-Fac
shall not be responsible for any latent or other defect or
change in their condition, and the payments hereunder shall
in no case be withheld or diminished because of any defect
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or change in their condition, or because of any damage
occurring thereto during the term hereof.
31. Liens Against Premises. If any mechanics or
other liens or order for the payment of money shall be filed
against the Premises or Equipment by reason of or arising
out of any labor or material furnished or alleged to have
been furnished, or to be furnished, to or for Curtice Burns
at the Premises for or by reason of any change, alteration
or addition or the cost of expenses thereof, or any contract
relating thereto, or against Pro-Fac as owner thereof,
Curtice Burns shall cause the same to be cancelled and
discharged of record, by bond, or otherwise at the election
and expense of Curtice Burns. Curtice Burns shall also
defend on behalf of Pro-Fac at the sole cost and expense of
Curtice Burns any action, suit or proceeding which may be
brought thereon or for the enforcement of such lien, or
order, and Curtice Burns will pay any damages or discharge
any judgment entered therein and save harmless Pro-Fac from
any claim or damages resulting therefrom.
32. Alterations and Improvements. Curtice Burns
shall have the right to make alterations and improvements to
the Premises from time to time without the written consent
of Pro-Fac upon condition, however, that the cost of such
alterations or improvements shall not exceed the sum of
$150,000.00 for any such alteration or improvement. If any
such alteration or improvement shall cost more than
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<PAGE>
$150,000.00 (or such other amount as may be agreed to by the
parties as appropriate), the written consent of Pro-Fac
shall be obtained before work is commenced. Pro-Fac shall
not withhold such consent unreasonably and covenants to
consent thereto, provided that such alteration or
improvement shall not tend to decrease the space or the
value of any building upon the Premises. All improvements
to the Premises shall become the property of Pro-Fac.
33. Proper Use. Curtice Burns covenants not to
use the buildings on the premises for any illegal or
unlawful purpose.
34. Additional Equipment. Should Curtice Burns
in its discretion deem it necessary for the continued
successful operation of the Facilities by Curtice Burns for
the purpose of the business of Curtice Burns to install
additional machinery or equipment of its own, Curtice Burns
may do so; such additional machinery or equipment shall not
be deemed the property of Pro-Fac and part of the Premises,
and Curtice Burns shall have the right to remove such
additional machinery and equipment at its own cost and
expense on the termination hereof.
35. Surrender of Premises and Equipment. At the
expiration of this agreement Curtice Burns will surrender
and deliver to Pro-Fac the Premises and Equipment in good
repair and condition, reasonable wear and tear excepted.
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36. Purchase Rights of Curtice Burns. In the
event of the termination of this agreement or at any time at
the option of Curtice Burns upon written notice of 60 days
to Pro-Fac, Curtice Burns shall have the right to purchase
the Facilities at the book value thereof at the time of
purchase. Upon the exercise of the option to purchase the
Facilities as specified in this paragraph, this agreement
shall also automatically terminate. Should Curtice Burns
exercise this option at a time of year when Pro-Fac is
obligated to process crops for its members, then
notwithstanding the exercise of the option by Curtice Burns
pursuant to this paragraph, Curtice Burns shall nevertheless
complete the processing of such crops for that year pursuant
to this agreement, which shall remain in effect until such
crops are processed and marketed.
37. Purchase of Trademarks by Pro-Fac. Should
this agreement be terminated for any reason and upon such
termination Curtice Burns does not purchase the Facilities
as herein provided, then Pro-Fac shall have the right to
purchase all trademarks, tradenames and copyrights of
Curtice Burns at their then book value.
38. Intangibles. Pro-Fac owns an undivided
interest in goodwill and other intangible assets obtained in
the course of the acquisition of various businesses by Pro-
Fac and Curtice Burns ('Intangibles'). The Intangibles do
not include any interest in trademarks or the goodwill
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<PAGE>
associated with trademarks. In future business acquisitions
by the parties during the term of this agreement Pro-Fac
shall purchase an undivided interest in all intangibles
acquired with such businesses ('Future Intangibles'). Pro-
Fac shall pay for Future Intangibles an amount equal to the
same percentage of the entire purchase price for such Future
Intangibles that the adjusted deemed equity investment of
Pro-Fac bears to the combined adjusted deemed equity
investment of both Pro-Fac and Curtice Burns as defined in
paragraph 51 hereof. While the purchase price to be paid by
Pro-Fac for its interest in Future Intangibles shall be
based upon the price paid in the course of the acquisition
for all Future Intangibles (including trademarks and the
goodwill associated therewith), the undivided interest in
such Future Intangibles so acquired by Pro-Fac shall not
include any interest in such trademarks or the goodwill
associated therewith, except as provided in Paragraph 37
hereof.
39. License of Intangibles. Pro-Fac hereby
grants to Curtice Burns the exclusive right to use the
interest of Pro-Fac in the Intangibles and Future
Intangibles in conducting their business pursuant to this
agreement. For such use, Curtice Burns shall pay to Pro-Fac
annually the amount by which the interest of Pro-Fac in the
Intangibles and Future Intangibles is amortized each year.
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40. Purchase of Intangibles by Curtice Burns.
Should Curtice Burns purchase the facilities of Pro-Fac in
accordance with paragraph 36 hereof, Curtice Burns shall
also be obligated to repurchase from Pro-Fac at the then
book value thereof the interest of Pro-Fac in the
Intangibles and Future Intangibles.
41. Purchase of Intangibles by Pro-Fac. Should
Pro-Fac purchase the trademarks, tradenames and copyrights
of Curtice Burns and the goodwill associated therewith as
provided in paragraph 37 hereof, then at such time Pro-Fac
shall also be obligated to purchase the Curtice Burns
interest in the Intangibles and Future Intangibles at the
book value thereof at the time of purchase.
MARKETING
42. Delivery of Crops. Pro-Fac agrees to sell
and deliver to Curtice Burns all crops of the type and in
the amounts set forth by acreage or tonnage in the raw
product section of the profit plan as approved each year by
the board of directors of each party during the term hereof
to be marketed in behalf of the grower-members of Pro-Fac
pursuant to the terms of the agreements between Pro-Fac and
its members. Subject only to its inability to do so because
of the vagaries of weather or other causes validly
preventing growing such crops as set forth in the agreements
between Pro-Fac and its members (the form of which shall be
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approved by Curtice Burns), Pro-Fac shall deliver to Curtice
Burns the crops described in the profit plan, and Curtice
Burns agrees to process and market such crops as herein
provided.
43. Marketing Discretion. Curtice Burns shall in
its discretion determine in what form the finished processed
products shall appear for marketing and what label or labels
shall appear on such finished processed products. Curtice
Burns shall establish the price at which it shall sell
products originating in whole or in part from Pro-Fac
products. To facilitate the marketing of the finished
products by Curtice Burns, title to the Pro-Fac crops shall
pass to Curtice Burns at the time such crops are graded and
accepted by Curtice Burns.
44. Agency. To the extent necessary to enable
Pro-Fac to receive crops from its members and deliver such
crops to Curtice Burns pursuant to the terms and conditions
of this agreement, Curtice Burns will act as agent for Pro-
Fac and charge the cost thereof to overhead as provided
herein. Curtice Burns will indemnify and save Pro-Fac
harmless from any loss or damage incurred in acting as such
agent.
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SETTLEMENT
45. Definitions. When used in this agreement, the
following terms shall have the definitions indicated:
a. 'Commercial market value' of crops sold by
Pro-Fac to Curtice Burns shall mean the price paid for
such crops by commercial processors for similar crops
used for similar or related purposes sold under pre-
season contracts and in the open market in the same or
similar marketing areas. Where such price cannot be
readily determined, then commercial market value shall
be determined by some other method acceptable to each
party. Commercial market value shall be determined as
provided in paragraph 46 hereof.
b. 'Pro-Fac products' shall mean all products
sold by Curtice Burns which were processed from crops
supplied by Pro-Fac. The determination of what is a
Pro-Fac product shall be made in an annual examination
of products made from crops supplied by Pro-Fac. If
made from crops supplied by Pro-Fac and from similar
crops purchased directly by Curtice Burns to supplement
and facilitate the marketing of crops by Pro-Fac, then
such product shall be considered to be a Pro-Fac
product, provided that the value of such crops
purchased by Curtice Burns for use in the product is
not greater than the value of crops supplied by Pro-Fac
for the product. If Pro-Fac supplied less than half
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the value of crops necessary to make the product, then
only that portion of the product actually made from
crops supplied by Pro-Fac shall be considered a Pro-Fac
product.
c. 'Net proceeds' shall mean the entire proceeds
received by Curtice Burns from the sale of Pro-Fac
products less the costs incurred by Curtice Burns in
its own behalf or in behalf of Pro-Fac in processing
and selling such products. Such costs shall be
determined in accordance with generally accepted
accounting practices in the food industry as modified
by past practices and accounting methods used by the
parties and shall include all variable product costs, a
pro rata share of plant and warehousing overhead costs
based upon the estimated usage of facilities and a pro
rata share of selling, general and administrative,
overhead and financial expenses. Such costs shall
include payments by Curtice Burns to Pro-Fac under this
agreement but shall not include commercial market value
paid pursuant to paragraph 48, any additional payment
for Pro-Fac crops pursuant to paragraph 49 or any
payment pursuant to paragraph 52.
d. 'Earnings (losses) on Pro-Fac products' shall
mean the amount by which the net proceeds received by
Curtice Burns from the sale of Pro-Fac products in any
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fiscal year exceeds or is less than the commercial
market value of crops supplied by Pro-Fac.
e. 'Commission' shall mean a commission due
Curtice Burns for its services in the processing and
marketing of all Pro-Fac products in the amount of 30%
of all earnings on Pro-Fac products. The remaining 70%
of all such earnings shall be due to Pro-Fac for its
crops as provided in paragraphs 48 and 49 herein. If
Curtice Burns incurs a loss on the sale of Pro-Fac
products then Curtice Burns shall not be entitled to
receive any commission.
