<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1994
REGISTRATION NO. 33-56517
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CURTICE-BURNS FOODS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- ----------------------------------------------------------
<TABLE>
<S> <C> <C>
NEW YORK 16-0845824 2037
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER) (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
AND ITS GUARANTORS
<TABLE>
<S> <C> <C> <C>
PRO-FAC COOPERATIVE, INC. NEW YORK 16-6036816 5148
CURTICE-BURNS EXPRESS, INC. NEW YORK 16-1198316 4213
CURTICE BURNS MEAT SNACKS, INC. DELAWARE 13-3346668 2013
FINGER LAKES PACKAGING COMPANY, INC. NEW YORK 16-1262806 3411
HUSMAN SNACK FOODS COMPANY, INC. OHIO 31-1308171 2096
KENNEDY ENDEAVORS, INCORPORATED WASHINGTON 91-1350382 2096
NALLEY'S CANADA LIMITED BRITISH COLUMBIA N/A 2032
QUALITY SNAX OF MARYLAND, INC. MARYLAND 52-0911948 5145
SEASONAL EMPLOYERS, INC. NEW YORK 16-1375253 7363
PRO-FAC HOLDING COMPANY OF IOWA, INC. NEW YORK 16-1335217 6799
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION OF (I.R.S EMPLOYER (PRIMARY STANDARD INDUSTRIAL
SPECIFIED IN ITS CHARTER) INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
ROY A. MYERS
CURTICE-BURNS FOODS, INC.
90 LINDEN PLACE 90 LINDEN PLACE
P.O. BOX 681 P.O. BOX 681
ROCHESTER, NEW YORK 14603 ROCHESTER, NEW YORK 14603
(716) 383-1850 (716) 383-1850
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
COPY TO:
SCOTT F. SMITH, ESQ.
HOWARD, DARBY & LEVIN
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 841-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
CURTICE-BURNS FOODS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM IN FORM S-4 LOCATION OR CAPTION IN PROSPECTUS
- ------ ---------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page of
Prospectus.......................................................... Facing Page; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus............... Inside Front and Outside Back Cover
Pages of Prospectus; Table of
Contents; Available Information
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information......................................................... Summary; Risk Factors; The Company;
The Exchange Offer; Selected
Historical Consolidated Financial
Data of the Company; Selected
Historical Consolidated Financial
Data of Pro-Fac; Pro Forma
Financial Data of the Company; Pro
Forma Financial Data of Pro-Fac
and the Company
4. Terms of the Transaction.............................................. Summary; The Exchange Offer;
Description of the Notes
5. Pro Forma Financial Information....................................... Pro Forma Financial Data of the
Company; Pro Forma Financial Data
of Pro-Fac and the Company
6. Material Contracts with the Company Being Acquired.................... Not Applicable
7. Additional Information Required for Reoffering by Persons and Parties
Deemed to be Underwriters........................................... Not Applicable
8. Interests of Named Experts and Counsel................................ Not Applicable
9. Disclosure of Commission Position on Indemnification for Securities
Act Liabilities..................................................... Part II -- Indemnification of
Directors and Officers
10. Information with Respect to S-3 Registrants........................... Not Applicable
11. Incorporation of Certain Information by Reference..................... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants.................... Not Applicable
13. Incorporation of Certain Information by Reference..................... Not Applicable
14. Information with Respect to Registrants Other Than S-2 or S-3
Registrants......................................................... Summary; Risk Factors;
Capitalization; Selected
Historical Consolidated Financial
Data of the Company; Selected
Historical Consolidated Financial
Data of Pro-Fac; Management's
Discussion and Analysis of
Financial Condition and Results of
Operations of the Company;
Management's Discussion and
Analysis of Financial Condition
and Results of Operation of
Pro-Fac; Business; Description of
Certain Indebtedness; Description
of the Notes; Financial Statements
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM IN FORM S-4 LOCATION OR CAPTION IN PROSPECTUS
- ------ ---------------------------------------------------------------------- ------------------------------------
<S> <C> <C>
15. Information with Respect to S-3 Companies............................. Not Applicable
16. Information with Respect to S-2 or S-3 Companies...................... Not Applicable
17. Information with Respect to Companies Other Than S-2 or S-3
Companies........................................................... Not Applicable
18. Information if Proxies, Consents or Authorizations are to be
Solicited........................................................... Not Applicable
19. Information if Proxies, Consents or Authorizations are not to be
Solicited, or in an Exchange Offer.................................. Management; Executive Compensation;
The Acquisition; Certain
Transactions; Security Ownership
of Certain Beneficial Owners and
Management
</TABLE>
ii
<PAGE>
PROSPECTUS
CURTICE-BURNS FOODS, INC.
(AS SUCCESSOR BY MERGER TO PF ACQUISITION CORP.)
OFFER TO EXCHANGE ITS
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS OUTSTANDING
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 18, 1995, UNLESS EXTENDED.
Curtice-Burns Foods, Inc., a New York corporation (the 'Company'), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the 'Prospectus') and the accompanying Letter of Transmittal (the
'Letter of Transmittal'), to exchange (the 'Exchange Offer') its 12 1/4% Senior
Subordinated Notes due 2005 (the 'New Notes') for an equal principal amount of
its outstanding 12 1/4% Senior Subordinated Notes due 2005 (the 'Old Notes,'
and, together with the New Notes, the 'Notes'), of which $160.0 million
aggregate principal amount is outstanding. The terms of the New Notes are
identical in all material respects to the terms of the Old Notes, except for
certain transfer restrictions and registration and other rights relating to the
exchange of the Old Notes for New Notes. The New Notes will evidence the same
debt as the Old Notes and will be issued under the same Indenture (as defined
below) as the Indenture governing the Old Notes. See 'The Exchange Offer' and
'Description of the Notes.'
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on January 18, 1995,
unless extended (the 'Expiration Date'). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is subject to certain customary conditions. See 'The Exchange
Offer.' Old Notes may be tendered only in integral multiples of $1,000.
Interest on the Notes is payable on February 1 and August 1 of each year,
commencing February 1, 1995. The Notes are redeemable in whole or in part at the
option of the Company at any time on or after February 1, 2000 at the redemption
prices hereinafter set forth. In addition, at any time on or prior to February
1, 1998, the Company may redeem up to $56.0 million aggregate principal amount
of the Notes, provided that after giving effect to such redemption at least
$104.0 million aggregate principal amount remains outstanding, with the proceeds
of certain offerings of Capital Stock (as defined herein) of the Company or the
proceeds of certain Asset Sales (as defined herein).
Upon a Change of Control (as defined herein), each holder of the Notes has
the right to require the Company to purchase all outstanding Notes then held by
it at a purchase price equal to 101% of the aggregate principal amount of the
Notes, plus accrued and unpaid interest to the date of purchase.
The Notes are general unsecured obligations of the Company and are
subordinate in right of payment to the Company's Senior Indebtedness (as defined
herein). The Notes are unconditionally guaranteed on an unsecured senior
subordinated basis by Pro-Fac Cooperative, Inc., a New York cooperative
corporation ('Pro-Fac'), which owns 100% of the capital stock of the Company,
and certain of the Company's subsidiaries. At November 3, 1994, on a pro forma
basis after giving effect to the Transactions, the total Senior Indebtedness of
the Company would have been $255.4 million. The indenture governing the Notes
permits the incurrence of additional Indebtedness (as defined herein) by
Pro-Fac, the Company and its subsidiaries under certain circumstances.
Prior to this offering, there has been no public market for the New Notes.
The Company does not intend to list the New Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the New Notes will develop. The
Company has agreed to pay the expenses of the Exchange Offer.
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. See 'Plan of Distribution.'
- ----------------------------------------------------------
SEE 'RISK FACTORS' FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE NOTES.
- ----------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- ----------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 16, 1994.
<PAGE>
AVAILABLE INFORMATION
Pro-Fac is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and the rules and
regulations promulgated thereunder, and in accordance therewith files reports
and other information with the Securities and Exchange Commission (the 'SEC' or
the 'Commission'). The Company has filed with the SEC a Registration Statement
on Form S-4 (together with any amendments thereto, the 'Registration Statement')
under the Securities Act of 1933, as amended (the 'Securities Act'), with
respect to the New Notes being offered by this Prospectus. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete. With respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference.
Reports and other information filed by Pro-Fac with the SEC, and the
Registration Statement and the exhibits and schedules thereto, may be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will
also be available for inspection and copying at the regional offices of the SEC
located at 7 World Trade Center, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661.
Copies of such material may also be obtained from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
Upon consummation of the Exchange Offer, the Company will become subject to
the information requirements of the Exchange Act, and in accordance therewith
will be required to file periodic reports and other information with the SEC. In
the event Pro-Fac or the Company is not subject to the reporting requirements of
the Exchange Act at any time following consummation of the Exchange Offer,
Pro-Fac and the Company will be required under the Indenture, dated as of
November 3, 1994, as supplemented by the First Supplemental Indenture, dated
November 3, 1994 (as so supplemented, the 'Indenture'), among the Company,
Pro-Fac, certain subsidiaries of the Company and IBJ Schroder Bank & Trust
Company, as trustee (the 'Trustee'), pursuant to which the Old Notes were, and
the New Notes will be, issued, to continue to file with the SEC, and to furnish
holders of the Notes with (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if Pro-Fac or the Company were required to file such forms,
including a 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' with respect to Pro-Fac or the Company, as the case may
be, and, with respect to the annual information only, a report on the financial
statements therein by Pro-Fac's or the Company's certified independent
accountants, as the case may be, and (ii) all reports that would be required to
be filed with the Commission on Form 8-K if Pro-Fac or the Company were required
to file such reports. In addition, for so long as any of the Old Notes remain
outstanding, each of Pro-Fac and the Company has agreed to make available to any
prospective purchaser of the Old Notes or beneficial owner of the Old Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act.
2
<PAGE>
SUMMARY
The following information is qualified in its entirety by and should be
read in conjunction with the more detailed information and financial statements
appearing elsewhere in this Prospectus. All references in this Prospectus to the
'Company' will include the Company and its subsidiaries. Unless otherwise stated
herein, market share data used throughout this Prospectus was obtained from
industry sources believed by the Company to be reliable. The Company has not
independently verified this market share data and makes no representation as to
its accuracy.
THE COMPANY
GENERAL
Curtice-Burns Foods, Inc. (the 'Company') is a producer and marketer of
processed food products including canned and frozen fruits and vegetables,
canned desserts and condiments, fruit fillings and toppings, canned chilies and
stews, salad dressings, pickles, peanut butter and snack foods. In addition, the
Company manufactures cans which are both utilized by the Company and sold to
third parties. For the fiscal year ended June 25, 1994, on a pro forma basis
after giving effect to the Transactions (as defined herein), the Company would
have had net sales and operating income plus depreciation and amortization of
$749.2 million and $77.0 million (excluding the nonrecurring restructuring gain
of $7.8 million and the $3.5 million charge relating to legal and advisory costs
incurred in connection with the change of control), respectively. See 'Pro Forma
Financial Data of the Company.'
The Company sells products in three principal categories: (i) 'branded'
products, which are sold under the Company's trademarks, (ii) 'private label'
products, which are sold to grocers that in turn use their own brand names on
the products and (iii) 'food service' products, which are sold to food service
institutions, such as restaurants, caterers and bakeries and to schools. In
fiscal 1994, approximately one-half of the Company's net sales were branded and
the remainder were split between private label and food service. The Company's
branded products include 'Comstock,' 'Thank You' and 'Wilderness' fruit fillings
and toppings, 'Nalley' chilies and stews, 'Bernstein's' salad dressings and
'Adams' peanut butter. The Company's private label products include salad
dressings, salsa, fruit fillings and toppings, canned puddings and canned and
frozen vegetables, which are sold to customers such as A&P, Kroger, Safeway,
Topco, Wegman's and Winn-Dixie. The Company's food service products include
salad dressings, pickles, fruit fillings and toppings, canned and frozen
vegetables, canned puddings, cheese sauces and canned and frozen fruit, which
are sold to customers such as Carvel, Disney, Foodservice of America, KFC,
McDonald's and Sysco.
OPERATIONS
The Company operates throughout the United States and in Western Canada
through six operating divisions. Each division (other than the Snack Foods
Group, which has three separate divisional operations) is managed by a division
president and has its own sales, marketing and financial staff.
Comstock Michigan Fruit. The Company's largest division, Comstock Michigan
Fruit ('CMF'), produces products in three principal categories: (i) fruit
fillings and toppings, (ii) aseptically produced products and (iii) canned and
frozen fruits and vegetables. In fiscal 1994, approximately one-third of CMF's
net sales represented branded products, approximately one-third represented
private label products and approximately one-third represented food service
products. CMF's fruit fillings and toppings, sold under the Company's
'Comstock,' 'Thank You' and 'Wilderness' brand names, had a national market
share of approximately 56% in fiscal 1994. CMF's aseptic operations produce
puddings, cheese sauces and dips primarily for sale nationally to food service
outlets. CMF's canned and frozen fruits and vegetables are sold primarily in the
Eastern United States to private label customers. In fiscal 1994, CMF had net
sales and division operating income of $333.4 million and $29.6 million,
respectively.
Nalley's. The Nalley's Fine Foods division ('Nalley's'), which includes
Nalley's Canada Ltd., markets canned meat products such as chilies and stews,
pickles, salad dressings and peanut butter. Nalley's products are primarily
branded, accounting for approximately three-quarters of Nalley's fiscal 1994 net
sales. Several of Nalley's branded products have leading market shares in the
Pacific
3
<PAGE>
Northwest, such as 'Nalley' chili, which had a market share of approximately
57%, and 'Nalley' and 'Farman's' pickles, which together had a market share of
approximately 49%, for the 52-week period ended August 7, 1994. In the Pacific
Northwest, the Company's 'Nalley' and 'Bernstein's' brands of salad dressings
had a combined market share of approximately 17% for the same period. In fiscal
1994, Nalley's had net sales and division operating income of $214.8 million and
$17.6 million, respectively.
Southern Frozen Foods. The Southern Frozen Foods division ('Southern')
specializes in producing and selling a full line of southern vegetables such as
black-eyed peas, okra and leafy greens as well as a line of traditional
vegetables such as corn, peas, squash and green beans. In fiscal 1994, branded
sales represented approximately one-half of total net sales of Southern, food
service sales represented more than a quarter of the total and private label
sales accounted for the remainder. Southern's line of frozen southern
vegetables, which are marketed under the 'McKenzie's' and 'Southern Farms' brand
names, had a leading market share of approximately 26% in the Southeast for the
52-week period ended March 6, 1994. Southern distributes primarily in the
Southeast and South Central portions of the United States. In fiscal 1994,
Southern had net sales and division operating income of $94.3 million and $10.2
million, respectively.
Snack Foods Group. The Company's Snack Foods Group consists of Snyder of
Berlin ('Snyder') and Husman Snack Foods ('Husman'), which produce and
distribute their snack food products primarily in the Mid-Atlantic and Midwest
regions of the country, and Tim's Cascade Chips ('Tim's'), which produces and
distributes kettle-fried chips in the Pacific Northwest. In fiscal 1994, the
Snack Foods Group had net sales and division operating income of $61.2 million
and $2.7 million, respectively.
Brooks Foods. The Company's Brooks Foods division ('Brooks') markets
specialty chili beans, specialty tomato products, barbecue sauce and related
products under the 'Brooks' label. Sales of Brooks products are principally in
the Midwest. In fiscal 1994, Brooks had net sales and division operating income
of $30.0 million and $3.1 million, respectively.
Finger Lakes Packaging. Finger Lakes Packaging ('Finger Lakes')
manufactures various sizes of three-piece sanitary food cans for the Company and
third-party food processors. Approximately two-thirds of the cans manufactured
by Finger Lakes are sold to divisions of the Company, with the remaining
one-third sold to other customers. In fiscal 1994, Finger Lakes had net sales
and operating income (before elimination of intercompany transactions) of $49.9
million and $3.9 million, respectively.
BUSINESS STRATEGY
Achieve Leading Market Shares of Branded Products. The Company believes
that having branded products with strong shares in regional markets provides it
with distinct advantages. Specifically, by achieving a market presence within a
geographic region, the Company believes it is better able to create avenues for
the sale of the Company's other branded products and to assess and meet local
market and consumer needs.
Diversify Through Sales of Branded, Private Label and Food Service
Products. Historically, the Company has focused primarily on its branded
products, many of which have leading market shares in the regions they serve.
However, with the growth of the private label and food service businesses, the
Company has also begun to focus on profitable opportunities in these areas. For
example, Nalley's has been working with grocers on programs for private label
salsa, soups and salad dressings with 'good,' 'better' and 'best' categories.
This concept offers the grocer a three-tiered product selection and provides the
Company with a means to customize products and programs specifically for
consumer desires. The Company is currently reviewing the expansion of the
'good,' 'better' and 'best' program to many other products. In addition, with
the growth of the food service sector, the Company has pursued food service
opportunities for its fruit fillings and toppings, puddings and cheese sauces.
Future food service growth is planned for other products such as breaded
vegetables and salad dressings.
Engage in Selective National Expansion Program. Certain of the Company's
products have achieved significant market shares within specific geographic
regions, and the Company believes substantial opportunities exist to distribute
these products on a national basis. The Company recently began selling its
'Bernstein's' salad dressing, first introduced in California, in Arizona,
Colorado and Upstate New
4
<PAGE>
York. Other products under consideration for national expansion include Mexican
specialty items, such as chili and salsa, other salad dressings and canned
soups.
Continuous Focus on Cost Reduction. Through a corporate wide program of
information management, selected capital expenditures and individual division
initiatives, the Company continuously seeks to reduce costs and improve
efficiency. During fiscal 1993, the Company initiated production consolidation
efforts involving the closing of three plants located in Michigan, Colorado and
New York. Further consolidations are being explored to reduce operational
redundancies. In the area of purchasing, by maximizing market leverage through
collaborative and cooperative purchasing activities throughout the Company,
significant savings have been achieved. As a result of the Company's cost
reduction activities, the Company's operating income margin from ongoing
businesses improved from 6.0% to 6.5% to 6.9% in each of fiscal 1992, 1993 and
1994, respectively.
PRO-FAC
On November 3, 1994 the Company was acquired by Pro-Fac, an agricultural
cooperative formed under New York State law to process and market crops grown by
its members. Only growers of crops marketed through Pro-Fac, or associations of
such growers, can become members of Pro-Fac. A grower becomes a member of
Pro-Fac through the purchase of common stock, which obligates the grower to
supply, and Pro-Fac to purchase, crops. Pro-Fac's approximately 700 members are
growers, or associations of growers, located principally in California, Florida,
Georgia, Illinois, Iowa, Michigan, Nebraska, New York, North Dakota, Oregon,
Pennsylvania and Washington. Crops grown by Pro-Fac members and purchased by
Pro-Fac include fruits (cherries, apples, blueberries, peaches and plums),
vegetables (snap beans, beets, cucumbers, peas, sweet corn, carrots, cabbage,
squash, asparagus, potatoes, dry beans, southern peas, turnip roots and leafy
greens) and popcorn. All of the crops supplied to Pro-Fac by its members are
sold to the Company for processing.
Pro-Fac and the Company were established together in the early 1960s and
before Pro-Fac's recent acquisition of the Company, had a long-standing
contractual relationship under the Integrated Agreement between Pro-Fac and the
Company (the 'Integrated Agreement') and similar predecessor agreements. The
Integrated Agreement, which has been superseded by the Marketing and
Facilitation Agreement, dated as of November 3, 1994, between Pro-Fac and the
Company (the 'Pro-Fac Marketing Agreement'), principally governed four
arrangements between Pro-Fac and the Company: facilities financing, operations
financing, marketing and management. Pro-Fac continues to market its members'
crops and provide other accommodations to the Company, and the Company continues
to provide management services to Pro-Fac, pursuant to the Pro-Fac Marketing
Agreement.
THE ACQUISITION
GENERAL
The proceeds of the Old Notes, together with the proceeds of borrowings
under a new credit facility (the 'New Credit Agreement') with Springfield Bank
for Cooperatives (the 'Bank'), were used to pay the purchase price and related
fees and expenses paid in connection with the acquisition of the Company by
Pro-Fac and to repay the existing bank loans of Pro-Fac and the Company. The
Acquisition was effected through the Agreement and Plan of Merger dated as of
September 27, 1994 among PF Acquisition Corp., a New York corporation ('PFAC'),
Pro-Fac and the Company (the 'Merger Agreement'). Pursuant to the Merger
Agreement, (i) PFAC commenced a tender offer (the 'Tender Offer') for all of the
outstanding shares of Class A and Class B Common Stock, $.99 par value
(collectively, the 'Shares'), of the Company, (ii) on November 3, 1994, PFAC
accepted for payment and paid for Shares validly tendered and not withdrawn at a
price per Share of $19.00 in cash, (iii) substantially simultaneously with the
acceptance of Shares for payment pursuant to the Tender Offer, PFAC merged with
and into the Company, with the Company continuing as the surviving corporation
(the 'Merger'), (iv) any Shares (except Shares owned by Pro-Fac or its
subsidiaries or held by the Company or its subsidiaries (which were cancelled)
or Shares as to which stockholders of the Company may exercise appraisal rights
provided in connection with the Merger) not tendered and accepted for payment
pursuant to the Tender Offer were converted in the Merger into the right to
receive from the
5
<PAGE>
Company $19.00 per Share in cash, and (v) each issued and outstanding share of
the capital stock of PFAC, all of which were owned by Pro-Fac, was converted
into one share of common stock of the Company. As a result of the Merger, the
Company is a wholly-owned subsidiary of Pro-Fac and has assumed all of the
obligations and liabilities of PFAC, including PFAC's obligations and
liabilities under the Old Notes.
The Acquisition, the contribution of certain assets by Pro-Fac to PFAC, the
repurchase or repayment of existing indebtedness of Pro-Fac and the Company, the
offering of the Old Notes (the 'Old Notes Offering') and the execution of, and
initial borrowings under, the New Credit Agreement entered into by Pro-Fac, PFAC
and the Bank are referred to herein collectively as the 'Transactions.'
The Old Notes were sold in a private placement pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. PFAC structured the Old
Notes Offering as a private placement to be followed by an Exchange Offer of New
Notes for Old Notes in order to raise funds on a more expeditious basis than
would have been possible had the initial sale been pursuant to an offering
registered under the Securities Act. Such funds were required in order to
consummate the Acquisition in a timely manner. The purchasers of the Old Notes,
as a condition to such purchase, requested that the Company agree to commence
the Exchange Offer following the Old Notes Offering.
SOURCES AND USES OF FUNDS
The sources and uses of funds necessary to consummate the Transactions were
as follows:
<TABLE>
<CAPTION>
AMOUNT(1)
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Borrowings under New Credit Agreement(2):
Acquisition Facility:
Term Loan........................................................... $ 80.0
Term Loan Facility.................................................. 97.5
Seasonal Facility........................................................ 72.6
Sale of Notes................................................................. 160.0
Capital contribution by Pro-Fac(3)............................................ 134.6
-------
Total sources of funds.............................................. 544.7
-------
-------
USES OF FUNDS:
Purchase of the Company's Class A and Class B Common Stock(4)................. $ 166.8
Repayment of existing debt (other than seasonal debt) and other
obligations(5)............................................................... 276.4
Repayment of existing seasonal debt........................................... 84.1
Fees, discounts and commissions(6)............................................ 17.4
-------
Total uses of funds................................................. $ 544.7
-------
-------
</TABLE>
- ------------
(1) Sources and uses of funds are based on (i) the borrowings of bank debt that
were outstanding under the Company's existing credit facilities on November
3, 1994, the date that the Transactions were consummated (the 'Closing
Date'), (ii) the amounts due from the Company to Pro-Fac that were
outstanding on the Closing Date, (iii) the purchase price paid for the
Company in connection with the Acquisition and (iv) the fees, discounts and
commissions paid on or subsequent to the Closing Date in connection with the
Transactions.
(2) In connection with the Acquisition, PFAC entered into the New Credit
Agreement with the Bank, pursuant to which the Bank agreed to provide loans
to PFAC of up to $200.0 million to finance the Acquisition, to refinance
certain existing indebtedness of Pro-Fac and the Company and to pay fees and
expenses related to the Acquisition (the 'Acquisition Facility'). On
completion of the Merger,
(footnotes continued on next page)
6
<PAGE>
(footnotes continued from previous page)
the obligations of PFAC under the New Credit Agreement became obligations of
the Company. The Acquisition Facility consists of (i) an $80.0 million term
loan (the 'Term Loan'), which is fully drawn, payable in 20 equal
semi-annual installments and (ii) a $120.0 million term loan facility (the
'Term Loan Facility'), approximately $97.5 million of which has been or will
be drawn in connection with the Transactions, payable during the first five
years in annual installments each in an amount equal to the 'annual cash
sweep' for the preceding fiscal year as defined in the New Credit Agreement,
and payable thereafter in ten equal semi-annual installments. Amounts drawn
under the Acquisition Facility include $155.2 million to repay indebtedness
due from the Company to Pro-Fac, which Pro-Fac, in turn, applied to repay an
equal amount of outstanding debt plus accrued and unpaid interest due to the
Bank. The New Credit Agreement also provides the Company with seasonal
financing of up to $86.0 million (the 'Seasonal Facility'), which has an 18
month term, and a $10.0 million letter of credit facility, which has a 12
month term (the 'Letter of Credit Facility'). On the Closing Date, $72.6
million was drawn under the Seasonal Facility to repay outstanding seasonal
debt, together with accrued and unpaid interest and additional capital
investment, due from Pro-Fac to the Bank and outstanding seasonal debt,
together with accrued and unpaid interest and fees, due from the Company to
a syndicate of commercial lenders led by The Chase Manhattan Bank, N.A. The
Company estimates that its peak borrowings under the Seasonal Facility
during fiscal 1995 will not increase significantly over the $72.6 million
drawn on the Closing Date. In fiscal 1994, the Company's borrowings under
its existing seasonal line of credit peaked at approximately $81.0 million
and the average amount outstanding during such year was approximately $51.5
million. See 'Description of Certain Indebtedness -- New Credit Agreement.'
(3) In connection with the Acquisition, Pro-Fac made a $134.6 million capital
contribution to the Company which consisted of the cancellation of $110.0
million of indebtedness and capital lease obligations due to Pro-Fac by the
Company (including the cancellation of certain accounts payable due to
Pro-Fac by the Company, in the amount of $5.1 million) and the cancellation
of $24.6 million of obligations due to Pro-Fac from the Company as a result
of Pro-Fac's transfer to the Company of (i) its investment in the Bank in
the amount of $21.3 million and (ii) certain legal and advisory costs
incurred by Pro-Fac in connection with the Transactions in the amount of
$3.3 million. See 'Certain Transactions -- Equity Ownership in Springfield
Bank for Cooperatives.'
(4) The purchase price for the Shares consists of $165.1 million for the
8,690,005 shares outstanding as of the Closing Date at $19.00 per share plus
$1.7 million representing the aggregate payments being made by the Company
in connection with the cancellation of certain options to purchase shares of
the Company exercisable at a price less than $19.00 per share.
(5) Includes the cancellation of (i) $246.7 million of indebtedness and capital
lease obligations due to Pro-Fac by the Company, (ii) certain accounts
payable due to Pro-Fac by the Company , in the amount of $5.1 million, and
(iii) $24.6 million of obligations due to Pro-Fac by the Company as a result
of the transfer by Pro-Fac to the Company of its (a) $21.3 million
investment in the Bank and (b) $3.3 million of legal and advisory costs
incurred in connection with the Transactions. See 'Certain
Transactions -- Equity Ownership in Springfield Bank for Cooperatives.'
(6) $17.4 million in fees, discounts and commissions were paid on or subsequent
to the Closing Date. This amount excludes amounts paid for similar charges
prior to the Closing Date.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Registration Rights Agreement...... The Old Notes were sold by the Company on November 3, 1994 to institutional
investors. In connection therewith, the Company executed and delivered for
the benefit of the holders of the Old Notes a registration rights agreement
(the 'Registration Rights Agreement') providing, among other things, for
the Exchange Offer.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
The Exchange Offer................. New Notes are being offered in exchange for a like principal amount of Old
Notes. As of the date hereof, $160.0 million aggregate principal amount of
Old Notes are outstanding. The Company will issue the New Notes to holders
promptly following the Expiration Date. See 'Risk Factors -- Consequences
of Failure to Exchange.'
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by any holder
thereof (other than any such holder which is an 'affiliate' of the Company
or any Guarantor within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the
ordinary course of such holder's business and that such holder is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, the distribution of such
New Notes. Each broker or dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by
such broker or dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See 'Plan of Distribution.'
Expiration Date.................... 5:00 p.m., New York City time, on January 18, 1995, unless the Exchange
Offer is extended, in which case the term 'Expiration Date' means the
latest date and time to which the Exchange Offer is extended.
Conditions to the Exchange Offer... The Exchange Offer is subject to certain customary conditions, which may be
waived by the Company. See 'The Exchange Offer -- Conditions.'
Procedures for Tendering Old
Notes............................ Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such facsimile,
together with the Old Notes and any other required documentation to the
exchange agent (the 'Exchange Agent') at the address set forth herein. Old
Notes may be physically delivered, but physical delivery is not required if
a confirmation of a book-entry of such Old Notes to the Exchange Agent's
account at The Depository Trust Company ('DTC' or the 'Depositary') is
delivered in a timely fashion. By executing the Letter of Transmittal, each
holder will represent to the Company that, among other things, the New
Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether
or not such person is the holder, that neither the holder nor any such
other person is engaged in, or intends to engage in, or has an arrangement
or understanding with any person to participate in, the distribution of
such New Notes and that neither the holder nor any such other person is an
'affiliate,' as defined under Rule 405 of the Securities Act, of the
Company or any Guarantor. Each broker or dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker or dealer as a result of market-making activities
or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See 'The
Exchange Offer -- Procedures for Tendering' and 'Plan of Distribution.'
Special Procedures for Beneficial
Owners........................... Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
such beneficial owner's behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in
such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time. See 'The Exchange Offer -- Procedures for Tendering.'
Guaranteed Delivery Procedures..... Holders of Old Notes who wish to tender their Old Notes and whose Old Notes
are not entirely available or who cannot deliver their Old Notes, the
Letter of Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date must tender
their Old Notes according to the guaranteed delivery procedures set forth
in 'The Exchange Offer -- Guaranteed Delivery Procedures.'
Withdrawal Rights.................. Tenders may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. See 'The Exchange Offer -- Withdrawal of
Tenders.'
Acceptance of Old Notes and
Delivery of New Notes............ The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued pursuant to the Exchange
Offer will be delivered promptly following the Expiration Date. See 'The
Exchange Offer -- Terms of the Exchange Offer.'
Exchange Agent..................... IBJ Schroder Bank & Trust Company is serving as Exchange Agent in
connection with the Exchange Offer. See 'The Exchange Offer -- Exchange
Agent.'
</TABLE>
TERMS OF NOTES
The Exchange Offer applies to $160.0 million aggregate principal amount of
Old Notes. The terms of the New Notes are identical in all material respects to
the Old Notes, except for certain transfer restrictions and registration and
other rights relating to the exchange of the Old Notes for New Notes. The New
Notes will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture under which both the Old Notes were, and the New Notes
will be, issued. See 'Description of the Notes.'
<TABLE>
<S> <C>
The New Notes....................... Up to $160,000,000 in aggregate principal amount of 12 1/4% Senior
Subordinated Notes due 2005.
Interest Payment Dates.............. February 1 and August 1, commencing August 1, 1995.
Maturity Date....................... February 1, 2005.
Rank................................ The Notes are general unsecured obligations of the Company and are
subordinate in right of payment to the Company's existing and future Senior
Indebtedness (as defined herein). At November 3, 1994, on a pro forma basis
after giving effect to the Transactions, the total Senior Indebtedness of
the Company would have been $255.4 million.
Guarantees.......................... The Notes are unconditionally guaranteed by Pro-Fac and Curtice-Burns
Express, Inc., Curtice Burns Meat Snacks, Inc., Finger Lakes Packaging
Company, Inc., Husman Snack Foods Company, Inc., Kennedy Endeavors,
Incorporated, Nalley's Canada Limited, Quality Snax of Maryland, Inc.,
Seasonal Employers, Inc. and Pro-Fac Holding Company of Iowa, Inc.
(collectively the 'Subsidiary Guarantors' and together, with Pro-Fac, the
'Guarantors'). The guarantees of Pro-Fac and the Subsidiary Guarantors
(collectively, the 'Guarantees') are unsecured obligations of the
Guarantors and are subordinate in right of payment to the existing and
future Senior Indebtedness of such Guarantors.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Optional Redemption................. The Notes are redeemable in whole or in part at the option of the Company
at any time on or after February 1, 2000 at the redemption prices
hereinafter set forth. In addition, at any time on or prior to February 1,
1998, the Company may redeem up to $56.0 million aggregate principal amount
of the Notes, provided that after giving effect to such redemption at least
$104.0 million aggregate principal amount remains outstanding, with the
proceeds of certain offerings of Capital Stock (as defined herein) of the
Company or the proceeds of certain Asset Sales (as defined herein). The
Notes are not otherwise redeemable at the option of the Company.
Offers to Purchase.................. In the event of a Change of Control (as defined herein), each holder of
Notes has the right to require the Company to purchase all of the Notes
then held by it at a purchase price equal to 101% of the aggregate
principal amount of the Notes, plus accrued and unpaid interest to the date
of purchase. In addition, under certain circumstances, the Company will be
required to offer to purchase Notes with the proceeds of certain Asset
Sales. For more complete information regarding mandatory offers to purchase
the Notes, see 'Description of the Notes.'
Certain Covenants................... The Indenture contains certain covenants that, among other things, limit
the incurrence of additional indebtedness by the Company and its
Subsidiaries (as defined herein); restrict the payment of dividends by the
Company; restrict the repurchase of capital stock or subordinated
indebtedness by the Company and its Subsidiaries; limit the ability of the
Company and its Subsidiaries to enter into sale and leaseback transactions;
limit the creation of certain liens by the Company and the Subsidiaries;
limit the Company's creation of restrictions on the ability of Subsidiaries
to pay dividends or make other payments to the Company; and limit the
ability of the Company or its Subsidiaries to enter into certain
transactions with affiliates or merge, consolidate or transfer
substantially all of their assets. See 'Description of the Notes -- Certain
Covenants.'
Use of Proceeds..................... There will be no proceeds to the Company from any exchange pursuant to the
Exchange Offer.
</TABLE>
RISK FACTORS
See 'Risk Factors' for a discussion of certain factors that investors
should consider before exchanging Old Notes for New Notes in the Exchange Offer.
10
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND
OPERATING DATA OF THE COMPANY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------
JUNE 25, 1994
----------------------
JUNE 26, 1992 JUNE 26, 1993 ACTUAL PRO FORMA(1)
-------------- -------------- ------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $896.9 $878.6 $829.1 $749.2
Cost of sales.................. 652.3 632.6 592.6 534.3
------ ------ ------- ------
Gross profit............... 244.6 246.0 236.5 214.9
Selling, administrative and
general...................... 201.4 207.1 186.9 159.3
Amortization of unallocated
excess of purchase cost over
net assets acquired.......... -- -- -- 4.7
Restructuring including net
loss (gain) from division
disposals(2)................. -- 61.0 (7.8) --
Change in control
expenses(3).................. -- -- 3.5 --
(Gain) on assets resulting from
fire claim(4)................ -- -- -- --
------ ------ ------- ------
Operating income (loss).... 43.2 (22.1) 53.9 50.9
Total interest expense......... 22.8 19.6 18.2 37.2
------ ------ ------- ------
Pre-tax earnings (loss)
before dividing with Pro-
Fac...................... 20.4 (41.7) 35.7 13.7
Pro-Fac share of earnings
(loss)....................... 9.5 (21.8) 16.9 6.9
------ ------ ------- ------
Income (loss) before
taxes.................... 10.9 (19.9) 18.8 6.8
Provision for taxes............ 4.8 3.9 8.7 3.8
------ ------ ------- ------
Net income (loss).......... $6.1 $(23.8) $10.1 $3.0
------ ------ ------- ------
------ ------ ------- ------
BALANCE SHEET DATA:
Working capital................ $101.7 $100.4 $104.0
Total assets................... 529.7 493.7 446.9
Total debt(5).................. 357.7 316.3 271.6
Shareholders' equity........... 104.5 75.7 80.9
SELECTED OTHER DATA:
Adjusted EBITDA(6)............. $73.1 $69.4 $75.3 $77.0
Depreciation and amortization
of fixed assets.............. 24.4 25.4 22.3 19.7
Amortization of
intangibles(7)............... 5.5 5.1 3.4 6.4
Capital expenditures(8)........ 16.2 21.5 19.5 19.5
SELECTED RATIOS:
Adjusted EBITDA/total interest
expense...................... 3.21x 3.54x 4.14x 2.07x
Adjusted EBITDA less capital
expenditures/total interest
expense...................... 2.50x 2.44x 3.07x 1.55x
Total debt/Adjusted EBITDA..... 4.89x 4.56x 3.61x 4.46x
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
SEPTEMBER 24, 1994
----------------------
SEPTEMBER 25, 1993 ACTUAL PRO FORMA(1)
------------------- ------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $210.1 $176.8 $174.5
Cost of sales.................. 153.1 126.8 125.3
------ ------- ------
Gross profit............... 57.0 50.0 49.2
Selling, administrative and
general...................... 46.3 38.0 36.1
Amortization of unallocated
excess of purchase cost over
net assets acquired.......... -- -- 1.2
Restructuring including net
loss (gain) from division
disposals(2)................. -- 8.4 --
Change in control
expenses(3).................. -- 1.8 --
(Gain) on assets resulting from
fire claim(4)................ -- (6.5) --
------ ------- ------
Operating income (loss).... 10.7 8.3 11.9
Total interest expense......... 4.8 5.1 9.9
------ ------- ------
Pre-tax earnings (loss)
before dividing with Pro-
Fac...................... 5.9 3.2 2.0
Pro-Fac share of earnings
(loss)....................... 2.8 1.5 1.0
------ ------- ------
Income (loss) before
taxes.................... 3.1 1.7 1.0
Provision for taxes............ 1.9 1.4 0.6
------ ------- ------
Net income (loss).......... $1.2 $0.3 $0.4
------ ------- ------
------ ------- ------
BALANCE SHEET DATA:
Working capital................ $101.8 $125.8
Total assets................... 524.4 681.4
Total debt(5).................. 351.1 427.8
Shareholders' equity........... 79.9 134.6
SELECTED OTHER DATA:
Adjusted EBITDA(6)............. $17.2 $17.5 $18.1
Depreciation and amortization
of fixed assets.............. 5.7 4.7 4.6
Amortization of
intangibles(7)............... 0.8 0.8 1.6
Capital expenditures(8)........ 4.5 5.4 5.4
SELECTED RATIOS:
Adjusted EBITDA/total interest
expense...................... 3.58x 3.43x 1.83x
Adjusted EBITDA less capital
expenditures/total interest
expense...................... 2.65x 2.37x 1.28x
Total debt/Adjusted EBITDA..... 5.56x(9) 5.02x(9) 5.91(9)
</TABLE>
- ------------
(1) For information regarding the pro forma data, see 'Pro Forma Financial Data
of the Company.'
(2) In fiscal 1993, the Company incurred restructuring charges of $61.0 million
(before dividing such charges with Pro-Fac and before taxes), which included
the loss incurred on the sale of the Lucca frozen entree business,
anticipated losses on the sale of the meat snacks and Hiland potato chips
businesses, and other costs anticipated in conjunction with the
restructuring program. Virtually all of this charge was a revaluation of
assets rather than cash expense. During fiscal 1994, the Company sold the
oats operations of National Oats realizing a gain of $10.9 million (before
dividing such gain with Pro-Fac and before taxes), which was offset by a
charge of $3.1 million (before dividing such charge with Pro-Fac and before
taxes) to adjust previous estimates recorded regarding these restructuring
activities. During the first quarter of fiscal 1995, the Company incurred a
restructuring
(footnotes continued on next page)
11
<PAGE>
(footnotes continued from previous page)
charge of $8.4 million (before dividing such charge with Pro-Fac and before
taxes) to reflect the estimated impact of the potential sale of certain
assets of the Nalley's U.S. Chips and Snacks operation and other expenses
relating to the disposal of this operation.
(3) In fiscal 1994 and the first quarter of fiscal 1995 the Company expensed
$3.5 million and $1.8 million, respectively, in each case before dividing
such charges with Pro-Fac and before taxes, for legal, accounting,
investment banking and other expenses in connection with the change of
control issue. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company.'
(4) In the first quarter of fiscal 1995, the Company realized a gain of $6.5
million (before dividing such gain with Pro-Fac and before taxes)
representing the insurance proceeds for the replacement value in excess of
the depreciated value of the building and equipment destroyed by fire on
July 7, 1994 at the Southern division.
(5) Total debt is defined as the sum of (i) current and long-term debt due to
Pro-Fac, (ii) current and long-term debt due to others, including notes
payable and borrowings under the Seasonal Facility, if any, (iii) current
and long-term capital lease obligations, (iv) other amounts due to Pro-Fac
and (v) the finance receivable relating to intangibles owed to Pro-Fac,
which was $53.4 million, $26.5 million, $24.9 million and $24.5 million at
June 26, 1992, June 26, 1993, June 25, 1994 and September 24, 1994,
respectively, and would have been zero at September 24, 1994 on a pro forma
basis, after giving effect to the Transactions.
(6) Adjusted EBITDA is defined as the sum of (i) pre-tax earnings (loss) before
dividing with Pro-Fac, (ii) total interest expense, (iii) depreciation and
amortization of fixed assets and (iv) amortization of intangibles. Adjusted
EBITDA excludes the nonrecurring restructuring charge of $61.0 million in
fiscal 1993, the nonrecurring restructuring gain of $7.8 million in fiscal
1994, the nonrecurring restructuring charge of $8.4 million and the
nonrecurring gain on assets resulting from the fire claim of $6.5 million in
the first quarter of fiscal 1995 and the $3.5 million and $1.8 million
charges in fiscal 1994 and the first quarter of fiscal 1995, respectively,
relating to legal and advisory costs incurred in connection with the change
of control. Adjusted EBITDA is presented not as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles), but rather to provide
additional information related to the debt servicing ability of the Company.
(7) Amortization of intangibles is defined as the sum of amortization of
goodwill and intangibles, including the amount of the finance receivable
relating to goodwill recognized by Pro-Fac. Through the provisions of the
earnings split, amortization of intangibles has been recognized equally
between the Company and Pro-Fac in the amounts of $2.8 million, $2.6
million, $1.7 million, $0.4 million and $0.4 million for fiscal 1992, 1993
and 1994, the first quarter of fiscal 1994 and the first quarter of fiscal
1995, respectively.
(8) Includes capital expenditures of the Company of $0.6 million, $8.4 million,
$9.5 million, $4.5 million and $4.5 million for fiscal 1992, 1993 and 1994,
the first quarter of fiscal 1994 and the first quarter of fiscal 1995,
respectively, and capital expenditures of Pro-Fac of $15.6 million, $13.1
million, $10.0 million, $0.0 million and $0.9 million for fiscal 1992, 1993
and 1994, the first quarter of fiscal 1994 and the first quarter of fiscal
1995, respectively. Historically, under the Integrated Agreement, the
Company financed its purchase of assets through Pro-Fac.
(9) Adjusted EBITDA for the three months ended September 25, 1993 and September
24, 1994 has been annualized in computing this ratio and therefore does not
take into account seasonal factors that affect Adjusted EBITDA.
12
<PAGE>
RISK FACTORS
Holders of the Old Notes should consider carefully the specific risk
factors set forth below as well as the other information contained in this
Prospectus before deciding to tender their Old Notes in the Exchange Offer.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged, and such leverage may increase as a result
of future borrowings to fund capital expenditures, working capital needs or for
other general corporate purposes. At November 3, 1994, on a pro forma basis,
after giving effect to the Transactions, the Company would have had total
indebtedness of $421.9 million and shareholders' equity of $134.6 million, and
the Company's ratio of total debt to total shareholders' equity would have been
3.1 to 1.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain financing in the future for working capital, capital
expenditures and general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of principal of and interest on its indebtedness; and (iii) a high
degree of leverage may make the Company more vulnerable to economic downturns
and may limit its ability to withstand competitive pressures.
Based on current operations, the Company expects that it will be able to
service the interest and principal obligations on its indebtedness as well as
its working capital needs and to fund its capital expenditures and other
operating expenses out of cash flow from operations and available borrowings
under the New Credit Agreement. However, the Company may be unable to pay
principal when due on the Notes unless it is able to refinance the Notes. The
Company's future operating performance as well as its ability to service or
refinance the Notes and to extend or refinance the New Credit Agreement will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control. There can be no
assurance that the Company's future operating performance and borrowing
availability under the New Credit Agreement will be sufficient to service its
indebtedness or that the Company will be able to repay or refinance the Notes in
whole or in part.
For additional information on the Company's indebtedness, see
'Capitalization,' 'Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company -- Liquidity and Capital Resources,'
'Description of Certain Indebtedness -- New Credit Agreement' and 'Description
of the Notes.'
RELATIONSHIP WITH PRO-FAC; POTENTIAL CONFLICT OF INTEREST
Pro-Fac is an agricultural cooperative of over 700 members formed for the
purpose of developing and maintaining markets for its members' crops. The
principal reason for the purchase by Pro-Fac of the Company was to provide a
market for its members' crops, although the members are also seeking a favorable
return on their equity investment in Pro-Fac and the Company. The members'
interest in marketing their crops will at times conflict with the interest of
the Company in maximizing profits. This conflict may have an adverse effect on
the Company's ability to pay interest and principal on the Notes.
The Company has entered into the Pro-Fac Marketing Agreement with Pro-Fac
for the purchase of crops grown by Pro-Fac's members. The Pro-Fac Marketing
Agreement is the successor to the Integrated Agreement and other predecessor
marketing agreements between the Company and Pro-Fac, which have been
continuously in effect since the formation of these companies in the early
1960s. Under the Pro-Fac Marketing Agreement, the Company purchases crops from
Pro-Fac at the Commercial Market Value of those crops, which is generally
defined as the weighted average of the prices paid by other 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 market areas.
Although Commercial Market Value is intended to be no more than the fair market
value of the crops purchased by the Company, it may be more or less than the
price the Company would pay in the open market in the absence of the Pro-Fac
Marketing Agreement. Under the predecessor agreements to the Pro-Fac Marketing
Agreement, the Company paid Pro-Fac $64.2 million, $59.8 million and $59.2
million as Commercial Market Value for crops purchased from Pro-Fac in fiscal
1992, 1993 and 1994, respectively.
13
<PAGE>
The crops purchased by the Company from Pro-Fac represented approximately 65%,
60% and 65% of all raw agricultural crops purchased by the Company in fiscal
1992, 1993 and 1994, respectively.
Commercial Market Value for each crop has in the past been and will
continue to be determined by a joint committee of the Boards of Directors of
Pro-Fac and the Company. The joint committee will be comprised of the Chief
Executive Officer of the Company and an equal number of Pro-Fac directors and
Disinterested Directors (as defined herein). The Pro-Fac Marketing Agreement
requires a majority of the Disinterested Directors to approve the recommendation
of the joint committee. The volume and type of crops to be purchased by the
Company under the Pro-Fac Marketing Agreement are determined pursuant to its
annual profit plan, which requires the approval of a majority of the
Disinterested Directors.
In addition to the arrangements between Pro-Fac and the Company governed by
the Pro-Fac Marketing Agreement, as owner of the Company and through its
representatives on the Company's Board of Directors, Pro-Fac has significant
influence over the operations of the Company, including, without limitation, the
acquisition and disposition of assets and the making of capital expenditures.
However, Pro-Fac has established a management structure for the Company
providing for a Board of Directors of the Company consisting of one management
director, Pro-Fac Directors (as defined herein) and Disinterested Directors. The
Indenture provides that there will be a Change of Control if, for a period of
120 consecutive days, the number of Disinterested Directors on the Board of
Directors of the Company is less than the greater of (i) two and (ii) the number
of directors of the Company who are Pro-Fac Directors. See 'Description of the
Notes -- Repurchase at the Option of the Holders.' The initial management
director is Roy A. Myers, who is the new Chief Executive Officer of the Company.
See 'Management -- Directors and Executive Officers of the Company.' There can
be no assurance that the management and Board structure will eliminate the
conflict of interest described above.
For additional information on the Pro-Fac Marketing Agreement, see 'Certain
Transactions -- Pro-Fac Marketing Agreement.'
GENERAL RISKS OF THE FOOD INDUSTRY; COMPETITION
Food processors are subject to the risks of adverse changes in general
economic conditions; evolving consumer preferences and nutritional and
health-related concerns; changes in food distribution channels and increasing
buying power of large supermarket chains and other retail outlets that tend to
resist price increases; federal, state and local food processing controls;
consumer product liability claims; and risks of product tampering.
All products of the Company, particularly branded products, compete with
those of national and major regional food processors under highly competitive
conditions. Many of these manufacturers have substantially greater resources
than the Company. There can be no assurance that the Company will be able to
continue to compete successfully or that competition will not have a material
adverse effect on the Company's business or financial results in the future.
SEASONALITY; RAW MATERIALS
The Company's sales are not highly seasonal, although some products have
higher sales volumes in the cool weather months (such as canned fruits and
vegetables, chilies and fruit fillings and toppings) and others have higher
sales volumes in the warm weather months (such as potato chips and condiments).
Because many of the raw materials processed by the Company are agricultural
crops, production of products using these crops is predominantly seasonal. As a
result, the Company needs access to working capital financing to meet its
production requirements during these periods. In fiscal 1994, the Company's
borrowings under its seasonal line peaked at approximately $81.0 million and the
average amount outstanding during such year was approximately $51.5 million.
Although management believes that the availability under the New Credit
Agreement together with cash generated from operations will be adequate to
provide for its cash requirements, there can be no assurance that such increased
availability together with cash generated by operations will continue to be
adequate in the future. See
14
<PAGE>
'Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company -- Liquidity and Capital Resources.'
The canned and frozen vegetable portion of the Company's business can be
positively or negatively affected by weather conditions nationally and the
resulting impact on crop yields. Favorable weather conditions can produce high
crop yields and an oversupply situation in a given year. This oversupply
typically will result in depressed selling prices and reduced profitability to
the Company on the inventory produced from that year's crops. Excessive rain or
drought conditions can produce low crop yields and a shortage situation. This
shortage typically will result in higher selling prices and increased
profitability to the Company. While the national supply situation controls the
pricing, the supply can differ regionally because of variations in weather. The
1993 floods in the Midwest and the drought in the South increased prices of
vegetable products, even though the crops in the Company's growing areas were at
normal levels.
Except for cans manufactured by its subsidiary, Finger Lakes, the Company
purchases all of its requirements for nonagricultural products, including
containers, on the open market. Although the Company has not experienced any
difficulty in obtaining adequate supplies of such items, occasional periods of
short supply of certain raw materials may occur.
ENVIRONMENTAL
The disposal of solid and liquid waste material resulting from the
preparation and processing of foods and the emission of odors inherent in the
heating of foods during preparation are subject to various federal, state, and
local laws and regulations relating to the protection of the environment. Such
laws and regulations have had an important effect on the food processing
industry as a whole, requiring substantially all firms in the industry to incur
material expenditures for modification of existing processing facilities and for
construction of new waste treatment facilities. See 'Business -- Environmental
Matters.'
The Company cannot predict what environmental legislation or regulations
will be enacted in the future, how existing or future laws or regulations will
be administered or interpreted or what environmental conditions may be found to
exist. Enactment of more stringent laws or regulations or more strict
interpretation of existing laws and regulations may require additional
expenditures by the Company, some of which could be material.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The New Credit Agreement and the Indenture contain covenants imposing
certain operating and financial restrictions on the Company. These covenants,
among other things, limit the incurrence or maintenance of additional
indebtedness by the Company and its Subsidiaries and the incurrence or
maintenance of liens, restrict the payment by the Company of dividends or other
distributions, the redemption of capital stock of the Company and its
Subsidiaries and the making of other restricted payments, and restrict
transactions with affiliates, the sale or disposal of assets, and the merger,
consolidation or sale of all or substantially all of the assets of the Company.
In addition, under its guarantee of the indebtedness under the New Credit
Agreement (the 'Pro-Fac Bank Guarantee'), Pro-Fac is required to maintain
specified financial ratios and levels, including those relating to minimum
interest and fixed charge coverage, net worth and maximum leverage, and Pro-Fac
is subject to certain other restrictions.
The ability of the Company to comply with certain provisions in the New
Credit Agreement and the Indenture and of Pro-Fac to comply with the Pro-Fac
Bank Guarantee will depend on their future performance, which will, in part, be
subject to prevailing economic, financial and business factors beyond the
control of the Company and Pro-Fac. Although each of the Company and Pro-Fac
expects that it will be able to comply with such provisions, there can be no
assurance that it will be able to do so.
The failure of the Company to comply with certain provisions in the
Indenture or the New Credit Agreement or of Pro-Fac to comply with certain
provisions of the Pro-Fac Bank Guarantee would result in a default under the New
Credit Agreement and the Pro-Fac Bank Guarantee. Upon the
15
<PAGE>
occurrence of a default under the New Credit Agreement or the Pro-Fac Bank
Guarantee, the Bank could terminate its loan commitments, including its
commitment under the Seasonal Facility. Because the Company is highly dependent
on the Bank for liquidity, the termination of the Seasonal Facility could
significantly impair the operations of the Company. In addition, upon the
occurrence of a default under the New Credit Agreement or the Pro-Fac Bank
Guarantee, the Bank could accelerate its outstanding loans, foreclose upon its
collateral or exercise any other right or remedy available under the New Credit
Agreement or the Pro-Fac Bank Guarantee, or in lieu thereof, the Bank could
waive such default or, with the consent of Pro-Fac, the Company and the
Subsidiary Guarantors, as the case may be, amend the terms and provisions of the
New Credit Agreement or the Pro-Fac Bank Guarantee. The occurrence of a default
under the New Credit Agreement or the Pro-Fac Bank Guarantee could have a
material adverse effect on Pro-Fac and the Company and its Subsidiaries. See
'Description of Certain Indebtedness -- New Credit Agreement' and 'Description
of the Notes.'
FRAUDULENT CONVEYANCE STATUTES
Various laws enacted for the protection of creditors may apply to the
Company's incurrence of indebtedness in connection with the issuance of the
Notes and the guarantees by Pro-Fac and the Subsidiary Guarantors of such
indebtedness in the event of bankruptcy or a lawsuit on behalf of unpaid
creditors of the Company, Pro-Fac or any of the Subsidiary Guarantors. If a
court were to find in a lawsuit by an unpaid creditor or representative of
unpaid creditors, such as a trustee in bankruptcy, or the Company, Pro-Fac or
any of the Subsidiary Guarantors as a debtor in possession, that the Company,
Pro-Fac or such Subsidiary Guarantor did not receive fair consideration or
reasonably equivalent value for incurring such indebtedness or obligation
(including any guarantee thereof) and, at the time of such incurrence, the
Company, Pro-Fac or such Subsidiary Guarantor (i) was insolvent, (ii) was
rendered insolvent by reason of such incurrence or the aggregate payment of
$544.7 million in connection with the Transactions, (iii) was engaged in a
business or transaction for which the assets remaining in the Company, Pro-Fac
or such Subsidiary Guarantor, as the case may be, constituted unreasonably small
capital, or (iv) intended to incur or believed it would incur debts beyond its
ability to pay such debts as they mature, such court, subject to applicable
statutes of limitation, could determine to invalidate, in whole or in part, such
indebtedness and obligations as fraudulent conveyances or subordinate such
indebtedness and obligations to existing or future creditors of the Company,
Pro-Fac or such Subsidiary Guarantor, as the case may be. If a court were to
find that the Company, Pro-Fac or any Subsidiary Guarantor satisfied the
measures of insolvency or capital inadequacy described in (i) through (iv)
above, such court could avoid any distribution by such entity in respect of such
indebtedness (including, without limitation, any payment of principal or
interest) and order that it be returned to the Company, Pro-Fac or such
Subsidiary Guarantor, as the case may be, or to a fund for the benefit of the
creditors of such entity. Further, if a court were to find that, at the time
Pro-Fac, the Company or any Subsidiary Guarantor granted security interests for
the benefit of the Bank, Pro-Fac, the Company or such Subsidiary Guarantor did
not receive fair consideration or reasonably equivalent value for the grant of
such security interests and came within any of the foregoing clauses (i) through
(iv), a creditor or representative of creditors could seek to avoid the grant of
such security interests. This could result in an event of default with respect
to the New Credit Agreement which, under the terms thereof (subject to
applicable law), would allow the Bank to accelerate such debt.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, the Company,
Pro-Fac or any of the Subsidiary Guarantors would be considered insolvent at a
particular time if the sum of its debts was then greater than all of its
property at a fair valuation or if the present fair saleable value of its assets
was then less than the amount that would be required to pay its probable
liabilities on its existing debts as they became absolute and matured. On the
basis of the financial information, the recent operating history as discussed in
'Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company' and other factors, Pro-Fac believes that, after
giving effect to the issuance of the Notes, none of the Company, Pro-Fac or any
of the Subsidiary Guarantors has been rendered insolvent, each such entity has
sufficient capital for the businesses in which it is engaged and it will be able
to pay its debts as they mature. There can be no assurance, however, as to what
standard a court would apply in making any such determinations.
16
<PAGE>
SUBORDINATION OF THE NOTES; GUARANTEES
The Notes are general unsecured obligations of the Company and are
subordinate to all Senior Indebtedness of the Company, including all obligations
under the New Credit Agreement. The Company's obligations under the New Credit
Agreement are secured by all of the assets of the Company. The Guarantees are
general unsecured obligations of Pro-Fac and the Subsidiary Guarantors and
subordinate to all Senior Indebtedness of Pro-Fac and the Subsidiary Guarantors,
as the case may be, including all obligations pursuant to the Pro-Fac Bank
Guarantee and the guarantees by the Subsidiary Guarantors of the Company's
obligations under the New Credit Agreement (the 'Subsidiaries' Bank Guarantee').
The obligations of Pro-Fac and the Subsidiary Guarantors under the Pro-Fac Bank
Guarantee and the Subsidiaries' Bank Guarantee are secured by all of the assets
of Pro-Fac and the Subsidiary Guarantors, as the case may be. As of November 3,
1994, on a pro forma basis after giving effect to the Transactions, each of the
Company and Pro-Fac (after the elimination in consolidation of intercompany
obligations of $6.5 million) would have had $255.4 million of Senior
Indebtedness. In the event of a bankruptcy, liquidation or reorganization of the
Company, Pro-Fac or any of the Subsidiary Guarantors or in the event that any
default in payment of any debt constituting Senior Indebtedness occurs, holders
of Senior Indebtedness are entitled to payment in full from the proceeds of all
assets of the Company, Pro-Fac or the Subsidiary Guarantors, as the case may be,
prior to any payment of such proceeds to holders of Notes, and the Bank will
have certain rights as a secured creditor of the Company. In addition, upon the
occurrence of certain events of default under the New Credit Agreement, the
Company will be prohibited from making any payments in respect of the Notes
under certain circumstances. See 'Description of the Notes' and 'Description of
Certain Indebtedness -- New Credit Agreement.'
Pro-Fac has no independent operations and no significant assets other than
the capital stock of the Company, and is dependent upon the receipt of payments
under the Pro-Fac Marketing Agreement, dividends or other distributions from the
Company to fund its obligations, including its obligations under its Guarantee.
The assets and operations of the Subsidiary Guarantors do not constitute a
substantial portion of the assets and operations of the Company as a whole. In
the event that the Company is not able to make interest or principal payments on
the Notes, it is unlikely that Pro-Fac or the Subsidiary Guarantors would be
able to meet their obligations under the Guarantees.
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of any Change of Control
(as defined herein), the Company will be required to make an offer (a 'Change of
Control Offer') to purchase all or any part of a holder's Notes at 101% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of purchase. Any Change of Control, and any repurchase of the Notes
required under the Indenture upon a Change of Control, would constitute an event
of default under the New Credit Agreement, with the result that the obligations
of the Company thereunder could be declared due and payable. Any acceleration of
the Company's obligations under the New Credit Agreement would make it unlikely
that the Company would be able to purchase the Notes pursuant to the Change of
Control Offer.
LACK OF PUBLIC MARKET
The New Notes are being offered exclusively to the holders of the Old
Notes. The Old Notes were issued to a limited number of institutional investors
on November 3, 1994. There is currently no established market for the New Notes,
and there can be no assurance as to the liquidity of the trading markets for the
New Notes or that an active trading market for the New Notes will develop or be
sustained. If any such markets were to develop, the New Notes may trade at
prices that may be higher or lower than their principal amount, depending on
many factors, including prevailing interest rates and the markets for similar
securities. The Company does not intend to list the New Notes on any national
securities exchange or to apply for the quotation thereof on any automated
quotation system. Dillon, Read & Co. Inc. has advised Pro-Fac that it currently
intends to make a market in the Old Notes until the Expiration Date, and
thereafter it intends to make a market in the New Notes. However, Dillon, Read &
Co. Inc. is not obligated to do so, and any market making with respect to the
Notes may be
17
<PAGE>
discontinued at any time without notice. In addition, such market activity may
be limited during the pendency of the Exchange Offer.
To the extent Old Notes are tendered and accepted in the exchange, the
principal amount of outstanding Old Notes will decrease with a resulting
decrease in the liquidity in the market therefor. Following the consummation of
the Exchange Offer, holders of Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes will be adversely affected.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by Holders thereof (other than any such
holder which is an 'affiliate' of any issuer within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such Notes. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
'Plan of Distribution.' However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
To the extent that Old Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Old Notes will be
adversely affected.
18
<PAGE>
THE COMPANY
GENERAL
The Company is a producer and marketer of processed food products including
canned and frozen fruits and vegetables, canned desserts and condiments, fruit
fillings and toppings, canned chilies and stews, salad dressings, pickles,
peanut butter and snack foods. In addition, the Company manufactures cans which
are both utilized by the Company and sold to third parties. In fiscal 1994, on a
pro forma basis after giving effect to the Transactions, the Company would have
had net sales and operating income plus depreciation and amortization of $749.2
million and $77.0 million (excluding the nonrecurring restructuring gain of $7.8
million and the $3.5 million charge relating to legal and advisory costs
incurred in connection with the change of control), respectively. See 'Pro Forma
Financial Data of the Company.'
The Company sells products in three principal categories: (i) 'branded'
products, which are sold under the Company's trademarks, (ii) 'private label'
products, which are sold to grocers that in turn use their own brand names on
the products and (iii) 'food service' products, which are sold to food service
institutions such as restaurants, caterers and bakeries and to schools. In
fiscal 1994, approximately one-half of the Company's net sales were branded and
the remainder were split between private label and food service. The Company's
branded products include 'Comstock,' 'Thank You' and 'Wilderness' fruit fillings
and toppings, 'Nalley' chilies and stews, 'Bernstein's' salad dressings and
'Adams' peanut butter. The Company's private label products include salad
dressings, salsa, fruit fillings and toppings, canned puddings and canned and
frozen vegetables, which are sold to customers such as A&P, Kroger, Safeway,
Topco, Wegman's and Winn-Dixie. The Company's food service products include
salad dressings, pickles, fruit fillings and toppings, canned and frozen
vegetables, canned puddings, cheese sauces and canned and frozen fruit, which
are sold to customers such as Carvel, Disney, Foodservice of America, KFC,
McDonald's and Sysco.
OPERATIONS
The Company operates throughout the United States and in Western Canada
through six operating divisions. Each division (other than the Snack Foods
Group, which has three separate divisional operations) is managed by a division
president and has its own sales, marketing and financial staff.
Comstock Michigan Fruit. The Company's largest division, CMF, produces
products in three principal categories: (i) fruit fillings and toppings, (ii)
aseptically produced products and (iii) canned and frozen fruits and vegetables.
In fiscal 1994, approximately one-third of CMF's net sales represented branded
products, approximately one-third represented private label products and
approximately one-third represented food service products. CMF's fruit fillings
and toppings, sold under the Company's 'Comstock,' 'Thank You' and 'Wilderness'
brand names, had a national market share of approximately 56% in fiscal 1994.
CMF's aseptic operations produce puddings, cheese sauces and dips primarily for
sale nationally to food service outlets. CMF's canned and frozen fruits and
vegetables are sold primarily in the Eastern United States to private label
customers. In fiscal 1994, CMF had net sales and division operating income of
$333.4 million and $29.6 million, respectively.
Nalley's. Nalley's, which includes Nalley's Canada Ltd., markets canned
meat products such as chilies and stews, pickles, salad dressings and peanut
butter. Nalley's products are primarily branded, accounting for approximately
three-quarters of Nalley's fiscal 1994 net sales. Several of Nalley's branded
products have leading market shares in the Pacific Northwest, such as 'Nalley'
chili, which had a market share of approximately 57%, and 'Nalley' and
'Farman's' pickles, which together had a market share of approximately 49%, for
the 52-week period ended August 7, 1994. In the Pacific Northwest, the Company's
'Nalley' and 'Bernstein's' brands of salad dressings had a combined market share
of approximately 17% for the same period. In fiscal 1994, Nalley's had net sales
and division operating income of $214.8 million and $17.6 million, respectively.
Southern Frozen Foods. Southern specializes in producing and selling a full
line of southern vegetables such as black-eyed peas, okra and leafy greens as
well as a line of traditional vegetables such as corn, peas, squash and green
beans. In fiscal 1994, branded sales represented approximately one-half of total
net sales of Southern, food service sales represented more than a quarter of the
total and
19
<PAGE>
private label sales accounted for the remainder. Southern's line of frozen
southern vegetables, which are marketed under the 'McKenzie's' and 'Southern
Farms' brand names, had a leading market share of approximately 26% in the
Southeast for the 52-week period ended March 6, 1994. Southern distributes
primarily in the Southeast and South Central portions of the United States. In
fiscal 1994, Southern had net sales and division operating income of $94.3
million and $10.2 million, respectively.
Snack Foods Group. The Company's Snack Foods Group consists of Snyder and
Husman, which produce and distribute their snack food products primarily in the
Mid-Atlantic and Midwest regions of the country, and Tim's, which produces and
distributes kettle-fried chips in the Pacific Northwest. In fiscal 1994, the
Snack Foods Group had net sales and division operating income of $61.2 million
and $2.7 million, respectively.
Brooks Foods. The Company's Brooks division markets specialty chili beans,
specialty tomato products, barbecue sauce and related products under the
'Brooks' label. Sales of Brooks products are principally in the Midwest. In
fiscal 1994, Brooks had net sales and division operating income of $30.0 million
and $3.1 million, respectively.
Finger Lakes Packaging. Finger Lakes manufactures various sizes of
three-piece sanitary food cans for the Company, and third-party food processors.
Approximately two-thirds of the cans manufactured by Finger Lakes are sold to
divisions of the Company, with the remaining one-third sold to other customers.
In fiscal 1994, Finger Lakes had net sales and operating income (before
elimination of intercompany transactions) of $49.9 million and $3.9 million,
respectively.
BUSINESS STRATEGY
Achieve Leading Market Shares of Branded Products. The Company believes
that having branded products with strong shares in regional markets provides it
with distinct advantages. Specifically, by achieving a market presence within a
geographic region, the Company believes it is better able to create avenues for
the sale of the Company's other branded products and to assess and meet local
market and consumer needs.
Diversify Through Sales of Branded, Private Label and Food Service
Products. Historically, the Company has focused primarily on its branded
products, many of which have leading market shares in the regions they serve.
However, with the growth of the private label and food service businesses, the
Company has also begun to focus on profitable opportunities in these areas. For
example, Nalley's has been working with grocers on programs for private label
salsa, soups and salad dressings with 'good,' 'better' and 'best' categories.
This concept offers the grocer a three-tiered product selection and provides the
Company with a means to customize products and programs specifically for
consumer desires. The Company is currently reviewing the expansion of the
'good,' 'better' and 'best' program to many other products. In addition, with
the growth of the food service sector, the Company has pursued food service
opportunities for its fruit fillings and toppings, puddings and cheese sauces.
Future food service growth is planned for other products such as breaded
vegetables and salad dressings.
Engage in Selective National Expansion Program. Certain of the Company's
products have achieved significant market shares within specific geographic
regions, and the Company believes substantial opportunities exist to distribute
these products on a national basis. The Company recently began selling its
'Bernstein's' salad dressing, first introduced in California, in Arizona,
Colorado and Upstate New York. Other products under consideration for national
expansion include Mexican specialty items, such as chili and salsa, other salad
dressings and canned soups.
Continuous Focus on Cost Reduction. Through a corporate wide program of
information management, selected capital expenditures and individual division
initiatives, the Company continuously seeks to reduce costs and improve
efficiency. During fiscal 1993, the Company initiated production consolidation
efforts involving the closing of three plants located in Michigan, Colorado and
New York. Further consolidations are being explored to reduce operational
redundancies. In the area of purchasing, by maximizing market leverage through
collaborative and cooperative purchasing activities throughout the Company,
significant savings have been achieved. As a result of the Company's cost
reduction activities, the Company's operating income margin from ongoing
businesses improved from 6.0% to 6.5% to 6.9% in each of fiscal 1992, 1993 and
1994, respectively.
20
<PAGE>
The Company's principal executive offices are located at 90 Linden Place,
P.O. Box 681, Rochester, New York 14603 and its telephone number is (716)
383-1850.
PRO-FAC COOPERATIVE, INC.
On November 3, 1994 the Company was acquired by Pro-Fac, an agricultural
cooperative formed under New York State law to process and market crops grown by
its members. Only growers of crops marketed through Pro-Fac, or associations of
such growers, can become members of Pro-Fac. A grower becomes a member of
Pro-Fac through the purchase of common stock, which obligates the grower to
supply, and Pro-Fac to purchase, crops. Pro-Fac's approximately 700 members are
growers, or associations of growers, located principally in California, Florida,
Georgia, Illinois, Iowa, Michigan, Nebraska, New York, North Dakota, Oregon,
Pennsylvania and Washington. Crops grown by Pro-Fac members and purchased by
Pro-Fac include fruits (cherries, apples, blueberries, peaches and plums),
vegetables (snap beans, beets, cucumbers, peas, sweet corn, carrots, cabbage,
squash, asparagus, potatoes, dry beans, southern peas, turnip roots and leafy
greens) and popcorn. All of the crops supplied to Pro-Fac by its members are
sold to the Company for processing.
Pro-Fac and the Company were established together in the early 1960s and
before Pro-Fac's recent acquisition of the Company, had a long-standing
contractual relationship under the Integrated Agreement, and similar predecessor
agreements. The Integrated Agreement, which has been superseded by the Pro-Fac
Marketing Agreement, principally governed four arrangements between Pro-Fac and
the Company: facilities financing, operations financing, marketing and
management. Pro-Fac continues to market its members' crops and provide other
accommodations to the Company, and the Company continues to provide management
services to Pro-Fac, pursuant to the Pro-Fac Marketing Agreement. See 'Certain
Transactions -- Pro-Fac Marketing Agreement.'
Pro-Fac's principal executive offices are located at 90 Linden Place, P.O.
Box 682, Rochester, New York 14603 and its telephone number is (716) 383-1850.
THE ACQUISITION
The proceeds of the Old Notes, together with the proceeds of borrowings
under the New Credit Agreement, were used to pay the purchase price and related
fees and expenses paid by Pro-Fac in connection with the Acquisition and to
repay the existing bank loans of Pro-Fac and the Company. The Acquisition was
effected through the Merger Agreement. Pursuant to the Merger Agreement, (i)
PFAC commenced the Tender Offer, (ii) on November 3, 1994, PFAC accepted for
payment and paid for Shares validly tendered and not withdrawn at a price per
Share of $19.00 in cash, (iii) simultaneously with the acceptance of Shares for
payment pursuant to the Tender Offer, the Merger occurred, (iv) any Shares
(except Shares owned by Pro-Fac or its subsidiaries or the Company or its
subsidiaries (which was cancelled) or Shares as to which stockholders of the
Company may exercise their appraisal rights provided in connection with the
Merger) not tendered and accepted for payment pursuant to the Tender Offer were
converted into the right to receive from the Company $19.00 per Share in cash,
and (v) each issued and outstanding share of the capital stock of PFAC, all of
which were owned by Pro-Fac, was converted into one share of common stock of the
Company. As a result of the Merger, the Company is a wholly-owned subsidiary of
Pro-Fac and has assumed all of the obligations and liabilities of PFAC,
including PFAC's obligations and liabilities under the Old Notes.
The Old Notes were sold in a private placement pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. PFAC structured the Old
Notes Offering as a private placement to be followed by an Exchange Offer of New
Notes for Old Notes in order to raise funds on a more expeditious basis than
would have been possible had the initial sale been pursuant to an offering
registered under the Securities Act. Such funds were required in order to
consummate the Acquisition in a timely manner. The purchasers of the Old Notes,
as a condition to such purchase, requested that the Company agree to commence
the Exchange Offer following the Old Notes Offering.
21
<PAGE>
FINANCING THE ACQUISITION
SOURCES AND USES OF FUNDS
The sources and uses of funds necessary to consummate the Transactions were
as follows:
<TABLE>
<CAPTION>
AMOUNT(1)
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Borrowings under New Credit Agreement(2):
Acquisition Facility:
Term Loan........................................................... $ 80.0
Term Loan Facility.................................................. 97.5
Seasonal Facility........................................................ 72.6
Sale of Notes................................................................. 160.0
Capital contribution by Pro-Fac(3)............................................ 134.6
-------
Total sources of funds.............................................. $544.7
-------
-------
USES OF FUNDS:
Purchase of the Company's Class A and Class B Common Stock(4)................. $166.8
Repayment of existing debt (other than seasonal debt) and other
obligations(5)............................................................... 276.4
Repayment of existing seasonal debt........................................... 84.1
Fees, discounts and commissions(6)............................................ 17.4
-------
Total uses of funds................................................. $544.7
-------
-------
</TABLE>
- ------------
(1) Sources and uses of funds are based on (i) the borrowings of bank debt that
were outstanding under the Company's existing credit facilities on the
Closing Date, (ii) the amounts due from the Company to Pro-Fac that were
outstanding on the Closing Date, (iii) the purchase price paid for the
Company in connection with the Acquisition and (iv) the fees, discounts and
commissions paid on or subsequent to the Closing Date in connection with the
Transactions.
(2) In connection with the Acquisition, PFAC entered into the New Credit
Agreement with the Bank, pursuant to which the Bank agreed to provide loans
to PFAC of up to $200.0 million pursuant to the Acquisition Facility. On
completion of the Merger, the obligations of PFAC under the New Credit
Agreement became obligations of the Company. The Acquisition Facility
consists of (i) the $80.0 million Term Loan, which is fully drawn and (ii)
the $120.0 million Term Loan Facility, approximately $97.5 million of which
has been or will be drawn in connection with the Transactions. Amounts drawn
under the Acquisition Facility include $155.2 million to repay indebtedness
due from the Company to Pro-Fac, which Pro-Fac, in turn, applied to repay an
equal amount of outstanding debt plus accrued and unpaid interest due to the
Bank. The New Credit Agreement also provides the Company with the Seasonal
Facility of up to $86.0 million and a $10.0 million Letter of Credit
Facility. On the Closing Date, $72.6 million was drawn under the Seasonal
Facility to repay outstanding seasonal debt, together with accrued and
unpaid interest and additional capital investment, due from Pro-Fac to the
Bank and outstanding seasonal debt, together with accrued and unpaid
interest and fees, due from the Company to a syndicate of commercial lenders
led by The Chase Manhattan Bank, N.A. The Company estimates that its peak
borrowings under the Seasonal Facility during fiscal 1995 will not increase
significantly over the $72.6 million drawn on the Closing Date. In fiscal
1994, the Company's borrowings under its existing seasonal line of credit
peaked at approximately $81.0 million and the average amount outstanding
during such year was approximately $51.5 million. See 'Description of
Certain Indebtedness -- New Credit Agreement.'
(3) In connection with the Acquisition, Pro-Fac made a $134.6 million capital
contribution to the Company which consisted of the cancellation of $110.0
million of indebtedness and capital lease obligations due to Pro-Fac by the
Company (including the cancellation of certain accounts payable due to
Pro-Fac by the Company, in the amount of $5.1 million) and the cancellation
of $24.6 million
(footnotes continued on next page)
22
<PAGE>
(footnotes continued from previous page)
of obligations due to Pro-Fac from the Company as a result of Pro-Fac's
transfer to the Company of (i) its investment in the Bank in the amount of
$21.3 million and (ii) certain legal and advisory costs incurred by Pro-Fac
in connection with the Transactions in the amount of $3.3 million. See
'Certain Transactions -- Equity Ownership in Springfield Bank for
Cooperatives.'
(4) The purchase price for the Shares consists of $165.1 million for the
8,690,005 shares currently outstanding as of the Closing Date at $19.00 per
share plus $1.7 million representing the aggregate payments being made by
the Company in connection with the cancellation of certain options to
purchase shares of the Company exercisable at a price less than $19.00 per
share.
(5) Includes the cancellation of (i) $246.7 million of indebtedness and capital
lease obligations due to Pro-Fac by the Company, (ii) certain accounts
payable due to Pro-Fac by the Company, in the amount of $5.1 million, and
(iii) $24.6 million of obligations due to Pro-Fac by the Company as a result
of the transfer by Pro-Fac to the Company of its (a) $21.3 million
investment in the Bank and (b) $3.3 million of legal and advisory costs
incurred in connection with the Transactions. See 'Certain
Transactions -- Equity Ownership in Springfield Bank for Cooperatives.'
(6) $17.4 million in fees, discounts and commissions were paid on or subsequent
to the Closing Date. This amount excludes amounts paid for similar charges
prior to the Closing Date.
USE OF PROCEEDS
There will be no proceeds to the Company from any exchange pursuant to the
Exchange Offer.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on November 3, 1994 to institutional
investors (the 'Initial Investors'). In connection therewith, the Company and
the Initial Investors entered into the Registration Rights Agreement, which
requires that, as soon as practicable within 45 days following the issuance of
the Old Notes, the Company file with the Commission a Registration Statement
(the 'Exchange Offer Registration Statement,' of which this Prospectus is a
part) under the Securities Act with respect to an issue of new notes of the
Company identical in all material respects to the Old Notes, use its best
efforts to cause such Exchange Offer Registration Statement to become effective
under the Securities Act and, upon the effectiveness of that Exchange Offer
Registration Statement, offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, to be issued
without a restrictive legend and which might be reoffered and resold by the
holder without restrictions or limitations under the Securities Act. A copy of
the Registration Rights Agreement has been filed as an exhibit to the Exchange
Offer Registration Statement.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder of such New Notes
(other than any such holder which is an 'affiliate' of the Company or any
Guarantor within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and such holder is not engaged in, and does not intend
to engage in, and has no arrangement or understanding with any person to
participate in, the distribution of such New Notes. Any holder who tenders in
the Exchange Offer for the purpose of participating in a distribution of the New
Notes cannot rely on the staff position enunciated in the no-action letters
issued to third parties referred to above and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer
23
<PAGE>
will not be deemed to admit that it is an 'underwriter' within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. By acceptance of this Exchange Offer,
each broker-dealer that receives New Notes pursuant to the Exchange Offer agrees
to notify the Company prior to using this Prospectus in connection with the sale
or transfer of New Notes. See 'Plan of Distribution.'
As a result of the filing and the effectiveness of the Exchange Offer
Registration Statement and the consummation of the Exchange Offer, the Company's
obligation to make certain semi-annual payments with respect to the Old Notes
will be terminated. The Old Notes were issued to a small number of institutional
investors on November 3, 1994 and there is no public market for them at present.
To the extent Old Notes are tendered and accepted in the exchange, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes will continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the market for the Old Notes could be
adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date (as defined below). An aggregate of $160.0 million principal
amount of the Old Notes is outstanding. The Company will issue $1,000 principal
amount at maturity of New Notes in exchange for each $1,000 principal amount at
maturity of outstanding Old Notes accepted in the Exchange Offer. Holders may
tender some or all of their Old Notes pursuant to the Exchange Offer. However,
Old Notes may be tendered only in integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes will
have been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of the Indenture under which
the Old Notes were, and the New Notes will be, issued.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral (promptly confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purpose of receiving the New Notes from
the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
' -- Fees and Expenses.'
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term 'Expiration Date' shall mean 5:00 p.m., New York City time, on
January 18, 1995, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term 'Expiration Date' shall mean the latest
date and time to which the Exchange Offer is extended.
24
<PAGE>
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under 'Conditions' shall not have been satisfied, to
terminate the Exchange Offer, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by a public
announcement thereof. If the Exchange Offer is amended in a manner determined by
the Company to constitute a material change, the Company will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (or a confirmation of an appropriate book-entry transfer into the Exchange
Agent's account at DTC as described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. To be tendered effectively, the Old Notes (or a timely confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC
as described below), Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under 'Exchange
Agent' prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender by a holder will constitute an agreement between such holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal, with any required
signature guarantees and any other required documents, must in any case be
transmitted to and received by the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date at one of its addresses set forth below under
'Exchange Agent', or the guaranteed delivery procedure described below must be
complied with. Delivery of documents to DTC in accordance with its procedures
does not constitute delivery to the Exchange Agent. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent, including delivery through DTC,
is at the election and risk of the holder. Instead of delivery by mail, it is
recommended that Holders use an overnight or hand delivery service. If Old Notes
are sent by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company.
25
<PAGE>
Holders may request their respective brokers, dealers, commercial banks, trust
companies or nominees to effect the above transactions for such holders.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled 'Special Issuance Instructions' or
'Special Delivery Instructions' on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an 'eligible guarantor institution' within the meaning of Rule
17Ad-15 under the Exchange Act (an 'Eligible Institution').