46. Commercial Market Value. Commercial market
value shall be determined by a committee established jointly
by the boards of directors of Pro-Fac and Curtice Burns and
consisting of two members appointed by the president of Pro-
Fac, two members appointed by the chairman of the board of
Curtice Burns and a fifth member appointed by the other four
members of the committee.
47. Calculation of Earnings and Losses. The
determination of earnings and losses on Pro-Fac products and
of any commission due Curtice Burns as herein provided shall
be made on the basis of all Pro-Fac products considered in
the aggregate each year as of the end of the fiscal year for
each party.
48. Payment for Crops. Curtice Burns shall pay
to Pro-Fac as the minimum purchase price for the crops
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purchased from Pro-Fac each year the commercial market value
of those crops, together with any additional payment which
may be due Pro-Fac pursuant to paragraph 49 hereof. The due
date for payment of the purchase price shall coincide with
the time of payment for crops by Pro-Fac to its members.
49. Additional Payment for Crops. Curtice Burns
shall as of the end of each fiscal year remit to Pro-Fac all
earnings on the sale of Pro-Fac products, less the
commission due Curtice Burns on the sale of such products.
However, should the earnings on the sale of Pro-Fac products
less the commission exceed the amount allocated to Pro-Fac
pursuant to paragraphs 50, 52 and 53 hereof, then the
obligation of Curtice Burns to make payments as herein
provided shall be limited to the amount specified in said
paragraphs.
50. Division of Earnings. As further
consideration to Pro-Fac for the use of its facilities and
funds in the production and marketing of food products,
Curtice Burns shall pay annually to Pro-Fac a portion of its
earnings as herein provided.
51. Definitions for Division of Earnings. For
purposes of the computation of the division of earnings, the
following terms shall have the definitions indicated:
a. 'Curtice Burns products and services' shall
mean all products sold by Curtice Burns which are not
Pro-Fac products as defined in paragraph 45(b) and all
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services performed by Curtice Burns for others, except
those services performed for Pro-Fac for which Curtice
Burns is specifically paid by Pro-Fac.
b. 'Adjusted equity investment' shall as to
Curtice Burns mean the sum of:
(1) the par value of the outstanding common
stock of both classes as of the end of the fiscal
year preceding the year for which that
determination is to be made;
(2) the additional paid in capital as to
such stock;
(3) the retained earnings of Curtice Burns
as of the end of the fiscal year preceding the
year for which that determination is to be made;
and
(4) the par value and additional paid in
surplus of stock sold during the fiscal year for
which that determination is to be made, weighted
in proportion to the number of days during the
year for which the determination is to be made
that the proceeds from the sale of such stock are
available for use by Curtice Burns.
c. As to Pro-Fac 'adjusted deemed equity
investment' shall mean generally all funds of Pro-Fac
for which Pro-Fac does not receive interest from
Curtice Burns, more particularly the sum of:
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(1) the par value of the outstanding common
shares of Pro-Fac as of the end of the fiscal year
preceding the year from which that determination
is to be made, excluding the par value of any
shares subscribed but not paid for;
(2) the par value of common stock issued and
paid for during the fiscal year for which that determination
is to be made, weighted in proportion to the number of days
during the year for which the determination is to be made
that the proceeds from the sale of such stock are available
for use by Pro-Fac;
(3) the aggregate amount of all retains of
Pro-Fac, determined as of the end of the fiscal
year preceding the year for which that
determination is to be made, excluding, however,
retains which mature into preferred stock during
the fiscal year for which that determination is to
be made;
(4) all earnings of Pro-Fac as to which Pro-
Fac has paid income taxes, including earned
surplus and allocated tax paid reserves ('earned
surplus'), whether or not such earned surplus has
been allocated to the accounts of or for the
benefit of members or other patrons of Pro-Fac,
determined as of the end of the fiscal year
preceding the year for which that determination is
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<PAGE>
to be made ('determination date'). However, for
purposes of this determination there shall only be
included in the earned surplus of Pro-Fac that
which originated within the five years preceding
the determination date;
(5) 20 percent of the commercial market
value of crops furnished by Pro-Fac for the crop
year applicable to the fiscal year for which the
determination is to be made, unless some other
amount is agreed to by the parties as appropriate
to take into consideration the delay in payment
for crops by Curtice Burns to Pro-Fac;
(6) the aggregate amount for all fiscal
years of Pro-Fac from that ended on March 31, 1962
through that ended on June 25, 1976 by which
payment by Curtice Burns to Pro-Fac for crops was
less than the commercial market value of such
crops; and
(7) the aggregate amount for all fiscal
years of Pro-Fac during the term hereof by which
Pro-Fac is paid less than the interest payable
under this agreement.
d. Notwithstanding the foregoing, the amount of
Pro-Fac adjusted deemed equity investment may be
modified by resolutions duly adopted by the boards of
directors of Pro-Fac and Curtice Burns during the
37
<PAGE>
fiscal year affected by revising the amount of funds on
which Curtice Burns pays interest to Pro-Fac. To the
extent that the amount of allocated tax paid reserves,
earned surplus or retained funds on which Curtice Burns
pays interest to Pro-Fac as provided in paragraphs 5
and 6 hereof, or the amount of funds derived from the
issuance of preferred stock on which Curtice Burns pays
interest as provided in paragraph 3-b hereof, is
reduced, then the adjusted deemed equity of Pro-Fac
shall be treated as increased by the amount of such
reduction. Conversely, to the extent that the amount
of allocated tax paid reserves, earned surplus or
retained funds on which Curtice Burns pays interest to
Pro-Fac as provided in paragraphs 5 and 6 hereof may be
increased, the adjusted deemed equity of Pro-Fac shall
be treated as decreased by the amount of such increase.
52. Payment of Earnings to be Divided. Subject
to the provisions of paragraph 53, Curtice Burns shall pay
to Pro-Fac as of the close of each fiscal year of Pro-Fac in
each year during the term of this agreement an amount based
upon the profits of Curtice Burns as herein provided. In
determining the earnings (or losses) of Curtice Burns, there
shall be included in such computation all earnings (or
losses) of all subsidiaries of Curtice Burns. The resultant
combined earnings or losses shall be allocated between the
parties in proportion to their respective aggregate adjusted
38
<PAGE>
equity and deemed equity investments as determined pursuant
to this agreement. From that portion so allocable to Pro-
Fac there shall be deducted the amount paid to Pro-Fac as
provided in paragraphs 48 and 49 hereof. The balance of the
combined earnings or losses of Curtice Burns allocable to
Pro-Fac pursuant to this paragraph shall be paid by Curtice
Burns to Pro-Fac. Should it be determined as herein
provided that a loss is allocable to Pro-Fac as a result of
the computations made pursuant to this paragraph, then
Curtice Burns shall make no payment to Pro-Fac pursuant to
this paragraph and the interest payable by Curtice Burns to
Pro-Fac shall be reduced by the amount of such loss
allocable to Pro-Fac.
53. Further Adjustments to Division of Earnings.
Notwithstanding the provisions of paragraph 52 herein, the
following additional adjustments shall be made in
determining the division of earnings:
a. In determining the earnings of Curtice Burns
there shall be taken into account and charged to the
operations of Curtice Burns the gain or loss on the
sale or other disposition of assets of Pro-Fac which
are leased to Curtice Burns.
b. The amount of any payment due Pro-Fac from
Curtice Burns pursuant to paragraph 52 shall be reduced
by 50% of any dividend received by Pro-Fac from the
39
<PAGE>
Springfield Bank for Cooperatives during the year for
which earnings are to be divided.
54. Payments to Members of Pro-Fac. While
pursuant to paragraph 48 hereof Pro-Fac will receive from
Curtice Burns at least the commercial market value of all
crops purchased each year, Pro-Fac shall not be obligated to
pay out that amount to its members and others who sold those
crops to Pro-Fac. It is the intent of the parties hereto
that Pro-Fac will pay or allocate to its grower-members and
others entitled thereto the payments made by Curtice Burns
pursuant to this agreement to the extent deemed advisable by
the board of directors of Pro-Fac after retaining such funds
as may be necessary for the payment of any dividends which
may be declared and for the creation of such reserve funds
as may be deemed fair and reasonable.
MANAGEMENT
55. Management Services. Pro-Fac hereby employs
Curtice-Burns to supervise and manage the business and
properties of Pro-Fac, including the performance of its
responsibilities under this agreement and also including
responsibility for handling the business of Pro-Fac with the
Springfield Bank for Cooperatives and any other banks with
which Pro-Fac may do business.
56. Asset Management. Pro-Fac agrees that
Curtice-Burns shall have possession of its properties, both
40
<PAGE>
real and personal, money, all other assets and the business
of Pro-Fac during the term hereof for the purpose of
carrying on the business of Pro-Fac as authorized by its
certificate of incorporation and bylaws.
57. Financial Management. All moneys and
receipts derived from the business of Pro-Fac shall be the
property of Pro-Fac but shall be deposited in such
depositories in the name of Curtice-Burns as shall be
determined by resolution of the board of directors of
Curtice-Burns, subject to withdrawal by Curtice-Burns in the
course of Pro-Fac business.
58. Financial Agency. All checks, drafts, orders
or other instruments for the payment of money shall be
signed and endorsed by Curtice-Burns in the name of Pro-Fac.
59. Payment of Expenses. From revenue derived
from the operation of Pro-Fac business Curtice-Burns shall
pay all costs and expenses of such business, including, but
not limited to, taxes, insurance, interest, depreciation,
amortization, repairs, refunds, bonuses, legal and
accounting fees, licenses, transportation, service,
promotion, and any and all other expenses necessary or
incident to operate the business of and comply with the
legal commitments made by Pro-Fac.
60. Books of Account. All accounting records and
books of account necessary for Curtice-Burns to perform its
41
<PAGE>
obligations hereunder shall be kept at such office of
Curtice-Burns as it deems appropriate.
61. Standard of Care. Curtice-Burns will manage
the business of Pro-Fac according to the best ability of its
officers, but without accountability for mistakes or errors
of judgment or for any losses arising from negligence, fire,
water or casualty or from any other causes except for such
losses resulting from gross negligence or willful
misconduct.
62. Policy Established by Pro-Fac Board of
Directors. The supervision and management of the business
of Pro-Fac by Curtice-Burns pursuant to this agreement shall
be in accordance with the general policies formulated and
approved by the board of directors of Pro-Fac, which by this
agreement only delegates to Curtice-Burns the authority to
manage and operate the business of Pro-Fac in its normal
course, limited by the provisions of law as to the
delegation of authority by a corporate board of directors.
Curtice-Burns shall consult Pro-Fac and its board of
directors on any matter which, by reason of its size or its
nature, is not in the ordinary course of business.
63. Access to Records. Pro-Fac, through its
officers and board of directors, shall have free access to
all the books and records of both Curtice-Burns and Pro-Fac
related to the business of Pro-Fac. Curtice-Burns will also
make available to the Pro-Fac officers and board of
42
<PAGE>
directors such operating and financial statements as the
board may deem necessary and proper to keep Pro-Fac fully
informed of the operation of its business.
64. Hiring Authority. Curtice-Burns shall hire,
pay and at its pleasure discharge or transfer, supervise and
direct all persons employed in the business of Pro-Fac
during the term of this agreement. The chief executive
officer of Curtice-Burns, with the approval of the board of
directors of Pro-Fac, shall hire and discharge or transfer
the chief executive officer of Pro-Fac, who shall be an
officer of Pro-Fac with the title of general manager.
Employees handling money shall be bonded in accordance with
the requirements of the New York Cooperative Corporation Law
and in such amounts as may be determined by the board of
directors of Pro-Fac. Employees operating under this
agreement shall, for all purposes, be employees of Curtice-
Burns, shall be paid by Curtice-Burns, and shall be entitled
to welfare, pension and insurance and similar benefits,
either statutory or voluntary, on the same basis and under
the same rules as other employees of Curtice-Burns who are
similarly situated. Pro-Fac shall reimburse curtice-Burns
for the cost of such employees.
43
<PAGE>
GENERAL
65. Assignment. This agreement may not be
assigned by either party without the written consent of the
other.
66. Arbitration. Should any dispute arise under
this agreement, such dispute shall be resolved by three
arbitrators, one appointed by Pro-Fac, one appointed by
Curtice Burns and a third chosen by the two arbitrators so
selected by the parties. The determination by a majority of
the arbitrators shall be final.
67. Election of Directors. So long as this
agreement is in effect the nominating committee of the board
of directors of Curtice Burns shall nominate a person
designated by Pro-Fac for election each year as a director
of Curtice Burns, and the Pro-Fac board of directors shall
as provided in the Pro-Fac bylaws elect as a public director
of Pro-Fac the person so designated by Curtice Burns.
68. Not A Partnership. Nothing in this agreement
shall be construed to have created a partnership between the
parties hereto.
69. Amendment. This agreement may be amended or
modified only by a written statement of such amendment or
modification duly signed by each of the parties.
70. Headings. The headings preceding the text of
paragraphs of this agreement are for convenience only and
shall not be deemed part of this agreement.
44
<PAGE>
71. Applicable Law. This agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
72. Renewal Option. Curtice Burns shall have the
right to extend this agreement for a period of five years
beginning June 28, 1997 upon written notice to Pro-Fac
before June 30, 1996. Thereafter, Curtice Burns shall also
have an additional right to extend this agreement for
another five years beginning June 29, 2002 upon written
notice to Pro-Fac no later than June 30, 2001. At the time
notice of renewal is given by Curtice Burns under either
option to renew, either party may propose a change in the
amounts to be paid by Curtice Burns as provided in
paragraph 52 hereof during the term of such renewal. The
amounts to be paid by Curtice Burns during such term shall
then be promptly negotiated by the parties. If the parties
are unable to agree, then the issue shall be settled by
arbitration as provided in paragraph 67. Any dispute
concerning such amounts to be paid pursuant to the
provisions of this paragraph shall in no way invalidate the
exercise of either renewal option by Curtice Burns, and upon
such exercise the agreement shall be deemed renewed, subject
only to the resolution of any dispute as to the amount to be
paid as herein provided.
45
<PAGE>
IN WITNESS WHEREOF the parties have each caused
this agreement to be entered into and executed as of
June 27, 1992.
Pro-Fac Cooperative, Inc.
By: /s/ Robert V. Call
-------------------------------
Robert V. Call, Jr. - President
By: /s/ Roy A. Myers
--------------------------------
Roy A. Myers - General Manager
Curtice Burns Foods, Inc.
By: /s/ Donald E. Pease
-------------------------------
Donald E. Pease
Chairman of the Board
By: /s/ David J. McDonald
-------------------------------
David J. McDonald - President
<PAGE>
EXHIBIT 6
[Letterhead of]
AGWAY INC.
November 11, 1993
Mr. William Petty
Curtice Burns Foods, Inc.
90 Linden Place
Rochester, NY 14625
Dear Bill:
This will confirm our understanding that it is in
the best interests of both Curtice Burns and Agway that
during the period in which Curtice Burns has engaged Goldman
Sachs and Donaldson, Lufkin & Jenrette under the letters
dated November 11, 1993 (the 'Engagement Letters'), and is
actively engaged in the process of seeking buyers for common
stock of all Class A and Class B shareholders:
a) Agway will not pursue a separate sale of its
equity interest in Curtice Burns;
b) In connection with a Sale of the Company (as
defined in the Engagement Letters), Agway will not seek to
be paid a higher price for its shares of Curtice Burns than
the price to be paid to the holders of all other shares of
common stock of Curtice Burns whether Class A or Class B;
c) Agway will be permitted and encouraged to stay
fully informed during the process through direct
consulatation with Goldman Sachs on matters addressed in the
Engagement Letters and through direct access to all
information provided back and forth between Curtice Burns,
Goldman Sachs and Donaldson, Lufkin & Jenrette; and
<PAGE>
2
d) Agway will be permitted to also receive a copy
of the Goldman Sachs fairness opinion contemplated in its
Engagement Letter.
Very truly yours,
AGWAY INC.
AGWAY FINANCIAL CORPORATION
AGWAY HOLDINGS, INC.
By: /s/ Peter J. O'Neill
--------------------------
Name: Peter J. O'Neill
Title: Vice President
Accepted and agreed:
CURTICE BURNS FOOD, INC.
By:/s/ J. William Petty
-------------------------
Name: J. William Petty
Title: President
<PAGE>
EXHIBIT 7
This agreement is dated as of April 29, 1993
between Agway, Inc. and Agway Holdings Inc. (together,
'Agway') and Curtice-Burns Foods, Inc. ('Curtice-Burns').
Agway owns a controlling interest in Curtice-Burns
through its ownership of essentially all the outstanding
Class B common shares of Curtice-Burns ('B shares') as well
as a number of the outstanding Class A common shares of
Curtice-Burns ('A shares'). Through its ownership of the B
shares, Agway has the right to elect 70% of the directors
currently constituting the board of directors of Curtice-
Burns (the 'Board').
In response to an investigation by Agway of the
possible sale of its B shares, the Board has created a
committee of three of its independent directors to consider
all aspects of any proposed transaction (a 'Transaction')
which may result in a change of control of Curtice-Burns and
to recommend to the Board what action, if any, should be
taken by Curtice-Burns with regard to a Transaction,
including the proposed sale by Agway of its B shares.
Agway and Curtice-Burns each have confidence in
the intention and ability of their respective directors and
officers to perform their responsibilities and duties with
regard to a Transaction. Accordingly, in order to
facilitate the free and full consideration by the directors
<PAGE>
2
and officers of Agway and Curtice-Burns of the issues which
they may be required to resolve, it is therefore agreed as
follows:
1. Agway hereby unconditionally and irrevocably
releases and discharges the directors and officers of
Curtice-Burns, or any of them, in their capacity as
directors or officers (as the case may be), and any heirs or
legatees of such persons, of and from all manner of actions,
causes of action, suits, debts, liabilities, contracts,
controversies, agreements, promises, claims and demands
whatsoever, in law or in equity, that Agway ever had, now
has, or shall or may have, for, upon or by reason of any
matter arising out of or relating to a Transaction. Agway
agrees that it shall not directly sue or otherwise make any
claim with regard to a Transaction against the directors or
officers of Curtice-Burns, or any of them, because of their
acting as directors or officers (as the case may be) of
Curtice-Burns.
2. Curtice-Burns hereby unconditionally and
irrevocably releases and discharges the directors and
officers of Agway, or any of them, in their capacity as
directors or officers (as the case may be), and any heirs or
legatees of such persons, of and from all manner of actions,
causes of action, suits, debts, liabilities, contracts,
<PAGE>
3
controversies, agreements, promises, claims and demands
whatsoever, in law or in equity, that Curtice-Burns ever
had, now has, or shall or may have, for, upon or by reason
of any matter arising out of or relating to a Transaction.
Curtice-Burns agrees that it shall not directly sue or
otherwise make any claim with regard to a Transaction
against the directors or officers of Agway, or any of them,
because of their acting as directors or officers (as the
case may be) of Agway.