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders
(or, in the case of Old Notes delivered by book-entry transfer within DTC, will
be credited to the account maintained within DTC by the participant in DTC which
delivered such shares), unless otherwise provided in the Letter of Transmittal,
as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth below under 'Conditions,' to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, that each of the holder and any such
other person is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, the distribution
of such New Notes and that neither the
26
<PAGE>
holder nor any such other person is an 'affiliate,' as defined under Rule 405 of
the Securities Act, of the Company or any Guarantor. Each broker or dealer that
receives New Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker or dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See 'Plan of
Distribution.'
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes (or a
confirmation of book-entry transfer of Old Notes into the Exchange Agent's
account at DTC), the Letter of Transmittal or any other required documents to
the Exchange Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made by or through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five (5) New York Stock
Exchange, Inc. trading days after the Expiration Date, a duly executed
Letter of Transmittal (or facsimile thereof) together with the Old Notes
(or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC), and any other documents required by the
Letter of Transmittal and the instructions thereto, will be deposited by
such Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), and all tendered Old Notes in proper form for transfer
(or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC) and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five (5)
New York Stock Exchange, Inc. trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the 'Depositor'),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Old Notes are to be registered, if different from that of the Depositor. If the
Old Notes have been delivered pursuant to the book-entry procedure set forth
above under ' -- Procedures for Tendering', any notice of withdrawal must
specify the name and number of the participant's account at DTC to be credited
with the withdrawn Old Notes. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, which determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Properly withdrawn Old Notes may be retendered by following one of
the procedures described above under ' -- Procedures for Tendering' at any time
prior to the Expiration Date.
27
<PAGE>
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the holder thereof without cost
to such holder.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company, or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the sole judgement of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the sole judgement of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(d) any governmental approval has not been obtained, which approval
the Company shall in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders (or, in the case of Old Notes
delivered by book-entry transfer within DTC, credit such Old Notes to the
account maintained within DTC by the participant in DTC which delivered such
shares), (ii) extend the Exchange Offer and retain all Old Notes tendered prior
to the expiration of the Exchange Offer, subject, however, to the rights of
holders to withdraw such Old Notes (see 'Withdrawal of Tenders' above) or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such five to ten business day
period.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
28
<PAGE>
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 Transmission (for One State Street
Bowling Green Station eligible financial New York, New York 10004
New York, New York 10274-0084 institutions only): Attn: Securities Processing
Attn: Reorganization (212) 858-2611 Window, Subcellar One
Operations
Department
To Confirm Facsimile
Transmissions Call:
(212) 858-2103
(call collect)
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for services and will reimburse it
for its reasonable out-of-pocket expenses in connection therewith and will pay
the reasonable fees and expenses of one firm acting as counsel for the holders
of Old Notes should such holders deem it advisable to appoint such counsel.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, New Notes or Old Notes
for principal amounts not tendered or accepted for exchange are to be
registered, or are to be issued in the name of, or delivered to, any person
other than the registered holder, or if tendered Old Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
considerations applicable to the exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes by holders who acquire the New Notes.
This discussion is based on laws, regulations, rulings and decisions now in
effect, all of which are subject to change, possibly retroactively. The
discussion is not based on the opinion of tax counsel or any other tax expert
nor does it cover all aspects of federal income taxation that may be relevant to
holders, in light of their specific circumstances, particularly holders subject
to special treatment under the federal income tax laws (such as insurance
companies, financial institutions, tax exempt organizations, foreign persons,
and taxpayers subject to the alternative minimum tax). It also does not address
state, local, foreign or other tax laws. The description assumes that holders of
the New Notes will hold the New Notes as 'capital assets' (generally, property
held for investment purposes) under the Internal Revenue Code of 1986, as
amended (the 'Code'). EACH HOLDER SHOULD CONSULT HIS TAX ADVISOR IN DETERMINING
THE FEDERAL, STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR
HOLDER
29
<PAGE>
OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF
THE NEW NOTES.
EXCHANGE OF NOTES
There will be no federal income tax consequences to holders exchanging Old
Notes for New Notes pursuant to the Exchange Offer and such a holder will have
the same adjusted basis and holding period in the New Notes as it had in the Old
Notes immediately before the exchange.
UNITED STATES TAXATION OF UNITED STATES HOLDERS
As used herein, the term 'United States Holder' means a holder of a New
Note that is, for United States federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof or (c) an estate or trust the income of which is
subject to United States federal income taxation regardless of source.
PAYMENT OF INTEREST ON NEW NOTES
Interest paid or payable on the New Notes will be taxable to a United
States Holder as ordinary interest income, generally as received or accrued, in
accordance with such holder's method of accounting for federal income tax
purposes.
DISPOSITION OF NEW NOTES
In general, the holder of a New Note will recognize gain or loss upon the
sale, redemption, retirement or other disposition of the New Note measured by
the difference between the amount of cash and the fair market value of property
received (except to the extent attributable to accrued interest, which
constitutes ordinary income), and the holder's tax basis in the New Note.
Subject to the market discount rules discussed below, the gain or loss on the
sale or other disposition of the New Note should be long-term capital gain or
loss, provided the holder has a holding period for the New Note (which would
include the holding period of the Old Note) of more than one year.
MARKET DISCOUNT ON RESALE
Holders, other than the Initial Investors, should be aware that the resale
of the New Notes may be affected by the market discount provisions of the Code.
These rules generally provide that, if a subsequent holder of a Note purchases
it at a market discount in excess of a statutorily defined de minimis amount,
and thereafter recognizes gain upon a disposition (including a partial
redemption) of the Note, the lesser of such gain or the portion of the market
discount that accrued while the Note was held by such holder will be treated as
ordinary interest income at the time of the disposition. The rules also provide
that a holder that acquires a Note at a market discount may be required to defer
a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such Note until the
holder disposes of such Note in a taxable transaction. If a holder of a Note
elects to include market discount income currently, neither of the foregoing
rules would apply.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, a United States Holder of a New Note may be subject to backup
withholding at the rate of 31% with respect to interest and principal paid on a
New Note, unless the holder (a) is an entity (including corporations, tax-exempt
organizations and certain qualified nominees) which is exempt from withholding
and, when required, demonstrates this fact, or (b) provides the payor with its
Taxpayer Identification Number ('TIN') (which for an individual would be the
holder's Social Security number), certifies that the TIN provided to the payor
is correct and that the holder has not been notified by the Internal Revenue
Service ('IRS') that it is subject to backup withholding due to underreporting
of interest or dividends, and otherwise complies with applicable requirements of
the backup withholding rules. In addition, such payments of principal and
interest to United States Holders that are not
30
<PAGE>
corporations, tax-exempt organizations or qualified nominees will generally be
subject to information reporting requirements. A holder of a New Note who does
not provide the payor with his correct TIN may be subject to penalties imposed
by the IRS.
The payor will report to holders of the New Notes and the IRS the amount of
any 'reportable payments' (including any interest paid) and any amount withheld
with respect to the New Notes during the calendar year.
The amount of any backup withholding from a payment to a holder will be
allowed as a credit against such holder's federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the IRS.
UNITED STATES TAXATION OF FOREIGN HOLDERS
PAYMENT OF INTEREST ON NOTES
In general, payments of interest received by any holder that is not a
United States Holder (a 'Foreign Holder') will not be subject to United States
federal withholding tax, provided that (a)(i) the holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (ii) the holder is not a controlled
foreign corporation that is related to the Company actually or constructively
through stock ownership and (iii) either (x) the beneficial owner of the New
Note, under penalties of perjury, provides the Company or its agent with the
beneficial owner's name and address and certifies that it is not a United States
Holder on IRS Form W-8 (or a suitable substitute form) or (y) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a 'financial
institution') holds the New Note and certifies to the Company or its agent under
penalties of perjury that such a Form W-8 (or suitable substitute) has been
received by it from the beneficial owner or qualifying intermediary and
furnishes the payor a copy thereof, (b) the Foreign Holder is subject to United
States federal income tax with respect to the New Note on a net basis because
payments received with respect to the New Note are effectively connected with a
United States trade or business of the Foreign Holder (in which case the Foreign
Holder may also be subject to 'branch profits tax' under section 884 of the
Code) and provides the Company with a properly executed IRS Form 4224 or (c) the
Foreign Holder is entitled to the benefits of an income tax treaty under which
the interest is exempt from United States withholding tax, and the Foreign
Holder or such holder's agent provides the Company with a properly executed IRS
Form 1001 claiming the exemption. Payments of interest not exempt from United
States withholding tax as described above will be subject to such withholding
tax at the rate of 30% (subject to reduction under an applicable income tax
treaty).
DISPOSITION OF NEW NOTES
A Foreign Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain realized
on the sale, redemption, retirement or other disposition of New Notes unless (i)
the gain is effectively connected with a United States trade or business
conducted by the Foreign Holder or (ii) the Foreign Holder is an individual who
is present in the United States for a period or periods aggregating 183 or more
days in the taxable year of the disposition and certain other conditions are
met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current Treasury regulations, backup withholding and information
reporting do not apply to payments made by the Company or a paying agent to
Foreign Holders if the certification described under ' -- United States Taxation
of Foreign Holders -- Payment of Interest on Notes' above is received, provided
that the payor does not have actual knowledge that the holder is a United States
Holder. If any payments of principal and interest are made to the beneficial
owner of a New Note by or through the foreign office of a foreign custodian,
foreign nominee or other foreign agent of such beneficial owner, or if the
foreign office of a foreign 'broker' (as defined in applicable United States
Treasury regulations) pays the proceeds of the sale of a New Note or a coupon to
the seller thereof,
31
<PAGE>
backup withholding and information reporting will not apply. Information
reporting requirements (but not backup withholding) will apply, however, to a
payment by a foreign office of a broker that is a United States person, that
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the United States, or that is a 'controlled foreign
corporation' (generally, a foreign corporation controlled by United States
shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a Foreign Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Payment by a United States office of a broker is subject to both
backup withholding at a rate of 31% and information reporting unless the holder
certifies under penalties of perjury that it is a Foreign Holder or otherwise
establishes an exemption. A Foreign Holder may obtain a refund or a credit
against such holder's United States federal income tax liability of any amounts
withheld under the backup withholding rules, provided the required information
is furnished to the IRS.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Exchange Offer
will be amortized over the term of the New Notes.
CAPITALIZATION
The following table sets forth the historical consolidated capitalization
of the Company as of September 24, 1994 and the pro forma consolidated
capitalization of the Company as adjusted to give effect to the Transactions,
including the sale of the Old Notes as if they had occurred as of September 24,
1994. This presentation should be read in conjunction with the Consolidated
Financial Statements and the other information contained in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 24, 1994
-------------------------
PRO FORMA
FOR THE
ACTUAL TRANSACTIONS(1)
------ ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Existing seasonal debt(2)............................................................... $ 90.0 $--
Long-term debt, including current portion:
Existing long-term debt(3)......................................................... 257.5 6.5
Acquisition Facility:
Term Loan(4).................................................................. -- 80.0
Term Loan Facility(4)......................................................... -- 97.5
Seasonal Facility(4)............................................................... -- 78.5
Old Notes.......................................................................... -- 160.0
Other long-term debt(5)............................................................ 3.6 5.3
------ -------
Total debt(6)................................................................. 351.1 427.8
Shareholders' equity.................................................................... 79.9 134.6
------ -------
Total capitalization.......................................................... $431.0 562.4
------ -------
------ -------
Total debt/total capitalization......................................................... 81.5% 76.1%
Total debt/pro forma Adjusted EBITDA(7)................................................. 4.85x 5.91x
</TABLE>
- ------------
(1) For information regarding the pro forma data, see 'Pro Forma Financial Data
of the Company.'
(2) Includes $40.0 million of notes payable and $50.0 million of seasonal debt
due to Pro-Fac.
(3) Includes accounts payable, capital lease obligations and debt due to Pro-Fac
as calculated by the Company at September 24, 1994 and, therefore, excludes
$2.6 million of disputed legal and advisory costs incurred by the Company in
fiscal 1994 and the first quarter of fiscal 1995 and allocated to
(footnotes continued on next page)
32
<PAGE>
(footnotes continued from previous page)
Pro-Fac. Also includes the finance receivable relating to intangibles owed
to Pro-Fac, which was $24.5 million at September 24, 1994.
(4) In connection with the Acquisition, PFAC and Pro-Fac entered into the New
Credit Agreement with the Bank, pursuant to which the Bank has provided
loans pursuant to the Acquisition Facility. On completion of the Merger, the
obligations of PFAC under the New Credit Agreement became obligations of the
Company. The Acquisition Facility consists of (i) the $80.0 million Term
Loan, all of which was drawn in connection with the Transactions and (ii)
the $120.0 million Term Loan Facility, $97.5 million of which has been or
will be drawn in connection with the Transactions. See 'The Acquisition.'
Amounts drawn under the Acquisition Facility include $155.2 million to repay
indebtedness due from the Company to Pro-Fac, which Pro-Fac, in turn,
applied to repay an equal amount of outstanding debt due to the Bank plus
accrued and unpaid interest. The New Credit Agreement also provides the
Company with the Seasonal Facility of up to $86.0 million and a $10.0
million Letter of Credit Facility. As of September 24, 1994, on a pro forma
basis after giving effect to the Transactions, there would have been $78.5
million of borrowings under the Seasonal Facility. On the Closing Date,
$72.6 million was drawn under the Seasonal Facility to repay outstanding
seasonal debt. The Company estimates that its peak borrowings under the
Seasonal Facility during fiscal 1995 will not increase significantly over
the $72.6 million drawn on the Closing Date. In fiscal 1994, the Company's
borrowings under its existing seasonal line of credit peaked at
approximately $81.0 million and the average amount outstanding during such
year was approximately $51.5 million. See 'Description of Certain
Indebtedness -- New Credit Agreement.'
(5) The increase in other debt reflects (i) employee severance and retirement
benefits for certain employees incurred in conjunction with the Merger in
the amount of $0.7 million and (ii) the reclassification of previously
accrued retirement benefits totalling $1.0 million.
(6) Total debt is defined as the sum of (i) current and long-term debt due to
Pro-Fac, (ii) current and long-term debt due to others, including notes
payable and borrowings under the Seasonal Facility, if any, (iii) current
and long-term capital lease obligations, (iv) other amounts due to Pro-Fac
and (v) the finance receivable relating to intangibles owed to Pro-Fac which
was $24.5 million on September 24, 1994.
(7) Total debt divided by pro forma first quarter fiscal 1995 Adjusted EBITDA of
$18.1 million (presented on an annualized basis). Adjusted EBITDA for the
three months ended September 24, 1994 has been annualized in computing this
ratio and therefore does not take into account seasonal factors that affect
Adjusted EBITDA.
33
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected historical consolidated financial
data of the Company for the periods indicated. The information should be read in
conjunction with the Company's Consolidated Financial Statements and related
notes thereto appearing elsewhere herein and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company.'
The selected historical consolidated financial data for each of the years
ended June 26, 1992, June 26, 1993 and June 25, 1994 and as of June 26, 1993 and
June 25, 1994 have been derived from the Company's audited consolidated
financial statements included elsewhere herein. The selected historical
consolidated financial data for each of the years ended June 29, 1990 and June
28, 1991 and as of June 29, 1990, June 28, 1991 and June 26, 1992 have been
derived from the Company's audited consolidated financial statements not
included herein. The financial data for the three months ended September 25,
1993 and September 24, 1994 and as of September 24, 1994 are unaudited, but in
the opinion of the Company reflect all adjustments necessary for a fair
presentation of such data. The data for the three months ended September 24,
1994 are not necessarily indicative of results of operations for fiscal 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------
JUNE 25, 1994
JUNE JUNE JUNE JUNE ------------------
29, 28, 26, 26, PRO
1990 1991 1992 1993 ACTUAL FORMA(1)
------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $926.9 $933.1 $896.9 $878.6 $829.1 $749.2
Cost of sales.............................. 658.5 673.3 652.3 632.6 592.6 534.3
------- ------- ------- ------- ------- -------
Gross profit........................... 268.4 259.8 244.6 246.0 236.5 214.9
Selling, administrative and general........ 218.4 220.9 201.4 207.1 186.9 159.3
Amortization of unallocated excess of
purchase price over net assets
acquired................................. -- -- -- -- -- 4.7
Restructuring including net loss (gain)
from division disposals(2)............... -- -- -- 61.0 (7.8) --
Change in control expenses(3).............. -- -- -- -- 3.5 --
(Gain) on assets resulting from fire
claim(4)................................. -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Operating income (loss)................ 50.0 38.9 43.2 (22.1 ) 53.9 50.9
Total interest expense..................... 26.0 26.1 22.8 19.6 18.2 37.2
------- ------- ------- ------- ------- -------
Pre-tax earnings (loss) before dividing
with Pro-Fac......................... 24.0 12.8 20.4 (41.7 ) 35.7 13.7
Pro-Fac share of earnings (loss)........... 11.5 5.9 9.5 (21.8 ) 16.9 6.9
------- ------- ------- ------- ------- -------
Income (loss) before taxes and
cumulative effect of an accounting
change............................... 12.5 6.9 10.9 (19.9 ) 18.8 6.8
Provision for taxes........................ 5.2 3.2 4.8 3.9 8.7 3.8
------- ------- ------- ------- ------- -------
Net income (loss) before cumulative
effect of an accounting change....... 7.3 3.7 6.1 (23.8 ) 10.1 3.0
Cumulative effect of an accounting
change................................... 4.3 -- -- -- -- --
------- ------- ------- ------- ------- -------
Net income (loss)...................... $ 11.6 $ 3.7 $ 6.1 $(23.8 ) $ 10.1 $ 3.0
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Ratio of earnings to fixed charges(5)...... 1.47x 1.26x 1.46x -- (6) 1.98x 1.14x
BALANCE SHEET DATA:
Working capital............................ $121.4 $106.8 $101.7 $100.4 $104.0
Total assets............................... 567.1 557.9 529.7 493.7 446.9
Total debt(7).............................. 396.7 387.4 357.7 316.3 271.6
Shareholders' equity....................... 102.5 107.3 104.5 75.7 80.9
SELECTED OTHER DATA:
Adjusted EBITDA(8)......................... $ 76.8 $ 69.1 $ 73.1 $ 69.4 $ 75.3 $77.0
Depreciation and amortization of fixed
assets................................... 22.2 24.4 24.4 25.4 22.3 19.7
Amortization of intangibles(9)............. 4.6 5.8 5.5 5.1 3.4 6.4
Capital expenditures(10)................... 40.0 24.9 16.2 21.5 19.5 19.5
SELECTED RATIOS:
Adjusted EBITDA/total interest expense..... 2.95x 2.65x 3.21x 3.54x 4.14x 2.07x
Adjusted EBITDA less capital
expenditures/total interest expense...... 1.42x 1.69x 2.50x 2.44x 3.07x 1.55x
Total debt/Adjusted EBITDA................. 5.17x 5.61x 4.89x 4.56x 3.61x 4.46x
<CAPTION>
THREE MONTHS ENDED
----------------------------------
SEPTEMBER 24, 1994
------------------
SEPTEMBER 25, PRO
1993 ACTUAL FORMA(1)
------------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $210.1 $176.8 $174.5
Cost of sales.............................. 153.1 126.8 125.3
------ ------- -------
Gross profit........................... 57.0 50.0 49.2
Selling, administrative and general........ 46.3 38.0 36.1
Amortization of unallocated excess of
purchase price over net assets
acquired................................. -- -- 1.2
Restructuring including net loss (gain)
from division disposals(2)............... -- 8.4 --
Change in control expenses(3).............. -- 1.8 --
(Gain) on assets resulting from fire
claim(4)................................. -- (6.5 ) --
------ ------- -------
Operating income (loss)................ 10.7 8.3 11.9
Total interest expense..................... 4.8 5.1 9.9
------ ------- -------
Pre-tax earnings (loss) before dividing
with Pro-Fac......................... 5.9 3.2 2.0
Pro-Fac share of earnings (loss)........... 2.8 1.5 1.0
------ ------- -------
Income (loss) before taxes and
cumulative effect of an accounting
change............................... 3.1 1.7 1.0
Provision for taxes........................ 1.9 1.4 0.6
------ ------- -------
Net income (loss) before cumulative
effect of an accounting change....... 1.2 0.3 0.4
Cumulative effect of an accounting
change................................... -- -- --
------ ------- -------
Net income (loss)...................... $ 1.2 $ 0.3 $ 0.4
------ ------- -------
------ ------- -------
Ratio of earnings to fixed charges(5)...... 1.62x 1.32x 1.10x
BALANCE SHEET DATA:
Working capital............................ $101.8 $125.8
Total assets............................... 524.4 681.4
Total debt(7).............................. 351.1 427.8
Shareholders' equity....................... 79.9 134.6
SELECTED OTHER DATA:
Adjusted EBITDA(8)......................... $ 17.2 $ 17.5 $ 18.1
Depreciation and amortization of fixed
assets................................... 5.7 4.7 4.6
Amortization of intangibles(9)............. 0.8 0.8 1.6
Capital expenditures(10)................... 4.5 5.4 5.4
SELECTED RATIOS:
Adjusted EBITDA/total interest expense..... 3.58x 3.43x 1.83x
Adjusted EBITDA less capital
expenditures/total interest expense...... 2.65x 2.37x 1.28x
Total debt/Adjusted EBITDA................. 5.56x(11) 5.02x(11 ) 5.91x(11)
</TABLE>
(footnotes on next page)
34
<PAGE>
(footnotes from previous page)
(1) For information regarding the pro forma data, see 'Pro Forma Financial Data
of the Company.'
(2) In fiscal 1993, the Company incurred restructuring charges of $61.0 million
(before dividing such charges with Pro-Fac and before taxes), which included
the loss incurred on the sale of the Lucca frozen entree business,
anticipated losses on the sale of the meat snacks and Hiland potato chips
businesses, and other costs anticipated in conjunction with the
restructuring program. Virtually all of this charge was a revaluation of
assets, rather than cash expense. During fiscal 1994, the Company sold the
oats operations of National Oats realizing a gain of $10.9 million (before
dividing such gain with Pro-Fac and before taxes), which was offset by a
$3.1 million charge (before dividing such charge with Pro-Fac and before
taxes) to adjust previous estimates recorded regarding these restructuring
activities. During the first quarter of fiscal 1995, the Company incurred a
restructuring charge of $8.4 million (before dividing such charge with
Pro-Fac and before taxes) to reflect the estimated impact of the potential
sale of certain assets of the Nalley's U.S. Chips and Snacks operation and
other expenses relating to the disposal of this operation.
(3) In fiscal 1994 and the first quarter of fiscal 1995 the Company expensed
$3.5 million and $1.8 million, respectively, in each case before dividing
such charges with Pro-Fac and before taxes, for legal, accounting,
investment banking and other expenses in connection with the change of
control issue. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company.'
(4) In the first quarter of fiscal 1995, the Company realized a gain of $6.5
million (before dividing such gain with Pro-Fac and before taxes),
representing insurance proceeds for the replacement value in excess of the
depreciated value of the building and equipment destroyed by fire on July 7,
1994 at the Southern division.
(5) For purposes of calculating earnings to fixed charges, earnings are
determined by adding fixed charges to pre-tax earnings (loss) after dividing
with Pro-Fac. On a pro forma basis, earnings are determined by adding fixed
charges to pre-tax earnings (loss) after dividing with Pro-Fac less
undistributed earnings of the Bank. Fixed charges consist of interest
expense and the interest component of rental obligations.
(6) Earnings were inadequate to cover fixed charges by $20.0 million in fiscal
1993.
(7) Total debt is defined as the sum of (i) the current and long-term debt due
to Pro-Fac, (ii) the current and long-term debt due to others, including
notes payable and borrowings under the Seasonal Facility, if any, (iii) the
current and long-term capital lease obligations, (iv) the other amounts due
to Pro-Fac and (v) the finance receivable relating to intangibles owed to
Pro-Fac, which was $53.4 million, $55.8 million, $53.4 million, $26.5
million, $24.9 and $24.5 million at June 29, 1990, June 28, 1991, June 26,
1992, June 26, 1993, June 25, 1994 and September 24, 1994, respectively, and
would have been zero at September 24, 1994, on a pro forma basis, after
giving effect to Transactions.
(8) Adjusted EBITDA is defined as the sum of (i) pre-tax earnings (loss) before
dividing with Pro-Fac, (ii) total interest expense, (iii) depreciation and
amortization of fixed assets and (iv) amortization of intangibles. Adjusted
EBITDA excludes the nonrecurring restructuring charge of $61.0 million in
fiscal 1993, the nonrecurring restructuring gain of $7.8 million in fiscal
1994, the nonrecurring restructuring charge of $8.4 million and the
nonrecurring gain on assets resulting from the fire claim of $6.5 million in
the first quarter of fiscal 1995 and the $3.5 million and $1.8 million
charges in fiscal 1994 and the first quarter of fiscal 1995, respectively,
relating to legal and advisory costs incurred in connection with the change
of control. Adjusted EBITDA is presented not as an alternative measure of
operating results or cash flow from operations (as determined in accordance
with generally accepted accounting principles), but rather to provide
additional information related to the debt servicing ability of the Company.
(9) Amortization of intangibles is defined as the sum of amortization of
goodwill and intangibles, including the amount of the finance receivable
relating to goodwill recognized by Pro-Fac. Through the provisions of the
earnings split, amortization of intangibles has been recognized equally
between
(footnotes continued on next page)
35
<PAGE>
(footnotes continued from previous page)
the Company and Pro-Fac in the amounts of $2.3 million, $2.9 million, $2.8
million, $2.6 million, $1.7 million and $0.4 million and $0.4 million for
fiscal 1990, 1991, 1992, 1993 and 1994, the first quarter of fiscal 1994 and
the first quarter of fiscal 1995, respectively.
(10) Includes capital expenditures of the Company of $5.7 million, $1.5 million,
$0.6 million, $8.4 million, $9.5 million, $4.5 million and $4.5 million for
fiscal 1990, 1991, 1992, 1993 and 1994, the first quarter of fiscal 1994
and the first quarter of fiscal 1995, respectively, and capital
expenditures of Pro-Fac of $34.3 million, $23.4 million, $15.6 million,
$13.1 million, $10.0 million, $0.0 million and $0.9 million for fiscal
1990, 1991, 1992, 1993 and 1994, the first quarter of fiscal 1994 and the
first quarter of fiscal 1995, respectively. Historically, under the
Integrated Agreement, the Company financed its purchases of assets through
Pro-Fac.
(11) The ratio has been presented on an annualized basis. Adjusted EBITDA for
the three months ended September 25, 1993 and September 24, 1994 has been
annualized in computing this ratio and therefore does not take into account
seasonal factors that affect Adjusted EBITDA.
36
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PRO-FAC
The following table sets forth selected historical financial data of
Pro-Fac for the periods indicated. The information should be read in conjunction
with the Pro-Fac Financial Statements and related notes thereto appearing
elsewhere herein and 'Management's Discussion and Analysis of Financial
Condition and Results of Operations of Pro-Fac.'
The selected historical financial data for each of the years ended June 26,
1992, June 26, 1993 and June 25, 1994 and as of June 26, 1993 and June 26, 1994
have been derived from Pro-Fac's audited financial statements included elsewhere
herein. The selected historical financial information for each of the years
ended June 29, 1990 and June 28, 1991 and as of June 29, 1990, June 28, 1991 and
June 26, 1992 have been derived from Pro-Fac's audited financial statements not
included herein. The financial data for the three months ended September 25,
1993 and September 24, 1994 and as of September 24, 1994 are unaudited, but in
the opinion of Pro-Fac reflect all adjustments necessary for a fair presentation
of such data. The data for the three months ended September 24, 1994 are not
necessarily indicative of results of operations for fiscal 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------
JUNE 25, 1994
JUNE 29, JUNE 28, JUNE 26, JUNE 26, -----------------------
1990 1991 1992 1993 ACTUAL PRO FORMA(1)
-------- -------- -------- -------- ------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ -- -- -- -- -- $ 749.2
Raw product deliveries at Commercial
Market Value........................... $ 54.9 $ 61.2 $ 64.2 $ 59.8 $ 59.2 --
Adjust to fiscal year basis.............. 5.9 1.0 (0.7) (0.1) (1.0 ) --
Additional proceeds (loss) from Curtice-
Burns under the Integrated Agreement... 11.5 5.9 9.5 (21.8) 18.6 --
Interest income.......................... 22.6 22.7 19.8 17.1 15.6 --
Other income............................. 1.1 0.9 1.4 1.9 1.9 --
-------- -------- -------- -------- ------- ------
Total revenues....................... 96.0 91.7 94.2 56.9 94.3 749.2
-------- -------- -------- -------- ------- ------
Cost of sales............................ -- -- -- -- -- 534.3
Selling, administrative and general...... -- -- -- -- -- 160.1
Total interest and other expenses........ 20.4 21.2 18.0 14.7 12.4 37.2
Commercial Market Value paid or accrued.. 60.8 62.2 63.4 59.7 58.2 --
Amortization of unallocated excess of
purchase cost over net assets
acquired............................... -- -- -- -- -- 4.7
-------- -------- -------- -------- ------- ------
Total costs and expenses............. 81.2 83.4 81.4 74.4 70.6 736.3
-------- -------- -------- -------- ------- ------
Excess (deficiency) of revenues before
taxes, dividends and allocation of net
proceeds............................... 14.8 8.3 12.8 (17.5) 23.7 12.9
Tax benefit (provision) for taxes on
income................................. (4.4) (3.0) 1.1 -- 0.8 (3.0)
-------- -------- -------- -------- ------- ------
Net income (loss) (proceeds before
dividends)......................... $ 10.4 $ 5.3 $ 13.9 $(17.5) $ 24.5 $ 9.9
-------- -------- -------- -------- ------- ------
-------- -------- -------- -------- ------- ------
Ratio of earnings to fixed charges(2).... 1.71x 1.37x 1.68x -- (3) 2.91x 1.30x
BALANCE SHEET DATA:
Investment in direct financing leases.... $146.6 $193.3 $187.3 $173.5 $141.4
Total assets............................. 385.1 385.6 361.4 324.9 296.1
Total debt............................... 192.4 178.0 164.0 168.0 127.1
Shareholders' investment and members'
capitalization......................... 124.1 126.6 133.1 109.9 123.8
<CAPTION>
THREE MONTHS ENDED
------------------------------------
SEPTEMBER 24, 1994
SEPTEMBER 25, ---------------------
1993 ACTUAL PRO FORMA(1)
------------- ------ ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ -- -- $174.5
Raw product deliveries at Commercial
Market Value........................... $ 42.3 $ 37.7 --
Adjust to fiscal year basis.............. -- -- --
Additional proceeds (loss) from Curtice-
Burns under the Integrated Agreement... 2.8 2.4 --
Interest income.......................... 4.1 4.2 --
Other income............................. 0.4 0.2 --
------ ------ ------
Total revenues....................... 49.6 44.5 174.5
------ ------ ------
Cost of sales............................ -- -- 125.3
Selling, administrative and general...... -- -- 36.3
Total interest and other expenses........ 3.4 3.1 9.9
Commercial Market Value paid or accrued.. 42.3 37.7 --
Amortization of unallocated excess of
purchase cost over net assets
acquired............................... -- -- 1.2
------ ------ ------
Total costs and expenses............. 45.7 40.8 172.7
------ ------ ------
Excess (deficiency) of revenues before
taxes, dividends and allocation of net
proceeds............................... 3.9 3.7 1.8
Tax benefit (provision) for taxes on
income................................. (0.4 ) 0.0 (1.2)
------ ------ ------
Net income (loss) (proceeds before
dividends)......................... $ 3.5 $ 3.7 $ 0.6
------ ------ ------
------ ------ ------
Ratio of earnings to fixed charges(2).... 2.22x 2.28x 1.18x
BALANCE SHEET DATA:
Investment in direct financing leases.... $130.7 --
Total assets............................. 338.1 $684.7
Total debt............................... 190.9 421.3
Shareholders' investment and members'
capitalization......................... 122.1 122.1
</TABLE>
- ------------
(1) For information regarding the pro forma data, see 'Pro Forma Financial Data
of Pro-Fac and the Company.'
(2) For purposes of calculating earnings to fixed charges, earnings are
determined by adding fixed charges to excess (deficiency) of revenues before
taxes, dividends and allocation of net proceeds less undistributed earnings
of the Bank. Fixed charges consist of interest expense.
(3) Earnings were inadequate to cover fixed charges by $19.0 million in fiscal
1993.
37
<PAGE>
PRO FORMA FINANCIAL DATA OF THE COMPANY
The following unaudited pro forma condensed consolidated financial data
(the 'Pro Forma Financial Data') of the Company is based on the historical
Consolidated Financial Statements of the Company included elsewhere herein,
adjusted to give effect to the Transactions.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company
as of September 24, 1994 gives effect to the Transactions as if they had
occurred as of September 24, 1994. The Unaudited Pro Forma Consolidated
Statements of Operations for the Year Ended June 25, 1994 and for the Three
Months Ended September 24, 1994 of the Company give effect to the Transactions
as if they had occurred as of June 27, 1993 and June 26, 1994, respectively. The
Pro Forma Financial Data do not purport to represent what the Company's results
of operations or financial position would actually have been had the
Transactions in fact occurred on such dates or to project the Company's results
of operations or financial position for any future period or date. The Pro Forma
Financial Data do not give effect to any transactions other than the
Transactions as discussed in the notes to the Pro Forma Financial Data set forth
below.
The Acquisition will be accounted for using the purchase method of
accounting. Under purchase accounting, tangible and identifiable intangible
assets acquired and liabilities assumed will be recorded at their respective
fair values. The valuations and other studies which will provide the basis for
such an allocation have not progressed to a stage where there is sufficient
information to make a final allocation in the accompanying unaudited pro forma
condensed consolidated financial data. Accordingly, the purchase accounting
adjustments made in connection with the development of the unaudited pro forma
condensed consolidated financial data are preliminary and have been made solely
for purposes of developing the unaudited pro forma condensed consolidated
financial data. The Acquisition and Merger will be accounted for as a step
acquisition. The step acquisition method of purchase accounting requires that
the percentage of assets and liabilities acquired be recorded at fair values at
the acquisition date. As Pro-Fac has historically shared in 50% of the earnings
of the Company, acquired assets will be reflected as 50% of historic value,
representing the interest of Pro-Fac retained. The remaining 50% will be
recorded at fair value, representing the interest acquired. Once an appropriate
allocation is made after the closing of the Acquisition in accordance with
generally accepted accounting principles, any remaining excess of purchase cost
over net assets acquired will be recorded as goodwill. The Company expects that
significant goodwill will be recorded as a result of the Acquisition.
The Pro Forma adjustments are based on available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. The Pro Forma Financial Data and accompanying notes should be
read in conjunction with the historical Consolidated Financial Statements of the
Company, including the notes thereto, and other financial information pertaining
to the Company included elsewhere herein.
38
<PAGE>
CURTICE-BURNS FOODS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 24, 1994
<TABLE>
<CAPTION>
PRO FORMA
----------------------------------------
ACQUISITION
AND OLD
CURTICE-BURNS NOTES
FOODS, INC. DIVISION OFFERING
(HISTORICAL) DISPOSALS(a) ADJUSTMENTS TOTAL
------------- ------------ ----------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Inventory.................................................... $222.4 $(1.5) $220.9
Accounts receivable trade.................................... 65.1 (3.2) 61.9
Other current assets......................................... 34.2 $ 0.5(e)(i) 34.7
------------- ------ ----------- ------
Total current assets.................................... 321.7 (4.7) 0.5 317.5
Net property, plant and equipment................................. 160.3 (0.5) 159.8
Net assets available for disposal................................. 3.4 3.4
Goodwill and other intangibles.................................... 24.5 0.0(c)(g) 24.5
Unallocated excess of purchase cost over net assets acquired...... 132.0(g) 132.0
Other assets...................................................... 17.9 26.3(e)(g) 44.2
------------- ------ ----------- ------
Total assets............................................ $524.4 $(1.8) $158.8 $681.4
------------- ------ ----------- ------
------------- ------ ----------- ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable................................................ $ 40.0 $(40.0)(d)
Seasonal Facility under New Credit Agreement................. 78.5(b) $ 78.5
Current portion of long-term debt under New Credit
Agreement.................................................. 8.0(b) 8.0
Current portion of obligations under Pro-Fac capital
leases..................................................... 17.7 (17.7)(c)
Current portion of Pro-Fac long-term debt.................... 14.0 (14.0)(c)
Current portion of other long-term debt and capital leases... 1.4 1.7(j) 3.1
Due to Pro-Fac............................................... 49.3 (42.8)(c)(f) 6.5
Accounts payable............................................. 53.5 $(1.4) 52.1
Accruals and other current liabilities....................... 44.0 (0.4) (0.1)(j)(k) 43.5
------------- ------ ----------- ------
Total current liabilities............................... 219.9 (1.8) (26.4) 191.7
Long-term debt under New Credit Agreement:
Acquisition Facility:
Term Loan............................................... 72.0(b) 72.0
Term Loan Facility...................................... 97.5(b) 97.5
Notes............................................................. 160.0(b) 160.0
Long-term debt due Pro-Fac........................................ 89.0 (89.0)(c)
Obligations under Pro-Fac capital leases.......................... 113.1 (113.1)(c)
Long-term debt due others and obligations under other capital
leases.......................................................... 2.2 2.2
Other long-term liabilities....................................... 20.3 3.1(g)(k) 23.4
------------- ------ ----------- ------
Total liabilities....................................... 444.5 (1.8) 104.1 546.8
Shareholders' equity:
Common stock................................................. 22.9 111.7(h) 134.6(l)
Retained earnings............................................ 57.0 (57.0)(h)
------------- ------ ----------- ------
Total shareholders' equity.............................. 79.9 54.7 134.6
------------- ------ ----------- ------
Total liabilities and shareholders' equity.............. $524.4 $(1.8) $158.8 $681.4
------------- ------ ----------- ------
------------- ------ ----------- ------
</TABLE>
See accompanying notes to the pro forma consolidated financial data.
39
<PAGE>
CURTICE-BURNS FOODS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 25, 1994
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
ACQUISITION AND
CURTICE-BURNS OLD NOTES
FOODS, INC. DIVISION OFFERING
(HISTORICAL) DISPOSALS ADJUSTMENTS TOTAL
------------- --------- --------------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales............................................ $829.1 $(79.9)(a) $749.2
Cost of sales........................................ 592.6 (58.3)(a) 534.3(e)
------------- --------- ------
Gross profit.................................... 236.5 (21.6) 214.9
Selling, administrative and general.................. 186.9 (24.0)(a) $(3.6)(b)(c) 159.3(e)
Amortization of unallocated excess of purchase cost
over net assets acquired........................... 4.7(b) 4.7
Restructuring including net (gain)/loss from division
disposals.......................................... (7.8) 7.8(h)
Change in control expenses........................... 3.5 (3.5)(g)
------------- --------- ------- ------
Operating income (loss)......................... 53.9 2.4 (5.4) 50.9
Total interest expense............................... 18.2 19.0(d) 37.2
------------- --------- ------- ------
Pre-tax earnings before dividing with Pro-Fac... 35.7 2.4 (24.4) 13.7
Pro-Fac share of earnings (loss)..................... 16.9 1.2(f) (11.2)(f) 6.9
------------- --------- ------- ------
Income (loss) before taxes...................... 18.8 1.2 (13.2) 6.8
Provision (benefit) for taxes........................ 8.7 0.5(i) (5.4)(i) 3.8
------------- --------- ------- ------
Net income (loss)............................... $ 10.1 $ 0.7 $(7.8) $ 3.0
------------- --------- ------- ------
------------- --------- ------- ------
</TABLE>
CURTICE-BURNS FOODS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 24, 1994
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
ACQUISITION AND
CURTICE-BURNS OLD NOTES
FOODS, INC. DIVISION OFFERING
(HISTORICAL) DISPOSALS ADJUSTMENTS TOTAL
------------- --------- --------------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales............................................ $176.8 $(2.3)(a) $174.5
Cost of sales........................................ 126.8 (1.5)(a) 125.3(e)
------------- --------- ------
Gross profit.................................... 50.0 (0.8) 49.2
Selling, administrative and general.................. 38.0 (1.2)(a) $(0.7)(b)(c) 36.1(e)
Amortization of unallocated excess of purchase cost
over net assets acquired........................... 1.2(b) 1.2
Restructuring including net (gain)/loss from division
disposals.......................................... 8.4 (8.4)(h)
(Gain) on assets resulting from fire claim........... (6.5) 6.5(h)
Change in control expenses........................... 1.8 (1.8)(g)
------------- --------- ------- ------
Operating income (loss)......................... 8.3 0.4 3.2 11.9
Total interest expense............................... 5.1 4.8(d) 9.9
------------- --------- ------- ------
Pre-tax earnings before dividing with Pro-Fac... 3.2 0.4 (1.6) 2.0
Pro-Fac share of earnings (loss)..................... 1.5 0.2(f) (0.7)(f) 1.0
------------- --------- ------- ------
Income (loss) before taxes...................... 1.7 0.2 (0.9) 1.0
Provision (benefit) for taxes........................ 1.4 0.1(i) (0.9)(i) 0.6
------------- --------- ------- ------
Net income (loss)............................... $ 0.3 $ 0.1 $ 0.0 $ 0.4
------------- --------- ------- ------
------------- --------- ------- ------
</TABLE>
See accompanying notes to the pro forma consolidated financial data.
40
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA
NOTE 1 -- BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 24, 1994 has been presented assuming the Merger of the Company and
PFAC occurred as of September 24, 1994. The unaudited Pro Forma Consolidated
Statements of Operations for the Year Ended June 25, 1994 and for the Three
Months Ended September 24, 1994 have been presented assuming the Merger was
consummated as of June 27, 1993 and June 26, 1994, respectively. The unaudited
pro forma financial information should be read in conjunction with the
historical financial statements and notes thereto of the Company and Pro-Fac
included elsewhere in this document.
NOTE 2 -- UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 24, 1994 ADJUSTMENTS
(a) To reflect anticipated net realizable value and related adjustments
from the sale of the Nalley's U.S. Chips and Snacks operations, expected to
occur in fiscal 1995.
(b) To reflect the issuance by the Company of $160.0 million in aggregate
principal amount of Notes, due 2005, bearing interest at an estimated rate of
12.25% and borrowings of $256.0 million under the New Credit Agreement. The New
Credit Agreement includes (i) an $80.0 million Term Loan, which was fully drawn
on the Closing Date, with a 10 year term (the current portion of which is $8.0
million), bearing an interest rate, at the Company's option, of (A) the relevant
London interbank offered rate plus 2.60%, (B) the relevant prime rate plus 0.50%
or (C) the relevant U.S. Treasury Rate plus 3.00%, which rate is assumed to be
8.5%; (ii) a $120.0 million Term Loan Facility, approximately $97.5 million of
which has been or will be drawn in connection with the Transactions, payable
during the first five years in annual installments in an amount equal to the
'annual cash sweep' (as defined in the New Credit Agreement) for the preceding
fiscal year (there was no amount of annual cash sweep for the quarter ended
September 24, 1994; accordingly, a current portion of long-term debt is not
reflected in the unaudited pro forma condensed consolidated balance sheet), and
payable thereafter in ten equal, consecutive semi-annual installments, bearing
an interest rate, at the Company's option of (A) the relevant London interbank
offered rate plus 2.60%, (B) the relevant prime rate plus 0.50% or (C) the
relevant U.S. Treasury Rate plus 3.00%, which rate is assumed to be 8.0% and
(iii) an $86.0 million Seasonal Facility, $78.5 million of which would have been
drawn as of September 24, 1994, after giving effect to the Transactions,
borrowings under which mature 18 months after the Closing Date, except that for
15 consecutive calendar days before the end of fiscal 1995, the borrowings under
such facility must be zero, bearing an interest rate at the Company's option of
(A) the relevant London interbank offered rate plus 1.75%, (B) the relevant
prime rate minus 0.25% or (C) the relevant U.S. Treasury Rate plus 2.00%, which
rate is assumed to be the same as the actual rate for seasonal borrowings during
the first quarter of fiscal 1995. The assumed rates for the Acquisition Facility
reflect the Bank's extension under the New Credit Agreement of certain fixed
rates selected by the Company earlier this year. For a description of the
indebtedness under the New Credit Agreement, see 'Description of Certain
Indebtedness -- New Credit Agreement.'
(c) To reflect the elimination of certain outstanding amounts due to
Pro-Fac from the Company of $303.7 million, including the repurchase by the
Company of the finance receivable related to intangibles held by Pro-Fac of
$24.5 million and other amounts as follows: (i) current portion of obligations
under Pro-Fac capital leases of $17.7 million; (ii) current portion of Pro-Fac
long-term debt in the amount of $14.0 million; (iii) certain amounts due to
Pro-Fac totalling $42.8 million (which includes borrowings under seasonal debt,
which has been refinanced with borrowings under the New Credit Agreement); (iv)
long-term debt due to Pro-Fac of $89.0 million; (v) obligations under Pro-Fac
capital leases totalling $113.1 million; and (vi) the $2.6 million credited to
Pro-Fac upon consummation of the Transactions as a result of the resolution of
the disputed matter regarding legal, accounting, investment banking and other
expenses incurred by the Company in connection with the change of control.
(d) To reflect repayment of seasonal debt, which has been refinanced with
borrowings under the New Credit Agreement.
41
<PAGE>
(e) To reflect the transfer of the investment in the Bank to the Company,
including the current portion of $1.3 million and the long-term portion of $20.0
million. This transfer is required under the provisions of the New Credit
Agreement and reflects a capital contribution by Pro-Fac. See 'Certain
Transactions -- Equity Ownership in Springfield Bank for Cooperatives.'
(f) To reflect the crediting to Pro-Fac of $2.6 million upon consummation
of the Transactions as a result of the settlement of the disputed matter
regarding legal, accounting, investment banking and other expenses incurred in
fiscal 1994 and the first quarter of fiscal 1995 by the Company in connection
with the change of control.
(g) Under purchase accounting, tangible and identifiable intangible assets
acquired will be recorded at their respective fair values. Current information
regarding the fair values of assets to be acquired is not available. As such, no
allocation of the excess of purchase cost over net assets acquired has been made
for purposes of this pro forma presentation. The valuations and other studies
which will provide the basis for such an allocation have not progressed to a
stage where there is sufficient information to make a final allocation in the
accompanying unaudited pro forma condensed consolidated financial data.
Accordingly, the purchase accounting adjustments made in connection with the
development of the unaudited pro forma condensed consolidated financial data are
preliminary and have been made solely for purposes of developing the unaudited
pro forma condensed consolidated financial data. Once an appropriate allocation
is made, any remaining excess of purchase cost over net assets acquired will be
recorded as goodwill. The acquisition and merger will be accounted for as a step
acquisition. The step acquisition method of purchase accounting requires that
the percentage of assets and liabilities acquired be recorded at fair values at
the acquisition date. As Pro-Fac has historically shared in 50% of the earnings
of the Company, acquired assets will be reflected at 50% of historic value,
representing the interest of Pro-Fac retained. The remaining 50% will be
recorded at fair value, representing the interest acquired. It is expected that
significant goodwill in addition to existing goodwill retained will be recorded
as a result of the Merger.
(h) To reflect the elimination of the historical shareholders' equity
accounts of the Company of $22.9 million for the common stock and $57.0 million
of retained earnings, and to reflect the capital contribution of approximately
$134.6 million by Pro-Fac in conjunction with the Merger.
(i) To reflect the elimination of debt issuance costs of $0.8 million
relating to debt repaid in connection with the Merger.
(j) To reflect (i) employee severance and retirement benefits for certain
employees incurred in conjunction with the Merger in the amount of $0.7 million
and (ii) the reclassification of previously accrued retirement benefits
totalling $1.0 million. Such amounts are treated as Senior Indebtedness under
the Indenture.
(k) To reflect a reclassification for the income tax effect of the pro
forma adjustments based on an estimated marginal income tax rate of 40% in the
amount of $0.9 million.
42
<PAGE>
(l) The amount of common stock as reflected in the unaudited pro forma
condensed consolidated balance sheet is summarized as follows:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Class A and Class B Common Stock, prior to Merger.................................. $ 22.9
Adjustments:
To reflect elimination of historical common stock............................. (22.9)
To reflect the capital contribution of Pro-Fac:
Capital lease obligations and certain debt due Pro-Fac................... 305.1
Accounts payable due to Pro-Fac to be canceled at closing................ 5.1
Accounts payable due to Pro-Fac not to be canceled at closing............ (6.5)
Repayment in part of capital lease obligations and certain debt due
Pro-Fac................................................................ (193.7)
--------
Sub-total........................................................... 110.0
Transfer of the investment in the Bank from Pro-Fac to the Company....... 21.3
Other.................................................................... 3.3
--------
Common stock, after the Merger...................................... $ 134.6
--------
--------
</TABLE>
NOTE 3 -- UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR YEAR
ENDED JUNE 25, 1994 ADJUSTMENTS
(a) To reflect the division disposals completed during fiscal 1994 and to
reflect the elimination of the fiscal 1994 operating activities of the Nalley's
U.S. Chips and Snacks operation anticipated to be sold. In conjunction with this
decision, the Company has recognized a charge of approximately $8.4 million
(pre-tax and pre-earnings split with Pro-Fac) during the first quarter of fiscal
1995. Such charge has not been reflected in the unaudited Pro Forma Consolidated
Statement of Operations.
(b) To reflect $4.7 million of additional amortization assuming an
estimated weighted average life of 28 years. Depreciation and amortization
recorded by the Company subsequent to the Merger will be determined based upon
the fair values of acquired assets and their related lives as ultimately
recorded under purchase accounting. Additionally, to reduce previously recorded
amortization of goodwill and other intangibles by $1.7 million.
(c) To reflect the fiscal 1994 patronage dividend from the Bank of $1.9
million.
(d) To reflect the net adjustment to interest expense calculated as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Notes at rate of 12.25%.................................................. $19.6
Borrowings under New Credit Agreement:
$80.0 million Term Loan at assumed rate of 8.3%..................... 6.7
$97.5 million Term Loan Facility at assumed rate of 7.8%............ 7.6
Amortization of debt issuance costs (10 year period)..................... 0.8
Less historical interest expense net adjustment.......................... (15.4)
Less amortization of debt issuance costs related to debt repaid.......... (0.3)
------
Net adjustment to interest expense..................................... $19.0
------
------
</TABLE>
(e) Cost of sales and other selling, administrative and general expenses
includes $21.4 million of depreciation and amortization expenses (including $1.7
million of amortization of goodwill and intangibles, which is not extinguished
as a result of the Transactions).
(f) Reflects the assumption that the Pro-Fac Marketing Agreement will, in
effect, continue a comparable 50% earnings split with Pro-Fac.
(g) To reflect the elimination of change in control expenses incurred by
the Company during fiscal 1994.
(h) To reflect the elimination of the restructuring charge, including net
gains from division disposals, incurred by the Company during fiscal 1994.
43
<PAGE>
(i) To reflect the income tax effect of the pro forma adjustments
(exclusive of non-deductible expenses) based on an assumed marginal income tax
rate of 40%.
NOTE 4 -- UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 24, 1994 ADJUSTMENTS
(a) To reflect the elimination of the fiscal 1995 operating activities of
the Nalley's U.S. Chips and Snacks operation prior to the disposition of this
operation. The operation is anticipated to be sold during fiscal 1995.
(b) To reflect $1.2 million of additional depreciation and amortization
assuming an estimated weighted average life of 28 years. Depreciation and
amortization recorded by the Company subsequent to the Merger will be determined
based upon the fair values of acquired assets and their related lives as
ultimately recorded under purchase accounting. Additionally, to reduce
previously recorded amortization of goodwill and other intangibles by $0.4
million.
(c) To reflect the patronage dividend from the Bank of $0.3 million for the
three month period ended September 24, 1994.
(d) To reflect the net adjustment to interest expense calculated as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Notes at rate of 12.25%............................................................ $ 4.9
Borrowings under New Credit Agreement:
$80.0 million Term Loan at assumed rate of 8.5%............................... 1.7
$97.5 million Term Loan Facility at assumed rate of 8.0%...................... 2.0
Amortization of debt issuance costs (10 year period)............................... 0.2
Less historical interest expense net adjustment.................................... (3.8)
Less amortization of debt issuance costs related to debt repaid.................... (0.2)
------
Net adjustment to interest expense............................................ $ 4.8
------
------
</TABLE>
(e) Cost of sales and other selling, administrative and general expenses
includes $5.0 million of depreciation and amortization expenses (including $0.4
million of amortization of goodwill and intangibles, which is not extinguished
as a result of the Transactions).
(f) Reflects the assumption that the Pro-Fac Marketing Agreement will, in
effect, continue a comparable 50% earnings split with Pro-Fac.
(g) To reflect the elimination of change in control expenses incurred by
the Company during the three month period ended September 24, 1994.
(h) To reflect the elimination of the restructuring charge, including net
gains from division disposals, and the elimination of the gain on assets
resulting from the Southern Frozen Foods fire claim incurred by the Company
during the three month period ended September 24, 1994.
(i) To reflect the income tax effect of the pro forma adjustments
(exclusive of non-deductible expenses) based on an assumed marginal income tax
rate of 40%.
44
<PAGE>
PRO FORMA FINANCIAL DATA OF PRO-FAC AND THE COMPANY
The following unaudited pro forma condensed combined financial data (the
'Pro Forma Combined Financial Data') of Pro-Fac and the Company is based on the
historical Financial Statements of Pro-Fac and the historical Consolidated
Financial Statements of the Company included elsewhere herein, adjusted to give
effect to the Transactions.
The Unaudited Pro Forma Condensed Combined Balance Sheet of Pro-Fac and the
Company as of September 24, 1994 gives effect to the Transactions as if they had
occurred as of September 24, 1994. The Unaudited Pro Forma Combined Statements
of Operations of Pro-Fac and the Company for the Year Ended June 25, 1994 and
the Three Months Ended September 24, 1994 give effect to the Transactions as if
they had occurred as of June 27, 1993 and June 26, 1994, respectively. The Pro
Forma Combined Financial Data do not purport to represent what the combined
results of operations or financial position of Pro-Fac and the Company would
actually have been had the Transactions in fact occurred on such dates or to
project the combined results of operations or financial position of Pro-Fac and
the Company for any future period or date. The Pro Forma Combined Financial Data
do not give effect to any transactions other than the Transactions as discussed
in the notes to the Pro Forma Combined Financial Data set forth below.
The Acquisition will be accounted for using the purchase method of
accounting. Under purchase accounting, tangible and identifiable intangible
assets acquired and liabilities assumed will be recorded at their respective
fair values. The valuations and other studies which will provide the basis for
such an allocation have not progressed to a stage where there is sufficient
information to make a final allocation in the accompanied unaudited pro forma
condensed combined financial data. Accordingly, the purchase accounting
adjustments made in connection with the development of the unaudited pro forma
condensed combined financial data are preliminary and have been made solely for
purposes of developing the unaudited pro forma condensed combined financial
data. The Acquisition and Merger will be accounted for as a step acquisition.
The step acquisition method of purchase accounting requires that the percentage
of assets and liabilities acquired be recorded at fair values at the acquisition
date. As Pro-Fac has historically shared in 50% of the earnings of the Company,
acquired assets will be reflected as 50% of historic value, representing the
interest of Pro-Fac retained. The remaining 50% will be recorded at fair value,
representing the interest acquired. Once an appropriate allocation is made after
the closing of the Acquisition in accordance with generally accepted accounting
principles, any remaining excess of purchase cost over net assets acquired will
be recorded as goodwill. The Company expects that significant goodwill will be
recorded as a result of the Acquisition.
The Pro Forma adjustments are based on available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. The Pro Forma Combined Financial Data of Pro-Fac and the
Company and accompanying notes should be read in conjunction with the historical
Financial Statements of Pro-Fac and the historical Consolidated Financial
Statements of the Company, including the notes thereto, and other financial
information pertaining to Pro-Fac and the Company included elsewhere herein.
45
<PAGE>
PRO-FAC COOPERATIVE, INC. AND CURTICE-BURNS FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 24, 1994
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
PRO-FAC ACQUISITION
COOPERATIVE, CURTICE-BURNS AND OLD NOTES
INC. FOODS, INC. DIVISION OFFERING
(HISTORICAL) (HISTORICAL) DISPOSALS(a) ADJUSTMENTS COMBINED
------------ ------------- ------------ ------------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Receivable from the Company..................... $ 51.9 $ (51.9)(c)
Current portion of long-term loans receivable
from the Company.............................. 14.0 (14.0)(c)
Current portion of investment in direct
financing leases.............................. 17.7 (17.7)(c)
Inventory....................................... $222.4 $ (1.5) $220.9
Accounts receivable trade....................... 65.1 (3.2) 61.9
Other current assets............................ 5.0 34.2 (4.1)(f)(h) 35.1
------ ------ ------ ------------- --------
Total current assets........................ 88.6 321.7 (4.7) (87.7) 317.9
Long-term loans receivable from the Company......... 89.0 (89.0)(c)
Long-term portion of investment in direct financing
leases............................................ 113.1 (113.1)(c)
Finance receivable related to intangibles........... 24.5 (24.5)(c)
Net property, plant and equipment................... 160.3 (0.5) 159.8
Net assets available for disposal................... 3.4 3.4
Goodwill and other intangibles...................... 24.5 0.0(c)(f) 24.5
Unallocated excess of purchase cost over net assets
acquired.......................................... 132.0(f) 132.0
Other assets........................................ 22.9 17.9 6.3(f) 47.1
------ ------ ------ ------------- --------
Total assets................................ $338.1 $524.4 $ (1.8) $(176.0) $684.7
------ ------ ------ ------------- --------
------ ------ ------ ------------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable................................... $ 50.0 $ 40.0 $ (90.0)(d)
Seasonal Facility under New Credit Agreement.... 78.5(b) $ 78.5
Current portion of long-term debt under New
Credit Agreement.............................. 8.0(b) 8.0
Current portion of obligations under Pro-Fac
capital leases................................ 17.7 (17.7)(c)
Current portion of Pro-Fac long-term debt....... 14.0 14.0)(c)
Current portion of other long-term debt......... 14.0 1.4 (12.3)(d)(i) 3.1
Due to Pro-Fac.................................. 49.3 (49.3)(c)(e)
Accounts payable................................ 2.3 53.5 $ (1.4) 54.4
Accruals and other current liabilities.......... 22.3 44.0 (0.4) (2.9)(d)(i)(j) 63.0
------ ------ ------ ------------- --------
Total current liabilities................... 88.6 219.9 (1.8) (99.7) 207.0
Long-term debt due others........................... 126.9 (126.9)(d)
Long-term debt under New Credit Agreement:
Acquisition Facility:
Term Loan................................... 72.0(b) 72.0
Term Loan Facility.......................... 97.5(b) 97.5
Notes............................................... 160.0(b) 160.0
Long-term debt due Pro-Fac.......................... 89.0 (89.0)(c)
Obligations under Pro-Fac capital leases............ 113.1 (113.1)(c)
Long-term debt due others and obligations under
other capital leases.............................. 2.2 2.2
Other long-term liabilities......................... 0.5 20.3 3.1(f)(j) 23.9
------ ------ ------ ------------- --------
Total liabilities........................... 216.0 444.5 (1.8) (96.1) 562.6
Shareholders' equity and members' capitalization:
Retained earnings allocated to members.......... 36.9 36.9
Non-qualified allocations to members............ 6.0 6.0
Capital stock:
Preferred....................................... 65.6 65.6
Common.......................................... 10.2 22.9 (22.9)(g) 10.2
Earned surplus/retained earnings.................... 3.4 57.0 (57.0)(g) 3.4
------ ------ ------ ------------- --------
Total capitalization........................ 122.1 79.9 (79.9) 122.1
------ ------ ------ ------------- --------
Total liabilities and capitalization........ $338.1 $524.4 $ (1.8) $(176.0) $684.7
------ ------ ------ ------------- --------
------ ------ ------ ------------- --------
</TABLE>
See accompanying notes to the pro forma combined financial data.
46
<PAGE>
PRO-FAC COOPERATIVE, INC. AND CURTICE-BURNS FOODS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 25, 1994
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------
PRO-FAC ACQUISITION
COOPERATIVE, CURTICE-BURNS AND OLD NOTES
INC. FOODS, INC. DIVISION OFFERING PRO FORMA
(HISTORICAL) (HISTORICAL) DISPOSALS ADJUSTMENTS COMBINED
------------ ------------- --------- ------------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales and revenues........................ $94.3 $829.1 $(79.9)(a) $(94.3)(d) $749.2
Cost of sales................................. 58.2 592.6 (58.3)(a) (58.2)(d) 534.3(g)
------ ------------- --------- ------------- ---------
Gross profit............................. 36.1 236.5 (21.6) (36.1) 214.9
Selling, administrative and general........... 0.8 186.9 (24.0)(a) (3.6)(b)(d) 160.1(g)
Amortization of unallocated excess of purchase
cost over net assets acquired............... 4.7(b) 4.7
Restructuring including net (gain) loss from
division disposals.......................... (7.8) 7.8(f)
Change in control expenses.................... 3.5 (3.5)(e)
Pro-Fac share of earnings..................... 16.9 1.2(a) (18.1)(d)
------ ------------- --------- ------------- ---------
Operating income......................... 35.3 37.0 1.2 (23.4) 50.1
Total interest expense........................ 11.6 18.2 7.4(c) 37.2
------ ------------- --------- ------------- ---------
Pre-tax earnings (loss).................. 23.7 18.8 1.2 (30.8) 12.9
(Benefit) provision for taxes................. (0.8) 8.7 0.5(h) (5.4)(h) 3.0
------ ------------- --------- ------------- ---------
Net income (loss)........................ $24.5 $ 10.1 $ 0.7 $(25.4) $ 9.9
------ ------------- --------- ------------- ---------
------ ------------- --------- ------------- ---------
</TABLE>
PRO-FAC COOPERATIVE, INC. AND CURTICE-BURNS FOODS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 24, 1994
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------
PRO-FAC ACQUISITION
COOPERATIVE, CURTICE-BURNS AND OLD NOTES
INC. FOODS, INC. DIVISION OFFERING
(HISTORICAL) (HISTORICAL) DISPOSALS ADJUSTMENTS COMBINED
------------ ------------- --------- ------------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales and revenues........................ $44.5 $176.8 $(2.3)(a) $(44.5)(d) $174.5
Cost of sales................................. 37.7 126.8 (1.5)(a) (37.7)(d) 125.3(g)
------ ------------- --------- ------------- ---------
Gross profit............................. 6.8 50.0 (0.8) (6.8) 49.2
Selling, administrative and general........... 0.2 38.0 (1.2)(a) (0.7)(b)(d) 36.3(g)
Amortization of unallocated excess of purchase
cost over net assets acquired............... 1.2(b) 1.2
Restructuring including net (gain) loss from
division disposals.......................... 8.4 (8.4)(f)
Change in control expenses.................... 1.8 (1.8)(e)
Gain on assets resulting from fire claim...... (6.5) 6.5(f)
Pro-Fac share of earnings..................... 1.5 0.2(a) (1.7)(d)
------ ------------- --------- ------------- ---------
Operating income......................... 6.6 6.8 0.2 (1.9) 11.7
Total interest expense........................ 2.9 5.1 1.9(c) 9.9
------ ------------- --------- ------------- ---------
Pre-tax earnings (loss).................. 3.7 1.7 0.2 (3.8) 1.8
Provision (benefit) for taxes................. 1.4 0.1(h) (0.9)(h) 0.6
------ ------------- --------- ------------- ---------
Net income (loss)........................ $ 3.7 $ 0.3 $ 0.1 $ (2.9) $ 1.2
------ ------------- --------- ------------- ---------
------ ------------- --------- ------------- ---------
</TABLE>
See accompanying notes to the pro forma combined financial data.
47
<PAGE>
NOTES TO THE PRO FORMA COMBINED FINANCIAL DATA
NOTE 1 -- BASIS OF PRESENTATION
The unaudited Pro Forma Condensed Combined Balance Sheet as of September
24, 1994 has been presented assuming the Merger of the Company and PFAC occurred
as of September 24, 1994. The unaudited Pro Forma Combined Statements of
Operations for the Year Ended June 25, 1994 and the Three Months Ended September
24, 1994 have been presented assuming the Merger was consummated as of June 27,
1993 and June 26, 1994, respectively. The unaudited pro forma financial
information should be read in conjunction with the historical financial
statements and notes thereto of the Company and Pro-Fac included elsewhere in
this document.
NOTE 2 -- UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER
24, 1994 ADJUSTMENTS
(a) To reflect anticipated net realizable value and related adjustments
from the sale of the Nalley's U.S. Chips and Snacks operations, expected to
occur in fiscal 1995.
(b) To reflect the issuance by the Company of $160.0 million in aggregate
principal amount of Notes, due 2005, bearing interest at an estimated rate of
12.25% and borrowings of $256.0 million under the New Credit Agreement. The New
Credit Agreement includes (i) an $80.0 million Term Loan, which was fully drawn
on the Closing Date, with a 10 year term (the current portion of which is $8.0
million), bearing an interest rate, at the Company's option, of (A) the relevant
London interbank offered rate plus 2.60%, (B) the relevant prime rate plus 0.50%
or (C) the relevant U.S. Treasury Rate plus 3.00%, which rate is assumed to be
8.5%; (ii) a $120.0 million Term Loan Facility, approximately $97.5 million of
which has been or will be drawn in connection with the Transactions, payable
during the first five years in annual installments in an amount equal to the
'annual cash sweep' (as defined in the New Credit Agreement) for the preceding
fiscal year (there was no amount of annual cash sweep for the quarter ended
September 24, 1994; accordingly, a current portion of long-term debt is not
reflected in the unaudited pro forma condensed combined balance sheet), and
payable thereafter in ten equal, consecutive semi-annual installments, bearing
an interest rate, at the Company's option of (A) the relevant London interbank
offered rate plus 2.60%, (B) the relevant prime rate plus 0.50% or (C) the
relevant U.S. Treasury Rate plus 3.00%, which rate is assumed to be 8.0% and
(iii) an $86.0 million Seasonal Facility, $78.5 million of which would have been
drawn as of September 24, 1994, after giving effect to the Transactions,
borrowings under which mature 18 months after the Closing Date, except that for
15 consecutive calendar days before the end of fiscal 1995, the borrowings under
such facility must be zero, bearing an interest rate at the Company's option of
(A) the relevant London interbank offered rate plus 1.75%, (B) the relevant
prime rate minus 0.25% or (C) the relevant U. S. Treasury Rate plus 2.00%, which
rate is assumed to be the same as the actual rate for seasonal borrowings during
the first quarter of fiscal 1995. The assumed rates for the Acquisition Facility
reflect the Bank's extension under the New Credit Agreement of certain fixed
rates selected by the Company earlier this year. For a description of the
indebtedness under the New Credit Agreement, see 'Description of Certain
Indebtedness -- New Credit Agreement.'
(c) To reflect the elimination of outstanding amounts due to Pro-Fac from
the Company of $310.2 million, including the repurchase by the Company of the
finance receivable related to intangibles held by Pro-Fac of $24.5 million and
other amounts as follows: (i) current portion of obligations under Pro-Fac
capital leases of $17.7 million; (ii) current portion of Pro-Fac long-term debt
in the amount of $14.0 million; (iii) certain amounts due to Pro-Fac totalling
$49.3 million (which includes borrowings under seasonal debt, which has been
refinanced with borrowings under the New Credit Agreement and intercompany
obligations eliminated in consolidation); (iv) long-term debt due to Pro-Fac of
$89.0 million; (v) obligations under Pro-Fac capital leases totalling $113.1
million; and (vi) the $2.6 million credited to Pro-Fac upon consummation of the
Transactions as a result of the resolution of the disputed matter regarding
legal, accounting, investment banking and other expenses incurred by the Company
in connection with the change of control.
(d) To reflect repayment of seasonal debt provided to the Company by
Pro-Fac and third parties, which debt has been refinanced under the New Credit
Agreement.
48
<PAGE>
(e) To reflect the crediting to Pro-Fac of $2.6 million upon consummation
of the Transactions as a result of the settlement of the disputed matter
regarding legal, accounting, investment banking and other expenses incurred in
fiscal 1994 and the first quarter of fiscal 1995 by the Company in connection
with the change of control.
(f) Under purchase accounting, tangible and identifiable intangible assets
acquired will be recorded at their respective fair values. Current information
regarding the fair values of assets to be acquired is not available. As such, no
allocation of the excess of purchase cost over net assets acquired has been made
for purposes of this pro forma presentation. The valuations and other studies
which will provide the basis for such an allocation have not progressed to a
stage where there is sufficient information to make a final allocation in the
accompanying unaudited pro forma condensed combined financial data. Accordingly,
the purchase accounting adjustments made in connection with the development of
the unaudited pro forma condensed combined financial data are preliminary and
have been made solely for purposes of developing the unaudited pro forma
condensed combined financial data. Once an appropriate allocation is made, any
remaining excess of purchase cost over net assets acquired will be recorded as
goodwill. The acquisition and merger will be accounted for as a step
acquisition. The step acquisition method of purchase accounting requires that
the percentage of assets and liabilities acquired be recorded at fair values at
the acquisition date. As Pro-Fac has historically shared in 50% of the earnings
of the Company, acquired assets will be reflected at 50% of historic value,
representing the interest of Pro-Fac retained. The remaining 50% will be
recorded at fair value, representing the interest acquired. It is expected that
significant goodwill in addition to existing goodwill retained will be recorded
as a result of the Merger.
(g) To reflect the elimination of the historical shareholders' equity
accounts of the Company of $22.9 million for the common stock and $57.0 million
of retained earnings, and to reflect the capital contribution of approximately
$134.6 million by Pro-Fac in conjunction with the Merger, which capital
contribution is eliminated in consolidation.
(h) To reflect the elimination of debt issuance costs of $0.8 million
relating to debt repaid in connection with the Merger.
(i) To reflect (i) employee severance and retirement benefits for certain
employees incurred in conjunction with the Merger in the amount of $0.7 million
and (ii) the reclassification of previously accrued retirement benefits
totalling $1.0 million. Such amounts are treated as Senior Indebtedness under
the Indenture.
(j) To reflect a reclassification for the income tax effect of the pro
forma adjustments based on an estimated marginal income tax rate of 40% in the
amount of $0.9 million.
NOTE 3 -- UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR
ENDED JUNE 25, 1994 ADJUSTMENTS
(a) To reflect the division disposals completed during fiscal 1994 and to
reflect the elimination of the fiscal 1994 operating activities of the Nalley's
U.S. Chips and Snacks operations anticipated to be sold. In conjunction with
this decision, the Company has recognized a charge of approximately $8.4 million
(pre-tax and pre-earnings split with Pro-Fac) during the first quarter of fiscal
1995. Such charge has not been reflected in the unaudited Pro Forma Combined
Statement of Operations.
(b) To reflect $4.7 million of additional depreciation and amortization
assuming an estimated weighted average life of 28 years. Depreciation and
amortization recorded by the Company subsequent to the Merger will be determined
based upon the fair values of acquired assets and their related lives as
ultimately recorded under purchase accounting. Additionally, to reduce
previously recorded amortization of goodwill and other intangibles by $1.7
million.
49
<PAGE>
(c) To reflect the net adjustment to interest expense calculated as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
<S> <C>
Notes at rate of 12.25%............................................................. $ 19.6
Borrowings under New Credit Agreement:
$80.0 million Term Loan at assumed rate of 8.3%................................ 6.7
$97.5 million Term Loan Facility at assumed rate of 7.8%....................... 7.6
Amortization of debt issuance costs (10 year period)................................ 0.8
Less historical interest expense net adjustment..................................... (27.0)
Less amortization of debt issue costs related to debt repaid........................ (0.3)
------
Net adjustment to interest expense............................................. $ 7.4
------
------
</TABLE>
(d) To reflect the elimination of the earnings split and other transactions
between the Company and Pro-Fac.
(e) To reflect the elimination of change in control expenses incurred
during fiscal 1994.
(f) To reflect the elimination of the restructuring charge, including net
gains from division disposals, incurred by the Company during fiscal 1994.
(g) Cost of sales and other selling, administrative and general expenses
include $21.4 million of depreciation and amortization expenses (including $1.7
million of amortization of goodwill and intangibles, which is not extinguished
as a result of the Transactions).
(h) To reflect the income tax effect of the pro forma adjustments
(exclusive of non-deductible expenses) based on an assumed marginal income tax
rate of 40%.
NOTE 4 -- UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 24, 1994 ADJUSTMENTS
(a) To reflect the elimination of the fiscal 1995 operating activities of
the Nalley's U.S. Chips and Snacks operation prior to the disposition of this
operation. The operation is anticipated to be sold during fiscal 1995.
(b) To reflect $1.2 million of additional depreciation and amortization
assuming an estimated weighted average life of 28 years. Depreciation and
amortization recorded by the Company subsequent to the Merger will be determined
based upon the fair values of acquired assets and their related lives as
ultimately recorded under purchase accounting. Additionally, to reduce
previously recorded amortization of goodwill and other intangibles by $0.4
million.
(c) To reflect the net adjustment to interest expense calculated as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
<S> <C>
Notes at rate of 12.25%............................................................. $ 4.9
Borrowings under New Credit Agreement:
$80.0 million Term Loan at assumed rate of 8.5%................................ 1.7
$97.5 million Term Loan Facility at assumed rate of 8.0%....................... 2.0
Amortization of debt issuance costs (10 year period)................................ 0.2
Less historical interest expense net adjustment..................................... (7.1)
Less amortization of debt issuance costs related to debt repaid..................... (0.2)
------
Net adjustment to interest expense............................................. $ 1.5
------
------
</TABLE>
(d) To reflect the elimination of the earnings split and other transactions
between the Company and Pro-Fac.
(e) To reflect the elimination of change in control expenses incurred by
the Company during the three month period ended September 24, 1994.
50
<PAGE>
(f) To reflect the elimination of the restructuring charge, including net
gains from division disposals, and the elimination of the gain on assets
resulting from the Southern Frozen Foods fire claim incurred by the Company
during the three month period ended September 24, 1994.
(g) Cost of sales and other selling, administrative and general expenses
includes $5.0 million of depreciation and amortization expenses (including $0.4
million of amortization of goodwill and intangibles, which is not extinguished
as a result of the Transactions).
(h) To reflect the income tax effect of the pro forma adjustments
(exclusive of non-deductible expenses) based on an assumed marginal income tax
rate of 40%.
51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
GENERAL
This discussion outlines the most significant reasons for changes in net
sales, expenses and earnings for the Company from fiscal 1992 through fiscal
1994 and the first quarter of fiscal 1995. The relevant figures are shown in the
Consolidated Financial Statements of the Company elsewhere herein. All figures
shown by business are before any allocation of corporate overhead and before
division with Pro-Fac. The historical operating results are not necessarily
indicative of the future operating results or financial condition of the
Company.
In addition to the results of operations during fiscal 1994 and the first
quarter of fiscal 1995 the Company continued a major restructuring program.
RESTRUCTURING PROGRAM
The restructuring program first initiated in fiscal 1993 was based on a
strategic foundation of five points: (i) a focus on a more limited number of
product lines and businesses for which the Company has the resources to compete
and grow profitably; (ii) a strengthening of its national sales and distribution
capability so as to better serve large regional and national customers; (iii) a
drive to true low-cost producer/distributor status, including a commitment to a
unified corporate program of information management; (iv) a continuation of the
development of one high-performance, adaptive culture for all divisions, capable
of dealing with the continuing change in the food industry; and (v) continuing
support of the historically decentralized, autonomous division management
system, operating within these overall strategic parameters.
The first step of the restructuring program was to divest businesses that
were unprofitable or declining for the Company, but would fit strategically with
other business portfolios. The businesses identified for divestiture were the
Lucca Frozen Foods business, the oats portion of the National Oats business, the
Hiland potato chips business, the meat snacks business and the Nalley's U.S.
Chips and Snacks business. The private label beverage business was sold before
the initiation of the restructuring program. Of these six businesses sold, all
but the private label beverage and oats businesses incurred significant
operating losses over the last few years. The private label beverage business
was divested in order to allow the Company to focus on a more limited number of
product lines. The National Oats business was divested because, after
experiencing record increases in sales and profitability in the oat-based
packaged and bulk cereal category during fiscal 1990, the demand for oat bran
had reached its peak and began falling off. While the National Oats business was
still profitable, the downward trend was expected to continue due to the
over-capacity situation in the oat industry. This over-capacity situation and
the Company's decision to focus on a more limited number of product lines were
the key reasons for the divestiture of the oats portion of the National Oats
business.
Information regarding businesses sold or to be sold is provided below:
Private Label Beverage. On July 20, 1992, the Company sold the private
label beverage business for $2.0 million. There was no material gain or
loss on this transaction.
Lucca Frozen Foods. On November 8, 1992, the Company divested Lucca
Frozen Foods. A loss of approximately $2.7 million was recognized on this
transaction as part of the $61.0 million restructuring charge in fiscal
1993.
National Oats. On November 19, 1993, the Company sold the oats portion
of the National Oats business for $39.0 million and transferred the popcorn
business to CMF. The sale of the oats business resulted in an approximate
$10.9 million gain in fiscal 1994.
Hiland Potato Chips. On November 22, 1993, the Company sold certain
assets of the Hiland potato chips business for approximately $3.0 million.
There was no material gain or loss on this transaction after taking into
account the fiscal 1993 restructuring charge.
Meat Snacks. On February 22, 1994, the Company sold the meat snacks
business. The Company will lease certain manufacturing facilities and
equipment and license its trademarks, trade names, etc. to the buyer until
February 1995, at which time the buyer is contractually obligated to
purchase these assets for $2.0 million. There was no material gain or loss
on this transaction after taking into account the fiscal 1993 restructuring
charge.
52
<PAGE>
Nalley's U.S. Chips and Snacks. On September 8, 1994, the Company
signed a letter of intent to sell the Nalley's U.S. Chips and Snacks
business. There can be no assurance that the transaction will be completed.
In the first quarter of fiscal 1995, the Company recognized a charge of
approximately $8.4 million in connection with the elimination of this line
of business. If the sale contemplated by the letter of intent is not
consummated by the end of December, 1994, it is anticipated that Nalley's
U.S. Chips and Snacks will discontinue operations, and the Company will
incur an additional $3.5 million charge.
The business divestitures resulted in the following charges to earnings in
fiscal 1993, fiscal 1994 and the first quarter of fiscal 1995:
Fiscal 1993 Restructuring Charge. To reflect completed and anticipated
effects of the restructuring program, the Company incurred restructuring
charges in fiscal 1993 of $61.0 million. This charge included the loss
incurred on the sale of the Lucca Frozen Foods business, anticipated losses
on the sale of the Hiland potato chips and meat snacks businesses, and
other costs anticipated in conjunction with the restructuring program.
Virtually all of this charge was a revaluation of assets, rather than cash
expense. The Company also made staff reductions in selected locations
throughout the Company. A $1.0 million accrual relating to such costs was
recorded as part of the fiscal 1993 restructuring charge.
Fiscal 1994 Restructuring Gain. Included in the fiscal 1994 results
was a net gain of $7.8 million comprised of a gain on the sale of the oats
business of $10.9 million, net of a charge of $3.1 million to adjust
previous estimates regarding activities initiated in fiscal 1993. Subject
to completion of the sale of Nalley's U.S. Chips and Snacks, the Company
will have completed its dispositions pursuant to the existing restructuring
program and does not currently plan to dispose of any other businesses.
First Quarter of Fiscal 1995 Restructuring Charge. Included in the
first quarter of fiscal 1995 results was a restructuring charge of $8.4
million to reflect the estimated impact of the potential sale of certain
assets of the Nalley's U.S. Chips and Snacks operation and other expenses
relating to the disposal of this operation. Of this amount, approximately
40% reflects non-cash charges.
DEVELOPMENTS RELATED TO CHANGE OF CONTROL OF THE COMPANY
On March 23, 1993, the Company announced that Agway Inc. ('Agway'), which
through its wholly-owned subsidiary, Agway Holdings, Inc., owned approximately
99% of the Company's Class B Shares and approximately 14% of the Class A Shares,
as of June 25, 1994, was considering the potential sale of its interest in the
Company. In August 1993, the Company's Board of Directors authorized the
Company's management, with the advice of its investment bankers, to pursue
strategic alternatives for the Company. These options included (i) negotiations
with Pro-Fac relative to Pro-Fac gaining control of the business; (ii) the
possible sale of the entire equity of the Company to a third party; and (iii)
the implementation of additional restructuring actions that may include
recapitalizing the Company to buy out Pro-Fac. Under the Integrated Agreement,
prior to the consummation of the Transactions, title to substantially all of the
Company's fixed assets was held by Pro-Fac, and Pro-Fac provided the major
portion of the financing of the Company's operations.
The Company actively explored these alternatives during fiscal 1994. On
June 8, 1994, the Company's Board of Directors voted to pursue a proposal
submitted by Dean Foods Company ('Dean Foods') to acquire all the outstanding
shares of common stock of the Company at a maximum cash price of $20.00 per
share, subject to a number of contingencies, including an agreement with Pro-Fac
covering the termination of the Integrated Agreement, an agreement with Hormel
Foods Corporation for the purchase of Nalley's (excluding Nalley's Canada Ltd.
and the Nalley's U.S. Chips and Snacks business) for $150.0 million, clearance
of the transaction by appropriate government agencies and negotiation of
definitive agreements.
On August 4, 1994, Pro-Fac submitted a proposal to the Board of Directors
of the Company to acquire the Shares for cash in the amount of $19.00 per Share.
Pro-Fac's proposal was subject to certain terms and conditions, including
receipt of approval of the Board of Directors and shareholders of the Company,
receipt of approval of a majority of Pro-Fac's members and receipt of sufficient
financing to consummate the Acquisition. In September, Pro-Fac modified its
proposal by removing several contingencies and indicating its interest in
purchasing the Shares pursuant to a tender offer.
53
<PAGE>
At its special meeting on September 27, 1994, the Board of Directors of the
Company accepted Pro-Fac's proposal. Pro-Fac and the Company entered into the
Merger Agreement on September 27, 1994. Pursuant to the Merger Agreement, the
Company notified Dean Foods that it had accepted Pro-Fac's proposal and was
terminating all negotiations with Dean Foods and other parties for the purchase
of all or part of the Company.
On October 4, 1994, Pro-Fac initiated a tender offer for all of the
Company's outstanding stock at $19.00 per share. At the expiration of the tender
offer on November 2, 1994, 6,229,442 shares of Class A and 2,046,997 shares of
Class B common stock (or approximately 94% and 99%, respectively, of the total
number of outstanding shares of Class A and Class B common stock of the Company)
had been validly tendered and not withdrawn. All such tendered shares were
accepted for payment by PFAC. On November 3, 1994, PFAC merged into the Company,
making the Company a wholly-owned subsidiary of Pro-Fac.
During fiscal 1994 and the first quarter of fiscal 1995, the Company
expensed $3.5 million and $1.8 million, respectively, of legal, accounting,
investment banking and other expenses relative to the change of control issue.
In recognizing these expenses, the Company allocated half of these amounts to
Pro-Fac as a deduction to the profit split.
RESULTS OF OPERATIONS OF THE COMPANY
The following tables illustrate the Company's results of operations by
business for the periods indicated.
NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED ---------------------------------------
----------------------------------------------------
SEPTEMBER 25, SEPTEMBER 24,
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 1993 1994
-------------- -------------- -------------- ----------------- -----------------
NET % OF NET % OF NET % OF NET % OF NET % OF
SALES TOTAL SALES TOTAL SALES TOTAL SALES TOTAL SALES TOTAL
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit........... $318.8 35.6% $317.8 36.1% $333.4 40.2% $ 75.0 35.7% $ 71.7 40.6%
Nalley's Fine Foods............... 211.9 23.6 211.1 24.0 214.8 26.0 52.7 25.1 54.0 30.5
Southern Frozen Foods............. 91.7 10.2 93.4 10.7 94.3 11.4 22.9 10.9 23.1 13.1
Snack Foods Group................. 65.3 7.3 65.4 7.4 61.2 7.4 15.5 7.4 15.4 8.7
Brooks Foods...................... 30.0 3.3 30.7 3.5 30.0 3.6 5.6 2.7 5.4 3.1
Finger Lakes...................... 46.9 5.2 47.1 5.4 49.9 6.0 12.6 6.0 14.6 8.3
Intercompany eliminations(1)...... (30.6) (3.4) (32.9) (3.7) (34.4) (4.2) (9.3) (4.5) (9.7) (5.6)
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Sub-total -- Ongoing
operations................. 734.0 81.8 732.6 83.4 749.2 90.4 175.0 83.3 174.5 98.7
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Businesses sold(2)................ 131.2 14.7 116.4 13.2 55.5 6.7 27.6 13.1 -- --
Business to be sold(3)............ 31.7 3.5 29.6 3.4 24.4 2.9 7.5 3.6 2.3 1.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Sub-total.................... 162.9 18.2 146.0 16.6 79.9 9.6 35.1 16.7 2.3 1.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total net sales......... $896.9 100.0% $878.6 100.0% $829.1 100.0% $210.1 100.0% $176.8 100.0%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
</TABLE>
- ------------
(1) Principally intercompany sales by Finger Lakes.
(2) The Company has sold the private label beverage business, the Lucca Frozen
Foods business, the oats portion of the National Oats business, the Hiland
potato chips business and the meats snack business. See
' -- General -- Restructuring Program' above.
(3) On September 8, 1994, the Company signed a letter of intent to sell the
Nalley's U.S. Chips and Snacks business. There can be no assurance that the
transaction will be completed. However, if the sale contemplated by the
letter of intent is not consummated by the end of December, 1995, it is
anticipated that Nalley's U.S. Chips and Snacks will discontinue operations,
and the Company will incur an additional $3.5 million charge.
54
<PAGE>
OPERATING INCOME(1)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
-------------------------------------------------------- ------------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
---------------- ---------------- ---------------- ------------------- -------------------
OPERATING % OF OPERATING % OF OPERATING % OF OPERATING % OF OPERATING % OF
INCOME TOTAL INCOME TOTAL INCOME TOTAL INCOME TOTAL INCOME TOTAL
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit... $20.4 47.2% $23.0 59.1% $29.6 59.7% $ 4.9 45.8% $ 6.7 55.8%
Nalley's Fine Foods....... 19.5 45.1 21.4 55.0 17.6 35.5 4.7 43.9 4.6 38.3
Southern Frozen Foods..... 8.1 18.7 7.6 19.5 10.2 20.5 1.8 16.8 2.4 20.0
Snack Foods Group......... 5.1 11.8 4.1 10.6 2.7 5.4 0.9 8.4 0.8 6.7
Brooks Foods.............. 2.7 6.3 2.7 6.9 3.1 6.3 0.2 1.9 0.1 0.8
Finger Lakes Packaging.... (0.9) (2.0) 2.9 7.5 3.9 7.9 1.1 10.3 1.0 8.3
Intercompany eliminations
and corporate
overhead................ (11.2) (25.9) (14.4) (37.0) (15.1) (30.4) (3.7) (34.6) (3.2) (26.6)
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Sub-total -- Ongoing
operations......... 43.7 101.2 47.3 121.6 52.0 104.9 9.9 92.5 12.4 103.3
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Businesses sold(2)........ (0.1) (0.2) (7.3) (18.8) 1.2 2.4 1.0 9.4 -- --
Business to be sold(3).... (0.4) (1.0) (1.1) (2.8) (3.6) (7.3) (0.2) (1.9) (0.4) (3.3)
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Sub-total............ (0.5) (1.2) (8.4) (21.6) (2.4) (4.9) 0.8 7.5 (0.4) (3.3)
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Total operating
income........ $43.2 100.0% $38.9 100.0% $49.6 100.0% $10.7 100.0% $12.0 100.0%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
</TABLE>
- ------------
(1) Table excludes restructuring loss from division disposals of $8.4 million,
change in control expense of $1.8 million, and an insurance gain on assets
resulting from a fire claim of $6.5 million in the first quarter of fiscal
1995. Table also excludes restructuring loss on division disposals for
fiscal 1993 of $61.0 million and restructuring gain from division disposals
in fiscal 1994 of $7.8 million and change of control expense in fiscal 1994
of $3.5 million.
(2) The Company has sold the private label beverage business, the Lucca Frozen
Foods business, the oats portion of the National Oats business, the Hiland
potato chips business and the meats snack business. See
' -- General -- Restructuring Program' above.
(3) On September 8, 1994, the Company signed a letter of intent to sell the
Nalley's U.S. Chips and Snacks business. There can be no assurance that the
transaction will be completed. However, if the sale contemplated by the
letter of intent is not consummated by the end of December, 1995, it is
anticipated that Nalley's U.S. Chips and Snacks will discontinue operations,
and the Company will incur an additional $3.5 million charge.
DEPRECIATION AND AMORTIZATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED --------------------------------------
-----------------------------------------------------
SEPTEMBER 25, SEPTEMBER 24,
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 1993 1994
--------------- --------------- --------------- ----------------- -----------------
DEPRE. & % OF DEPRE. & % OF DEPRE. & % OF DEPRE. & % OF DEPRE. & % OF
AMORT. TOTAL AMORT. TOTAL AMORT. TOTAL AMORT. TOTAL AMORT. TOTAL
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit........... $ 12.0 40.1% $ 11.6 38.0% $ 11.5 44.8% $2.9 44.6% $2.7 49.1%
Nalley's Fine Foods............... 3.7 12.4 3.7 12.1 3.6 14.0 1.0 15.4 1.0 18.2
Southern Frozen Foods............. 2.1 7.0 2.1 6.9 2.5 9.7 0.5 7.7 0.6 10.9
Snack Foods Group................. 1.9 6.4 2.0 6.5 2.0 7.8 0.5 7.7 0.5 9.1
Brooks Foods...................... 0.7 2.3 0.6 2.0 0.6 2.3 0.2 3.1 0.2 3.6
Finger Lakes Packaging............ 1.1 3.7 1.4 4.6 1.2 4.7 0.3 4.6 0.3 5.5
Intercompany eliminations and
corporate overhead.............. 0.9 3.0 2.7 8.9 1.7 6.6 0.0 0.0 0.1 1.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Sub-total -- Ongoing
operations................. 22.4 74.9 24.1 79.0 23.1 89.9 5.4 83.1 5.4 98.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Businesses sold(1)................ 6.4 21.4 5.3 17.4 1.5 5.8 0.9 13.8 0.0 0.0
Business to be sold(2)............ 1.1 3.7 1.1 3.6 1.1 4.3 0.2 3.1 0.1 1.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Sub-total.................... 7.5 25.1 6.4 21.0 2.6 10.1 1.1 16.9 0.1 1.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total depreciation and
amortization.......... $ 29.9 100.0% $ 30.5 100.0% $ 25.7 100.0% $6.5 100.0% $5.5 100.0%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
</TABLE>
(footnotes on next page)
55
<PAGE>
(footnotes from previous page)
(1) The Company has sold the private label beverage business, the Lucca Frozen
Foods business, the oats portion of the National Oats business, the Hiland
potato chips business and the meats snack business. See
' -- General -- Restructuring Program' above.
(2) On September 8, 1994, the Company signed a letter of intent to sell the
Nalley's U.S. Chips and Snacks business. There can be no assurance that the
transaction will be completed. However, if the sale contemplated by the
letter of intent is not consummated by the end of December, 1995, it is
anticipated that Nalley's U.S. Chips and Snacks will discontinue operations,
and the Company will incur an additional $3.5 million charge.
TOTAL ASSETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED ------------------------------------------
-----------------------------------------------
SEPTEMBER 25, SEPTEMBER 24,
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 1993 1994
------------- ------------- ------------- ----------------- -----------------
TOTAL % OF TOTAL % OF TOTAL % OF TOTAL % OF TOTAL % OF
ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL ASSETS TOTAL
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit....... $223.4 42.2% $238.3 48.3% $218.5 48.9% $239.2 43.7% $258.9 49.4%
Nalley's Fine Foods........... 81.0 15.3 83.9 17.0 83.5 18.6 96.0 17.5 97.9 18.7
Southern Frozen Foods......... 47.6 9.0 45.4 9.1 48.2 10.8 46.8 8.6 47.6 9.1
Snack Foods Group............. 26.6 5.0 27.6 5.6 24.5 5.5 26.0 4.7 24.1 4.6
Brooks Foods.................. 14.9 2.8 12.6 2.6 11.0 2.5 12.8 2.3 13.0 2.4
Finger Lakes Packaging........ 42.2 8.0 42.2 8.5 39.3 8.8 50.2 9.2 50.5 9.6
Intercompany eliminations and
corporate overhead.......... (31.2) (5.9) (11.5) (2.3) 5.8 1.3 (48.3) (8.8) 22.0 4.2
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Sub-total -- Ongoing
operations............. 404.5 76.4 438.5 88.8 430.8 96.4 422.7 77.2 514.0 98.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Businesses sold(1)............ 111.4 21.0 41.8 8.5 5.4 1.2 116.1 21.2 5.3 1.0
Business to be sold(2)........ 13.8 2.6 13.4 2.7 10.7 2.4 8.6 1.6 5.1 1.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Sub-total................ 125.2 23.6 55.2 11.2 16.1 3.6 124.7 22.8 10.4 2.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total assets........ $529.7 100.0% $493.7 100.0% $446.9 100.0% $547.4 100.0% $524.4 100.0%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
</TABLE>
- ------------
(1) The Company has sold the private label beverage business, the Lucca Frozen
Foods business, the oats portion of the National Oats business, the Hiland
potato chips business and the meats snack business. See
' -- General -- Restructuring Program' above.
(2) On September 8, 1994, the Company signed a letter of intent to sell the
Nalley's U.S. Chips and Snacks business. There can be no assurance that the
transaction will be completed. However, if the sale contemplated by the
letter of intent is not consummated by the end of December, 1995, it is
anticipated that Nalley's U.S. Chips and Snacks will discontinue operations,
and the Company will incur an additional $3.5 million charge.
56
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
The following table illustrates the Company's income statement data and the
percentage of net sales represented by these items for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------------------------ ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
--------------- --------------- --------------- ------------------ ------------------
% OF % OF % OF % OF % OF
DOLLARS SALES DOLLARS SALES DOLLARS SALES DOLLARS SALES DOLLARS SALES
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $ 896.9 100.0% $ 878.6 100.0% $ 829.1 100.0% $ 210.1 100.0% $ 176.8 100.0%
Cost of sales............. 652.3 72.7 632.6 72.0 592.6 71.5 153.1 72.9 126.8 71.7
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit......... 244.6 27.3 246.0 28.0 236.5 28.5 57.0 27.1 50.0 28.3
Operating expense:
Selling,
administrative and
general............ 201.4 22.5 207.1 23.6 186.9 22.5 46.3 22.0 38.0 21.5
Restructuring,
including net loss
(gain) on division
disposals.......... -- -- 61.0 6.9 (7.8) (0.9) -- -- 8.4 4.8
(Gain) on assets
resulting from fire
claim.............. -- -- -- -- -- -- -- -- (6.5) (3.7)
Change in control
expenses........... -- -- -- -- 3.5 0.4 -- -- 1.8 1.0
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total operating
expenses...... 201.4 22.5 268.1 30.5 182.6 22.0 46.3 22.0 41.7 23.6
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income
(loss)............. 43.2 4.8 (22.1) (2.5) 53.9 6.5 10.7 5.1 8.3 4.7
Total interest expense.... 22.8 2.5 19.6 2.2 18.2 2.2 4.8 2.3 5.1 2.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Income (loss) before
split with Pro-Fac
and before tax..... 20.4 2.3 (41.7) (4.7) 35.7 4.3 5.9 2.8 3.2 1.8
Pro-Fac share of
(earnings) loss......... (9.5) (1.1) 21.8 2.5 (16.9) (2.0) (2.8) (1.3) (1.5) (0.8)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Pre-tax income
(loss)............. 10.9 1.2 (19.9) (2.2) 18.8 2.3 3.1 1.5 1.7 1.0
Provision for taxes....... 4.8 0.5 3.9 0.4 8.7 1.1 1.9 0.9 1.4 0.8
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net income (loss).... $ 6.1 0.7% $ (23.8) (2.6)% $ 10.1 1.2% $ 1.2 0.6% $ 0.3 0.2%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
</TABLE>
57
<PAGE>
CHANGES FROM THREE MONTHS ENDED SEPTEMBER 25, 1993 TO THREE MONTHS ENDED
SEPTEMBER 24, 1994
Net Sales. The Company's net sales in the first quarter of fiscal 1995 of
$176.8 million decreased $33.3 million, or 15.8%, from $210.1 million in the
first quarter of fiscal 1994. The net sales attributable to businesses sold or
to be sold in connection with the Company's restructuring program were $2.3
million in the first quarter of fiscal 1995 and $35.1 million in the first
quarter of fiscal 1994. The Company's net sales from ongoing operations
excluding businesses sold or to be sold were $174.5 million in the first quarter
of fiscal 1995, a decrease of $0.5 million or 0.3% from $175.0 million in the
first quarter of fiscal 1994.
Gross Profit. Gross profit of $50.0 million in the first quarter of fiscal 1995
decreased $7.0 million or 12.3% from $57.0 million in the first quarter of
fiscal 1994. Of this net decrease, a $10.3 million reduction was attributable to
businesses sold or to be sold and an increase of $3.3 million was attributable
to increased gross profit at the Company's ongoing operations. This increase of
$3.3 million was the result of variations in volume, selling prices, costs and
product mix.
Restructuring including net (gain)/loss from division disposals.
Restructuring expenses, including net (gain)/loss from division disposals,
resulted in a charge in the first quarter of fiscal 1995 of $8.4 million to
reflect the estimated impact of the potential sale of certain assets of the
Nalley's U.S. Chips and Snacks operation and other expenses relating to the
disposal of this operation. Of this amount, approximately 40% reflects non-cash
charges. The Company annnounced on September 8, 1994 the signing of a letter of
intent, subject to a number of conditions, including successful financing by the
purchaser and the negotiation of a definitive agreement. If the sale
contemplated by the letter of intent is not consummated by the end of December,
1994, it is anticipated that Nalley's U.S. Chips and Snacks will discontinue
operations, and the Company will incur an additional $3.5 million charge.
Change in control expenses. Change in control expenses recorded in the
first quarter of fiscal 1995, amounting to $1.8 million, reflect non-tax
deductible expenses relating to the sale of the Company covering legal,
accounting, investment banking and other expenses relative to the change in
control issue. In recognizing this expense, the Company allocated half of this
amount to Pro-Fac as a deduction to the profit split. See ' -- Developments
Related to Change in Control of the Company' above.
Gain on assets resulting from fire claim. The gain on assets resulting from
fire claim recorded in the first quarter of fiscal 1995 amounted to $6.5 million
representing the insurance proceeds for the replacement value in excess of the
depreciated value of the building and equipment destroyed by fire on July 7,
1994 at Southern.
Other selling, administrative and general expenses. Other selling,
administrative and general expenses in the first quarter of fiscal 1995 of $38.0
million decreased $8.3 million, or 17.9%, from $46.3 million in the first
quarter of fiscal 1994. This net decrease of $8.3 million includes primarily: a
$1.2 million net decrease in trade promotions (comprised of a decrease
attributable to businesses sold or to be sold of $2.7 million and an increase
for ongoing operations of $1.5 million); a $4.3 million net decrease in
advertising and selling costs (comprised of a decrease attributable to
businesses sold or to be sold of $5.1 million and a $0.8 million increase for
the Company's ongoing operations); and a $2.8 million decrease in other
administrative costs (comprised of a decrease attributable to businesses sold or
to be sold of $1.7 million and a decrease of $1.1 million attributable to the
Company's ongoing operations). Of the $1.5 million increase in trade promotions
for the Company's ongoing operations: $0.4 million is attributable to an
increase at CMF; $0.9 million is attributable to increased spending at Nalley's;
and $0.2 million is attributable to increased spending at Southern. The $0.8
million increase in advertising and selling costs attributable to the Company's
ongoing operations is comprised of no major variations in any individual
division. The $1.1 million decrease in other administrative costs attributable
to the Company's ongoing operations is primarily related to reduced spending at
CMF ($0.2 million), Nalley's ($0.3 million) and corporate headquarters ($0.6
million).
Operating Income before dividing profits with Pro-Fac. The Company's
operating income (excluding restructuring charges, change in control expenses
and the gain on assets resulting from the fire claim discussed above) of $12.0
million in the first quarter of fiscal 1995 increased $1.3 million, or 12.1%,
from $10.7 million in the first quarter of fiscal 1994. Of this net increase, a
decrease of $1.2 million is
58
<PAGE>
attributable to businesses sold or to be sold and an increase of $2.5 million is
attributable to ongoing operations. CMF experienced increased operating income
during this period of $1.8 million; Southern's operating income increased $0.6
million; and the operating income of Nalley's, the Snack Foods Group, Brooks and
Finger Lakes each decreased $0.1 million. Reduced administrative expenses at the
Company's corporate headquarters operation increased operating profit by $0.4
million. CMF's improved operating earnings resulted from increased profits
relating to the cheese sauce, fruit fillings and toppings, canned and frozen
vegetables and pudding product lines.
Interest Expense. Interest expense in the first quarter of fiscal 1995 of
$5.1 million increased $0.3 million, or 6.3%, from $4.8 million in the first
quarter of fiscal 1994. This net increase is attributable to an increase in debt
(with Pro-Fac), which accounted for $0.8 million, offset by a decrease of $0.5
million due to lower interest rates.
Pro-Fac share of earnings/(loss). Pro-Fac's share of the Company's earnings
in the first quarter of fiscal 1995 of $1.5 million decreased $1.3 million, or
46.4%, from $2.8 million in the first quarter of fiscal 1994. Restructuring
charges, change in control expenses and the gain on assets resulting from the
fire claim accounted for a decrease of $1.8 million which offset an increase of
$0.5 million due to operational improvements. The Pro-Fac share of earnings in
the first quarter of fiscal 1995 and fiscal 1994 was 45.8% and 47.0%,
respectively, of the Company's pretax earnings before dividing with Pro-Fac.
Income/(loss) before taxes. The Company's income/(loss) before taxes in the
first quarter of fiscal 1995 of $1.7 million decreased $1.4 million, or 45.2%,
from $3.1 million in the first quarter of fiscal 1994. Restructuring charges,
change in control expenses and the gain on assets resulting from the fire claim
accounted for a decrease of $1.8 million which offset an increase of $0.5
million due to operational improvements.
Provision for taxes. The provision for taxes in the first quarter of fiscal
1995 of $1.4 million decreased $0.5 million, or 26.3%, from $1.9 million in the
first quarter of fiscal 1994. The provision for taxes is adversely affected by
the non-deductibility of change in control expenses incurred in the first
quarter of fiscal 1995. The tax provision for the first quarter of fiscal 1994
includes a charge of $0.5 million to adjust deferred taxes to the higher rates
as legislated by the Congress and as required under Financial Accounting
Standards Board No. 109.
Net income/(loss). The Company's net income for the first quarter of fiscal
1995 of $0.3 million decreased $0.9 million, or 75%, from $1.2 million in the
first quarter of fiscal 1994. Excluding non-recurring charges, the Company's net
income for the first quarter of fiscal 1995 of $2.1 million increased $0.4
million, or 23.5%, from $1.7 million in the first quarter of fiscal 1994.
CHANGES FROM FISCAL 1993 TO FISCAL 1994
Net Sales. The Company's net sales in fiscal 1994 of $829.1 million
decreased $49.5 million, or 5.6%, from $878.6 million in fiscal 1993. The net
sales attributable to businesses sold or to be sold in connection with the
Company's restructuring program discussed above were $79.9 million in fiscal
1994 and $146.0 million in fiscal 1993. The Company's net sales from ongoing
operations excluding businesses sold or to be sold in fiscal 1994 were $749.2
million, an increase of $16.6 million, or 2.3%, from $732.6 million in fiscal
1993. The increase in net sales from ongoing operations is attributable in part
to CMF. Net sales at CMF in fiscal 1994 of $333.4 million increased $15.6
million, or 4.9%, from $317.8 million in fiscal 1993. The increase in net sales
at CMF was due to an increase in net sales at CMF's New York vegetables business
resulting from increased prices and volumes associated with a national shortage
in supply in the vegetable market attributable to floods in the Midwest and a
drought in the South in the 1993 growing season. This increase in sales at CMF
was offset in part by reduced raw material costs at the Company, that were
reflected in reduced selling prices of the Company's products. Net sales at
Nalley's in fiscal 1994 of $214.8 million increased $3.7 million, or 1.8%, from
$211.1 million in fiscal 1993. The increase in net sales at Nalley's was
primarily net of increases and decreases as follows: (i) an $8.6 million
increase in the salad dressing operation that was primarily due to an increase
in volume, (ii) a $1.7 million decrease in pickles and relishes related to
reduced volume, and (iii) a $3.0 million reduction in the Canadian chips and
snacks operation due to reduced pricing. Net sales at Southern in fiscal 1994 of
$94.3 million remained essentially flat compared to $93.4 million in fiscal
1993. Net sales at
59
<PAGE>
the Snack Foods Group in fiscal 1994 of $61.2 million decreased $4.2 million, or
6.4%, from $65.4 million in fiscal 1993. The decrease was caused by reduced
volume related principally to the competitive pressures of the salty snacks
business and the decline in consumption for the potato chip category. Net sales
at Brooks in fiscal 1994 of $30.0 million decreased $0.7 million, or 2.3%, from
$30.7 million in fiscal 1993. This net decrease is comprised of a decrease of
$2.8 million of tomato products almost completely offset by increased sales of
bean products. The decrease in tomato products sold was the result of the
decision to exit the private label ketchup business. The increase in bean
products was due to a 21.0% increase in units sold. Net sales at Finger Lakes in
fiscal 1994 of $49.9 million increased $2.8 million, or 5.9%, from $47.1 million
(before elimination of intercompany sales) in fiscal 1993. This was primarily
the result of a 10.2% increase in volume.
Gross Profit. Gross profit of $236.5 million in fiscal 1994 decreased $9.5
million, or 3.9%, from $246.0 million in fiscal 1993. Of this net decrease, a
$21.1 million reduction was attributable to businesses sold or to be sold and an
increase of $11.6 million was attributable to increased gross profit at the
Company's ongoing operations. Gross profit for CMF increased $8.5 million,
Nalley's increased $2.1 million, Southern increased $2.5 million, and the Snack
Foods Group decreased $2.8 million. These changes were the result of variations
in volume, selling prices, costs and product mix.
Restructuring including net (gain)/loss from division disposals. Included
in the fiscal 1994 results was a net gain of $7.8 million comprised of a gain on
the sale of the oats operations of National Oats of $10.9 million, net of a
charge of $3.1 million to adjust previous estimates regarding activities
initiated in fiscal 1993. Subject to completion of the sale of Nalley's U.S.
Chips and Snacks the Company will have completed its dispositions pursuant to
the existing restructuring program and does not currently plan to dispose of any
other businesses. The Company incurred restructuring charges in fiscal 1993 of
$61.0 million, which included the loss incurred on the sale of the Lucca frozen
entree business, anticipated losses on the sale of the meat snacks and Hiland
potato chips businesses, and other costs anticipated in conjunction with the
restructuring program. See ' -- General -- Restructuring Program' above.
Change in control expenses. During fiscal 1994, the Company expensed $3.5
million of legal, accounting, investment banking and other expenses relative to
the change in control issue. In recognizing this expense, the Company allocated
half of this amount to Pro-Fac as a deduction to the profit split. See
' -- General -- Developments Related to Change of Control of the Company' above.
Selling, administrative and general expenses. Selling, administrative and
general expenses of $186.9 million in fiscal 1994 decreased $20.2 million, or
9.8%, from $207.1 million in fiscal 1993. Cost reductions include (i) a $0.7
million decrease in trade promotions, (ii) a $13.1 million decrease in
advertising and selling costs and (iii) a $5.1 million decrease in
administrative costs. Of the net decrease in trade promotions, an $8.4 million
decrease was attributable to businesses sold or to be sold and an increase of
$7.7 million was attributable to increased trade promotions at the Company's
ongoing operations. Of this increase, $2.6 million was due to increased
promotions on a reformulated fruit filling and topping product of CMF and to the
expansion of the pumpkin pie filling category and $4.3 million was primarily due
to new product promotions for Nalley's salad dressings and canned meats and
entrees introduced in fiscal 1993 and 1994. Of the net decrease in advertising
and selling costs, $12.2 million was attributable to businesses sold or to be
sold. The remaining decrease of $0.9 million was attributable to a $2.1 million
decrease in advertising and selling costs net of an increase in such costs of
$1.2 million at Nalley's. The increase at Nalley's was primarily related to
canned meats and entrees and salad dressings.
Operating Income before dividing profits with Pro-Fac. The Company's
operating income in fiscal 1994 of $53.9 million increased $76.0 million from an
operating loss of $22.1 million in fiscal 1993. Excluding restructuring charges
and change in control expenses, the Company's operating income in fiscal 1994
was $49.6 million, a $10.7 million increase, or 27.5%, from an operating income
of $38.9 million in fiscal 1993. Operating losses attributable to businesses
sold or to be sold in connection with the Company's restructuring program were
$2.4 million in fiscal 1994 and $8.4 million in fiscal 1993. Excluding operating
losses from businesses sold or to be sold, the Company's operating income from
continuing operations in fiscal 1994 was $52.0 million, an increase of $4.7
million, or 9.9%, from $47.3 million in fiscal 1993. Of this increase, CMF
contributed $6.6 million, Southern contributed $2.6 million and Finger Lakes
contributed $1.0 million. These increases were off-set in part by decreased
operating income at Nalley's of $3.8 million and $1.4 million for the Snack
Foods Group. The increases for CMF's
60
<PAGE>
New York vegetables business and Southern were attributable to increased selling
prices as a result of the short crop of vegetables nationally due to poor
weather conditions in the Midwest during the 1993 growing season. Finger Lakes
benefitted from improved production efficiencies and procedures as a result of
capital improvements. The decrease at Nalley's pertained to both a sales volume
decline and an increase in costs for the peanut butter and pickles and relishes
categories, and trade promotions and selling costs on the canned meat and entree
category. In addition, CMF's fruit fillings and toppings business experienced
increased trade promotions and advertising costs related to reformulated fruit
fillings and toppings and expansion of the pumpkin pie filling markets. The
decrease in the Snack Foods Group is the result of the sales decline as
previously mentioned. An increase of $1.2 million related to the management
incentive plan also reduced operating income.
Interest Expense. Interest expense in fiscal 1994 of $18.2 million
decreased $1.4 million, or 7.1%, from $19.6 million in fiscal 1993. The
reduction in interest expense is due to lower interest rates off-set in part by
an increase in loan volume.
Pro-Fac share of earnings/(loss). Pro-Fac share of earnings in 1994 of $16.9
million increased $38.7 million from a share of loss of $21.8 million in fiscal
1993. The increase is attributable to the factors described above. The Pro-Fac
share of earnings/(loss) in fiscal 1994 and fiscal 1993 was 47.3% and 52.3%,
respectively, of the Company's pre-tax earnings/(loss) before dividing with
Pro-Fac. The change in percentage is the result of changes in the dividend paid
by the Bank that Pro-Fac shares with the Company.
Income/(loss) before taxes. Income/(loss) before taxes in fiscal 1994 of
$18.8 million increased $38.7 million from a loss of $19.9 million in fiscal
1993. Excluding restructuring charges and change in control expenses, the
Company's income before taxes in fiscal 1994 was $16.6 million, a $6.0 million
increase, or 56.6%, from income before taxes of $10.6 million in fiscal 1993.
The increase is attributable to the factors described above.
Provision for taxes. Provision for taxes in fiscal 1994 of $8.7 million
increased $4.8 million from a provision of $3.9 million in fiscal 1993. Included
in the fiscal 1994 results was a charge against earnings of $0.5 million to
adjust deferred taxes to the higher rate as legislated by Congress and as
required under Financial Accounting and Standards Board No. 109. The Company's
effective tax rate was significantly impacted during fiscal 1994 by
non-deductible legal and advisory expenses incurred in conjunction with the
change in control, the increase in the federal statutory income tax rate enacted
on August 10, 1993 and the adjustment of the valuation allowance previously
recorded.
Net income/(loss). The Company's fiscal 1994 net earnings were $10.1
million compared to a loss of $23.8 million in fiscal 1993. Also included in the
fiscal 1994 results was a net gain of $7.8 million comprised of a gain on the
sale of the oats operations of National Oats of $10.9 million, net of a charge
of $3.1 million to adjust previous estimates regarding activities initiated in
1993, and a charge of $3.5 million of legal, accounting and investment banking
and other expenses relating to the potential change of control of the Company.
Included in fiscal 1993 results were restructuring charges of $61.0 million. Net
earnings, excluding these items, were approximately $9.1 million in fiscal 1994
and $5.8 million in fiscal 1993, an increase of 56.9%.
CHANGES FROM FISCAL 1992 TO FISCAL 1993
Net Sales. The Company's net sales in fiscal 1993 of $878.6 million
decreased $18.3 million, or 2.0%, from $896.9 million in fiscal 1992. The net
sales attributable to businesses sold or to be sold in connection with the
Company's restructuring program discussed above were $146.0 million in fiscal
1993 and $162.9 million in fiscal 1992. The Company's net sales from continuing
operations excluding business sold or to be sold in fiscal 1993 were $732.6
million, a decrease of $1.4 million, or 0.2%, from $734.0 million in fiscal
1992. There were no major variations in net sales by division in these two
years.
Gross Profit. Gross profit of $246.0 million in fiscal 1993 increased $1.4
million, or 0.6%, from $244.6 million in fiscal 1992. Of this net increase, a
$10.1 million reduction was attributable to businesses sold or to be sold and an
increase of $11.5 million was attributable to increased gross profit at the
Company's operations. Gross profit for CMF increased $4.3 million, Nalley's
increased $4.9 million,
61
<PAGE>
Southern decreased $0.7 million, and the Snack Foods Group decreased $0.1
million. These changes were the result of variations in volume, selling prices,
costs and product mix.
Restructuring including net (gain)/loss from division disposals. To reflect
completed and anticipated effects of the restructuring program, the Company
incurred restructuring charges in fiscal 1993 of $61.0 million, which included
the loss incurred on the sale of the Lucca frozen entree business, anticipated
losses on the sale of the meat snacks and Hiland potato chips businesses, and
other costs anticipated in conjunction with the restructuring program. See
' -- General-Restructuring Program' above.
Selling, administrative and general expenses. Selling, administrative and
general expenses of $207.1 million in fiscal 1993 increased $5.7 million, or
2.8%, from $201.4 million in fiscal 1992. This net increase includes an $8.6
million increase in trade promotions, a $1.9 million decrease in advertising and
selling costs, a one-time $3.3 million benefit due to operational changes in the
Company's salaried vacation policy, and a $2.3 million increase in other
administrative costs. Of the increase in trade promotions, $0.4 million was
attributable to businesses sold or to be sold and $8.2 million was attributable
to ongoing businesses. Of this $8.2 million increase in trade promotions
attributable to ongoing businesses, $4.8 million related to CMF, primarily
attributable to pie fillings and toppings, New York vegetables business and the
introduction of salad dressings in the eastern United States. Nalley's had a
$2.7 million increase in trade promotions, primarily attributable to canned
meats and entrees and salad dressings. All of the decrease in advertising and
selling costs were attributable to ongoing operations, primarily CMF, which was
mostly attributable to reduced advertising and selling costs for the fruit
filling and topping category. Of the $2.3 million increase in other
administrative costs, $1.8 million relates to increases attributable to ongoing
businesses and $0.5 million was attributable to businesses sold or to be sold.
Operating Income before dividing profits with Pro-Fac. The Company's
operating loss in fiscal 1993 of $22.1 million was a decrease of $65.3 million,
or 151.1%, from an operating income of $43.2 million in fiscal 1992. Excluding
the restructuring charge, the Company's operating income in fiscal 1993 was
$38.9 million, a $4.3 million decrease, or 10.0%, from fiscal 1992. Operating
losses attributable to businesses sold or to be sold in connection with the
Company's restructuring program were $8.4 million in fiscal 1993 and $0.5
million in fiscal 1992. Excluding operating losses from businesses sold or to be
sold, the Company's operating income from ongoing operations in fiscal 1993 was
$47.3 million, an increase of $3.6 million, or 8.2%, from $43.7 million in
fiscal 1992. This $3.6 million increase was comprised of a $2.6 million increase
at CMF, including $2.8 million attributable to fruit fillings and toppings and
puddings, a $1.9 million increase at Nalley's primarily comprised of a $1.6
million increase in canned meats and entrees and a $0.3 million decrease in
peanut butter, and a $3.8 million increase at Finger Lakes primarily due to
improved production efficiencies. These increases were offset, in part, by
reduced operating profits for CMF's New York vegetables business of $0.9 million
and Southern of $0.5 million as a result of the over-supply situation in the
commodity vegetable business. The Snack Foods Group had a decreased operating
income of $1.0 million as a result of competitive pressures that prevented the
implementation of price increases to cover increased costs. An increase of $1.3
million related to the management incentive plan also reduced operating income.
Interest Expense. Interest expense in fiscal 1993 of $19.6 million
decreased $3.2 million, or 14.0%, from $22.8 million in fiscal 1992. This
decrease was attributable to a reduction in debt, which accounted for $0.8
million of the decrease, and lower interest rates, which accounted for $2.4
million of the decrease.
Pro-Fac share of earnings/(loss). Pro-Fac's share of the Company's loss in
fiscal 1993 of $21.8 million decreased $31.3 million from a share of earnings in
fiscal 1992 of $9.5 million. Restructuring charges accounted for $30.5 million
of the decrease. The Pro-Fac share of earnings/(loss) in fiscal 1993 and fiscal
1992 was 52.3% and 46.6%, respectively, of the Company's pre-tax earnings/(loss)
before dividing with Pro-Fac.
Income/(loss) before taxes. The Company's loss before taxes in fiscal 1993
of $19.9 million decreased $30.8 million from income of $10.9 million in fiscal
1992. This decrease in earnings was due primarily to the restructuring charges
discussed above.
62
<PAGE>
Provision for taxes. Provision for taxes in fiscal 1993 of $3.9 million
decreased $0.9 million from a provision of $4.8 million in fiscal 1992. The
Company's effective tax rate was significantly impacted by the writedown of
goodwill and other intangibles having a lower tax basis than book value.
Net income/(loss). The Company's fiscal 1993 net loss of $23.8 million was
a decrease of $29.9 million compared to earnings of $6.1 million in fiscal 1992.
This decrease was almost entirely due to the restructuring charges (after
allocating to Pro-Fac its share of the loss) and the Company's increased
effective tax rate, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL FUNDING AND CAPITAL EXPENDITURES
The operations of the Company historically have been funded with cash flows
generated by operations, borrowings from Pro-Fac (which in turn borrowed a
portion of these funds from the Bank) and borrowings under the Company's
seasonal facility with a syndicate of commercial lenders led by The Chase
Manhattan Bank, N.A. Pro-Fac and the Company had available seasonal lines of
credit of $100.0 million through September 1993, $86.0 million through September
1994 and $96.0 million thereafter. The maximum borrowing on those seasonal lines
during fiscal 1994 was $81.0 million, while the average amount outstanding
during such year totaled approximately $51.5 million. The balance outstanding at
September 24, 1994 was $90.0 million. These borrowings were repaid
simultaneously with the consummation of the Transactions.
In addition to borrowings by Pro-Fac, which have been loaned to the
Company, substantially all cash not distributed by Pro-Fac to its members or
securityholders has either been invested in assets leased to the Company or
loaned to the Company to finance its operations. As such, the information
provided below describes liquidity and capital resources of the Company and
Pro-Fac on a combined basis.
In the first quarter of fiscal 1995, the net cash used by combined
operating activities of the Company and Pro-Fac of $62.1 million reflects net
income of $0.3 million for the Company and $3.7 million for Pro-Fac.
Amortization of assets amounted to $5.5 million. Non-recurring charges amounted
to $3.7 million. Inventories increased $67.2 million, and accounts receivable
increased $7.1 million. Changes in other assets and liabilities amounted to $1.0
million.
In fiscal 1994, the net cash provided by combined operating activities of
the Company and Pro-Fac of $39.0 million reflects net income of $10.1 million
for the Company and $24.5 million for Pro-Fac. Amortization of assets amounted
to $25.7 million. Inventories decreased $0.3 million and accounts receivable
decreased $5.7 million. Changes in other assets and liabilities amounted to
$27.3 million.
Cash flows from investing activities include the acquisition and
disposition of property, plant and equipment and other assets held for or used
in the production of goods. Net cash used in investing activities of $4.7
million in the first quarter of fiscal 1995 was comprised of $1.0 million
received for the disposition of fixed assets, offset by $5.4 million paid for
fixed assets, and a $0.3 million increase in the investment in the Bank. Net
cash provided by investing activities of $22.4 million in fiscal 1994 was
comprised of $42.1 million received from disposals, $19.6 million paid for
purchases of property, plant and equipment, $1.3 million received for disposals
of fixed assets, and a $1.4 million increase in the investment of the Bank. In
fiscal 1994, the $42.1 million received from the disposition of the oats portion
of the National Oats business and the Hiland potato chips business was generally
applied to reduce debt.
Net cash provided by financing activities of $71.3 million in the first
quarter of fiscal 1995 was primarily comprised of proceeds of short-term debt of
$78.5 million which offset payments on long-term debt of $0.5 million, the cash
portion of non-qualified retain conversion of $0.3 million, and dividends paid
of $6.3 million. Net cash used in financing activities of $65.0 million in
fiscal 1994 was primarily comprised of payments on short-term debt of $0.5
million, payments on long-term debt of $50.2 million, payments on capital leases
of $2.1 million, repurchases of $3.2 million, and dividends paid of $9.9
million, less issuance of capital stock of $0.7 million.
63
<PAGE>
Capital expenditures were $16.2 million, $21.5 million and $19.5 million in
the 1992, 1993 and 1994 fiscal years, respectively. These figures represent
capital expenditures for the Company and Pro-Fac. Under the Integrated
Agreement, Pro-Fac had historically provided the fixed assets used in the
business of the Company. Capital expenditures are expected to approximate $20.0
million in fiscal 1995. Management believes the Company's maintenance level of
capital expenditures to be approximately $8.0 million.
NEW BORROWINGS; ADDITIONAL CAPITAL CONTRIBUTION BY PRO-FAC
Under the New Credit Agreement, the Company is able to borrow up to $86.0
million for seasonal working capital purposes under the Seasonal Facility,
subject to a borrowing base limitation, and obtain up to $10.0 million in
aggregate face amount of letters of credit pursuant to a letter of credit
facility. The borrowing base is defined as the lesser of (i) $86.0 million and
(ii) the sum of 60% of eligible accounts receivable plus 50% of eligible
inventory. As of the Closing Date, after giving effect to the Transactions, the
borrowing base under the Seasonal Facility was $108.2 million.
As of the Closing Date, after giving effect to the Transactions, (i) cash
borrowings outstanding under the Seasonal Facility were $72.6 million, (ii)
additional availability under the Seasonal Facility, after taking into account
the amount of the borrowing base, was $13.4 million and (iii) outstanding
letters of credit were approximately $9.7 million. In addition to its seasonal
financing, as of November 3, 1994, after giving effect to the Transactions, the
Company would have had $22.5 million available for long-term borrowings under
the Term Loan Facility. The Company believes that the cash flow generated by its
operations and the amounts available under the Seasonal Facility should be
sufficient to fund its working capital needs, fund its capital expenditures and
service its debt for the foreseeable future. See 'Description of Certain
Indebtedness -- New Credit Agreement.'
Pro-Fac intends to make additional equity contributions to the Company.
Specifically, Pro-Fac has undertaken to contribute not less than $10.0 million
in equity to the Company by the end of fiscal 1995.
As a result of the Transactions, the Company's total debt and interest
expense have increased because the Notes have a substantially higher interest
rate than the debt that was repaid with the proceeds from the Old Note Offering.
The New Credit Agreement will require that both Pro-Fac and the Company meet
certain financial tests and ratios and comply with certain other restrictions
and limitations. See 'Description of Certain Indebtedness -- New Credit
Agreement.'
CERTAIN TAX MATTERS
In December 1991, the national office of the Internal Revenue Service
issued a technical advice memorandum ('TAM') concluding that virtually all of
Pro-Fac's income arises from patronage sources. As a result of the TAM, in
January 1992 an additional distribution of patronage proceeds for fiscal 1991
was made to members in the amount of $3.7 million. Patronage proceeds available
for distribution are determined by the Board of Directors each year, as
stipulated in the Bylaws.
In August 1993, the Internal Revenue Service issued a determination letter
which concluded that Pro-Fac is exempt from federal income tax to the extent
provided by Section 521 of the Internal Revenue Code of 1986, as amended (the
'Code'), 'Exemption of Farmers' Cooperatives from Tax.' Unlike a non-exempt
cooperative, a tax-exempt cooperative is entitled to deduct any cash dividends
it pays on its capital stock in computing its taxable income. The exempt status
is retroactive to fiscal year 1986. In conjunction with this ruling, for fiscal
years 1986 to 1990, Pro-Fac has filed for tax refunds in the amount of
approximately $5.8 million and interest payments of approximately $3.4 million.
In addition, it is anticipated that Pro-Fac will file for tax refunds for fiscal
years 1991 and 1992 in the amount of approximately $3.1 million and interest
payments of approximately $0.4 million. No such refund amounts have been
reflected in the financial statements of Pro-Fac as of June 25, 1994 or
September 24, 1994. It is anticipated that the refund amounts will be recognized
upon receipt. It is anticipated, however, that as a result of the acquisition of
the Company, Pro-Fac may no longer be
64
<PAGE>
entitled to exempt status under Section 521 of the Code and may no longer be
permitted to deduct the cash dividends paid on its capital stock.
During fiscal 1989 and 1990, the Company entered into a series of
transactions with Pro-Fac which were recorded as financing transactions for
financial reporting purposes. For tax purposes, these transactions were
inadvertently reported in a manner that may have implied that certain intangible
assets had been disposed of. The Company is amending its tax returns to correct
the reporting. The years in question are currently under audit by the Internal
Revenue Service. Based upon consultation with its tax counsel and independent
accountants, the Company does not believe that there will be any material
incremental tax due as a result of such audit.
OTHER MATTERS
In November 1992, the Financial Accounting Standard Board issued Statement
of Accounting Standards No. 112, 'Employers' Accounting for Postemployment
Benefits.' This statement establishes accounting standards for employers who
provide benefits to former or inactive employees after employment but before
retirement. Postemployment benefits are all types of benefits provided to former
or inactive employees, their beneficiaries and covered dependents. This
statement is effective for fiscal years beginning after December 15, 1993. The
Company adopted this statement in the first quarter of fiscal 1995 with no
significant impact on its results of operations.
Statement of Position (SOP) 93-7, 'Reporting on Advertising Costs,' was
issued in December 1993. The Statement provides guidance on financial reporting
on advertising costs. The Company believes that the effect on the results of
operations will not be material.
SUPPLEMENTAL INFORMATION ON INFLATION
During the last three fiscal years, the changes in costs and prices within
the Company's business due to inflation were not significantly different from
inflation in the United States economy as a whole. Levels of capital investment,
pricing and inventory investment were not materially affected by the moderate
inflation.
65
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PRO-FAC
GENERAL
This discussion outlines the most significant reasons for changes in the
major items of Pro-Fac's statement of net proceeds from fiscal 1992 through 1994
and the first quarter of fiscal 1995. The relevant figures are shown in the
Financial Statements of Pro-Fac elsewhere herein. The historical operating
results are not necessarily indicative of the future operating results or
financial condition of Pro-Fac.
Most of the proceeds of Pro-Fac are derived from the sale to the Company of
the crops of its members and hence depend primarily upon the volume and
Commercial Market Value of these crops (which accrues to Pro-Fac at the time of
delivery). In addition, proceeds depend upon the profitability of the finished
products made from Pro-Fac crops and raw materials from other sources which are
then processed and sold by the Company during the course of the fiscal year.
Under the Integrated Agreement, which has been superseded by the Pro-Fac
Marketing Agreement, the total purchase price for crops and the financing charge
were both based in part on the results of operations of the Company.
PRO-FAC'S RESULTS OF OPERATIONS
CHANGES FROM THREE MONTHS ENDED SEPTEMBER 25, 1993 TO THREE MONTHS ENDED
SEPTEMBER 24, 1994
The Commercial Market Value of crops delivered during the first quarter of
fiscal 1995 decreased to $37.7 million from $42.3 million in the first quarter
of fiscal 1994.
For the quarter ended September 24, 1994, the change in net proceeds
compared to the prior year quarter is summarized below:
<TABLE>
<CAPTION>
(MILLIONS)
<S> <C>
Decreased proceeds from the Company.......................................................... $ (0.4)
Increased net interest income................................................................ 0.3
Change in bank dividend...................................................................... (0.1)
----------
Change in excess of revenues before taxes, dividends and allocation of net proceeds.......... (0.2)
Change in tax provision...................................................................... 0.4
Increase in dividends........................................................................ (0.5)
----------
Change in net proceeds....................................................................... $ (0.3)
----------
----------
</TABLE>
CHANGES FROM FISCAL 1993 TO FISCAL 1994
The 1994 Commercial Market Value of crops delivered during this production
season decreased to $59.2 million from $59.8 million in fiscal 1993. This 1.0%
decrease was the net result of a 2.5% tonnage increase offset by the effect of
price and mix variations from the commodities.
66
<PAGE>
For the year ended June 25, 1994, the change in net proceeds and the
allocation to members compared to the prior year is summarized below:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Increased proceeds from the Company................................................ $40.4
Increased net interest income...................................................... 0.7
All other.......................................................................... 0.1
------
Change in excess of revenues before taxes, dividends and allocation of net
proceeds......................................................................... 41.2
Benefit for taxes.................................................................. 0.8
Change in dividends................................................................ 0.2
------
Change in net proceeds............................................................. 42.2
Less increase in allocation to earned surplus...................................... (30.8)
------
Increase in net proceeds available to members...................................... $11.4
------
------
</TABLE>
CHANGES FROM FISCAL 1992 TO FISCAL 1993
The 1993 Commercial Market Value of crops delivered during the production
season decreased to $59.8 million from $64.2 million in fiscal 1992. This
decrease of 6.9% was the net result of a 12.0% tonnage increase offset by the
effect of price and mix variations for the commodities. Significant supplies of
cherries in 1992 drove Commercial Market Value for that crop down so that even
though the volume delivered to Pro-Fac increased 64% from the prior year the
dollar amount of Commercial Market Value decreased by 39%.
For the year ended June 25, 1994, the change in net proceeds and the
allocation to members compared to the prior year is summarized below:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
Decreased proceeds from the Company................................................ (31.3)
Increase net interest income....................................................... 0.6
Change in bank dividend............................................................ 0.4
------
Change in excess of revenues before taxes, dividends and allocation of net
proceeds......................................................................... (30.3)
Decrease in the benefit for taxes.................................................. (1.1)
Increase in dividends.............................................................. (0.1)
------
Change in net proceeds............................................................. (31.5)
Decrease in allocation to earned surplus........................................... 28.0
------
Decrease in net proceeds available to members from current operations.............. (3.5)
Additional distribution of 1991 net proceeds from earned surplus in fiscal 1992.... (3.7)
------
Decrease in net proceeds available to members...................................... (7.2)
------
------
</TABLE>
CERTAIN TAX MATTERS
In December 1991, the national office of the Internal Revenue Service
issued a TAM concluding that virtually all of Pro-Fac's income arises from
patronage sources. As a result of the TAM, in January 1992 an additional
distribution of patronage proceeds for fiscal 1991 was made to members in the
amount of $3.7 million. Patronage proceeds available for distribution are
determined by the Board of Directors each year, as stipulated in the Bylaws.
In August of 1993, the Internal Revenue Service issued a determination
letter which concluded that Pro-Fac is exempt from federal income tax to the
extent provided by Section 521 of the Internal Revenue Code, 'Exemption of
Farmers' Cooperatives from Tax.' Unlike a non-exempt cooperative, a tax-exempt
cooperative is entitled to deduct cash dividends it pays on its capital stock in
computing its taxable income. The exempt status is retroactive to fiscal year
1986. In conjunction with this ruling, for
67
<PAGE>
fiscal years 1986 to 1990, Pro-Fac has filed for tax refunds in the amount of
approximately $5.8 million and interest payments of approximately $3.4 million.
In addition, it is anticipated that Pro-Fac will file for tax refunds for fiscal
years 1991 and 1992 in the amount of approximately $3.1 million and interest
payments of approximately $0.4 million. No such refund amounts have been
reflected in the financial statements of Pro-Fac as of June 25, 1994 or
September 24, 1994. It is anticipated that the refund amounts will be recognized
upon receipt. It is anticipated, however, that as a result of the acquisition of
the Company Pro-Fac may no longer be entitled to exempt status under Section 521
of the Internal Revenue Code and may no longer be permitted to deduct the cash
dividends paid on its capital stock.
ACCOUNTING FOR INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued SFAS 109,
'Accounting for Income Taxes.' SFAS 109 eliminates and simplifies part of the
requirements of the previously issued SFAS 96. The Statement is effective for
fiscal years beginning after December 15, 1992, with retroactive adoption
permitted. Pro-Fac has retroactively adopted the provisions of this standard as
of June 29, 1991. There was no effect on Pro-Fac for this accounting change.
68
<PAGE>
BUSINESS
GENERAL
The Company is a producer and marketer of processed food products including
canned and frozen fruits and vegetables, canned desserts and condiments, fruit
fillings and toppings, canned chilies and stews, salad dressings, pickles,
peanut butter and snack foods. In addition, the Company manufactures cans which
are both utilized by the Company and sold to third parties. In fiscal 1994, on a
pro forma basis after giving effect to the Transactions, the Company would have
had net sales and operating income plus depreciation and amortization of $749.2
million and $77.0 million (excluding the nonrecurring restructuring gain of $7.8
million and the $3.5 million charge relating to legal and advisory costs
incurred in connection with the change of control), respectively. See 'Pro Forma
Financial Data of the Company.'
The Company sells products in three principal categories: (i) 'branded'
products, which are sold under the Company's trademarks, (ii) 'private label'
products, which are sold to grocers that in turn use their own brand names on
the products and (iii) 'food service' products, which are sold to food service
institutions such as restaurants, caterers and bakeries and to schools. In
fiscal 1994, approximately one-half of the Company's net sales were branded and
the remainder were split between private label and food service. The Company's
branded products include 'Comstock,' 'Thank You' and 'Wilderness' fruit fillings
and toppings, 'Nalley' chilies and stews, 'Bernstein's' salad dressings and
'Adams' peanut butter. The Company's private label products include salad
dressings, salsa, fruit fillings and toppings, canned puddings and canned and
frozen vegetables, which are sold to customers such as A&P, Kroger, Safeway,
Topco, Wegman's and Winn-Dixie. The Company's food service products include
salad dressings, pickles, fruit fillings and toppings, canned and frozen
vegetables, canned puddings, cheese sauces and canned and frozen fruit, which
are sold to customers such as Carvel, Disney, Foodservice of America, KFC,
McDonald's and Sysco.
BUSINESS STRATEGY
Achieve Leading Market Shares of Branded Products. The Company believes
that having branded products with strong shares in regional markets provides it
with distinct advantages. Specifically, by achieving a market presence within a
geographic region, the Company believes it is better able to create avenues for
the sale of the Company's other branded products and to assess and meet local
market and consumer needs.
Diversify Through Sales of Branded, Private Label and Food Service
Products. Historically, the Company has focused primarily on its branded
products, many of which have leading market shares in the regions they serve.
However, with the growth of the private label and food service businesses, the
Company has also begun to focus on profitable opportunities in these areas. For
example, Nalley's has been working with grocers on programs for private label
salsa, soups and salad dressings with 'good,' 'better' and 'best' categories.
This concept offers the grocer a three-tiered product selection and provides the
Company with a means to customize products and programs specifically for
consumer desires. The Company is currently reviewing the expansion of the
'good,' 'better' and 'best' program to many other products. In addition, with
the growth of the food service sector, the Company has pursued food service
opportunities for its fruit fillings and toppings, puddings and cheese sauces.
Future food service growth is planned for other products such as breaded
vegetables and salad dressings.
Engage in Selective National Expansion Program. Certain of the Company's
products have achieved significant market shares within specific geographic
regions, and the Company believes substantial opportunities exist to distribute
these products on a national basis. The Company recently began selling its
'Bernstein's' salad dressing, first introduced in California, in Arizona,
Colorado and Upstate New York. Other products under consideration for national
expansion include Mexican specialty items, such as chili and salsa, other salad
dressings and canned soups.
Continuous Focus on Cost Reduction. Through a corporate wide program of
information management, selected capital expenditures and individual division
initiatives, the Company continuously seeks to reduce costs and improve
efficiency. During fiscal 1993, the Company initiated production consolidation
efforts involving the closing of three plants located in Michigan, Colorado and
New York.
69
<PAGE>
Further consolidations are being explored to reduce operational redundancies. In
the area of purchasing, by maximizing market leverage through collaborative and
cooperative purchasing activities throughout the Company, significant savings
have been achieved. As a result of the Company's cost reduction activities, the
Company's operating income margin from ongoing businesses improved from 6.0% to
6.5% to 6.9% in each of fiscal 1992, 1993 and 1994, respectively.
DESCRIPTION OF BUSINESSES
COMSTOCK MICHIGAN FRUIT
CMF, the Company's largest division, headquartered in Rochester, New York,
produces products in three principal categories: (i) fruit fillings and
toppings, (ii) aseptically produced products and (iii) canned and frozen fruits
and vegetables. In fiscal 1994, approximately one-third of CMF's net sales
represented branded products, approximately one-third represented private label
products and approximately one-third represented food service products. CMF
markets its branded products under the 'Thank You,' 'Comstock,' 'Wilderness,'
'Greenwood,' 'Silver Floss,' 'Blue Boy,' 'Victor,' 'Cortland Valley,' 'Cerise,'
'Super Pop,' 'Pop-Eye' and 'Pops-Rite' labels. The following table sets forth
the net sales and division operating income for CMF for the periods shown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
------------- ------------- ------------- ------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........ $ 318.8 $ 317.8 $ 333.4 $ 75.0 $ 71.7
Operating
income......... 20.4 23.0 29.6 4.9 6.7
</TABLE>
CMF estimates the national fruit fillings and toppings market to be
approximately $225.0 million. CMF's fruit fillings and toppings are marketed
under the 'Comstock,' 'Thank You' and 'Wilderness' brands, which held a national
market share of approximately 56% in the fruit filling segment in fiscal 1994.
CMF's fruit fillings and toppings are sold both through grocers to the public
and to food service institutions such as restaurants, caterers and bakeries and
to schools. In fiscal 1994, the Company introduced the 'More Fruit/More Flavor'
program at CMF, which involved the production of fruit fillings and toppings
with 25% more fruit content, which CMF sells at a premium price. The Company
believes this program has increased CMF's market share in the fruit fillings and
toppings category. In fiscal 1992, CMF also launched a pumpkin filling, which
represents approximately one-quarter of the fruit fillings and toppings
category. CMF is capitalizing on its existing brand franchise in fruit fillings
and toppings to make pumpkin a part of its full line.
CMF's aseptic operations produce puddings, cheese sauces and dips for sale
by CMF and diet drinks for sale by a third party under a co-packing arrangement.
The aseptic production process involves preparation of the product in a sterile
environment beginning with batch formulation and continuing through packaging.
As a result, once packaged, the product requires no further cooking. The Company
believes its aseptic production facility is state-of-the-art. In 1993, CMF's
aseptically processed puddings accounted for approximately one-half of the
national food service market and aseptically processed cheese sauces accounted
for approximately one-quarter of the national food service market.
CMF's fruit and vegetable processing business includes both branded and
private label production. It also includes value added products such as canned
specialty fruits and frozen vegetable mixes. Success in the fruit and vegetable
processing business is driven by, among other things, an ability to control
costs. The Company has aggressively sought to reduce costs in the fruit and
vegetable processing business by closing plants, making capital investments in
the modernization of processing equipment, changing its product mix and refining
advertising strategies. For example, in fiscal 1993, the Company initiated
production consolidation efforts involving the closing of CMF plants located in
Michigan and New York. Programs aimed at further reducing costs include
continued capital investment in cost savings projects and further vegetable
plant consolidation.
70
<PAGE>
NALLEY'S
Nalley's, which includes the Nalley's Fine Foods division headquartered in
Tacoma, Washington and Nalley's Canada Ltd. located in Vancouver, British
Columbia, markets canned meat products such as chilies and stews, pickles, salad
dressings, peanut butter and syrup, which are sold throughout the Northwest and
Western United States and Western Canada under the 'Nalley' brand and other
brands, such as 'Bernstein's' salad dressing and 'Adams' natural peanut butter.
Approximately three-quarters of Nalley's products are branded; however, private
label accounts for a growing percentage of Nalley's business. The following
table sets forth the net sales and division operating income for Nalley's for
the periods shown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
------------- ------------- ------------- ------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........ $ 211.9 $ 211.1 $ 214.8(1) $ 52.7 $ 54.0
Operating
income......... 19.5 21.4 17.6 4.7 4.6
</TABLE>
- ------------
(1) Sales by Nalley's Canada Ltd. accounted for approximately 20% of Nalley's
total net sales in fiscal 1994.
The Nalley's branded products have been a vehicle for growth through both
geographic expansion and line extension. Several of Nalley's branded products
have leading market shares in the Pacific Northwest, such as Nalley's chili,
which had a market share of approximately 57%, and 'Nalley' and 'Farman's'
pickles, which together had a market share of approximately 49%, for the 52-week
period ended August 7, 1994. In the Pacific Northwest, the Company's 'Nalley'
and 'Bernstein's' brands of salad dressings had a combined market share of
approximately 17% for the same period. The Company recently began selling its
'Bernstein's' salad dressings in Arizona, Colorado and Upstate New York. Plans
are under consideration to expand production to an existing facility in the
Midwest or East to service Eastern markets. In addition, Nalley's has begun
distribution of a refrigerated version of the 'Bernstein's' dressings in the
Pacific Northwest. Nalley's is currently exploring opportunities with two
national food companies in order to expand the distribution of its products.
Private label efforts include executing a new three-tiered store labeling
strategy for specialty Mexican products such as chili and salsa, salad dressings
and canned soups. The three-tiered strategy allows the Company to offer its
'Nalley' branded products to its private label customers in a 'good,' 'better,'
'best' product format. For example, if a given grocer seeks a premium salsa
brand, Nalley's can offer its top-tier brand of salsa. By using the three-tiered
product approach, the Company believes it can effectively extend the reach of a
given product line. The private label customer base includes Kroger in the
Midwest, Ralph's on the West Coast, Wegman's in Upstate New York and Winn-Dixie
in the Southeast.
SOUTHERN FROZEN FOODS
Southern, located in Montezuma, Georgia, freezes and sells a full line of
southern vegetables such as black-eyed peas, okra and leafy greens as well as a
line of traditional vegetables such as corn, peas, squash and green beans.
Southern also produces specialty side dishes and a small amount of frozen fruit.
The following table sets forth the net sales and division operating income for
Southern for the periods shown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
------------- ------------- ------------- ------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........ $91.7 $93.4 $94.3 $ 22.9 $ 23.1
Operating
income......... 8.1 7.6 10.2 1.8 2.4
</TABLE>
Southern's products are marketed under the following brand names:
'McKenzie's,' 'Southern Farms,' 'Gold King,' 'Chill-Ripe' and 'Tropic Isle.'
Approximately one-half of Southern's products are sold under brand labels, with
'McKenzie's' and 'Southern Farms' accounting for approximately 26% of the
southern vegetable market in the Southeastern United States for the 52-week
period ended
71
<PAGE>
March 6, 1994. Approximately 15% of Southern's products are sold to private
label customers with major accounts including Winn-Dixie, Federated Foods,
SuperValue and Marketing Management. Distribution is primarily in the Southeast
and South Central portions of the United States.
On July 7, 1994, a fire extensively damaged Southern's breading and
packaging operations. By July 12, 1994, Southern had arranged for co-packing and
resumed shipments. The Company has business interruption insurance and believes
that all losses beyond its $250,000 deductible will be covered. The Company
began construction of a new breading and packaging facility in late October
1994. Completion is scheduled for June 1995.
SNACK FOODS GROUP
The Snack Foods Group consists of three separate divisions: (i) Snyder,
(ii) Tim's and (iii) Husman. The following table sets forth the net sales and
division operating income for the Snack Foods Group for the periods shown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
------------- ------------- ------------- ------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........ $65.3 $65.4 $61.2 $ 15.5 $ 15.4
Operating
income......... 5.1 4.1 2.7 0.9 0.8
</TABLE>
Snyder of Berlin, located in Berlin, Pennsylvania, produces and markets
several varieties of potato chips in distinctive silver-colored bags, as well as
several varieties of corn chips and similar snack products in conventional
packaging, primarily under the 'Snyder of Berlin' brand. Snyder's products are
recognized for their taste and freshness among users in Western Pennsylvania,
Ohio and West Virginia, some of the country's highest per capita snack
consumption markets.
Tim's Cascade Chips, located in Tacoma, Washington, produces kettle-fried
potato chips for distribution in the Seattle/Tacoma, Washington area.
Kettle-frying produces a potato chip that is thicker and crisper than other
potato chips.
Husman Snack Foods, located in Cincinnati, Ohio, markets potato chips in
Cincinnati and Dayton, Ohio. Husman has maintained volume with marketing
concepts such as a licensing agreement with a leading local restaurant chain to
use its recognizable Bar-B-Que flavor in potato chips and dip.
BROOKS FOODS
Brooks markets specialty chili beans, specialty tomato products, barbecue
sauce and related products under the 'Brooks' label. Its principal markets are
in the Midwest. In fiscal 1994, branded sales accounted for approximately
three-quarters of Brooks' total sales. However, Brooks is seeking to expand its
private label business, particularly for its specialty chili bean products. The
following table sets forth the net sales and division operating income for
Brooks for the periods shown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
------------- ------------- ------------- ------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........ $30.0 $30.7 $30.0 $5.6 $5.4
Operating
income......... 2.7 2.7 3.1 0.2 0.1
</TABLE>
Brooks sells a line of specialty tomato products under the 'Just for Chili'
brand name, a line of whole and stewed tomatoes under the 'Hoosier Sweets' brand
name and a line of chili hot beans under the 'Brooks' brand name. In fiscal
1994, 'Brooks' chili hot beans had a market share of approximately 68% in the
major Midwestern cities it serves.
72
<PAGE>
FINGER LAKES PACKAGING COMPANY
Finger Lakes manufactures various sizes of three-piece sanitary food cans
for sale to the Company and third parties. In fiscal 1994, approximately
two-thirds of Finger Lakes sales were to other divisions of the Company and
one-third were to other customers. The following table sets forth the net sales
and division operating income (before elimination of corporate overhead) for
Finger Lakes for the periods shown:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------- ----------------------------------------
JUNE 26, 1992 JUNE 26, 1993 JUNE 25, 1994 SEPTEMBER 25, 1993 SEPTEMBER 24, 1994
------------- ------------- ------------- ------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........ $46.9 $47.1 $49.9 $ 12.6 $ 14.6
Operating
income......... (0.9) 2.9 3.9 1.1 1.0
</TABLE>
Finger Lakes' three part metal sanitary cans are used in the retail, food
service and institutional markets. These cans are recyclable and provide
economical containers for the Company's products based on volume run and
customer base.
PACKAGING AND DISTRIBUTION
The food products produced by the Company are distributed to various
consumer markets in all 50 states as well as in Canada. Branded lines of CMF,
Southern and Brooks are sold through food brokers which sell primarily to
supermarket chains and various institutional feeders. Nalley's has its own sales
personnel responsible for sales within the Pacific Northwest and uses food
brokers for sales in other marketing areas. Snyder's, Tim's and Husman's
products are marketed through distributors, some of which are owned and operated
by the Company, who sell directly to retail outlets in Kentucky, Maryland, Ohio,
Pennsylvania, Virginia and West Virginia.
Customer brand operations encompass the sale of products under private
labels to chain stores and under the controlled labels of buying groups. For
example, private label customers of CMF include such major food distributors as
A&P, Kroger, Safeway, Topco, Wegman's and Winn-Dixie. The Company has developed
central storage and distribution facilities that permit multi-item single
shipment to customers in key marketing areas.
Curtice-Burns Express ('CBX'), a subsidiary of the Company, is a licensed
common carrier with authority in 48 states. It is used by the Company to obtain
backhaul volume on shipments via the Company's trucks or contract haulers. The
other divisions of the Company lease their equipment to CBX for these backhauls.
TRADEMARKS
The major brand names under which the Company markets its products are
trademarks of the Company. Such brand names are considered to be of material
importance to the business of the Company since they have the effect of
developing brand identification and maintaining consumer loyalty. All of the
Company's trademarks are of perpetual duration so long as periodically renewed,
and it is currently intended that the Company will maintain them in force. The
major brand names utilized by the Company are as follows:
73
<PAGE>
<TABLE>
<CAPTION>
PRODUCT BRAND NAME
- ------------------------------------ -----------------------------------------------------------------
<S> <C>
Chilies, stews and soups............ Brooks, Mariners Cove, Nalley
Fruits and vegetables............... Blue Boy, Brooks, Cerise, Chill-Ripe, Gold King, Gracias,
Greenwood, Hoosier Sweets, Just for Chili, McKenzie's, Naturally
Good, Ritter, Southern Farms, Southland, Thank You, Tropic Isle
Fruit fillings and toppings......... Comstock, Globe, Gracias, Thank You, Wilderness
Peanut butter....................... Adams
Pickles............................. Farman's, Nalley
Popcorn............................. Pop-Eye, Pops-Rite, Super Pop
Puddings............................ Gracias, Thank You
Salad dressings..................... Bernstein's, Bernstein's Light Fantastic, Nalley
Sauerkraut.......................... Cortland Valley, Silver Floss, Victor
Snack food.......................... Cheese Pleezers, Husman, La Restaurante, Snyder of Berlin,
Thunder Crunch, Tim's Cascade Chips
Syrup............................... Lumberjack
</TABLE>
RAW MATERIALS
It is currently anticipated that the Company will acquire a substantial
part of its raw agricultural products from Pro-Fac. In fiscal 1994,
approximately 65% of the crops processed by the Company were supplied by
Pro-Fac. The Company also will purchase on the open market some crops of the
same type and condition as those purchased from Pro-Fac. Such open market
purchases may occur at prices higher or lower than those paid to Pro-Fac for
similar products. See 'Certain Transactions -- Pro-Fac Marketing Agreement.'
The canned and frozen vegetable portion of the Company's business can be
positively or negatively affected by weather conditions nationally and the
resulting impact on crop yields. Favorable weather conditions can produce high
crop yields and an oversupply situation in a given year. This oversupply
typically will result in depressed selling prices and reduced profitability to
the Company on the inventory produced from that year's crops. Excessive rain or
drought conditions can produce low crop yields and a shortage situation. This
shortage typically will result in higher selling prices and increased
profitability to the Company. While the national supply situation controls the
pricing, the supply can differ regionally because of variations in weather. The
1993 floods in the Midwest and the drought in the South increased prices, even
though the crops in the Company's growing areas were at normal levels.
Except for cans manufactured by Finger Lakes, the Company purchases all of
its requirements for nonagricultural products, including containers, on the open
market. Although the Company has not experienced any difficulty in obtaining
adequate supplies of such items, occasional periods of short supply of certain
raw materials may occur.
COMPETITION
All products of the Company, particularly branded products, compete with
those of national and major regional food processors under highly competitive
conditions. Many of the national manufacturers have substantially greater
resources than the Company. The principal methods of competition in the food
industry are ready availability of a broad line of products, product quality,
price, advertising and sales promotion.
In recent years, and particularly when various food items are in short
supply, the constant availability of a full line of food items and the ability
to deliver the required items rapidly and economically have been among the most
important competitive factors in the markets in which the Company operates. The
Company believes that it is competitive with national brands in this area since
distribution of many of its regional brands and custom-pack food items are
limited to areas which can easily be served from its production and distribution
facilities.
Quality of product and uniformity of quality are also important methods of
competition. The Company's relationship with Pro-Fac has provided the Company
with local sources of supply, thus
74
<PAGE>
allowing the Company to exercise control over the quality and uniformity of much
of the raw product which it purchases. The members of Pro-Fac generally operate
relatively large production units with emphasis on mechanical growing and
harvesting techniques. This factor is also an advantage in producing uniform,
high-quality food products.
The Company believes that its pricing is generally competitive with that of
other food processors for products of comparable quality. The branded products
of the Company are marketed under regional brands and its marketing programs are
focused on local tastes and preferences as a means of developing consumer brand
loyalty. The Company's advertising program utilizes local media, and strong
emphasis is placed on in-store promotions.
Although the relative importance of the above factors may vary as between
particular products or customers, the above description is generally applicable
to all of the products of the Company in the various markets in which they are
distributed.
An estimate of the number of competitors in the markets served by the
Company is very difficult. Nearly all products sold by the Company compete with
the nationally advertised brands of the leading food processors, including
Borden, DelMonte, Eagle, Green Giant, Heinz, Frito-Lay, Kraft, Vlasic, Birdseye
and similar major brands, as well as with the branded and private label products
of a number of regional processors, many of which operate only in portions of
the marketing area served by the Company. While the major brands are dominant in
branded products on a national level, the Company believes that it is a
significant factor in many of the marketing areas served by one or more of its
regional brands.
ENVIRONMENTAL MATTERS
The disposal of solid and liquid waste material resulting from the
preparation and processing of foods and the emission of wastes and odors
inherent in the heating of foods during preparation are subject to various
federal, state, and local environmental laws and regulations. Such laws and
regulations have had an important effect on the food processing industry as a
whole, requiring substantially all firms in the industry to incur material
expenditures for modification of existing processing facilities and for
construction of new waste treatment facilities. The Company is also subject to
standards imposed by regulatory agencies pertaining to the occupational health
and safety of its employees. Management believes that continued measures to
comply with such laws and regulations will not have a material adverse effect
upon its competitive position.
Among the various programs for the protection of the environment which have
been adopted to date, the most important for the operations of the Company are
the wastewater discharge permit programs administered by the environmental
protection agencies in those states in which the Company does business and by
the federal Environmental Protection Agency. Under these programs, permits are
required for processing facilities which discharge certain wastes into streams
and other bodies of water, and the Company is required to meet certain discharge
standards in accordance with compliance schedules established by such agencies.
The Company has to date received permits for all facilities for which permits
are required, and each year submits applications for renewal permits for some of
the facilities. Such renewal permits are currently being processed, and the
Company expects that they will be issued by the agencies in due course.
While the Company cannot predict with certainty the effect of any proposed
or future environmental legislation or regulations on its processing operations,
management of the Company believes that the waste disposal systems which are now
in operation or which are being constructed or designed are sufficient to comply
with all currently applicable laws and regulations.
In 1991, the Company settled criminal charges arising out of its alleged
failure to file accurate monthly discharge reports pursuant to waste water
discharge permits at its Red Creek, New York and Rushville, New York facilities.
There was no claim of any harm to the environment, only that certain reports
were not properly filed as required by the permits. At the time the criminal
charges were settled by payment of a fine of $50,000, the New York State
Department of Environmental Conservation ('DEC'), which issued the permits,
indicated that it might seek a civil penalty for the same alleged violations on
which the criminal charges were based. During the ensuing three years the DEC
has not
75
<PAGE>
formally sought any such penalties, and in any event the Company believes that
it has valid defenses to any such claims.
A facility owned by the Company in Brockport, New York, known as the Former
3M/Dynacolor Plant Site (DEC Site No. 828066) and used by prior owners as a
manufacturing facility, is under study by DEC to determine whether it should be
classified as a hazardous waste site presenting a significant threat to the
public health or the environment. Levels of contaminants of concern in soil
appear to be below DEC action levels. However, DEC is currently assessing any
impact on groundwater from soil contamination. Until the results of DEC's
assessment are available, it is not possible to determine what, if any, response
actions will be required at the facility.
The Company has been identified as a potentially responsible party ('PRP')
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, ('CERCLA') along with over 100 other entities, at the Ellis
Road Site in Jacksonville, Florida. To date, the Company has paid approximately
$45,000 toward the completion of various removal actions and soil clean up. EPA
is evaluating the need for groundwater remediation which, if required, the
Company does not believe will have a material impact on its earnings given its
relatively small contribution of material to the site and the availability of
other viable PRPs.
The Company has been identified by EPA as a PRP under CERCLA at the
Spectron Inc. Site located in Elkton, Maryland. The investigation of the site is
still in the preliminary stages, and it is not yet possible to estimate the
scope or cost of whatever remedial action may be required. However, based upon
its very small contribution of material to the site and the large number of
other viable PRPs, the Company does not believe this matter will have a material
impact on its earnings.
The Company is cooperating with environmental authorities in remediating
various leaks and spills at several of its plants, primarily associated with
underground storage tanks. Such actions are being conducted pursuant to
procedures approved by the appropriate environmental authorities at a cost which
is not significant, except for one project at the Company's Nalley's plant in
Tacoma, Washington, where the cost of remediation is expected to be
approximately $800,000. Approximately three-quarters of this amount has already
been expended by the Company.
Historically, expenditures for facilities related to protection of the
environment have been made from the regular capital budget of Pro-Fac and such
facilities were then leased to the Company pursuant to the facilities financing
section of the Integrated Agreement. Expenditures related to environmental
programs and facilities have not had, and are not expected to have, a material
effect on the earnings of the Company.
In fiscal 1994, total capital expenditures of Pro-Fac and the Company were
$19.5 million, of which approximately $2.1 million was devoted to the
construction of environmental facilities. The Company estimates that the capital
expenditures for environmental control facilities, principally waste water
treatment facilities, for the 1995 fiscal year will be approximately $2.7
million. However, there can be no assurance that expenditures will not be
higher.
EMPLOYEES
As of June 25, 1994, the Company had 4,325 full-time employees, of whom
2,750 were engaged in production and the balance in management, sales and
administration. As of that date, the Company also employed approximately 1,000
seasonal and other part-time employees, almost all of whom were engaged in
production. Most of the production employees are members of various labor
unions. The Company believes its relationship with its employees is good.
LEGAL PROCEEDINGS
A grower has filed suit against the Company for damages resulting from
defective seed which was purchased from Southern. The lawsuit alleges that the
defective seed resulted in the loss of crops and acreage, and the grower is
seeking $950,000 in damages. Management believes this claim is without merit and
intends to vigorously defend its position. In addition, management anticipates
that any material costs of settlement, if incurred, will be covered under its
insurance policies.
76
<PAGE>
In conjunction with the sale of the National Oats division by Pro-Fac and
the Company, Pro-Fac terminated the membership of the Harvest States Cooperative
('Harvest States') in Pro-Fac. Harvest States was the only supplier of oats to
the Company's National Oats division. As a result of this action, Harvest States
filed a claim against Pro-Fac for, among other things, the receipt of payments
for future oats purchases after the sale of National Oats division through
fiscal 1995. The Company agreed to indemnify Pro-Fac as to certain expenses
arising out of the termination of the membership of Harvest States in Pro-Fac.
It was agreed that any settlement payments would be deemed an expense of the
Company under the division of earnings with Pro-Fac. The exact amount of any
potential settlement related to this issue cannot be estimated at September 24,
1994, but Pro-Fac's management does not believe that this is a material exposure
to the Company.
The owner of property formerly leased by the Company in the City of South
San Francisco, San Mateo, California sued the Company in February 1994 seeking,
inter alia, damages for alleged contamination from underground storage tanks and
other activities at the facility, an order requiring the Company to perform
environmental investigation and remediation, and additional rental payments at
the rate of approximately $26,800 per month commencing November 1, 1993. 350
Harborway Associates v. Curtice-Burns Foods, Inc., Civ. Action No. 387014
(Super. Ct., San Mateo County, Cal.). The Company has completed soil remediation
and is conducting groundwater monitoring with the approval of the San Mateo
County Health Department and believes there is no need for additional study or
clean-up at the facility. Management believes this claim is without merit and
intends to vigorously defend its position.
The Company has been named as a third-party defendant in a lawsuit brought
by the Federal Environmental Protection Agency (EPA) under CERCLA against, inter
alia, the owner of the International Disc Site in Ellsworth, Michigan to recover
response costs. United States v. Taylor, 802 F. Supp. 116 (W.D. Mich. 1992). The
site was formerly owned by a business acquired by the Company in 1974. The
Company believes it has valid defenses to this suit and does not expect it to
have a material impact on its earnings.
Other than these disputes there are no material pending legal proceedings
other than routine litigation incidental to the business to which either the
Company or Pro-Fac is a party or to which any of their property is subject.
Further, no such proceedings are known to be contemplated by governmental
authorities.
PROPERTIES
Historically, Pro-Fac has held title to, and leased to the Company, most of
the processing facilities, warehouses and other plants and equipment (including
equipment located in properties not owned by Pro-Fac) utilized in the Company's
business. Nalley's Canada Ltd. owns the facility used in its business and the
Company leases some facilities from third parties. In connection with the
Transactions, Pro-Fac contributed title to all of its properties to PFAC, which
was merged into the Company, and Pro-Fac, PFAC and the Company terminated the
lease arrangements.
Seven of the properties contributed by Pro-Fac are not being used for
production by the Company and are held for resale. These properties are located
in Denver, Colorado; Des Moines, Iowa; Wall Lake, Iowa; Clifton, New Jersey;
Alton, New York; Rushville, New York; and Albany, Oregon. The aggregate net book
value of these properties was $11.9 million as of June 25, 1994.
In July 1994, a plant operated by Southern, located in Montezuma, Georgia,
was damaged by fire. All material costs associated with repairs to the facility
and business interruption are anticipated to be covered under the Company's
insurance policies.
The following table describes all facilities leased or owned by the Company
(other than the seven properties held for resale and certain public warehouses
leased by the Company from third parties from time to time). Except as otherwise
noted, each facility set forth below is owned by the Company.
77
<PAGE>
<TABLE>
<CAPTION>
TYPE OF PROPERTY (BY DIVISION) LOCATION SQUARE FEET
- ------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
COMSTOCK MICHIGAN FRUIT:
Office building, manufacturing plant and warehouse.................. Benton Harbor, MI 239,252
Distribution center................................................. Coloma, MI 400,000
Manufacturing plant and warehouse................................... Fennville, MI 370,600
Warehouse........................................................... Sodus, MI 243,138
Warehouse and office; public storage facility (1)................... Vineland, NJ 198,000
Warehouse........................................................... Alton, NY 60,060
Freezing plant; warehouse; office and dry storage................... Barker, NY 150,100
Freezing plant...................................................... Bergen, NY 122,009
Cold storage and repack facility and public storage warehouse....... Brockport, NY 429,052
Cutting, curing and packaging plant................................. Gorham, NY 55,534
Canning plant and warehouse; freezing plant......................... Leicester, NY 205,599
Distribution center and warehouse................................... LeRoy, NY 137,300
Canning plant and warehouse; freezing plant......................... Oakfield, NY 203,403
Canning plant and warehouse......................................... So. Dayton, NY 151,140
Canning plant and warehouse......................................... Red Creek, NY 137,264
Cutting, curing and canning plant................................... Shortsville, NY 103,686
Cutting and curing plant............................................ Waterport, NY 21,626
Manufacturing plant................................................. Ridgway, IL 50,000
Manufacturing plant................................................. North Bend, NE 50,000
NALLEY'S FINE FOODS:
Office building, warehouse and tank farm............................ Enumclaw, WA 87,313
Office building, manufacturing plant and warehouse.................. Tacoma, WA 438,000
Sales offices and distribution warehouse (1)........................ Spokane, WA 16,300
Parking lot and yards (1)........................................... Tacoma, WA 162,570
Warehouses (1)...................................................... Tacoma, WA 254,000
Receiving and grading station (1)................................... Cornelius, OR 11,700
Sales offices and distribution warehouses (1)....................... Portland, OR 14,365
Receiving and grading station (1)................................... Mount Vernon, WA 30,206
Warehouse (1)....................................................... Sea-Tac, WA 13,950
Annacis Island,
Office, manufacturing plant and distribution warehouse (1).......... BC 108,000
Main office (1)..................................................... Burnaby, BC 8,350
Office building and warehouse (1)................................... Kelowna, BC 15,900
Office, manufacturing plant and warehouse........................... Vancouver, BC 48,000
Warehouse (1)....................................................... Calgary, AB 13,800
Warehouse (1)....................................................... Edmonton, AB 8,000
SOUTHERN FROZEN FOODS:
Office, freezing plant, cold storage and repackaging facility....... Montezuma, GA 545,942
Office, freezing plant and cold storage............................. Alamo, TX 110,000
SNACK FOODS GROUP:
Office, plant and warehouse......................................... Berlin, PA 190,225
Administrative, plant, warehouse and distribution center (1)........ Auburn, WA 37,600
Office, plant and warehouse......................................... Cincinnati, OH 113,576
Warehouse (1)....................................................... Elwood City, PA 8,000
BROOKS FOODS:
Office building, canning plant and warehouse........................ Mt. Summit, IN 200,000
FINGER LAKES PACKAGING:
Can manufacturing plant............................................. Lyons, NY 147,376
CORPORATE HEADQUARTERS:
Headquarters office (1) (Includes office space for CMF as well as
Corporate Conference Center)...................................... Rochester, NY 62,500
</TABLE>
- ------------
(1) Leased from third parties, although certain related equipment is owned by
the Company.