3. Notwithstanding anything herein to the
contrary, nothing in this agreement shall be construed to
prevent, proclude or in any way inhibit the right of Agway
or Curtice-Burns to sue or otherwise assert any claim
against the other arising out of or relating to a
Transaction.
4. Agway and Curtice-Burns intend, and it is a
basis of this agreement, that the rights, duties, privileges
and obligations of Agway and Curtice-Burns under this
agreement are reciprocal. If any part of this agreement is
finally determined by a court of competent jurisdiction to
be invalid or unenforceable, then this agreement shall be
thereby modified and reformed so that the remaining parts of
this agreement provide for full reciprocity of the rights,
<PAGE>
4
duties, privileges and obligations of Agway and of Curtice-
Burns.
5. This agreement is subject to the approval of
the Boards of Directors of Agway and Curtice-Burns.
Agway, Inc.
By: /s/ Peter J. O'Neill
----------------------------
Title: Senior Vice President
-----------------------
Agway Holdings Inc.
By: /s/ Donald P. Cardarelli
----------------------------
Title: Vice President, Treasurer
-----------------------
Curtice-Burns Foods, Inc.
By: /s/ J. William Petty
----------------------------
Title: President
-----------------------
<PAGE>
EXHIBIT 8
CONFIDENTIAL
FOR SETTLEMENT PURPOSES
AGREEMENT, DATED AUGUST 16, 1994, BETWEEN CURTICE-BURNS
FOODS, INC. ('CURTICE BURNS') AND PRO-FAC COOPERATIVE,
INC. ('PRO-FAC').
The parties have agreed to arbitrate certain disputes
arising under the Integrated Agreement, dated June 27, 1992,
between them.
Accordingly, the parties agree as follows:
1. This Agreement shall become effective upon the
effectiveness of a merger agreement that provides for the
purchase by Pro-Fac (or a subsidiary of Pro-Fac) of Curtice
Burns. Upon the execution of this Agreement, the
arbitrators promptly will be informed of the terms of this
Agreement. In the event no such merger agreement is signed
on or before December 31, 1994 (as such date may be extended
in writing by the parties), this Agreement shall never
become effective and shall be for all purposes null and
void. Until its effectiveness, this Agreement shall not
create, amend, abrogate or discharge any rights or
obligations of any party and shall be treated as for
settlement purposes only; discussing or entering into this
Agreement shall not be used by either party as evidence of a
reasonable timetable.
2. The parties agree to the schedule for the conduct
of the arbitration as set forth on the annex to this
Agreement, subject to each party's right to seek extension
of time from the arbitrators for exceptional cause. The
schedule set forth on the annex sets forth generally the
steps required for the entry of an arbitration award and is
not intended to identify all possible actions or requests;
however, any supplemental steps, actions or requests must be
taken or made in a manner consistent with the completion of
the arbitration on the schedule set forth on the annex. The
parties agree to jointly instruct the arbitrators to render
a decision expeditiously, but no later than three weeks
following the conclusion of the hearing.
<PAGE>
2
3. The parties agree that each will pay the costs and
expenses of its selected arbitrator and the parties will
split equally the costs of the third arbitrator. The
parties agree to share equally the costs of daily
transcripts of depositions and the arbitration hearings.
Each party will otherwise pay its own expenses.
4. The arbitration proceeding will be conducted in New
York City in the offices of the parties' respective counsels
on alternate weeks. The parties will instruct the
arbitrators to be available, to the extent practicable, to
conduct the hearing until completion during consecutive
weeks, for not less than four days per week.
This Agreement has been duly executed by the
undersigned.
CURTICE-BURNS FOODS' INC.
By /s/ J. William Petty
------------------------
PRO-FAC COOPERATIVE, INC.
By /s/ Roy A. Myers
------------------------
General Manager
<PAGE>
Schedule
Commencing upon signing Merger Agreement
- ----------------------------------------
Within 1 week of signing Serve initial document requests
Within 3 weeks of signing Serve objections to document
requests
Within 4 weeks of signing Complete production of
documents
Within 6 weeks of signing Provide witness list
Within 8 weeks of signing Serve notices of non-expert
depositions
Commencing upon the termination of the Merger Agreement (but
not before the end of the eighth week after signing)
- --------------------------------------------------------------
Within 1 month of termination Exchange expert reports
(consistent with the
requirements for experts'
statements set forth in
Rule 26(a)(2)(B))
Within 6 weeks of termination Complete depositions,
including of experts
Within 2.5 months of termination Submit pre-trial briefs and
motions
Within 3.5 months of termination Complete hearing
<PAGE>
EXHIBIT 9
Letterhead of
[Farm Credit Bank of Springfield
Springfield Bank for Cooperatives]
September 2, 1994
Pro-Fac Cooperative, Inc.
P.O. Box 682
Rochester, New York 14603
Attention: Mr. Roy A. Myers
General Manager
Gentlemen:
In response to the request of Pro-Fac
Cooperative, Inc. ('Pro-Fac'), Springfield Bank for
Cooperatives (the 'Bank') is prepared to provide a wholly-
owned subsidiary of Pro-Fac ('PF Acquisition') with (1) a
term loan in an aggregate principal amount of $80 million,
(2) a term loan facility in an aggregate principal amount of
$120 million and (3) a seasonal loan facility in an
aggregate principal amount equal to the lesser of (a) the
Borrowing Base (as hereinafter defined) and (b) $86 million
(said term loan, term loan facility and seasonal loan
facility being hereinafter collectively referred to as the
'Acquisition Facility') to assist in financing the
acquisition (the 'Acquisition') by PF Acquisition of the
Class A and Class B Common Stock of Curtice-Burns
Foods, Inc. ('Curtice-Burns'), to repay the existing
indebtedness of Pro-Fac to the Bank, to repay existing
indebtedness of Curtice-Burns to its lenders, and to provide
permanent financing to Curtice-Burns following the merger of
PF Acquisition into Curtice-Burns. PF Acquisition and
Curtice-Burns, as the entity surviving the merger of PF
Acquisition into Curtice-Burns are sometimes hereinafter
referred to as the 'Borrower'. A summary of the principal
terms and conditions of the Acquisition Facility is set
forth in the term sheet attached hereto as Exhibit A
(the 'Term Sheet').
In addition, the Bank will provide the Borrower
with a letter of credit facility as set forth in the Term
Sheet (the 'L/C Facility'; together with the Acquisition
Facility, the 'Facility').
The Bank's commitment to provide the Facility is
subject to the conditions set forth or referred to in this
commitment letter (the 'Commitment Letter') and the Term
Sheet.
<PAGE>
2
This commitment is conditional upon: (1) the
execution and delivery of definitive documentation with
respect to the Facility in form and substance reasonably
satisfactory to the Bank and its counsel incorporating terms
and conditions customary to transactions of this type and as
shall be reasonably satisfactory to the Bank, together with
opinions of counsel in form and substance satisfactory to
the Bank and its counsel; (2) there being no changes, prior
to closing of the Facility, to the Pro-Fac Cooperative, Inc.
Restructuring Proposal, dated August 25, 1994
('Restructuring Proposal') and the supplement thereto, dated
September 1, 1994, describing the Borrower's proposed
management structure (the 'Management Supplement')
previously delivered to the Bank other than changes
reasonably acceptable to the Bank; (3) the absence, prior to
the closing of the Facility, of any material adverse change
in the business, assets, operations, properties, financial
condition, contingent liabilities, prospects or material
agreements of Pro-Fac and Curtice-Burns taken as a whole as
reflected in the June 25, 1994 financial statements of
Pro-Fac and of Curtice-Burns; (4) receipt by the Bank prior
to closing of the Facility of pro forma consolidated
financial statements for the Borrower, reasonably acceptable
to the Bank, demonstrating to the Bank's satisfaction that
as of the closing of the Facility, the Borrower will be in
compliance with the financial tests set forth as conditions
precedent in the Term Sheet; (5) receipt by the Bank of a
copy of an opinion from Dillon Read, addressed to Pro-Fac,
when and if delivered to Pro-Fac, as to the reasonableness,
from the standpoint of Pro-Fac, of the consideration to be
paid by PF Acquisition to the holders of the Class A and
Class B Common Stock of Curtice-Burns in connection with the
proposed acquisition of Curtice-Burns by PF Acquisition,
which opinion must be reasonably acceptable to Pro-Fac, and
which opinion shall in no way be relied upon by the Bank;
and (6) compliance with all other conditions set forth
herein and in the Term Sheet.
By executing this Commitment Letter, Pro-Fac
agrees (a) to indemnify and hold harmless the Bank and its
officers, directors, employees, affiliates, agents and
controlling persons from and against any and all losses,
claims, damages, liabilities and reasonable expenses, joint
or several, to which any such person may become subject
arising out of or in connection with this Commitment Letter,
the Term Sheet, the Facility or any related transaction,
including, but not limited to the Bank's furnishing of funds
<PAGE>
3
to the Borrower under the Facility and assisting in
financing the Acquisition or any claim, litigation,
investigation or proceeding relating to any of the
foregoing, regardless of whether any of such indemnified
parties is a party thereto, and to reimburse each of such
indemnified parties upon demand for any reasonable legal or
other expenses incurred in connection with investigating or
defending any of the foregoing; provided that such
indemnified parties will not be indemnified for any such
losses, claims, damages, liabilities or expenses resulting
from the gross negligence or willful misconduct of the Bank,
and (b) to reimburse the Bank from time to time, for all
reasonable expenses (including reasonable fees,
disbursements and other charges of counsel) incurred in
connection with the Facility and the preparation of this
Commitment Letter, the Term Sheet, the definitive
documentation for the Facility and the security arrangements
in connection therewith, whether or not the closing of the
Facility occurs. The provisions contained in the
immediately preceding sentence shall remain in full force
and effect notwithstanding the termination of the Commitment
Letter or the Bank's commitment hereunder.