78
<PAGE>
MANAGEMENT
Effective upon consummation of the Transactions, Pro-Fac established a
management structure for the Company, providing for a Board of Directors
consisting of one management director, Pro-Fac Directors and Disinterested
Directors. The number of Pro-Fac Directors is equal to the number of
Disinterested Directors. The Chairman of the Board is a Pro-Fac Director. The
initial management and directors are listed below. The Company may in the future
expand the Board of Directors, but Pro-Fac has undertaken to cause the Company
to maintain a Board on which the number of Pro-Fac Directors does not exceed the
number of Disinterested Directors. The Indenture provides that there will be a
Change of Control if, for a period of 120 consecutive days, the number of
Disinterested Directors on the Board of Directors of the Company is less than
the greater of (i) two and (ii) the number of directors of the Company who are
Pro-Fac Directors.
Upon consummation of the Transactions, Roy A. Myers was elected as Chief
Executive Officer. The Company intends to commence a search for a chief
executive officer to replace Mr. Myers. Although the Company believes that it
will be able to find a qualified candidate to become chief executive officer,
there can be no assurance as to how long such search will take. Mr. Myers has
agreed to remain as Chief Executive Officer until his successor is found.
THE COMPANY
DIRECTORS AND OFFICERS
Set forth below is certain information concerning the individuals who serve
as directors and executive officers of the Company and the individuals who serve
as presidents and chief executive officers of certain of the Company's
divisions.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ----------------------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Roy A. Myers(1).......................... 63 Chief Executive Officer and Director
William D. Rice.......................... 60 Senior Vice President, Secretary and Treasurer
Stephen R. Wright........................ 47 Senior Vice President -- Procurement
Patrick D. Lindenbach.................... 39 Executive Vice President of the Company and President and Chief
Executive Officer of Nalley's
Dennis M. Mullen......................... 40 President and Chief Executive Officer of CMF
Thomas A. Collins........................ 56 President and Chief Executive Officer of Southern
Eugene W. Hermenet....................... 56 President and Chief Executive Officer of Brooks
Ronald R. Fithen......................... 48 President and Chief Executive Officer of Finger Lakes
Robert V. Call, Jr.(2)................... 68 Director
Bruce R. Fox(2).......................... 47 Director
Cornelius D. Harrington, Jr.(3).......... 67 Director
Steven D. Koinzan(2)..................... 45 Director
William B. McKnight, Jr.(3).............. 49 Director
Frank M. Stotz(3)........................ 64 Director
</TABLE>
- ------------
(1) Management director.
(2) Pro-Fac Director.
(3) Disinterested Director.
Roy A. Myers has been the Chief Executive Officer and a Director of the
Company since the completion of the Transactions. Mr. Myers served as a Director
and Executive Vice President of the Company from 1987 to the completion of the
Transactions (at which time he was appointed the Chief Executive Officer). He
served as Vice President-Operations of the Company from 1985 to 1987 and as Vice
President of the Company from 1983 to 1985. He has been an employee of the
Company or a predecessor to the Company since 1955 in various other capacities
including Industrial Relations Manager, Operations Manager and President of the
Corporate Services Division. He was General Manager of Pro-Fac from 1987 until
the completion of the Transactions, having served as Assistant General Manager
from 1983 to 1987.
79
<PAGE>
William D. Rice has been Senior Vice President Finance and Administration
of the Company since 1991, Secretary of the Company since 1989 and Treasurer of
the Company since 1975. He was Vice President-Finance of the Company from 1969
to 1991. He has been Assistant Treasurer of Pro-Fac since 1970.
Stephen R. Wright has been Senior Vice President -- Procurement of the
Company since the completion of the Transactions. He was Vice
President -- Procurement for the Company from 1990 to November, 1994, having
served as Director of Commodities and Administration Services for the Company
from 1988 to 1990.
Patrick D. Lindenbach has been an Executive Vice President of the Company
since March 1993 and Division President and Chief Executive Officer of Nalley's
since June 1990. He was Division President and Chief Executive Officer of
Nalley's Canada Ltd. from 1988 to 1990. Prior to working at the Company, he held
various positions at Kellogg Salada Canada Inc., Warner Lambert Canada, Inc. and
Standard Brands Canada Ltd.
Dennis M. Mullen has been President and Chief Executive Officer of CMF
since March 1993. He was Senior Vice President and Business Unit Manager-Food
Service of CMF from 1991 to 1993, and Senior Vice President-Custom Pack Sales
for Nalley's from 1990 to 1991. Prior to employment with the Company, he was
President and Chief Executive Officer of Globe Products Company.
Thomas A. Collins has been President and Chief Executive Officer of
Southern since 1990. He was Executive Vice President of Southern from 1989 to
1990, Vice President-Sales and Marketing of Southern from 1985 to 1989, Vice
President-Marketing for Retail and Foodservice of Southern from 1981 to 1985 and
Vice President-Foodservice Sales of Southern from 1975 to 1981.
Ronald R. Fithen has been President and Chief Executive Officer of Finger
Lakes since 1991. Prior to joining the Company in 1991, he was Plant Manager for
Continental Can's largest manufacturing operation in St. Louis.
Eugene W. Hermenet has been President and Chief Executive Officer of Brooks
since 1978. He was Executive Vice President of Brooks from 1975 to 1978. He was
President of Silver Floss from 1972 to 1975, Vice President of Silver Floss from
1971 to 1972 and Assistant to the President of Silver Floss from 1969 to 1971.
Robert V. Call, Jr. has been a Director of the Company since the completion
of the Transactions. Mr. Call had been a Director of the Company since 1986
until completion of the Transactions (at which time he resigned and was
reappointed). He has been a Director of Pro-Fac since 1962. He has been the
President of Pro-Fac since 1986, having served as Treasurer from 1973 to 1984,
and a member of Pro-Fac since 1961. He is a vegetable, fruit and grain farmer
(My-T Acres, Inc., Batavia, NY).
Bruce R. Fox has been a Director of the Company since the completion of the
Transactions. He has been a Director of Pro-Fac since 1974. He has been
Treasurer of Pro-Fac since 1984 and a member of Pro-Fac since 1974. Mr. Fox is a
fruit and vegetable grower (N.J. Fox & Sons, Inc., Shelby, MI).
Cornelius D. Harrington, Jr. has been a Director of the Company since the
completion of the Transactions. He has been retired since December 1990. Prior
to his retirement, Mr. Harrington was President of the Bank of New England-West
in Springfield, MA or a predecessor to the Bank of New England-West from 1978 to
December 1990. He was Chief Executive Officer of the Bank of New England-West
from 1984 to December 1990. Until 1987, he served as Chairman of the Board of
Directors of BayState Medical Center in Springfield, MA. He has been a Director
of the Farm Credit Bank of Springfield since January 1994.
Steven D. Koinzan has been a Director of the Company since the completion
of the Transactions. He has been a Director of Pro-Fac since 1983. He has been
Secretary of Pro-Fac since March 1993 and a member of Pro-Fac since 1979. Mr.
Koinzan is a popcorn, fieldcorn and soybean farmer (Koinzan Farms, Norden, NE).
80
<PAGE>
William B. McKnight, Jr. has been a Director of the Company since the
completion of the Transactions. Mr. McKnight is a management consultant. He was
Executive Vice President of the Nabisco Foods Group of RJR Nabisco, Inc. until
1993. He was President and Chief Executive Officer of the Nabisco Foods Company
from 1988 to 1992 and President of the Biscuit Division of the Nabisco Foods
Group from 1986 to 1988. Mr. McKnight was President of the Grocery Division of
the Nabisco Foods Group from 1984 to 1986, President of the Grocery Products
Division from 1982 to 1984 and Vice President, Marketing of the Special Products
Division from 1981 to 1982. From 1968 to 1981, he held various management
positions at General Mills, Inc. Mr. McKnight has been a Director of VideOcart,
Inc. since 1989 and a Director of Ghirardelli Chocolate Company since 1991. He
is a member of the Executive Committee of The Kenyon College Fund and St.
Clare's Riverside Hospital.
Frank M. Stotz has been a Director of the Company since the completion of
the Transactions. Mr. Stotz retired this year from his position as Senior Vice
President -- Finance of Bausch & Lomb Incorporated. Before joining Bausch & Lomb
in that capacity in 1991, Mr. Stotz was a partner in Price Waterhouse. He joined
Price Waterhouse in Chicago in 1954, was admitted to partnership in 1966 and
retired from the firm in 1991 to join Bausch & Lomb. From 1980 to 1991, he was
partner in charge of the Rochester office of Price Waterhouse. Mr. Stotz serves
on the Boards of Trustees of St. John Fisher College, The Genesee Hospital, The
Rochester Center for Governmental Research and The Automobile Club of Rochester.
He is also a member of the Bishop's Council of the Catholic Diocese of
Rochester.
TERM OF OFFICE
All directors of the Company will hold office from the date of election
until the next annual meeting of shareholders or until their successors are duly
elected and qualified. Each executive officer of the Company will hold office
from the date of election until his successor is elected or appointed.
PRO-FAC
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the individuals who serve
as directors and executive officers of Pro-Fac.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Robert V. Call, Jr.......... 68 President and Director
Albert P. Fazio............. 58 Vice President and Director
Bruce R. Fox................ 47 Treasurer and Director
Steven D. Koinzan........... 45 Secretary and Director
William D. Rice............. 60 Assistant Treasurer
Stephen R. Wright........... 47 Assistant General Manager
Thomas R. Kalchik........... 47 Vice President of Member Relations
Dale W. Burmeister.......... 54 Director
Glen Lee Chase.............. 57 Director
Tommy R. Croner............. 52 Director
Kenneth A. Mattingly........ 46 Director
Allan D. Mitchell........... 67 Director
Allan W. Overhiser.......... 34 Director
Paul E. Roe................. 55 Director
Edward L. Whitaker.......... 68 Director
</TABLE>
Robert V. Call, Jr. has been a Director of Pro-Fac since 1962. For
information regarding Mr. Call, see 'Management -- The Company -- Directors and
Officers.'
Albert P. Fazio has been a Director of Pro-Fac since 1976, Vice President
of Pro-Fac since March 1993 and a member of Pro-Fac since 1975. He was Secretary
of Pro-Fac from 1991 to 1993. Mr. Fazio is a vegetable, grain and livestock
farmer (New Columbia Garden Co., Inc., Vancouver, WA). Mr. Fazio also operates a
sand and gravel business (Fazio Bros. Sand Co., Vancouver, WA).
Bruce R. Fox has been a Director of Pro-Fac since 1974. For information
regarding Mr. Fox, see 'Management -- The Company -- Directors and Officers.'
81
<PAGE>
Steven D. Koinzan has been a Director of Pro-Fac since 1983. For
information regarding Mr. Koinzan, see 'Management -- The Company -- Directors
and Officers.'
William D. Rice has been Assistant Treasurer of Pro-Fac since 1970. For
information regarding Mr. Rice, see 'Management -- The Company -- Directors and
Officers.'
Stephen R. Wright has been Assistant General Manager of Pro-Fac since
November 14, 1994. For information regarding Mr. Wright, see 'Management -- The
Company -- Directors and Officers.'
Thomas R. Kalchik is employed by the Company to provide management services
to Pro-Fac pursuant to the Pro-Fac Marketing Agreement. In such capacity, he has
served as Vice President of Member Relations of Pro-Fac since June 1990 and
Assistant Secretary of Pro-Fac since 1983. Mr. Kalchik was Director of Member
Relations of Pro-Fac from August 1983 to June 1990.
Dale W. Burmeister has been a Director of Pro-Fac since 1992 and a member
of Pro-Fac since 1974. Mr. Burmeister is a fruit and vegetable grower (Lakeshore
Farms, Inc., and Dale Burmeister, sole proprietorship, Shelby, MI).
Glen Lee Chase has been a Director of Pro-Fac since 1989 and a member of
Pro-Fac since 1984. Mr. Chase is a peanut, poultry, grain and vegetable farmer
(Chase Farms Inc., Oglethorpe, GA).
Tommy R. Croner has been a Director of Pro-Fac since 1985 and a member of
Pro-Fac since 1973. Mr. Croner is a dairy and potato farmer (T-Rich Inc.,
Berlin, PA).
Kenneth A. Mattingly has been a Director of Pro-Fac since 1993 and a member
of Pro-Fac since 1978. Mr. Mattingly is a vegetable and grain farmer (M-B Farms
Inc., LeRoy, NY).
Allan D. Mitchell has been a Director of Pro-Fac since 1975 and a member of
Pro-Fac since 1961. He was Secretary of Pro-Fac from 1985 to 1990. Mr. Mitchell
is a fruit grower (North Rose, NY).
Allan W. Overhiser has been a Director of Pro-Fac since March 1994 and a
member of Pro-Fac since 1984. Mr. Overhiser is a fruit farmer (A.W. Overhiser
Orchards, South Haven, MI).
Paul E. Roe has been a Director of Pro-Fac since 1986 and a member of
Pro-Fac since 1961. Mr. Roe is a vegetable, grain and dry bean farmer (Roe
Acres, Inc., Bellona, NY).
Edward L. Whitaker has been a Director of Pro-Fac since 1992 and a member
of Pro-Fac since 1988. Mr. Whitaker is a farm land owner and a popcorn grower
(Forest City, IL).
REGIONAL REPRESENTATION
The business of Pro-Fac is conducted pursuant to policies established by
its Board of Directors. The territorial area in which Pro-Fac operates has been
divided into geographical regions based on natural divisions of product and
location. In addition, some regions have been further divided into districts.
The members within each region or district are represented on the Board by at
least one director. The Board designates the number of directors to be elected
from each region or district, based on the value of raw product delivered, so as
to attain reasonably balanced representation on the Board. At present, there are
five regions of Pro-Fac covering the following areas and represented by the
number of directors indicated:
<TABLE>
<CAPTION>
NUMBER
REGION AREA OF DIRECTORS
- -------------- --------------------------------- ------------
<C> <S> <C>
I (Dist. 1) Western Upstate New York 2
(Dist. 2) Eastern Upstate New York 2
(Dist. 3) Pennsylvania and Maryland 1
II (Dist. 1) Michigan 3
(Dist. 2) Illinois 1
III Iowa, Nebraska and North Dakota 1
IV Washington, Oregon and California 1
V Georgia and Florida 1
</TABLE>
TERM OF OFFICE
Directors of Pro-Fac are elected for three-year terms. Officers of Pro-Fac
are elected for one-year terms.
82
<PAGE>
EXECUTIVE COMPENSATION
THE COMPANY
The following table shows the cash compensation and certain other
components of the compensation of the chief executive officer and the four other
most highly compensated executive officers of the Company earned during fiscal
years ended June 25, 1994, June 26, 1993 and June 26, 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION DEFERRED
-------------------- AWARDS PROFIT
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(3) SHARING(4)
- ------------------------------------------------------ ---- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
J. William Petty(5) .................................. 1994 $406,369 $219,440 0 $ 13,323
Chief Executive Officer and Director 1993 322,498 148,739 66,800 0
1992 283,134 73,803 11,785 0
Roy A. Myers ......................................... 1994 $228,615 $101,231 0 $ 7,886
Executive Vice President and Director(6) 1993 219,969 35,943 18,200 0
1992 211,467 0 3,460 0
Patrick D. Lindenbach ................................ 1994 $189,083 $ 66,438 0 $ 6,403
Executive Vice President and President and Chief 1993 166,779 102,152 12,700 0
Executive Officer, Nalley's 1992 145,206 84,569 1,154 0
William D. Rice ...................................... 1994 $230,912 $102,248 0 $ 7,933
Senior Vice President, Secretary and Treasurer 1993 222,700 36,389 19,500 0
1992 215,494 0 3,403 0
Dennis M. Mullen ..................................... 1994 $170,128 $101,643 0 $ 5,761
President and Chief Executive Officer, CMF 1993 151,880 98,531 10,200 0
1992 134,369 57,217 0 0
</TABLE>
- ------------
(1) No named executive officer has received personal benefits during the listed
years in excess of the lesser of $50,000 or 10% of annual salary.
(2) Pursuant to the Management Incentive Plan of the Company (the 'Incentive
Plan'), additional compensation 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 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
Roy A. Myers.................................... 12,460 10.25 9,000 15.375
Patrick D. Lindenbach........................... 6,554 10.25 5,400 15.375
William D. Rice................................. 12,803 10.25 9,400 15.375
</TABLE>
(4) The deferred profit sharing program (the 'Profit Sharing Plan') is a defined
contribution plan, which is dependent upon the financial success of the
Company.
(5) Mr. Petty resigned as a Director and the Chief Executive Officer of the
Company upon completion of the Transactions.
(6) Mr. Myers has been a Director and the Chief Executive Officer of the Company
since completion of the Transactions.
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 for
the named executive officers of the Company is included in the salary column of
the Summary Compensation Table.
83
<PAGE>
For retirement before age 65, the annual benefits are reduced by an amount,
depending upon the participant's date of birth, for each year prior to age 65 at
which such retirement occurs so that if retirement occurs at age 55, the
benefits are 70% of those payable at age 65 for any participant whose date of
birth precedes January 1, 1938, and 61% for any participant whose of date of
birth is January 1, 1938 or later.
The number of years of credited participation under the Company's Pension
Plan as of June 25, 1994, of the executive officers listed in the Summary
Compensation Table are as follows: J. William Petty, 10; Roy A. Myers, 32;
Patrick D. Lindenbach, 4; William D. Rice, 22; and Dennis M. Mullen, 4.
The Company's Excess Benefit Retirement Plan serves to provide employees
with the same retirement benefit they would have received from the Pension 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 Code, which was $150,000 on January 1, 1994, having been revised in the 1992
Omnibus Budget Reform Act.
The following table shows the estimated pension benefits payable to a
covered participant, at age 65, at the specified final average pay, and years of
credited service levels under the Pension Plan and the Excess Benefit Retirement
Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL ----------------------------------------------------------------
AVERAGE PAY 15 20 25 30 35
- ----------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 22,607 $ 29,558 $ 36,490 $ 43,446 $ 50,645
150,000 27,857 36,558 45,240 53,946 62,895
175,000 33,107 43,558 53,990 64,446 75,145
200,000 38,357 50,558 62,740 74,946 87,395
225,000 43,607 57,558 71,490 85,446 99,645
250,000 48,857 64,558 80,240 94,946 111,895
275,000 54,107 71,558 88,990 106,446 124,145
300,000 59,357 78,558 97,740 116,946 136,395
350,000 69,857 92,558 115,240 137,946 160,895
400,000 80,357 106,558 132,740 158,946 185,395
</TABLE>
The benefits listed on the Pension Plan Table are not subject to any
deduction for Social Security.
The Company also maintains a Supplemental Executive Retirement Plan (the
'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.
CHANGE OF CONTROL PROVISIONS OF SEVERANCE AND OTHER BENEFIT PLANS
The Company has adopted the Key Executive Severance Plan concerning certain
key employees and executive officers (the 'KESP'). The KESP provides salary and
benefit continuation to designated executives (including the named executives
listed in the Summary Compensation Table) 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 KESP. The completion of the Transactions
constituted a change of control under the KESP as of November 3, 1994. As part
of the Transactions, Mr. Petty has resigned.
Because of the completion of the Transactions, the term of the KESP is
extended through November 3, 1996. The KESP cannot be terminated during this
two-year period. The KESP provides for salary and benefit continuation upon a
designated executive's termination, other than for cause, 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. Lindenbach and Mullen, or until the executive (other than Mr. Petty)
obtains other employment at an annual salary not less than 75% of his annual
salary at termination, whichever occurs first.
Under the terms of the KESP, Mr. Petty was entitled to a minimum
supplemental retirement benefit equal to 50% of his salary as of the Closing
Date, less all other sources of retirement income including his supplemental
retirement benefit under the SERP. Messrs. Myers and Rice would be
84
<PAGE>
entitled to a supplemental retirement benefit equal to the benefit they would
receive from the Pension Plan if they continue working until age 65 at their
current salary level, less their actual retirement benefit from such Plan. In
all cases, the supplemental retirement benefits begin at the end of the salary
and benefit continuation period. Also, upon completion of the Transactions all
stock options granted prior to February 15, 1993 became exercisable. However,
with the exception of Mr. Petty's stock options, the vesting of stock options
was accelerated only to the extent that such acceleration would not result in an
excise tax under the Code. Upon completion of the Transactions, payments were
made by the Company to the designated executives in connection with the
cancellation of exercisable stock options.
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. See 'Certain Transactions -- Golden
Parachutes/Severance in connection with the Transactions.'
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 plans who are terminated within two years
following a change in control are entitled to benefits earned under such plans
for the fiscal year of their termination on a pro rata basis for the part of the
year they were employed.
EXECUTIVE STOCK OPTIONS
The following table provides information on unexercised stock options held
as of the end of the fiscal year by the named executive officers. No options
were exercised by the named executive officers during the fiscal year ended June
25, 1994. For certain amounts paid to the named executive officers on account of
cancelled options in connection with the consummation of the Transactions, see
'Certain Transactions -- Golden Parachutes/Severance in connection with the
Transactions.'
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL YEAR
FISCAL YEAR END(1) END(2)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J. William Petty......................................... 59,038 49,474 $ 175,674 $ 140,047
Roy A. Myers............................................. 26,836 15,904 61,773 53,613
Patrick D. Lindenbach.................................... 17,145 10,242 35,227 31,955
William D. Rice.......................................... 27,632 16,821 64,573 56,046
Dennis M. Mullen......................................... 4,080 6,120 8,160 12,240
</TABLE>
- ------------
(1) Fair market value of the Company's Class A Common Stock on June 25, 1994 was
$16.625.
(2) Value of unexercised options equals the fair market value of the shares
underlying in-the-money options at June 25, 1994 ($16.625), less exercise
price, times the number of options outstanding.
Subject to certain limited exceptions, the Company will maintain in effect
for at least one year after the effective time of the Merger all existing
employee benefit plans (except stock-related plans) and will honor all deferred
compensation arrangements for current and former executive officers of the
Company. Upon the effective time of the Merger, all stock option plans, and the
provisions of any other benefit plan calling for the issuance of stock by the
Company, were terminated.
DIRECTORS COMPENSATION
In fiscal 1994, non-employee directors who were designated by either
Pro-Fac or Agway received an annual stipend of $6,000 per year, plus $200 per
day for attending Board or Committee meetings. In fiscal 1994, all other outside
directors, Messrs. Blazin and Tiedemann and Ms. Ford, received $18,000 in
addition to $600 per day. The Chairman of the Board receives a fixed amount in
lieu of the standard
85
<PAGE>
attendance fees and annual stipend. During fiscal 1994, Mr. Pease received
$24,700 for the fiscal year as Chairman of the Board. Directors who are also
officers of the Company or Agway were not paid directors' fees. Directors of the
Company will continue to be compensated according to the same terms. Due to the
consummation of the Transactions, there will no longer be any directors
designated by Agway.
PRO-FAC
Pro-Fac does not compensate its executive officers. However, under the
Integrated Agreement, which has been superseded by the Pro-Fac Marketing
Agreement, Pro-Fac had reimbursed the Company annually for the salaries and
expenses of the Company employees who performed Pro-Fac membership relations
functions. Under the Pro-Fac Marketing Agreement, the Company will continue to
manage the business and affairs of Pro-Fac and provide all personnel and systems
required for its management, and Pro-Fac will pay the Company a quarterly fee of
$25,000 for these services.
For fiscal 1994, the salary expense paid by Pro-Fac was $180,000 and the
employee expense (travel and telephone) was $68,000. Each director of Pro-Fac
receives an annual fee of $6,000 (except the President who receives $12,000)
plus an additional fee of $200 per day (except the President who receives $400)
for attendance at board and other designated meetings. Pro-Fac directors are
also reimbursed for their out-of-pocket expenses.
Pro-Fac has no pension or retirement plan under which retirement benefits
are proposed to be paid to any of its officers or directors.
CERTAIN TRANSACTIONS
PRO-FAC MARKETING AGREEMENT
GENERAL
Upon consummation of the Transactions, the Integrated Agreement was
terminated, and Pro-Fac and the Company entered into the Pro-Fac Marketing
Agreement. Under the Pro-Fac Marketing Agreement, Pro-Fac and the Company will
continue the marketing and management arrangements of the Integrated Agreement.
The Pro-Fac Marketing Agreement is the successor to similar marketing agreements
between the Company and Pro-Fac that have been continuously in effect since
these companies' formations in the early 1960s.
PURCHASE OF CROPS FROM PRO-FAC
Under the Pro-Fac Marketing Agreement, the Company purchases crops from
Pro-Fac at the Commercial Market Value of those crops, which is defined
generally as the weighted average of the prices paid by other 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 market areas.
Under the predecessor agreements to the Pro-Fac Marketing Agreement, the Company
paid Pro-Fac $64.2 million, $59.8 million and $59.2 million as Commercial Market
Value for crops purchased from Pro-Fac in fiscal years 1992, 1993 and 1994,
respectively. The crops purchased by the Company from Pro-Fac represented
approximately 65%, 60% and 65% of all raw agricultural crops purchased by the
Company in fiscal 1992, 1993 and 1994, respectively.
Commercial Market Value will be determined, similar to the process that
existed prior to the Acquisition, by a joint committee of the Boards of
Directors of Pro-Fac and the Company, which is currently comprised of the Chief
Executive Officer of the Company and an equal number of Pro-Fac directors and
Disinterested Directors. The Pro-Fac Marketing Agreement requires a majority of
the Disinterested Directors to approve the recommendation of the joint
committee. Although Commercial Market Value is intended to be no more than the
fair market value of the crops purchased by the Company, it may be more or less
than the price the Company would pay in the open market in the absence of the
Pro-Fac Marketing Agreement. The volume and type of crops to be purchased by the
Company under the Pro-Fac Marketing Agreement are determined pursuant to its
annual profit plan, which requires the approval of a majority of the
Disinterested Directors.
86
<PAGE>
PATRONAGE INCOME OF PRO-FAC
In addition to Commercial Market Value, under the Pro-Fac Marketing
Agreement, the Company will pay to Pro-Fac as additional patronage income (the
'Additional Patronage Income') up to 90% of the Company's pre-tax income on
Pro-Fac related products (the 'Pro-Fac Products'), or reduce Commercial Market
Value by up to 90% of the Company's losses on Pro-Fac Products. The Pro-Fac
Marketing Agreement provides that Additional Patronage Income may not exceed 50%
of the Company's entire pre-tax income and that no more than 50% of the
Company's entire pre-tax loss will be charged to Pro-Fac, through a reduction of
Commercial Market Value, during the term of the Notes. Additional Patronage
Income is paid to Pro-Fac for services provided to the Company, including the
provision of a long term, stable crop supply, favorable payment terms for crops
and access to cooperative bank financing and the sharing of risks in losses of
operations of the business.
The Company has historically paid Pro-Fac Additional Patronage Income based
on a portion of the Company's pre-tax income. Under the predecessor agreements
to the Pro-Fac Marketing Agreement, Additional Patronage Income has generally
been equal to 50% of the pre-tax income of the Company, or in loss years amounts
due to Pro-Fac for interest on its loans to the Company have been reduced by 50%
of the Company's pre-tax losses. The Company paid Additional Patronage Income to
Pro-Fac of $9.5 million and $16.9 million in fiscal 1992 and 1994 on account of
the Company's earnings for those years. In fiscal 1993, the Company reduced the
amount of interest due to Pro-Fac by $21.8 million based on a 50% allocation of
a loss at the Company.
Historically, the Company has deducted Additional Patronage Income for
income tax purposes as an ordinary and necessary business expense for
accommodations provided to the Company by Pro-Fac. Under the Pro-Fac Marketing
Agreement, Pro-Fac will continue to provide many of the same services as it has
in the past. Although the Company is a wholly-owned subsidiary of Pro-Fac, the
payment of Additional Patronage Income will be subject to a similar methodology
to that established at arm's length in the past and will be approved by a
majority of the Disinterested Directors. The Indenture provides that there will
be a Change of Control if, for a period of 120 consecutive days, the number of
Disinterested Directors on the Board of Directors of the Company is less than
the greater of (i) two and (ii) the number of directors of the Company who are
Pro-Fac Directors. The Company's management believes that it will continue to be
able to pay Additional Patronage Income to Pro-Fac and deduct such payments for
federal income tax purposes as ordinary and necessary business expenses. There
can be no assurance that all of such payments will be able to be deducted in the
future.
Additional Patronage Income received by Pro-Fac is deductible to Pro-Fac
for federal tax purposes only to the extent distributed to its members. Pro-Fac
may make this distribution to its members through a combination of cash and
securities as long as a minimum of 20% of the amount is paid in cash as required
by federal tax law. Pro-Fac has historically paid its members between 20% and
30% of Additional Patronage Income in cash and the remaining portion in
securities. Funds made available by the distribution of investment certificates
to members in lieu of cash have historically been reinvested by Pro-Fac in the
Company. Under the Indenture, Pro-Fac will be required to reinvest at least 70%
of the Additional Patronage Income in the Company. See 'Description of the
Notes -- Certain Covenants.'
Under the Pro-Fac Marketing Agreement, the Company will continue to manage
the business and affairs of Pro-Fac and provide all personnel and systems
required for its management, and Pro-Fac will pay the Company a quarterly fee of
$25,000 for these services. See 'Executive Compensation -- Pro-Fac.'
Immediately prior to the Acquisition, Pro-Fac contributed to PFAC all of
its properties, which were leased to the Company, and, upon consummation of the
Transactions, Pro-Fac, PFAC and the Company terminated the lease arrangements.
In addition, borrowings under the New Credit Agreement were used in part to
refinance the existing financing arrangements between Pro-Fac and the Company.
BORROWINGS BY PRO-FAC
The Indenture governing the Notes permits the Company to make demand loans
to Pro-Fac for working capital purposes in amounts not exceeding $10.0 million
at any time outstanding, each such loan to bear interest at a rate equal to the
rate in effect on the date of such loan under the Seasonal Facility. The loan
balance must be reduced to zero for a period of not less than 15 consecutive
days in
87
<PAGE>
each fiscal year. Except for the foregoing provision and except for Pro-Fac's
guarantee of the Notes and the New Credit Agreement, as long as Pro-Fac has the
right to borrow under the Pro-Fac Marketing Agreement, the Indenture does not
permit Pro-Fac to incur any other Indebtedness.
EQUITY OWNERSHIP IN SPRINGFIELD BANK FOR COOPERATIVES
As part of its historical lending arrangements with the Bank, which is a
cooperative, Pro-Fac made investments in the Bank. Pro-Fac made these
investments through (i) a capital purchase obligation equal to a percentage, set
annually based on the Bank's capital needs, of its interest paid to the Bank and
(ii) a patronage rebate on interest paid by Pro-Fac to the Bank based on the
Bank's earnings, which is paid in cash and capital certificates. The investments
in the Bank are capital certificates that are redeemed by the Bank, currently
beginning six years after issuance in four quarterly installments. As of June
25, 1994, the amount of Pro-Fac's investment in the Bank was approximately $20.9
million. Pursuant to its capital purchase obligation, Pro-Fac increased its
investment in the Bank by $2.5 million, $2.6 million and $2.6 million in fiscal
1992, 1993 and 1994, respectively. Amounts paid to Pro-Fac on account of
dividends and the redemption of capital certificates in connection with such
investment were $2.2 million, $2.5 million and $3.1 million in fiscal 1992, 1993
and 1994, respectively. In connection with the Transactions, Pro-Fac contributed
its investment in the Bank to the capital of the Company. Robert V. Call, Jr., a
director and executive officer of Pro-Fac and a director of the Company, is also
a director of the Bank. (The Bank announced that it will consolidate with the
Farm Credit Bank of Springfield and CoBank effective January 1, 1995 to form an
Agricultural Credit Bank named CoBank ACB.)
GOLDEN PARACHUTES/SEVERANCE IN CONNECTION WITH THE TRANSACTIONS
The completion of the Transactions constituted a change of control under
the KESP thereby causing the KESP to remain in effect until November 3, 1996.
The KESP provides ten executive officers of the Company with salary and benefit
continuation in the event of their termination within two years of the
Acquisition. Under the KESP, certain executives are provided with two years of
salary and benefit continuation and the other executives with up to twelve
months of salary and benefit continuation if they are terminated for reasons
other than 'cause' or resign for 'good reason' within the term of the KESP. In
addition, the KESP permits Mr. Petty and Mr. Lindenbach to receive severance
benefits if they voluntarily resign from the Company during the term of the
KESP.
Upon consummation of the Transactions, Mr. Petty resigned from the Company.
Under the KESP, Mr. Petty will receive salary continuation for one year of
approximately $424,000, less earned income from other sources of employment, an
annual supplemental retirement benefit for his life of approximately $58,000 and
benefits continuation for one year with a value of approximately $4,500. These
benefits to Mr. Petty are in addition to the projected annual benefits payable
under the SERP. See 'Executive Compensation -- Retirement Plans.'
In the event Mr. Lindenbach exercises his right to resign voluntarily from
the Company during the remaining term of the KESP, his benefits would include
salary continuation for two years with a present value of approximately $370,000
in the aggregate, and benefit continuation for two years with a present value of
approximately $11,000 in the aggregate.
Messrs. Myers, Mullen and Rice also participate in the KESP. Under the
KESP, none of these executives will be entitled to benefits unless his
employment with the Company is terminated for reasons other than 'cause' or he
resigns for 'good reason' within two years of the Acquisition.
Although not technically severance plans, the Profit Sharing Plan and
Incentive Plan provide that, in a change of control situation, a pro rata
portion of annual awards will be granted to terminated executives for the year
of termination.
The payments made by the Company to the named executive officers set forth
in the Summary Compensation Table in connection with the cancellation pursuant
to the Merger Agreement of certain options granted to such officers pursuant to
the Company's stock option plans, which options were exercisable at prices less
than $19.00 per share, were as follows: J. William Petty, $340,856; Roy A.
Myers, $148,342; Patrick D. Lindenbach, $85,545; William D. Rice, $154,231; and
Dennis M. Mullen, $17,850.
88
<PAGE>
SALE OF CROPS TO PRO-FAC
Each of the members of Pro-Fac sells crops to Pro-Fac pursuant to a general
marketing agreement between such member and Pro-Fac, which crops in turn are
sold to the Company pursuant to the Pro-Fac Marketing Agreement. Prior to
consummation of the Transactions, these crops were sold to the Company pursuant
to the Integrated Agreement. During fiscal 1994, the following directors and
executive officers of Pro-Fac and beneficial owners of more than 5% of Pro-Fac's
common stock, directly or through sole proprietorships or corporations, sold
crops to Pro-Fac for the following aggregate amounts:
<TABLE>
<CAPTION>
RELATIONSHIP
NAME TO PRO-FAC
- -------------------------------------------- --------------------------- AGGREGATE AMOUNT PAID
IN FISCAL 1994
---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Dale E. Burmeister(1)....................... Director $ 0.1
Robert V. Call, Jr.(2)...................... Director and President 2.0
Glen Lee Chase(3)........................... Director 0.1
Tommy R. Croner(4).......................... Director 0.2
Albert P. Fazio(5).......................... Director and Vice President 0.2
Bruce R. Fox(6)............................. Director and Treasurer 0.4
Steven D. Koinzan........................... Director and Secretary 0.1
Kenneth A. Mattingly(7)..................... Director 0.4
Paul E. Roe(8).............................. Director 0.2
Cherry Central Cooperative, Inc............. Stockholder 2.1
Michigan Blueberry Growers Assoc............ Stockholder 2.5
</TABLE>
- ------------
(1) Paid to Lakeshore Farms, Inc., which is 100% beneficially owned by Mr.
Burmeister.
(2) Paid to My-T Acres, Inc., which is 20% beneficially owned by Mr. Call.
(3) Paid to Chase Farms, Inc., which is 96% beneficially owned by Mr. Chase.
(4) Paid to T-Rich, Inc., which is 50% beneficially owned by Mr. Croner.
(5) Paid to New Columbia Garden Co., Inc., which is 30% beneficially owned by
Mr. Fazio.
(6) Paid to N.J. Fox & Sons, which is 33% beneficially owned by Mr. Fox.
(7) Paid to M-B Farms, Inc., which is 50% beneficially owned by Mr. Mattingly.
(8) Paid to Roe Acres, Inc., which is 100% beneficially owned by Mr. Roe.
OTHER TRANSACTIONS WITH DIRECTORS AND OFFICERS OF PRO-FAC
In fiscal 1994, CMF paid My-T Acres, Inc. $0.2 million for commercial
harvesting and hauling services and $0.1 million for crops (not covered by the
Integrated Agreement). Robert V. Call, Jr. is a Director and the President of
Pro-Fac, a Director of the Company and the President and a 20% beneficial owner
of My-T Acres, Inc.
In fiscal 1994, the Company paid T-Rich, Inc. $0.1 million for solid waste
removal services provided to Snyder. Tommy R. Croner is a Director of Pro-Fac
and is the President and a 50% beneficial owner of T-Rich, Inc.
In fiscal 1994, Pro-Fac paid N.J. Fox & Sons, Inc. $0.4 million for
storage, handling, hydrocooling and trucking services. Bruce R. Fox is a
Director and the Treasurer of Pro-Fac, a Director of the Company and the
President and a 33% beneficial owner of N.J. Fox & Sons.
In fiscal 1994, CMF paid H&M Harvesting $0.2 million for harvesting
services. M-B Farms Inc. is a 50% partner of H&M Harvesting. Kenneth A.
Mattingly is a Director of Pro-Fac and the President and a 50% beneficial owner
of M-B Farms Inc.
In fiscal 1994, CMF paid Roe Acres, Inc. $0.2 million for harvesting
services. Paul E. Roe is a Director of Pro-Fac and the President and sole
stockholder of Roe Acres, Inc.
89
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
THE COMPANY
The following table sets forth certain information, as of November 3, 1994,
with respect to each person who is a beneficial owner of more than 5% of the
outstanding shares of the Common Stock of the Company. No shares of Common Stock
of the Company are owned by any director or executive officer of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
- ---------------------------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Pro-Fac Cooperative, Inc. ........................................................ 10,000 100%
90 Linden Place
P.O. Box 682
Rochester, New York 14603
</TABLE>
PRO-FAC
The following table sets forth certain information, as of November 3, 1994,
with respect to (i) each person known by Pro-Fac to own beneficially 5% or more
of any class of Pro-Fac's voting securities, (ii) each director and executive
officer of Pro-Fac and (iii) all directors and executive officers of Pro-Fac as
a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME TITLE OF CLASS BENEFICIAL OWNERSHIP(A) CLASS(B)
- -------------------------------------------------------------- --------------- ----------------------- ----------
<S> <C> <C> <C>
Cherry Central Cooperative, Inc. ............................. Common
P.O. Box 988 Preferred
Traverse City, MI 49685 383,942 18.79%
10,073 0.39
Michigan Blueberry Growers Assoc. ............................ Common
P.O. Drawer B Preferred
Grand Junction, MI 49056 116,400 5.70
51,060 1.95
Dale E. Burmeister............................................ Common 3,318(c) 0.16
Preferred 486(c) 0.02
7,535 0.29
Robert V. Call, Jr............................................ Common 35,197(d) 1.72
Preferred 27,112(d) 1.05
13,088(e) 0.50
392(f) 0.02
1,506 0.06
Glen Lee Chase................................................ Common 9,472(g) 0.46
Preferred 3,521(g) 0.13
Tommy R. Croner............................................... Common 7,026(h) 0.34
Preferred 9,057(i) 0.35
Albert P. Fazio............................................... Common 6,975(j) 0.34
Preferred 6,971(j) 0.27
Bruce R. Fox.................................................. Common 20,222(k) 0.99
Preferred 7,745(k) 0.30
3,196(l) 0.12
1,085 0.04
Steven D. Koinzan............................................. Common 7,140 0.35
Preferred 840 0.03
Kenneth A. Mattingly.......................................... Common 4,645(m) 0.23
Preferred 2,617(m) 0.10
Allan D. Mitchell............................................. Common 78 0.00
Preferred 1,674(n) 0.06
4,978 0.19
Allan W. Overhiser............................................ Common 1,139(o) 0.06
Preferred 1,332(o) 0.05
Paul E. Roe................................................... Common 12,005(p) 0.59
Preferred 2,683(p) 0.10
Edward L. Whitaker............................................ Common 240 0.01
Preferred -- --
All directors and officers as a group......................... Common 107,457 5.3
Preferred 96,146 3.7
</TABLE>
(footnotes on next page)
90
<PAGE>
(footnotes from previous next page)
(a) Certain of the directors named above may have the opportunity, along with
the other members producing a specific crop, to acquire beneficial
ownership of additional shares of the common stock of Pro-Fac within a
period of approximately 60 days commencing February 1, 1995 if Pro-Fac
determines that a permanent change is required in the total quantity of
that particular crop.
(b) In the above table, each director who has direct beneficial ownership of
common or preferred shares by reason of being the record owner of such
shares has sole voting and investment power with respect to such shares,
while each director who has direct beneficial ownership of common or
preferred shares as a result of owning such shares as a joint tenant has
shared voting and investment power regarding such shares. Each director who
has indirect beneficial ownership of common or preferred shares resulting
from his status as a shareholder or a partner of a corporation or
partnership which is the record owner of such shares has sole voting and
investment power if he controls such corporation or partnership. If he does
not control such corporation or partnership, he has shared voting and
investment power. Pro-Fac does not believe that the percentage ownership of
any such corporation or partnership by a director is material, since in the
aggregate no director beneficially owns in excess of 5% of either the
common or preferred shares of Pro-Fac.
(c) Record ownership by Lakeshore Farms, Inc.
(d) Record ownership by My-T Acres, Inc.
(e) Record ownership by My-T Acres, Inc. Employee Profit-Sharing Plan
(f) Record ownership by estate of L. Call
(g) Record ownership by Chase Farms, Inc.
(h) Record ownership by Richard Croner & Son
(i) Record ownership by T-Rich, Inc.
(j) Record ownership by New Columbia Garden Co., Inc.
(k) Record ownership by N.J. Fox & Sons, Inc.
(l) Record ownership by K. Fox
(m) Record ownership by M-B Farms, Inc.
(n) Record ownership jointly with spouse
(o) Record ownership by A.W. Overhiser Orchards
(p) Record ownership by Roe Acres, Inc.
91
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT AGREEMENT
The Bank has provided the Company, subject to the terms and conditions set
out in the New Credit Agreement, with loans of up to $200 million to finance the
purchase of Shares pursuant to the Tender Offer and the Merger, to refinance
certain existing indebtedness of Pro-Fac and the Company and to pay fees and
expenses related to the purchase of Shares.
The Bank also has provided the Company, subject to the terms and conditions
set out in the New Credit Agreement, with seasonal financing of up to $86.0
million and a $10.0 million letter of credit facility. The Acquisition Facility,
the Seasonal Facility and the Letter of Credit Facility are collectively
referred to herein as the 'Bank Facility.' The closing under the Bank Facility
occurred on the Closing Date substantially simultaneously with the closing of
the other Transactions.
Guarantees and Security. All obligations under the Bank Facility are
guaranteed by Pro-Fac and the Subsidiary Guarantors. The Company's obligations
under the Bank Facility, and Pro-Fac's and the Subsidiary Guarantors'
obligations under their respective guaranties, are secured by all of the assets
of the Company and each guarantor, respectively, including (i) all present and
future accounts, contract rights, chattel paper, instruments (excluding shares
of capital stock), documents, inventory, general intangibles and equipment, (ii)
all real property and (iii) all products and proceeds of the foregoing.
Interest. The Bank Facility provides for interest rates on the Acquisition
Facility, at the Company's option, equal to (i) the relevant London interbank
offered rate plus 2.60%, (ii) the relevant prime rate plus 0.50% or (iii) the
relevant U.S. Treasury Rate plus 3.00%. The Seasonal Facility provides for
interest rates on amounts outstanding thereunder, at the Company's option, equal
to (x) the relevant London interbank offered rate plus 1.75%, (y) the relevant
prime rate minus 0.25% or (z) the relevant U.S. Treasury Rate plus 2.00%. The
Bank has extended to a portion of the Acquisition Facility for a limited period
of time certain fixed rates that were in effect with respect to indebtedness
repaid to the Bank on the Closing Date. The weighted average rate of interest
applicable to that portion of the Acquisition Facility is estimated to equal
approximately 8.3% per annum for the period from the Closing Date through May 1,
1995.
Maturity. Borrowings of $80.0 million under the Term Loan portion of the
Acquisition Facility are payable in 20 equal semi-annual installments, beginning
in May 1995. Borrowings of up to an additional $120.0 million under the Term
Loan Facility portion of the Acquisition Facility are payable during the first
five years of the facility in annual installments on September 1 of each year,
in an amount equal to the 'annual cash sweep' for the preceding fiscal year, as
defined in the Acquisition Facility. The Company will be permitted to pay and
reborrow funds under the Term Loan Facility, subject to limitations on the
amount reborrowed and the other terms of the Acquisition Facility. Beginning in
the year 2000, the balance of the Term Loan Facility will be payable in ten
equal semi-annual installments.
Borrowings under the Seasonal Facility are payable at the expiration of
that portion of the facility, which is 18 months after the Closing Date, except
that for 15 consecutive calendar days before the end of fiscal 1995, the
borrowings under the Seasonal Facility must be zero. The Letter of Credit
Facility provides for the issuance of letters of credit during the first 12
months of the facility.
Certain Covenants. The Pro-Fac Bank Guarantee requires Pro-Fac, on a
consolidated basis, to achieve an adjusted cash flow coverage ratio at the end
of fiscal 1995 of at least 1.0 to 1.0 and at the end of each fiscal year
thereafter of at least 1.1 to 1.0, to maintain a minimum working capital of at
least $100.0 million for each fiscal year (beginning with the fiscal year ending
June 30, 1995), and to maintain a minimum long-term debt to equity ratio
(measured at each month-end) of 3.1 to 1.0 from the Closing Date through May,
1995, 2.8 to 1.0 from June 30, 1995 through May 1996 and declining over time to
1.8 to 1.0 at June 30, 2001 and thereafter. In addition, the Pro-Fac Bank
Guarantee requires Pro-Fac, on a consolidated basis, to maintain a consolidated
total net worth of not less than 15% of total assets for each month-end until
July 2000, and 20% thereafter and at least 19% of total assets at the fiscal
years ending June 1995 and 1996, increasing over time to at least 25% of total
assets at the fiscal year ending June 2001 and each fiscal year thereafter. The
Bank Facility and the Pro-Fac Bank Guarantee contain additional restrictions and
obligations on Pro-Fac and the Company, including (i) restrictions on the
92
<PAGE>
ability to declare or pay dividends or repurchase stock, (ii) limitations on the
incurrence of debt or prepayment of debt, (iii) limitations on debt,
investments, acquisitions, capital expenditures and asset sales and (iv)
requiring maintenance of properties and insurance and the delivery of
information, financial and otherwise.
Conditions. Subsequent drawings under the Bank Facility are subject to
various conditions, including the absence of defaults under the Bank Facility
and the accuracy in all material respects of certain representations on the date
of such drawing.
Events of Default. The Bank Facility contains customary events of default,
including (i) a cross default to certain defaults under other debt obligations
(including the Notes) and (ii) defaults relating to changes in ownership of the
Company.
Fees. PFAC agreed to pay certain fees with respect to the Bank Facility,
including a fee of 3/4% of the Acquisition Facility, which was paid at the
closing of the Acquisition Facility.
DESCRIPTION OF THE NOTES
GENERAL
The New Notes will be issued pursuant to the Indenture among the Company,
Pro-Fac, as Parent Guarantor, certain Subsidiaries of the Company, as Subsidiary
Guarantors (together with Pro-Fac, as Parent Guarantor, the 'Guarantors'), and
IBJ Schroder Bank & Trust Company, as trustee (the 'Trustee'), a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus constitutes a part. The Indenture is subject to and governed by the
Trust Indenture Act of 1939, as amended (the 'Trust Indenture Act'). The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. The definitions of certain terms used in the following
summary are set forth below under ' -- Certain Definitions.'
On November 3, 1994, the Company issued $160.0 million aggregate principal
amount of Old Notes under the Indenture. The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Old Notes for New Notes. The Trustee will authenticate and deliver New Notes for
original issue only in exchange for a like principal amount of Old Notes. Any
Old Notes that remain outstanding after the consummation of the Exchange Offer,
together with the New Notes, will be treated as a single class of securities
under the Indenture.
The Notes represent general unsecured obligations of the Company,
subordinated in right of payment to certain other debt obligations of the
Company (including the Company's obligations under the New Credit Agreement) as
described below under ' -- Subordination.' The Notes are unconditionally
guaranteed by the Guarantors on a senior subordinated basis, with each such
guarantee subordinated to the Guarantors' respective guarantees of the
obligations of the Company under the New Credit Agreement and all other Senior
Indebtedness of the Guarantors.
If the date of exchange is before February 1, 1995, interest on each New
Note will not begin to accrue until February 1, 1995, and thereafter, interest
will accrue from the most recent date to which interest has been paid, and
interest and, if applicable, Additional Payments and Liquidated Damages (as
defined in the Indenture) accruing from and including November 3, 1994 through
and including January 31, 1995 will be payable on the Old
Notes to the registered holders thereof as of January 13, 1995. If the date of
exchange is after February 1, 1995, interest on each New Note will accrue
from the most recent date to which interest has been paid on the Old Note
surrendered in exchange therefor or on the New Note, as the case may be. The
New Notes will bear interest at 12 1/4% per annum, except that, if any interest
accrues on the New Notes in respect of any period prior to their issuance, such
interest will accrue at the rate or rates borne by the Old Notes from time to
time during such period.
93
<PAGE>
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $160.0 million and
will mature on February 1, 2005. Interest on the Notes accrues at the rate of
12 1/4% per annum and is payable semi-annually in arrears on February 1 and
August 1, commencing on February 1, 1995, to Holders of record on the
immediately preceding January 15 and July 15, respectively. Except as
provided above, interest on the Notes accrues from the most recent date to
which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months. The Notes are payable as to principal and
interest at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, by wire
transfer of immediately available funds or, in the case of certificated
securities only, by mailing a check to the Holder's registered address. See
' -- Delivery and Form of Securities -- Book Entry, Delivery and Form.'
Until otherwise designated by the Company, the Company's office or agency in
New York is the office of the Trustee maintained for such purpose. The Notes
are issued in registered form, without coupons, and in denominations of
$1,000 and integral multiples thereof.
GUARANTEES
Each of Pro-Fac and the Subsidiary Guarantors has unconditionally
guaranteed the payment of Obligations of the Company under the Notes. Rights of
Holders pursuant to such guarantees are subordinate to the rights of the holders
of the Senior Indebtedness of Pro-Fac and the Subsidiary Guarantors to payment
in full in the same manner as the rights of Holders of the Notes are subordinate
to those of the holders of the Senior Indebtedness of the Company.
SUBORDINATION
The Indebtedness evidenced by the Notes is subordinated to the prior
payment in cash or Cash Equivalents when due of the principal of, and premium,
if any, and accrued and unpaid interest on and all other amounts owing in
respect of, all existing and future Senior Indebtedness of the Company. The
Notes rank pari passu with all existing and future senior subordinated
Indebtedness of the Company, and rank senior to all existing and future
subordinated Indebtedness of the Company.
The Indenture provides that, upon any distribution to creditors of the
Company of the assets of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company, (i) the holders of all Senior Indebtedness
of the Company then outstanding will be entitled to be paid in full in cash or
Cash Equivalents (including interest accruing subsequent to a bankruptcy or
insolvency, whether or not such interest is an allowed claim enforceable against
the Company in bankruptcy) before the Holders are entitled to receive any
payment on or with respect to the Notes; and (ii) the holders of all Senior
Indebtedness of the Company will be entitled to be paid in full in cash
(including interest accruing subsequent to a bankruptcy or insolvency, whether
or not such interest is an allowed claim enforceable against the Company in
bankruptcy) before the Holders are entitled to receive any cash payment on or
with respect to the Notes. Until all Senior Indebtedness of the Company is paid
in full in cash or Cash Equivalents, any distribution to which the Holders would
be entitled but for the subordination provisions will be made to holders of
Senior Indebtedness of the Company as their interests may appear, and until all
Senior Indebtedness of the Company is paid in full in cash (or in Cash
Equivalents subsequently converted to cash), any cash distribution to which the
Holders would be entitled but for the subordination provisions will be first,
exchanged for Cash Equivalents previously applied to the payment of Senior
Indebtedness (and not subsequently converted to cash), and second, made to
holders of Senior Indebtedness of the Company as their interests may appear.
Upon the occurrence of any default beyond the applicable grace period in
the payment of any principal of or interest on or other amounts due on any
Senior Indebtedness of the Company (a 'Payment Default'), no payment shall be
made by the Company with respect to the Notes unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist, such
Senior Indebtedness has been discharged or paid in full or the benefits of this
sentence have been waived by or on behalf of the holders of such Senior
Indebtedness of the Company, immediately after which the
94
<PAGE>
Company must resume making any and all required payments, including missed
payments, in respect of its obligations under the Notes.
Upon (1) the occurrence of a continuing event of default (other than a
Payment Default) relating to Senior Indebtedness of the Company, as such event
of default is defined therein or in the instrument or agreement under which it
is outstanding, which event of default, pursuant to the instruments governing
such Senior Indebtedness, entitles the holders (or a specified portion of the
holders) of such Senior Indebtedness to immediately accelerate without further
notice (except such notice as may be required to effect such acceleration) the
maturity of such Senior Indebtedness (a 'Non-payment Default') and (2) the
receipt by the Trustee and the Company from a senior representative of written
notice (a 'Payment Blockage Notice') of such occurrence, no payment is permitted
to be made by the Company in respect of the Notes for a period (a 'Payment
Blockage Period') commencing on the date of receipt by the Trustee of such
notice and ending on the earliest to occur of the following events (subject to
any blockage of payments that may then be in effect due to a Payment Default on
Senior Indebtedness of the Company): (w) such Non-payment Default has been cured
or waived or has ceased to exist; (x) a 179-consecutive-day period commencing on
the date such written notice is received by the Trustee has elapsed; (y) such
Payment Blockage Period has been terminated by written notice to the Trustee
from the Senior Representative, whether or not such Non-payment Default has been
cured or waived or has ceased to exist; and (z) such Senior Indebtedness of the
Company has been discharged or paid in full, immediately after which, in the
case of clause (w), (x), (y) or (z), the Company must resume making any and all
required payments, including missed payments, in respect of its obligations
under the Notes. Notwithstanding the foregoing, (a) not more than one Payment
Blockage Period may be commenced in any period of 365 consecutive days and (b)
no default or event of default with respect to the Senior Indebtedness of the
Company that was the subject of a Payment Blockage Notice which existed or was
continuing on the date of the giving of any Payment Blockage Notice shall be or
serve as the basis for the giving of a subsequent Payment Blockage Notice
whether or not within a period of 365 consecutive days unless such default or
event of default shall have been cured or waived for a period of at least 120
consecutive days after such date.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Guarantor, whether in cash,
property or securities (other than securities that are subordinated at least to
the same extent as the Notes and the guarantees are to Senior Indebtedness of
the Company or such Guarantor, respectively), shall be received by the Trustee
or the Holders of Notes at a time when such payment or distribution is
prohibited by the foregoing provisions, such payment or distribution shall be
held in trust for the benefit of the holders of Senior Indebtedness of the
Company or such Guarantor, as the case may be, and shall be paid or delivered by
the Trustee or such Holders, as the case may be, to the holders of the Senior
Indebtedness of the Company or such Guarantor, as the case may be, remaining
unpaid or unprovided for or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness of the Company or such Guarantor, as
the case may be, may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness of the Company or
such Guarantor, as the case may be, held or represented by each, for application
to the payment of all Senior Indebtedness of the Company or such Guarantor, as
the case may be, remaining unpaid, to the extent necessary to pay or to provide
for the payment of all such Senior Indebtedness in full in cash and Cash
Equivalents after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not such failure is on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the Holders to accelerate
the maturity of the Notes. See ' -- Events of Default and Remedies.'
95
<PAGE>
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable at the option of
the Company prior to February 1, 2000. At any time on or after February 1, 2000,
the Notes will be redeemable, at the option of the Company, in whole or in part,
at the redemption prices (expressed as percentages of the principal amount) set
forth below, plus accrued interest to the redemption date, if redeemed during
the 12 month period beginning February 1, of the years indicated below:
<TABLE>
<CAPTION>
%
-------
<S> <C>
2000........................................................... 104.594
2001........................................................... 103.063
2002........................................................... 101.531
2003 and thereafter............................................ 100.000
</TABLE>
Notwithstanding the foregoing, at any time on or prior to February 1, 1998,
the Company may redeem up to $56.0 million aggregate principal amount of Notes
(provided that at least $104.0 million aggregate principal amount of Notes
remains outstanding immediately after the occurrence of such redemption), at a
redemption price equal to 110.0% of the principal amount of such Notes, plus
accrued interest to the date of redemption, with the proceeds of any offering of
Capital Stock (other than a public offering pursuant to a registration statement
on Form S-8 or an offering of Disqualified Stock) or the proceeds of any Asset
Sale generating Net Proceeds in excess of $20.0 million to the extent such
proceeds are not otherwise applied in accordance with the terms of the
Indenture.
MANDATORY REDEMPTION
Except as set forth below under ' -- Repurchase at the Option of Holders,'
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the 'Change of Control Offer') at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, Additional Payments and Liquidated Damages thereon, if any, to the
date of purchase (the 'Change of Control Payment'). Within 30 days following any
Change of Control, the Company will mail a notice to each Holder stating: (i)
that the Change of Control Offer is being made pursuant to the covenant entitled
'Change of Control' and that all Notes tendered will be accepted for payment and
setting forth the facts and circumstances relevant to such Change of Control;
(ii) the purchase price and the purchase date, which will be no earlier than 30
days nor later than 60 days from the date such notice is mailed (the 'Change of
Control Payment Date'); (iii) that any Note not tendered will continue to accrue
interest; (iv) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on and after the Change of Control
Payment Date; (v) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Notes, with the form
entitled 'Option of Holder to Elect Purchase' on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal
96
<PAGE>
amount or an integral multiple thereof. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes in connection with a
Change of Control.
On or before the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Company. The Paying Agent will
promptly mail to each Holder of Notes so accepted the Change of Control Payment
for such Notes, and the Trustee will promptly authenticate and mail to each
Holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, (i) sell, lease, convey or otherwise dispose of any
assets (including by way of a sale-and-leaseback) other than sales of inventory
in the ordinary course of business consistent with past practice (provided that
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company will be governed by the provisions of the Indenture
described above under the caption ' -- Change of Control' and the provisions
described below under the caption ' -- Certain Covenants -- Merger,
Consolidation or Sale of Assets' and not by the provisions of this covenant), or
(ii) issue Equity Interests in any of its Subsidiaries, or sell Equity Interests
in any of its Subsidiaries, in the case of either clause (i) or (ii) above,
whether in a single transaction or a series of related transactions, (a) that
have a fair market value in excess of $1.0 million, or (b) for net proceeds in
excess of $1.0 million (each of the foregoing, an 'Asset Sale'), unless (x) the
Company or the Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets sold or otherwise disposed of and (y)
any securities and other non-cash consideration acquired in connection with such
Asset Sale are Permitted Asset Sale Consideration. A transfer of assets or
issuance of Equity Interests by a Subsidiary of the Company to the Company or a
Subsidiary Guarantor will not be deemed to be an Asset Sale and a transfer of
assets that constitutes a Restricted Investment and that is permitted by the
covenant described below under the caption ' -- Certain Covenants -- Restricted
Payments' will not be deemed to be an Asset Sale.
Within 270 days after any Asset Sale, the Company or the relevant
Subsidiary, as the case may be, may apply the Net Proceeds from such Asset Sale,
at its option, either (i) to permanently reduce borrowings under the New Credit
Agreement or any successor facility or to permanently repay any other Senior
Indebtedness (and, in each case, correspondingly to reduce commitments
thereunder, if any, unless such borrowings could be incurred under the first
paragraph of the covenant described below under the caption ' -- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock' as of
such date), (ii) to acquire properties and assets in the same line of business
as the Company or the relevant Subsidiary, as the case may be, was engaged in on
the date of the Asset Sale or a similar business or a business reasonably
related thereto or (iii) to redeem the Notes in whole or in part to the extent
permitted under the caption ' -- Optional Redemption.' Pending the final
application of any such Net Proceeds, the Company or the relevant Subsidiary, as
the case may be, may temporarily reduce borrowings under any revolving credit
facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from the Asset Sale that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute 'Excess
97
<PAGE>
Proceeds.' When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall make an offer to all Holders of Notes (an 'Asset Sale Offer')
to purchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest, Additional Payments
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company or the relevant Subsidiary, as the case may be, may use
such remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased as nearly as
possible on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
The Indenture also provides that, notwithstanding the foregoing, to the
extent that the Company or any of its Subsidiaries receives securities or other
non-cash property or assets as proceeds of an Asset Sale, the Company will not
be required to make any application of such non-cash proceeds required by the
covenant described in the immediately preceding paragraph until such non-cash
property has been converted to cash or Cash Equivalents.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate or, if the
relevant notice of redemption identifies the requirements applicable to such
selection of the principal national securities exchange, if any, on which the
Notes are listed, then selection of Notes for redemption will be made by the
Trustee in compliance with such requirements; provided that no Notes of $1,000
or less shall be redeemed in part. Notices of redemption shall be mailed by
first class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Note. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any distribution on account of the Company's or any of its Subsidiaries'
Equity Interests (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company or any Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Subsidiary of the Company); (iii)
purchase, redeem or otherwise acquire or retire for value prior to its scheduled
final maturity any Indebtedness that is subordinated to the Notes; or (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as 'Restricted
Payments'), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) at the time of such Restricted Payment and after giving effect
thereto as if such Restricted Payment (and any other Restricted Payments
made since the end of the applicable four-quarter period) had been made at
the beginning of such four-quarter period, the Fixed Charge Coverage Ratio
(calculated in the manner set forth in clause (i) of the proviso contained
in the first paragraph of the covenant described below under the caption
' -- Incurrence of Indebtedness and Issuance of Preferred Stock') would
have been at least 1.75 to 1.00; and
98
<PAGE>
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of the Indenture (including, but not limited to, Restricted Payments
permitted by clauses (i), (ii) and (iii)(b) of the next succeeding
paragraph), is less than the sum of (u) 50% of the Consolidated Net Income
(or, if Consolidated Net Income is negative, 100% of the Consolidated Net
Income) of the Company for the period (taken as one accounting period) from
June 26, 1994 to the end of the most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment, plus (v) 100% of the aggregate net cash proceeds (50%
with respect to the first $10.0 million) received by the Company from the
issue or sale since the date of the Indenture of Equity Interests of the
Company (including, but not limited to, Equity Interests issued as
described in clauses (ii) and (iii)(b) of the next succeeding paragraph,
but excluding amounts contributed to the Company as contemplated by clause
(y) and any Equity Interests purchased with the proceeds of loans by the
Company or any of its Subsidiaries to employees of the Company or any of
its Subsidiaries or additional contributions of capital by Pro-Fac in
respect of Equity Interests), plus (w) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the date of
the Indenture of debt securities of the Company that have been converted
into such Equity Interests (other than (1) Equity Interests (or convertible
debt securities) sold to a Subsidiary of the Company, (2) Disqualified
Stock or debt securities that have been converted into Disqualified Stock
and (3) Equity Interests purchased by members of the Company's or its
Subsidiaries' management with the proceeds of loans from the Company or any
of its Subsidiaries), plus (x) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment, plus (y)
40% of the aggregate contributions by Pro-Fac to the Company pursuant to
the covenant entitled ' -- Payments Pursuant to the Pro-Fac Marketing
Agreement; Reinvestments by Pro-Fac; Borrowings by Pro-Fac' subsequent to
the date of the Indenture, plus (z) $5.0 million.
The foregoing provisions of clauses (b) and (c) will not prohibit (i) the
payment of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the provisions
of the Indenture; (ii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of other Equity Interests of the Company (other than any
Disqualified Stock); (iii) the defeasance, redemption, repurchase or other
retirement of subordinated Indebtedness (a) with the net proceeds from an
incurrence of Permitted Refinancing Indebtedness or (b) in exchange for, or out
of the proceeds of, the substantially concurrent sale of Equity Interests of the
Company (other than (x) Disqualified Stock, (y) Equity Interests sold to a
Subsidiary of the Company and (z) Equity Interests purchased by members of the
Company's or its Subsidiaries' management with the proceeds of loans from the
Company or any of its Subsidiaries); and (iv) the payment of amounts required to
fund Pro-Fac's reasonable operating expenses, not in excess of $250,000, as
adjusted to reflect changes in the Consumer Price Index between the date of the
Indenture and the date of any such payment, in any fiscal year.
PAYMENTS PURSUANT TO THE PRO-FAC MARKETING AGREEMENT; REINVESTMENTS BY
PRO-FAC; BORROWINGS BY PRO-FAC
As promptly as practicable, and in any event within ten Business Days,
after receipt from the Company of any payment made in excess of the Commercial
Market Value for crops and other services pursuant to the Pro-Fac Marketing
Agreement, Pro-Fac will invest in cash as common equity interests (other than
Disqualified Stock) in the Company an amount equal to 70% of such excess.
Without the consent of the Holders of at least 75% in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for the Notes), the Company will not: (a) amend the
calculation of amounts payable to Pro-Fac under the Pro-Fac Marketing Agreement
in a manner which would increase the payments made to Pro-Fac or (b) amend the
Pro-Fac Marketing Agreement to require that Affiliate Transactions involving
Pro-Fac be approved by less than a majority of the Disinterested Directors. The
Indenture permits the Company to make demand loans to Pro-Fac
99
<PAGE>
for working capital purposes in amounts not exceeding $10.0 million at any time
outstanding, each such loan to bear interest at a rate equal to the rate in
effect on the date of such loan under the Seasonal Facility. The loan balance
must be reduced to zero for a period of not less than 15 consecutive days in
each fiscal year. Except for the foregoing provision and except for Pro-Fac's
guarantee of the Obligations under the Indenture and the New Credit Agreement,
as long as Pro-Fac has the right to borrow under the Pro-Fac Marketing
Agreement, the Indenture does not permit Pro-Fac to incur any other Indebtedness
(it being understood that Pro-Fac's obligations in respect of retained earnings
allocated to its members shall not be deemed to be Indebtedness).
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to (collectively, 'incur') any Indebtedness
(including Acquired Debt) and will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to incur any Indebtedness (including Acquired
Debt) or to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness and issue shares of Disqualified Stock if (i) the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1.0,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued, as the case may be, and the net proceeds
therefrom had been applied, at the beginning of such four-quarter period and
(ii) no Default or Event of Default shall have occurred and be continuing
immediately after such incurrence.
The foregoing limitations will not apply to the incurrence (i) by the
Company of Indebtedness (and by Subsidiary Guarantors of related guarantees)
under the Seasonal Working Capital Facility in an aggregate principal amount at
any time outstanding not to exceed the amount of the Borrowing Base calculated
as of the date of such incurrence; (ii) (A) by the Company of Indebtedness
evidenced by letters of credit issued in the ordinary course of business
consistent with past practice to support the Company's insurance or
self-insurance obligations (including to secure workers' compensation and other
similar insurance coverage) or to support surety bonds or appeal bonds provided
by the Company in the ordinary course of business and (B) by the Company of
Indebtedness (and by Subsidiary Guarantors of related guarantees) available
under the Letter of Credit Facility evidenced by letters of credit with an
aggregate face amount not to exceed $10.0 million; (iii) by the Company of
Indebtedness (and by Subsidiary Guarantors of related guarantees) available
under the Term Loan Facility in an aggregate principal amount at any time
outstanding not to exceed $120.0 million, as reduced by any mandatory commitment
reductions under the Term Loan Facility; (iv) by the Company of Indebtedness
under the Term Loan (and by Subsidiary Guarantors of related guarantees) in an
aggregate principal amount at any time not to exceed $80.0 million, as reduced
by any mandatory commitment reductions under the Term Loans; (v) by the Company
of Indebtedness represented by the Notes (and by the Subsidiary Guarantors of
Indebtedness represented by the Guarantees); (vi) by the Company or any
Subsidiary in respect of Capital Lease Obligations in an aggregate principal
amount not to exceed $10.0 million at any time outstanding; (vii) by the Company
or any Subsidiary in respect of purchase money obligations in an aggregate
amount not to exceed $5.0 million at any time outstanding; (viii) by the Company
or any Subsidiary in respect of industrial revenue bonds or similar securities
provided that the net proceeds thereof are applied to construct new facilities
and that the aggregate principal amount of such industrial revenue bonds does
not exceed 75% of the fair market value of the facilities financed thereby; (ix)
by any Subsidiary of the Company of Indebtedness to the Company; (x) by the
Company of Hedging Obligations for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted by
the terms of the Indenture to be outstanding; and (xi) Permitted Refinancing
Indebtedness of Indebtedness incurred by the Company pursuant to clause (v)
above or pursuant to the preceding paragraph.
100
<PAGE>
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom,
except Permitted Liens, unless (i) in the case of any Lien that secures an
Obligation that is pari passu with the Indebtedness represented by the Notes,
all payments in respect of the Notes are secured on an equal and ratable basis
with the Obligation so secured and (ii) in the case of any Lien that secures an
Obligation that is subordinated to the Indebtedness represented by the Notes,
all payments in respect of the Notes are secured on a senior basis reflecting
the subordination of the Obligation so secured.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any such Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (x) on its Capital Stock
or (y) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any Indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) applicable law, (b) customary non-assignment
provisions in leases or other contracts entered into in the ordinary course of
business and consistent with past practices, (c) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in this clause (iii) on the property so acquired, (d)
customary restrictions imposed on the transfer of copyrighted or patented
materials, (e) the entering into of a contract for the sale or other disposition
of assets, directly or indirectly, so long as such restrictions do not extend to
assets that are not subject to such sale or other disposition, (f) provisions in
Indebtedness of Subsidiaries that is permitted by the Indenture to be incurred
that only restrict the transfer of the assets purchased with the proceeds of
such Indebtedness or (g) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS
In addition to permitting the Acquisition, the Indenture provides that the
Company may consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity, but only if (i)
the Company is the surviving corporation or the entity or the Person formed by
or surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation or, subject to the final sentence of this
paragraph, a limited liability company or similar entity organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the Obligations of the Company under the Notes
and the Indenture pursuant to a supplemental indenture in a form satisfactory to
the Trustee in its reasonable judgment; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) the Company or any entity or
Person formed by or surviving any such consolidation or merger, or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (a) will have Consolidated Net Worth (immediately after the
transaction) equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (b) would, after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the most
recently ended four full fiscal quarter period for which internal financial
statements are available, be permitted to incur at
101
<PAGE>
least $1.00 of additional Indebtedness pursuant to the Fixed Coverage Ratio test
set forth in the covenant entitled ' -- Incurrence of Indebtedness and Issuance
of Preferred Stock.' At or prior to consummation of any transaction otherwise
permitted by this provision, if the entity or the Person formed by or surviving
any such consolidation or merger or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a limited
liability company or similar entity (such transaction being hereinafter referred
to as an 'LLC Restructuring'), the Company shall deliver to the Trustee (i) an
opinion of counsel in the United States acceptable to the Trustee in its
reasonable judgment to the effect that (a) the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such LLC Restructuring and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such LLC Restructuring had not occurred or (b) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling to the same effect; (ii) an opinion of counsel to the effect that, as a
result of the LLC Restructuring, the rights of the Holders of the outstanding
Notes will not be adversely affected in any material respect by the application
of any bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (iii) an Officers' Certificate stating that the LLC
Restructuring was not effected by the Company with the intent of preferring the
Holders of Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (iv) such other opinions of counsel and Officers' Certificates customary in
the issuance of debt securities as the Trustee may reasonably request.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an 'Affiliate
Transaction'), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction involving Pro-Fac (including, without
limitation, any amendment to or waiver under the Pro-Fac Marketing Agreement and
any agreement for the purchase of crops entered into pursuant to the Pro-Fac
Marketing Agreement) or involving aggregate payments in excess of $1.0 million,
a written resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and such Affiliate Transaction is approved by a majority of the
Disinterested Directors and (b) with respect to any Affiliate Transaction (other
than relating to the Pro-Fac Marketing Agreement or any agreement for the
purchase of crops entered into pursuant to the Pro-Fac Marketing Agreement)
involving aggregate payments in excess of $5.0 million, either (I) an opinion as
to the fairness to the Company or such Subsidiary from a financial point of view
issued by an investment banking firm of national standing or (II) with respect
to any Affiliate Transaction involving a transfer of tangible assets, a written
appraisal from a nationally recognized appraiser showing such tangible assets to
have a value not less than the value of such payments, in the case of a transfer
of such assets to the Company or such Subsidiary, and not more than the value of
such payments, in the case of a transfer of such assets from the Company or such
Subsidiary; provided, however, that (x) any employment agreement entered into by
the Company or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (y) except
to the extent referenced in the parenthetical to clause (a), the Pro-Fac
Marketing Agreement and any transactions effected pursuant thereto and (z)
transactions permitted by the provisions of the Indenture described above under
the covenant ' -- Restricted Payments,' in each case, shall not be deemed
Affiliate Transactions.
LIMITATIONS ON LAYERING DEBT
The Indenture provides that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any
102
<PAGE>
Senior Indebtedness of the Company and senior in right of payment to the Notes
and that neither Pro-Fac nor any Subsidiary Guarantor will incur, create, issue,
assume, guarantee, or otherwise become liable for any Indebtedness that is
subordinate in right of payment to any Senior Indebtedness of Pro-Fac or any
such Subsidiary Guarantor, as the case may be, and senior in any respect in
right of payment to the guarantee of Pro-Fac or such Subsidiary Guarantor, as
the case may be, with respect to the Notes.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company or its Subsidiaries may enter into such sale and leaseback
transaction if (i) the Company or such Subsidiary could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to the covenant described above under the
caption ' -- Incurrence of Indebtedness and Issuance of Preferred Stock' and (b)
incurred a Lien to secure such Indebtedness pursuant to the covenant described
above under the caption ' -- Liens,' (ii) the proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by the Company's Board of Directors and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and (iii) the Company shall apply or cause
to be applied the proceeds of such transaction in compliance with the covenant
entitled ' -- Repurchase at the Option of Holders -- Asset Sales.' To the extent
that the Company or any Subsidiary enters into a sale and leaseback transaction,
the Company will specify to the Trustee the provision of the covenants relating
to incurrence of Indebtedness pursuant to which such Attributable Debt would
have been permitted to have been incurred and the amount available under such
provision for future incurrences of Indebtedness or Attributable Debt shall be
correspondingly reduced.
ADDITIONAL SUBSIDIARY GUARANTORS
If the Company shall at any time have a Subsidiary that is a guarantor of
any Senior Indebtedness of the Company or any Guarantor, the Company shall cause
such Subsidiary to become a Subsidiary Guarantor.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, Pro-Fac and the Company will furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms 10-Q and
10-K if Pro-Fac and the Company were required to file such Forms, including a
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' that describes the financial condition and results of operations of
Pro-Fac, the Company and its Subsidiaries, and, with respect to the annual
information only, a report by Pro-Fac's and the Company's certified independent
accountants and (ii) all reports that would be filed with the Commission on Form
8-K if Pro-Fac and the Company were required to file such reports. In addition,
whether or not required by the rules and regulations of the Commission,
following Consummation of the Exchange Offer, Pro-Fac and the Company will file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to investors who request it in writing. Each of Pro-Fac
and the Company has agreed that, for so long as any Transfer Restricted
Securities remain outstanding, they will furnish to the Holders and beneficial
holders of Transfer Restricted Securities and to prospective purchasers of
Transfer Restricted Securities designated by the Holders of Transfer Restricted
Securities and to broker-dealers, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
RELEASE OF A SUBSIDIARY GUARANTOR
Upon the sale or disposition of all of the Equity Interests of a Subsidiary
Guarantor by the Company, or upon the consolidation or merger of a Subsidiary
Guarantor with or into any entity or the sale, conveyance, assignment, transfer,
lease or other disposition of all or substantially all of its
103
<PAGE>
properties and assets to any entity (in each case, other than the Company or an
Affiliate of the Company), such Subsidiary Guarantor will be automatically and
unconditionally released from all obligations under its guarantee of the Notes;
provided that the proceeds received by the Company or any Subsidiary of the
Company, from such transaction shall be applied as described above under the
caption ' -- Optional Redemption' or ' -- Repurchase at the Option of
Holders -- Asset Sales.'
SECURITIES OWNED BY THE COMPANY OR AN AFFILIATE OF THE COMPANY
The Indenture provides that the Company shall, as promptly as reasonably
practicable, notify the Trustee of any Notes owned by the Company or any
Affiliate of the Company and that the Trustee shall provide to each Holder upon
the request of such Holder all such information furnished to the Trustee.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Additional Payments on, or Liquidated Damages with respect to, the Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by the Company or any Subsidiary to comply with the
provisions described above under the captions ' -- Certain
Covenants -- Restricted Payments,' ' -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock' or ' -- Certain
Covenants -- Merger, Consolidation or Sale of Assets' or by Pro-Fac to comply
with the provisions described above under the caption ' -- Payments Pursuant to
the Pro-Fac Marketing Agreement; Reinvestments by Pro-Fac; Borrowings by
Pro-Fac'; (iv) failure by the Company or any Guarantor for 60 days after notice
from the Trustee or from holders of at least 25% of the aggregate principal
amount of the Notes outstanding to comply with any of its other agreements in
the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default results in the acceleration of
such Indebtedness prior to its express maturity and the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates $2.0
million or more; (vi) default by any Guarantor under its guarantee with respect
to the Notes or such guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of such Guarantor, shall
deny or disaffirm its Obligations under such guarantee; (vii) failure by the
Company or any of its Subsidiaries to pay final judgments aggregating in excess
of $2.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (viii) failure by the Company to file the certificate of merger with
respect to the Merger on the Closing Date and to take all other steps, if any,
required to effectuate the Merger by 5:00 P.M. New York City time on the
business day following the Closing Date; and (ix) certain events of bankruptcy
or insolvency with respect to the Company or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, all outstanding Notes will
become due and payable without further action or notice. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a continuing Default or Event of Default in the payment of
interest or Additional Payments or Liquidated Damages on, or the principal of or
premium on, the Notes) if it determines that withholding notice is in their
interest.
Except as set forth in the last sentence of this paragraph, no Holder of
any of the Notes has any right to institute any proceeding with respect to the
Indenture or any remedy thereunder unless such Holder gives to the Trustee
written notice of a continuing Event of Default, the Holders of at least 25% in
aggregate principal amount of the outstanding Notes have made written request
and offered reasonable indemnity to the Trustee to institute such proceeding as
Trustee, the Trustee does not pursue the remedy addressed in such request within
30 days after receipt of such notice and offer and the
104
<PAGE>
Trustee has not within such 30-day period received directions inconsistent with
such written request from Holders of a majority in principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit instituted
by a Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or accrued interest on such Note on or after the due date
expressed in such Note (including acceleration thereof) or, following
notification by the Trustee to the Company of its resignation as Trustee under
the Indenture and prior to the appointment of a successor Trustee, the
institution of any proceeding with respect to the Indenture or any remedy
thereunder, including acceleration, by the Holders of a majority in principal
amount of outstanding Notes with respect to such Holders' Notes, provided that
upon institution of any proceeding or exercise of any remedy such Holders
provide the Trustee with prompt notice.
In the case of an Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes as described under
the caption ' -- Optional Redemption,' an equivalent premium shall also become
and be immediately due and payable, to the extent permitted by law, upon the
acceleration of the Notes. If an Event of Default occurs prior to February 1,
2000 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to February 1, 2000, then, upon acceleration of
the Notes, an additional premium shall also become and be immediately due and
payable, to the extent permitted by law, in an amount equal to 110.0%.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, member or stockholder of
Pro-Fac, the Company or their Subsidiaries, as such, shall have any liability
for any Obligations of the Company or the Guarantors under the Notes, the
Guarantees, or the Indenture or for any claim based on, in respect of, or by
reason of, such Obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes and the Guarantees. Such waiver
may not be effective to waive liabilities under the federal securities laws, and
it is the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
Obligations discharged with respect to the outstanding Notes ('Legal
Defeasance') except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (ii) the Company's Obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
Obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the Obligations of the Company released with respect to certain
covenants that are described in the Indenture ('Covenant Defeasance') and
thereafter any omission to comply with such Obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership and insolvency events) described under ' -- Events of Default and
Remedies' will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the
105
<PAGE>
principal of, premium, if any, and interest, Additional Payments on, and
Liquidated Damages with respect to, the outstanding Notes on the stated maturity
or on the applicable redemption date, as the case may be, of such principal or
installment of principal of, premium, if any, or interest or Additional Payments
on, or Liquidated Damages with respect to, the outstanding Notes; (ii) in the
case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States acceptable to the Trustee in its
reasonable judgment confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that and based thereon, such opinion of
counsel shall confirm that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States acceptable to the Trustee in its reasonable
judgment confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (except as the
result of the incurrence of Indebtedness the proceeds of which are applied to
such defeasance) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
opinion of counsel acceptable to the Trustee in its reasonable judgment to the
effect that the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the deposit
was not made by the Company with the intent of preferring the Holders of Notes
over the other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and (viii) the
Company shall have delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of such Note
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing Default or Event of Default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder of Notes): (i) reduce
the principal amount of Notes whose
106
<PAGE>
Holders must consent to an amendment, supplement or waiver, (ii) reduce the
principal of or change the fixed maturity of any Note or alter the provisions
with respect to the redemption of the Notes, (iii) reduce the rate of or change
the time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the right of
Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any
Note, (viii) make any change in the provisions described above under the caption
' -- Repurchase at the Option of Holders -- Change of Control' that adversely
affects the rights of any Holder of Notes or (ix) make any change in the
foregoing amendment and waiver provisions.