The Bank is issuing this commitment in reliance
upon the accuracy of the information and projections
furnished to it by Pro-Fac without independent verification
thereof, including without limitation, the information
contained in the Restructuring Proposal, and the Management
Supplement. Pro-Fac agrees to supplement the information
and the projections previously furnished by it from time to
time until the closing of the Facility in order that all
such information and projections, when taken as a whole,
will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements contained therein, when made, not materially
misleading in light of the circumstances under which such
statements were made. However, the Bank recognizes that,
although Pro-Fac has prepared the projections using
assumptions it believes are reasonable, actual results or
events may vary.
Pro-Fac agrees that this Commitment Letter and the
Term Sheet and the contents hereof and thereof are for
Pro-Fac's confidential use only in connection with Pro-Fac's
submission of bid(s) relative to the Acquisition and will
not without the prior written consent of the Bank (except as
otherwise required by law) be disclosed by Pro-Fac to any
person other than Curtice-Burns or Pro-Fac's and
<PAGE>
4
Curtice-Burns' officers, directors, accountants, attorneys
and other advisors, in each case only in connection with the
transactions contemplated hereby and on a confidential
basis.
This Commitment Letter and the Bank's commitment
hereunder shall not be assignable by Pro-Fac and may not be
amended or any provision hereof waived or modified except by
an instrument in writing signed by Pro-Fac and the Bank.
This Commitment Letter may be executed in any number of
counterparts, each of which shall be an original and all of
which, when taken together, shall constitute one agreement.
Delivery of an executed counterpart of a signature page of
this Commitment Letter by facsimile transmission shall be
effective as delivery of a manually executed counterpart of
this Commitment Letter. This Commitment Letter is intended
to be solely for the benefit of the parties hereto and is
not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties
hereto. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of
New York.
Please evidence your acceptance of the foregoing
by signing in the appropriate space below and returning to
us the enclosed duplicate original of this Commitment Letter
not later than 5:00 p.m., Eastern time, on the earlier of
(a) the fifth business day following the date on which
Curtice-Burns publicly announces its acceptance of Pro-Fac's
bid for the purchase of the Curtice-Burns Class A and
Class B Common Stock, and (b) September 15, 1994, at which
time the Bank's commitment hereunder will expire if not
previously accepted in accordance with this sentence.
We understand that you contemplate that the
Acquisition will close during October, 1994. In the event
that the execution of the definitive documentation
satisfactory to the Bank in respect of the Facility does not
occur on or before January 15, 1995, then this Commitment
Letter and the Bank's commitment hereunder shall terminate
unless the Bank shall, in its discretion, agree to an
extension. Notwithstanding the foregoing, the compensation,
reimbursement and indemnification provisions hereof and of
the Term Sheet shall survive any termination of this
Commitment Letter and the Bank's commitment hereunder, but
such reimbursement and indemnification provisions shall be
superseded in all respects by the provisions of the
<PAGE>
5
definitive documentation upon its execution by the parties
thereto.
This Commitment Letter supersedes and replaces in
their entirety any and all prior letters or correspondence
heretofore delivered by the Bank to Pro-Fac relating to the
Facility or any other financial accommodation relating to
the Acquisition.
We look forward to working with you on this
transaction.
Sincerely,
SPRINGFIELD BANK FOR COOPERATIVES
C. Scott Herring
Vice President
Accepted: September 7, 1994.
PRO-FAC COOPERATIVE, INC.
By: /s/ Roy A. Myers
--------------------------
Title: General Manager
Duly Authorized
<PAGE>
EXHIBIT A
---------
TERM SHEET
SPRINGFIELD BANK FOR COOPERATIVES
with
PRO-FAC COOPERATIVE, INC.
$286,000,000 ACQUISITION FACILITY
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
-----------------------------------------
Terms used but not defined in this Term Sheet shall have the
respective meanings assigned thereto in the Commitment
Letter to which this Term Sheet is attached (the 'Commitment
Letter').
Borrower: PF Acquisition Corp., a New York
cooperative corporation and, upon
completion of the merger of PF
Acquisition into Curtice-Burns Foods,
Inc., means Curtice-Burns as the entity
surviving such merger.
Lender: Springfield Bank for Cooperatives.
Acquisition
Facility: (1) A term loan in the amount of
$80,000,000 (the '$80 Million Term
Loan').
(2) A term loan facility in the amount
of $120,000,000 (the '$120 Million
Term Loan Facility'; together with
the $80 Million Term Loan,
collectively, the 'Term Loan').
The Borrower may borrow under the
$120 Million Term Loan Facility
upon closing of the Facility and
from time to time thereafter.
(3) A seasonal loan facility in an
aggregate principal amount equal to
the lesser of (a) the Borrowing
<PAGE>
Base (as hereinafter defined) and
(b) $86 Million. 'Borrowing Base'
shall mean (i) 66% of eligible
accounts receivable plus (ii) 50%
of eligible inventory, as provided
for in the definitive
documentation.
Letter of Credit
Facility: A letter of credit facility in an
aggregate amount not to exceed
$10 million of letters of credit at any
time outstanding. The Borrower shall
pay to the Bank the Bank's customary
fees and charges for issuance, amendment
and payment of letters of credit, as in
effect from time to time.
Use of Proceeds
of Acquisition
Facility: Assist in financing the acquisition by
PF Acquisition of the Class A and
Class B Common Stock of Curtice-Burns,
repay the existing indebtedness of Pro-
Fac to the Bank, repay the existing
indebtedness of Curtice-Burns to its
existing lenders, and provide permanent
financing to the Borrower.
Guarantors: All obligations of the Borrower under
the definitive credit documentation for
the Facility will be unconditionally
guaranteed by Pro-Fac and by each
subsidiary of the Borrower
(collectively, the 'Guarantors').
Security: As security for the Facility and the
obligations of the Guarantors to the
Bank, first and only security interests
in and liens upon all of the assets of
the Borrower and Guarantors, including,
without limitation, (a) all present and
future: accounts, contract rights,
chattel paper, instruments, documents,
inventory, general intangibles
(including, without limitation, all
patents, trade names, trademarks,
copyrights, and tax refunds) and
-ii-
<PAGE>
equipment; (b) all real property of the
Borrower and Guarantors, and (c) all
products and proceeds of all of the
foregoing (collectively, the
'Collateral'), except for liens
reasonably acceptable to the Bank.
Amortization
of the $80 Million
Term Loan: The $80 Million Term Loan shall be
repaid in twenty (20) equal, consecutive
semi-annual installments.
Amortization of
$120 Million
Term Loan Facility: The $120 Million Term Loan Facility
shall be repaid as follows: (1) from
closing of the Facility through
September 1, 1999, on September 1 of
each year, to the extent of Annual Cash
Sweep (as hereinafter defined) for the
Borrower's immediately preceding fiscal
year and (2) from September 2, 1999
through the tenth anniversary of
closing, any outstanding balance in ten
equal installments payable on the same
dates that the installments of the
$80 Million Term Loan are due. All
payments at any time applied to the
outstanding balance of the $120 Million
Term Loan Facility shall reduce the
amount available to be borrowed
thereunder by an equal amount. 'Annual
Cash Sweep' means 80% of the Borrower's
available cash at the end of each fiscal
year, calculated as follows for each
fiscal year: net income after taxes and
interest, plus depreciation, plus
amortization, plus deferred finance
charges, for such fiscal year, less the
principal installments payable during
such fiscal year with respect to the
$120 Million Term Loan, less capital
expenditures, less dividends paid to
preferred stockholders, and less cash
patronage payments.
-iii-
<PAGE>
In addition, all net proceeds received
by the Borrower at any time after
closing from the sale and issuance by
the Borrower to its members of so-called
PIk Preferred Stock and/or subordinated
debentures (said net proceeds are
collectively hereinafter referred to as
'Member Equity') shall be applied to the
outstanding balance of the $120 Million
Term Loan Facility and shall reduce the
amount available to be borrowed
thereunder by an equal amount, except
that, the Borrower shall be permitted to
re-borrow at any time, and from time to
time, under the $120 Million Term Loan
Facility an amount which, together with
all amounts previously re-borrowed under
the $120 Million Term Loan Facility,
shall be equal to, in the aggregate, the
lesser of (a) Member Equity applied to
the outstanding balance of the
$120 Million Term Facility and
(b) (i) $25 million from closing through
and including June 30, 1996 and
(ii) $20 million from and after July 1,
1996.
Repayment of
Seasonal Loan
Facility: The Seasonal Loan Facility shall have
terms similar to those that presently
exist under the Bank's seasonal loan
facility with Pro-Fac. The Seasonal
Loan Facility shall be in a fully paid
status for a period of at least fifteen
(15) consecutive days.
Interest: Payable monthly in arrears, calculated
on the basis of a 360-day year and
actual days elapsed, at a rate per annum
equal to, at the option of the Borrower,
(a) The Wall Street Journal Prime Rate
(i) with respect to the Term Loan, plus
.50%, and (ii) with respect to the
Seasonal Loan Facility, minus .25%
(collectively, the 'Variable Rate
Option'), (b) LIBOR plus, for interest
periods less than 180 days, (i) with
-iv-
<PAGE>
respect to the Term Loan, 2.60% and
(ii) with respect to the Seasonal Loan
Facility, 1.75% (collectively, the
'LIBOR Rate') or (c) the U.S. Treasury
Rate plus, for interest periods in
excess of 180 days, (i) with respect to
the Term Loan, 3.00% and (ii) with
respect to the Seasonal Loan Facility,
2.00% (collectively the 'Treasury -
Based Rate', together with the LIBOR
Rate, collectively, the 'Fixed Rate
Option'). Notwithstanding the
foregoing, if the Borrower achieves a
long-term debt to equity ratio of
(x) 2.5:1 or (y) 2.15:1, then, solely
with respect to the Term Loan, the
Variable Rate Option and the Fixed Rate
Option shall be reduced by .25% or .50%,
respectively.