Any amendment to the Indenture or the Notes which would materially and
adversely affect the rights of the lenders under the New Credit Agreement will
also require the consent of such lenders.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or the Guarantors'
respective Obligations to Holders of the Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements of
the Commission in order to effect or maintain the qualifications of the
Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
as Trustee with such conflict or resign as Trustee.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee reasonable indemnity satisfactory to the Trustee against any loss,
liability or expense.
DELIVERY AND FORM OF SECURITIES
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes were initially issued in the form of one or more Global Notes
(collectively, the 'Old Global Note'). Except for New Notes issued to Non-Global
Purchasers (as defined below), the New Notes will initially be issued in the
form of one or more Global Notes (collectively, the 'New Global Note'). The Old
Global Note was deposited on the date of closing of the sale of the Old Notes,
and the New Global Note will be deposited on the date of closing of the Exchange
Offer, with or on behalf of the Depositary and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to herein as the
'Global Note Holder').
Notes that are (i) originally issued to or transferred to 'institutional
accredited investors' that are not 'qualified institutional buyers,' as defined
in Rule 144A under the Securities Act (the 'Non-Global Purchasers') or (ii)
issued as described below under ' -- Certificated Securities' will be issued in
107
<PAGE>
registered form (the 'Certificated Securities'). Upon the transfer to a
qualified institutional buyer of Certificated Securities initially issued to a
Non-Global Purchaser, such Certificated Securities will, unless the Global Note
has previously been exchanged for Certificated Securities, be exchanged for an
interest in the Global Note representing the principal amount of Notes being
transferred. 'Global Note' means the Old Global Note or the New Global Note, as
the case may be.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the 'Participants'
or the 'Depositary's Participants') and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depositary's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the 'Indirect Participants' or the
'Depositary's Indirect Participants') that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depositary only through the Depositary's Participants or the Depositary's
Indirect Participants.
Pursuant to procedures established by the Depositary (i) upon deposit of
the Global Note, the Depositary will credit the accounts of Participants in
connection with the Notes with portions of the principal amount of the Global
Note and (ii) ownership of the Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer Notes will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder of the Global Note under
the Indenture. Except as provided below, owners of Notes will not be entitled to
have Notes registered in their names and will not be considered the owners or
Holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instructions or approvals to the Trustee
thereunder. None of the Company, the Guarantors or the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Notes by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names any Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, none of the Company or the Trustee has or
will have any responsibility or liability for the payment of such amounts to
beneficial owners of Notes (including principal, premium, if any, and interest).
The Company believes, however, that it is currently the policy of the Depositary
to immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective beneficial interests in
the relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in definitive form. Upon any such issuance, the Trustee is
required to register such Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). In
addition, if (i) the Company
108
<PAGE>
notifies the Trustee in writing that the Depositary is no longer willing or able
to act as a depositary and the Company is unable to locate a qualified successor
within 90 days or (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Notes in definitive form under
the Indenture, then, upon surrender by the Global Note Holder of the Global
Note, Notes in such form will be issued to each person that the Global Note
Holder and the Depositary identify as being the beneficial owner of the related
Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
THE EXCHANGE OFFER; REGISTRATION RIGHTS
Holders of New Notes are not entitled to any registration rights with
respect to the New Notes. The Company agrees for a period of 180 days from the
consummation of the Exchange Offer to make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any New Notes. The Registration Statement of which this
Prospectus is a part constitutes the registration statement for the Exchange
Offer which is the subject of the Registration Rights Agreement. Upon the
closing of the Exchange Offer, subject to certain limited exceptions, Holders of
untendered Old Notes will not retain any rights under the Registration Rights
Agreement.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by contacting the Company at 90 Linden Place, P.O. Box 681,
Rochester, New York 14603, Attention: Secretary (Telephone: (716) 383-1850).
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
'Acquired Debt' means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
'Acquisition' means (i) the acquisition by PFAC of 90% or more of each
class of the capital stock of the Company and (ii) the Merger.
'Affiliate' of any specified Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and (ii) with respect to Pro-Fac and the
Company, any member of Pro-Fac that is a director of Pro-Fac or that has
beneficial ownership of more than 1% of the voting securities of Pro-Fac. For
purposes of this definition, 'control' (including, with correlative meanings,
the terms 'controlling,' 'controlled by' and 'under common control with'), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that beneficial ownership of 10% or
more of the voting securities of a Person shall be deemed to be control.
'Attributable Debt' in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the actual rate
of interest implicit in such transaction) of the obligation of the lessee for
net rental payments during the remaining terms of the lease included in such
sale and leaseback transaction (including any period for which such lease has
been extended or may, at the option of the lessor, be extended).
109
<PAGE>
'Borrowing Base' means, as of any date, an amount equal to the sum of (i)
80% of the face amount of all accounts receivable owned by the Company and its
Subsidiaries as of such date and (ii) 50% of the book value of all inventory
owned by the Company and its Subsidiaries as of such date (calculated in each
case in accordance with the New Credit Agreement). To the extent that
information is not available as to the amount of accounts receivable or
inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
'Capital Lease Obligation' means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on the balance sheet in accordance
with GAAP.
'Capital Stock' means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, such partnership.
'Cash Equivalents' means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States Government or
any agency or instrumentality thereof having remaining maturities of not more
than 12 months from the date of acquisition and rated at least 'A' or the
equivalent by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation, (iii) certificates of deposit and eurodollar time deposits with
remaining maturities of not more than 12 months from the date of acquisition,
bankers' acceptances with remaining maturities not more than 12 months and
overnight bank deposits, in each case with any lender party to the New Credit
Agreement or with any domestic commercial bank having capital and surplus in
excess of $250 million and a Keefe Bank Watch Rating of B or better, (iv)
repurchase Obligations with a term of not more than 30 days for underlying
securities of the types described in clauses (ii) and (iii) entered into with
any financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case with a
remaining maturity of not more than 12 months after the date of acquisition,
(vi) any security with a remaining maturity of not more than 12 months from the
date of acquisition backed by standby or direct pay letters of credit issued by
any bank satisfying the requirements of clause (iii) above, and (vii) any
money-market fund sponsored by any registered broker-dealer or mutual fund
distributor that invests solely in instruments of the types set forth above.
'Change of Control' means the occurrence of any of the following, other
than in connection with the Acquisition: (i) the sale, lease or transfer, in one
or a series of related transactions, of all or substantially all of Pro-Fac's or
the Company's assets to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act), (ii) the consummation of any transaction the
result of which is that any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act) owns, directly or indirectly, (A) more than 50% of
the voting power of the voting stock of Pro-Fac or the Company or (B) more than
30% of the voting power of the voting stock of the Company if Pro-Fac owns,
directly or indirectly, a lesser percentage than such Person or group of the
voting power of the voting stock of the Company, (iii) the first date on which
any Person or group (as defined above) shall have elected, or caused to be
elected, a sufficient number of its or their nominees to the Board of Directors
of Pro-Fac or the Company such that the nominees so elected (regardless of when
elected) shall collectively constitute a majority of the Board of Directors of
Pro-Fac or the Company, as the case may be, or (iv) for a period of 120
consecutive days, the number of Disinterested Directors on the Board of
Directors of the Company being less than the greater of (A) two and (B) the
number of directors of the Company who are Pro-Fac Directors. For purposes of
this definition, any transfer of an equity interest of an entity that was formed
for the purpose of acquiring voting stock of Pro-Fac or the Company shall be
deemed to be a transfer of such portion of the voting stock owned by such entity
as corresponds to the portion of the equity of such entity that has been so
transferred.
'Commercial Market Value' means Commercial Market Value determined in
accordance with the Pro-Fac Marketing Agreement.
'Consolidated Cash Flow' means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to the noncash portion of any
110
<PAGE>
extraordinary loss and any loss realized in connection with an Asset Sale (to
the extent such losses were deducted in computing such Consolidated Net Income),
plus (ii) the Consolidated Income Tax Expense of such Person for such period
(other than income tax expense (either positive or negative) attributable to
extraordinary gains or losses or gains or losses on Asset Sales), plus (iii) in
the case of the Company, the Pro-Fac share of earnings(loss) as determined in
accordance with the Pro-Fac Marketing Agreement, plus (iv) the Consolidated
Interest Expense of such Person for such period, plus (v) depreciation,
amortization (including amortization of goodwill and other intangibles) and
other non-cash charges (excluding any such non-cash charge that results in an
accrual of a reserve for cash charges in any future period) of such Person for
such period to the extent such depreciation, amortization and other non-cash
charges were deducted in computing such Consolidated Net Income, in each case,
on a consolidated basis and determined in accordance with GAAP.
'Consolidated Income Tax Expense' means, with respect to any Person for any
period, the income tax expense of such Person and its Subsidiaries for such
period that was deducted in computing the Consolidated Net Income of such Person
for such period, determined on a consolidated basis in accordance with GAAP.
'Consolidated Interest Expense' means, without duplication, with respect to
any Person for any period, the sum of the interest expense on all Indebtedness
of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP and including, without limitation (i)
imputed interest on Capital Lease Obligations and Attributable Debt, (ii)
commissions, discounts and other fees and charges owed with respect to letters
of credit securing financial Obligations and bankers' acceptance financing,
(iii) the net costs associated with Hedging Obligations, (iv) amortization of
financing fees and expenses, (v) the interest portion of any deferred payment
Obligations, (vi) amortization of debt discount or premium, if any, (vii) all
other non-cash interest expense, (viii) capitalized interest, (ix) all interest
payable with respect to discontinued operations, and (x) all interest on any
Indebtedness of any other Person guaranteed by the referent Person or any of its
Subsidiaries to the extent paid by the referent Person or any such Subsidiary.
'Consolidated Net Income' means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
that (i) the Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to the referent
Person or a Subsidiary thereof, (ii) the Net Income of any Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of such Net Income is not at the date of
determination permitted without any governmental approval (which has not been
obtained) or directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded;
provided, that in calculating Consolidated Net Income for the Company, any
charges recognized in connection with the Company's elimination of its Nalley's
U.S. Chips and Snacks line of business or the change of control of the Company,
in each case subsequent to June 25, 1994 and net of any related tax benefits,
shall be excluded.
'Consolidated Net Worth' means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock determined in accordance with GAAP,
less all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within 12 months after the acquisition of such business) subsequent to the date
of the Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person.
111
<PAGE>
'Consolidated Tangible Assets' means with respect to any Person as of any
date, the total assets of such Person and its Subsidiaries (excluding any assets
that would be classified as 'intangible assets' under GAAP) on a consolidated
basis at such date, as determined in accordance with GAAP, less all write-ups
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or any of its Subsidiaries (except to the extent that any such
write-up was required by GAAP as a result of an acquisition by such Person or
any such Subsidiary accounted for as a purchase).
'Default' means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
'Disinterested Directors' means directors of the Company who are not
employees, shareholders (at the time of becoming directors) or otherwise
Affiliates (other than by reason of being a director of the Company) of either
Pro-Fac or the Company.
'Disqualified Stock' means any Capital Stock and all warrants, options or
other rights to acquire Capital Stock which, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund Obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to a date that is one year
after the date on which the Notes mature.
'Equity Interests' means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into or exchangeable for Capital Stock).
'Fixed Charge Coverage Ratio' means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
(exclusive of amounts attributable to discontinued operations, as determined in
accordance with GAAP, or operations and businesses disposed of prior to the
Calculation Date (as defined below)) to the Fixed Charges of such Person for
such period (exclusive of amounts attributable to discontinued operations, as
determined in accordance with GAAP, or operations and businesses disposed of
prior to the Calculation Date, but only to the extent that the Obligations
giving rise to such Fixed Charges would no longer be Obligations contributing to
such Person's Fixed Charges subsequent to the Calculation Date). In the event
that the Company or any of its Subsidiaries incurs, assumes, guarantees or
repays any Indebtedness (other than revolving credit borrowings) or Attributable
Debt or issues preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the 'Calculation Date'), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
repayment of Indebtedness or Attributable Debt, or such issuance or redemption
of preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. For purposes of making the computation
referred to above, acquisitions that have been made by the referent Person or
any of its Subsidiaries, including all mergers and consolidations, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period; provided, however, that if any such
calculation requires the use of any quarter prior to the date of the Indenture,
such calculation for such quarter shall be made on a pro forma basis giving
effect to the Acquisition, including the financing thereof, as if the same had
occurred at the beginning of such four-quarter period.
'Fixed Charges' means, with respect to any Person for any period, the sum
of (a) the Consolidated Interest Expense of such Person and its Subsidiaries for
such period, and (b) the product of (i) all cash dividend payments (and non-cash
dividend payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person or a Subsidiary of such Person, times (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in
112
<PAGE>
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
date of the Indenture.
'Hedging Obligations' means, with respect to any Person, the Obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or the value of foreign currencies.
'Indebtedness' means, with respect to any Person, (i) any indebtedness of
such Person (including Acquired Debt and Attributable Debt), whether or not
contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any such indebtedness
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
(ii) all indebtedness of others secured by a Lien on any asset of such Person
whether or not such indebtedness is assumed by such Person, and (iii) to the
extent not otherwise included, the guarantee of any indebtedness of any other
Person by such Person.
'Investments' means, with respect to any Person, all (i) investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including guarantees), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), (ii) purchases or other acquisitions for consideration of
Indebtedness, (iii) Equity Interests or other securities and (iv) other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
'Letter of Credit Facility' means that portion of the New Credit Agreement
that provides for the issuance of letters of credit, with an aggregate face
amount not in excess of $10.0 million at any time outstanding, naming the
Company as the account party.
'Lien' means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
'Merger' means the merger under New York law of PFAC with and into the
Company, with the Company being the surviving entity.
'Net Income' means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or (b)
the disposition of any securities or the extinguishment of any Indebtedness of
such Person or any of its Subsidiaries, and (ii) any extraordinary gain (but not
loss), together with any related provision for taxes on such extraordinary gain
(but not loss).
'Net Proceeds' means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale, net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness that is by its terms subordinated to the Notes) upon
sale of the asset or assets that are the subject of such Asset Sale, and any
reserve for adjustment in respect of the sale price of such asset or assets.
'New Credit Agreement' means the Credit Agreement by and among the Company
and Springfield Bank for Cooperatives in the form existing as of the Closing
Date, including any related notes, guarantees, collateral documents, instruments
and agreements executed in connection therewith, in each
113
<PAGE>
case as amended, modified, renewed, restated, refunded, replaced or refinanced
in whole or in part from time to time.
'Obligations' means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
'Permitted Asset Sale Consideration' means securities and other non-cash
consideration acquired by the Company or any of its Subsidiaries as
consideration for the sale of assets or Equity Interests in an Asset Sale having
an aggregate fair market value (measured as of the date of acquisition) that
does not exceed 5% of the Consolidated Tangible Assets of the Company and its
Subsidiaries as of the most recently ended fiscal quarter for which financial
statements are available immediately preceding the date such consideration is
acquired. The fair market value of Permitted Asset Sale Consideration shall be
determined in good faith by the Company's Board of Directors on the date on
which it is acquired and no adjustments will be made for subsequent changes in
fair market value except that the amount deemed to be outstanding will be
reduced (but not below zero) to the extent of any cash received by the Company
or a Subsidiary upon disposition of such Permitted Asset Sale Consideration.
'Permitted Investments' means (i) any Investments in the Company or in a
Subsidiary of the Company; (ii) any Investments in Cash Equivalents; (iii)
Investments by the Company or any Subsidiary in a Person, if as a result of such
Investment (a) such Person becomes a Subsidiary of the Company that is engaged
in the same or a similar line of business to that which the Company and its
Subsidiaries were engaged in on the date of the Investment or (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Subsidiary of the Company that is engaged in the same or a similar line of
business to that which the Company and its Subsidiaries were engaged in on the
date of the Investment; (iv) Permitted Asset Sale Consideration; (v) loans by
the Company or any of its Subsidiaries to employees of the Company or any of its
Subsidiaries the proceeds of which are applied to purchase Capital Stock of the
Company; (vi) demand loans for working capital purposes from the Company to
Pro-Fac, not exceeding $10.0 million at any time outstanding, which will be
reduced to zero for a period of not less than 15 consecutive days in each fiscal
year; and (vii) any Investment in the Bank required under the New Credit
Agreement.
'Permitted Liens' means (i) Liens securing Indebtedness under the New
Credit Agreement that is permitted to be incurred pursuant to clauses
(i) -- (iv) of the second paragraph of the covenant described under the caption
' -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock'; (ii) Liens securing intercompany notes on assets that are required to be
pledged to secure borrowings under the New Credit Agreement; (iii) Liens in
favor of the Company; (iv) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; (v) Liens on assets of
the Company and its Subsidiaries to secure Capital Lease Obligations, purchase
money obligations and industrial revenue bonds or similar securities permitted
to be incurred pursuant to the covenant described above under the caption
' -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock', provided that such Liens cover only the assets acquired with the
proceeds of such Capital Lease Obligations, purchase money obligations or
industrial revenue bonds or similar securities, as the case may be; (vi) Liens
existing on the date of the Indenture; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently prosecuted; provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens created or pledges and deposits made in connection with workers'
compensation, unemployment insurance and other social security benefits incurred
by the Company or any Subsidiary of the Company; (ix) Liens imposed by law,
including, without limitation, mechanics', carriers', warehousemen's,
materialmen's, suppliers' and vendors' Liens created by the Company or any
Subsidiary in the ordinary course of business; (x) zoning restrictions,
easements, licenses, covenants, reservations, restrictions on the use of real
property or minor irregularities of title incident thereto which do not, in the
aggregate, have a material adverse effect on the operation of the business of
the Company and its Subsidiaries taken as a whole; (xi) Liens imposed pursuant
to condemnation or eminent domain or substantially similar proceedings or in
connection with compliance with
114
<PAGE>
environmental laws or regulations; and (xii) Liens incurred in the ordinary
course of business of the Company or any Subsidiary of the Company with respect
to Obligations that do not exceed $2.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Subsidiary.
'Permitted Refinancing Indebtedness' means any Indebtedness of the Company
issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, other Indebtedness of the Company;
provided that: (i) the principal amount and premium, if any, of such
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of expenses incurred in connection therewith); (ii) such Indebtedness has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iii) such Indebtedness is subordinated in
right of payment to the Notes on terms at least as favorable to the Holders of
Notes as those, if any, contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
'Pro-Fac Director' means any Person who, as a director, officer or other
designee of Pro-Fac, serves as a director of the Company.
'Pro-Fac Marketing Agreement' means the agreement between Pro-Fac and the
Company in the form existing as of the Closing Date, as such agreement may be
amended, restated, renewed, extended or replaced in accordance with the
Indenture.
'Restricted Investment' means an Investment other than a Permitted
Investment.
'Seasonal Working Capital Facility' means that portion of the New Credit
Agreement that provides for revolving Indebtedness of the Company, the proceeds
of which are to be used to finance the Company's operations.
'Senior Indebtedness' means all Indebtedness and other Obligations
specified below payable directly or indirectly by the Company or any Guarantor,
as the case may be, whether outstanding on the date of the Indenture or
thereafter created, incurred or assumed by the Company or such Guarantor: (i)
the principal of and interest on and all other Obligations related to the New
Credit Agreement (including without limitation all loans, letters of credit and
unpaid drawings with respect thereto and other extensions of credit under the
New Credit Agreement, and all expenses, fees, reimbursements, indemnities and
other amounts owing pursuant to the New Credit Agreement), (ii) amounts payable
in respect of any Hedging Obligations, (iii) all Indebtedness not prohibited by
the ' -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock' covenant that is not expressly pari passu with, or subordinated
to, the Notes or the guarantees, as the case may be, (iv) all Indebtedness
represented by industrial revenue bonds and all Capital Lease Obligations, in
each case, outstanding on the date of the Indenture, (v) all amounts payable to
senior officers and directors of the Company in connection with the Acquisition
and (vi) all permitted renewals, extensions, refundings or refinancings thereof
permitted under the Indenture. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness will not include (i) any Indebtedness which by
the express terms of the agreement or instrument creating, evidencing or
governing the same is junior or subordinate in right of payment to any item of
Senior Indebtedness (it being understood that any agreements among creditors, as
to their priority positions with respect to collateral, shall not be included as
Indebtedness for purposes of this clause (i)), (ii) any trade payable arising
from the purchase of goods or materials or for services obtained in the ordinary
course of business or (iii) Indebtedness incurred (but only to the extent
incurred) in violation of the Indenture as in effect at the time of the
respective incurrence, provided that any Lender under the New Credit Agreement
with respect to such Indebtedness shall be permitted to rely conclusively on an
Officers' Certificate as to the permissibility of such Indebtedness under the
Indenture.
'Subsidiary' means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
115
<PAGE>
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
'Term Loan Facility' means that portion of the New Credit Agreement that
provides for up to $120.0 million of term Indebtedness of the Company, as
reduced by any mandatory commitment reductions pursuant to the terms of the New
Credit Agreement as in effect on the date of the Indenture, at least $90.0
million of the proceeds of which are to be used to finance in part the
Acquisition.
'Term Loans' means that portion of the New Credit Agreement that provides
for $80.0 million of term Indebtedness of the Company, as reduced by any
mandatory commitment reductions pursuant to the terms of the New Credit
Agreement as in effect on the date of the Indenture.
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed, in connection with the
Exchange Offer, to indemnify the Initial Investors against certain liabilities,
including liabilities under the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer hereby agrees to notify the Company prior
to using the Prospectus in connection with the sale or transfer of New Notes,
and acknowledges and agrees that, upon receipt of notice from the Company of the
happening of any event which makes any statement in the Prospectus untrue in any
material respect or which requires the making of any changes in the Prospectus
in order to make the statements therein not misleading (which notice the Company
agrees to deliver promptly to such broker-dealer), such broker-dealer will
suspend use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
116
<PAGE>
LEGAL MATTERS
The legality of the New Notes and the Guarantees to be issued in the
Exchange Offer will be passed upon for the Company by Howard, Darby & Levin, New
York, New York and Harris Beach & Wilcox, Rochester, New York and, as to matters
of Canadian law, by Bull, Housser & Tupper.
EXPERTS
The consolidated financial statements and financial statement schedules of
Curtice-Burns Foods, Inc. and the financial statements and financial statement
schedules of Pro-Fac Cooperative, Inc. at June 25, 1994 and June 26, 1993 and
for each of the three years in the period ended June 25, 1994, included in the
Prospectus, have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants (which reports contain an explanatory paragraph
relative to disputes between Curtice-Burns Foods, Inc. and Pro-Fac Cooperative,
Inc.), given on the authority of said firm as experts in auditing and
accounting.
117
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Curtice-Burns Foods, Inc. and Consolidated Subsidiaries:
Report of Independent Accountants..................................................................... F-2
Consolidated Financial Statements for the years ended June 25, 1994, June 26, 1993 and June 26, 1992
Consolidated Statement of Operations and Retained Earnings....................................... F-3
Consolidated Balance Sheet....................................................................... F-4
Consolidated Statement of Cash Flows............................................................. F-5
Notes to Consolidated Financial Statements....................................................... F-6
Consolidated Financial Statements (Unaudited) for the three months ended September 24, 1994 and
September 25, 1993
Consolidated Statement of Operations and Retained Earnings....................................... F-25
Consolidated Balance Sheet....................................................................... F-26
Consolidated Statement of Cash Flows............................................................. F-27
Notes to Consolidated Financial Statements....................................................... F-28
Pro-Fac Cooperative, Inc.:
Report of Independent Accountants..................................................................... F-36
Financial Statements for the years ended June 25, 1994, June 26, 1993 and June 26, 1992
Statement of Net Proceeds........................................................................ F-37
Balance Sheet.................................................................................... F-38
Statement of Cash Flows.......................................................................... F-39
Statement of Changes in Shareholders' and Members' Capitalization................................ F-40
Notes to Financial Statements.................................................................... F-41
Financial Statements (Unaudited) for the three months ended September 24, 1994 and September 25, 1993
Statement of Net Proceeds........................................................................ F-53
Balance Sheet.................................................................................... F-54
Statement of Cash Flows.......................................................................... F-55
Notes to Financial Statements.................................................................... F-56
</TABLE>
The Company's obligations under the New Credit Agreement and the Notes are
guaranteed by Curtice-Burns Express, Inc., Curtice Burns Meat Snacks, Inc.,
Finger Lakes Packaging Company, Inc., Husman Snack Foods Company, Inc., Kennedy
Endeavors, Incorporated, Nalley's Canada Limited, Quality Snax of Maryland,
Inc., Seasonal Employers, Inc. and Pro-Fac Holding Company of Iowa, Inc., each a
wholly-owned subsidiary of the Company, in addition to Pro-Fac. All subsidiaries
of the Company, other than Curtice-Burns Express, Inc., Curtice Burns Meat
Snacks, Inc., Finger Lakes Packaging Company, Inc., Husman Snack Foods Company,
Inc., Kennedy Endeavors, Incorporated, Nalley's Canada Limited, Quality Snax of
Maryland, Inc., Seasonal Employers, Inc. and Pro-Fac Holding Company of Iowa,
Inc., are inactive, and consequently, maintain no assets or are active, but
maintain insignificant assets. Financial information of the Company and the
Subsidiary Guarantors is substantially the same as that presented in the
Consolidated Financial Statements of the Company.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
CURTICE-BURNS FOODS, INC.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and retained earnings and cash flows
present fairly, in all material respects, the financial position of
Curtice-Burns Foods, Inc. and its subsidiaries at June 25, 1994 and June 26,
1993, and the results of their operations and their cash flows for each of the
three fiscal years in the period ended June 25, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 4 to the consolidated financial statements,
several disputes currently exist between Pro-Fac Cooperative, Inc. and the
Company. The Company has requested arbitration to resolve the disputes with
Pro-Fac Cooperative, Inc. Additionally, two competing offers to acquire the
outstanding common stock of the Company have been made.
PRICE WATERHOUSE LLP
Rochester, New York
August 10, 1994 (Except as to Note 3, which is as of September 22, 1994)
F-2
<PAGE>
CURTICE-BURNS FOODS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C> <C>
Net sales.................................................................... $829,116 $878,627 $896,931
Costs and expenses:
Cost of sales........................................................... 592,621 632,663 652,347
Restructuring including net (gain) loss from division disposals......... (7,768) 61,037 --
Change in control expenses.............................................. 3,500 -- --
Other selling, administrative and general expenses...................... 186,934 207,119 201,327
Interest expense:
Interest expense on Pro-Fac related borrowings..................... 15,617 16,515 19,869
Interest expense on other debt..................................... 2,667 3,047 3,558
Less capitalized interest.......................................... (79) (12) (592)
-------- -------- --------
Total interest expense........................................ 18,205 19,550 22,835
-------- -------- --------
Total costs and expenses..................................................... 793,492 920,369 876,509
-------- -------- --------
Pre-tax earnings (loss) before dividing with Pro-Fac......................... 35,624 (41,742) 20,422
Pro-Fac share of (earnings) loss............................................. (16,849) 21,800 (9,505)
-------- -------- --------
Income (loss) before taxes................................................... 18,775 (19,942) 10,917
Provision for taxes.......................................................... (8,665) (3,895) (4,769)
-------- -------- --------
Net income (loss)............................................................ 10,110 (23,837) 6,148
Retained earnings at beginning of period..................................... 53,541 82,882 80,849
Less cash dividends declared ($.64, $.64, and $.48 per share,
respectively).............................................................. (5,530) (5,504) (4,115)
-------- -------- --------
Retained earnings at end of period........................................... $ 58,121 $ 53,541 $ 82,882
-------- -------- --------
-------- -------- --------
Net income (loss) per share.................................................. $ 1.17 $ (2.77) $ .71
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CURTICE-BURNS FOODS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 25, JUNE 26,
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................................................. $ 2,928 $ 6,516
Accounts receivable trade, less allowances for bad debts of $1,066 and $801,
respectively......................................................................... 57,640 63,160
Accounts receivable, other............................................................ 8,460 8,151
Income taxes refundable............................................................... 237 --
Current deferred taxes receivable..................................................... 10,487 7,561
Inventories --
Finished goods................................................................... 108,538 110,772
Raw materials and supplies....................................................... 46,721 58,704
-------- --------
Total inventories........................................................... 155,259 169,476
-------- --------
Prepaid manufacturing expense......................................................... 8,190 7,164
Prepaid expenses and other current assets............................................. 4,305 4,920
-------- --------
Total current assets........................................................ 247,506 266,948
Net property, plant and equipment leased from Pro-Fac...................................... 141,322 173,513
Other property, plant and equipment, net................................................... 26,194 18,939
Goodwill and other intangibles, less amounts financed and accumulated amortization of
$10,335 and $8,650, respectively......................................................... 24,909 26,546
Other assets............................................................................... 7,007 7,783
-------- --------
Total assets................................................................ $446,938 $493,729
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 62,335 $ 64,663
Due to Pro-Fac........................................................................ 9,447 9,113
Accrued employee compensation......................................................... 11,482 11,843
Other accrued expenses................................................................ 26,947 30,334
Income taxes payable.................................................................. -- 9,046
Current portion of obligations under Pro-Fac capital leases........................... 17,645 21,184
Current portion of obligations under other capital leases............................. 785 1,687
Current portion of Pro-Fac long-term debt............................................. 14,000 16,000
Current portion of other long-term debt............................................... 816 2,656
-------- --------
Total current liabilities................................................... 143,457 166,526
Long-term debt due Pro-Fac................................................................. 78,040 78,648
Long-term debt due others.................................................................. 1,021 6,389
Obligations under Pro-Fac capital leases................................................... 123,677 152,329
Obligations under other capital leases..................................................... 1,296 1,773
Deferred income taxes...................................................................... 14,958 9,362
Other non-current liabilities.............................................................. 3,591 3,027
-------- --------
Total liabilities........................................................... 366,040 418,054
-------- --------
Commitments and contingencies
Shareholders' equity:
Class A Common -- $.99 par value; 10,125,000 shares authorized; 6,628,430 and
6,568,518 outstanding, respectively.................................................. 6,562 6,503
Class B Common -- $.99 par value; 4,050,000 shares authorized; 2,056,876 and 2,060,702
outstanding, respectively............................................................ 2,036 2,040
Additional paid-in capital............................................................ 14,224 13,591
Retained earnings..................................................................... 58,121 53,541
Minimum pension liability adjustment.................................................. (45) --
-------- --------
Total shareholders' equity.................................................. 80,898 75,675
-------- --------
Total liabilities and shareholders' equity.................................. $446,938 $493,729
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CURTICE-BURNS FOODS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................ $ 10,110 $(23,837) $ 6,148
Adjustments to reconcile net income to net cash provided by operating
activities --
Restructuring charges, including net (gain) loss from division
disposals............................................................ (7,768) 61,037 --
Amortization of goodwill and other intangibles......................... 1,685 2,538 2,742
Depreciation and amortization of capital assets........................ 22,322 25,432 24,414
Provision for losses on accounts receivable............................ 709 346 827
Deferred tax provision (benefit)....................................... 2,670 (10,642) 1,009
Change in assets and liabilities net of effects of disposals --
Accounts receivable.................................................... 5,704 (8,043) 7,823
Inventories............................................................ 250 4,738 9,162
Income taxes (refundable) payable...................................... (9,283) 11,617 (650)
Accounts payable and accrued expenses.................................. (7,313) 2,497 7,136
Due to Pro-Fac......................................................... 834 (1,654) (443)
Other assets and liabilities........................................... 2,055 (3,345) (5,491)
-------- -------- --------
Net cash provided by operating activities.............................. 21,975 60,684 52,677
-------- -------- --------
Cash flows from investing activities:
Proceeds from division disposals............................................ 42,097 -- --
Cash paid for intangibles................................................... (1,637) (26,898) (2,405)
Purchase of property, plant and equipment................................... (9,543) (8,360) (562)
Disposal of assets.......................................................... 1,900 3,817 6,176
Disposal of Pro-Fac assets.................................................. 714 4,923 1,661
Disposal of third party leases.............................................. 357 94 587
-------- -------- --------
Net cash provided by (used in) investing activities.................... 33,888 (26,424) 5,457
-------- -------- --------
Cash flows from financing activities:
Due to Pro-Fac.............................................................. (500) (16,000) (18,000)
Proceeds from issuance of Pro-Fac long-term debt............................ 40,378 33,348 201
Payments on Pro-Fac long-term debt.......................................... (42,986) (14,000) --
Payments on other long-term debt............................................ (7,208) (2,644) (3,108)
Payments on Pro-Fac capital leases.......................................... (42,193) (26,928) (23,827)
Payments on other capital leases............................................ (2,100) (2,642) (2,073)
Proceeds from sale of stock under stock option plans........................ 688 517 213
Stock repurchased........................................................... -- (17) (5,000)
Cash dividends paid......................................................... (5,530) (5,504) (5,540)
-------- -------- --------
Net cash used in financing activities.................................. (59,451) (33,870) (57,134)
-------- -------- --------
Net change in cash............................................................... (3,588) 390 1,000
Cash at beginning of year........................................................ 6,516 6,126 5,126
-------- -------- --------
Cash at end of year.............................................................. $ 2,928 $ 6,516 $ 6,126
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for --
Interest (net of amount capitalized)........................................ $ 18,623 $ 19,757 $ 22,636
-------- -------- --------
-------- -------- --------
Income taxes, net........................................................... $ 15,077 $ 1,909 $ 3,795
-------- -------- --------
-------- -------- --------
Supplemental schedule of non-cash investing and financing activities:
Capital lease obligations incurred.......................................... $ 10,723 $ 16,065 $ 19,897
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles including the following
major accounting policies:
FISCAL YEAR
Fiscal 1994 ended on June 25, 1994, and fiscal 1993 ended on June 26,
1993, the last Saturday in June. Prior years ended on the last Friday in
June. All future fiscal years will end on the last Saturday in June. The
years ended June 25, 1994, June 26, 1993, and June 26, 1992 each comprised
52 weeks.
CONSOLIDATION
The consolidated financial statements include the Company and its
wholly-owned subsidiaries after elimination of intercompany transactions
and balances. Certain items for fiscal 1993 and 1992 have been reclassified
to conform with fiscal 1994 presentations.
INVENTORIES
Inventories are stated at the lower of cost or market on the first-in,
first-out ('FIFO') method. Inventory reserves are recorded to reflect the
difference between FIFO cost and the market applicable to canned and frozen
fruit and vegetable inventories. These reserves amounted to $379,000,
$1,189,000 and $2,520,000 for fiscal 1994, 1993 and 1992, respectively.
MANUFACTURING OVERHEAD
Allocation of manufacturing overhead to finished goods produced is on
the basis of a production year; thus at the end of each fiscal year,
manufacturing costs incurred by seasonal plants subsequent to the previous
pack are deferred and included in the accompanying balance sheet under the
caption 'Prepaid manufacturing expense.'
PROPERTY, PLANT AND EQUIPMENT AND RELATED LEASE ARRANGEMENTS
Property, plant and equipment are depreciated over the estimated
useful lives of the assets using the straight-line method, half-year
convention, over 3 to 40 years.
Lease arrangements are capitalized when such leases convey
substantially all of the risks and benefits incidental to ownership. Such
leases include those assets title to which is held by Pro-Fac and utilized
by the Company under the terms of the Integrated Agreement (the
'Agreement') described in Note 4. Capital leases are amortized over either
the lease term or the life of the related assets, depending upon available
purchase options and lease renewal features.
INCOME TAXES
Income taxes are provided on income for financial reporting purposes.
Deferred income taxes resulting from temporary differences between
financial reporting and tax reporting are appropriately classified in the
balance sheet.
PENSION
The Company and its subsidiaries have several pension plans and
participate in various union pension plans which on a combined basis cover
substantially all employees. Charges to income with respect to plans
sponsored by the Company and its subsidiaries are based upon actuarially
F-6
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined costs. Pension liabilities are funded by periodic payments to
the various pension plan trusts.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In fiscal 1994, the Company adopted Statement of Financial Accounting
Standards No. 106, 'Employers Accounting for Postretirement Benefits Other
than Pensions' which is further described in Note 9.
EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 112, 'Employers' Accounting for
Postemployment Benefits.'
This statement establishes accounting standards for employers who
provide benefits to former or inactive employees after employment but
before retirement. Postemployment benefits are all types of benefits
provided to former or inactive employees, their beneficiaries, and covered
dependents.
This Statement is effective for fiscal years beginning after December
15, 1993. Management believes that any change caused by this Statement will
not be material.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangible assets include the cost in excess of the
fair value of net tangible assets acquired in purchase transactions and
acquired non-competition agreements and trademarks net of the portion of
such intangibles financed by Pro-Fac in those transactions. Goodwill and
other intangible assets, stated at net of accumulated amortization, are
amortized on a straight-line basis over periods ranging to 40 years. The
Company periodically assesses whether there has been a permanent impairment
in the value of goodwill. This is accomplished by determining whether the
estimated undiscounted future cash flows from operating activities exceed
the carrying value of goodwill as of the assessment date. Should aggregate
future cash flows be less than the carrying value, a writedown would be
required, measured by the difference between the undiscounted future cash
flows and the carrying value of goodwill.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures that pertain to current operations are
expensed or capitalized consistent with the Company's capitalization
policy. Expenditures that result from the remediation of an existing
condition caused by past operations that do not contribute to current or
future revenues are expensed. Liabilities are recorded when remedial
activities are probable and the cost can be reasonably estimated.
NOTE 2. POTENTIAL CHANGE OF CONTROL OF CURTICE-BURNS
On March 23, 1993, the Company announced that Agway Inc., which owns 99% of
Curtice-Burns' Class B shares and approximately 14% of Class A shares, was
considering the potential sale of its interest in the Company. At its meeting
held on August 9 and 10, 1993, the Curtice-Burns Board of Directors authorized
Curtice-Burns' management, with the advice of its investment bankers, to pursue
strategic alternatives for Curtice-Burns. These options include negotiations
with Pro-Fac relative to Pro-Fac gaining control of the business; the possible
sale of the entire equity of Curtice-Burns to a third party; and the
implementation of additional restructuring actions that may include
recapitalizing the Company to buy out Pro-Fac and possibly Agway. Under the
Agreement with Pro-Fac, title to substantially all of Curtice-Burns' fixed
assets is held by Pro-Fac, and Pro-Fac provides the major
F-7
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
portion of the financing of Curtice-Burns' operations. Under the Agreement,
Curtice-Burns has an option to purchase these assets from Pro-Fac at their book
value. However, Curtice-Burns and Pro-Fac are currently in arbitration
proceedings relating to, among other matters, whether or not Curtice-Burns has
the right to terminate the Agreement, the amount that would be due to Pro-Fac
upon such termination and when such termination would take effect. In connection
with any termination of the Agreement, Curtice-Burns would be required to repay
all debt owed to Pro-Fac.
The Company actively explored these alternatives during fiscal 1994. On
June 8, 1994, the Curtice-Burns Board of Directors voted to pursue a proposal
submitted by Dean Foods to acquire all the outstanding shares of Curtice-Burns
at a maximum cash price of $20.00 per share, subject to a number of
contingencies, including an agreement with Pro-Fac covering the termination of
the Integrated Agreement, an agreement with Hormel Foods Corporation for the
purchase of the Nalley's Fine Foods Division of Curtice-Burns, clearance of the
transaction by appropriate government agencies, negotiation of definitive
agreements and approval of any transaction by Curtice-Burns' shareholders.
As a result of Pro-Fac's unwillingness to enter into the agreement required
by Dean Foods, on July 11, 1994, Curtice-Burns commenced arbitration proceedings
against Pro-Fac under the Integrated Agreement. These arbitration proceedings
are discussed in more detail under 'Arbitration Proceedings with Pro-Fac' below.
ARBITRATION PROCEEDINGS WITH PRO-FAC
On July 11, 1994, Curtice-Burns commenced arbitration proceedings against
Pro-Fac under the Integrated Agreement by serving a Demand for Arbitration on
Pro-Fac. In the arbitration, Curtice-Burns is seeking, among other relief, a
declaration confirming its right to terminate the Integrated Agreement and to
purchase the assets owned by Pro-Fac but used by Curtice-Burns in the conduct of
its business upon tender of the then current book value thereof, determined in
accordance with generally accepted accounting principles, a declaration
confirming the effect of termination of the Integrated Agreement on the
obligations of Curtice-Burns under the Integrated Agreement and a declaration
confirming that Curtice-Burns does not have any obligations under the Integrated
Agreement to purchase crops except as set forth in the fiscal 1995 Profit Plan.
Curtice-Burns is also seeking an award of damages sustained by Curtice-Burns in
an amount to be determined by the arbitrators, but in no event less than the
difference in value between the Dean Foods $20.00 per share offer and the market
price per share of Curtice-Burns' common stock following any public announcement
that the Dean Foods acquisition proposal has been withdrawn.
On August 2, 1994, Curtice-Burns 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 Curtice-Burns with Pro-Fac's Response and
Counterdemand for Arbitration (the 'Response'). In the Response, Pro-Fac
asserted (1) that Pro-Fac is 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 of Curtice-Burns' common
stock; (2) that Curtice-Burns cannot terminate the Integrated Agreement at all
or not before, at the earliest, June 1996; (3) that the book value of Pro-Fac's
assets for the purposes of calculating the price at which Curtice-Burns may buy
those assets and terminate the Integrated Agreement should not take into account
specified writedowns by Curtice-Burns of those assets; (4) that Curtice-Burns is
in default under the Integrated Agreement for improper termination of crops; and
(5) that Curtice-Burns is 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. In the Response, Pro-Fac also generally
denied Curtice-Burns' allegations in its Demand for Arbitration.
On August 4, 1994, Pro-Fac submitted a proposal for acquisition of all the
outstanding stock of Curtice-Burns for $19.00 per share in cash, and upon
acceptance of the offer, Pro-Fac would relinquish its claims against
Curtice-Burns. The contingencies of the Pro-Fac offer involve shareholder
approval
F-8
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and financing. This was the second proposal submitted by Pro-Fac. The first was
for $16.87 per share, in cash, on June 8, 1994, which the Company rejected at
that time in favor of pursuing the Dean Foods offer.
The Company has expensed $3.5 million of legal, accounting, investment
banking and other expenses relative to the change in control issue. In
recognizing this expense, the Company allocated half of this amount to Pro-Fac
as a deduction to the profit split ($1.8 million). The allocation to Pro-Fac of
this charge is being disputed by Pro-Fac. See Notes 4 and 5.
The Company believes that Pro-Fac's allegations are without merit and
intends to resist them vigorously.
NOTE 3. RESTRUCTURING PROGRAM
THE CONCEPTUAL VISION AND STRATEGY
The restructuring program first initiated in fiscal 1993 was based on
Curtice-Burns' new vision of a company smaller in sales but more profitable, as
measured by return on sales and equity, and possessing the financial and
management resources sufficient to drive growth in carefully selected product
line markets in which the Company can prosper for the long term. Thus, the
strategy was to focus on a more limited number of product lines which now have a
strong, competitive position.
The Plan outlined in 1993 is to restructure the business to a more
profitable base. At the same time, the remaining businesses were to be managed
to optimize earnings growth by installing corporate-wide purchasing, and a
corporate-wide focus of capital spending.
The third leg of the strategy was to accelerate the Company's national
sales and distribution programs by executing new product programs in store-brand
retail dressings, salsa and chunky soups, and the 'More Fruit/More Flavor' pie
filling program.
EXECUTION OF THE PROGRAM
The first step of the restructuring program was to divest businesses that
were unprofitable or declining for the Company but would fit strategically with
other business portfolios. During fiscal 1993, the Company divested Lucca Frozen
Foods. A loss of approximately $2.7 million (before dividing with Pro-Fac and
before taxes) was recognized on this transaction. At the end of fiscal 1993, the
Company wrote down the assets and provided for the expenses to dispose of the
Hiland potato chips and meat snacks businesses during fiscal 1994. On November
22, 1993, Curtice-Burns sold certain assets of the Hiland potato chips business
for $2.0 million at closing, plus approximately $1.0 million paid in
installments over three months. On February 22, 1994, Curtice-Burns sold the
meat snacks business located in Denver, Colorado and Albany, Oregon to Oberto
Sausage Company of Kent, Washington. Under the agreement, Oberto has purchased
certain assets and assumed certain liabilities of the meat snacks operation,
excluding plant, equipment, and trademarks. Curtice-Burns will lease its Albany
Oregon manufacturing facility and equipment and license its trademarks, trade
names, etc. to Oberto until February 1995, at which time Oberto is contractually
obligated to purchase these assets. The sale of the Hiland potato chips and meat
snacks businesses did not result in any significant gain or loss in fiscal 1994
after giving effect to the restructuring charges recorded in fiscal 1993;
however, charges of $3.1 million were incurred in fiscal 1994 to adjust previous
estimates. In the fiscal year ended June 26, 1993, Curtice-Burns incurred losses
of $13.2 million from the meat snacks and Hiland potato chips businesses before
dividing such losses with Pro-Fac and before taxes.
On November 19, 1993, the Company sold the oats portion of the National
Oats business for $39.0 million. The oats business contributed approximately
$1.4 million of earnings in fiscal 1993 before dividing with Pro-Fac and before
taxes. The sale of the oats business resulted in an approximate $10.9
F-9
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million gain. The popcorn portion of the National Oats Division was transferred
to the Comstock Michigan Fruit Division.
During fiscal 1993 and 1994, the Company also made staff reductions in
selected locations throughout the Company. A $1.0 million accrual relating to
such costs was recorded as part of the fiscal 1993 restructuring charge.
Thus, a major part of the restructuring plan was successfully executed
during fiscal 1994.
As reported above, Curtice-Burns incurred restructuring charges in fiscal
1993 of $61.0 million (before dividing such charges with Pro-Fac and before
taxes), which included the loss incurred on the sale of the Lucca frozen entree
business, anticipated losses on the sale of the meat snacks and Hiland
businesses, and other costs (primarily severance and losses prior to sale) in
conjunction with the restructuring program. Virtually all of this charge was a
revaluation of assets, rather than cash expense.
Having completed the first phase of the restructuring program in fiscal
1993, the second phase was approved by the Company's Board of Directors in
August 1994. In connection with the second phase, the company is evaluating
several alternatives regarding the Nalley's snack food business in the United
States, including its possible sale to a third party. A charge, not to exceed
$12.0 million before split with Pro-fac and before taxes, for this phase of the
restructuring program will be recorded during the first quarter of fiscal 1995.
With respect to the potential sale of the snack food business, the Company
has signed a letter of intent with Country Crisp Foods of Salt Lake City, Utah.
The letter of intent is subject to a number of conditions, including successful
financing by the purchaser and the negotiation of a definitive purchase
agreement. Country Crisp, a regional snack food company operating in the
inter-mountain states of Colorado, Utah, Wyoming, Idaho, Nevada and New Mexico,
will continue to market the Nalley's brand snacks under a licensing arrangement
with the Company. If this sale is finalized, it may result in a revision to the
aforementioned reserve.
NOTE 4. AGREEMENT WITH PRO-FAC
The Company has a contractual relationship with Pro-Fac under an Agreement
consisting of five sections: Operations Financing, Marketing, Facilities
Financing, Management, and Settlement, which extends to 1997, and provides for
two successive five-year renewals at the option of the Company.
The provisions of the Agreement include the financing of certain assets
utilized in the business of the Company and provide a sharing of income and
losses between Curtice-Burns and Pro-Fac. Should the Company terminate the
Agreement, the Company has the option of purchasing those assets financed by
Pro-Fac at their book value at that time.
Revenues received or paid by Pro-Fac from or to Curtice-Burns under the
Agreement for the years ended June 25, 1994, June 26, 1993, and June 26, 1992
include: commercial market value of crops delivered, $59,216,000, $59,800,000,
and $64,152,000, respectively; interest income, $15,617,000, $16,515,000, and
$19,869,000, respectively; and additional proceeds from profit and loss sharing
provisions (amounts in parenthesis indicate deductions from amounts otherwise
payable by Curtice-Burns to Pro-Fac as a result of loss sharing), $16,849,000,
($21,800,000), and $9,505,000, respectively. In addition, Pro-Fac received from
the Company amortization and financing payments of $43,830,000, $53,826,000, and
$26,232,000 for the years ending June 25, 1994, June 26, 1993, and June 26,
1992, respectively.
Should the resolution of the potential change of control of Curtice-Burns
(see Note 2) result in the Company exercising its option to purchase from
Pro-Fac the property and equipment and certain other assets used by the Company
in its business, the financing required to accomplish this (including the
repayment of debt) would be $267,718,000 as measured at the book value on June
25, 1994. Of this amount, $101,487,000 represents short- and long-term debt,
$24,909,000 relates to intangible assets, and $141,322,000 relates to fixed
assets. This $267,718,000 at June 25, 1994 compares to $303,820,000 at June
F-10
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
26, 1993, which was comprised of $103,761,000 of short- and long-term debt,
$26,546,000 relating to intangible assets and $173,513,000 relating to leased
fixed assets. This change of $36,102,000 during the year is the net of increases
and decreases in the amounts attributable to short- and long-term debt and
leased assets. The decrease in leased assets during fiscal 1994 is the result of
certain businesses that were sold (see Note 3) and depreciation exceeding
additions for the period, resulting in a net decrease of $32,191,000 in the
leased asset values for which Pro-Fac holds title.
In fiscal 1993 the Company wrote down assets associated with its Meat
Snacks and Hiland Potato Chip businesses (see Note 3). The total amount of such
writedown was $58,300,000, of which approximately $29,150,000 was allocated to
reduce the value of assets leased from Pro-Fac.
In the arbitration proceedings currently pending between Curtice-Burns 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 the pending acquisition
proposal from Dean Foods, which share Pro-Fac calculates to be greater than
$5.75 per share of Curtice-Burns' common stock; and (2) that the book value of
Pro-Fac's assets for the purposes of calculating the buyout price under the
Integrated Agreement should not take into account the writedown of the assets
associated with the Meat Snacks and Hiland Potato Chip businesses. See Note 2.
The Company and Pro-Fac have agreed that, in such arbitration, the effect of the
fiscal 1993 writedown of assets associated with the Company's Meat Snacks and
Hiland Potato Chip businesses will be treated as if such businesses had not been
sold. Also in dispute is Curtice-Burns allocation to Pro-Fac of one-half of the
change in control costs of $3.5 million, one-half of which were allocated to
Pro-Fac in fiscal 1994 pursuant to the provisions of the Agreement. See Note 2.
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
Curtice-Burns to purchase any crops from Pro-Fac or its growers in calendar 1995
and beyond. In addition, the Company notified Pro-Fac that Curtice-Burns will
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 has given notice
to its affected members terminating Pro-Fac's obligation to purchase these crops
beginning next year. The affected Pro-Fac growers are principally Pro-Fac's New
York fruit and vegetable growers, Illinois and Nebraska popcorn growers, and
Northwest potato growers who represent more than half of Pro-Fac's membership
and have accounted for approximately $29.9 million or 50% of the total crops
delivered by Pro-Fac to Curtice-Burns in the past year. In the arbitration
proceedings currently pending between Curtice-Burns and Pro-Fac, Pro-Fac has
asserted, among other matters, that Curtice-Burns is in default under the
Integrated Agreement for improper termination of crops and has claimed damages
that Pro-Fac estimates at more than $50.0 million (see Note 2). The Company
believes that its only obligation to purchase crops from Pro-Fac is as set forth
in the Profit Plan as approved each year by the Boards of Directors of both
Pro-Fac and the Company. Because the most recent approved Profit Plan was for
fiscal year 1995 (which Plan corresponds to the 1994 calendar year crops), the
Company believes that it is not currently obligated to purchase any crops from
Pro-Fac for calendar year 1995 or later.
On August 3, 1994, Pro-Fac responded to the claim and served the Company
with a counter claim demanding arbitration.
NOTE 5. DEBT
SHORT-TERM DEBT
Short-term bank lines of credit are extended individually to both the
Company and Pro-Fac. They are interrelated so that both companies must
participate on a proportionate basis in the average borrowings under such lines.
At least 55% of such borrowing is attributable to Pro-Fac and advanced by the
Springfield Bank for Cooperatives and up to 45% is attributable to the Company
and advanced by a commercial bank syndicate consisting of six banks. The
combined line of credit at June 25, 1994 was $86,000,000. The revolving lines of
credit under such agreements have been renewed through November
F-11
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of 1994. Such lines expire annually unless renewed. Such renewals grant both
short-term and long-term lenders liens on substantially all assets of the
Company and Pro-Fac as collateral for borrowings under such agreements and other
long-term debt. Outstanding borrowings at June 25, 1994 were $11,500,000. The
maximum amount of short-term borrowings outstanding during the year were
$81,000,000. The approximate average short-term borrowings during fiscal 1994
were $51,516,000, of which $30,464,000 was borrowed from Pro-Fac through funds
advanced to Pro-Fac from the Springfield Bank for Cooperatives and $21,052,000
was borrowed from commercial banks. The approximate daily weighted average
interest rate on borrowings was 4.6% and the rate at June 25, 1994 was 5.5%. The
Company pays a one-fourth of one percent fee on the unused portion of the
commercial bank lines of credit and a one-eighth of one percent facility fee to
commercial banks participating in the credit agreement. There are no
compensating balance requirements.
LONG-TERM DEBT
In addition to the long-term and the short-term borrowings included in the
balance sheet as due to Pro-Fac, the Company guaranteed Pro-Fac debt at June 25,
1994 of $48,974,000 which was used primarily for financing the fixed and
intangible assets referred to in Note 4. The interest rate on Pro-Fac borrowings
was 6.7% at June 25, 1994. The other debt of $1,837,000, primarily Industrial
Revenue Bonds, carries rates ranging up to 11.0% at June 25, 1994.
Long-term debt maturities during each of the next five fiscal years are as
follows: 1995-$14,816,000; 1996-$14,343,000; 1997-$14,209,000; 1998-$14,206,000,
and 1999-$14,182,000. Provisions of the Agreement do, however, allow Pro-Fac,
with sufficient notice, to accelerate the repayment of debt.
Based on an estimated borrowing rate at fiscal year end 1994 of 8.0% for
long-term debt with similar terms and maturities, the fair value of the
Company's long-term debt outstanding is approximately $88,709,000 for Pro-Fac
related debt and $1,835,000 for other debt.
ADDITIONAL INFORMATION WITH RESPECT TO BORROWING ARRANGEMENTS
Because Pro-Fac guarantees the debt of the Company and the Company
guarantees the debt of Pro-Fac (substantially all of which is advanced to the
Company), management and lenders use combined pro forma financial statements to
assess the financial strength of the two companies. Specifically, the combined
statement of operations, balance sheet and statement of cash flows portray the
financial results, cash flows and equity of the Company and Pro-Fac. Management
believes that combined financial statements are useful because they provide
information concerning the Company's ability to continue present credit
arrangements and/or obtain additional borrowings in the future.
Certain borrowing agreements require that the companies maintain specified
levels with regard to working capital, current ratio, ratio of net worth to
assets, ratio of long-term debt to net worth, tangible net worth, net income,
coverage of interest, and fixed charges and the incurrence of additional debt.
The companies are in compliance with, or have obtained waivers for, restrictions
and requirements under the terms of the borrowing agreements. The revolving
lines of credit under such agreements have been renewed through November of
1994. Such renewals grant to both short-term and long-term lenders liens on
substantially all assets of the Company and Pro-Fac as collateral for borrowings
under such agreements.
Such combined financial statements are neither necessary for a fair
presentation of the financial position of the Company nor appropriate as primary
statements for the Company's shareholders or for Pro-Fac shareholders and
members because they combine earnings, assets and liabilities and cash flows
which are legally attributable to either the Company's shareholders or to
Pro-Fac shareholders and members, but not to both. Accordingly, the condensed
pro forma financial statements presented below are special purpose in nature and
should be used only within the context described.
F-12
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JUNE 25, 1994
---------------------------------------------- JUNE 26, 1993
CURTICE- -------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
------- ------- ------------ -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales and revenues................................... $ 829.1 $94.4 $(94.4) $829.1 $ 878.6
Cost of sales........................................ 592.6 58.2 (58.2) 592.6 632.7
Restructuring, including net (gain) loss from
division disposals................................. (7.8) -- -- (7.8) 61.0
Change in control costs.............................. 3.5 -- -- 3.5 --
Other selling, administrative and general expenses... 187.0 .9 (2.0) 185.9 205.5
Interest expense..................................... 18.2 11.6 (15.6) 14.2 16.8
Pro-Fac share of earnings............................ 16.8 -- (16.8) -- --
------- ------- ------------ -------- -------------
Total cost and expenses.............................. 810.3 70.7 (92.6) 788.4 916.0
------- ------- ------------ -------- -------------
Income (loss) before taxes........................... 18.8 23.7 (1.8)(A) 40.7 (37.4)
(Provision) benefit for taxes........................ (8.7) .8 -- (7.9) (3.9)
------- ------- ------------ -------- -------------
Net income (loss).................................... $ 10.1 $24.5 $ (1.8)(A) $ 32.8 $ (41.3)
------- ------- ------------ -------- -------------
------- ------- ------------ -------- -------------
</TABLE>
- ------------
Note to combined pro forma condensed statement of operations:
(A) Amounts represent the balance of the fiscal 1994 share of earnings between
the Company and Pro-Fac which is currently under dispute. See discussion at
Notes 2 and 4.
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of operations.
F-13
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
JUNE 25, 1994
--------------------------------------------- JUNE 26, 1993
CURTICE- -------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
------ ------- ------------ -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets(A)(C)................................. $247.5 $ 46.7 $ (42.9) $251.3 $ 268.9
Property, plant and equipment, net(B)................ 167.5 -- -- 167.5 192.5
Investment in direct financing leases(C)............. -- 123.7 (123.7) -- --
Due from Curtice-Burns(D)............................ -- 78.0 (78.0) -- --
Goodwill and other intangibles....................... 24.9 24.9 -- 49.8 53.1
Other assets.................................... 7.0 22.7 -- 29.7 26.9
------ ------- ------------ -------- -------------
Total assets............................... $446.9 $296.0 $ (244.6) $498.3 $ 541.4
------ ------- ------------ -------- -------------
------ ------- ------------ -------- -------------
LIABILITIES AND NET WORTH
Current liabilities(A)(C)............................ $143.4 $ 44.6 $ (41.1) $146.9 $ 166.8
Lease obligations(C)................................. 125.0 -- (123.7) 1.3 1.8
Long-term debt --
Due Pro-Fac(D).................................. 78.0 -- (78.0) -- --
Due others(E)................................... 1.1 127.1 -- 128.2 174.4
Other liabilities.................................... 18.5 0.5 -- 19.0 12.8
------ ------- ------------ -------- -------------
Total liabilities.......................... 366.0 172.2 (242.8) 295.4 355.8
Shareholders' equity and members'
capitalization(F).................................. 80.9 123.8 (1.8)(G) 202.9 185.6
------ ------- ------------ -------- -------------
Total liabilities and net worth............ $446.9 $296.0 $ (244.6) $498.3 $ 541.4
------ ------- ------------ -------- -------------
------ ------- ------------ -------- -------------
</TABLE>
- ------------
Notes to combined balance sheet:
(A) Current assets of Pro-Fac consist principally of amounts due from
Curtice-Burns with respect to the Agreement described in Note 4. Such
amounts are eliminated for purposes of this balance sheet.
(B) Property, plant and equipment owned by Pro-Fac and leased to Curtice-Burns
on a financing basis had a net book value of $141.3 million at June 25,
1994.
(C) The majority of the lease obligations of Curtice-Burns are payable to
Pro-Fac and amount to $141.3 million at June 25, 1994, of which $17.6
million is payable currently. The related Curtice-Burns liability and
Pro-Fac receivable are eliminated for purposes of this balance sheet.
(D) Long-term borrowings by Curtice-Burns from Pro-Fac under the Agreement are
eliminated for purposes of this balance sheet.
(E) With respect to Pro-Fac, long-term debt due others represents term loans
payable to the Springfield Bank for Cooperatives (interest rate of 6.7% at
June 25, 1994).
(F) Shareholders' and members' capitalization of Pro-Fac at June 25, 1994
consists of common stock, $10.3 million; retained earnings allocated to
members ('retains'), $44.4 million; preferred stock, $64.4 million which
originates from conversion of 'retains' -- normally after five years -- and
which is redeemable at the option of Pro-Fac; and earned surplus
(unallocated and apportioned), $4.7 million.
(G) Amount represents the balance of the fiscal 1994 share of earnings between
the Company and Pro-Fac which is currently under dispute. See discussion at
Notes 2 and 4.
F-14
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
JUNE 25, 1994
--------------------------------------------- JUNE 26, 1993
CURTICE- -------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
------ ------- ------------ -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities... $ 21.9 $18.0 $ (0.9) $ 39.0 $42.2
Net cash provided by (used in) investing activities... 33.9 32.9 (44.4)(A) 22.4 (17.1)
Net cash (used in) provided by financing activities... (59.4) (50.9) 45.3 (65.0) (24.7)
------ ------- ------------ -------- ------
Net change in cash.................................... (3.6) -- -- (3.6) 0.4
Cash at beginning of year............................. 6.5 -- -- 6.5 6.1
------ ------- ------------ -------- ------
Cash at end of year................................... $ 2.9 $-- $-- $ 2.9 $ 6.5
------ ------- ------------ -------- ------
------ ------- ------------ -------- ------
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amount capitalized)............. $ 18.6 $12.1 $(15.6) $ 15.1 $17.3
------ ------- ------------ -------- ------
------ ------- ------------ -------- ------
Income taxes, net................................ $ 15.0 $(1.0) $-- $ 14.0 $ 2.9
------ ------- ------------ -------- ------
------ ------- ------------ -------- ------
Supplemental schedule of non-cash investing and
financing activities:
Capital lease obligations incurred............... $ 10.7 $-- $(10.0) $ 0.7 $ 3.0
------ ------- ------------ -------- ------
------ ------- ------------ -------- ------
Conversion of retains into preferred stock....... $ 4.9 $ 4.9 $ 5.9
------- -------- ------
------- -------- ------
Net proceeds allocated to members but retained by
the cooperative................................ $14.2 $ 14.2 $ 4.8
------- -------- ------
------- -------- ------
</TABLE>
- ------------
(A) Amount includes the balance of the fiscal 1994 share of earnings between
the Company and Pro-Fac which is currently under dispute. See discussion at
Notes 2 and 4.
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of cash flows.
F-15
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS
The following is a summary of property, plant and equipment and related
obligations at June 25, 1994 and June 26, 1993.
<TABLE>
<CAPTION>
JUNE 25, 1994 JUNE 26, 1993
----------------------------------------- -----------------------------
LEASED FROM LEASED FROM
OWNED ------------------ OWNED ------------------
ASSETS PRO-FAC OTHERS TOTAL ASSETS PRO-FAC OTHERS
------- -------- ------ -------- ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Land............................................ $ 6 $ 8,635 $ -- $ 8,641 $ 41 $ 9,673 $ --
Land improvements............................... 85 3,467 -- 3,552 85 3,693 --
Buildings....................................... 1,150 86,903 720 88,773 1,377 95,597 720
Machinery and equipment......................... 8,953 219,971 4,609 233,533 8,895 234,930 6,615
Construction in progress........................ 21,085 -- -- 21,085 18,778 -- --
Valuation allowance............................. -- (3,970) -- (3,970) (6,900) -- --
------- -------- ------ -------- ------- -------- ------
31,279 315,006 5,329 351,614 22,276 343,893 7,335
Less accumulated amortization................... 7,142 173,684 3,272 184,098 6,628 170,380 4,044
------- -------- ------ -------- ------- -------- ------
Net............................................. $24,137 $141,322 $2,057 $167,516 $15,648 $173,513 $3,291
------- -------- ------ -------- ------- -------- ------
------- -------- ------ -------- ------- -------- ------
Obligations under capital leases(1)............. $141,322 $2,081 $143,403 $173,513 $3,460
Less current portion............................ 17,645 785 18,430 21,184 1,687
-------- ------ -------- -------- ------
Long-term portion............................... $123,677 $1,296 $124,973 $152,329 $1,773
-------- ------ -------- -------- ------
-------- ------ -------- -------- ------
<CAPTION>
TOTAL
--------
<S> <C>
Land............................................ $ 9,714
Land improvements............................... 3,778
Buildings....................................... 97,694
Machinery and equipment......................... 250,440
Construction in progress........................ 18,778
Valuation allowance............................. (6,900)
--------
373,504
Less accumulated amortization................... 181,052
--------
Net............................................. $192,452
--------
--------
Obligations under capital leases(1)............. $176,973
Less current portion............................ 22,871
--------
Long-term portion............................... $154,102
--------
--------
</TABLE>
- ------------
(1) Represents the present value of net minimum lease payments calculated at the
Company's incremental borrowing rate at the inception of the leases, which
ranged from 6 to 9%.
- ----------------------------------------------------------
As of June 25, 1994, the Company leases seven facilities from Pro-Fac that
are not being utilized and are currently for sale. The net book value of these
properties is $11,898,000 at June 25, 1994.
The following is a schedule of future minimum lease payments together with
the present value of the minimum lease payments related to capitalized leases,
both as of June 25, 1994.
<TABLE>
<CAPTION>
CAPITALIZED LEASES
FISCAL YEAR ENDING LAST ------------------------------ OPERATING TOTAL FUTURE
SATURDAY IN JUNE PRO-FAC OTHER TOTAL LEASES COMMITMENT
- ------------------------------------------------------ -------- ------ -------- --------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995.................................................. $ 17,645 $1,207 $ 18,852 $ 5,175 $ 24,027
1996.................................................. 15,829 765 16,594 2,591 19,185
1997.................................................. 14,590 503 15,093 1,655 16,748
1998.................................................. 13,276 308 13,584 1,234 14,818
1999.................................................. 11,963 98 12,061 932 12,993
Later years........................................... 68,019 309 68,328 956 69,284
-------- ------ -------- --------- ------------
Net minimum lease payments(1)......................... 141,322 3,190 144,512 $12,543 $157,055
--------- ------------
--------- ------------
Less amount representing interest(1).................. -- 1,109 1,109
-------- ------ --------
Present value of minimum lease payments............... $141,322 $2,081 $143,403
-------- ------ --------
-------- ------ --------
</TABLE>
- ------------
(1) With respect to the Agreement with Pro-Fac (see Note 4), the net minimum
payments do not include interest since interest amounts are determined and
billed to Curtice-Burns based upon Pro-Fac's borrowing costs required to
finance the leased assets. With respect to other leases, interest has been
calculated at the Company's incremental borrowing rate at the inception of
the respective leases.
- ----------------------------------------------------------
Total rent expense related to operating leases (including lease
arrangements of less than one year which are not included in the previous table)
amounted to $11,721,000, $13,713,000, and $13,659,000, for fiscal years 1994,
1993 and 1992, respectively.
F-16
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INCOME TAXES
Taxes on income include the following:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------
1994 1993 1992
------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal --
Current.......................................................... $ 4,047 $10,132 $ 1,933
Deferred......................................................... 1,831 (7,407) 911
------- ------- --------
5,878 2,725 2,844
------- ------- --------
State and foreign --
Current.......................................................... 1,948 4,405 1,827
Deferred......................................................... 839 (3,235) 98
------- ------- --------
2,787 1,170 1,925
------- ------- --------
$ 8,665 $ 3,895 $ 4,769
------- ------- --------
------- ------- --------
</TABLE>
The deferred tax liabilities/assets consist of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- --------
<S> <C> <C> <C>
Liabilities
Depreciation..................................................... $22,147 $19,854 $ 27,734
Non-compete agreements........................................... 513 620 1,336
Long-term receivables............................................ 1,416 885 --
Insurance accruals............................................... -- -- 317
Other............................................................ 486 592 1,178
------- ------- --------
24,562 21,951 30,565
------- ------- --------
Assets
Inventory reserves............................................... 319 796 3,124
Allowance for doubtful accounts.................................. 514 364 520
Reserve for restructuring........................................ 3,526 6,459 --
Capital loss carryforward........................................ 3,979 3,979 --
Accrued employee benefits........................................ 2,180 1,817 3,659
Insurance accruals............................................... 2,022 1,249 --
Pension accruals................................................. 2,971 2,179 1,749
Plant consolidation and closing expenses......................... 3,639 2,321 3,256
Alternative minimum income tax................................... -- 376 2,859
Other............................................................ 941 1,460 2,955
------- ------- --------
20,091 21,000 18,122
------- ------- --------
Net deferred liabilities......................................... (4,471) (951) (12,443)
Valuation allowance.............................................. -- (850) --
------- ------- --------
$(4,471) $(1,801) $(12,443)
------- ------- --------
------- ------- --------
</TABLE>
Federal income taxes have been reduced by $213,000 for job development
credits for fiscal 1992. The fiscal 1994 and 1993 credits have no significant
impact on federal income taxes. The Alternative Minimum Tax credit carryforwards
created in prior years have been fully utilized.
A valuation allowance was recorded in fiscal 1993 for that portion of the
capital loss carryforward where, it was more likely than not that, a tax benefit
would not be realized. However, based on activities during fiscal 1994, which
include the anticipated acquisition of the Company by a third party and the
disposal of certain divisions, management now believes that the utilization of
the complete capital loss
F-17
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
carryforward is more likely than not. Accordingly, the provision for the
valuation allowance was reversed in fiscal 1994.
The capital loss carryforward can be used to reduce future capital gains.
The amount expires in fiscal 1999.
A reconciliation of the Company's effective tax rate to the amount computed
by applying the federal income tax rates of 35 and 34% to income before taxes,
is as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------
1994 1993 1992
------ ------- ------
<S> <C> <C> <C>
Income tax provision (benefit), at 35% in 1994 and 34% in previous
years................................................................... $6,571 $(6,797) $3,712
State income taxes, net of federal income tax effect...................... 900 189 597
Goodwill.................................................................. 480 9,248 442
Valuation allowance....................................................... (850) 850 --
Tax credits............................................................... -- -- (141)
Statutory rate change..................................................... 480 -- --
Non-deductible legal and advisory expenses................................ 1,058 -- --
Other, net................................................................ 26 405 159
------ ------- ------
$8,665 $ 3,895 $4,769
------ ------- ------
------ ------- ------
Effective Tax Rate........................................................ 46.2% N/M* 43.7%
------ ------- ------
------ ------- ------
</TABLE>
- ------------
* The effective tax rate calculation for 1993 is not meaningful.
- ----------------------------------------------------------
On August 10, 1993, President Clinton signed into law a new income tax bill
which increased corporate income tax rates from 34% to 35%. Under the provisions
of SFAS 109 the Company recorded the impact of this rate increase during the
first quarter of fiscal 1994. The impact of this rate increase on the Company's
deferred tax assets and liabilities resulted in an increase to income tax
expense of approximately $480,000.
Although the Company reported a pretax loss for fiscal 1993, a tax
provision of $3,895,000 was recorded, primarily due to the non-deductible
writedown of goodwill recorded in conjunction with the Company's overall
restructuring plan.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, 'Accounting for Income Taxes,' (SFAS
109) and the Company adopted the provisions of this standard effective as of
June 29, 1991. Under the liability method specified by SFAS 109, the deferred
tax liability is based on the difference between the financial statement and tax
basis of assets and liabilities as measured by the enacted tax rates which are
anticipated to be in effect when these differences reverse. The deferred tax
provision is the result of changes in the liability for deferred tax. There was
no cumulative effect of this change on prior years and no effect on the 1992
provision for income taxes for this accounting change as the Company was
previously accounting for income taxes in accordance with SFAS 96.
NOTE 8. CAPITAL STOCK
The rights and privileges of the holders of the two classes of common stock
are identical except as follows:
Class A shares are freely transferable. Holders of Class B shares
cannot transfer or sell such shares without first offering the shares to
the Company.
F-18
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dividends may be paid on Class A shares without payment of dividends
on Class B shares; any dividends paid on Class B shares cannot exceed the
per share dividends on Class A shares.
The Class A shareholders vote for the election of 30% (rounded to the
nearest whole number) and the Class B shareholders vote for the election of
70% of the directors of the Company. As of June 25, 1994, Agway Inc. owned
through a subsidiary approximately 33.8% of the outstanding securities of
the Company, consisting of 899,447 shares or 13.6% of the Class A stock and
2,036,643 shares or 99.0% of the Class B stock. In fiscal 1993, Agway
informed the Company it was considering the potential sale of its interest
in the Company (see Note 2).
The Company had reserved 523,125 shares of Class A Common Stock for
its 1980 Non-Qualified Stock Option Plan. During fiscal 1982, by
shareholder vote, this plan and most of the outstanding options under the
plan were converted to an Incentive Stock Option Plan complying with the
regulations issued by the Internal Revenue Service under 1981 tax
legislation. The plan has expired so that no new options can be granted
from it but the remaining unexercised options can be exercised until ten
years from the day they were granted. The Company reserved 500,000 shares
of Class A Common Stock for its 1990 Incentive Stock Option Plan which was
approved by shareholders on November 15, 1990. Under these plans, options
have been granted to officers and key employees at prices equal to the fair
market value at the date of grant and are exercisable over a ten year
period. During the first five years, the options are exercisable at a rate
of 20% each year on a cumulative basis, except that those options granted
March 27, 1993, were not exercisable until March 27, 1994, at which time
40% were exercisable.
The following summarizes stock option transactions for fiscal years
1992 through 1994:
<TABLE>
<CAPTION>
1980 PLAN 1990 PLAN
----------------------------- -----------------------------
NUMBER OF NUMBER OF
SHARES PRICE PER SHARE SHARES PRICE PER SHARE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at June 28, 1991................. 173,823 $ 7.11 - 24.63 97,700 $ 15.38
Granted................................. -- -- 150,000 10.25
Exercised............................... -- -- (3,141) 10.25
Canceled................................ (8,203) 20.58 - 22.67 (97,700) 15.38
--------- ---------------- --------- ----------------
Outstanding at June 26, 1992................. 165,620 7.11 - 24.63 146,859 10.25
Granted................................. -- -- 268,000 14.25 - 14.63
Exercised............................... (31,185) 7.11 - 12.17 (3,500) 10.25
Canceled................................ (13,901) 11.00 - 23.83 (3,120) 10.25
--------- ---------------- --------- ----------------
Outstanding at June 26, 1993................. 120,534 11.00 - 24.63 408,239 10.25 - 14.63
Granted................................. -- -- 1,400 12.63
Exercised............................... -- -- (5,650) 10.25
Canceled................................ (19,747) 17.67 - 24.63 (26,066) 10.25 - 14.63
--------- ---------------- --------- ----------------
Outstanding at June 25, 1994................. 100,787 $ 11.00 - 22.67 377,923 $ 10.25 - 14.63
--------- ---------------- --------- ----------------
--------- ---------------- --------- ----------------
Exercisable at June 25, 1994................. 98,965 $ 11.00 - 22.67 175,645 $ 10.25 - 14.63
--------- ---------------- --------- ----------------
--------- ---------------- --------- ----------------
</TABLE>
The Company had reserved 409,688 shares of Class A Common Stock for
issuance under the 1980 Installment Stock Purchase Plan, which was amended by
stockholder vote on November 12, 1981 to an Incentive Stock Option Plan. Under
this plan, 401,593 shares were issued and the plan expired as of June 28, 1991.
The Company has also reserved 150,000 shares of Class A Common Stock for
issuance under the 1990 Installment Stock Purchase Plan which was approved by
shareholders on November 15, 1990. Under this plan, 75,441 shares were issued,
and no shares had been subscribed as of June 25, 1994.
Under this stock purchase plan, each salaried employee and eligible
hourly-paid employee has been offered options equal in value to 10% of the
employee's annual base salary as of the date the option is
F-19
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
offered, at prices equal to the fair market value at the date of offer. The
employee has 45 days to subscribe and can exercise at that time or up to one
year later. The absence of stock subscriptions as of June 25, 1994, relates to a
decision by the Company to freeze this Plan until the potential change in
ownership of the Company is clarified or completed.
None of the options has been considered in the computation of weighted
average shares outstanding inasmuch as their inclusion would be insignificant.
The following summarizes changes in common stock, additional paid-in
capital and treasury stock for fiscal years 1992 through 1994:
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON ADDITIONAL
------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ------ --------- ------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at June 28, 1991..................... 6,846,029 $6,778 2,063,282 $2,043 $ 17,600
Exchange of Class B stock for Class A
stock...................................... 2,430 3 (2,430) (3 ) --
Issued under Stock Option and Purchase
Plans...................................... 15,292 14 -- -- 199
Stock canceled in connection with
acquisition................................ (341,297) (338 ) -- -- (4,662)
--------- ------ --------- ------ ----------
Balance at June 26, 1992..................... 6,522,454 6,457 2,060,852 2,040 13,137
Exchange of Class B stock for Class A
stock...................................... 150 -- (150) -- --
Issued under Stock Option and Purchase
Plans...................................... 47,539 47 -- -- 470
Repurchased and canceled under terms of Stock
Option Plan................................ (1,625) (1 ) -- -- (16)
--------- ------ --------- ------ ----------
Balance at June 26, 1993..................... 6,568,518 6,503 2,060,702 2,040 13,591
Exchange of Class B stock for Class A
stock...................................... 3,826 4 (3,826) (4 ) --
Issued under Stock Option and Purchase
Plans...................................... 56,086 55 -- -- 633
--------- ------ --------- ------ ----------
Balance at June 25, 1994..................... 6,628,430 $6,562 2,056,876 $2,036 $ 14,224
--------- ------ --------- ------ ----------
--------- ------ --------- ------ ----------
</TABLE>
NOTE 9. PENSIONS, PROFIT SHARING, AND OTHER EMPLOYEE BENEFITS
PENSIONS
The Company has primarily noncontributory defined benefit plans covering
most employees. The benefits for these plans are based primarily on years of
service and employees' pay near retirement. The Company's funding policy is
consistent with the funding requirements of Federal law and regulations. Plan
assets consist principally of common stocks, corporate bonds and U.S. Government
obligations.
The Company also participates in several union sponsored pension plans;
however, it is not possible to determine the Company's relative share of the
accumulated benefit obligations or net assets for these plans.
F-20
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pension cost for fiscal years ended 1994, 1993 and 1992 includes the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service cost -- benefits earned during
the period............................. $3,958 $3,927 $3,393
Interest cost on projected benefit
obligation............................. 6,815 6,259 5,951
Return on assets
Actual gain.............................. (2,044) (6,311) (6,446)
Deferred gain............................ (5,213) (842) (493)
------- ------- -------
Total gain.......................... (7,257) (7,153) (6,939)
Amortization of transition amount at June
29, 1985............................... (1,001) (1,001) (1,001)
Amortization of prior service cost....... 426 130 134
Recognition of curtailment gain.......... (874) -- --
Amortization of gain..................... 6 -- --
------ ------ ------
2,073 2,162 1,538
Union and other pension costs............ 593 555 427
------ ------ ------
Net pension cost......................... $2,666 $2,717 $1,965
------ ------ ------
------ ------ ------
</TABLE>
As a result of restructuring activities, the Plan assets and obligations
were remeasured as of November 22, 1993. The restructuring and the resulting
curtailment caused the projected benefit obligation to decrease by approximately
$874,000 and caused approximately $311,000 of previously unrecognized prior
service cost to be recognized immediately. This resulted in a net decrease in
annual pension cost of $563,000.
The pension plans' funded status was as follows:
<TABLE>
<CAPTION>
JUNE 25, 1994 JUNE 26, 1993 JUNE 26, 1992
------------- ------------- -------------
ACCUMULATED ASSETS EXCEED ASSETS EXCEED
BENEFITS ACCUMULATED ACCUMULATED
EXCEED ASSETS BENEFITS BENEFITS
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ (71,302) $ (66,927) $ (57,234)
------------- ------------- -------------
------------- ------------- -------------
Accumulated benefit obligation....................... $ (76,649) $ (70,522) $ (62,997)
------------- ------------- -------------
------------- ------------- -------------
Projected benefit obligation.............................. $ (87,744) $ (85,277) $ (76,033)
Plan assets at fair value................................. 71,875 74,147 72,941
------------- ------------- -------------
Projected benefit obligation in excess of plan assets..... (15,869) (11,130) (3,092)
Unrecognized net loss..................................... 11,075 8,305 3,423
Unrecognized prior service cost........................... 1,088 1,693 1,701
Unrecognized net asset at year end........................ (4,408) (5,410) (6,411)
Liability for unfunded accumulated benefit obligation..... (1,401) -- --
------------- ------------- -------------
(9,515) (6,542) (4,379)
Union and other pension plans............................. (958) (711) (536)
------------- ------------- -------------
Pension liability at year end............................. $ (10,473) $ (7,253) $ (4,915)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
In 1994 the assumed discount rate, assumed long-term rate of return on plan
assets and the assumed long-term rate of compensation increase were 7.75%, 10.0%
and 4.50%, respectively. In 1993
F-21
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and 1992 the assumed discount rate, assumed long-term rate of return on plan
assets and the assumed long-term rate of compensation increase were 8.25%, 10.0%
and 6.0%, respectively.
Provisions of the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 87, 'Employers Accounting for Pensions' (SFAS
87), require the Company to record a minimum pension liability relating to
certain unfunded pension obligations, establish an intangible asset thereto and
reduce stockholders equity. At June 25, 1994, a minimum pension liability of
$1,401,000 was recorded as required by SFAS 87. A related intangible asset was
recorded for $1,356,000 and stockholders equity was reduced by $45,000. The
adjustment in the minimum pension liability at June 25, 1994 resulted mainly
from a decrease in the discount rate and the general performance of investment
markets.
PROFIT SHARING
Under the Deferred Profit Sharing Plan, the Company allocates to all
salaried employees a percentage of its earnings in excess of 7.0% of the
combined long-term debt and equity (as defined) of Pro-Fac and the Company. In
fiscal 1994, $1,171,000 was allocated to the Plan while no awards were allocated
in fiscal years 1993 and 1992.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Generally, other than pensions, the Company does not pay retirees' benefit
costs. Isolated exceptions exist, which have evolved from union negotiations,
early retirement incentives and existing retiree commitments from acquired
companies.
In December 1990, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 106, 'Employers' Accounting for
Postretirement Benefits Other Than Pensions' (SFAS 106). SFAS 106, effective for
fiscal years beginning after December 15, 1992, requires employers to accrue the
cost of retiree health and other postretirement benefits during the working
careers of active employees and allows the transition obligation to be
recognized in net income either immediately or over 20 years.
The Company adopted SFAS 106 during the first quarter of fiscal 1994. The
Company has elected to amortize the unrecognized transition obligation over 20
years. The adoption of SFAS 106 is not considered material to the financial
statements as a whole.
The Company has not prefunded any of its retiree medical or life insurance
liabilities. Consequently there are no Plan assets held in a trust, and there is
no expected long-term rate of return assumption for purposes of determining the
annual expense.
F-22
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Plan's funded status was as follows:
<TABLE>
<CAPTION>
JUNE 25, 1994
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit obligation:
Fully eligible active participants.......................................... $ 202
Other active participants................................................... 288
Retirees.................................................................... 2,474
-------
Total.................................................................. 2,964
Less Plan assets at fair value.............................................. --
-------
Accumulated postretirement benefit obligation in excess of fair value of
assets.................................................................... (2,964)
Unrecognized transition obligation.......................................... 2,622
Unrecognized prior service cost............................................. --
Unrecognized losses......................................................... 6
-------
Accrued postretirement benefit cost......................................... $ (336)
-------
-------
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
JUNE 25, 1994
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Service cost..................................................................... $ 38
Interest cost.................................................................... 248
Actual return on assets.......................................................... --
Net amortization and deferral.................................................... 155
-------
Net periodic postretirement benefit cost......................................... $ 441
-------
-------
</TABLE>
Restructuring activities during the year resulted in a curtailment which
caused the Accumulated Postretirement Obligation to decrease by approximately
$878,000 and the Unrecognized Transition Obligation to decrease by approximately
$817,000. This resulted in a net decrease in the Net Postretirement Benefit Cost
of $92,000.
The weighted-average assumed discount rate used to measure the benefit
obligations was 8.25% at the beginning and 7.75% at the end of the fiscal year.
The annual rate of increase in the per capita cost of health care benefits
was assumed to be 15% for 1993. The rate was assumed to decrease gradually to
6.5% by the year 2006 and remain at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation (APBO) and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost as
follows:
<TABLE>
<CAPTION>
1% HIGHER
CURRENT TREND TREND
---------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
APBO................................................................ $2,964 $3,149
Service cost+interest cost.......................................... 286 301
</TABLE>
EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 112, 'Employers' Accounting for Postemployment
Benefits.'
F-23
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
This statement establishes accounting standards for employers who provide
benefits to former or inactive employees after employment but before retirement.
Postemployment benefits are all types of benefits provided to former or inactive
employees, their beneficiaries, and covered dependents.
This Statement is effective for fiscal years beginning after December 15,
1993. Management believes that any change caused by this Statement will not be
material.
NOTE 10. OTHER MATTERS
CONTINGENCIES
In conjunction with the sale of the National Oats Division by the Company,
Pro-Fac terminated the membership of the Harvest States Cooperatives ('Harvest
States') in Pro-Fac. Harvest States was the National Oats Division's only
supplier of oats. As a result of this action, Harvest States filed a claim
against Pro-Fac for, among other things, the receipt of payments for future oats
purchases after the sale of National Oats division through fiscal year 1995.
Under an agreement with Pro-Fac, the Company agreed to indemnify Pro-Fac as
to certain expenses arising out of the termination of the membership of Harvest
States in Pro-Fac. It was agreed that any settlement payments would be deemed an
expense of the Company under the division of earnings with Pro-Fac. The exact
amount of any potential settlement related to this issue cannot be estimated at
June 25, 1994, but management, upon input from counsel, does not believe that
this is a material exposure to the Company.
A grower has filed suit against the Company for damages resulting from
defective seed which was purchased from the Southern Frozen Foods division. The
lawsuit alleges that the defective seed resulted in the loss of crops and
acreage use for a growing season, and the grower is seeking $950,000 in damages.
Management believes this claim is without merit and intends to vigorously defend
its position. As the amount of damages is neither probable nor reasonably
estimable, no accrual for loss has been included in the fiscal 1994 financial
statements. In addition, management anticipates that all material costs of
settlement, if incurred, will be covered under its insurance policies.
COMMITMENTS
The Company's Southern Frozen Foods Division has guaranteed an approximate
$1.4 million loan for the City of Montezuma to renovate a sewage treatment plant
operated by Southern Frozen Foods on behalf of the City.
SUBSEQUENT EVENTS
Subsequent to year end, on July 1, 1994, Curtice-Burns declared a dividend
of $.16 per share to Class A and Class B shareholders of record on July 15,
1994. The dividend was paid on July 29, 1994.
In July 1994, a plant operated by the Company's Southern Frozen Foods
division, located in Montezuma, Georgia, was damaged by fire. The plant itself
is owned by Pro-Fac and leased to the Company under the terms of the Integrated
Agreement. Management is currently in the process of assessing the extent of
damage to the facility. All material costs associated with the facility repairs
and business interruption are anticipated to be covered under the Company's
insurance policies. The Springfield Bank for Cooperatives is loss payee on the
property insurance policy under the terms of the Security Agreement with
lenders. See Note 5.
NOTE 11. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
ACCOUNTANTS
On November 3, 1994, PF Acquisition Corp., a New York corporation and a
wholly owned subsidiary of Pro-Fac, consummated a merger with the Company. The
Company will continue as the surviving corporation and has, therefore, become a
wholly owned subsidiary of Pro-Fac. In conjunction with the consummation of this
merger, the disputes between the Company and Pro-Fac, as described in Notes 2
and 4, have been resolved.
F-24
<PAGE>
The interim financial statements contained herein are unaudited, but in the
opinion of the management of Curtice-Burns Foods, Inc. include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations for these periods. The results of
operations for the interim periods are not necessarily indicative of the results
of operations for the full year.
CURTICE-BURNS FOODS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 24, SEPTEMBER 25,
1994 1993
------------- -------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net sales.......................................................................... $ 176,847 $ 210,090
------------- -------------
Costs and expenses:
Cost of sales................................................................. 126,844 153,051
Restructuring expenses, including net (gain) loss from division disposals..... 8,415 --
Change in control expenses.................................................... 1,750 --
Gain on assets resulting from fire claim...................................... (6,469) --
Other selling, administrative and general expenses............................ 37,973 46,289
------------- -------------
Operating income......................................................... 8,334 10,750
------------- -------------
Interest expense:
Interest expense on Pro-Fac related borrowings........................... 4,247 4,124
Interest expense on other debt........................................... 862 754
Less capitalized interest................................................ (38) (24)
------------- -------------
Total interest expense.............................................. 5,071 4,854
------------- -------------
Pretax earnings before dividing with Pro-Fac....................................... 3,263 5,896
Pro-Fac share of earnings.......................................................... (1,493) (2,773)
------------- -------------
Income before taxes................................................................ 1,770 3,123
Provision for taxes................................................................ (1,437) (1,939)
------------- -------------
Net income......................................................................... 333 1,184
Retained earnings at beginning of period........................................... 58,121 53,541
Less cash dividends declared ($.16 per share)...................................... (1,390) (1,382)
------------- -------------
Retained earnings at end of period................................................. $ 57,064 $ 53,343
------------- -------------
------------- -------------
Net income per share............................................................... $ .04 $ .14
------------- -------------
------------- -------------
Average number of shares outstanding............................................... 8,690,005 8,635,291
------------- -------------
------------- -------------
Dividends per share................................................................ $ .16 $ .16
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
CURTICE-BURNS FOODS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 24, JUNE 25, SEPTEMBER 25,
1994 1994 1993
------------- -------- -------------
(DOLLARS IN THOUSANDS
EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash......................................................... $ 7,293 $ 2,928 $ 7,598
Accounts receivable trade.................................... 65,120 57,640 73,589
Accounts receivable, other................................... 8,055 8,460 7,173
Income taxes refundable...................................... -- 237 --
Current deferred taxes receivable............................ 12,618 10,487 7,561
Inventories:
Finished goods.......................................... 177,952 108,538 167,038
Raw materials and supplies.............................. 44,488 46,721 49,809
------------- -------- -------------
Total inventories.................................. 222,440 155,259 216,847
------------- -------- -------------
Prepaid manufacturing expense................................ -- 8,190 --
Prepaid expenses and other current assets.................... 6,151 4,305 8,628
------------- -------- -------------
Total current assets............................... 321,677 247,506 321,396
Net property, plant and equipment leased from Pro-Fac............. 130,728 141,322 172,108
Other property, plant and equipment, net.......................... 29,560 26,194 19,169
Goodwill and other intangibles, net............................... 24,487 24,909 26,125
Other assets...................................................... 17,914 7,007 8,601
------------- -------- -------------
Total Assets....................................... $ 524,366 $446,938 $ 547,399
------------- -------- -------------
------------- -------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable................................................ $ 40,000 $ -- $ 34,000
Accounts payable............................................. 53,491 62,335 55,932
Due to Pro-Fac............................................... 49,304 9,447 41,308
Accrued employee compensation................................ 8,597 11,482 9,181
Other accrued expenses....................................... 33,409 26,947 31,941
Accrued manufacturing expense................................ 774 -- 2,059
Income taxes payable......................................... 1,288 -- 3,199
Current portion of obligations under Pro-Fac capital
leases...................................................... 17,645 17,645 21,184
Current portion of obligations under other capital leases.... 785 785 1,687
Current portion of Pro-Fac long-term debt.................... 14,000 14,000 16,000
Current portion of other long-term debt...................... 641 816 2,886
------------- -------- -------------
Total current liabilities.......................... 219,934 143,457 219,377
Long-term debt due Pro-Fac........................................ 88,952 78,040 80,848
Long-term debt due others......................................... 896 1,021 5,848
Obligations under Pro-Fac capital leases.......................... 113,083 123,677 150,924
Obligations under other capital leases............................ 1,296 1,296 1,773
Deferred income taxes............................................. 16,338 14,958 9,828
Other non-current liabilities..................................... 3,974 3,591 3,233
------------- -------- -------------
Total liabilities.................................. 444,473 366,040 471,831
------------- -------- -------------
Commitments and Contingencies
Shareholders' Equity:
Class A common -- $.99 par value; 10,125,000 shares
authorized; 6,633,129, 6,628,430 and 6,575,787 outstanding,
respectively................................................ 6,567 6,562 6,510
Class B common -- $.99 par value; 4,050,000 shares
authorized; 2,056,876, 2,056,876 and 2,060,702 outstanding,
respectively................................................ 2,036 2,036 2,040
Additional paid-in capital................................... 14,271 14,224 13,675
Retained earnings............................................ 57,064 58,121 53,343
Minimum pension liability.................................... (45) (45) --
------------- -------- -------------
Total shareholders' equity......................... 79,893 80,898 75,568
------------- -------- -------------
Total liabilities and shareholders' equity......... $ 524,366 $446,938 $ 547,399
------------- -------- -------------
------------- -------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
CURTICE-BURNS FOODS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
SEPTEMBER 24, SEPTEMBER 25,
1994 1993
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income.................................................................... $ 333 $ 1,184
Adjustments to reconcile net income to net cash provided by operating
activities --
Restructuring including net (gain)/loss from division disposals.......... 8,415 --
Gain on assets resulting from fire claim................................. (6,469) --
Amortization of goodwill and other intangibles........................... 422 421
Depreciation and amortization of capital assets.......................... 4,671 5,698
Deferred tax provision................................................... (751) 466
Change in assets and liabilities
Accounts receivable...................................................... (7,075) (9,451)
Inventories.............................................................. (67,181) (47,371)
Income taxes payable/refundable.......................................... 1,525 (5,847)
Accounts payable and accrued expenses.................................... (9,985) (563)
Due to Pro-Fac........................................................... 1,357 2,195
Other assets and liabilities............................................. 6,298 (4,320)
------------- -------------
Net cash used in operating activities......................................... (68,440) (57,588)
------------- -------------
Cash Flows From Investing Activities:
Purchase of property, plant and equipment..................................... (4,419) (4,584)
Disposal of assets............................................................ 44 61
------------- -------------
Net cash used in investing activities......................................... (4,375) (4,523)
------------- -------------
Cash Flows From Financing Activities:
Due to Pro-Fac................................................................ 38,500 32,200
Proceeds from issuance of short-term debt..................................... 40,000 34,000
Proceeds from issuance of long-term debt (Pro-Fac)............................ 10,912 --
Payments on long-term debt.................................................... (300) (311)
Payments on Pro-Fac capital leases............................................ (10,594) (1,405)
Proceeds from sale of stock under stock option plans.......................... 52 91
Cash dividends paid........................................................... (1,390) (1,382)
------------- -------------
Net cash provided by financing activities..................................... 77,180 63,193
------------- -------------
Net change in cash................................................................. 4,365 1,082
Cash at beginning of period........................................................ 2,928 6,516
------------- -------------
Cash at end of period.............................................................. $ 7,293 $ 7,598
------------- -------------
------------- -------------
Supplemental Disclosure of Cash Flow Information:
Cash paid/(received) during the period for --
Interest (net of amount capitalized)..................................... $ 4,661 $ 4,855
------------- -------------
------------- -------------
Income taxes, net........................................................ $ 557 $ 7,455
------------- -------------
------------- -------------
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Capital lease obligations incurred....................................... $ 934 $ 4,150
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. AGREEMENT WITH PRO-FAC COOPERATIVE, INC. ('PRO-FAC')
The Company has a contractual relationship with Pro-Fac under an Agreement
consisting of five sections: Operations Financing, Marketing, Facilities
Financing, Management, and Settlement, which extends to 1997, and provides for
two successive five-year renewals at the option of the Company.
The provisions of the Agreement include the financing of certain assets
utilized in the business of the Company and provide a sharing of income and
losses between Curtice-Burns and Pro-Fac. Should the Company terminate the
Agreement, the Company has the option of purchasing those assets financed by
Pro-Fac at their book value at that time.
Revenues received or paid by Pro-Fac from or to Curtice-Burns under the
Agreement for the quarters ended September 24, 1994 and September 25, 1993
include: commercial market value of crops delivered, $37,657,000 and
$42,327,000, respectively; interest income, $4,247,000 and $4,124,000,
respectively; and additional proceeds from profit sharing provisions, $1,493,000
and $2,773,000, respectively. In addition, Pro-Fac received from the Company
amortization and financing payments of $11,016,000 and 1,825,000 for the
quarters ending September 24, 1994 and September 25, 1993, respectively. See
discussion at Note 2 relative to disputed profit sharing allocation.
On September 27, 1994, the Company entered into a definitive merger
agreement with Pro-Fac for the acquisition by Pro-Fac of all the outstanding
stock of Curtice-Burns for $19.00 per share in cash.
NOTE 2. DEVELOPMENTS RELATED TO CHANGE OF CONTROL OF THE COMPANY
On March 23, 1993, the Company announced that Agway, which through its
wholly-owned subsidiary, AHI, owned approximately 99% of the Company's Class B
shares and approximately 14% of the Class A shares as of June 25, 1994, was
considering the potential sale of its interest in the Company. In August 1993,
the Company's Board of Directors authorized the Company's management, with the
advice of its investment bankers, to pursue strategic alternatives for the
Company. These options included (i) negotiations with Pro-Fac relative to
Pro-Fac gaining control of the business; (ii) the possible sale of the entire
equity of the Company to a third party; and (iii) the implementation of
additional restructuring actions that may include recapitalizing the Company to
buy out Pro-Fac. Under the Integrated Agreement, title to substantially all of
the Company's fixed assets is held by Pro-Fac, and Pro-Fac provides the major
portion of the financing of the Company's operations. Under the Integrated
Agreement, the Company has an option to purchase these assets from Pro-Fac at
their book value. However, there presently exists a disagreement with Pro-Fac as
to how such settlement amount would be calculated. Exercise of the buyout option
would result in the termination of the Integrated Agreement with Pro-Fac. In
such event, the Company would be required to repay all debt owed to Pro-Fac.
The Company actively explored these alternatives during fiscal 1994. On
June 8, 1994, the Company's Board of Directors voted to pursue a proposal
submitted by Dean Foods Company ('Dean Foods') to acquire all the outstanding
shares of common stock of the Company at a maximum cash price of $20.00 per
share, subject to a number of contingencies, including an agreement with Pro-Fac
covering the termination of the Integrated Agreement, an agreement with Hormel
Foods Corporation for the purchase of Nalley's (excluding Nalley's Canada Ltd.
and the Nalley's U.S. Chips and Snacks business) for $150.0 million, clearance
of the transaction by appropriate government agencies and negotiation of
definitive agreements.
On August 4, 1994, Pro-Fac submitted a proposal to the Board of Directors
of the Company to acquire the shares for cash in the amount of $19.00 per share.
Pro-Fac's proposal was subject to certain terms and conditions, including
receipt of approval of the Board of Directors and shareholders of the Company,
receipt of approval of a majority of Pro-Fac's members and receipt of sufficient
financing to consummate the acquisition. In September Pro-Fac modified its
proposal by removing several contingencies and indicating its interest in
purchasing the share pursuant to a tender offer.
F-28
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At its special meeting on September 27, 1994, the Board of Directors of the
Company accepted Pro-Fac's proposal. Pro-Fac and the Company entered into the
Merger Agreement on September 27, 1994. Pursuant to the Merger Agreement, the
Company notified Dean Foods that it had accepted Pro-Fac's proposal and was
terminating all negotiations with Dean Foods and other parties for the purchase
of all or part of the Company. Management expects such merger to be finalized in
the second quarter of fiscal 1995.
During fiscal 1994 and the first quarter of fiscal 1995, the Company
expensed $3.5 million and $1.8 million, respectively, of legal, accounting,
investment banking and other expenses relative to the change of control issue.
In recognizing these expenses, the Company allocated half of these amounts to
Pro-Fac as a deduction to the profit split. Pro-Fac has objected to this
allocation. This dispute has been resolved in conjunction with the merger.
On October 4, 1994, Pro-Fac initiated a tender offer for all of
Curtice-Burns outstanding stock at $19.00 per share. At the expiration of the
tender offer on November 2, 1994, 6,229,442 shares of Class A and 2,046,997
shares of Class B common stock (or approximately 94% and 99%, respectively of
the total number of outstanding shares of Class A and Class B common stock of
Curtice-Burns) had been validly tendered and not withdrawn. All such tendered
shares were accepted for payment by PF Acquisition Corp., a wholly-owned
subsidiary of Pro-Fac. On November 3, 1994, PF Acquisition Corp. merged into
Curtice-Burns, making Curtice-Burns a wholly-owned subsidiary of Pro-Fac.
Roy A. Myers, who has served as the general manager of Pro-Fac since 1987,
has been named president and chief executive officer of Curtice-Burns, replacing
J. William Petty, who has resigned. Pro-Fac and Curtice-Burns will continue to
operate under two separate boards. The Pro-Fac Board of Directors will remain
unchanged, and a new Curtice-Burns Board, consisting of seven directors, has
been appointed.
Financing for the offer was obtained through approximately $250.0 million
of seasonal and term senior bank financing from Springfield Bank for
Cooperatives and from the issuance of $160.0 million in senior subordinated debt
securities issued to qualified institutional buyers. The bonds will carry an
annual interest rate of 12 1/4%. In addition, Pro-Fac contributed approximately
$135.0 million in capital to complete the transaction.
NOTE 3. RESTRUCTURING PROGRAM
THE CONCEPTUAL VISION AND STRATEGY
The restructuring program first initiated in fiscal 1993 was based on
Curtice-Burns' new vision of a company smaller in sales but more profitable, as
measured by return on sales and equity, and possessing the financial and
management resources sufficient to drive growth in carefully selected product
line markets in which the Company can prosper for the long term. Thus, the
strategy was to focus on a more limited number of product lines which now have a
strong, competitive position.
The Plan outlined in 1993 is to restructure the business to a more
profitable base. At the same time, the remaining businesses were to be managed
to optimize earnings growth by installing corporate-wide purchasing, and a
corporate-wide focus of capital spending.
The third leg of the strategy was to accelerate the Company's national
sales and distribution programs by executing new product programs in store-brand
retail dressings, salsa and chunky soups, and the 'More Fruit/More Flavor' pie
filling program.
EXECUTION OF THE PROGRAM
The first step of the restructuring program was to divest businesses that
were unprofitable or declining for the Company but would fit strategically with
other business portfolios. During fiscal 1993, the Company divested Lucca Frozen
Foods. A loss of approximately $2.7 million (before dividing with
F-29
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro-Fac and before taxes) was recognized on this transaction. At the end of
fiscal 1993, the Company wrote down the assets and provided for the expenses to
dispose of the Hiland potato chips and meat snacks businesses during fiscal
1994. On November 22, 1993, Curtice-Burns sold certain assets of the Hiland
Potato Chip business for $2.0 million at closing, plus approximately $1.0
million paid in installments over three months. On February 22, 1994,
Curtice-Burns sold the meat snacks business located in Denver, Colorado and
Albany, Oregon to Oberto Sausage Company of Kent, Washington. Under the
agreement, Oberto has purchased certain assets and assumed certain liabilities
of the meat snacks operation, excluding plant, equipment, and trademarks.
Curtice-Burns will lease its Albany Oregon manufacturing facility and equipment
and license its trademarks, trade names, etc. to Oberto until February 1995, at
which time Oberto is contractually obligated to purchase these assets. The sale
of the Hiland and meat snacks businesses did not result in any significant gain
or loss in fiscal 1994 after giving effect to the restructuring charges recorded
in fiscal 1993; however, charges of $3.1 million (before dividing with Pro-Fac
and before taxes) were incurred in fiscal 1994 to adjust previous estimates. In
the fiscal year ended June 26, 1993, Curtice-Burns incurred losses of $13.2
million from the meat snacks and Hiland potato chip businesses before dividing
such losses with Pro-Fac and before taxes.
On November 19, 1993, the Company sold the oats portion of the National
Oats business for $39.0 million. The oats business contributed approximately
$1.4 million of earnings in fiscal 1993 before dividing with Pro-Fac and before
taxes. The sale of the oats business resulted in an approximate $10.9 million
gain (before dividing with Pro-Fac and before taxes). The popcorn portion of the
National Oats Division was transferred to the Comstock Michigan Fruit Division.
During fiscal 1993 and 1994, the Company also made staff reductions in
selected locations throughout the Company. A $1.0 million accrual relating to
such costs was recorded as part of the fiscal 1993 restructuring charge.
Thus, a major part of the restructuring plan was successfully executed
during fiscal 1994.
As reported above, Curtice-Burns incurred restructuring charges in fiscal
1993 of $61.0 million (before dividing such charges with Pro-Fac and before
taxes), which included the loss incurred on the sale of the Lucca frozen entree
business, anticipated losses on the sale of the meat snacks and Hiland
businesses, and other costs (primarily severance and unexpected losses prior to
sale) in conjunction with the restructuring program. Virtually all of this
charge was a revaluation of assets, rather than cash expense.
Having completed the first phase of the restructuring program in fiscal
1993, the second phase was approved by the Company's Board of Directors in
August 1994. In connection with the second phase, the Company is evaluating
several alternatives regarding the Nalley's snack food business in the United
States, including its possible sale to a third party. A charge of $8.4 million
before split with Pro-Fac and before taxes, for this phase of the restructuring
program was recorded during the first quarter of fiscal 1995.
With respect to the potential sale of the snack food business, the Company
has signed a letter of intent with Country Crisp Foods of Salt Lake City, Utah.
The letter of intent is subject to a number of conditions, including successful
financing by the purchaser and the negotiation of a definitive purchase
agreement. Country Crisp, a regional snack food company operating in the
inter-mountain states of Colorado, Utah, Wyoming, Idaho, Nevada and New Mexico,
will continue to market the Nalley's brand snacks under a licensing arrangement
with the Company.
NOTE 4. DEBT
SHORT-TERM DEBT
Short-term bank lines of credit are extended individually to both the
Company and Pro-Fac. They are interrelated so that both companies must
participate on a proportionate basis in the average
F-30
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowings under such lines. At least 55% of such borrowing is attributable to
Pro-Fac and advanced by the Springfield Bank for Cooperatives and up to 45% is
attributable to the Company and advanced by a commercial bank syndicate
consisting of six banks. The combined line of credit at September 24, 1994 was
$96,000,000. Such lines expire annually unless renewed. The revolving lines of
credit under such agreements have been renewed through November of 1994. Such
renewals provide for adjustments in interest rates and covenants and grant to
both short-term and long-term lenders, or entitle such lenders to obtain, liens
on substantially all assets of the Company and Pro-Fac as collateral for
borrowings under such agreements. Outstanding borrowings at September 24, 1994
were $90,000,000.
LONG-TERM DEBT
In addition to the long-term and the short-term borrowings included in the
balance sheet as due to Pro-Fac, the Company guaranteed Pro-Fac debt at
September 24, 1994 of $37,973,000 which was used primarily for financing the
fixed and intangible assets referred to in Note 1. The interest rate on Pro-Fac
borrowings was 6.8% at September 24, 1994. The other debt of $1,537,000 consists
of primarily industrial revenue bonds and carries rates ranging up to 11.0% at
September 24, 1994.
ADDITIONAL INFORMATION WITH RESPECT TO BORROWING ARRANGEMENTS
Because Pro-Fac guarantees the debt of the Company and the Company
guarantees the debt of Pro-Fac (substantially all of which is advanced to the
Company), management and lenders use combined pro forma financial statements to
assess the financial strength of the two companies. Specifically, the combined
statement of operations, balance sheet and statement of cash flows portray the
financial results, cash flows and equity of the Company and Pro-Fac. Management
believes that combined financial statements are useful because they provide
information concerning the Company's ability to continue present credit
arrangements and/or obtain additional borrowings in the future.
Certain borrowing agreements require that the companies maintain specified
levels with regard to working capital, current ratio, ratio of net worth to
assets, ratio of long-term debt to net worth, tangible net worth, net income,
coverage of interest, and fixed charges and the incurrence of additional debt.
The companies are in compliance with, or have obtained waivers for, restrictions
and requirements under the terms of the borrowing agreements. The revolving
lines of credit under such agreements have been renewed through November of
1994. Such renewals provide for adjustments in interest rates and covenants and
grant to both short-term and long-term lenders, or entitle such lenders to
obtain, liens on substantially all assets of the Company and Pro-Fac as
collateral for borrowings under such agreements.
Such combined financial statements are neither necessary for a fair
presentation of the financial position of the Company nor appropriate as primary
statements for the Company's shareholders or for Pro-Fac shareholders and
members because they combine earnings, assets and liabilities and cash flows
which are legally attributable to either the Company's shareholders or to
Pro-Fac shareholders and members, but not to both. Accordingly, the condensed
pro forma financial statements presented herein are special purpose in nature
and should be used only within the context described.
F-31
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------
SEPTEMBER 24, 1994
---------------------------------------------- SEPTEMBER 25, 1993
CURTICE- ------------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
------- ------- ------------ -------- ------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales and revenues.............................. $ 176.8 $44.5 $(44.5) $176.8 $210.1
------- ------- ------------ -------- -------
Cost of sales................................... 126.8 37.7 (37.7) 126.8 153.1
Restructuring................................... 8.4 -- -- 8.4 --
Change of control costs......................... 1.8 -- -- 1.8 --
Insurance gain.................................. (6.5) -- -- (6.5) --
Selling, administrative and general expenses.... 38.0 0.2 (0.2) 38.0 46.1
Interest expense................................ 5.1 2.9 (4.2) 3.8 3.9
Pro-Fac share of earnings....................... 1.5 -- (1.5) -- --
------- ------- ------------ -------- -------
Total cost and expenses......................... 175.1 40.8 (43.6) 172.3 203.1
------- ------- ------------ -------- -------
Income before taxes............................. 1.7 3.7 (0.9)(A) 4.5 7.0
Provision for taxes............................. (1.4) -- -- (1.4) (2.3)
------- ------- ------------ -------- -------
Net income...................................... $ 0.3 $ 3.7 $ (0.9)(A) $ 3.1 $ 4.7
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
</TABLE>
- ------------
(A) Amounts represent the balance of the first quarter fiscal 1995 share of
earnings between the Company and Pro-Fac which is currently under dispute.
See discussion at Note 2.
- ----------------------------------------------------------
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of operations.
F-32
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------
SEPTEMBER 24, 1994
---------------------------------------------- SEPTEMBER 25, 1993
CURTICE ------------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
------- ------- ------------ -------- ------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets(A)(C)........................ $ 321.7 $ 88.5 $ (83.6) $326.6 $324.0
Property, plant and equipment, net(B)....... 160.3 -- -- 160.3 191.3
Investment in direct financing leases(C).... -- 113.1 (113.1) -- --
Due from Curtice-Burns(D)................... -- 89.0 (89.0) -- --
Goodwill and other intangibles.............. 24.5 24.5 -- 49.0 52.2
Other assets................................ 17.9 23.0 -- 40.9 28.1
------- ------- ------------ -------- -------
Total assets........................... $ 524.4 $338.1 $ (285.7) $576.8 $595.6
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
LIABILITIES AND NET WORTH
Current liabilities(A)(C)................... $ 219.9 $ 88.5 $ (81.0) $227.4 $221.9
Lease obligations(C)........................ 114.4 -- (113.1) 1.3 1.8
Long-term debt --
Due Pro-Fac(D)............................ 89.0 -- (89.0) -- --
Due others(E)............................. 0.9 126.9 -- 127.8 173.9
Other liabilities........................... 20.3 0.6 -- 20.9 13.4
------- ------- ------------ -------- -------
Total liabilities...................... 444.5 216.0 (283.1) 377.4 411.0
Shareholders' equity and members'
capitalization(F).............................. 79.9 122.1 (2.6)(G) 199.4 184.6
------- ------- ------------ -------- -------
Total liabilities and net worth........ $ 524.4 $338.1 $ (285.7) $576.8 $595.6
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
</TABLE>
- ------------
Notes to combined balance sheet:
(A) Current assets of Pro-Fac consist principally of amounts due from
Curtice-Burns with respect to the Agreement described in Note 1. Such
amounts are eliminated for purposes of this balance sheet.
(B) Property, plant and equipment to which Pro-Fac holds title and leases
to Curtice-Burns on a financing basis had a net book value of $130.7
million at September 24, 1994.
(C) The majority of the lease obligations of Curtice-Burns are payable to
Pro-Fac and amount to $130.7 million at September 24, 1994 of which
$17.6 million is payable currently. The related Curtice-Burns liability
and Pro-Fac receivable are eliminated for purposes of this balance
sheet.
(D) Long-term borrowings by Curtice-Burns from Pro-Fac under the Agreement
are eliminated for purposes of this balance sheet.
(E) With respect to Pro-Fac, long-term debt due others represents term
loans payable to the Springfield Bank for Cooperatives (interest rate
of 6.8% at September 24, 1994).
(F) Shareholders' and members' capitalization of Pro-Fac at September 25,
1993 consists of common stock, $10.2 million; retained earnings
allocated to members ('retains'), $42.9 million; preferred stock, $65.6
million which originates from conversion of 'retains' -- normally after
five years -- and which is redeemable at the option of Pro-Fac; and
earned surplus, $3.4 million.
(G) Amount represents the balance of the fiscal 1994 and first quarter
fiscal 1995 share of earnings between the Company and Pro-Fac which is
currently under dispute. See discussion at Note 2.
F-33
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 24, 1994
------------------------------------------------- SEPTEMBER 25, 1993
CURTICE ------------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
------- ------- ------------ -------- ------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Net cash (used in)/provided by operating
activities................................ $ (68.4) $ 8.1 $ (1.8)(A) $(62.1) $(51.9)
Net cash (used in)/provided by investing
activities................................ (4.4) (40.9 ) 40.6(A) (4.7) (5.0)
Net cash provided by/(used in) financing
activities................................ 77.2 32.9 (38.8) 71.3 58.0
------- ------- ------------ -------- -------
Net change in cash.......................... 4.4 0.1 -- 4.5 1.1
Cash at beginning of period................. 2.9 -- -- 2.9 6.5
------- ------- ------------ -------- -------
Cash at end of period....................... $ 7.3 $ 0.1 $-- $ 7.4 $ 7.6
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest (net of amount capitalized)... $ 4.6 $ 2.7 $ (4.2) $ 3.1 $ 3.9
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
Income taxes, net...................... $ .6 $ -- $-- $ 0.6 $ 7.5
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Capital lease obligations incurred..... $ 0.9 $ -- $ (0.9) $-- $--
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
Conversion of retains to preferred
stock................................ $ -- $ 1.2 $-- $ 1.2 $--
------- ------- ------------ -------- -------
------- ------- ------------ -------- -------
</TABLE>
- ------------
(A) Amounts include the balance of the first quarter fiscal 1995 share of
earnings between the Company and Pro-Fac which is currently under dispute.
See discussion at Note 2.
- ----------------------------------------------------------
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of cash flows.
NOTE 5. LEASES
Lease arrangements are capitalized when such leases convey substantially
all of the risks and benefits incident to ownership. Such leases include those
assets furnished by Pro-Fac Cooperative, Inc. under the Agreement described in
Note 1. Capital leases are amortized over either the lease term or the life of
the related asset, depending upon available purchase options and lease renewal
features.
NOTE 6. OTHER MATTERS
CONTINGENCIES
In conjunction with the sale of the National Oats Division by the Company,
Pro-Fac terminated the membership of the Harvest States Cooperatives ('Harvest
States') in Pro-Fac. Harvest States was the National Oats Division's only
supplier of oats. As a result of this action, Harvest States filed a claim
F-34
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
against Pro-Fac for, among other things, the receipt of payments for future oats
purchases after the sale of National Oats division through fiscal year 1995.
Under an agreement with Pro-Fac, the Company agreed to indemnify Pro-Fac as
to certain expenses arising out of the termination of the membership of Harvest
States in Pro-Fac. It was agreed that any settlement payments would be deemed an
expense of the Company under the division of earnings with Pro-Fac. The exact
amount of any potential settlement related to this issue cannot be estimated at
September 24, 1994, but management, upon input from counsel, does not believe
that this is a material exposure to the Company.
A grower has filed suit against the Company for damages resulting from
defective seed which was purchased from the Southern Frozen Foods division. The
lawsuit alleges that the defective seed resulted in the loss of crops and
acreage use for a growing season, and the grower is seeking $950,000 in damages.
Management believes this claim is without merit and intends to vigorously defend
its position. As the amount of damages is neither probable nor reasonably
estimable, no accrual for loss has been included in the financial statements. In
addition, management anticipates that all material costs of settlement, if
incurred, will be covered under its insurance policies.
COMMITMENTS
The Company's Southern Frozen Foods Division has guaranteed an approximate
$1.4 million loan for the City of Montezuma to renovate a sewage treatment plant
operated by Southern Frozen Foods on behalf of the City.
FIRE CLAIM
In July 1994, a plant operated by the Company's Southern Frozen Foods
division, located in Montezuma, Georgia, was damaged by fire. The plant itself
is owned by Pro-Fac and leased to the Company under the terms of the Integrated
Agreement. All material costs associated with the facility repairs and business
interruption are anticipated to be covered under the Company's insurance
policies. During the first quarter of fiscal 1995, a $6.5 million gain (before
dividing with Pro-Fac and before taxes) was recorded representing the insurance
proceeds for the replacement value in excess of the depreciated book value of
the building and equipment destroyed in this fire.
F-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members, Shareholders and
Board of Directors of
PRO-FAC COOPERATIVE, INC.
In our opinion, the accompanying balance sheets and the related statements
of net proceeds, of cash flows and of changes in shareholders' and members'
capitalization present fairly, in all material respects, the financial position
of Pro-Fac Cooperative, Inc. at June 25, 1994 and June 26, 1993, and the results
of its operations and its cash flows for each of the three fiscal years in the
period ended June 25, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Cooperative's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Several disputes currently exist between Curtice-Burns Foods, Inc. and the
Cooperative. Both Curtice-Burns Foods, Inc. and the Cooperative have requested
arbitration to resolve these matters. In addition, on September 27, 1994, the
Cooperative's offer to acquire the outstanding common stock of Curtice-Burns
Foods, Inc. was recommended for shareholders' approval by the Board of Directors
of Curtice-Burns Foods, Inc. The outcome of such transactions could affect the
Integrated Agreement with the Cooperative. These matters are described in Note 2
to the financial statement.
PRICE WATERHOUSE LLP
Rochester, New York
September 28, 1994
F-36
<PAGE>
PRO-FAC COOPERATIVE, INC.
STATEMENT OF NET PROCEEDS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
JUNE 25, JUNE 26, JUNE 26,
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Proceeds from sale of crops to Curtice-Burns Foods, Inc.
Established commercial market value:
Delivered during production season (April through March in each period)...... $ 59,216 $ 59,800 $ 64,152
Adjust to fiscal year basis....................................................... (979) (65) (718)
-------- -------- --------
Deliveries during the period........................................................... 58,237 59,735 63,434
Proceeds (loss) under the Integrated Agreement......................................... 18,599 (21,800) 9,505
Interest income........................................................................ 15,630 17,090 19,869
Patronage dividend from Springfield Bank for Cooperatives.............................. 1,927 1,857 1,411
-------- -------- --------
Total revenues.................................................................... 94,393 56,882 94,219
-------- -------- --------
Costs and Expenses
Established commercial market value paid to or accrued for the accounts of members
during the period..................................................................... 58,237 59,735 63,434
Interest expense....................................................................... 11,587 13,753 17,179
Administrative expenses................................................................ 871 892 852
-------- -------- --------
Total costs and expenses.......................................................... 70,695 74,380 81,465
-------- -------- --------
Excess (deficiency) of revenues before taxes, dividends and allocation of net proceeds from
current operations........................................................................ 23,698 (17,498) 12,754
Benefit for taxes........................................................................... 844 -- 1,151
-------- -------- --------
Net income (loss) (proceeds before dividends)............................................... 24,542 (17,498) 13,905
Dividends on common and preferred stock..................................................... (4,390) (4,548) (4,437)
-------- -------- --------
Net proceeds (loss)......................................................................... 20,152 (22,046) 9,468
Allocation (to) from earned surplus......................................................... (2,856) 27,917 (155)
-------- -------- --------
Net proceeds available to members from current operations................................... 17,296 5,871 9,313
Additional distribution of 1991 net proceeds................................................ -- -- 3,727
-------- -------- --------
Total net proceeds available to members........................................... $ 17,296 $ 5,871 $ 13,040
-------- -------- --------
-------- -------- --------
Net proceeds available to members as a percent of commercial market value:
From current operations................................................................ 29.21% 9.82% 14.52%
From additional distribution of 1991 net proceeds...................................... -- -- 5.81%
Allocation of net proceeds available to members
Distribution from current operations:
Payable to members currently (20%, 20% and 25%, respectively, of qualified
proceeds available to members)................................................... $ 3,109 $ 1,052 $ 2,253
Allocated to members but retained by the Cooperative:
Qualified retains................................................................. 12,437 4,209 6,760
Non-qualified retains............................................................. 1,750 610 300
-------- -------- --------
17,296 5,871 9,313
-------- -------- --------
Additional distribution of 1991 net proceeds:
Cash................................................................................... -- -- 932
Qualified Retains...................................................................... -- -- 2,795
-------- -------- --------
-- -- 3,727
-------- -------- --------
Total allocation of net proceeds available to members............................. $ 17,296 $ 5,871 $ 13,040
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
PRO-FAC COOPERATIVE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 25, JUNE 26,
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................................................. $ 10 $ 19
Accounts receivable.............................................................................. 68 25
Receivable from Curtice-Burns Foods, Inc......................................................... 11,197 9,113
Current portion of long-term loans receivable from Curtice-Burns Foods, Inc...................... 14,000 16,000
Current portion of investment in direct financing leases......................................... 17,645 21,184
Current portion of investment in Springfield Bank for Cooperatives............................... 1,324 1,172
Income taxes refundable.......................................................................... -- 70
Prepaid expenses................................................................................. 2,464 693
-------- --------
Total current assets........................................................................ 46,708 48,276
Long-term portion of investment in direct financing leases............................................ 123,677 152,329
Long-term loans receivable from Curtice-Burns Foods, Inc.............................................. 78,040 78,648
Long-term portion of investment in Springfield Bank for Cooperatives.................................. 19,632 16,814
Deferred tax benefit.................................................................................. 2,623 2,010
Finance receivable related to intangibles............................................................. 24,909 26,545
Other assets.......................................................................................... 462 262
-------- --------
Total assets................................................................................ $296,051 $324,884
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' AND MEMBERS' CAPITALIZATION
Current liabilities:
Notes payable.................................................................................... $ 11,500 $ 12,000
Accounts payable................................................................................. 617 1,019
Accrued interest................................................................................. 2,536 3,019
Federal and state income taxes payable........................................................... 668 --
Current portion of long-term debt................................................................ 14,000 16,000
Amounts due members.............................................................................. 15,327 14,525
-------- --------
Total current liabilities................................................................... 44,648 46,563
Long-term debt........................................................................................ 127,134 168,000
Other non-current liabilities......................................................................... 504 417
-------- --------
Total liabilities........................................................................... 172,286 214,980
-------- --------
Commitments and contingencies
Shareholders' and members' capitalization:
Retained earnings allocated to members........................................................... 36,924 29,446
Non-qualified allocation to members.............................................................. 7,454 5,704
Capital Stock --
Preferred, par value $25.00, authorized -- 5,000,000 and shares; issued and
outstanding -- 2,576,720 and 2,378,807, respectively........................................ 64,418 59,470
Common, par value $5.00, authorized -- 5,000,000 shares
</TABLE>
<TABLE>
<CAPTION>
JUNE 25, JUNE 26,
1994 1993
--------- ---------
<S> <C> <C> <C> <C>
Shares issued............................................................... 2,056,878 2,690,430
Shares subscribed........................................................... 9,270 24,788
--------- ---------
Total subscribed and issued....................................... 2,066,148 2,715,218
Less subscriptions receivable in installments............................... (9,270) (24,788)
--------- ---------
2,056,878 2,690,430 10,284 13,455
--------- ---------
--------- ---------
Earned surplus (unallocated and apportioned)................................ 4,685 1,829
-------- --------
Total shareholders' and members' capitalization................... 123,765 109,904
-------- --------
Total liabilities and capitalization.............................. $296,051 $324,884
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
PRO-FAC COOPERATIVE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
JUNE 25, JUNE 26, JUNE 26,
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss)........................................................ $ 24,542 $(17,498) $ 13,905
Less amounts payable to members currently................................ (3,109) (1,052) (2,253)
-------- -------- --------
21,433 (18,550) 11,652
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in undistributed earnings of Springfield.......................... (1,541) (1,486) (1,129)
(Benefit)/provision for deferred taxes................................... (613) 207 307
Change in assets and liabilities:
Accounts receivable...................................................... (43) 618 (552)
Accounts payable and accrued expenses.................................... (885) 309 (1,117)
Amounts due to members................................................... 802 (2,277) 372
Federal and state taxes payable.......................................... 738 (1,180) 265
Other assets and liabilities............................................. (1,895) (319) 591
-------- -------- --------
Net cash provided by/(used in) operating activities...................... 17,996 (22,678) 10,389
-------- -------- --------
Cash flows from investing activities:
Due from Curtice-Burns, net.............................................. 524 (1,694) 18,242
Return from/(investment in) direct financing leases...................... 32,191 13,785 6,002
Investment in Springfield Bank........................................... (1,429) (1,937) (1,691)
Cash received from the finance receivable related to intangibles......... 1,636 26,898 2,405
-------- -------- --------
Net cash provided by investing activities................................ 32,922 37,052 24,958
-------- -------- --------
Cash flows from financing activities:
Payments on short-term debt.............................................. (500) (16,000) (18,000)
Proceeds from long-term debt............................................. 120 20,000 --
Payments on long-term debt............................................... (42,986) (14,025) (14,027)
Repurchases of common stock, net of issuances............................ (3,171) 358 1,088
Payments for the repurchase of preferred stock........................... -- (165) --
Cash dividends paid...................................................... (4,390) (4,548) (4,437)
-------- -------- --------
Net cash used in financing activities.................................... (50,927) (14,380) (35,376)
-------- -------- --------
Net decrease in cash.......................................................... (9) (6) (29)
Cash at beginning of year..................................................... 19 25 54
-------- -------- --------
Cash at end of year........................................................... $ 10 $ 19 $ 25
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flow information
Cash paid or received during the year for:
Interest............................................................ $ 12,068 $ 14,050 $ 18,349
-------- -------- --------
-------- -------- --------
Income taxes, net................................................... $ (970) $ 970 $ (1,711)
-------- -------- --------
-------- -------- --------
Supplemental schedule of non-cash investing and financing activities
Conversion of retains to preferred stock................................. $ 4,948 $ 5,934 $ 5,739
-------- -------- --------
-------- -------- --------
Net proceeds allocated to members but retained by the Cooperative........ $ 14,187 $ 4,819 $ 9,855
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
PRO-FAC COOPERATIVE, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' AND MEMBERS' CAPITALIZATION
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
JUNE 25, JUNE 26, JUNE 26,
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Retained earnings allocated to members:
Qualified retains:
Balance at beginning of period..................................... $ 29,446 $ 29,950 $ 24,128
Additional distribution of 1991 net proceeds....................... -- -- 2,795
Net proceeds allocated to members.................................. 12,437 4,209 6,760
Converted to preferred stock....................................... (4,948) (4,702) (3,719)
Cash paid in lieu of fractional shares............................. (11) (11) (14)
-------- -------- --------
Balance at end of period..................................................... 36,924 29,446 29,950
-------- -------- --------
Non-qualified retains:
Balance at beginning of period.......................................... 5,704 6,645 9,178
Distribution of 1987, 1986 and 1985 non-qualified retains:
Cash paid.......................................................... -- (319) (813)
Converted to preferred stock....................................... -- (1,232) (2,020)
Net proceeds allocated to members.................................. 1,750 610 300
-------- -------- --------
Balance at end of period..................................................... 7,454 5,704 6,645
-------- -------- --------
Total retains allocated to members at end of period.......................... 44,378 35,150 36,595
-------- -------- --------
Preferred stock:
Balance at beginning of period.......................................... 59,470 53,701 47,962
Converted from earnings retained for preferred stock.................... 4,948 4,702 3,719
Conversion of 1987, 1986 and 1985 non-qualified retains................. -- 1,232 2,020
Repurchased and canceled................................................ -- (165) --
-------- -------- --------
Balance at end of period..................................................... 64,418 59,470 53,701
-------- -------- --------
Common stock:
Balance at beginning of period.......................................... 13,455 13,097 12,009
Repurchased, net of issued.............................................. (3,171) 358 1,088
-------- -------- --------
Balance at end of period..................................................... 10,284 13,455 13,097
-------- -------- --------
Earned surplus (unallocated and apportioned):
Balance at beginning of period.......................................... 1,829 29,746 33,318
Additional distribution of 1991 net proceeds............................ -- -- (3,727)
Net proceeds arising from after tax undistributed income/(loss)......... 2,856 (27,917) 155
-------- -------- --------
Balance at end of period..................................................... 4,685 1,829 29,746
-------- -------- --------
Total shareholders' and members' capitalization.................... $123,765 $109,904 $133,139
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles including the following major
accounting policies:
Fiscal Year -- Fiscal 1994 ended on June 25, 1994, and fiscal 1993
ended on June 26, 1993, the last Saturday in June. All future fiscal years
will end on the last Saturday in June. The fiscal year ended on the last
Friday in June in fiscal 1992. The years ended June 25, 1994, June 26,
1993, and June 26, 1992 each comprised 52 weeks.
Leases -- The Cooperative leases its property, plant, equipment and
intangibles to Curtice-Burns Foods, Inc. ('Curtice-Burns') under an
agreement described in Note 2. Such leases are recorded under the financing
method of accounting. See further discussion in Note 4.
Investment in Springfield Bank for Cooperatives ('Springfield' or 'the
Bank') -- The Cooperative's investment in Springfield is comprised of
revolving securities which are presently being redeemed by the Bank on the
basis of a six-year cycle. These securities are not physically issued by
the Bank, but the Cooperative is notified as to their monetary value. The
investment is carried on the Cooperative's books at cost (the cash
purchases of securities each year in an amount equal to a percentage of the
annual interest paid by the Cooperative on its borrowings from the Bank)
plus the Cooperative's share of the undistributed earnings of the Bank
(that portion of patronage refunds not distributed currently in cash).
The current portion of the investment represents securities which are
expected to be redeemed by the Bank during the subsequent fiscal year.
Income Taxes -- In February 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 109,
'Accounting for Income Taxes,' ('SFAS 109') with retro-active adoption
permitted. The Cooperative has adopted the provisions of this standard as
of June 29, 1991. Deferred income taxes arise from the issuance of
non-qualified retains (see Note 5). Income taxes are recorded under the
liability method specified by SFAS 109 in 1992, 1993 and 1994.
Finance receivable relating to goodwill and other intangibles -- Under
the provisions of the Agreement with Curtice-Burns, the Cooperative has
provided financing for a portion of the goodwill and other intangible
assets which represent the excess of the fair value of net tangible assets
acquired in purchase transactions. The decrease in the receivable related
to intangibles in fiscal 1993 is attributable to the restructuring efforts
initiated by Curtice-Burns (see Note 8).
Reclassification -- Certain items for fiscal 1993 and 1992 have been
reclassified to conform with 1994 presentations.
Earnings Per Share Data Omitted -- Net income or net proceeds per
share amounts are not presented because earnings are not distributed to
members in proportion to their common stock holdings. For example,
patronage related earnings (representing those earnings derived from
patronage-sourced business) are distributed to members in proportion to the
dollar value of deliveries under Pro-Fac contracts rather than based on the
number of shares of common stock held.
NOTE 2. AGREEMENT WITH CURTICE-BURNS FOODS, INC.
Pro-Fac has a contractual relationship with Curtice-Burns under an
Agreement ('the Agreement') consisting of five sections: Operations Financing,
Marketing, Facilities Financing, Management, and Settlement, which extends to
1997 and provides for two successive five-year renewals at the option of
Curtice-Burns.
The provisions of the Agreement include the financing of certain assets
utilized in the business of Curtice-Burns and provide a sharing of income and
losses between Curtice-Burns and Pro-Fac. Should
F-41
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Curtice-Burns terminate the Agreement, Curtice-Burns has the option of
purchasing those assets financed by Pro-Fac at the book value at that time.
Revenues received from Curtice-Burns under the Agreement for the years
ended June 25, 1994, June 26, 1993, and June 26, 1992, include: commercial
market value of crops delivered, $59,216,000, $59,800,000, and $64,152,000,
respectively; interest income, $15,617,000, $16,515,000, and $19,869,000,
respectively; and additional proceeds from profit sharing provisions,
$18,599,000 gain, $21,800,000 loss, and $9,505,000 gain, respectively. In
addition, Pro-Fac received financing amortization payments of $43,830,000,
$53,826,000, and $26,232,000 for the years ended June 25, 1994, June 26, 1993,
and June 26, 1992, respectively.
In March 1994, Curtice-Burns advised Pro-Fac that in view of the
possibility that Curtice-Burns might be acquired by a third party, Pro-Fac
should not rely on Curtice-Burns to purchase any crops from Pro-Fac or its
growers in calendar 1995 and beyond. In addition, Curtice-Burns notified Pro-Fac
that Curtice-Burns will 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 has given notice to its affected members terminating Pro-Fac's
obligation to purchase these crops beginning next year. The affected Pro-Fac
growers are principally Pro-Fac's New York fruit and vegetable growers, Illinois
and Nebraska popcorn growers, and Northwest potato growers who represent more
than half of Pro-Fac's membership and have accounted for approximately $29.9
million or 50% of the total crops delivered by Pro-Fac to Curtice-Burns in the
past year. In the arbitration proceedings currently pending between
Curtice-Burns and Pro-Fac, Pro-Fac has asserted, among other matters, that
Curtice-Burns is in default under the Integrated Agreement for improper
termination of crops and has claimed damages that Pro-Fac estimates at more than
$50.0 million. Curtice-Burns believes that its only obligation to purchase crops
from Pro-Fac is as set forth in the Profit Plan as approved each year by the
Boards of Directors of both Pro-Fac and Curtice-Burns. Because the most recent
approved Profit Plan was for fiscal year 1995 (which Plan corresponds to the
1994 calendar year crops), Curtice-Burns believes that it is not currently
obligated to purchase any crops from Pro-Fac for calendar year 1995 or later.
Management believes these matters will be resolved in conjunction with the
Merger Agreement described above.
POTENTIAL CHANGE OF CONTROL OF CURTICE-BURNS
On March 23, 1993, the Curtice-Burns announced that Agway Inc., which owns
99% of Curtice-Burns' Class B shares and approximately 14% of Class A shares,
was considering the potential sale of its interest in Curtice-Burns. At its
meeting held on August 9 and 10, 1993, the Curtice-Burns Board of Directors
authorized Curtice-Burns' management, with the advice of its investment bankers,
to pursue strategic alternatives for Curtice-Burns. These options included
negotiations with Pro-Fac relative to Pro-Fac gaining control of the business;
the possible sale of the entire equity of Curtice-Burns to a third party; and
the implementation of additional restructuring actions that may include
recapitalizing Curtice-Burns to buy out Pro-Fac. Under the Agreement with
Pro-Fac, title to substantially all of Curtice-Burns' fixed assets is held by
Pro-Fac, and Pro-Fac provides the major portion of the financing of
Curtice-Burns' operations. Under the Agreement Curtice-Burns has an option to
purchase these assets from Pro-Fac at their book value. However, there presently
exists a disagreement with Pro-Fac as to how such settlement amount would be
calculated. Exercise of the option would result in the termination of the
Agreement with Pro-Fac. In such event, Curtice-Burns would be required to repay
all debt owed to Pro-Fac.
On June 8, 1994, the Curtice-Burns Board of Directors voted to pursue an
offer from Dean Foods Company for a maximum of $20.00 per share which was
contingent upon Curtice-Burns buying Pro-Fac's assets at book value and upon the
sale of the Nalley's Fine Foods Division and the Nalley's Canada, Ltd.
subsidiary, both excluding the chips and snack businesses, to Hormel Foods
Corporation.
On September 27, 1994, Pro-Fac and Curtice-Burns entered into a Merger
Agreement pursuant to which Pro-Fac will purchase all of the shares of Class A
common stock and Class B common stock of
F-42
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Curtice-Burns for $19.00 per share, or approximately $167.0 million in the
aggregate. Pro-Fac will immediately commence a tender offer for all of the
shares to be followed, if successful, by a merger of a subsidiary of Pro-Fac
into Curtice-Burns. Pro-Fac has advised Curtice-Burns that it expects to
complete its tender offer on or about November 1, 1994.
In connection with the proposed purchase of Curtice-Burns, Pro-Fac has
obtained the commitment of the Springfield Bank to provide up to $200.0 million
in long-term financing and up to $86 million in seasonal financing. In addition,
Pro-Fac intends to issue up to $160.0 million principal amount of senior
subordinated debt privately placed through Dillon, Read & Co. Inc. Upon
completion of the merger transaction, Pro-Fac would have an equity investment of
$133.0 million in Curtice-Burns, most of which was existing financing to
Curtice-Burns under the Integrated Agreement.
During fiscal 1994, Curtice-Burns expensed $3.5 million of legal,
accounting and other expenses relative to the change in control issue and
allocated half of those expenses to Pro-Fac. Pro-Fac has disputed this
allocation and the financial statements do not reflect the charge as management
believes it should not be included as a component of the fiscal 1994 earnings
split. Resolution of this dispute is anticipated in conjunction with the Merger
Agreement described above.
NOTE 3. DEBT
SHORT-TERM DEBT
Short-term borrowings are made by the Cooperative under a seasonal line of
credit with Springfield which currently provides for borrowings up to
$46,000,000. Outstanding borrowings at June 25, 1994 amounted to $11,500,000 at
5.5%. The maximum amount of short-term borrowings outstanding during the 52-week
period ended June 25, 1994 was $46,000,000. The approximate average aggregate
short-term borrowings were: fiscal 1994 -- $30,464,000, fiscal
1993 -- $39,444,000, fiscal 1992 -- $47,764,000 The approximate daily weighted
average interest rates were: fiscal 1994 -- 4.6%, fiscal 1993 -- 4.6% and fiscal
1992 -- 6.2%.
The Cooperative's short-term borrowings are loaned to Curtice-Burns under
the same conditions and at the same rates as the Cooperative obtained from its
lenders. Provisions of the Agreement between the two companies do however, allow
Pro-Fac, with sufficient notice to Curtice-Burns, to accelerate the repayment of
outstanding debt.
LONG-TERM DEBT
The Cooperative's long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 25, JUNE 26,
1994 1993
------------ ------------
<S> <C> <C>
Term loans due Springfield:
Interest rate of 6.7% and 6.2% at June 25, 1994 and June 26, 1993,
respectively.................................................... $141,014,000 $184,000,000
Other debt............................................................. 120,000 --
------------ ------------
141,134,000 184,000,000
Less current portion.............................................. 14,000,000 16,000,000
------------ ------------
$127,134,000 $168,000,000
------------ ------------
------------ ------------
</TABLE>
The term loans due Springfield are payable as follows: $14.0 million
annually fiscal 1995 through fiscal 2002; $12.0 million in fiscal 2003; $10.0
million in fiscal 2004 and $7.0 million in fiscal 2005. The term loans are
collateralized by fixed assets and the Cooperative's investment in Springfield
(see Note 1). In addition, Curtice-Burns guarantees all of the Cooperative's
bank debt and the Cooperative guarantees Curtice-Burns' short-term notes payable
to commercial banks and certain other debt. The total lines of credit available
to the companies for seasonal borrowings expire annually unless extended or
renewed. Curtice-Burns had no short-term notes payable to commercial banks at
June 25, 1994,
F-43
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
June 26, 1993 or June 26, 1992. Other Curtice-Burns debt which Pro-Fac
guarantees amounted to $106,000 at June 25, 1994 and $6,294,000 at June 26,
1993.
Pro-Fac's other debt of $120,000 is payable in nine installments from
fiscal 1996 to fiscal 2005. The rate on this debt is 4%.
Based on an estimated borrowing rate at 1994 fiscal year end of 8.0% for
long-term debt with similar terms and maturities, the fair value of the
Cooperative's long-term debt outstanding is approximately $136,779,000 at June
25, 1994.
ADDITIONAL INFORMATION WITH RESPECT TO BORROWING ARRANGEMENTS
Because Pro-Fac's income is largely determined by the income of
Curtice-Burns and because Pro-Fac guarantees the debt of Curtice-Burns and
Curtice-Burns guarantees the debt of Pro-Fac (substantially all of which is
advanced to Curtice-Burns), management and lenders use combined pro forma
financial statements to assess the financial strength of the two companies.
Specifically, the combined statement of operations, balance sheet and statement
of cash flows portray the financial results, cash flows and equity of
Curtice-Burns and Pro-Fac. Management believes that combined financial
statements are useful because they provide information concerning Pro-Fac's
ability to continue present credit arrangements and/or obtain additional
borrowings in the future.
Certain borrowing agreements require that the companies maintain specified
levels with regard to working capital, tangible net worth, fixed charges and the
incurrence of additional debt. The Cooperative is in compliance with, or has
obtained waivers for, restrictions and requirements under the terms of the
borrowing agreements.
Such financial statements are neither necessary for a fair presentation of
the financial position of Pro-Fac nor appropriate as primary statements for
Curtice-Burns' shareholders or for Pro-Fac shareholders and members because they
combine earnings, assets and liabilities and cash flows which are legally
attributable to either Curtice-Burns' shareholders or to Pro-Fac shareholders
and members, but not to both. Accordingly, the condensed pro forma financial
statements presented below are special purpose in nature and should be used only
within the context described.
F-44
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JUNE 25, 1994
----------------------------------------------- JUNE 26, 1993
CURTICE- -------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
-------- ------- ------------ -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales and revenues..................................... $829.1 $94.4 $(94.4) $829.1 $ 878.6
Cost of sales.......................................... 592.6 58.2 (58.2) 592.6 632.7
Restructuring, including net (gain) loss from division
disposals............................................ (7.8) -- -- (7.8) 61.0
Change in control costs................................ 3.5 -- -- 3.5 --
Other selling, administrative and general expenses..... 187.0 0.9 (2.0) 185.9 205.5
Interest expense....................................... 18.2 11.6 (15.6) 14.2 16.8
Pro-Fac share of earnings.............................. 16.8 -- (16.8) -- --
-------- ------- ------------ -------- -------------
Total cost and expenses........................... 810.3 70.7 (92.6) 788.4 916.0
-------- ------- ------------ -------- -------------
Income (loss) before taxes............................. 18.8 23.7 (1.8)(A) 40.7 (37.4)
(Provision) benefit for taxes.......................... (8.7) 0.8 -- (7.9) (3.9)
-------- ------- ------------ -------- -------------
Net income (loss)...................................... $ 10.1 $24.5 $ (1.8)(A) $ 32.8 $ (41.3)
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
</TABLE>
- ------------
(A) Amounts represent the balance of the fiscal 1994 share of earnings between
Curtice-Burns and Pro-Fac which is currently under dispute. See discussion
at Note 2.
- ----------------------------------------------------------
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of operations.
F-45
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
JUNE 25, 1994
----------------------------------------------- JUNE 26, 1993
CURTICE- -------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
-------- ------- ------------ -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets(A)(C)................................... $247.5 $ 46.7 $ (42.9) $251.3 $ 268.9
Property, plant and equipment, net(B).................. 167.5 -- -- 167.5 192.5
Investment in direct financing leases(C)............... -- 123.7 (123.7) -- --
Due from Curtice-Burns(D).............................. -- 78.0 (78.0) -- --
Goodwill and other intangibles......................... 24.9 24.9 -- 49.8 53.1
Other assets........................................... 7.0 22.7 -- 29.7 26.9
-------- ------- ------------ -------- -------------
Total assets................................. $446.9 $296.0 $ (244.6) $498.3 $ 541.4
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
LIABILITIES AND NET WORTH
Current liabilities(A)(C).............................. $143.4 $ 44.6 $ (41.1) $146.9 $ 166.8
Lease obligations(C)................................... 125.0 -- (123.7) 1.3 1.8
Long-term debt --
Due Pro-Fac(D).................................... 78.0 -- (78.0) -- --
Due others(E)..................................... 1.1 127.1 128.2 174.4
Other liabilities...................................... 18.5 0.5 -- 19.0 12.8
-------- ------- ------------ -------- -------------
Total liabilities...................................... 366.0 172.2 (242.8) 295.4 355.8
Shareholders' equity and members' capitalization(E).... 80.9 123.8 (1.8)(F) 202.9 185.6
-------- ------- ------------ -------- -------------
Total liabilities and net worth.............. $446.9 $296.0 $ (244.6) $498.3 $ 541.4
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
</TABLE>
- ------------
Notes to combined balance sheet:
(A) Current assets of Pro-Fac consist principally of amounts due from
Curtice-Burns with respect to the Agreement described in Note 2. Such
amounts are eliminated for purposes of this balance sheet.
(B) Property, plant and equipment owned by Pro-Fac (with net book value $141.3
million at June 25, 1994) is leased to Curtice-Burns on a financing basis.
Such leased assets are reclassified as property, plant and equipment for
purposes of this balance sheet.
(C) The majority of Curtice-Burns' lease obligations are payable to Pro-Fac and
amount to $141.3 million at June 25, 1994, of which $17.6 million is
payable currently. The related Curtice-Burns liability and Pro-Fac
receivable are eliminated for purposes of this balance sheet.
(D) Long-term borrowings by Curtice-Burns from Pro-Fac under the Agreement are
eliminated for purposes of this balance sheet.
(E) Shareholders' equity of Curtice-Burns consists of Class A common stock,
$6.6 million; Class B common stock, $2.0 million; additional paid-in
capital, $14.2 million; and retained earnings, $58.1 million.
(F) Amount represents the balance of the fiscal 1994 share of earnings between
Curtice-Burns and Pro-Fac which is currently under dispute. See discussion
at Note 2.
F-46
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
JUNE 25, 1994
----------------------------------------------- JUNE 26, 1993
CURTICE- -------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
-------- ------- ------------ -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities............ $ 21.8 $ 18.0 $ (0.9) $ 38.9 $ 42.2
Net cash provided by (used in) investing
activities......................................... 33.9 32.9 (44.4) 22.4(A) (17.1)
Net cash (used in) provided by financing
activities......................................... (59.4) (50.9 ) 45.3 (65.0) (24.7)
-------- ------- ------------ -------- -------------
Net change in cash................................... (3.7) -- -- (3.7) 0.4
Cash at beginning of year............................ 6.5 -- -- 6.5 6.1
Cash at end of year.................................. $ 2.8 $ -- $-- $ 2.8 $ 6.5
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amount capitalized)............ $ 18.6 $ 12.1 $(15.6) $ 15.1 $ 17.3
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
Income taxes, net............................... $ 15.0 $ (1.0 ) $-- $ 14.0 $ 2.9
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Capital lease obligations incurred.............. $ 10.7 $ -- $(10.0) $ 0.7 $ 3.0
-------- ------- ------------ -------- -------------
-------- ------- ------------ -------- -------------
Conversion of retains into preferred stock...... $ 4.9 $ 4.9 $ 5.9
------- -------- -------------
------- -------- -------------
Net proceeds allocated to members but retained by the
Cooperative........................................ $ 14.2 $ 14.2 $ 4.8
------- -------- -------------
------- -------- -------------
</TABLE>
- ------------
(A) Amount represents the balance of the fiscal 1994 share of earnings between
Curtice-Burns and Pro-Fac which is currently under dispute. See discussion
at Note 2.
- ----------------------------------------------------------
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of cash flows.
NOTE 4. LEASES
At June 25, 1994 and June 26, 1993 Pro-Fac had investments in financing
leases of $141,322,000 and $173,513,000, respectively, of which $17,645,000 and
$21,184,000, were due currently.
Minimum rent payments to be received during each of the next five fiscal
years are as follows: 1995-$17,645,000; 1996-$15,829,000; 1997-$14,590,000;
1998-$13,276,000; and 1999-$11,963,000. The minimum rent payments do not include
executory costs, since such costs are paid directly by Curtice-Burns and they do
not include interest, since interest amounts are determined and billed to
Curtice-Burns based upon Pro-Fac's borrowing costs required to finance the
leased assets.
NOTE 5. TAXES ON INCOME
In December 1991, the national office of the Internal Revenue Service
issued a technical advice memorandum ('TAM') concluding that virtually all of
Pro-Fac's income arises from patronage sources. As a result of the TAM, in
January 1992 an additional distribution of patronage proceeds for fiscal 1991
was made to members in the amount of $3,727,000. Patronage proceeds available
for distribution are
F-47
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
determined by the Board of Directors each year, as stipulated in the Bylaws. As
the longer term effects of the TAM are further researched and analyzed, it is
possible that the Board may calculate future patronage proceeds available for
distribution utilizing a different formula than that used for 1992 and 1993.
A summary of taxable income (loss) and the related (benefit) provision for
income taxes for fiscal 1994, 1993 and 1992 follows.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
JUNE 25, JUNE 26, JUNE 26,
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Taxable income (loss):
Excess (deficiency) of revenues before taxes, dividends and allocation of
net proceeds........................................................... $ 23,698 $(17,498) $ 12,754
Less patronage income to be allocated to members for current period...... (15,546) (5,261) (13,040)
Less cash dividends paid on capital stock................................ (4,390) (4,548) --
Less utilization of net operating loss carryforwards..................... (3,857) -- --
Additional fiscal 1991 distribution...................................... -- -- 3,727
Difference between book and tax methodologies............................ 95 52 996
-------- -------- --------
Taxable income (loss) to the Cooperative............................ $ 0 $(27,255) $ 4,437
-------- -------- --------
-------- -------- --------
Provision (benefit) for income taxes:
Federal:
Current............................................................. $ 267 $ 207 $ (1,560)
Deferred............................................................ (613) (207) 307
-------- -------- --------
(346) -- (1,253)
State............................................................... (498) -- 102
-------- -------- --------
$ (844) $ -- $ (1,151)
-------- -------- --------
-------- -------- --------
Effective tax rate (percent):
Federal.................................................................. 34.0% (34.0)% 34.0%
Loss for which no benefit was recorded................................... -- 34.0 --
Utilization of net operating loss carryforward........................... (34.0) -- --
State (net of federal tax benefit)....................................... 0.4 -- 1.6
Other.................................................................... (4.0) -- 0.7
-------- -------- --------
Sub-total...................................................... (3.6) -- 36.3
Tax benefits resulting from the IRS Technical Advice Memorandum............... -- -- (62.3)
-------- -------- --------
Total..................................................... (3.6)% --% (26.0)%
-------- -------- --------
-------- -------- --------
</TABLE>
In August of 1993, the Internal Revenue Service issued a determination
letter which concluded that the Cooperative is exempt from federal income tax to
the extent provided by Section 521 of the Internal Revenue Code, 'Exemption of
Farmers' Cooperatives from Tax.' Unlike a non-exempt cooperative, a tax-exempt
cooperative is entitled to deduct cash dividends it pays on its capital stock in
computing its taxable income. This exempt status is retroactive to fiscal year
1986 and is anticipated to apply to future years as long as there is no
significant change in the way in which the Cooperative operates. In conjunction
with this ruling, the Cooperative has filed for tax refunds for fiscal years
1986 to 1990 in the amount of approximately $5.8 million and interest payments
of approximately $3.4 million. In addition, it is anticipated that the
Cooperative will file for tax refunds for fiscal years 1991 and 1992 in the
amount of approximately $3.1 million and interest payments of approximately $0.4
million. No such refund amounts have been reflected in the Cooperative's
financial statements as of June 25, 1994. It is anticipated that the refund
amounts will be recognized upon receipt.
F-48
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A benefit has not been recorded for the net operating loss carryforward
resulting from 1993 operations due to the uncertainties surrounding utilization
in future years.
Deferred tax assets have been established for the future tax benefit of the
redemption on non-qualified retains.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, 'Accounting for Income Taxes,' ('SFAS
109') and the Cooperative has adopted the provisions of this standard as of June
29, 1991. There was no effect on the 1992 provision for income taxes for this
accounting change as the Cooperative was previously accounting for income taxes
in accordance with SFAS 96.
NOTE 6. CAPITALIZATION
Preferred Stock -- Preferred stock originates from the conversion at par
value of retains. Preferred stock is non-voting, except that the holders of
preferred and common stock would be entitled to vote as separate classes on
certain matters which would affect or subordinate the rights of the class. The
preferred stock is segregated by the original year of issue in the records of
the Cooperative.
The Cooperative is entitled to redeem or retire all or any portion of its
outstanding preferred stock, at par value, upon 90 days notice.
Common Stock -- The common stock purchased by members is related to the
crop delivery of each member. Regardless of the number of shares held, each
member has one vote.
Common stock may be transferred to another grower only with approval of the
Pro-Fac Board of Directors. If a member ceases to be a producer of agricultural
products which he markets through the Cooperative, then he must sell his common
stock to another grower acceptable to the Cooperative. If no such grower is
available to purchase the stock, then the member must provide one year's advance
written notice of his intent to withdraw, after which the Cooperative must
purchase his common stock at par value. (See Note 7 for common stock dividend
information.)
Due to the uncertainty surrounding the potential change of control of
Curtice-Burns and its implications to the Integrated Agreement, the Board of
Directors, during 1994, approved a moratorium on all transactions involving
common stock and waived the restriction on the utilization of agent farmers to
satisfy supply commitments. As a Merger Agreement between the Cooperative and
Curtice-Burns was entered into on September 27, 1994, it is anticipated that the
Board of Directors will re-evaluate the above described restrictions.
At June 25, 1994 and June 26, 1993, there were outstanding subscriptions,
at par value, for 9,270 and 24,788 shares of common stock, respectively. These
shares are issued as subscription payments are received.
Retained Earnings Allocated to Members ('Retains') -- Retains arise from
patronage income and are allocated to the accounts of members within 8.5 months
of the end of each fiscal year.
Qualified Retains -- Qualified retains are freely transferable and normally
mature into preferred stock in December of the fifth year after allocation.
Qualified retains are taxable income to the member in the year the allocation is
made.
Non-Qualified Retains -- Non-qualified retains may not be sold or
purchased. The present intention of the Board of Directors is that the
non-qualified retains allocation be redeemed in five years through partial
payment in cash and issuance of preferred stock. The non-qualified retains will
not be taxable to the member until the year of conversion. Non-qualified retains
may be subject to later adjustment if such is deemed necessary by the Board of
Directors because of events which may occur after the retains were allocated.
F-49
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Earned Surplus (Unallocated and Apportioned) -- Earned surplus consists of
accumulated income after distribution of earnings allocated to members,
dividends and after state and federal income taxes. Earned surplus is reinvested
in the business in the same fashion as retains. (See Note 5.)
Stabilization Program -- Each year a portion of the earnings is available
for the commercial market value stabilization program. The amount designated for
the program is determined at the discretion of the Board of Directors based upon
the amount needed to accumulate the maximum authorized, which is 15% of the
previous year's commercial market value of crops delivered. In a year when
revenues are insufficient to pay 100% of commercial market value, the
stabilization program, with Board approval, will provide for extra payments to
be made up to the amount previously designated for the program. The amount
designated to the program was $8,970,000 at June 25, 1994.
Market for Pro-Fac Securities -- There is no established market for trading
Pro-Fac common stock. All trades have been arranged on a private basis between
buyers and sellers.
Transfers of preferred stock and qualified retained earnings can be
arranged on a regular basis through the Buffalo offices of First Albany
Corporation or Trubee, Collins and Company, registered securities broker
dealers. Transfers of preferred stock can also be arranged on a regular basis
through the Erie, Pennsylvania office of Advest, registered securities broker
dealer. There can be no assurance this market will have the necessary volume of
transactions to continue in the future.
NOTE 7. DIVIDENDS ON CAPITAL STOCK
Dividends on preferred and common stock are declared at the discretion of
the Board of Directors and are paid out of legally available funds. Preferred
shareholders are entitled to a dividend of up to 12% of the par value of the
stock if declared by the Board. Pursuant to New York State laws, applicable to
agricultural cooperatives, dividends have been declared and paid subsequent to
the fiscal year to which they relate. In fiscal 1994 and 1993, dividends on
preferred stock were paid at a rate of 6.25 and 7.25%, respectively, of the par
value and dividends on common stock were paid at a rate of 5% of the par value.
Subsequent to June 25, 1994, the Cooperative declared a cash dividend of
6.75% of the par value of preferred stock and 5.5% of the par value of the
common stock, payable on July 15, 1994. These dividends amounted to $4,914,000
and will appear in the fiscal 1995 Statement of Net Proceeds.
NOTE 8. RESTRUCTURING PROGRAM
THE CONCEPTUAL VISION AND STRATEGY
The restructuring program first initiated in fiscal 1993 was based on
Curtice-Burns' new vision of a company smaller in sales but more profitable, as
measured by return on sales and equity, and possessing the financial and
management resources sufficient to drive growth in carefully selected product
line markets in which Curtice-Burns can prosper for the long term. Thus, the
strategy was to focus on a more limited number of product lines which now have a
strong, competitive position.
The Plan outlined in 1993 is to restructure the business to a more
profitable base. At the same time, the remaining businesses were to be managed
to optimize earnings growth by installing corporate-wide purchasing, and a
corporate-wide focus of capital spending.
The third leg of the strategy was to accelerate Curtice-Burns' national
sales and distribution programs by executing new product programs in store-brand
retail dressings, salsa and chunky soups and the 'More Fruit/More Flavor' pie
filling program.
F-50
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXECUTION OF THE PROGRAM
The first step of the restructuring program was to divest businesses that
were unprofitable or declining for Curtice-Burns but would fit strategically
with other business portfolios. During fiscal 1993, Curtice-Burns divested Lucca
Frozen Foods. A loss of approximately $2.7 million (before dividing with Pro-Fac
and before taxes) was recognized on this transaction. At the end of fiscal 1993,
Curtice-Burns wrote down the assets and provided for the expenses to dispose of
the Hiland potato chips and meat snacks businesses during fiscal 1994. On
November 22, 1993, Curtice-Burns sold certain assets of the Hiland potato chips
business for $2.0 million at closing, plus approximately $1.0 million paid in
installments over three months. On February 22, 1994, Curtice-Burns sold the
meat snacks business located in Denver, Colorado and Albany, Oregon to Oberto
Sausage Company of Kent, Washington. Under the agreement, Oberto has purchased
certain assets and assumed certain liabilities of the meat snacks operation,
excluding plant, equipment, and trademarks. Curtice-Burns will lease its Albany
Oregon manufacturing facility and equipment and license its trademarks, trade
names, etc. to Oberto until February 1995, at which time Oberto is contractually
obligated to purchase these assets. The sale of the Hiland potato chips and meat
snacks businesses did not result in any significant gain or loss in fiscal 1994
after giving effect to the restructuring charges recorded in fiscal 1993;
however, charges of $3.1 million were incurred in fiscal 1994 to adjust previous
estimates. In the fiscal year ended June 26, 1993, Curtice-Burns incurred losses
of $13.2 million from the meat snacks and Hiland potato chips businesses before
dividing such losses with Pro-Fac and before taxes.
On November 19, 1993, Curtice-Burns sold the oats portion of the National
Oats business for $39 million. The oats business contributed approximately $1.4
million of earnings in fiscal 1993 before dividing with Pro-Fac and before
taxes. The sale of the oats business resulted in an approximate $10.9 million
gain. The popcorn portion of the National Oats Division was transferred to the
Comstock Michigan Fruit Division.
During fiscal 1993 and 1994, Curtice-Burns also made staff reductions in
selected locations throughout Curtice-Burns. A $1.0 million accrual relating to
such costs was recorded as part of the fiscal 1993 restructuring charge.
Thus, a major part of the restructuring plan was successfully executed
during fiscal 1994.
As reported above, Curtice-Burns incurred restructuring charges in fiscal
1993 of $61.0 million (before dividing such charges with Pro-Fac and before
taxes), which included the loss incurred on the sale of the Lucca frozen entree
business, anticipated losses on the sale of the meat snacks and Hiland potato
chips businesses, and other costs (primarily severance and losses prior to sale)
in conjunction with the restructuring program. Virtually all of this charge was
a revaluation of assets, rather than cash expense.
Having completed the first phase of the restructuring program in fiscal
1993, the second phase was approved by Curtice-Burns' Board of Directors in
August 1994. In connection with the second phase, the company is evaluating
several alternatives regarding the Nalley's snack food business in the United
States, including its possible sale to a third party. A charge, not to exceed
$12.0 million, before the split with Pro-Fac and before taxes, for this phase of
the restructuring program will be recorded during the first quarter of fiscal
1995.
With respect to the potential sale of the snack food business,
Curtice-Burns has signed a letter of intent with Country Crisp Foods of Salt
Lake City, Utah. The letter of intent is subject to a number of conditions,
including successful financing by the purchaser and the negotiation of a
definitive purchase agreement. Country Crisp, a regional snack food company
operating in the inter-mountain states of Colorado, Utah, Wyoming, Idaho, Nevada
and New Mexico, will continue to market the Nalley's brand snacks under a
licensing arrangement with Curtice-Burns. If this sale is finalized, it may
result in a revision to the aforementioned reserve.
F-51
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. OTHER MATTERS
HARVEST STATES COOPERATIVE
In conjunction with the sale of the National Oats division by
Curtice-Burns, Pro-Fac terminated the membership of the Harvest States
Cooperatives ('Harvest States') in Pro-Fac. Harvest States was the National Oats
divisions's only supplier of oats. As a result of this action, Harvest States
filed a claim against Pro-Fac for, among other things, the receipt of payments
for future oats purchases after the sale of National Oats division through
fiscal year 1995.
Under an agreement with Curtice-Burns, Curtice-Burns agreed to indemnify
Pro-Fac as to certain expenses arising out of the termination of the membership
of Harvest States in Pro-Fac. It was agreed that any settlement payments would
be deemed an expense of Curtice-Burns under the division of earnings with
Pro-Fac. The exact amount of any potential settlement related to this issue
cannot be estimated at June 25, 1994, but management does not believe that this
is a material exposure to Curtice-Burns.
SUBSEQUENT EVENTS
In July 1994, a plant operated by Curtice-Burns's Southern Frozen Foods
division, located in Montezuma, Georgia, was damaged by fire. The plant itself
is owned by Pro-Fac and leased to Curtice-Burns under the terms of the
Integrated Agreement. Management is currently in the process of assessing the
extent of damage to the facility. All material costs associated with the
facility repairs and business interruption are anticipated to be covered under
Curtice-Burns's insurance policies. The Springfield Bank for Cooperatives is
loss payee on the property insurance policy under the terms of the Security
Agreement with lenders. See Note 5.
On September 27, 1994, Pro-Fac and Curtice-Burns entered into a Merger
Agreement pursuant to which Pro-Fac will purchase all of the shares of Class A
common stock and Class B common stock of Curtice-Burns for $19.00 per share, or
approximately $167.0 million in the aggregate. Pro-Fac will immediately commence
a tender offer for all of the shares to be followed, if successful, by a merger
of a subsidiary of Pro-Fac into Curtice-Burns. Pro-Fac has advised Curtice-Burns
that it expects to complete its tender offer on or about November 1, 1994.