The Variable Rate Option and the Fixed
Rate Option may be selected by the
Borrower with respect to all or a
designated portion of the Term Loan and
the Seasonal Loan Facility, as provided
in the definitive documentation.
Solely with respect to the Treasury -
Based Rate, if, as and when the spread
between the Bank's cost of funds and the
U.S. Treasury Rate increases or
decreases, then the Treasury - Based
Rate shall be automatically changed by
an amount equal to such increase or
decrease.
Fees: 1. Commitment Fee. A non-refundable
commitment fee as agreed upon
between Pro-Fac and the Bank.
2. Acquisition Facility Fee. Non-
refundable acquisition facility fee
in an amount equal to the sum of
3/4 of 1% of the Acquisition
Facility, payable at the closing of
the Acquisition Facility.
-v-
<PAGE>
3. Break-up Fee. A non-refundable
Break-up Fee in the amount of One
Hundred Thousand Dollars ($100,000)
if the Acquisition Facility does
not close due to no fault of the
Bank.
Prepayment: The Term Loan may be prepaid in whole or
in part at any time without premium or
penalty, except for prepayments with
respect to any portion of the Term Loan
with respect to which the Borrower has
elected the Fixed Rate Option, which
prepayments shall be subject to the
breakage costs provided for in the
definitive documentation. All Term Loan
prepayments shall be applied pro rata to
the unpaid installments, at the
Borrower's option, of the $80 Million
Term Loan or the $120 Million Term Loan
Facility.
Conditions
Precedent to the
Facility: The Term Loan will be subject to
conditions precedent customarily found
in credit agreements for similar
financings, including:
1. The Agreement and Plan of Merger by
and among Pro-Fac, PF Acquisition
and Curtice-Burns shall have been
executed and delivered in
substantially the form of the draft
dated August 24, 1994, previously
delivered to the Bank, with such
material changes thereto in a form
reasonably acceptable to the Bank,
and all conditions precedent for
the consummation of the merger of
PF Acquisition into Curtice-Burns
(the 'Merger') shall have been
satisfied or waived;
2. The Borrower shall have received
gross proceeds of Subordinated Debt
(as hereinafter defined) of not
less than $160 Million.
-vi-
<PAGE>
3. After giving effect to the Merger,
PF Acquisition and Curtice-Burns
shall have, as at the date of the
closing of the Facility, on a
consolidated basis and determined
in accordance with generally
accepted accounting principles
consistently applied ('GAAP'):
a. a long term debt-to-equity
ratio of no greater than
3.1:1.0;
b. total net worth (including
capital stock, earnings
allocated to Pro-Fac members
and earned surplus) of not
less than 18% of total assets;
c. working capital of not less
than $100 million; and
d. on the basis of cash flow
projections reasonably
acceptable to the Bank, a cash
flow coverage ratio at the end
of each fiscal year of (1) net
income after taxes, plus
depreciation, plus
amortization plus deferred
finance charges for such
fiscal year to (2) the current
portion of long term debt,
plus capital expenditures,
plus dividends to preferred
stockholders, plus cash
patronage payments to members
for such fiscal year, of not
less than 1.1 to 1.0.
4. No injunction or other order issued
by any court of competent
jurisdiction or by any governmental
or regulatory body which prevents
the consummation of the Merger as
contemplated by the Merger
Agreement shall be in effect; and
no proceeding before any such court
-vii-
<PAGE>
or governmental or regulatory body
with any reasonable likelihood of
success shall have been commenced
seeking to enjoin the consummation
of the merger contemplated by the
Merger Agreement.
5. Definitive documentation with
respect to the Facility, including,
without limitation, a loan
agreement, security agreements,
guaranties, UCC financing
statements and related
documentation incorporating
customary terms and provisions and
such other provisions as the Bank
may reasonably require in the
context of the transactions
contemplated hereby, including, but
not limited to, those described
herein, and such other closing
documentation as the Bank may
reasonably require.
6. There shall not be any material
liabilities under ERISA of Pro-Fac
or Curtice-Burns in respect of any
pension plan, except and to the
extent disclosed in the most recent
audited financial statements of
Pro-Fac and of Curtice-Burns or
otherwise disclosed and acceptable
to the Bank.
7. There shall exist no default or
event which with notice or passage
of time, or both, would constitute
a default under the definitive
documentation for the Facility, and
the representations and warranties
in such definitive documentation
shall be true and correct in all
material respects.
8. The terms and conditions of the
Subordinated Debt shall be
substantially as set forth in
Schedule A annexed hereto (the
-viii-
<PAGE>
'Subordinated Debt') and the terms
of any other financing assumed or
incurred by the Borrower, whether
direct or indirect, and of any
indebtedness which is to remain
outstanding after the closing of
the Facility shall be satisfactory
in all material respects to the
Bank and its counsel.
9. Delivery to the Bank of evidence of
insurance coverage, including
mortgagee's and lender's loss payee
endorsements in the Bank's favor as
to casualty and business
interruption insurance and
mortgagee's title insurance by a
company and agent acceptable to the
Bank (a) insuring the priority,
amount and sufficiency of any
mortgage, deed of trust or deed to
secure debt in favor of the Bank on
each fee and leasehold interest
included in the Collateral,
(b) insuring against matters that
would be disclosed by surveys, and
(c) containing all endorsements,
assurances or affirmative coverage
reasonably requested by the Bank
for protection of the Bank's
interests.
Representations
and Warranties: To include, but not be limited to:
authorization and enforceability;
absence of default or event of default;
absence of material adverse change;
accuracy of financial statements
(including pro forma financial
statements); absence of undisclosed
liabilities; compliance with laws
(including environmental laws and
regulations); charter documents and
agreements; good standing;
inapplicability of the Investment
Company Act of 1940; payment of taxes;
ownership of properties; validity of
-ix-
<PAGE>
security interests; absence of liens;
and absence of material litigation.
Affirmative
Covenants: To include, but not be limited to:
maintenance of corporate existence and
rights; compliance with laws, including
environmental laws; performance of
obligations; maintenance of properties
in good repair; maintenance of
appropriate and adequate insurance;
inspection of books and properties;
payment of taxes and other liabilities;
delivery of notice of defaults,
litigation and other adverse action,
including environmental action; delivery
of financial statements, financial
projections and other information; from
and after the occurrence of an event of
default, at such times as the Bank may
request, delivery of appraisals of the
Collateral from appraisers acceptable to
the Bank; and further assurances.
Negative
Covenants: To include, but not be limited to:
limitations on dividends and on
redemptions and repurchases of capital
stock; limitations on debt (except for
the Subordinated Debt) and guarantees;
limitations on repurchases or prepayment
of debt; limitations on liens;
limitations on sale-leaseback
transactions; limitations on loans,
investments, acquisitions and asset
sales; limitations on amendment of
certain material agreements; limitations
on transactions or changes in business
conducted; limitations on capital
expenditures including expenditures in
respect of capitalized leases (all such
capital expenditures in any year not to
exceed the amount of depreciations in
such fiscal year); and limitations on
mergers and consolidations.
Financial
-x-
<PAGE>
Covenants: Shall include, but not be limited to,
the following:
1. The Borrower shall achieve and
maintain as of each fiscal year end
and at all times thereafter, on a
consolidated basis and in
accordance with GAAP:
(a) Achieve and maintain a long
term debt-to-equity ratio of
not less than the following
minimum levels for the periods
set forth below;
6/30/95 through 6/29/97:
2.7 to 1.0
6/30/97 through 6/29/98:
2.5 to 1.0
6/30/98 through 6/29/01:
2.15 to 1.0
6/30/01 and thereafter:
1.8 to 1.0
(b) Achieve and maintain a total
net worth (including capital
stock, earnings allocated to
members and earned surplus) of
not less than the following
minimum levels for the period
set forth below;
6/30/95 through 6/29/97: 19%
6/30/97 through 6/29/01: 20%
6/30/01 and thereafter: 25%
(c) Achieve and maintain a
tangible net worth of not less
than the amount determined
upon completion of the Merger,
subject to adjustments made in
accordance with GAAP;
(d) Achieve and maintain a cash
flow coverage ratio at the end
of each fiscal year of (1) net
income after taxes, plus
depreciation, plus
amortization, plus deferred
-xi-
<PAGE>
finance charges for such
fiscal year to (2) the current
portion of long term debt,
plus capital expenditures,
plus dividends to preferred
stockholders, plus cash
patronage payments for such
fiscal year, of not less than
1.1 to 1.0;
(e) Achieve and maintain minimum
working capital of not less
than $100 million for the
Borrower's fiscal year ending
6/30/95 and for each fiscal
year thereafter.
2. If the Borrower fails to comply
with any of the financial covenants
set forth in paragraphs 1(a)
through (d), inclusive, immediately
above, then, without in any way
limiting or waiving any of the
Bank's rights or remedies that will
be set forth in the definitive
documentation for the Facility, the
Borrower shall make no cash
payments to growers for raw
products in excess of 90% of
established commercial market
values therefor in any fiscal year
in which such covenants default
occurs.
3. No later than two months prior to
the commencement of each fiscal
year, the Borrower shall provide
the Bank with a financial plan for
such fiscal year, satisfactory to
the Bank, which plan shall include,
without limitation, provision for
maintenance of appropriate grower
contracts and pool accounting and
pool proceeds distribution
procedures to support the Bank's
credit terms and conditions.
-xii-
<PAGE>
Events of Default: Shall include, but not be limited to,
payment defaults, cross defaults to
agreements evidencing indebtedness to
other parties, covenant defaults, breach
of warranty, voluntary and involuntary
bankruptcy, judgments and attachments,
dissolution ERISA violations, OSHA
violations, environmental law
violations, change in control and breach
of collateral documents.