NOTE 10. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
ACCOUNTANTS
On November 3, 1994, PF Acquisition Corp., a New York corporation and a
wholly owned subsidiary of Pro-Fac, consummated a merger with Curtice-Burns.
Curtice-Burns will continue as the surviving corporation and has, therefore,
become a wholly owned subsidiary of Pro-Fac. In conjunction with the
consummation of this merger, the disputes between Curtice-Burns and Pro-Fac as
described in Note 2 have been resolved.
F-52
<PAGE>
The interim financial statements contained herein are unaudited, but in the
opinion of the management of Pro-Fac Cooperative, Inc. include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations for these periods. The results of
operations for the interim periods are not necessarily indicative of the results
of operations for the full year.
PRO-FAC COOPERATIVE, INC.
STATEMENT OF NET PROCEEDS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 24, SEPTEMBER 25,
1994 1993
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues:
Proceeds from sale of crops to Curtice-Burns Foods, Inc.
Estimated commercial market value delivered during the period............ $37,657 $42,327
Additional proceeds under the Integrated Agreement....................... 2,368 2,773
Interest income.......................................................... 4,247 4,124
Patronage dividend from Springfield Bank for Cooperatives................ 275 350
------------- -------------
Total revenues...................................................... 44,547 49,574
------------- -------------
Costs and expenses:
Estimated commercial market value paid to or accrued for the accounts of
members during the period.................................................... 37,657 42,327
Interest expense.............................................................. 2,939 3,168
Administrative expenses....................................................... 222 203
------------- -------------
Total costs and expenses............................................ 40,818 45,698
------------- -------------
Excess of revenues before taxes, dividends and allocation of net proceeds.......... 3,729 3,876
Provision for taxes on income...................................................... (25) (409)
------------- -------------
Net income (proceeds before dividends)............................................. 3,704 3,467
Dividends on common and preferred stock............................................ (4,914) (4,390)
------------- -------------
Net proceeds....................................................................... (1,210) (923)
Allocation from earned surplus..................................................... 1,210 923
------------- -------------
Net proceeds available to members.................................................. $-- $--
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
PRO-FAC COOPERATIVE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 24, JUNE 25,
1994 1994
------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash................................................................................. $ 113 $ 10
Accounts receivable.................................................................. 140 68
Receivable from Curtice-Burns Foods, Inc............................................. 51,929 11,197
Current portion of long-term loans receivable from Curtice-Burns Foods, Inc.......... 14,000 14,000
Current portion of investment in direct financing leases............................. 17,645 17,645
Current portion of investment in Springfield Bank for Cooperatives................... 1,308 1,324
Income taxes refundable..............................................................
Prepaid expenses..................................................................... 3,437 2,464
------------- --------
Total current assets............................................................ 88,572 46,708
Long-term portion of investment in direct financing leases............................... 113,083 123,677
Long-term loans receivable from Curtice-Burns Foods, Inc................................. 88,952 78,040
Long-term portion of investment in Springfield Bank for Cooperatives..................... 19,968 19,632
Deferred tax benefit..................................................................... 2,623 2,623
Finance receivable related to intangibles................................................ 24,486 24,909
Other assets............................................................................. 450 462
------------- --------
Total assets.................................................................... $ 338,134 $296,051
------------- --------
------------- --------
Liabilities and Shareholders' and Members Capitalization
Current liabilities:
Notes payable........................................................................ $ 50,000 $ 11,500
Accounts payable..................................................................... 2,288 617
Accrued interest..................................................................... 2,802 2,536
Federal and state income taxes payable............................................... 697 668
Current portion of long-term debt.................................................... 14,000 14,000
Amounts due members.................................................................. 18,762 15,327
------------- --------
Total current liabilities....................................................... 88,549 44,648
Long-term debt........................................................................... 126,925 127,134
Other non-current liabilities............................................................ 521 504
------------- --------
Total liabilities............................................................... 215,995 172,286
------------- --------
Commitments
Shareholders' and members' capitalization:
Retained earnings allocated to members............................................... 36,912 36,924
Non-qualified allocation to members.................................................. 5,979 7,454
Capital Stock --
Preferred, par value $25, authorized -- 5,000,000 shares; issued and
outstanding -- 2,378,807, 2,378,807 and 2,148,050, respectively............... 65,590 64,418
Common, par value $5, authorized -- 5,000,000 shares
<CAPTION>
SEPTEMBER 25,
1993
-------------
<S> <C>
Current assets:
Cash................................................................................. $ 16
Accounts receivable.................................................................. 25
Receivable from Curtice-Burns Foods, Inc............................................. 41,308
Current portion of long-term loans receivable from Curtice-Burns Foods, Inc.......... 16,000
Current portion of investment in direct financing leases............................. 21,184
Current portion of investment in Springfield Bank for Cooperatives................... 1,371
Income taxes refundable..............................................................
Prepaid expenses..................................................................... 1,154
-------------
Total current assets............................................................ 81,058
Long-term portion of investment in direct financing leases............................... 150,924
Long-term loans receivable from Curtice-Burns Foods, Inc................................. 80,848
Long-term portion of investment in Springfield Bank for Cooperatives..................... 17,183
Deferred tax benefit..................................................................... 2,010
Finance receivable related to intangibles................................................ 26,125
Other assets............................................................................. 257
-------------
Total assets.................................................................... $ 358,405
-------------
-------------
Liabilities and Shareholders' and Members Capitalization
Current liabilities:
Notes payable........................................................................ $ 42,000
Accounts payable..................................................................... 712
Accrued interest..................................................................... 3,049
Federal and state income taxes payable............................................... 342
Current portion of long-term debt.................................................... 16,000
Amounts due members.................................................................. 18,876
-------------
Total current liabilities....................................................... 80,979
Long-term debt........................................................................... 168,000
Other non-current liabilities............................................................ 431
-------------
Total liabilities............................................................... 249,410
-------------
Commitments
Shareholders' and members' capitalization:
Retained earnings allocated to members............................................... 29,435
Non-qualified allocation to members.................................................. 5,704
Capital Stock --
Preferred, par value $25, authorized -- 5,000,000 shares; issued and
outstanding -- 2,378,807, 2,378,807 and 2,148,050, respectively............... 59,470
Common, par value $5, authorized -- 5,000,000 shares
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 24, JUNE 25, SEPTEMBER 25,
1994 1994 1993
------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Shares issued................................ 2,036,655 2,056,878 2,695,885
Shares subscribed............................ 9,270 9,270 18,038
------------- --------- -------------
Total subscribed and issued.............. 2,045,925 2,066,148 2,713,923
Less subscriptions receivable in
installments............................... (9,270) (9,270) (18,038)
------------- --------- -------------
2,036,655 2,256,878 2,695,885 10,183 10,284
------------- --------- -------------
------------- --------- -------------
Earned surplus............................... 3,475 4,685
------------- --------
Total shareholders' and members'
capitalization........................ 122,139 123,765
------------- --------
Total liabilities and
capitalization.................... $ 338,134 $296,051
------------- --------
------------- --------
<CAPTION>
<S> <C>
Shares issued................................
Shares subscribed............................
Total subscribed and issued..............
Less subscriptions receivable in
installments...............................
13,479
Earned surplus............................... 907
-------------
Total shareholders' and members'
capitalization........................ 108,995
-------------
Total liabilities and
capitalization.................... $ 358,405
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE>
PRO-FAC COOPERATIVE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------
SEPTEMBER 24, SEPTEMBER 25,
1994 1993
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................... $ 3,704 $ 3,467
Change in assets and liabilities:
Accounts receivable........................................................... (72) --
Accounts payable and accrued expenses......................................... 1,937 (277)
Amounts due to members........................................................ 3,435 4,351
Federal and state taxes payable/refundable.................................... 29 412
Other assets and liabilities.................................................. (944) (452)
------------- -------------
Net cash provided by operating activities..................................... 8,089 7,501
------------- -------------
Cash flows from investing activities:
Due from Curtice-Burns, net................................................... (51,644) (34,395)
Return from direct investment in financing leases............................. 10,594 1,405
Investment in Springfield Bank................................................ (320) (568)
Cash received from the finance receivable related to intangibles.............. 423 420
------------- -------------
Net cash used in investing activities......................................... (40,947) (33,138)
------------- -------------
Cash flows from financing activities:
Proceeds from short-term debt................................................. 38,500 30,000
Payments on long-term debt.................................................... (209) --
Repurchase of common stock, net of issuances.................................. (101) 24
Cash portion of non-qualified conversion...................................... (304) --
Cash paid in lieu of fractional shares........................................ (11) --
Cash dividends paid........................................................... (4,914) (4,390)
------------- -------------
Net cash provided by financing activities..................................... 32,961 25,634
------------- -------------
Net change in cash................................................................. 103 (3)
Cash at beginning of period........................................................ 10 19
------------- -------------
Cash at end of period.............................................................. $ 113 $ 16
------------- -------------
------------- -------------
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest................................................................. $ 2,677 $ 3,146
------------- -------------
------------- -------------
Income taxes, net........................................................ $ 54 $ (3)
------------- -------------
------------- -------------
Supplemental schedule of non-cash investing and financing activities:
Conversion of retains to preferred stock...................................... $ 1,172 $--
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. AGREEMENT WITH CURTICE-BURNS FOODS, INC.
Pro-Fac has a contractual relationship with Curtice-Burns under an
Agreement ('the Agreement') consisting of five sections: Operations Financing,
Marketing, Facilities Financing, Management and Settlement, which extends to
1997 and provides for two successive five-year renewals at the option of
Curtice-Burns.
The provisions of the Agreement include the financing of certain assets
utilized in the business of Curtice-Burns and provide a sharing of income and
losses between Curtice-Burns and Pro-Fac. Should Curtice-Burns terminate the
Agreement, Curtice-Burns has the option of purchasing those assets financed by
Pro-Fac at the book value at that time.
Revenues received from Curtice-Burns under the Agreement for the quarters
ended September 24, 1994 and September 25, 1993 include: commercial market value
of crops delivered, $37,675,000 and $42,327,000, respectively; interest income,
$4,247,000 and $4,124,000, respectively; and additional proceeds from profit
sharing provisions, $2,368,000 and $2,773,000, respectively. In addition,
Pro-Fac received financing amortization payments of $11,016,000 and $1,825,000
for the quarters ended September 24, 1994 and September 25, 1993, respectively.
See discussion below relative to disputed profit sharing.
DEVELOPMENTS RELATED TO CHANGE OF CONTROL OF CURTICE-BURNS
On March 23, 1993, Curtice-Burns announced that Agway, which through its
wholly-owned subsidiary, AHI, owned approximately 99% of Curtice-Burns' Class B
shares and approximately 14% of the Class A shares as of June 25, 1994, was
considering the potential sale of its interest in Curtice-Burns. In August 1993,
Curtice-Burns Board of Directors authorized Curtice-Burns management, with the
advice of its investment bankers, to pursue strategic alternatives for
Curtice-Burns. These options included (i) negotiations with Pro-Fac relative to
Pro-Fac gaining control of the business; (ii) the possible sale of the entire
equity of Curtice-Burns to a third party; and (iii) the implementation of
additional restructuring actions that my include recapitalizing Curtice-Burns to
buy out Pro-Fac. Under the Integrated Agreement, title to substantially all of
Curtice-Burns fixed assets is held by Pro-Fac, and Pro-Fac provides the major
portion of the financing of Curtice-Burns operations. Under the Integrated
Agreement, Curtice-Burns has an option to purchase these assets from Pro-Fac at
their book value. However, there presently exists a disagreement with Pro-Fac as
to how such settlement amount would be calculated. Exercise of the buyout option
would result in the termination of the Integrated Agreement with Pro-Fac. In
such event, Curtice-Burns would be required to repay all debt owed to Pro-Fac.
Curtice-Burns actively explored these alternatives during fiscal 1994. On
June 8, 1994, Curtice-Burns Board of Directors voted to pursue a proposal
submitted by Dean Foods Company ('Dean Foods') to acquire all the outstanding
shares of common stock of Curtice-Burns at a maximum cash price of $20.00 per
share, subject to a number of contingencies, including an agreement with Pro-Fac
covering the termination of the Integrated Agreement, an agreement with Hormel
Foods Corporation for the purchase of Nalley's (excluding Nalley's Canada Ltd.
and the Nalley' U.S. Chips and Snacks business) for $150.0 million, clearance of
the transaction by appropriate government agencies and negotiation of definitive
agreements.
On August 4, 1994, Pro-Fac submitted a proposal to the Board of Directors
of Curtice-Burns to acquire the shares for cash in the amount of $19.00 per
share. Pro-Fac's proposal was subject to certain terms and conditions, including
receipt of approval of the Board of Directors and shareholders of Curtice-Burns,
receipt of approval of a majority of Pro-Fac's members and receipt of sufficient
financing to consummate the acquisition. In September Pro-Fac modified its
proposal by removing several contingencies and indicating its interest in
purchasing the share pursuant to a tender offer.
F-56
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At its special meeting on September 27, 1994, the Board of Directors of
Curtice-Burns accepted Pro-Fac's proposal. Pro-Fac and Curtice-Burns entered
into the Merger Agreement on September 27, 1994. Pursuant to the Merger
Agreement, Curtice-Burns notified Dean Foods that it had accepted Pro-Fac's
proposal and was terminating all negotiations with Dean Foods and other parties
for the purchase of all or part of Curtice-Burns. Management expects such merger
to finalized in the second quarter of fiscal 1995.
During fiscal 1994 and the first quarter of fiscal 1995, Curtice-Burns
expensed $3.5 million and $1.8 million, respectively, of legal, accounting,
investment banking and other expenses relative to the change of control issue.
In recognizing these expenses, Curtice-Burns allocated half of this amount to
Pro-Fac as a deduction to the profit split. Pro-Fac has objected to this
allocation. This dispute will terminate upon completion of the merger.
On October 4, 1994, Pro-Fac initiated a tender offer for all of
Curtice-Burns outstanding stock at $19.00 per share. At the expiration of the
tender offer on November 2, 1994, 6,229,442 shares of Class A and 2,046,997
shares of Class B common stock (or approximately 94% and 99%, respectively of
the total number of outstanding shares of Class A and Class B common stock of
Curtice-Burns) had been validly tendered and not withdrawn. All such tendered
shares were accepted for payment by PF Acquisition Corp., a wholly-owned
subsidiary of Pro-Fac. On November 3, 1994, PF Acquisition Corp. merged into
Curtice-Burns, making Curtice-Burns a wholly-owned subsidiary of Pro-Fac.
Roy A. Myers, who has served as the general manager of Pro-Fac since 1987,
has been named president and chief executive officer of Curtice-Burns, replacing
J. William Petty, who has resigned. Pro-Fac and Curtice-Burns will continue to
operate under two separate boards. The Pro-Fac Board of Directors will remain
unchanged, and a new Curtice-Burns Board, consisting of seven directors, has
been appointed.
Financing for the offer was obtained through $250.1 million of seasonal and
term senior bank financing from Springfield Bank for Cooperatives and from the
issuance of $160.0 million in senior subordinated debt securities issued to
qualified institutional buyers. The bonds will carry an annual interest rate of
12 1/4%. In addition, Pro-Fac contributed $134.6 million in capital to complete
the transaction.
NOTE 2. RESTRUCTURING PROGRAM
THE CONCEPTUAL VISION AND STRATEGY
The restructuring program first initiated in fiscal 1993 was based on
Curtice-Burns new vision of a company smaller in sales but more profitable, as
measured by return on sales and equity, and possessing the financial and
management resources sufficient to drive growth in carefully selected product
line markets in which Curtice-Burns can prosper for the long term. Thus, the
strategy was to focus on a more limited number of product lines which now have a
strong, competitive position.
The Plan outlined in 1993 is to restructure the business to a more
profitable base. At the same time, the remaining businesses were to be managed
to optimize earnings growth by installing corporate-wide purchasing, and a
corporate-wide focus of capital spending.
The third leg of the strategy was to accelerate Curtice-Burns national
sales and distribution programs by executing new product programs in store-brand
retail dressings, salsa and chunky soups, and the 'More Fruit/More Flavor' pie
filling program.
EXECUTION OF THE PROGRAM
The first step of the restructuring program was to divest businesses that
were unprofitable or declining for Curtice-Burns but would fit strategically
with other business portfolios. During fiscal 1993, Curtice-Burns divested Lucca
Frozen Foods. A loss of approximately $2.7 million (before dividing with
F-57
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Pro-Fac and before taxes) was recognized on this transaction. At the end of
fiscal 1993, Curtice-Burns wrote down the assets and provided for the expenses
to dispose of the Hiland potato chips and meat snacks businesses during fiscal
1994. On November 22, 1993, Curtice-Burns sold certain assets of the Hiland
Potato Chip business for $2.0 million at closing, plus approximately $1.0
million paid in installments over three months. On February 22, 1994,
Curtice-Burns sold the meat snacks business located in Denver, Colorado and
Albany, Oregon to Oberto Sausage Company of Kent, Washington. Under the
agreement, Oberto has purchased certain assets and assumed certain liabilities
of the meat snacks operation, excluding plant, equipment, and trademarks.
Curtice-Burns will lease its Albany Oregon manufacturing facility and equipment
and license its trademarks, trade names, etc. to Oberto until February 1995, at
which time Oberto is contractually obligated to purchase these assets. The sale
of the Hiland and meat snacks businesses did not result in any significant gain
or loss in fiscal 1994 after giving effect to the restructuring charges recorded
in fiscal 1993; however, charges of $3.1 million (before dividing with Pro-Fac
and before taxes) were incurred in fiscal 1994 to adjust previous estimates. In
the fiscal year ended June 26, 1993, Curtice-Burns incurred losses of $13.2
million from the meat snacks and Hiland potato chip businesses before dividing
such losses with Pro-Fac and before taxes.
On November 19, 1993, Curtice-Burns sold the oats portion of the National
Oats business for $39.0 million. The oats business contributed approximately
$1.4 million of earnings in fiscal 1993 before dividing with Pro-Fac and before
taxes. The sale of the oats business resulted in an approximate $10.9 million
gain (before dividing with Pro-Fac and before taxes). The popcorn portion of the
National Oats Division was transferred to the Comstock Michigan Fruit Division.
During fiscal 1993 and 1994, Curtice-Burns also made staff reductions in
selected locations throughout Curtice-Burns. A $1.0 million accrual relating to
such costs was recorded as part of the fiscal 1993 restructuring charge.
Thus, a major part of the restructuring plan was successfully executed
during fiscal 1994.
As reported above, Curtice-Burns incurred restructuring charges in fiscal
1993 of $61.0 million (before dividing such charges with Pro-Fac and before
taxes), which included the loss incurred on the sale of the Lucca frozen entree
business, anticipated losses on the sale of the meat snacks and Hiland
businesses, and other costs (primarily severance and unexpected losses prior to
sale) in conjunction with the restructuring program. Virtually all of this
charge was a revaluation of assets, rather than cash expense.
Having completed the first phase of the restructuring program in fiscal
1993, the second phase was approved by Curtice-Burns Board of Directors in
August 1994. In connection with the second phase, Curtice-Burns is evaluating
several alternatives regarding the Nalley's snack food business in the United
States, including its possible sale to a third party. A charge of $8.4 million
before split with Pro-Fac and before taxes, for this phase of the restructuring
program was recorded during the first quarter of fiscal 1995.
With respect to the potential sale of the snack food business,
Curtice-Burns has signed a letter of intent with Country Crisp Foods of Salt
Lake City, Utah. The letter of intent is subject to a number of conditions,
including successful financing by the purchaser and the negotiation of a
definitive purchase agreement. Country Crisp, a regional snack food company
operating in the inter-mountain states of Colorado, Utah, Wyoming, Idaho, Nevada
and New Mexico, will continue to market the Nalley's brand snacks under a
licensing arrangement with Curtice-Burns.
F-58
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. DEBT
SHORT-TERM DEBT
Short-term borrowings are made by the Cooperative under a seasonal line of
credit with Springfield which currently provides for borrowings up to
$56,000,000. Outstanding borrowings at September 24, 1994 amounted to
$50,000,000.
The Cooperative's short-term borrowings are loaned to Curtice-Burns under
the same conditions and at the same rates as the Cooperative obtained from its
lenders. Provisions of the Agreement between the two companies do however, allow
Pro-Fac, with sufficient notice to Curtice-Burns, to accelerate the repayment of
outstanding debt.
LONG-TERM DEBT
The Cooperative's long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 25,
1994 1993
------------- -------------
<S> <C> <C>
Term loans due Springfield:
Interest rate of 6.8% and 6.3% at 9/24/94 and 9/25/93,
respectively.................................................... $ 140,805,000 $ 184,000,000
Other debt........................................................ 120,000 --
------------- -------------
140,925,000 184,000,000
Less current portion......................................... 14,000,000 16,000,000
------------- -------------
$ 126,925,000 $ 168,000,000
------------- -------------
------------- -------------
</TABLE>
The term loans are collateralized by virtually all the assets of
Curtice-Burns and Pro-Fac. In addition, Curtice-Burns guarantees all of the
Cooperative's bank debt and the Cooperative guarantees Curtice-Burns' short-term
notes payable to commercial banks and certain other debt. The total lines of
credit available to the companies for seasonal borrowings expire annually unless
extended or renewed. Curtice-Burns had short-term notes payable to commercial
banks at September 24, 1994 and September 25, 1993 of $40,000,000 and
$34,000,000, respectively.
ADDITIONAL INFORMATION WITH RESPECT TO BORROWING ARRANGEMENTS
Because Pro-Fac's income is largely determined by the income of
Curtice-Burns and because Pro-Fac guarantees the debt of Curtice-Burns and
Curtice-Burns guarantees the debt of Pro-Fac (substantially all of which is
advanced to Curtice-Burns), management and lenders use combined pro forma
financial statements to assess the financial strength of the two companies.
Specifically, the combined statement of operations, balance sheet and statement
of cash flows portray the financial results, cash flows and equity of
Curtice-Burns and Pro-Fac. Management believes that combined financial
statements are useful because they provide information concerning Pro-Fac's
ability to continue present credit arrangements and/or obtain additional
borrowings in the future.
Certain borrowing agreements require that the companies maintain specified
levels with regard to working capital, tangible net worth, fixed charges and the
incurrence of additional debt. The Cooperative is in compliance with, or has
obtained waivers for, restrictions and requirements under the terms of the
borrowing agreements.
Such financial statements are neither necessary for a fair presentation of
the financial position of Pro-Fac nor appropriate as primary statements for
Curtice-Burns' shareholders or for Pro-Fac shareholders and members because they
combine earnings, assets and liabilities and cash flows which are legally
attributable to either Curtice-Burns' shareholders or to Pro-Fac shareholders
and members, but not to both. Accordingly, the condensed pro forma financial
statements presented herein are special purpose in nature and should be used
only within the context described.
F-59
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------
SEPTEMBER 24, 1994
-------------------------------------------------- SEPTEMBER 25, 1993
CURTICE- ------------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
-------- ------- ------------ -------- ------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales and revenues......................... $176.8 $44.5 $(44.5) $176.8 $210.1
-------- ------- ------------ -------- -------
Cost of sales.............................. 126.8 37.7 (37.7) 126.8 153.1
Restructuring.............................. 8.4 -- -- 8.4 --
Change of control costs.................... 1.8 -- -- 1.8 --
Insurance gain............................. (6.5) -- -- (6.5) --
Selling, administrative and general
expenses................................. 38.0 0.2 (0.2) 38.0 46.1
Interest expense........................... 5.1 2.9 (4.2) 3.8 3.9
Pro-Fac share of earnings.................. 1.5 -- (1.5) -- --
-------- ------- ------------ -------- -------
Total cost and expenses............... 175.1 40.8 (43.6) 172.3 203.1
-------- ------- ------------ -------- -------
Income before taxes........................ 1.7 3.7 (0.9)(A) 4.5 7.0
Provision for taxes........................ (1.4) -- -- (1.4) (2.3)
-------- ------- ------------ -------- -------
Net income................................. $ 0.3 $ 3.7 $ (0.9)(A) $ 3.1 $ 4.7
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
</TABLE>
- ------------
(A) Amounts represent the balance of the first quarter fiscal 1995 share of
earnings between Curtice Burns and Pro-Fac which is currently under
dispute. See discussion at Note 1.
- ----------------------------------------------------------
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of operations.
F-60
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------
SEPTEMBER 24, 1994
-------------------------------------------------- SEPTEMBER 25, 1993
CURTICE- ------------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
-------- ------- ------------ -------- ------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets(A)(C).................. $321.7 $ 88.5 $ (83.6) $326.6 $324.0
Property, plant and equipment,
net(B).............................. 160.3 -- -- 160.3 191.3
Investment in direct financing
leases(C)........................... -- 113.1 (113.1) -- --
Due from Curtice-Burns(D)............. -- 89.0 (89.0) -- --
Goodwill and other intangibles........ 24.5 24.5 -- 49.0 52.2
Other assets.......................... 17.9 23.0 -- 40.9 28.1
-------- ------- ------------ -------- -------
Total assets..................... $524.4 $338.1 $ (285.7) $576.8 $595.6
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
LIABILITIES AND NET WORTH
Current liabilities(A)(C)............. $219.9 $ 88.5 $ (81.0) $227.4 $221.9
Lease obligations(C).................. 114.4 -- (113.1) 1.3 1.8
Long-term debt --
Due Pro-Fac(D)................... 89.0 -- (89.0) -- --
Due others....................... 0.9 126.9 -- 127.8 173.9
Other liabilities..................... 20.3 0.6 -- 20.9 13.4
-------- ------- ------------ -------- -------
Total liabilities................ 444.5 216.0 (283.1) 377.4 411.0
Shareholders' equity and members'
capitalization(E)................... 79.9 122.1 (2.6)(F) 199.4 184.6
-------- ------- ------------ -------- -------
Total Liabilities and Net
Worth.......................... $524.4 $338.1 $ (285.7) $576.8 $595.6
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
</TABLE>
- ------------
Notes to combined balance sheet:
(A) Current assets of Pro-Fac consist principally of amounts due from
Curtice-Burns with respect to the Agreement described in Note 1. Such
amounts are eliminated for purposes of this balance sheet.
(B) Property, plant and equipment to which Pro-Fac holds title (with net book
value of $130.7 million at September 24, 1994) is leased to Curtice-Burns
on a financing basis. Such leased assets are reclassified as property,
plant and equipment for purposes of this balance sheet.
(C) The majority of Curtice-Burns' lease obligations are payable to Pro-Fac and
amount to $130.7 million at September 24, 1994, of which $17.6 million is
payable currently. The related Curtice Burns liability and Pro-Fac
receivable are eliminated for purposes of this balance sheet.
(D) Long-term borrowings by Curtice-Burns from Pro-Fac under the Agreement are
eliminated for purposes of this balance sheet.
(E) Shareholders' equity of Curtice-Burns consists of Class A common stock,
$6.6 million; Class B common stock, $2.0 million; additional paid-in
capital, $14.3 million, and retained earnings, $57.0 million.
(F) Amount represents the balance of the fiscal 1994 and first quarter fiscal
1995 share of earnings between Curtice-Burns and Pro-Fac which is currently
under dispute. See discussion at Note 1.
F-61
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED PRO FORMA CONDENSED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------
SEPTEMBER 24, 1994
-------------------------------------------------- SEPTEMBER 25, 1993
CURTICE- ------------------
BURNS PRO-FAC ELIMINATIONS COMBINED COMBINED
-------- ------- ------------ -------- ------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Net cash (used in)/provided by operating
activities............................... $(68.4) $ 8.1 $ (1.8)(A) $(62.1) $(51.9)
Net cash (used in)/provided by investing
activities............................... (4.4) (40.9 ) 40.6(A) (4.7) (5.0)
Net cash provided by/(used in) financing
activities............................... 77.2 32.9 (38.8) 71.3 58.0
-------- ------- ------------ -------- -------
Net change in cash......................... 4.4 0.1 -- 4.5 1.1
Cash at beginning of period................ 2.9 -- -- 2.9 6.5
-------- ------- ------------ -------- -------
Cash at end of period...................... $ 7.3 $ 0.1 $-- $ 7.4 $ 7.6
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest (net of amount
capitalized)........................ $ 4.6 $ 2.7 $ (4.2) $ 3.1 $ 3.9
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
Income taxes, net..................... $ .6 $ -- $-- $ 0.6 $ 7.5
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Capital lease obligations incurred.... $ 0.9 $ -- $ (0.9) $-- $--
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
Conversion of retains to preferred
stock............................... $-- $ 1.2 $-- $ 1.2 $--
-------- ------- ------------ -------- -------
-------- ------- ------------ -------- -------
</TABLE>
- ------------
(A) Amounts include the balance of the first quarter fiscal 1995 share of
earnings between Curtice Burns and Pro-Fac which is currently under
dispute. See discussion at Note 1.
- ----------------------------------------------------------
Transactions between Curtice-Burns and Pro-Fac have been eliminated for
purposes of this combined statement of cash flows.
NOTE 4 -- OTHER MATTERS
FAVORABLE TAX RULING
In August of 1993, the Internal Revenue Service issued a determination
letter which concluded that the Cooperative is exempt from federal income tax to
the extent provided by Section 521 of the Internal Revenue Code, 'Exemption of
Farmers' Cooperatives from Tax.' Unlike a non-exempt cooperative, a tax-exempt
cooperative is entitled to deduct cash dividends it pays on its capital stock in
computing its taxable income. This exempt status is retroactive to fiscal year
1986 and is anticipated to apply to future years as long as there is no
significant change in the way in which the Cooperative operates. In conjunction
with this ruling, the Cooperative has filed for tax refunds for fiscal years
1986 to 1990 in the amount of approximately $5.8 million and interest payments
of approximately $3.4 million. In addition, it is anticipated that the
Cooperative will file for tax refunds for fiscal years 1991 and 1992 in the
amount of approximately $3.1 million and interest payments of approximately $0.4
million. No such refund amounts have been reflected in the Cooperative's
financial statements as of September 24, 1994. It is anticipated that the refund
amounts will be recognized upon receipt.
F-62
<PAGE>
_____________________________ _____________________________
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.......................... 2
Summary........................................ 3
Risk Factors................................... 13
The Company.................................... 19
The Acquisition................................ 21
Use of Proceeds................................ 23
The Exchange Offer............................. 23
Capitalization................................. 32
Selected Historical Consolidated Financial Data
of the Company............................... 34
Selected Historical Financial Data of
Pro-Fac...................................... 37
Pro Forma Financial Data of the Company........ 38
Pro Forma Financial Data of Pro-Fac and the
Company...................................... 45
Management's Discussion and Analysis of
Financial Condition and Results of Operations
of the Company............................... 52
Management's Discussion and Analysis of
Financial Condition and Results of Operations
of Pro-Fac................................... 66
Business....................................... 69
Management..................................... 79
Executive Compensation......................... 83
Certain Transactions........................... 86
Security Ownership of Certain Beneficial
Owners and Management........................ 90
Description of Certain Indebtedness............ 92
Description of the Notes....................... 93
Plan of Distribution........................... 116
Legal Matters.................................. 117
Experts........................................ 117
Index to Financial Statements.................. F-1
</TABLE>
CURTICE-BURNS FOODS, INC.
------------------
OFFER TO EXCHANGE ITS
12 1/4% SENIOR SUBORDINATED
NOTES DUE 2005
FOR ANY AND ALL OF ITS
OUTSTANDING 12 1/4% SENIOR
SUBORDINATED NOTES DUE 2005
-------------------------
PROSPECTUS
-------------------------
_____________________________ _____________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 722 of the New York Business Corporation Law (the 'New
York Corporation Law') Article V of the By-laws of the Company, a copy of which
is filed as Exhibit 3.4 to this Registration Statement, provides that the
Company shall indemnify any person made, or threatened to be made, a party to
any action or proceeding, whether civil or criminal, by reason of the fact that
he, his testator or intestate is or was a director, officer or employee of the
Company or serves or served any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity at the request
of the Company against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees actually and necessarily incurred
as a result of such action or proceeding or any appeal thereon to the full
extent permitted by the New York Corporation Law. Expenses incurred in defending
a civil or criminal action or proceeding shall be paid by the Registrant in
advance of the final disposition of such action or proceeding to the extent, if
any, authorized by the Board in accordance with the provisions of the New York
Corporation Law, upon receipt of an undertaking by or on behalf of the director,
officer or employee to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company as authorized in the
by-laws or to repay such amount to the extent the expenses so advanced by the
Company or allowed by a court exceed the indemnification to which he is
entitled. The Company shall provide such other indemnification to the directors
and officers of the Company as may, from time to time, be provided pursuant to
resolutions duly adopted by the Board of Directors of the Company.
Section 726 of the New York Corporation Law allows the Company to purchase
and maintain insurance to indemnify (i) the Company for any obligation which it
incurs as a result of the indemnification of directors and officers, (ii)
directors and officers in instances in which they may be indemnified by the
Company, and (iii) directors and officers in instances in which they may not
otherwise be indemnified by the Company provided the contract of insurance
covering such directors and officers provides, in a manner acceptable to the
superintendent of insurance of the State of New York, for a retention amount and
for co-insurance. Notwithstanding the foregoing, no such insurance may provide
for any payment, other than cost of defense, to or on behalf of any director or
officer (i) if a judgment or other final adjudication adverse to the insured
director or officer establishes that his acts of active and deliberate
dishonesty were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled or (ii) in relation to any risk the insurance of which is
prohibited under the insurance law of the State of New York.
Pursuant to Section 402(b) of the New York Corporation Law, paragraph 10 of
the Certificate of Incorporation of the Company, a copy of which is filed as
Exhibit 3.3 to the Registration Statement, provides that no director of the
Company shall be personally liable to the Company or its shareholders for
damages for any breach of duty in such capacity except where a judgment or other
final adjudication adverse to said director establishes: (i) that the director's
acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law; or (ii) that the director personally gained in fact a
financial profit or other advantage to which the director was not legally
entitled; or (iii) that the director's acts violated Section 719 of the New York
Corporation Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------------------------------
<C> <S>
2.1 -- Agreement and Plan of Merger dated as of September 27, 1994 among Pro-Fac Cooperative, Inc.
('Pro-Fac'), PF Acquisition Corp. ('PFAC') and Curtice-Burns Foods, Inc. ('Curtice- Burns').
3.1 -- Certificate of Incorporation of Pro-Fac.
3.2* -- Bylaws of Pro-Fac.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------------------------------
<C> <S>
3.3 -- Certificate of Incorporation of Curtice-Burns.
3.4 -- Bylaws of Curtice-Burns.
3.5* -- Certificate of Incorporation of Curtice-Burns Express, Inc. ('Express').
3.6* -- Bylaws of Express.
3.7* -- Certificate of Incorporation of Finger Lakes Packaging Company, Inc. ('Finger Lakes').
3.8* -- Bylaws of Finger Lakes.
3.9* -- Certificate of Incorporation of Curtice Burns Meat Snacks, Inc. ('Meat Snacks').
3.10* -- Bylaws of Meat Snacks.
3.11* -- Certificate of Incorporation of Quality Snax of Maryland, Inc. ('Snax').
3.12* -- Bylaws of Snax.
3.13* -- Certificate of Incorporation of Kennedy Endeavors, Incorporated ('Kennedy').
3.14* -- Bylaws of Kennedy.
3.15* -- Certificate of Incorporation of Husman Snack Foods Co., Inc. ('Husman').
3.16* -- Bylaws of Husman.
3.17* -- Certificate of Incorporation of Seasonal Employers, Inc. ('Seasonal').
3.18* -- Bylaws of Seasonal.
3.19* -- Certificate of Incorporation of Nalley's Canada Limited ('Nalley's').
3.20* -- Bylaws of Nalley's.
3.21* -- Certificate of Incorporation of Pro-Fac Holding Company of Iowa, Inc. ('Pro-Fac Iowa').
3.22* -- Bylaws of Pro-Fac Iowa.
4.1 -- Indenture, dated as of November 3, 1994 (the 'Indenture'), among PFAC, Pro-Fac and IBJ Schroder Bank &
Trust Company ('IBJ'), as Trustee, as amended by First Supplemental Indenture, dated as of November 3,
1994, each with respect to Curtice-Burns' 12 1/4% Senior Subordinated Notes due 2005 (the 'Notes').
4.2 -- Purchase Agreement, dated as of November 3, 1994, among Pro-Fac, PFAC and each of the purchasers named
on the signature pages thereof (the 'Purchasers').
4.3 -- Registration Rights Agreement, dated as of November 3, 1994, by and among PFAC, Pro-Fac, each of the
subsidiary guarantors named on the signature pages thereof (the 'Subsidiary Guarantors') and the
Purchasers.
4.4 -- Term Loan, Term Loan Facility and Seasonal Loan Agreement, dated as of November 3, 1994, among
Springfield Bank for Cooperatives (the 'Bank'), Curtice-Burns and PFAC.
4.5 -- Borrower Security Agreement, dated as of November 3, 1994, among the Bank, Curtice-Burns and PFAC.
4.6 -- Trademark Collateral Assignment and Security Agreement, dated as of November 3, 1994, between
Curtice-Burns and the Bank.
4.7 -- Patent Collateral Assignment and Security Agreement, dated as of November 3, 1994, between
Curtice-Burns and the Bank.
4.8 -- Parent Guaranty, dated as of November 3, 1994, by Pro-Fac in favor of the Bank.
4.9 -- Parent Security Agreement, dated as of November 3, 1994 between Pro-Fac and the Bank.
4.10 -- Subsidiaries Guaranty, dated as of November 3, 1994, by the Subsidiary Guarantors in favor of the Bank.
4.11 -- Subsidiaries Security Agreement, dated as of November 3, 1994, among the Subsidiary Guarantors and the
Bank.
4.12 -- Mortgage, Open End Mortgage, Deed of Trust, Trust Deed, Deed to Secure Debt, Purchase Money Mortgage,
Assignment, Security Agreement and Financing Statement dated November 3, 1994 among PFAC, Curtice-Burns
and the Bank.
5.1* -- Opinion and Consent of Howard, Darby & Levin.
5.2* -- Opinion and Consent of Harris, Beach & Wilcox.
5.3* --Opinion and Consent of Bull, Housser & Tupper.
10.1 -- Marketing and Facilitation Agreement, dated as of November 3, 1994, between Pro-Fac and Curtice-Burns.
10.2 -- Management Incentive Plan, as amended.
10.3 -- Supplemental Executive Retirement Plan, as amended.
10.4 -- Key Executive Severance Plan, as amended.
10.5 -- Master Salaried Retirement Plan, as amended.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.6 -- Non-Qualified Profit Sharing Plan, as amended.
10.7 -- Excess Benefit Retirement Plan.
10.8 -- Agreement, dated as of September 27, 1994, among Pro-Fac, PFAC and Agway Holdings, Inc.
12.1* -- Computation of Ratio of Earnings to Fixed Charges.
21.1 -- List of Subsidiaries.
23.1* -- Consent of Price Waterhouse LLP, independent accountants, relating to the financial statements of
Pro-Fac.
23.2* -- Consent of Price Waterhouse LLP, independent accountants, relating to the consolidated financial
statements of Curtice-Burns.
23.3 -- Consent of Howard, Darby & Levin (included in Exhibit 5.1).
23.4 -- Consent of Harris, Beach & Wilcox (included in Exhibit 5.2).
23.5 --Consent of Bull, Housser & Tupper (included in Exhibit 5.3).
24.1 -- Power of Attorney.
25.1 -- Statement of Eligibility and Qualification on Form T-1 under the Trust Indenture Act of 1939 of IBJ, as
Trustee under the Indenture relating to the Notes.
27.1 -- Financial Data Schedule of Pro-Fac.
27.2 -- Financial Data Schedule of Curtice-Burns.
99.1* -- Form of Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9).
99.2* -- Form of Notice of Guaranteed Delivery.
99.3* -- Form of Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner.
99.4* -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.5* -- Form of Letter to Clients.
</TABLE>
- ------------
* Filed as part of this Amendment No. 1.
(b) Financial Statement Schedules.
(1) The Company
<TABLE>
<CAPTION>
SCH. REF. SCHEDULE DESCRIPTION
-------------- -------------------------------------------------------------------------------------------
<S> <C>
Schedule V Property, Plant and Equipment.
Schedule VI Reserve for Amortization of Property, Plant and Equipment.
Schedule VIII Valuation and Qualifying Accounts.
Schedule IX Short Term Borrowings.
Schedule X Supplementary Income Statement Information.
</TABLE>
(2) Pro-Fac
<TABLE>
<CAPTION>
SCH. REF. SCHEDULE DESCRIPTION
-------------- -------------------------------------------------------------------------------------------
<S> <C>
Schedule II Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees Other
Than Related Parties.
Schedule IV Indebtedness of and to Related Parties -- Not Current.
Schedule IX Short Term Borrowings.
</TABLE>
All other schedules of the Company and Pro-Fac for which provision is made
in the applicable accounting regulations of the Securities and Exchange
Commission are not required, are inapplicable or have been disclosed in the
notes to the consolidated financial statements and therefore have been omitted.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415 will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(4) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
CURTICE-BURNS FOODS, INC.
By: /s/ ROY A. MYERS
...................................
ROY A. MYERS
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ ROY A. MYERS President and Chief Executive Officer and December 16, 1994
......................................... Director
(ROY A. MYERS)
* Senior Vice President, Secretary and December 16, 1994
......................................... Treasurer
(WILLIAM D. RICE)
* Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
* Director December 16, 1994
.........................................
(BRUCE R. FOX)
* Director December 16, 1994
.........................................
(CORNELIUS D. HARRINGTON)
* Director December 16, 1994
.........................................
(STEVEN D. KOINZAN)
* Director December 16, 1994
.........................................
(WILLIAM B. MCKNIGHT, JR.)
* Director December 16, 1994
.........................................
(FRANK M. STOTZ)
*By: /s/ ROY A. MYERS December 16, 1994
.........................................
ROY A. MYERS
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
PRO-FAC COOPERATIVE, INC.
By: /s/ ROBERT V. CALL, JR.
...................................
ROBERT V. CALL, JR.
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ ROBERT V. CALL, JR. President and Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
* Treasurer and Director December 16, 1994
.........................................
(BRUCE R. FOX)
* Director December 16, 1994
.........................................
(DALE W. BURMEISTER)
* Director December 16, 1994
.........................................
(GLEN LEE CHASE)
* Director December 16, 1994
.........................................
(TOMMY R. CRONER)
* Director December 16, 1994
.........................................
(ALBERT P. FAZIO)
* Director December 16, 1994
.........................................
(STEVEN D. KOINZAN)
* Director December 16, 1994
.........................................
(KENNETH A. MATTINGLY)
* Director December 16, 1994
.........................................
(ALLAN D. MITCHELL)
* Director December 16, 1994
.........................................
(ALLAN W. OVERHISER)
* Director December 16, 1994
.........................................
(PAUL E. ROE)
* Director December 16, 1994
.........................................
(EDWARD L. WHITAKER)
/S/ ROY A. MYERS December 16, 1994
*By: ....................................
ROY A. MYERS
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
CURTICE-BURNS EXPRESS, INC.
By: /s/ ROY A. MYERS
...................................
ROY A. MYERS
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ ROY A. MYERS President and Director December 16, 1994
.........................................
(ROY A. MYERS)
* Vice President, Treasurer, December 16, 1994
......................................... Secretary and Director
(WILLIAM D. RICE)
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
*By: /s/ ROY A. MYERS December 16, 1994
.........................................
ROY A. MYERS
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
CURTICE BURNS MEAT SNACKS, INC.
By: /s/ ROY A. MYERS
...................................
ROY A. MYERS
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ ROY A. MYERS President and Director December 16, 1994
.........................................
(ROY A. MYERS)
* Vice President, Treasurer, Secretary and December 16, 1994
......................................... Director
(WILLIAM D. RICE)
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
*By: /s/ ROY A. MYERS December 16, 1994
.........................................
ROY A. MYERS
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
FINGER LAKES PACKAGING CO., INC.
By: /s/ WILLIAM D. RICE
...................................
WILLIAM D. RICE
VICE PRESIDENT AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* President December 16, 1994
.........................................
(RONALD FITHEN)
/S/ WILLIAM D. RICE Vice President, Secretary and December 16, 1994
......................................... Director
(WILLIAM D. RICE)
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
* Director December 16, 1994
.........................................
(ROY A. MYERS)
/S/ WILLIAM D. RICE December 16, 1994
*By: ....................................
WILLIAM D. RICE
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
HUSMAN SNACK FOODS COMPANY, INC.
By: /S/ ROY A. MYERS
...................................
ROY A. MYERS
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ ROY A. MYERS President and Director December 16, 1994
.........................................
((ROY A. MYERS))
* Vice President, Treasurer, Secretary and December 16, 1994
......................................... Director
((WILLIAM D. RICE))
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
*By: /s/ ROY A. MYERS December 16, 1994
.........................................
ROY A. MYERS
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
NALLEY'S CANADA LIMITED
By: /s/ WILLIAM D. RICE
...................................
WILLIAM D. RICE
VICE PRESIDENT AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* President and Director December 16, 1994
.........................................
(JOHN FROSTAD)
/S/ WILLIAM D. RICE Vice President and Secretary December 16, 1994
.........................................
(WILLIAM D. RICE)
* Director December 16, 1994
.........................................
(DAVID PHILLIPPE BROWN)
* Director December 16, 1994
.........................................
(HENRY STEVENSON HOWE)
* Director December 16, 1994
.........................................
(PATRICK D. LINDENBACH)
* Director December 16, 1994
.........................................
(WILLIAM J. MCFETRIDGE)
* Director December 16, 1994
.........................................
(ROY A. MYERS)
*By: /s/ WILLIAM D. RICE December 16, 1994
.........................................
WILLIAM D. RICE
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
KENNEDY ENDEAVORS, INCORPORATED
By: /s/ WILLIAM D. RICE
...................................
WILLIAM D. RICE
VICE PRESIDENT AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* President December 16, 1994
.........................................
(HELEN WHATMOUGH)
/S/ WILLIAM D. RICE Vice President, Secretary and December 16, 1994
......................................... Director
(WILLIAM D. RICE)
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
* Director December 16, 1994
.........................................
(ROY A. MYERS)
/S/ WILLIAM D. RICE December 16, 1994
*By: ....................................
WILLIAM D. RICE
ATTORNEY-IN-FACT
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
QUALITY SNAX OF MARYLAND, INC.
By: /s/ ROY A. MYERS
...................................
ROY A. MYERS
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ ROY A. MYERS President and Director December 16, 1994
.........................................
(ROY A. MYERS)
* Vice President, Treasurer, Secretary and December 16, 1994
......................................... Director
(WILLIAM D. RICE)
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
*By: /s/ ROY A. MYERS December 16, 1994
.........................................
ROY A. MYERS
ATTORNEY-IN-FACT
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
SEASONAL EMPLOYERS, INC.
By: /s/ WILLIAM D. RICE
...................................
WILLIAM D. RICE
VICE PRESIDENT, TREASURER AND
SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* President December 16, 1994
.........................................
(WILLIAM FITZGERALD)
/S/ WILLIAM D. RICE Vice President, Treasurer, Secretary and December 16, 1994
......................................... Director
(WILLIAM D. RICE)
/S/ ROBERT V. CALL, JR. Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
* Director December 16, 1994
.........................................
(ROY A. MYERS)
/S/ WILLIAM D. RICE December 16, 1994
*By: ....................................
WILLIAM D. RICE
ATTORNEY-IN-FACT
</TABLE>
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ROCHESTER, STATE OF NEW
YORK ON DECEMBER 16, 1994.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By: /s/ WILLIAM D. RICE
...................................
WILLIAM D. RICE
VICE PRESIDENT AND TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
* President and Director December 16, 1994
.........................................
(ROBERT V. CALL, JR.)
/S/ WILLIAM D. RICE Vice President and Treasurer December 16, 1994
.........................................
(WILLIAM D. RICE)
* Director December 16, 1994
.........................................
(ROY A. MYERS)
* Director December 16, 1994
.........................................
(THOMAS R. KALCHIK)
*By: /s/ WILLIAM D. RICE December 16, 1994
.........................................
WILLIAM D. RICE
ATTORNEY-IN-FACT
</TABLE>
II-15
<PAGE>
SCHEDULE V
CURTICE-BURNS FOODS, INC.
PROPERTY, PLANT AND EQUIPMENT
(OWNED AND LEASED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 25, 1994
--------------------------------------------------------------
BALANCE AT
BEGINNING OF BALANCE AT END
YEAR ADDITIONS RETIREMENTS OF YEAR
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Land............................................ $ 9,714,000 $ 122,000 $ (1,195,000) $ 8,641,000
Land improvements............................... 3,778,000 88,000 (314,000) 3,552,000
Buildings....................................... 97,694,000 2,431,000 (11,352,000) 88,773,000
Machinery and equipment......................... 250,440,000 15,319,000 (32,226,000) 233,533,000
Construction in process......................... 18,778,000 2,307,000 -- 21,085,000
Valuation Allowance............................. (6,900,000) -- 2,930,000 (3,970,000)
-------------- ------------- --------------- --------------
Total...................................... $ 373,504,000 $ 20,267,000 $ (42,157,000) $ 351,614,000
-------------- ------------- --------------- --------------
-------------- ------------- --------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 26, 1993
--------------------------------------------------------------
BALANCE AT
BEGINNING OF BALANCE AT END
YEAR ADDITIONS RETIREMENTS OF YEAR
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Land............................................ $ 10,552,000 $ -- $ (838,000) $ 9,714,000
Land improvements............................... 3,703,000 75,000 -- 3,778,000
Buildings....................................... 97,721,000 3,034,000 (3,061,000) 97,694,000
Machinery and equipment......................... 249,961,000 13,349,000 (12,870,000) 250,440,000
Construction in process......................... 9,140,000 10,967,000 (1,329,000) 18,778,000
Valuation Allowance............................. -- -- (6,900,000) (6,900,000)
-------------- ------------- --------------- --------------
Total...................................... $ 371,077,000 $ 27,425,000 $ (24,998,000) $ 373,504,000
-------------- ------------- --------------- --------------
-------------- ------------- --------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 26, 1992
--------------------------------------------------------------
BALANCE AT
BEGINNING OF BALANCE AT END
YEAR ADDITIONS RETIREMENTS OF YEAR
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Land............................................ $ 10,666,000 $ -- $ (114,000) $ 10,552,000
Land improvements............................... 3,420,000 287,000 (4,000) 3,703,000
Buildings....................................... 97,139,000 2,006,000 (1,424,000) 97,721,000
Machinery and equipment......................... 236,733,000 18,166,000 (4,938,000) 249,961,000
Construction in process......................... 13,244,000 (1,876,000) (2,228,000) 9,140,000
-------------- ------------- --------------- --------------
Total...................................... $ 361,202,000 $ 18,583,000 $ (8,708,000) $ 371,077,000
-------------- ------------- --------------- --------------
-------------- ------------- --------------- --------------
</TABLE>
S-1
<PAGE>
SCHEDULE VI
CURTICE-BURNS FOODS, INC.
RESERVE FOR AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT
(OWNED AND LEASED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 25, 1994
--------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COST AND BALANCE AT END
YEAR EXPENSES RETIREMENTS OF YEAR
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Land Improvements............................... $ 1,946,000 $ 161,000 $ (147,000) $ 1,960,000
Buildings....................................... 36,776,000 3,925,000 (2,564,000) 38,137,000
Machinery and equipment......................... 142,330,000 18,236,000 (16,565,000) 144,001,000
-------------- ------------- --------------- --------------
Total...................................... $ 181,052,000 $ 22,322,000 $ (19,276,000) $ 184,098,000
-------------- ------------- --------------- --------------
-------------- ------------- --------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 26, 1993
--------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COST AND BALANCE AT END
YEAR EXPENSES RETIREMENTS OF YEAR
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Land Improvements............................... $ 1,761,000 $ 185,000 $ -- $ 1,946,000
Buildings....................................... 33,251,000 4,297,000 (772,000) 36,776,000
Machinery and equipment......................... 129,410,000 20,950,000 (8,030,000) 142,330,000
-------------- ------------- --------------- --------------
Total...................................... $ 164,422,000 $ 25,432,000 $ (8,802,000) $ 181,052,000
-------------- ------------- --------------- --------------
-------------- ------------- --------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 26, 1992
--------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COST AND BALANCE AT END
YEAR EXPENSES RETIREMENTS OF YEAR
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Land Improvements............................... $ 1,583,000 $ 180,000 $ (2,000) $ 1,761,000
Buildings....................................... 29,297,000 4,338,000 (384,000) 33,251,000
Machinery and equipment......................... 113,355,000 19,896,000 (3,841,000) 129,410,000
-------------- ------------- --------------- --------------
Total...................................... $ 144,235,000 $ 24,414,000 $ (4,227,000) $ 164,422,000
-------------- ------------- --------------- --------------
-------------- ------------- --------------- --------------
</TABLE>
S-2
<PAGE>
SCHEDULE VIII
CURTICE-BURNS FOODS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE FISCAL YEARS ENDED JUNE 25, 1994
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
BALANCE AT ---------- ------------ BALANCE AT
BEGINNING CHARGE TO ACCOUNTS END OF
OF PERIOD EXPENSE WRITTEN OFF PERIOD
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year ended June 25, 1994.............................. $ 801,000 $702,000 $437,000 $1,066,000
Year ended June 26, 1993.............................. $1,353,000 $346,000 $898,000 $ 801,000
Year ended June 26, 1992.............................. $1,118,000 $827,000 $592,000 $1,353,000
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING NET END OF
OF PERIOD CHANGE PERIOD*
---------- ----------- ----------
<S> <C> <C> <C>
Inventory Reserve
Year ended June 25, 1994.......................................... $1,189,000 $ (810,000) $ 379,000
Year ended June 26, 1993.......................................... $2,520,000 $(1,331,000) $1,189,000
Year ended June 26, 1992.......................................... $2,549,000 $ (29,000) $2,520,000
</TABLE>
- ------------
* Difference between FIFO cost and market applicable to canned and frozen fruit
and vegetable inventories.
S-3
<PAGE>
SCHEDULE IX
CURTICE-BURNS FOODS, INC.
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED JUNE 25, 1994
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
BALANCE WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AT END AVERAGE DURING DURING DURING
AGGREGATE SHORT-TERM BORROWINGS OF PERIOD INTEREST RATE THE PERIOD THE PERIOD THE PERIOD
- -------------------------------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
June 25, 1994
Payable to Commercial Banks...... None N/A $35,000,000 $21,052,000 4.41%
Payable to Pro-Fac Cooperative,
Inc............................ $11,500,000 5.5% $46,000,000 $30,464,000 4.79%
June 26, 1993
Payable to Commercial Banks...... None N/A $54,000,000 $31,505,000 4.70%
Payable to Pro-Fac Cooperative,
Inc............................ $12,000,000 4.32% $56,000,000 $39,444,000 4.60%
June 26, 1992
Payable to Commercial Banks...... None N/A $45,100,000 $26,567,000 5.83%
Payable to Pro-Fac Cooperative,
Inc............................ $28,000,000 4.85% $77,000,000 $47,764,000 6.28%
</TABLE>
S-4
<PAGE>
SCHEDULE X
CURTICE-BURNS FOODS, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
FISCAL YEAR ENDED
-----------------------------------------------
JUNE 25, 1994 JUNE 26, 1993 JUNE 26,1992
------------- ------------- -------------
<S> <C> <C> <C>
Maintenance and repairs............................................. $ 26,519,000 $ 28,176,000 $ 29,514,000
Advertising......................................................... $ 13,319,000 $ 16,499,000 $ 16,773,000
Taxes*
Royalties*
Amortization of Intangibles*
</TABLE>
- ------------
* Not applicable as individual amounts do not exceed 1 percent of net sales
S-5
<PAGE>
SCHEDULE II
PRO-FAC COOPERATIVE, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS,
AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
BALANCE BALANCE
AT BEGINNING AT END
NAME OF DEBTOR OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
- -------------------------------------------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Curtice-Burns Foods
June 25, 1994................................ $ 9,113,000 $123,153,000 $121,069,000 $11,197,000
June 26, 1993................................ $ 26,767,000 $113,478,000 $131,132,000 $ 9,113,000
June 26, 1992................................ $ 45,210,000 $121,836,000 $140,279,000 $26,767,000
</TABLE>
The cash needs of a fruit and vegetable food processor such as
Curtice-Burns fluctuate greatly during the year because of the peak cash outflow
required during a limited production season that is tied to the harvest season
of the crops involved, while the cash inflow from sales is more ratably spread
throughout the year. By reason of the agreements with Pro-Fac, these peak cash
needs are supplied to Curtice-Burns by Pro-Fac. Such receivables from
Curtice-Burns include:
1. Advances under a short-term line of credit.
2. Accrued interest on all short-term and long-term borrowings that
will be paid by Curtice Burns to Pro-Fac when Pro-Fac pays its
lenders.
3. Raw product delivered to Curtice-Burns for which Pro-Fac has agreed
on extended terms under the marketing section of the Integrated
Agreement.
4. Amounts due under the profit split provisions of the operations
financing section of the Integrated Agreement.
S-6
<PAGE>
SCHEDULE IV
PRO-FAC COOPERATIVE, INC.
INDEBTEDNESS OF AND TO RELATED PARTIES -- NOT CURRENT
<TABLE>
<CAPTION>
BALANCE BALANCE
AT BEGINNING ADDITIONS DEDUCTIONS AT END
NAME OF PERSON OF PERIOD (2) (3) OF PERIOD
- ---------------------------------------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Receivable from Curtice-Burns Foods
June 25, 1994.................................. $ 78,648,000 $40,378,000 $40,986,000 $78,040,000
June 26, 1993.................................. $ 61,300,000 $33,348,000 $16,000,000 $78,648,000
June 26, 1992.................................. $ 61,099,000 $14,201,000 $14,000,000 $61,300,000
</TABLE>
Under the terms of the operations financing section of the Integrated
Agreement between Pro-Fac and Curtice-Burns, Pro-Fac lends to Curtice-Burns all
funds not required for its own operations or for purchases of assets to be
leased to Curtice-Burns. Funds loaned to Curtice-Burns bear the same conditions
and interest rates as Pro-Fac has obtained from its lenders. The interest rates
on such borrowings at June 25, 1994, June 26, 1993 and June 26, 1992, were 6.7
percent, 6.2 percent, and 7.1 percent, respectively.
S-7
<PAGE>
SCHEDULE IX
PRO-FAC COOPERATIVE, INC.
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED JUNE 25, 1994
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
AMOUNT AMOUNT AVERAGE
BALANCE WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AT END AVERAGE DURING DURING DURING
AGGREGATE SHORT-TERM BORROWINGS OF PERIOD INTEREST RATE THE PERIOD THE PERIOD THE PERIOD
- -------------------------------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
June 25, 1994
Payable to Springfield Bank for
Cooperatives................... $11,500,000 5.50% $46,000,000 $30,464,000 4.79%
June 26, 1993
Payable to Springfield Bank for
Cooperatives................... $12,000,000 4.32% $56,000,000 $39,444,000 4.6%
June 26, 1992
Payable to Springfield Bank for
Cooperatives................... $28,000,000 4.85% $77,000,000 $47,764,000 6.20%
</TABLE>
S-8
<PAGE>
EXHIBIT 3.2
PRO-FAC COOPERATIVE, INC.
BYLAWS
ARTICLE I
OFFICES
Section 1. Principal Office
The principal office of the Cooperative shall be located
in Rochester, New York, or such other place as the Board of
Directors may from time to time designate.
ARTICLE II
MEMBERSHIP
Section 1. Eligibility
All persons, partnerships, firms, corporations,
institutions and business organizations of any sort which engage in
the production of agricultural products which can be marketed
through the Cooperative shall be eligible for membership in the
Cooperative as shall cooperative corporations of such producers.
Section 2. Application for Membership
An applicant for membership in the Cooperative shall file
with the Cooperative an application for membership in such form and
containing such terms as shall be from time to time determined by
the Board of Directors. Included in the application shall be a
statement that the applicant agrees to: (a) comply with and be
bound by the terms and conditions contained in the Certificate of
Incorporation and in these Bylaws and amendments thereto; (b)
purchase the required number of shares of common stock of the
Cooperative as established from time to time by the Board of
Directors based upon the quantity and type of agricultural products
to marketed through the Cooperative by the applicant; and (c) take
into account, pursuant to Section 1385 and 1388 of the Internal
Revenue Code of 1954, as amended, the stated dollar amount of any
and all written notices of allocation received from the Cooperative
and include such stated dollar amount in his gross income for the
year in which such written notices of allocation are received.
Section 3. Approval of Application
An application for membership may be approved by the
Board of Directors as herein provided if it is determined that the
approval of the application will be for the mutual benefit of the
members of the Cooperative and consistent with the accomplishment
of its corporate purposes.
Section 4. Membership Committee
<PAGE>
The Board of Directors, by resolution adopted by a
majority of the entire Board, may appoint a Membership Committee,
a majority of which shall be members of the Board of Directors,
each of whom shall hold office until such appointment is rescinded
and a successor appointed and qualified. The Membership Committee
shall have such functions and responsibilities as may be delegated
by the Board of Directors, including, but not limited to, approving
or rejecting applications for membership and for transfer of common
stock by a member. In any case where factual information
concerning the qualifications of an applicant is insufficient to
determine eligibility, the matter may be referred by the Membership
Committee to the Commodity Committee of the Cooperative in or near
the community in which the applicant resides for report and
recommendation to the Membership Committee.
Section 5. Ownership and Transfer of Common Stock
(a) The common stock of the Cooperative shall be issued
to and owned by only persons, partnerships, firms, corporations,
institutions, or other business organizations of any sort engaged
in the production of agricultural products (and cooperative
corporations of such producers) whose application for membership
has been approved and who market such agricultural products
annually through the Cooperative. The term 'member' shall refer to
an owner of common stock of the Cooperative.
(b) No common stock shall be transferred without the
prior written consent of the Cooperative.
(c) Upon the death of an individual member, the estate
of the deceased shall continue as a member of the Cooperative
solely for the purpose of winding up the affairs of the deceased
until all obligations of the deceased to the Cooperative, including
those under the current commodity agreement, have been performed,
after which the estate shall dispose of its common stock in the
manner specified in Section 7.
(d) Upon determination by the Board of Directors that a
member is no longer a producer of agricultural products which he
sells to the Cooperative, then such member shall dispose of his
common stock in the Cooperative in the manner specified in Section
7.
(e) Should the Cooperative discontinue a crop, then it
shall notify all members whose ownership of common stock is based
upon their marketing such crop through the Cooperative and direct
such members within a time specified by the Board of Directors in
its discretion to sell their common stock to the Cooperative for
cash at the par value thereof, plus any dividends accrued to the
date of such sale.
(f) Should a member desire or be required by the
2
<PAGE>
Cooperative permanently to reduce the quantity of a crop which he
sells to the Cooperative, then such member shall, in the manner
specified in Section 7 of this Article, dispose of such number of
shares of his common stock as is necessary to bring his ownership
of common shares into the proper relationship to the quantity and
type of agricultural products which he markets through the
Cooperative as determined by the Board of Directors.
Section 6. Expulsion
(a) The Board of Directors, acting through its
Membership Committee if it elects to do so, may expel any member of
the Cooperative if it determines that such member (1) has become in
default in payment of his subscription for common stock, or (2)
willfully fails to comply with these Bylaws or otherwise obstructs
the purposes or proper activities of general marketing agreement,
crop agreement, or any other agreement with the Cooperative.
(b) A member may be expelled from the Cooperative only
after a hearing before the Membership Committee. The member shall
be given by mail or in person at least five days' written notice of
such hearing, which indicates the intention to consider such
expulsion and specifies the proposed reasons therefor. The member
shall be given an opportunity to appear and be heard at such
hearing. If after such hearing the Committee determines that the
member should be expelled, he shall have the right to appeal the
decision to the full Board of Directors. The decision of the Board
of Directors in such a case shall be final.
(c) If a member is expelled as provided herein, the
Cooperative shall cause written notice of such action to be mailed
to the member.
(d) A member expelled from the Cooperative under this
Section shall dispose of his common stock as specified in Section
7.
Section 7. Procedure on Transfer
A member who is obligated to dispose of his common stock
in the Cooperative shall do so as follows:
(a) A member shall make a reasonable effort to find
another grower who is willing to purchase the common stock of such
member and assume all his obligations to the Cooperative and who
meets all requirements for membership in the Cooperative. The
Cooperative may assist the member in finding such a grower and
shall give the member a reasonable time within which to try to find
such a grower.
(b) The Cooperative shall notify the member when such
reasonable time has expired, at which time the member must then
3
<PAGE>
promptly sell his common stock to the Cooperative for cash at the
par value thereof plus any dividends thereon which have been
declared but remain unpaid.
Section 8. Rights of Transferees
No one shall become a member of the Cooperative unless an
application for membership is filed in accordance with Section 2 of
this Article and is approved as provided in Section 3 of this
Article.
ARTICLE III
MEETINGS OF MEMBERS
Section 1. Annual Meeting
(a) The annual meeting of members of the Cooperative
shall be held at such time and place as shall be designated by the
Board of Directors. Written notice of the time, place and any
particular known business to be transacted at such meeting shall be
given by mailing not less than ten, not more than fifty days prior
to the meeting, postage prepaid, a copy of such notice directed to
each eligible voter at his address as the same appears o the books
of the Cooperative.
(b) The Board of Directors may direct that, in lieu of
a single annual or special meeting of members, one or more regional
membership meetings be held in the regions, or in combinations of
the regions designated by the Board of Directors. Such regional
meetings shall be conducted as provided in this Article and as
otherwise determined by the Board of Directors.
(c) Should the Board of Directors direct the holding of
regional meetings of members as herein provided, then notice of
such meetings shall be given to all members in each region in the
manner provided in Section 1(a) of this Article. At each regional
meeting the members shall from their number elect a delegate and an
alternate delegate (who shall act if the delegate is unable to
serve) to represent the members at the meeting of delegates. Any
action required to be taken by the entire membership of the
Cooperative shall then be taken in their behalf by the delegates so
elected at a subsequent meeting of delegates.
(d) Delegates and alternate delegates shall be nominated
in the same manner as provided herein for the nomination of
regional directors.
(e) To the maximum extent possible, the members shall at
regional meetings instruct their delegates as to how to vote at any
meeting of delegates. At any meeting of delegates each delegate
shall, as to all matters voted upon by members as a regional
4
<PAGE>
meeting, have a number of votes equal to the total votes cast by
the members in his region at such regional meeting, and he shall
cast those votes in the same manner as those votes were cast at the
regional meting.
(f) As to any matter properly submitted to a meeting of
delegates which has not been voted upon by members at a regional
meeting, each delegate shall cast in a manner which he believes to
be in the best interest of the Cooperative all votes available to
be cast by the members in the region represented by such delegates.
(g) Delegates and alternate delegates shall be elected
for a term of one year, or until their successors have been duly
elected and qualified. At all meetings of delegates a majority of
the delegates (or any alternate delegates if they are serving
instead of the delegates) shall constitute a quorum.
Section 2. Special Meetings
A special meeting of members or delegates may be called
by a majority of the Board of Directors or of the members. Notice
of such special meeting, specifying the time, place and purpose for
which it is called, shall be given to each member (or if a delegate
meeting is called, to each delegate) in the same manner as that
required for the annual meeting.
Section 3. Quorum and Voting
(a) At all meetings of the members, the members present
shall constitute a quorum. At any regularly called meeting of
members, the written vote of an absent member signed by him shall
be received and counted, provided he shall have been previously
notified in writing of the substance of the motion or resolution
upon which such vote is taken. At all meetings of members, all
decisions (except decisions on matters otherwise regulated by
statute or otherwise governed by these Bylaws) shall be determined
by the majority vote of the members present in person or voting by
mail as herein provided.
(b) All voting by members and delegates shall be as
described in these Bylaws, and voting by proxy shall not be
permitted.
(c) The delegates may take action without a meeting upon
the unanimous written consent of all of the delegates.
Section 4. Inspectors of Election
Two inspectors of election shall be appointed by the
Chairman of the meeting at each annual meeting or regional meeting
of members to serve for that meeting. If any inspector shall not
be present or shall decline to serve, the Chairman shall appoint an
5
<PAGE>
inspector to fill his place.
ARTICLE IV
DIRECTORS
Section 1. Number of Directors
There shall be no fewer than eleven (11) nor more than
eighteen (18) directors of the Cooperative, with the exact number
to be determined from time to time by resolution of the Board.
Section 2. Term of Office
Except as provided in Section 5(b) and (c) of this
Article, directors shall serve for the term of three (3) years or
until their successors shall have been duly elected and qualified.
Section 3. Election of Directors
(a) Directors shall be chosen by a plurality of the
votes cast at any annual or special meeting called for that
purpose, and substantially one-third (1/3) of their number shall be
elected each year.
(b) The Board of Directors shall divide the territorial
area in which the Cooperative operates into regions and shall
designate the number of directors to be elected from each region so
as to attain reasonably balanced regional representation on the
Board based upon the value of raw product delivered by the members
in each region. The Board of Directors may in its discretion
further divide any region into districts within the region.
(c) The board of directors may appoint a number of
directors no greater than one-fifth of the entire number of
directors to represent primarily the interest of the general public
in the Cooperative.
(d) In the event that regional meetings of members are
directed to be held, the members in each region shall elect the
director or directors for that region. In any region which is
divided into districts, the members in each district shall elect
the directors from that director.
Section 4. Nomination of Directors
(a) The members of each region of the Cooperative shall
elect a nominating committee for their region. In any region which
is divided into districts there shall be a nominating committee for
each district elected by the members of the district. Each
committee member shall serve for a two-year term with substantially
one-half of the membership of the committee elected each year.
6
<PAGE>
Rules for the election of committee members and for selection of
nominees for directorships shall be established annually by the
Board of Directors.
(b) Directors representing each region shall be
nominated by the regional or district nominating committees formed
pursuant to these Bylaws. Directors may otherwise be nominated
only by members from the floor of the annual meeting or the
respective regional membership meetings.
(c) All nominees for director to be validly nominated
must meet such qualifications for office as are established under
these Bylaws or by law.
Section 5. Revision of Regional Representation
(a) Should there be major shifts in the geographical
distribution of members or the production of raw products delivered
to the Cooperative, the Board of Directors shall redistribute the
number of directors representing one or more regions or shall
revise the boundaries of one or more regions so as to maintain
reasonably balanced regional representation on the Board of
Directors based upon the value of raw product delivered in each
region.
(b) In case the number of directors representing a
region is to be reduced by a redistribution as provided in Section
5(a), then in order to facilitate that reduction the Board of
Directors may request (but not compel) the resignation as a
director of all directors from the region (or from a district
within a region) affected whose terms will not have expired as of
the time such reduction is to become effective.
(c) In acting pursuant to this section, the Board of
Directors may request the nominating committees for the affected
regions or districts to nominate members for election to those
vacant directorships to which the region or district may be
entitled to elect after the redistribution of director
representation as provided in this Section 5. At the next annual
regional meeting of members of the regions affected, or at a
special meeting of such members, as determined by the Board of
Directors, directors may be elected to fill such vacant
directorships as the members of the affected regions or districts
may be entitled to elect after the redistribution of director
representation as provided in this Section 5. Such directors shall
be nominated for and elected to such directorships for terms of one
to three years so that the terms of substantially one-third of all
directors shall expire each year.
Section 6. Board Vacancies
Vacancies in the Board of Directors occurring during the
7
<PAGE>
year, caused by death, resignation or otherwise, may be filled
until the next annual meeting by a majority vote of the remaining
directors at any meeting of the Board. Vacancies shall be filled
by members from the region or district in which the vacancy occurs.
Section 7. Compensation
Directors, as such, shall not receive any stated salary,
but as fixed by resolution of the Board, a stated sum and expenses
of attendance may be allowed for such meetings as they necessarily
attend in behalf of the Cooperative.
Section 8. Power of Directors
Subject to the provisions of the Certificate of
Incorporation and of these Bylaws, the business of the Cooperative
shall be managed and conducted by the Board of Directors. The
Board may adopt rules and regulations for the conduct of its
meetings and for the management of the affairs of the Cooperative
and may adopt additional Bylaws consistent with the laws of the
State of New York and with these Bylaws, provided such additional
Bylaws are submitted for the approval of members at the next annual
meeting.
Section 9. Committees of the Board
The Board of Directors, by resolution adopted by a
majority of the entire board, may designate from among its members
an executive committee and other committees, each consisting of
three or more directors, and each of which, to the extent provided
in such resolution, shall have all the authority of the Board,
except as to the following matters:
(1) The submission to members of any action that by law
requires authorization of members.
(2) The filling of vacancies in the Board of Directors
or in any committee.
(3) The fixing of compensation of any director for
serving on the Board or on any committee.
(4) The amendment or repeal of the Bylaws, or the
adoption of new Bylaws.
(5) The amendment or repeal of any resolution of the
Board which by its terms shall not be so amendable or repealable.
The Board may designate one or more directors as
alternate members of any such committee who may replace any absent
member or members at any meeting of such committee. Each such
committee (and each member of such committee) shall serve at the
8
<PAGE>
pleasure of the Board of Directors.
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Place of Meetings
All meetings of the Board of Directors shall be held at
the principal office of the Cooperative or at such other places as
the Board of Directors, from time to time, may determine.
Section 2. Regular Meetings
Regular meetings of the Board of Directors shall be held
immediately after the annual meeting of members or delegates, and
thereafter at such time as may be fixed by the directors for
regular meetings.
Section 3. Special Meetings
Special meetings of the Board of Directors may be called
by the General Manager or the President and shall be called by the
General Manager at any time at the request of any three directors.
Section 4. Notice
Written notice of each regular meeting of the Board of
Directors shall be mailed to each director not less than five days
before each regular meeting. Notice of special meetings shall be
given not less than five days before the meeting, if given by mail,
or three days before the meeting, if given by telephone or
telegram, and such notice shall state the purpose of the meeting.
No other business shall be transacted at a special meeting except
with the unanimous consent of all directors.
Section 5. Quorum
A majority of all the directors shall constitute a quorum
for the transaction of business at any meeting.
Section 6. Official Acts of the Board
Each of the official acts of the Board of Directors shall
be by a majority vote of the directors present at any duly convened
meeting. The Board may take action without a meeting upon the
unanimous written consent of all the directors.
ARTICLE VI
OFFICERS
9
<PAGE>
Section 1. Officers and Agents
(a) The officers of the Cooperative shall be a
president, a vice president, a secretary, a treasurer, and a
general manager, who shall be elected by the Board of Directors
immediately after each annual meeting of members or delegates. Any
two of the aforesaid offices, except those of president and
secretary, may be held by the same person.
(b) The Board may elect such other officers as it shall
deem necessary, who shall have such authority and shall perform
such duties as from time to time shall be prescribed by the Board.
Section 2. Term of Office
The officers of the Cooperative shall hold office for one
year and until their successors are chosen and qualify in their
stead. Any officer may be removed at any time by the affirmative
vote of a majority of the directors. If any office becomes vacant
for any reason, the vacancy shall be filled by the Board of
Directors.
Section 3. President
The President shall be a member and director of the
Cooperative; he shall preside at all meetings of members, delegates
and directors.
Section 4. Vice President
The Vice President shall be a member and director of the
Cooperative. In the absence or disability of the President, he
shall perform the duties and exercise the power of the President.
He shall also perform such other duties as the Board of Directors
shall prescribe.
Section 5. Secretary
The Secretary shall attend all meetings of the Board and
of the members or delegates and shall
(a) give or cause to be given a notice of all meetings
of members, shareholders, delegates and the Board of Directors.
(b) record or cause to be recorded all votes and minutes
of the proceedings of such meetings.
(c) have custody of the seal of the Cooperative and
affix it to any instrument when authorized by the Board of
Directors.
(d) perform or cause to be performed such other duties
10
<PAGE>
as may be prescribed by the Board of Directors.
Section 6. Treasurer
The Treasurer shall
(a) have custody of the funds of the Cooperative.
(b) keep or cause to be kept full and accurate
accounting of receipts and disbursements in books belonging to the
Cooperative.
(c) deposit or cause to be deposited, all money and
other valuable effects in the name and to the credit of the
Cooperative in such depositories as may be designated by the Board
of Directors.
(d) disburse or cause to be disbursed, the funds of the
Cooperative as may be ordered by the Board, taking proper vouchers
for such disbursements.
(e) render or cause to be rendered to the President,
directors and members an accounting of all his transactions as
Treasurer and of the financial condition of the Cooperative.
(f) give, or cause to be given to the Cooperative, if
required by the Board of Directors, a bond in such sum or sums with
such surety or sureties as shall be satisfactory to the Board,
conditioned upon the faithful performance of his duties and for
restoration to the Cooperative in case of his death, resignation,
retirement, or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or
under his control belonging to the Cooperative.
Section 7. General Manager
The General Manager shall be the chief executive officer
of the Cooperative and shall see that all orders and resolutions of
the Board of Directors are carried into effect.
ARTICLE VII
COMMODITY COMMITTEES
Section 1. Formation
There shall be a commodity committee representing the
member-growers for each of the major crops produced for the
Cooperative as determined by the Board of Directors.
Section 2. Committee Members
11
<PAGE>
The number, distributions, and method of election of
committee members, each of whom shall be a member of the
Cooperative, shall be determined by the Board of Directors.
Section 3. Purpose
Commodity committees are charged with the responsibility
of counseling and advising the Board of Directors and officers and
management of the Cooperative on matters generally associated with
the specific crop, the growers of which they represent. The
committees shall also act in matters referred to them by the
membership committee under Article II, Section 4 hereof, and shall
have such other functions as may be delegated by the Board.
ARTICLE VIII
INVESTMENT SUMMARIES AND SHARES OF STOCK
Section 1. Investment Summaries
Unless otherwise required by law, the Cooperative shall
not issue certificates for stock but shall issue, not less
frequently than annually, investment summaries to each member or
shareholder of the Cooperative, which shall set forth the entire
interest of the member or shareholder in the Cooperative as of the
date it is issued.
Section 2. Certificate of Stock
When required by law, the Cooperative shall issue stock
certificates. The certificates of stock of the Cooperative shall
be numbered and entered in the books of the Cooperative as they are
issued. They shall exhibit the holder's name and the number of
shares and shall be signed by the President or a Vice President and
the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary.
Section 3. Lost Certificates
Should it appear that a stock certificate issued by the
Cooperative has been lost, the Board of Directors may direct that
a new certificate or certificates be issued in place of any
certificates theretofore issued by the Cooperative, alleged to have
been lost or destroyed, upon the making of an affidavit of the fact
by the person claiming the certificate of stock to be lost or
destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of
such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
require and/or give the Cooperative a bond in such sum and with
such surety or sureties as it may direct as indemnity against any
12
<PAGE>
claim that may be made against the Cooperative with respect to the
certificate alleged to have been lost or destroyed.
Section 4. Stock Ownership
The Cooperative shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact
thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express other
notice thereof, except as expressly provided by the laws of New
York.
Section 5. Closing of Transfer Books or Fixing of Record Date
The Board of Directors may prescribe a period not
exceeding fifty days prior to the date of meetings of the members
and shareholders or prior to the last day on which the consent or
dissent of members and shareholders may be effectively expressed
for any purpose without a meeting, during which no transfer of
stock on the books of the Cooperative may be made; or in lieu of
prohibiting the transfer of stock, may fix a time not more than
fifty days prior to the date of any meeting of members and
shareholders or prior to the last day on which the consent or
dissent of members and shareholders may be effectively expressed
for any purpose without a meeting, as the time of which members and
shareholders entitled to notice of and to vote at such a meeting or
whose consent or dissent is required or may be expressed for any
purpose, as the case may be, shall be determined; and all persons
who were holders of record of voting stock at such time and no
others shall be entitled to notice of and to vote at such meeting
or to express their consent or dissent, as the case may be. The
Board of Directors may also fix a time not exceeding fifty days
preceding the date fixed for the payment of any dividend or the
making of any distribution, or for the delivery of evidence of
rights, or evidence of interests arising out of any change,
conversion or exchange of capital stock, as a record time for the
determination of the members and shareholders entitled to receive
any such dividend, distribution, rights or interests, or at its
option, in lieu of so fixing a record time, may prescribe a period
not exceeding fifty days prior to the date for such payment,
distribution or delivery during which no transfer of stock on the
books of the Cooperative may be made.
ARTICLE IX
PROCESSING & MARKETING
Section 1. Agent Growers
A member of the Cooperative may on a temporary basis
contract with another grower, who may, but need not, be a member of
13
<PAGE>
the Cooperative, to fulfill all or a part of the member's
obligation to deliver crops to the Cooperative, provided such
agreement is approved by the Membership Committee of the Board of
Directors. Such other grower shall be referred to as an 'agent
grower'.
Section 2. Delivery of Members' Products
It shall be the duty of every member and agent grower to
deliver his crops to the Cooperative for marketing in accordance
with the terms and conditions of, and in the amounts specified in,
the general marketing agreement, the annual crop agreements or any
other agreement between him and the Cooperative. It shall be the
duty of the Cooperative to receive and market such crops in
accordance with the terms and conditions of all such agreements.
Section 3. Cooperative's Control
All handling of the products of members and agent growers
produced under agreement with the Cooperative shall upon delivery
to the Cooperative be under the full and exclusive control of the
Cooperative and its agents and representatives, and the Cooperative
shall have the full and unqualified right to take title to such
products and process, sell, mortgage, pledge or otherwise encumber,
dispose of or transfer them and to sue on, enforce and compromise
any rights or claims arising out of any transaction involving such
products. No member or agent grower shall have any rights or shall
exercise any control over any products delivered by virtue of
having furnished such products, other than as may be expressly
provided in these Bylaws or in any agreement with the Cooperative.
Section 4. Liens
The Cooperative shall have a lien upon all of the
products of any member or agent grower to be marketed through the
Cooperative, whether harvested or growing, and upon all sums
payable to the member or agent grower, as security for the payment
to the Cooperative of all sums owing from such member or agent at
any time, including the sums due as damages pursuant to any crop
purchase or other agreement.