Participations: The Bank shall have the right to sell
participations in the Facility or any
part thereof. Participants shall have
the same benefits as the Bank with
respect to provision of information
regarding the Borrower. The Bank shall
have the right to furnish to
participants (including prospective
participants) any information concerning
the Borrower in the possession of the
Bank.
Indemnity: Borrower shall indemnify the Bank and
its directors, officers, agents, and
employees and hold them harmless from
and against all costs, expenses
(including the reasonable fees and
disbursements of counsel) and
liabilities, including those resulting
from any litigation or other proceedings
(regardless of whether the Bank is a
party thereto), related to or arising
out of the transactions contemplated
hereby, provided that the Bank will not
be indemnified for any costs, expenses
or liabilities resulting from its gross
negligence or willful misconduct.
Governing Law: New York.
This Term Sheet is not meant to be, nor
shall it be construed as, an attempt to
describe all of the terms and conditions
that pertain to this Facility, nor do
its terms suggest the specific phrasing
of documentation clauses. Rather, it is
-xiii-
<PAGE>
intended only to outline the principal
terms and conditions of the Facility.
-xiv-
<PAGE>
Letterhead of
[Farm Credit Bank of Springfield
Springfield Bank for Cooperatives]
September 16, 1994
Pro-Fac Cooperative, Inc.
P.O. Box 682
Rochester, NY 14603
Attention: Mr. Roy A. Myers
General Manager
Re: Amendment to Commitment Letter
Gentlemen:
We refer to our Commitment Letter, dated
September 2, 1994 (the 'Commitment Letter'), previously
delivered to you by the Bank. Capitalized terms used
herein, unless otherwise defined herein, shall have the
meaning ascribed thereto in the Commitment Letter.
As per your request, the Bank agreed with Pro-Fac
that the Commitment Letter is hereby amended as follows:
1. Commitment Acceptance: Clause (b) of the
second paragraph on page 4 of the Commitment Letter is
hereby amended by deleting therefrom 'September 15, 1994'
and substituting 'September 26, 1994' therefor.
2. Correction: The first paragraph of the
Section of the Term Sheet entitled, 'Amortization of
$120 Million Term Loan Facility', on page iii of the Term
Sheet, is hereby amended by deleting from the 24th line
thereof (i.e., the 4th line from the bottom of said
paragraph) the term, '$120 Million Term Loan' and correcting
the same to read '$80 Million Term Loan'.
3. Conditions Precedent: Paragraph 1 of the
Section of the Term Sheet entitled, 'Conditions Precedent to
the Facility', on page (v) of the Term Sheet, is hereby
amended by deleting from the 5th line thereof the reference
to the draft of the Agreement and Plan of Merger 'dated
August 24, 1994' and substituting therefor a reference to
the draft dated 'September 15, 1994'.
4. Subordinated Debt: Notwithstanding the fact
that the Summary Terms and Conditions of Subordinated Debt
attached to the Commitment Letter as Schedule A provides
that the amount of the Subordinated Debt shall be
<PAGE>
Pro-Fac Cooperative, Inc.
September 16, 1994
Page 2
$150 million, the Bank acknowledges and confirms that, as
set forth in paragraph 2 of the section in the Term Sheet
entitled, 'Conditions Precedent to the Facility', the gross
proceeds of Subordinated Debt received by the Borrower on or
before closing of the Term Loan shall be in an aggregate
amount of not less than $160 million.
5. Financial Covenants: Notwithstanding
anything to the contrary contained in the Commitment Letter,
the Bank agrees that, in calculating any ratio contained in
any financial covenant set forth in the Term Sheet, the
Borrower shall be permitted to round to the nearest tenth
both the numerator and denominator thereof.
Except as expressly set forth herein, no other
amendments or modifications to the Commitment Letter are
intended or implied, and the Commitment Letter remains in
full force and effect in accordance with its existing terms
and provisions.
Please signify your agreement with the foregoing
by executing a duplicate original of this letter and
returning the same to the Bank. Thank you.
Sincerely,
SPRINGFIELD BANK FOR COOPERATIVES
By: /s/ C. Scott Herring
--------------------------------
Title: Vice President
AGREED TO:
PRO-FAC COOPERATIVE, INC.
By: /s/ Roy A. Myers
-------------------------
Title: General Manager
<PAGE>
EXHIBIT 10
[Dillon, Read & Co. Inc. Letterhead]
[535 Madison Avenue
New York, New York 10022
212-906-7000]
[LOGO]
September 27, 1994
Board of Directors
Pro-Fac Cooperative, Inc.
90 Linden Place
Rochester, New York 14603
Gentlemen:
You have advised us of your intention to form a subsidiary to enter into an
agreement to acquire Curtice-Burns Foods, Inc. (the 'Acquired Business'). You
have retained us to assist you in raising a portion of the funds required to
consummate the acquisition of the Acquired Business (after giving effect
to the proposed contribution of your assets, the 'Transaction') through
the sale or placement of up to $160 million aggregate principal amount
of senior subordinated debt securities (the 'Subordinated Debt') to be issued by
the Acquired Business and to be guaranteed on a senior subordinated basis by
you. We understand that the sources of financing for the Transaction and related
costs and expenses will be bank financing from the Springfield Bank for
Cooperatives ('Springfield Bank') of approximately $200 million and the
Subordinated Debt. We also understand that Springfield Bank will provide a
seasonal working capital facility of up to $86 million. You have advised us that
you or your members will contribute not less than $10 million in equity to the
Acquired Business during the current fiscal year of the Acquired Business. You
have also advised us that following the Transaction the Acquired Business will
have no indebtedness for
<PAGE>
[LETTERHEAD DILLON, READ & CO. INC.]
money borrowed other than as set forth in the preceding sentences.
We are pleased to inform you that, based upon current market conditions, we
are highly confident of our ability to sell or place the Subordinated Debt in
connection with the Transaction. The structure, convenants, and terms of the
Subordinated Debt, including the coupon, will be determined by Dillon, Read &
Co. Inc. in consultation with you (to be mutually acceptable to both parties)
based on market conditions at the time of the sale or placement and on the
structure and documentation of the Transaction. Our ability to consummate the
sale or placement of the Subordinated Debt is subject to: (i) there not having
occurred any material adverse change in your financial condition, results of
operations, businesses or prospects or that of the Acquired Business since June
25, 1994, (ii) the terms and structure of the Springfield Bank or any other
financing for the Transaction being acceptable to us and the execution of
documentation relating thereto satisfactory in form and substance to us (and we
confirm that the terms and structure substantially as set forth in the
commitment letter dated September 2, 1994 and amended on September 16, 1994 from
Springfield Bank, previously reviewed by us, are acceptable to us on a
preliminary basis), (iii) the receipt of all necessary governmental, regulatory
or third party approvals or consents in connection with the Transaction and the
absence of any pending or threatened litigation which could jeopardize the
offering of the Subordinated Debt, (iv) the execution and delivery of
documentation for the Transaction and related transactions in form and substance
satisfactory to us and such documentation being in full force and effect, (v)
agreement on the terms of the Subordinated Debt including coupon, and the
negotiation and execution of satisfactory documentation with respect to the
Subordinated Debt and the offering and sale thereof, (vi) our continuing due
diligence investigation not having disclosed any facts that would alter our
current view with respect to all aspects of your business and the Acquired
Business, including, without limitation, the financial condition, results of
operations, prospects and environmental liabilities of your business and the
Acquired Business (including solvency), (vii) the availability of audited (the
reports with respect to which shall be unqualified) and
<PAGE>
[LETTERHEAD DILLON, READ & CO. INC.]
unaudited historical financial statements of your business and the Acquired
Business (including pro forma financial statements) as required by any state and
federal securities laws applicable to registration statements, reports and other
documents filed thereunder and a private placement memorandum and/or prospectus
and auditor's comfort letter in respect thereof, in each case, acceptable to us,
(viii) no change or proposed change in United States law having occurred that
could reasonably be expected to adversely affect the economic consequences,
including the tax treatment, that you or any of your subsidiaries contemplate
deriving from the Transaction, (ix) our having reasonable time to market the
Subordinated Debt, based on our experience in comparable transactions, (x) there
being satisfactory market conditions at the time of offering and (xi) the
cooperation of the management of the Acquired Business in marketing the
Subordinated Debt.
Very truly yours,
Dillon, Read & Co. Inc.
By: /s/ Robert H. Hotz
...................................
Name: Robert H. Hotz
Title: Managing Director
Agreed and Accepted:
Pro-Fac Cooperative, Inc.
By: /s/ Roy A. Myers
.................................
Name: Roy A. Myers
Title:General Manager
EXHIBIT 11
[LETTERHEAD OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION]
September 27, 1994
Board of Directors
Curtice-Burns Foods, Inc.
90 Linden Place
Rochester, NY 14603
Dear Gentlemen and Madam:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Class A Common Stock, par value
$.99 per share (the 'Class A Shares'), of Curtice-Burns Foods, Inc. (the
'Company') of the consideration to be received by the holders of Class A Shares
pursuant to the terms of the Agreement and Plan of Merger dated as of September
27, 1994 among Pro-Fac Cooperative, Inc. ('Pro-Fac'), PF Acquisition Corp., a
wholly owned subsidiary of Pro-Fac ('Sub'), and the Company (the 'Agreement').
Pursuant to the Agreement, Sub will commence a tender offer for all issued
and outstanding Class A Shares and all issued and outstanding shares of the
Company's Class B Common Stock, par value $.99 per share (the 'Class B Shares,'
and together with the Class A Shares, the 'Shares'), at a price of $19.00 in
cash per Share (the 'Tender Offer'). The Tender Offer is to be followed by a
merger in which the Shares of all shareholders who did not tender would be
converted into the right to receive $19.00 in cash per Share (the 'Merger'
and together with the Tender Offer, the 'Pro-Fac Offer').
In arriving at our opinion, we have reviewed the Agreement, the Agreement
dated as of September 27, 1994 among Pro-Fac, Sub and Agway Holdings, Inc.
('Holdings') under which Holdings has agreed to tender all of its Shares
pursuant to the Tender Offer (together with the Agreement, the 'Transaction
Documents'), and a recent draft of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9. We also have reviewed financial and other
information that was publicly available or furnished to us by the Company,
including information provided during discussions with management. Included in
the information provided during discussions with management were certain
financial projections of the Company prepared by the management of the Company.
In addition, we have compared certain financial and securities data of the
Company with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the common
stock of the Company, reviewed prices and premiums paid in other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company or
its representatives, or that was otherwise reviewed by us. We have not assumed
any responsibility for making an independent evaluation of the Company's assets
or liabilities or for making an independent verification of any of the
information reviewed by us.
<PAGE>
We have relied as to all legal matters relating to the Tender Offer, the Merger
and the Transaction Documents on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are aware that another party has made a
proposal (the 'Other Proposal') to acquire all of the issued and outstanding
Shares for $20.00 per Share in cash. The Board of Directors of the Company has
determined to proceed with the Pro-Fac Offer after taking into account the
material contingencies contained in the Other Proposal and the risk that the
Other Proposal would not be consummated in a timely fashion, if at all, at a
price per Share in excess of $19.00. Our opinion does not constitute a
recommendation to any shareholder of the Company to tender their Shares pursuant
to the Tender Offer or as to how such shareholder should vote on the proposed
transaction or the Agreement.
Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ'), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. As you are aware, DLJ has
been engaged to act as exclusive financial advisor to the Special Committee of
the Board of Directors of the Company.
Based upon and subject to the foregoing and based upon such other factors as we
deem relevant, we are of the opinion that the consideration to be received by
holders of Class A Shares pursuant to the Tender Offer and the Merger is fair to
the holders of Class A Shares from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
EXHIBIT 12
[LETTERHEAD OF
GOLDMAN, SACHS & CO.]
September 27, 1994
Board of Directors
Curtice-Burns Foods, Inc.
90 Linden Place, P.O. Box 681
Rochester, NY 14603
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Class B Common Stock, par value $.99 per share
(the 'B Shares'), of Curtice-Burns Foods, Inc. (the 'Company') of the
$19.00 per B Share in cash (the 'Pro-Fac Offer') proposed to be paid
by Pro-Fac Cooperative, Inc. ('Parent') in the Tender Offer and the Merger
(as defined below) pursuant to the Agreement and Plan of Merger dated as
of September 27, 1994 among Parent, PF Acquisition Corp., a wholly-owned
subsidiary of Parent ('Sub'), and the Company (the 'Agreement'). The
Agreement provides for a tender offer (the 'Tender Offer') for all of the
issued and outstanding B Shares and all of the issued and outstanding shares
of Class A Common Stock, par value $.99 per share (the 'A Shares', and
together with the B Shares, the 'Shares'), of the Company, pursuant to which
Parent will pay $19.00 per Share in cash for each Share accepted. The
Agreement further provides that following completion of the Tender Offer,
Sub shall be merged with and into the Company (the 'Merger') and each
outstanding Share (other than Shares already owned by Parent or Sub) will
be converted into the right to receive $19.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. As you are aware, pursuant to an engagement letter dated February 1,
1993, we were engaged by Agway Inc. ('Agway'), the beneficial owner of
approximately 99% of the issued and outstanding B Shares and approximately
14% of the issued and outstanding A Shares, to act as its financial advisors
in connection with its consideration of financial alternatives with respect to
its equity interest in the Company, including, among other things, a possible
sale of the Company. Agway, in a letter to us dated November 11, 1993,
consented to our engagement by the Company and agreed that it would not seek
to be paid a higher price for its Shares than the price to be paid to the
holders of all the other Shares, whether A Shares or B Shares.
<PAGE>
Curtice-Burns Foods, Inc.
September 27, 1994
Page Two
In connection with this opinion, we have reviewed, among other things, the
Agreement; a recent draft of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9; the Agreement dated as of September 27, 1994 among
Parent, Sub and Agway Holdings, Inc. ("Holdings"), under which Holdings
has agreed to, among other things, tender all of its Shares pursuant to the
Tender Offer; Annual Reports to Stockholders and Annual Reports on Form 10-K
of the Company for the four fiscal years ended June 26, 1993 and
the Company's Annual Report on Form 10-K for the fiscal year ended June 25,
1994; certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of the Company; certain other communications from the Company to its
stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management. We also have held discussions with members
of the senior management of the Company regarding its past and current business
operations, financial condition and future prospects. In addition, we have
reviewed the reported price and trading activity for the A Shares, compared
certain financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations
in the food processing industry specifically and in other industries generally
and performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and, we have not been furnished with any such evaluation or
appraisal. We are aware that another party has made a proposal (the 'Other
Proposal') to acquire all of the issued and outstanding Shares for $20.00 per
share in cash. The Board has determined to proceed with the Pro-Fac Offer
after taking into account the material contingencies contained in the Other
Proposal and the risk that the Other Proposal would not be consummated in a
timely fashion, if at all, at a price per Share in excess of $19.00. Our
opinion does not constitute a recommendation to any shareholder of the Company
to tender their Shares pursuant to the Tender Offer or as to how such
shareholder should vote on the proposed transaction or the Agreement. We are
not opining on the allocation between the holders of A Shares and B Shares of
the aggregate consideration to be paid to the holders of Shares in the Tender
Offer and the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $19.00
per B Share in cash to be received by the holders of B Shares in the Tender
Offer and the Merger is fair to such holders.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 13
[LETTERHEAD OF]
[CURTICE-BURNS FOODS, INC.]
September 28, 1994
Dear Curtice Burns Shareholder:
I am pleased to inform you that on September 27, 1994, Curtice Burns
entered into a definitive agreement with Pro-Fac Cooperative, Inc. for the
acquisition of all the outstanding shares of Curtice Burns for $19 per share in
cash. Pursuant to that agreement, Pro-Fac will make a cash tender offer for all
the outstanding shares of Curtice Burns at a price of $19 per share. Following
the successful completion of Pro-Fac's tender offer, Curtice Burns will be
merged with a subsidiary of Pro-Fac, whereby Pro-Fac will acquire any remaining
shares of Curtice Burns for $19 per share in cash.
YOUR BOARD OF DIRECTORS HAS APPROVED PRO-FAC'S TENDER OFFER AND THE RELATED
MERGER AND DETERMINED THAT THE TERMS THEREOF ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE SHAREHOLDERS OF CURTICE BURNS AND RECOMMENDED THAT THE
SHAREHOLDERS OF CURTICE BURNS ACCEPT PRO-FAC'S TENDER OFFER AND TENDER THEIR
SHARES.
As required by the merger agreement with Pro-Fac, Curtice Burns is
terminating all ongoing discussions between Curtice Burns and Dean Foods
Company, which had previously proposed, subject to certain contingencies, to
acquire Curtice Burns for a maximum of $20 per share in cash.
The merger agreement with Pro-Fac is the result of an intensive evaluation
by Curtice Burns of strategic alternatives to provide enhanced value to
shareholders, which began in early 1993. In June of this year, when the Curtice
Burns Board of Directors announced that it had decided to pursue the maximum $20
per share proposal from Dean Foods, the Board believed that the Dean Foods
transaction offered the best potential value for shareholders when compared with
the $16.87 per share offer Pro-Fac had proposed at that time. The Dean Foods
proposal was conditioned on a resolution of the dispute between Curtice Burns
and Pro-Fac regarding rights under the Integrated Agreement between the two
companies as well as the sale of the Curtice Burns Nalley's business. After
extensive efforts, it has become clear that the disagreements with Pro-Fac would
only be resolved through arbitration proceedings. Pro-Fac subsequently increased
its offer to $19 a share, a significant increase from its original proposal of
$16.87 per share, and the Curtice Burns Board concluded that the Pro-Fac
transaction not only provides a fair price for Curtice Burns shares, but is also
the only transaction likely to be consummated in the near future.
The Curtice Burns Board of Directors and I extend our sincere thanks to
Dean Foods and its management for the considerable time and effort they have put
into trying to develop a transaction with Curtice Burns. Dean Foods is an
excellent company with fine people. However, the responsibility of the Board is
to act in the best interests of our shareholders in providing them with the best
and most certain value for their shares.
The recommendation of the Board, including a description of certain matters
considered by the Board, are described in the Statement on Schedule 14D-9 filed
by Curtice Burns with the Securities and Exchange Commission, a copy of which is
enclosed. The Schedule 14D-9 also includes copies of the opinions of Curtice
Burns' financial advisors, Donaldson, Lufkin & Jenrette Securities Corporation
and Goldman, Sachs & Co., that the consideration to be received by the holders
of Class A common stock and the holders of Class B common stock, respectively,
of Curtice Burns in this transaction is fair to such holders. I urge you to read
the enclosed Schedule 14D-9 carefully.
Pro-Fac's tender offer will begin no later than October 4, 1994. After the
offer commences, you will receive from Pro-Fac an Offer to Purchase and related
Letter of Transmittal setting forth, in detail, the terms and conditions of
Pro-Fac's tender offer and providing instructions on how to tender your shares.
If you have any questions regarding this transaction or how to tender your
shares, please call Mackenzie Partners, who are assisting Curtice Burns with
these matters, at 1-800-322-2885 (toll free).
Sincerely,
J. WILLIAM PETTY
President and
Chief Executive Officer