Section 5. Non-Member Dealings
The Cooperative shall have the right to handle the
products of or otherwise deal with non-members upon such terms and
conditions as the Board of Directors may from time to time
determine, but the total value of all such products shall not
exceed the total value of all products handled for its members.
Section 6. Other Activities
The Cooperative shall have the right to engage in such
14
<PAGE>
other activities, including but not limited to, the furnishing of
equipment and supplies to members and agent growers, research and
advertising, as may be conducive to the attainment of its purposes.
ARTICLE X
PROCEEDS AND DISPOSITION OF PROCEEDS
Section 1. Commercial Market Value
The Board of Directors shall each year determine the
commercial market value of each crop marketed through the
Cooperative. Such commercial market value is to be a weighted
average of the prices paid by commercial processors for similar
crops sold for similar or related uses in the same or competing
marketing areas, as determined by the Board of Directors in
agreement with the Board of Directors of Curtice-Burns, Inc.
Section 2. Pools
The Cooperative shall operate with a single pool unless
the Board of Directors determines that additional pools are
advisable. The term 'pool' means the grouping together each fiscal
year for accounting purposes, of the operations concerned with the
determination of proceeds derived from a commodity or group of
commodities.
Section 3. Patronage Proceeds
The patronage proceeds of the Cooperative shall be the
gross receipts derived from sources which under law qualify as
patronage income, including income from the sale of raw product and
all income from other patronage sources, less its operating
expenses properly attributable to the production of such patronage
income, including overhead, interest, dividends on capital stock,
maintenance, depreciation, obsolescence, depletion, bad debts,
taxes and other proper costs, all as determined by the Board of
Directors in accordance with regular business practices and sound
accounting principles. Capital gains and capital losses shall be
distributed as determined by the Board of Directors in its
discretion after considering the current federal income tax law and
regulations.
Section 4. Members' Share of Patronage Proceeds
Each member's and each agent grower's pro rata share of
the patronage proceeds shall be determined annually by dividing the
patronage proceeds by the total raw product value (commercial
market value times total quantity delivered); this gives the
percent of commercial market value earned. The multiplication of
that percentage by the raw product value delivered by each member
and agent grower determines the pro rata share of patronage
15
<PAGE>
proceeds of each member and agent grower. In any year in which
patronage proceeds as determined pursuant to Sections 3, 4 and 8
are less than commercial market value there shall be paid or
allocated to each member and agent grower as the purchase price for
his crops as provided in Section 5 not only his share of patronage
proceeds for the year but also his share of funds available for
such payment pursuant to any commercial market value stabilization
program adopted by the Board of Directors, up to a total payment or
allocation of full commercial market value or the maximum amount
available under the program, whichever is less.
Section 5. Payment of Patronage Proceeds
Without any further action on the part of any officer or the
Board of Directors of the Cooperative, the Cooperative shall be
absolutely liable for the payment or allocation as herein provided
to each member and agent grower of the pro rata share of patronage
proceeds of each member and agent grower determined pursuant to
Section 4. Such payment or allocation shall be accomplished
annually within eight and one-half months of the close of the
fiscal year of the Cooperative.
Section 6. Retention of Patronage Proceeds
Upon such terms and conditions and in such amounts as are
deemed advisable in the discretion of the Board of Directors, a
portion of the patronage proceeds may be retained in the
Cooperative for use as working capital or for such other purposes
as may be determined by the Board of Directors. Such portion of
the patronage proceeds so retained shall be allocated among the
members and agent growers entitled thereto, and the Cooperative
shall cause written notice of such allocation to be sent to each
such member and agent grower. The balance of the patronage
proceeds not so retained shall be paid in cash.
Section 7. Taxable Income of Members
Each member of the Cooperative, and, as applicable, each agent
grower as described in Article IX, Section 1, shall take into
account, pursuant to Section 1385 of the Internal Revenue Code of
1954, as amended, the stated dollar amount of any and all written
notices of allocation received from the Cooperative and shall
include such stated dollar amount in his gross income for tax
purposes for the year in which such written notice of allocation is
received.
Section 8. Non-Patronage Proceeds
The non-patronage proceeds of the Cooperative shall be its
gross receipts derived from all sources which under law do not
qualify as patronage income, less all expenses properly
attributable to the production of such non-patronage income. Non-
16
<PAGE>
patronage proceeds shall be used in behalf of the Cooperative and
its members in accordance with such lawful purposes as may be
determined by the Board of Directors. In any year in which non-
patronage expenses exceed non-patronage income so that there is a
loss from the non-patronage activities of the Cooperative, such
non-patronage loss shall be deducted from patronage proceeds
determined in accordance with Sections 3 and 4 of this article
before payment and allocation of patronage proceeds is made
pursuant to Sections 5 and 6 of this article.
Section 9. Dissolution
Upon dissolution or other termination of the Cooperative or
its business, after the payment of all debts, amounts allocated to
members but retained by the Cooperative shall be paid in full, or
on a pro rata basis without priority, before any liquidating
dividends are declared on or with respect to capital stock.
After such payments, out of any funds then remaining, holders
of non-cumulative preferred stock are entitled to receive the full
par value of such stock, together with the amount of such dividends
as may have been declared but are then unpaid. After payment to
the holders of preferred stock, out of any funds then remaining,
the holders of common stock are entitled to receive the par value
thereof, together with the amount of such dividends as may have
been declared but are then unpaid.
After payments to the holders of preferred and common stock,
any funds then remaining shall be distributed among the members to
whom interests in funds retained by the Cooperative have been
allocated during the preceding five fiscal years in such proportion
as the total of the amounts allocated to each member during such
period shall bear to the total of the amounts allocated to all
members but retained by the Cooperative during such period.
Section 10. Guarantee
The Cooperative may, by resolution of the Board of Directors,
guarantee and endorse the notes, checks, drafts or borrowings of
any other corporation, and any bank or trust company shall be fully
protected under any such guarantee or endorsement upon receipt of
a copy of any such resolution duly certified by the secretary of
the Cooperative.
Section 11. Fiscal Year
The fiscal year of the Cooperative shall be as determined from
time to time by the Board of Directors of the Cooperative.
ARTICLE XI
DIVIDENDS
17
<PAGE>
Section 1. Declaration
Dividends upon the capital stock of the Cooperative may be
declared by the Board of Directors at any regular or special
meeting, subject to the provisions of law and of the Certificate of
Incorporation relating thereto.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 1. Seal
The seal of the Cooperative shall be circular in form and
contain the name of the Cooperative, the year of its organization
and the words, 'Corporate Seal, New York.' The seal may be used by
causing it to be impressed directly on the instrument or writing to
be sealed, or upon an adhesive substance affixed thereto. The seal
on any corporate instrument may be a facsimile, engraved or
printed.
Section 2. Roberts Rules of Order
To the extent that issues concerning the operation of the
Cooperative are not resolved by law, the Certificate of
Incorporation, or these Bylaws, they are to be determined in
accordance with the most recent edition of Roberts Rules of Order
published at the time such issue arises.
Section 3. Amendments
These Bylaws may be amended by the Board of Directors as set
forth in Article IV, Section 8, hereof, and may also be amended or
repealed, or new Bylaws adopted, at any meeting of members or
delegates by the affirmative vote of two-thirds of the votes cast
by the members voting, either in person or by mail, providing the
substance of the proposed amendment has been inserted in the notice
of such meeting.
18
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
CURTICE-BURNS EXPRESS, INC.
Under Section 402 of the
Business Corporation Law
1. The name of the corporation shall be CURTICE-BURNS
EXPRESS, INC.
2. (a) The purposes for which the corporation is to be
formed are:
(i) To manufacture, to purchase, lease, or
otherwise acquire, to hold and use, to sell, lease, or otherwise
dispose of, and to deal in or with personal property of any
description and any interest therein.
(ii) To purchase, lease, or otherwise acquire,
to invest in, hold, use, and encumber, to sell, lease, exchange,
transfer, or otherwise dispose of, and to construct, develop,
improve, equip, maintain, and operate structures and real property
of any description and any interest therein.
(iii) To borrow money, to issue, sell, and
pledge its notes, bonds, and other evidences of indebtedness, to
secure any of its obligations by mortgage, pledge, or deed of trust
of all or any of its property, and to guarantee and secure
obligations of any person, all to the extent necessary, useful, or
conducive to carrying out any of the purposes of the corporation.
(iv) To invest its funds in any shares or other
securities of another corporation, business, or undertaking or of
a government, governmental authority, or governmental subdivision.
(v) 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.
(vi) To do whatever is deemed necessary,
useful, or conducive to carrying out any of the purposes of the
corporation.
(b) The purposes specified herein shall be in no
way limited or restricted by reference to or inference from the
terms of any other clause in this, or in any other paragraph,
except that the corporation is not formed 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 from such state official, department,
board, agency or other body.
<PAGE>
(c) Other than the restriction in paragraph 2(b),
the purposes specified in each of the clauses herein shall be
regarded as independent purposes and the enumeration of specific
purposes shall not be construed to limit or restrict in any manner
the meaning of general terms or of the general powers of the
corporation; nor shall the expression of one thing be deemed to
exclude another although it be of like nature not expressed.
3. The office of the corporation shall be located in
the City of Rochester, County of Monroe, State of New York.
4. The aggregate number of shares which the corporation
shall have authority to issue is two hundred (200), all of which
are to be without par value.
5. The Secretary of State is hereby designated as the
agent of the corporation upon whom process against it may be served
and the post office address to which the Secretary of State shall
mail a copy of any process against the corporation which may be
served upon him is: P.O. Box 681, Rochester, New York 14603.
2
<PAGE>
EXHIBIT 3.6
BY-LAWS
of
CURTICE-BURNS EXPRESS, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
of the Corporation shall be held on such date and hour as may be
fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such business as
may properly be brought before such meeting.
SECTION 2. Special Meetings. Special meetings of the shareholders
of the Corporation may be held at any time in the interval between
annual meetings. Special meetings may be called by the President,
or by request of a majority of the Board of Directors, which
written request shall state the purpose or purposes of the Meeting
and matters proposed to be acted upon thereat. Nothing contained
herein shall limit the right and power of directors and
shareholders to require a special meeting for the election of
directors pursuant to Section 603 of the Business Corporation Law,
as that Section may from time to time be amended.
SECTION 3. Place of Meetings. Annual and special meetings of the
shareholders of the Corporation shall be held at the principal
office of the Corporation or at such other place within or without
the State of New York as the Board of Directors may from time to
time determine.
SECTION 4. Notice of Meetings. Written or printed notice of the
date, time and place of all meetings of the shareholders shall be
given personally, or by first class mail, not less than ten (10)
days nor more than fifty (50) days before the day fixed for the
meeting, to each shareholder entitled to vote at said meeting, and,
unless the meeting is an annual meeting, such notice must also
state the purpose or purposes for which the meeting is called and
must indicate that it is being issued by or at the direction of the
person or persons calling the meeting. Such notice must also be
given to any shareholder who, by reason of any action proposed at
such meeting, would be entitled to have his stock appraised, if
such action were taken, and such notice must specify the proposed
action and state the fact that if the action is taken, the
dissenting shareholder shall have appraisal rights. Such notice
shall be given to the shareholder by leaving the same with him at
his residence or usual place of business or by mailing it, postage
prepaid and addressed to him at his address as it appears on the
books of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which event it
<PAGE>
shall be mailed to the address designated in such request. The
notices, as provided for in this Section, are not required to be
given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by
him. No notice of an adjourned meeting of shareholders need be
given, unless the Board of Directors fixes a new record date for
the adjourned meeting.
SECTION 5. Record Dates. For the purposes of determining the
shareholders entitled to notice of or to vote at a shareholders'
meeting or any adjournment thereof, the Board of Directors may fix
a date of record which shall not be more than fifty (50) days nor
less than ten (10) days before said meeting date. For the purpose
of determining shareholders entitled to express consent to or
dissent from any proposal without a meeting, or for determining
shareholders entitled to receive payment of a dividend or the
allotment of any rights, or for any other action, the Board of
Directors may fix a date of record which shall not be more than
fifty (50) days prior to such action.
SECTION 6. Quorum. At all meetings of shareholders, except as
otherwise provided by law, a quorum shall exist if there is present
in person or represented by proxy, shareholders owning a majority
in number of the shares of the Corporation issued and outstanding
and entitled to vote thereat, in order to constitute a quorum; but
if there be no quorum, the holders of such shares so present or
represented may by majority vote adjourn the meeting from time to
time, but not for a period of over thirty (30) days at any one
time, without notice other than by announcement at the meeting,
until a quorum shall attend. At any such adjournment of the
meeting, which a quorum shall attend, any business may be
transacted which might have been transacted at the meeting as
originally called. When a quorum is once present, it is not broken
by the subsequent withdrawal of any shareholder.
SECTION 7. Voting. At all meetings of the shareholders, each
shareholder entitled to vote thereat may vote in person or by
proxy, and shall have one (1) vote for each share standing in his
name on the books of the Corporation as of the record date fixed
for the meeting, unless otherwise provided in the Certificate of
Incorporation or any amendments thereto. Upon demand of the
shareholders holding ten percent (10%) in interest of the shares,
present in person or by proxy and entitled to vote, voting shall be
by ballot. A plurality of votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take
any other corporate action, except as otherwise provided by law or
these By-Laws.
SECTION 8. Proxies. Every proxy shall be in writing, subscribed
2
<PAGE>
by the shareholder or his duly authorized attorney and dated. No
proxy which is dated more than eleven (11) months before the
meeting at which it is offered shall be accepted, unless such proxy
shall, on its face, name a longer period for which it is to remain
in force.
SECTION 9. Conduct of Meetings. Meetings of the shareholders
shall be presided over by the President of the Corporation or, in
his absence, by the Chairman of the Board of Directors, if any, or,
in the absence of both of them, by an Executive Vice President, if
any, or, in the absence of all such officers, by a Chairman to be
chosen at the Meeting. The Secretary of the Corporation shall act
as Secretary of the Meeting, if present.
SECTION 10. Action Without a Meeting. Whenever shareholders are
required or permitted to take any action by vote, such action may
be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Such written consent shall have the same
effect as a unanimous vote of shareholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The Board of Directors shall have
the management and control of the affairs and business of the
Corporation. The directors shall be elected by the shareholders at
each annual meeting of shareholders and each director shall serve
until his successor is elected or appointed and qualified, unless
his directorship be theretofore vacated by resignation, death,
removal or otherwise.
SECTION 2. Number. The number of directors constituting the
entire Board of Directors shall be such number, not less than three
(3), as shall be designated by resolution of the Board of Directors
adopted prior to the election of directors at the annual meeting of
shareholders. In the absence of such resolution the number of
directors to be elected at such annual meeting shall be the number
last fixed by the Board of Directors. Any Board action designating
a change in the number of directors shall require a vote of a
majority of the entire Board. The 'entire Board', as used in this
Article, shall mean the total number of directors which the
Corporation would have if there were no vacancies. Notwithstanding
the provisions of this Section, where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders.
SECTION 3. Vacancies. Vacancies in the Board of Directors
(including any resulting from an increase in the number of
3
<PAGE>
directors) created for any reason except the removal by the
shareholders of a director or directors without cause, may be
filled by vote of the Board of Directors. If, however, the number
of directors then in office is less than a quorum, vacancies may be
filled by a vote of a majority of the directors then in office. A
director elected by the Board of Directors to fill a vacancy under
this Section shall hold office until the next meeting of
shareholders at which the election of directors is in the regular
order of business, and until his successor has been duly elected or
appointed and qualified.
SECTION 4. Removal. At any meeting of the shareholders duly
called, any director may, by vote of the holders of a majority of
the shares entitled to vote in the election of directors, be
removed from office, with or without cause. In the case of removal
without cause, another director may be elected by the shareholders
in the place of the person so removed, to serve for the remainder
of the term.
SECTION 5. Meetings. Regular Meetings of the Board of Directors
shall be held at such times as the directors may from time to time
determine. Special meetings of the Board of Directors shall be
held at any time, upon call from the Chairman of the Board, the
President or at least one-third (1/3) of the directors.
SECTION 6. Place of Meetings. Regular and special meetings of the
Board of Directors shall be held at the principal office of the
Corporation or at such other place, within or without the State of
New York, as the Board of Directors may from time to time
determine.
SECTION 7. Notice of Meeting. Notice of the place, day and hour
of every regular and special meeting shall be given to each
director by delivering the same to him personally or sending the
same to him by telegraph or leaving the same at his residence or
usual place of business, at least one (1) day before the meeting,
or shall be mailed to each director, postage prepaid and addressed
to him at the last known mailing address according to the records
of the Corporation, at least three (3) days before the meeting. No
notice of any adjourned meeting of the Board of Directors need to
be given other than by announcement at the meeting, subject to the
provisions of Section 9 of this Article.
SECTION 8. Waiver of Notice. Notice of a meeting need not be
given to any director who submits a signed written waiver thereof,
whether before, during or after the meeting, nor to any director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
SECTION 9. Quorum. A majority of the entire Board shall be
necessary to constitute a quorum for the transaction of business at
each meeting of the Board of Directors; but if at any meeting there
4
<PAGE>
be less than a quorum present, a majority of those present may
adjourn the meeting from time to time without notice other than by
announcement at the meeting, until a quorum shall attend. At any
such adjournment, at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting
as originally called.
SECTION 10. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee
thereof at a duly held meeting may be taken without a meeting if
all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action.
Such resolution and the written consents thereto by the members of
the Board of Directors or committee shall be filed with the minutes
of the proceedings of the Board of Directors or the committee.
SECTION 11. Personal Attendance by Conference Communication
Equipment. Any one or more members of the Board of Directors or
any committee thereof may participate in a meeting of such Board or
committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at the meeting.
SECTION 12. Compensation. Directors as such shall not receive any
stated compensation for their services, but by resolution of the
Board of Directors a fixed sum and expenses of attendance may be
allowed for attendance at each special or regular meeting thereof.
Nothing in this Section will be construed to preclude a director
from serving the Corporation in any other capacity and from
receiving compensation therefor.
SECTION 13. Executive Committee and Other Committees. The Board
of Directors may, in its discretion, by an affirmative vote of a
majority of the entire Board, appoint an Executive Committee, or
any other committee, to consist of three (3) or more directors as
the Board of Directors may from time to time determine. The
Executive Committee shall have, and may exercise between meetings
of the Board of Directors, all the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
and other committees shall have those powers conferred upon them by
the Board of Directors, except that no committee shall have power:
(a) To submit to shareholders any action requiring share-
holder approval;
(b) To fill vacancies in the Board of Directors or in any
committee thereof;
(c) To fix compensation of directors for service on the Board
of Directors or any committee thereof;
5
<PAGE>
(d) To repeal, amend or adopt by-laws;
(e) To amend or repeal any Board resolution which is not, by
its terms, amendable or repealable by such committee;
In the absence of any member of the Executive Committee or of any
other committee, the members thereof present at any meeting may
appoint a member of the Board of Directors previously designated by
the Board of Directors as a committee alternate to act in place of
such absent member. The Board of Directors shall have the power at
any time to change the membership of any committee, to fill
vacancies in it, or dissolve it. The Executive Committee and any
other committee may make rules for the conduct of its business, and
may appoint such committees and assistants as may from time to time
be necessary, unless the Board of Directors shall provide
otherwise. A majority of the members of the Executive Committee
and of any other committee shall constitute a quorum.
ARTICLE III
OFFICERS
SECTION 1. Election of Officers. The Board of Directors (or the
Executive Committee), at any duly held meeting thereof, shall elect
a President, a Secretary and a Treasurer of the Corporation, and
may elect a Chairman of the Board from among the directors of the
Corporation, one or more Vice Presidents and any other officers.
Each such officer shall serve at the pleasure of the Board of
Directors or until his successor shall have been duly elected or
appointed and qualifies, or until he shall have resigned, shall
have deceased or shall have been removed in the manner provided in
Section 3 of this Article. Any two offices may be held by the same
person, except that no person shall hold the office of President
and Secretary concurrently. Notwithstanding the foregoing, if all
of the stock of the Corporation shall ever be owned by one person,
such person may hold all or any combination of offices. Any
vacancies in the above offices shall be filled by the Board.
SECTION 2. Assistant and Subordinate Officers. The Board of
Directors (or the Executive Committee) may elect one or more
Assistant Treasurers, one or more Assistant Secretaries and such
other subordinate officers or agents as it may deem proper from
time to time, who shall hold office at the pleasure of the Board of
Directors (or the Executive Committee). The Board of Directors may
from time to time authorize the President to appoint and remove
such assistant and subordinate officers and agents and prescribe
the powers and duties thereof.
SECTION 3. Removal. Any officers of the Corporation may be
removed with or without cause by a vote of the majority of the
entire Board of Directors of the Corporation then in office at a
6
<PAGE>
meeting called for that purpose (or, except in the case of an
officer elected by the Board of Directors, by the Executive
Committee) whenever in its judgment the best interests of the
Corporation may be served thereby.
SECTION 4. Compensation. The Board of Directors shall fix the
compensation of all officers of the Corporation who are elected or
appointed by the Board of Directors. The Board of Directors or the
Executive Committee shall fix the compensation of all other
officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such assistant
and subordinate officers and agents as he is authorized to appoint
and remove.
SECTION 5. Chairman of the Board. The Chairman of the Board, if
there be one, shall preside at all meetings of the Board of
Directors and shall perform such other duties as the Board of
Directors may direct.
SECTION 6. President. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of
the Board of Directors (or the Executive Committee), have the
general management of the affairs of the Corporation. The
President shall preside at all meetings of the shareholders. If
there be no Chairman of the Board, or in his absence or inability
to act, the President shall perform all duties of the Chairman of
the Board, subject, however, to the control of the Board of
Directors (or the Executive Committee).
SECTION 7. Vice Presidents. Any one or more of the Vice
Presidents may be designated by the Board of Directors (or the
Executive Committee) as an Executive Vice President. At the
request of the President, or in his absence or during his
disability, the Executive Vice President shall perform the duties
and exercise the functions of the President. If there be no
Executive Vice President, or if there be more than one (1), the
Board of Directors (or the Executive Committee) may determine which
one or more of the Vice Presidents shall perform any of such duties
or exercise any of such functions; if such determination is not
made by the Board of Directors (or the Executive Committee), the
President may make such determination; otherwise, any of the Vice
Presidents may perform any of such duties or exercise any of such
functions. Each Vice President shall have such other powers and
duties as may be properly designated by the Board of Directors (or
the Executive Committee) and the President.
SECTION 8. Secretary. The Secretary shall keep full minutes of
all meetings of the shareholders and of the Board of Directors in
books provided for that purpose. He shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as
required by law. He shall be the custodian of the records and of
the Seal or Seals of the Corporation. He shall affix the Corporate
7
<PAGE>
Seal to all documents, the execution of which on behalf of the
Corporation, under the Seal, is duly authorized by the Board of
Directors (or Executive Committee), and when so affixed may attest
the same. He shall have such other powers and duties as may be
properly designated by the Board of Directors (or the Executive
Committee) and the President.
SECTION 9. Treasurer. The Treasurer shall keep correct and
complete books and records of account for the Corporation. Subject
to the control and supervision of the Board of Directors (or the
Executive Committee) and the President, or such other officer as
the President may designate, the Treasurer shall establish and
execute programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors (or the Executive Committee)
and the President.
ARTICLE IV
SHARE CERTIFICATES
SECTION 1. Form and Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates for shares in
such form not inconsistent with the law or the Certificate of
Incorporation, and any amendments thereof, as the Board of
Directors may from time to time prescribe. The share certificates
shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary, and may be sealed with the
seal of the Corporation. Where any share certificate is
countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or its employee, or if the shares
are listed on a registered national security exchange, the
signatures of any such President, Vice President, Secretary, or
Assistant Secretary, may be facsimiles engraved or printed. In
case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such
officer before the share certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such
person had not ceased to be such officer.
SECTION 2. Transfer of Shares. The shares of the Corporation
shall be transferred on the books of the Corporation by the
8
<PAGE>
Registered holder thereof, in person or by his attorney, upon
surrender for cancellation of certificates for the same number of
shares, with a proper assignment and powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by
the certificate to be the owner of the shares represented thereby,
with such proof of the authenticity of the signature as the
Corporation, or its agents, may reasonably require. Such
certificate shall have affixed thereto all stock transfer stamps
required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may
deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation.
SECTION 3. Mutilated, Lost, Stolen or Destroyed Certificates. The
holder of any certificates representing shares of the Corporation
shall immediately notify the Corporation of any mutilation, loss,
theft or destruction thereof, and the Board of Directors may, in
its discretion, cause one or more new certificates, for the same
number of shares in aggregate, to be issued to such holder upon the
surrender of the mutilated certificate, or, in case of an alleged
loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction and the deposit of
indemnity, by way of bond or otherwise, in such form and amount and
with such sureties as the Board of Directors may require, to
indemnify the Corporation and transfer agent and registrar, if any,
against loss or liability by reason of the issuance of such new
certificates; but the Board of Directors may, in its discretion,
refuse to issue such new certificates save upon the order of some
court having jurisdiction in such matters.
SECTION 4. Stock Ledgers. The Stock Ledgers of the Corporation
containing the names and addresses of the shareholders and the
number of shares held by them respectively shall be maintained at
the principal office of the Corporation, or if there be a transfer
agent, at the office of such transfer agent, as the Board of
Directors shall determine.
SECTION 5. Transfer Agents and Registrars. The Corporation may
have one or more transfer agents and one or more registrars of its
stock or of any class or classes of its shares whose respective
duties the Board of Directors may from time to time determine.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify (a) any person made or threatened
to be made a party to any action or proceeding by reason of the
fact that he, his testator or intestate, is or was a director or
officer of the Corporation, and (b) any director or officer of the
Corporation who served any other company in any capacity at the
9
<PAGE>
request of the Corporation, in the manner and to the maximum extent
permitted by the Business Corporation Law of New York, as amended
from time to time; and the Corporation may, in the discretion of
the Board of Directors, indemnify all other corporate personnel to
the extent permitted by law.
ARTICLE VI
FINANCES
SECTION 1. Dividends. Subject to law and to the provisions of the
Certificate of Incorporation, and any amendments thereof, the Board
of Directors may declare dividends on the stock of the Corporation,
payable upon such dates as the Board of Directors may designate.
SECTION 2. Reserves. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for
dividends such sum or sums, as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the Board of Directors shall deem conducive
to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was
created.
SECTION 3. Bills, Notes, Etc. All checks or demands for money and
notes or other instruments evidencing indebtedness or obligations
of the Corporation shall be made in the name of the Corporation and
shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
ARTICLE VII
AMENDMENTS
SECTION 1. Power to Amend. The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws of the Corporation by
a majority vote of the entire Board at any meeting. However, any
By-Laws adopted by the Board of Directors may be amended or
repealed at any meeting of shareholders by a majority of the votes
cast at such meeting by the holders of shares entitled to vote
thereon.
SECTION 2. Notice of Amendment Affecting Election of Directors.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall
be set forth in the Notice of the next Meeting of shareholders for
the election of directors the By-Law so adopted, amended or
10
<PAGE>
repealed, together with a concise statement of the changes made.
11
<PAGE>
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
FINGER LAKES PACKAGING COMPANY, INC.
Under Section 402 of the
Business Corporation Law
1. The name of the corporation shall be
FINGER LAKES PACKAGING COMPANY, INC.
2. The purpose for which the corporation is to be
formed 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, provided that the corporation is not formed
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 from such
state official, department, board, agency or other body.
3. The office of the corporation shall be located in
the County of Monroe, State of New York.
4. The aggregate number of shares which the corporation
shall have authority to issue is 200, all of which shall be common
shares without par value.
5. The Secretary of State is hereby designated as the
agent of the corporation upon whom process against it may be
served, and the post office address to which the Secretary of State
shall mail a copy of any process against the corporation which may
be served upon him is:
c/o Curtice-Burns, Inc.
P.O. Box 681
Rochester, New York 14603.
<PAGE>
EXHIBIT 3.8
BY-LAWS
of
FINGER LAKES PACKAGING COMPANY, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
of the Corporation shall be held on such date and hour as may be
fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such business as
may properly be brought before such meeting.
SECTION 2. Special Meetings. Special meetings of the shareholders
of the Corporation may be held at any time in the interval between
annual meetings. Special meetings may be called by the President,
or by request of a majority of the Board of Directors, which
written request shall state the purpose or purposes of the Meeting
and matters proposed to be acted upon thereat. Nothing contained
herein shall limit the right and power of directors and
shareholders to require a special meeting for the election of
directors pursuant to Section 603 of the Business Corporation Law,
as that Section may from time to time be amended.
SECTION 3. Place of Meetings. Annual and special meetings of the
shareholders of the Corporation shall be held at the principal
office of the Corporation or at such other place within or without
the State of New York as the Board of Directors may from time to
time determine.
SECTION 4. Notice of Meetings. Written or printed notice of the
date, time and place of all meetings of the shareholders shall be
given personally, or by first class mail, not less than ten (10)
days nor more than fifty (50) days before the day fixed for the
meeting, to each shareholder entitled to vote at said meeting, and,
unless the meeting is an annual meeting, such notice must also
state the purpose or purposes for which the meeting is called and
must indicate that it is being issued by or at the direction of the
person or persons calling the meeting. Such notice must also be
given to any shareholder who, by reason of any action proposed at
such meeting, would be entitled to have his stock appraised, if
such action were taken, and such notice must specify the proposed
action and state the fact that if the action is taken, the
dissenting shareholder shall have appraisal rights. Such notice
shall be given to the shareholder by leaving the same with him at
his residence or usual place of business or by mailing it, postage
prepaid and addressed to him at his address as it appears on the
books of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which event it
<PAGE>
shall be mailed to the address designated in such request. The
notices, as provided for in this Section, are not required to be
given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by
him. No notice of an adjourned meeting of shareholders need be
given, unless the Board of Directors fixes a new record date for
the adjourned meeting.
SECTION 5. Record Dates. For the purposes of determining the
shareholders entitled to notice of or to vote at a shareholders'
meeting or any adjournment thereof, the Board of Directors may fix
a date of record which shall not be more than fifty (50) days nor
less than ten (10) days before said meeting date. For the purpose
of determining shareholders entitled to express consent to or
dissent from any proposal without a meeting, or for determining
shareholders entitled to receive payment of a dividend or the
allotment of any rights, or for any other action, the Board of
Directors may fix a date of record which shall not be more than
fifty (50) days prior to such action.
SECTION 6. Quorum. At all meetings of shareholders, except as
otherwise provided by law, a quorum shall exist if there is present
in person or represented by proxy, shareholders owning a majority
in number of the shares of the Corporation issued and outstanding
and entitled to vote thereat, in order to constitute a quorum; but
if there be no quorum, the holders of such shares so present or
represented may by majority vote adjourn the meeting from time to
time, but not for a period of over thirty (30) days at any one
time, without notice other than by announcement at the meeting,
until a quorum shall attend. At any such adjournment of the
meeting, which a quorum shall attend, any business may be
transacted which might have been transacted at the meeting as
originally called. When a quorum is once present, it is not broken
by the subsequent withdrawal of any shareholder.
SECTION 7. Voting. At all meetings of the shareholders, each
shareholder entitled to vote thereat may vote in person or by
proxy, and shall have one (1) vote for each share standing in his
name on the books of the Corporation as of the record date fixed
for the meeting, unless otherwise provided in the Certificate of
Incorporation or any amendments thereto. Upon demand of the
shareholders holding ten percent (10%) in interest of the shares,
present in person or by proxy and entitled to vote, voting shall be
by ballot. A plurality of votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take
any other corporate action, except as otherwise provided by law or
these By-Laws.
SECTION 8. Proxies. Every proxy shall be in writing, subscribed
2
<PAGE>
by the shareholder or his duly authorized attorney and dated. No
proxy which is dated more than eleven (11) months before the
meeting at which it is offered shall be accepted, unless such proxy
shall, on its face, name a longer period for which it is to remain
in force.
SECTION 9. Conduct of Meetings. Meetings of the shareholders
shall be presided over by the President of the Corporation or, in
his absence, by the Chairman of the Board of Directors, if any, or,
in the absence of both of them, by an Executive Vice President, if
any, or, in the absence of all such officers, by a Chairman to be
chosen at the Meeting. The Secretary of the Corporation shall act
as Secretary of the Meeting, if present.
SECTION 10. Action Without a Meeting. Whenever shareholders are
required or permitted to take any action by vote, such action may
be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Such written consent shall have the same
effect as a unanimous vote of shareholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The Board of Directors shall have
the management and control of the affairs and business of the
Corporation. The directors shall be elected by the shareholders at
each annual meeting of shareholders and each director shall serve
until his successor is elected or appointed and qualified, unless
his directorship be theretofore vacated by resignation, death,
removal or otherwise.
SECTION 2. Number. The number of directors constituting the
entire Board of Directors shall be such number, not less than three
(3), as shall be designated by resolution of the Board of Directors
adopted prior to the election of directors at the annual meeting of
shareholders. In the absence of such resolution the number of
directors to be elected at such annual meeting shall be the number
last fixed by the Board of Directors. Any Board action designating
a change in the number of directors shall require a vote of a
majority of the entire Board. The 'entire Board', as used in this
Article, shall mean the total number of directors which the
Corporation would have if there were no vacancies. Notwithstanding
the provisions of this Section, where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders.
SECTION 3. Vacancies. Vacancies in the Board of Directors
(including any resulting from an increase in the number of
3
<PAGE>
directors) created for any reason except the removal by the
shareholders of a director or directors without cause, may be
filled by vote of the Board of Directors. If, however, the number
of directors then in office is less than a quorum, vacancies may be
filled by a vote of a majority of the directors then in office. A
director elected by the Board of Directors to fill a vacancy under
this Section shall hold office until the next meeting of
shareholders at which the election of directors is in the regular
order of business, and until his successor has been duly elected or
appointed and qualified.
SECTION 4. Removal. At any meeting of the shareholders duly
called, any director may, by vote of the holders of a majority of
the shares entitled to vote in the election of directors, be
removed from office, with or without cause. In the case of removal
without cause, another director may be elected by the shareholders
in the place of the person so removed, to serve for the remainder
of the term.
SECTION 5. Meetings. Regular Meetings of the Board of Directors
shall be held at such times as the directors may from time to time
determine. Special meetings of the Board of Directors shall be
held at any time, upon call from the Chairman of the Board, the
President or at least one-third (1/3) of the directors.
SECTION 6. Place of Meetings. Regular and special meetings of the
Board of Directors shall be held at the principal office of the
Corporation or at such other place, within or without the State of
New York, as the Board of Directors may from time to time
determine.
SECTION 7. Notice of Meeting. Notice of the place, day and hour
of every regular and special meeting shall be given to each
director by delivering the same to him personally or sending the
same to him by telegraph or leaving the same at his residence or
usual place of business, at least one (1) day before the meeting,
or shall be mailed to each director, postage prepaid and addressed
to him at the last known mailing address according to the records
of the Corporation, at least three (3) days before the meeting. No
notice of any adjourned meeting of the Board of Directors need to
be given other than by announcement at the meeting, subject to the
provisions of Section 9 of this Article.
SECTION 8. Waiver of Notice. Notice of a meeting need not be
given to any director who submits a signed written waiver thereof,
whether before, during or after the meeting, nor to any director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
SECTION 9. Quorum. A majority of the entire Board shall be
necessary to constitute a quorum for the transaction of business at
each meeting of the Board of Directors; but if at any meeting there
4
<PAGE>
be less than a quorum present, a majority of those present may
adjourn the meeting from time to time without notice other than by
announcement at the meeting, until a quorum shall attend. At any
such adjournment, at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting
as originally called.
SECTION 10. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee
thereof at a duly held meeting may be taken without a meeting if
all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action.
Such resolution and the written consents thereto by the members of
the Board of Directors or committee shall be filed with the minutes
of the proceedings of the Board of Directors or the committee.
SECTION 11. Personal Attendance by Conference Communication
Equipment. Any one or more members of the Board of Directors or
any committee thereof may participate in a meeting of such Board or
committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at the meeting.
SECTION 12. Compensation. Directors as such shall not receive any
stated compensation for their services, but by resolution of the
Board of Directors a fixed sum and expenses of attendance may be
allowed for attendance at each special or regular meeting thereof.
Nothing in this Section will be construed to preclude a director
from serving the Corporation in any other capacity and from
receiving compensation therefor.
SECTION 13. Executive Committee and Other Committees. The Board
of Directors may, in its discretion, by an affirmative vote of a
majority of the entire Board, appoint an Executive Committee, or
any other committee, to consist of three (3) or more directors as
the Board of Directors may from time to time determine. The
Executive Committee shall have, and may exercise between meetings
of the Board of Directors, all the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
and other committees shall have those powers conferred upon them by
the Board of Directors, except that no committee shall have power:
(a) To submit to shareholders any action requiring share-
holder approval;
(b) To fill vacancies in the Board of Directors or in any
committee thereof;
(c) To fix compensation of directors for service on the Board
of Directors or any committee thereof;
5
<PAGE>
(d) To repeal, amend or adopt by-laws;
(e) To amend or repeal any Board resolution which is not, by
its terms, amendable or repealable by such committee;
In the absence of any member of the Executive Committee or of any
other committee, the members thereof present at any meeting may
appoint a member of the Board of Directors previously designated by
the Board of Directors as a committee alternate to act in place of
such absent member. The Board of Directors shall have the power at
any time to change the membership of any committee, to fill
vacancies in it, or dissolve it. The Executive Committee and any
other committee may make rules for the conduct of its business, and
may appoint such committees and assistants as may from time to time
be necessary, unless the Board of Directors shall provide
otherwise. A majority of the members of the Executive Committee
and of any other committee shall constitute a quorum.
ARTICLE III
OFFICERS
SECTION 1. Election of Officers. The Board of Directors (or the
Executive Committee), at any duly held meeting thereof, shall elect
a President, a Secretary and a Treasurer of the Corporation, and
may elect a Chairman of the Board from among the directors of the
Corporation, one or more Vice Presidents and any other officers.
Each such officer shall serve at the pleasure of the Board of
Directors or until his successor shall have been duly elected or
appointed and qualifies, or until he shall have resigned, shall
have deceased or shall have been removed in the manner provided in
Section 3 of this Article. Any two offices may be held by the same
person, except that no person shall hold the office of President
and Secretary concurrently. Notwithstanding the foregoing, if all
of the stock of the Corporation shall ever be owned by one person,
such person may hold all or any combination of offices. Any
vacancies in the above offices shall be filled by the Board.
SECTION 2. Assistant and Subordinate Officers. The Board of
Directors (or the Executive Committee) may elect one or more
Assistant Treasurers, one or more Assistant Secretaries and such
other subordinate officers or agents as it may deem proper from
time to time, who shall hold office at the pleasure of the Board of
Directors (or the Executive Committee). The Board of Directors may
from time to time authorize the President to appoint and remove
such assistant and subordinate officers and agents and prescribe
the powers and duties thereof.
SECTION 3. Removal. Any officers of the Corporation may be
removed with or without cause by a vote of the majority of the
entire Board of Directors of the Corporation then in office at a
6
<PAGE>
meeting called for that purpose (or, except in the case of an
officer elected by the Board of Directors, by the Executive
Committee) whenever in its judgment the best interests of the
Corporation may be served thereby.
SECTION 4. Compensation. The Board of Directors shall fix the
compensation of all officers of the Corporation who are elected or
appointed by the Board of Directors. The Board of Directors or the
Executive Committee shall fix the compensation of all other
officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such assistant
and subordinate officers and agents as he is authorized to appoint
and remove.
SECTION 5. Chairman of the Board. The Chairman of the Board, if
there be one, shall preside at all meetings of the Board of
Directors and shall perform such other duties as the Board of
Directors may direct.
SECTION 6. President. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of
the Board of Directors (or the Executive Committee), have the
general management of the affairs of the Corporation. The
President shall preside at all meetings of the shareholders. If
there be no Chairman of the Board, or in his absence or inability
to act, the President shall perform all duties of the Chairman of
the Board, subject, however, to the control of the Board of
Directors (or the Executive Committee).
SECTION 7. Vice Presidents. Any one or more of the Vice
Presidents may be designated by the Board of Directors (or the
Executive Committee) as an Executive Vice President. At the
request of the President, or in his absence or during his
disability, the Executive Vice President shall perform the duties
and exercise the functions of the President. If there be no
Executive Vice President, or if there be more than one (1), the
Board of Directors (or the Executive Committee) may determine which
one or more of the Vice Presidents shall perform any of such duties
or exercise any of such functions; if such determination is not
made by the Board of Directors (or the Executive Committee), the
President may make such determination; otherwise, any of the Vice
Presidents may perform any of such duties or exercise any of such
functions. Each Vice President shall have such other powers and
duties as may be properly designated by the Board of Directors (or
the Executive Committee) and the President.
SECTION 8. Secretary. The Secretary shall keep full minutes of
all meetings of the shareholders and of the Board of Directors in
books provided for that purpose. He shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as
required by law. He shall be the custodian of the records and of
the Seal or Seals of the Corporation. He shall affix the Corporate
7
<PAGE>
Seal to all documents, the execution of which on behalf of the
Corporation, under the Seal, is duly authorized by the Board of
Directors (or Executive Committee), and when so affixed may attest
the same. He shall have such other powers and duties as may be
properly designated by the Board of Directors (or the Executive
Committee) and the President.
SECTION 9. Treasurer. The Treasurer shall keep correct and
complete books and records of account for the Corporation. Subject
to the control and supervision of the Board of Directors (or the
Executive Committee) and the President, or such other officer as
the President may designate, the Treasurer shall establish and
execute programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors (or the Executive Committee)
and the President.
ARTICLE IV
SHARE CERTIFICATES
SECTION 1. Form and Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates for shares in
such form not inconsistent with the law or the Certificate of
Incorporation, and any amendments thereof, as the Board of
Directors may from time to time prescribe. The share certificates
shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary, and may be sealed with the
seal of the Corporation. Where any share certificate is
countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or its employee, or if the shares
are listed on a registered national security exchange, the
signatures of any such President, Vice President, Secretary, or
Assistant Secretary, may be facsimiles engraved or printed. In
case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such
officer before the share certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such
person had not ceased to be such officer.
SECTION 2. Transfer of Shares. The shares of the Corporation
shall be transferred on the books of the Corporation by the
8
<PAGE>
Registered holder thereof, in person or by his attorney, upon
surrender for cancellation of certificates for the same number of
shares, with a proper assignment and powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by
the certificate to be the owner of the shares represented thereby,
with such proof of the authenticity of the signature as the
Corporation, or its agents, may reasonably require. Such
certificate shall have affixed thereto all stock transfer stamps
required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may
deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation.
SECTION 3. Mutilated, Lost, Stolen or Destroyed Certificates. The
holder of any certificates representing shares of the Corporation
shall immediately notify the Corporation of any mutilation, loss,
theft or destruction thereof, and the Board of Directors may, in
its discretion, cause one or more new certificates, for the same
number of shares in aggregate, to be issued to such holder upon the
surrender of the mutilated certificate, or, in case of an alleged
loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction and the deposit of
indemnity, by way of bond or otherwise, in such form and amount and
with such sureties as the Board of Directors may require, to
indemnify the Corporation and transfer agent and registrar, if any,
against loss or liability by reason of the issuance of such new
certificates; but the Board of Directors may, in its discretion,
refuse to issue such new certificates save upon the order of some
court having jurisdiction in such matters.
SECTION 4. Stock Ledgers. The Stock Ledgers of the Corporation
containing the names and addresses of the shareholders and the
number of shares held by them respectively shall be maintained at
the principal office of the Corporation, or if there be a transfer
agent, at the office of such transfer agent, as the Board of
Directors shall determine.
SECTION 5. Transfer Agents and Registrars. The Corporation may
have one or more transfer agents and one or more registrars of its
stock or of any class or classes of its shares whose respective
duties the Board of Directors may from time to time determine.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify (a) any person made or threatened
to be made a party to any action or proceeding by reason of the
fact that he, his testator or intestate, is or was a director or
officer of the Corporation, and (b) any director or officer of the
Corporation who served any other company in any capacity at the
9
<PAGE>
request of the Corporation, in the manner and to the maximum extent
permitted by the Business Corporation Law of New York, as amended
from time to time; and the Corporation may, in the discretion of
the Board of Directors, indemnify all other corporate personnel to
the extent permitted by law.
ARTICLE VI
FINANCES
SECTION 1. Dividends. Subject to law and to the provisions of the
Certificate of Incorporation, and any amendments thereof, the Board
of Directors may declare dividends on the stock of the Corporation,
payable upon such dates as the Board of Directors may designate.
SECTION 2. Reserves. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for
dividends such sum or sums, as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the Board of Directors shall deem conducive
to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was
created.
SECTION 3. Bills, Notes, Etc. All checks or demands for money and
notes or other instruments evidencing indebtedness or obligations
of the Corporation shall be made in the name of the Corporation and
shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
ARTICLE VII
AMENDMENTS
SECTION 1. Power to Amend. The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws of the Corporation by
a majority vote of the entire Board at any meeting. However, any
By-Laws adopted by the Board of Directors may be amended or
repealed at any meeting of shareholders by a majority of the votes
cast at such meeting by the holders of shares entitled to vote
thereon.
SECTION 2. Notice of Amendment Affecting Election of Directors.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall
be set forth in the Notice of the next Meeting of shareholders for
the election of directors the By-Law so adopted, amended or
10
<PAGE>
repealed, together with a concise statement of the changes made.
11
<PAGE>
EXHIBIT 3.9
COMPOSITE CERTIFICATE OF INCORPORATION
OF
CURTICE BURNS MEAT SNACKS, INC.
FIRST: The name of the Corporation is Curtice Burns
Meat Snacks, Inc.
SECOND: The address of its registered office in the
State of Delaware is 229 South State Street, in the City of Dover
19901, County of Kent. The name of its registered agent at such
address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock that the
Corporation is authorized to issue is 1,000 shares of Common Stock,
par value $.01 each.
FIFTH: The Board of Directors of the Corporation,
acting by majority vote, may alter, amend or repeal the By-Laws of
the Corporation.
<PAGE>
EXHIBIT 3.10
BY-LAWS
of
CURTICE BURNS MEAT SNACKS, INC.
ARTICLE 1
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such
date, time and place either within or without the State of Delaware
as may be designated by the Board of Directors from time to time.
Any other proper business may be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of
stockholders may be called at any time by the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President or the Board of Directors, to be held at such date, time
and place either within or without the State of Delaware as may be
stated in the notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders
are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before
the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, postage prepaid, directed
to the stockholder at such stockholder's address as it appears on
the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders,
annual or special, may be adjourned from time to time, to reconvene
at the same or some other place, and notice need not be given of
any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders,
except where otherwise provided by law or the certificate of
incorporation or these by-laws, the holders of a majority of the
outstanding shares of stock entitled to vote on a matter at the
meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, where a
<PAGE>
separate vote by class or classes is required for any matter, the
holders of a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall
constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be
considered a single class if the holders thereof are entitled to
vote together as a single class at the meeting. In the absence of
a quorum of the holders of any class of stock entitled to vote on
a matter, the holders of such class so present or represented may,
by majority vote, adjourn the meeting of such class from time to
time in the manner provided by Section 1.4 of these by-laws until
a quorum of such class shall be so present or represented. Shares
of its own capital stock belonging on the record date for the
meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for
quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not
limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders
shall be presided over by the Chairman of the Board, if any, or in
the absence of the Chairman of the Board by the Vice Chairman of
the Board, if any, or in the absence of the Vice Chairman of the
Board by the President, or in the absence of the President by a
Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of
such designation by a chairman chosen at the meeting. The
Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the
absence of the Secretary and any Assistant Secretary the chairman
of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided
in the certificate of incorporation, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote
for each share of stock held by such stockholder that has voting
power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy, but
no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power,
regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation
generally. A stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by
2
<PAGE>
filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary of the
Corporation. Voting at meetings of stockholders need not be by
written ballot and need not be conducted by inspectors unless the
holders of a majority of the outstanding shares of all classes of
stock entitled to vote thereon present in person or represented by
proxy at such meeting shall so determine. Directors shall be
elected by a plurality of the votes of the shares present in person
or represented by proxy at the meeting and entitled to vote on the
election of directors. In all other matters, unless otherwise
provided by law or by the certificate of incorporation or these
by-laws, the affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the
stockholders. Where a separate vote by class or classes is
required, the affirmative vote of the holders of a majority of the
shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class or classes,
except as otherwise provided by law or by the certificate of
incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of
such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the
Board of Directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required
by law, shall be the first date on which a signed written consent
3
<PAGE>
setting forth the action taken or proposed to be taken is delivered
to the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by law, the record
date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date
is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who
is present.
Section 1.10. Consent of Stockholders in Lieu of
Meeting. Unless otherwise provided in the certificate of
incorporation or by law, any action required by law to be taken at
any annual or special meeting of stockholders of the Corporation,
or any action that may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of
4
<PAGE>
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the Corporation by delivery to
(a) its registered office in the State of Delaware by hand or by
certified mail or registered mail, return receipt requested, (b)
its principal place of business, or (c) an officer or agent of the
Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent shall
bear the date of signature of each stockholder who signs the
consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of
the earliest dated consent delivered in the manner required by this
by-law to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation
by delivery to (a) its registered office in the State of Delaware
by hand or by certified or registered mail, return receipt
requested, (b) its principal place of business, or (c) an officer
or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Prompt
notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
5
<PAGE>
ARTICLE 2
Board of Directors
Section 2.1. Powers; Number; Qualifications. The
business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, except as may be
otherwise provided by law or in the certificate of incorporation.
The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by the Board.
Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation;
Removal; Vacancies. Each director shall hold office until his or
her successor is elected and qualified or until his or her earlier
resignation or removal. Any director may resign at any time upon
written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect
at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to
make it effective. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.
Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single class
or from any other cause may be filled by a majority of the
directors then in office, although less than a quorum, or by the
sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without the
State of Delaware and at such times as the Board may from time to
time determine, and if so determined notice thereof need not be
given.
Section 2.4. Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or
without the State of Delaware whenever called by the Chairman of
the Board, if any, by the Vice Chairman of the Board, if any, by
the President or by any two directors. Reasonable notice thereof
shall be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference
Telephone Permitted. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the Board
of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar
communications equipment by means of which all persons
6
<PAGE>
participating in the meeting can hear each other, and participation
in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors one-third of the entire Board
shall constitute a quorum for the transaction of business. The
vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board unless the
certificate of incorporation or these by-laws shall require a vote
of a greater number. In case at any meeting of the Board a quorum
shall not be present, the members of the Board present may adjourn
the meeting from time to time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if
any, or in the absence of the Chairman of the Board by the Vice
Chairman of the Board, if any, or in the absence of the Vice
Chairman of the Board by the President, or in their absence by a
chairman chosen at the meeting. The Secretary, or in the absence
of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant
Secretary the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting.
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of
the Board or committee.
Section 2.9. Compensation of Directors. Unless
otherwise restricted by the certificate of incorporation or these
by-laws, the Board of Directors shall have the authority to fix the
compensation of directors.
7
<PAGE>
ARTICLE 3
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors or in these by-laws, shall
have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee
shall have power or authority in reference to amending the
certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board of Directors,
fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into,
or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or
classes of stock of the Corporation or fix the number of shares of
any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property
and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the
resolution, these by-laws or the certificate of incorporation
expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock
or to adopt a certificate of ownership and merger.
Section 3.2. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board or a
provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a
8
<PAGE>
meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts
its business pursuant to Article 2 of these by-laws.
ARTICLE 4
Officers
Section 4.1. Officers; Election. As soon as practicable
after the annual meeting of stockholders in each year, the Board of
Directors shall elect a President and a Secretary, and it may, if
it so determines, elect from among its members a Chairman of the
Board and a Vice Chairman of the Board. The Board may also elect
one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem
desirable or appropriate and may give any of them such further
designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person unless the
certificate of incorporation or these by-laws otherwise provide.
Section 4.2. Term of Office; Resignation; Removal;
Vacancies. Unless otherwise provided in the resolution of the
Board of Directors electing any officer, each officer shall hold
office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. Any officer may resign
at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise
specified therein no acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if
any, with the Corporation, but the election of an officer shall not
of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or
otherwise may be filled by the Board at any regular or special
meeting.
Section 4.3. Powers and Duties. The officers of the
Corporation shall have such powers and duties in the management of
the Corporation as shall be stated in these by-laws or in a
resolution of the Board of Directors that is not inconsistent with
these by-laws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the
Board. The Secretary shall have the duty to record the proceedings
of the meetings of the stockholders, the Board of Directors and any
committees in a book to be kept for that purpose. The Board may
9
<PAGE>
require any officer, agent or employee to give security for the
faithful performance of his or her duties.
Section 4.4. Chairman of the Board. The Chairman of
the Board, if there be one, shall preside at all meetings of the
Board of Directors and shall perform such other duties as the Board
of Directors may direct.
Section 4.5. President. The President shall be the
Chief Executive Officer of the Corporation and shall, subject to
the direction of the Board of Directors, have the general
management of the affairs of the Corporation. The President shall
preside at all meetings of the shareholders. If there be no
Chairman of the Board, or in his absence or inability to act, the
President shall perform all duties of the Chairman of the Board,
subject, however, to the control of the Board of Directors.
Section 4.6. Vice Presidents. Any one or more of the
Vice Presidents may be designated by the Board of Directors as an
Executive Vice President. At the request of the President, or in
his absence or during his disability, the Executive Vice President
shall perform the duties and exercise the functions of the
President. If there be no Executive Vice President, or if there be
more than one, the Board of Directors may determine which one or
more of the Vice Presidents shall perform any of such duties or
exercise any of such functions; if such determination is not made
by the Board of Directors, the President may make such
determination; otherwise, any of the Vice Presidents may perform
any of such duties or exercise any of such functions. Each Vice
President shall have such other powers and duties as may be
properly designated by the Board of Directors and the President.
Section 4.7. Secretary. The Secretary shall keep full
minutes of all meetings of the shareholders and of the Board of
Directors in books provided for that purpose. He shall see that
all notices are duly given in accordance with the provisions of
these by-laws or as required by law. He shall be the custodian of
the records and of the seal or seals of the Corporation. He shall
affix the corporate seal to all documents, the execution of which
on behalf of the Corporation, under the seal, is duly authorized by
the Board of Directors, and when so affixed may attest the same.
He shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
Section 4.8. Treasurer. The Treasurer shall keep
correct and complete books and records of account for the
Corporation. Subject to the control and supervision of the Board
of Directors and the President, or such other officer as the
President may designate, the Treasurer shall establish and execute
programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
10
<PAGE>
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
ARTICLE 5
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman or Vice Chairman of the
Board of Directors, if any, or the President or a Vice President,
and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, representing the number
of shares of stock in the Corporation owned by such holder. If
such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other
signature on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
If the Corporation is authorized to issue more than one
class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and
the qualifications or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back
of the certificate that the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise
provided by law, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock
a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences
and/or rights.
11
<PAGE>
Section 5.2. Lost, Stolen or Destroyed Stock
Certificates; Issuance of New Certificates. The Corporation may
issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal
representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE 6
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the
Corporation shall be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate
seal which shall have the name of the Corporation inscribed thereon
and shall be in such form as may be approved from time to time by
the Board of Directors. The corporate seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of
Stockholders, Directors and Committees. Whenever notice is
required to be given by law or under any provision of the
certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of
directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these by-laws.
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent
permitted by law any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the
request of the Corporation any other enterprise as a director,
officer or employee. Expenses incurred by any such person in
12
<PAGE>
defending any such action, suit or proceeding shall be paid or
reimbursed by the Corporation promptly upon receipt by it of an
undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be
indemnified by the Corporation. The rights provided to any person
by this by-law shall be enforceable against the Corporation by such
person who shall be presumed to have relied upon it in serving or
continuing to serve as a director, officer or employee as provided
above. No amendment of this by-law shall impair the rights of any
person arising at any time with respect to events occurring prior
to such amendment. For purposes of this by-law, the term
'Corporation' shall include any predecessor of the Corporation and
any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or
merger; the term 'other enterprise' shall include any corporation,
partnership, joint venture, trust or employee benefit plan; service
'at the request of the Corporation' shall include service as a
director, officer or employee of the Corporation that imposes
duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants
or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be
indemnifiable expenses; and action by a person with respect to an
employee benefit plan which such person reasonably believes to be
in the interest of the participants and beneficiaries of such plan
shall be deemed to be action not opposed to the best interests of
the Corporation.
Section 6.5. Interested Directors; Quorum. No contract
or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in
which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of
Directors or committee thereof that authorizes the contract or
transaction, or solely because his or her or their votes are
counted for such purpose, if: (1) the material facts as to his or
her relationship or interest and as to the contract or transaction
are disclosed or are known to the Board or the committee, and the
Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be
less than a quorum; or (2) the material facts as to his or her
relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved
in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board, a committee thereof
or the stockholders. Common or interested directors may be counted
13
<PAGE>
in determining the presence of a quorum at a meeting of the Board
of Directors or of a committee that authorizes the contract or
transaction.
Section 6.6. Form of Records. Any records maintained by
the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept
on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect
the same.
Section 6.7. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of
Directors, but the stockholders entitled to vote may adopt
additional by-laws and may amend or repeal any by-law whether or
not adopted by them.
14
<PAGE>
EXHIBIT 3.11
ARTICLES OF INCORPORATION
OF
QUALITY SNAX OF MARYLAND, INC.
THIS IS TO CERTIFY:
FIRST: That we, the subscribers, William B. Cavanaugh,
whose post office address is 9819 Cherry Tree Lane, Silver Spring,
Maryland, John G. Harrison whose post office address is 42 Maple
Drive, Accokeek, Maryland, and Carol J. Cavanaugh, whose post
office address is 9819 Cherry Tree Lane, Silver Spring, Maryland,
all being of full legal age, do, under and by virtue of the General
Laws of the State of Maryland authorizing the formation of
corporations, associate ourselves with the intention of forming a
corporation.
SECOND: The name of the Corporation is 'Quality Snax of
Maryland, Inc.'
THIRD: The purposes for which the Corporation is formed and
the business or objects to be carried on and promoted by it are as
follows:
(A) To engage in the business of buying, selling, dealing in,
and distributing at wholesale potato chips, pretzels, snack foods
and other foods of other nature and description of all kinds. To
purchase, buy, sell, exchange, process, market, export, import,
handle, store, distribute, and otherwise generally deal in any and
all articles of foods at wholesale; to acquire, construct,
establish, maintain, operate or sell or dispose of warehouses,
depots and gathering and delivery routes and systems for such
purposes.
(B) To own, operate, and carry on a transportation business
as a private, contract, or common carrier of any means of
transportation whatsoever; to engage and participate in any trading
or transportation business of any kind or character whatsoever; to
build, purchase, mortgage, equip, and operate any buildings,
structures, warehouses, or facilities, either for its own use and
occupancy or for renting, leasing, letting, and operating to
others; and to do any and every act or acts, thing or things
necessary or incident to, growing out of, or connected with the
usual conduct of such businesses, or any of them, or of any part or
parts thereof, for the accomplishment of any of such purposes.
(C) To enter into, perform and carry out contracts of any
kind necessary or incidental to the accomplishment of any one or
more of the purposes of the corporation.
(D) To carry out all or any part of the aforesaid objects and
purposes, and to conduct its business in all or any of its
<PAGE>
branches, in any or all states, territories, districts and
possessions of the United States of America and in foreign
countries; and to maintain offices and agencies in any and all
states, territories, districts, and possessions of the United
States of America and in foreign countries.
(E) To engage in and carry on any other business which may
conveniently be conducted in conjunction with any business of the
Corporation.
The foregoing objects and purposes shall, except when
otherwise expressed, be in no way limited or restricted by
reference to, or inference from, the terms of any other clause of
this or any other article of these Articles of Incorporation or of
any amendment thereto, and shall each be regarded as independent
and construed as powers as well as objects and purposes.
The Corporation shall be authorized to exercise and enjoy
all of the powers, rights and privileges granted to, or conferred
upon, corporations of a similar character by the General Laws of
the State of Maryland now or hereafter in force, and the
enumeration of the foregoing powers shall not be deemed to exclude
any powers, rights or privileges so granted or conferred.
FOURTH: The post office address of the place at which the
principal office of the Corporation in this State will be located
is 9819 Cherry Tree Lane, Silver Spring, Montgomery County,
Maryland 20901. The resident agent of the Corporation is William
B. Cavanaugh. Said resident agent is a citizen of the State of
Maryland and actually resides therein at 9819 Cherry Tree Lane,
Silver Spring, Montgomery County, Maryland, 20901.
FIFTH: The Corporation shall not have less than three (3)
nor more than five (5) directors.
SIXTH: The total amount of the authorized capital stock of
the Corporation is one thousand (1,000) shares without nominal or
par value.
SEVENTH: The following provisions are hereby adopted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the directors and stockholders:
(A) The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of
its stock of any class, whether now or hereafter authorized, and
securities convertible into shares of its stock of any class,
whether now or hereafter authorized, for such consideration as said
Board of Directors may deem advisable, subject to such limitations
and restrictions, if any, as may be set forth in the by-laws of the
Corporation.
2
<PAGE>
(B) The Board of Directors shall have power to determine from
time to time whether and to what extent and at which times and
places and under what conditions and regulations the books,
accounts and documents of the Corporation, or any of them shall be
open to the inspection of the stockholders, except as otherwise
provided by statute or by the by-laws; and, except as so provided,
no stockholder shall have any right to inspect any book, account,
or document of the Corporation unless authorized to so do by
resolution of the Board of Directors.
(C) Any contract, transaction or act of the Corporation or of
the directors which shall be ratified by a majority of a quorum of
the stockholders having voting powers at any annual meeting or at
any special meeting called for such purposes shall, so far as
permitted by law, be as valid and as binding as though ratified by
every stockholder of the Corporation.
(D) Unless the by-laws otherwise provide, any officer or
employee of the Corporation (other than a director) may be removed
at any time with or without cause by the Board of Directors or by
any committee or superior officers upon whom such power of removal
may be conferred by the by-laws or by authority of the Board of
Directors.
(E) The Corporation reserves the right from time to time to
make any amendments of its charter which may now or hereafter be
authorized by law, including any amendments changing the terms of
any of its outstanding stock by classification, reclassification,
or otherwise; but no such amendment which changes the terms of any
of the outstanding stock shall be valid unless such change in the
terms thereof shall have been authorized by the holders of fifty-
one percent (51%) of the shares of such stock at the time
outstanding, by a vote at a meeting or in writing with or without
a meeting.
EIGHTH: The duration of the Corporation shall be perpetual.
3
<PAGE>
EXHIBIT 3.12
BY-LAWS
of
QUALITY SNAX OF MARYLAND, INC.
ARTICLE 1
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such
date, time and place either within or without the State of Maryland
as may be designated by the Board of Directors from time to time.
Any other proper business may be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of
stockholders may be called at any time by the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President or the Board of Directors, to be held at such date, time
and place either within or without the State of Maryland as may be
stated in the notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders
are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special
meeting or as may be required by law, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the
written notice of any meeting shall be given not less than ten nor
more than ninety days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the
Corporation.
Section 1.4. Adjournments. Any meeting of stockholders,
annual or special, may be adjourned from time to time, to reconvene
at the same or some other place, and notice need not be given of
any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders,
except where otherwise provided by law or the certificate of
incorporation or these by-laws, the holders of a majority of the
outstanding shares of stock entitled to vote on a matter at the
meeting, present in person or represented by proxy, shall
<PAGE>
constitute a quorum. For purposes of the foregoing, where a
separate vote by class or classes is required for any matter, the
holders of a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall
constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be
considered a single class if the holders thereof are entitled to
vote together as a single class at the meeting. In the absence of
a quorum of the holders of any class of stock entitled to vote on
a matter, the holders of such class so present or represented may,
by majority vote, adjourn the meeting of such class from time to
time in the manner provided by Section 1.4 of these by-laws until
a quorum of such class shall be so present or represented. Shares
of its own capital stock belonging on the record date for the
meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for
quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not
limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders
shall be presided over by the Chairman of the Board, if any, or in
the absence of the Chairman of the Board by the Vice Chairman of
the Board, if any, or in the absence of the Vice Chairman of the
Board by the President, or in the absence of the President by a
Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of
such designation by a chairman chosen at the meeting. The
Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the
absence of the Secretary and any Assistant Secretary the chairman
of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided
in the certificate of incorporation, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote
for each share of stock held by such stockholder that has voting
power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or
persons to act for such stockholder by proxy. Every proxy shall be
in writing, subscribed by the shareholder or his duly authorized
attorney and dated. No proxy which is dated more than eleven (11)
months before the meeting at which it is offered shall be accepted,
unless such proxy shall, on its face, name a longer period for
which it is to remain in force. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to
support an irrevocable power, regardless of whether the interest
with which it is coupled is an interest in the stock itself or an
2
<PAGE>
interest in the Corporation generally. A stockholder may revoke
any proxy that is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the
Secretary of the Corporation. Voting at meetings of stockholders
need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding
shares of all classes of stock entitled to vote thereon present in
person or represented by proxy at such meeting shall so determine.
Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. In all other
matters, unless otherwise provided by law or by the certificate of
incorporation or these by-laws, the affirmative vote of the holders
of a majority of the shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. Where a separate vote by
class or classes is required, the affirmative vote of the holders
of a majority of the shares of such class or classes present in
person or represented by proxy at the meeting shall be the act of
such class or classes, except as otherwise provided by law or by
the certificate of incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall
not be more than ninety nor less than ten days before the date of
such meeting. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be
not more than ninety days prior to such action. If no record date
is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders
3
<PAGE>
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who
is present.
Section 1.10. Consent of Stockholders in Lieu of
Meeting. Whenever shareholders are required or permitted to take
any action by vote, such action may be taken without a meeting on
written consent, setting forth the action so taken, signed by the
holders of all outstanding shares entitled to vote thereon. Such
written consent shall have the same effect as a unanimous vote of
shareholders.
ARTICLE 2
Board of Directors
Section 2.1. Powers; Number; Qualifications. The
business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, except as may be
otherwise provided by law or in the certificate of incorporation.
The Board of Directors shall consist of three or more members, the
number thereof to be determined from time to time by the Board,
provided, however, that where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation;
Removal; Vacancies. Each director shall hold office until his or
her successor is elected and qualified or until his or her earlier
resignation or removal. Any director may resign at any time upon
written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect
at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to
make it effective. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.
Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by
4
<PAGE>
all of the stockholders having the right to vote as a single class
or from any other cause may be filled by a majority of the
directors then in office, although less than a quorum, or by the
sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without the
State of Maryland and at such times as the Board may from time to
time determine, and if so determined notice thereof need not be
given.
Section 2.4. Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or
without the State of Maryland whenever called by the Chairman of
the Board, if any, by the Vice Chairman of the Board, if any, by
the President or by any two directors. Reasonable notice thereof
shall be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference
Telephone Permitted. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the Board
of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors one-third of the entire Board
shall constitute a quorum for the transaction of business. The
vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board unless the
certificate of incorporation or these by-laws shall require a vote
of a greater number. In case at any meeting of the Board a quorum
shall not be present, the members of the Board present may adjourn
the meeting from time to time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if
any, or in the absence of the Chairman of the Board by the Vice
Chairman of the Board, if any, or in the absence of the Vice
Chairman of the Board by the President, or in their absence by a
chairman chosen at the meeting. The Secretary, or in the absence
of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant
Secretary the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting.
Unless otherwise restricted by the certificate of incorporation or
5
<PAGE>
these by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of
the Board or committee.
Section 2.9. Compensation of Directors. Unless
otherwise restricted by the certificate of incorporation or these
by-laws, the Board of Directors shall have the authority to fix the
compensation of directors.
ARTICLE 3
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors or in these by-laws, shall
have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee
shall have power or authority in reference to amending the
certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board of Directors,
fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into,
or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or
classes of stock of the Corporation or fix the number of shares of
any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property
and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the
resolution, these by-laws or the certificate of incorporation
6
<PAGE>
expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock
or to adopt a certificate of ownership and merger.
Section 3.2. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board or a
provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a
meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts
its business pursuant to Article 2 of these by-laws.
ARTICLE 4
Officers
Section 4.1. Officers; Election. As soon as practicable
after the annual meeting of stockholders in each year, the Board of
Directors shall elect a President, a Treasurer, and a Secretary,
and it may, if it so determines, elect from among its members a
Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents, one or more Assistant
Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers and such other officers as the Board may deem
desirable or appropriate and may give any of them such further
designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person unless the
certificate of incorporation or these by-laws otherwise provide.
Section 4.2. Term of Office; Resignation; Removal;
Vacancies. Unless otherwise provided in the resolution of the
Board of Directors electing any officer, each officer shall hold
office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. Any officer may resign
at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise
specified therein no acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if
any, with the Corporation, but the election of an officer shall not
of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or
7
<PAGE>
otherwise may be filled by the Board at any regular or special
meeting.
Section 4.3. Powers and Duties. The officers of the
Corporation shall have such powers and duties in the management of
the Corporation as shall be stated in these by-laws or in a
resolution of the Board of Directors that is not inconsistent with
these by-laws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to
give security for the faithful performance of his or her duties.
Section 4.4. Chairman of the Board. The Chairman of
the Board, if there be one, shall preside at all meetings of the
Board of Directors and shall perform such other duties as the Board
of Directors may direct.
Section 4.5. President. The President shall be the
Chief Executive Officer of the Corporation and shall, subject to
the direction of the Board of Directors, have the general
management of the affairs of the Corporation. The President shall
preside at all meetings of the shareholders. If there be no
Chairman of the Board, or in his absence or inability to act, the
President shall perform all duties of the Chairman of the Board,
subject, however, to the control of the Board of Directors.
Section 4.6. Vice Presidents. Any one or more of the
Vice Presidents may be designated by the Board of Directors as an
Executive Vice President. At the request of the President, or in
his absence or during his disability, the Executive Vice President
shall perform the duties and exercise the functions of the
President. If there be no Executive Vice President, or if there be
more than one, the Board of Directors may determine which one or
more of the Vice Presidents shall perform any of such duties or
exercise any of such functions; if such determination is not made
by the Board of Directors, the President may make such
determination; otherwise, any of the Vice Presidents may perform
any of such duties or exercise any of such functions. Each Vice
President shall have such other powers and duties as may be
properly designated by the Board of Directors and the President.
Section 4.7. Secretary. The Secretary shall have the
duty to record the proceedings of the meetings of the stockholders,
the Board of Directors and any committees in a book to be kept for
that purpose. He shall see that all notices are duly given in
accordance with the provisions of these by-laws or as required by
law. He shall be the custodian of the records and of the seal or
seals of the Corporation. He shall affix the corporate seal to all
documents, the execution of which on behalf of the Corporation,
under the seal, is duly authorized by the Board of Directors, and
when so affixed may attest the same. He shall have such other
8
<PAGE>
powers and duties as may be properly designated by the Board of
Directors and the President.
Section 4.8. Treasurer. The Treasurer shall keep
correct and complete books and records of account for the
Corporation. Subject to the control and supervision of the Board
of Directors and the President, or such other officer as the
President may designate, the Treasurer shall establish and execute
programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
ARTICLE 5
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman or Vice Chairman of the
Board of Directors, if any, or the President or a Vice President,
and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, representing the number
of shares of stock in the Corporation owned by such holder. If
such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other
signature on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
If the Corporation is authorized to issue more than one
class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and
the qualifications or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back
of the certificate that the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise
9
<PAGE>
provided by law, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock
a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences
and/or rights.
Section 5.2. Lost, Stolen or Destroyed Stock
Certificates; Issuance of New Certificates. The Corporation may
issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal
representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE 6
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the
Corporation shall be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate
seal which shall have the name of the Corporation inscribed thereon
and shall be in such form as may be approved from time to time by
the Board of Directors. The corporate seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of
Stockholders, Directors and Committees. Whenever notice is
required to be given by law or under any provision of the
certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of
directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these by-laws.
10
<PAGE>
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent
permitted by law any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the
request of the Corporation any other enterprise as a director,
officer or employee. The rights provided to any person by this
by-law shall be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving or
continuing to serve as a director, officer or employee as provided
above. No amendment of this by-law shall impair the rights of any
person arising at any time with respect to events occurring prior
to such amendment. For purposes of this by-law, the term
'Corporation' shall include any predecessor of the Corporation and
any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or
merger.
Section 6.5. Form of Records. Any records maintained by
the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept
on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect
the same.
Section 6.6. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of
Directors, but the stockholders entitled to vote may adopt
additional by-laws and may amend or repeal any by-law whether or
not adopted by them.
11
<PAGE>
EXHIBIT 3.13
ARTICLES OR INCORPORATION
OF
KENNEDY ENDEAVORS, INCORPORATED
ARTICLE I
Name
The name of this corporation is KENNEDY ENDEAVORS,
INCORPORATED.
ARTICLE II
Duration
The period of its duration is perpetual.
ARTICLE III
Purposes
This corporation is organized for the following purposes:
(a) To engage in any business, trade, or activity which
may lawfully be conducted by a corporation organized under the
Washington Business Corporation Act.
(b) To engage in all such activities as are incidental
or conducive to the attainment of the purposes of this corporation
or any of them and to exercise any and all powers authorized or
permitted to be done by a corporation under any laws that may be
now or hereafter applicable or available to this corporation.
The foregoing clauses of this Article III shall each be
construed as purposes and powers, and the matters expressed in each
clause shall be in no way limited or restricted by reference to or
inference from the terms or any other clauses, but shall be
regarded as independent purposes and powers; and nothing contained
in these clauses shall be deemed in any way to limit or exclude any
power, right, or privilege given to this corporation by law or
otherwise.
ARTICLE IV
Shares
This corporation shall have authority to issue fifty
thousand (50,000) shares of common stock, having no par value.
ARTICLE V
Contracts In Which Directors Have Interest
Any contract or other transaction between this
corporation and one or more of its directors, or between this
<PAGE>
corporation and any corporation, firm, association, or other entity
of which one or more of its directors are stockholders, members,
directors, officers, or employees or in which they are interested,
shall be valid for all purposes, notwithstanding the presence of
such director or directors at the meeting of the Board of Directors
which acts upon or in reference to such contract or transaction and
notwithstanding his or their participation in such action, by
voting or otherwise, even though his or their presence or vote, or
both, might have been necessary to obligate this corporation upon
such contract or transaction; provided, that the fact of such
interest shall be disclosed to or known by the Directors acting on
such contract or transaction.
ARTICLE VI
Directors
The number of directors of this corporation shall be
fixed by the Bylaws and may be increased or decreased from time to
time in the manner specified therein.
ARTICLE VII
Bylaws
The Board of Directors shall have the power to adopt,
amend, or repeal the Bylaws for this corporation, subject to the
power of the shareholders to amend or repeal such Bylaws.
ARTICLE VIII
Registered Office and Agent
The address of the initial registered office of this
corporation is 15812 Bowman Hilton Road, Puyallup, Washington,
98372, and the name of its initial registered agent is TIMOTHY D.
KENNEDY.
ARTICLE IX
Preemptive Rights
Preemptive rights shall exist with respect to shares of
stock or securities convertible into shares of stock of this
corporation.
ARTICLE X
Cumulative Voting
The right to cumulate votes in the election of directors
shall exist with respect to shares of stock of this corporation.
ARTICLE XI
Amendments of Articles Of Incorporation
This corporation reserves the right to amend or repeal
2
<PAGE>
any of the provisions contained in these Articles of Incorporation
in the manner now or hereafter prescribed by law, and the rights of
the shareholders of this corporation are granted subject to this
reservation.
3
<PAGE>
EXHIBIT 3.14
BY-LAWS
of
KENNEDY ENDEAVORS, INCORPORATED
ARTICLE 1
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such
date, time and place either within or without the State of
Washington as may be designated by the Board of Directors from time
to time. Any other proper business may be transacted at the annual
meeting.
Section 1.2. Special Meetings. Special meetings of
stockholders may be called at any time by the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President, the Board of Directors, or the holders of ten percent of
the outstanding shares entitled to vote at such meeting, to be held
at such date, time and place either within or without the State of
Washington as may be stated in the notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders
are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before
the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, postage prepaid, directed
to the stockholder at such stockholder's address as it appears on
the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders,
annual or special, may be adjourned from time to time, to reconvene
at the same or some other place, and notice need not be given of
any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders,
except where otherwise provided by law or the certificate of
incorporation or these by-laws, the holders of a majority of the
outstanding shares of stock entitled to vote on a matter at the
<PAGE>
meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, where a
separate vote by class or classes is required for any matter, the
holders of a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall
constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be
considered a single class if the holders thereof are entitled to
vote together as a single class at the meeting. In the absence of
a quorum of the holders of any class of stock entitled to vote on
a matter, the holders of such class so present or represented may,
by majority vote, adjourn the meeting of such class from time to
time in the manner provided by Section 1.4 of these by-laws until
a quorum of such class shall be so present or represented. Shares
of its own capital stock belonging on the record date for the
meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for
quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not
limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders
shall be presided over by the Chairman of the Board, if any, or in
the absence of the Chairman of the Board by the Vice Chairman of
the Board, if any, or in the absence of the Vice Chairman of the
Board by the President, or in the absence of the President by a
Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of
such designation by a chairman chosen at the meeting. The
Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the
absence of the Secretary and any Assistant Secretary the chairman
of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided
in the certificate of incorporation, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote
for each share of stock held by such stockholder that has voting
power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or
persons to act for such stockholder by proxy. Every proxy shall be
in writing, subscribed by the shareholder or his duly authorized
attorney and dated. No proxy which is dated more than eleven (11)
months before the meeting at which it is offered shall be accepted,
unless such proxy shall, on its face, name a longer period for
which it is to remain in force. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to
support an irrevocable power, regardless of whether the interest
2
<PAGE>
with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. A stockholder may revoke
any proxy that is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the
Secretary of the Corporation. Voting at meetings of stockholders
need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding
shares of all classes of stock entitled to vote thereon present in
person or represented by proxy at such meeting shall so determine.
In all matters, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, the affirmative vote
of the holders of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders. Where a
separate vote by class or classes is required, the affirmative vote
of the holders of a majority of the shares of such class or classes
present in person or represented by proxy at the meeting shall be
the act of such class or classes, except as otherwise provided by
law or by the certificate of incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall
not be more than seventy days before the date of such meeting. If
no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be
not more than seventy days prior to such action. If no record date
is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
3
<PAGE>
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who
is present.
Section 1.10. Consent of Stockholders in Lieu of
Meeting. Whenever shareholders are required or permitted to take
any action by vote, such action may be taken without a meeting on
written consent, setting forth the action so taken, signed by the
holders of all outstanding shares entitled to vote thereon. Such
written consent shall have the same effect as a unanimous vote of
shareholders.
4
<PAGE>
ARTICLE 2
Board of Directors
Section 2.1. Powers; Number; Qualifications. The
business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, except as may be
otherwise provided by law or in the certificate of incorporation.
The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by the Board.
Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation;
Removal; Vacancies. Each director shall hold office until his or
her successor is elected and qualified or until his or her earlier
resignation or removal. Any director may resign at any time upon
written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect
at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to
make it effective. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.
Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single class
or from any other cause may be filled by a majority of the
directors then in office, although less than a quorum, or by the
sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without the
State of Washington and at such times as the Board may from time to
time determine, and if so determined notice thereof need not be
given.
Section 2.4. Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or
without the State of Washington whenever called by the Chairman of
the Board, if any, by the Vice Chairman of the Board, if any, by
the President or by any two directors. Reasonable notice thereof
shall be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference
Telephone Permitted. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the Board
of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar
communications equipment by means of which all persons
5
<PAGE>
participating in the meeting can hear each other, and participation
in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors one-third of the entire Board
shall constitute a quorum for the transaction of business. The
vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board unless the
certificate of incorporation or these by-laws shall require a vote
of a greater number. In case at any meeting of the Board a quorum
shall not be present, the members of the Board present may adjourn
the meeting from time to time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if
any, or in the absence of the Chairman of the Board by the Vice
Chairman of the Board, if any, or in the absence of the Vice
Chairman of the Board by the President, or in their absence by a
chairman chosen at the meeting. The Secretary, or in the absence
of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant
Secretary the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting.
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of
the Board or committee.
Section 2.9. Compensation of Directors. Unless
otherwise restricted by the certificate of incorporation or these
by-laws, the Board of Directors shall have the authority to fix the
compensation of directors.
6
<PAGE>
ARTICLE 3
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors or in these by-laws, shall
have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee
shall have power or authority in reference to amending the
certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board of Directors,
fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into,
or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or
classes of stock of the Corporation or fix the number of shares of
any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property
and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the
resolution, these by-laws or the certificate of incorporation
expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock
or to adopt a certificate of ownership and merger.
Section 3.2. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board or a
provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a
7
<PAGE>
meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts
its business pursuant to Article 2 of these by-laws.
ARTICLE 4
Officers
Section 4.1. Officers; Election. As soon as practicable
after the annual meeting of stockholders in each year, the Board of
Directors shall elect a President and a Secretary, and it may, if
it so determines, elect from among its members a Chairman of the
Board and a Vice Chairman of the Board. The Board may also elect
one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem
desirable or appropriate and may give any of them such further
designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person unless the
certificate of incorporation or these by-laws otherwise provide.
Section 4.2. Term of Office; Resignation; Removal;
Vacancies. Unless otherwise provided in the resolution of the
Board of Directors electing any officer, each officer shall hold
office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. Any officer may resign
at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise
specified therein no acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such officer, if
any, with the Corporation, but the election of an officer shall not
of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or
otherwise may be filled by the Board at any regular or special
meeting.
Section 4.3. Powers and Duties. The officers of the
Corporation shall have such powers and duties in the management of
the Corporation as shall be stated in these by-laws or in a
resolution of the Board of Directors that is not inconsistent with
these by-laws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to
give security for the faithful performance of his or her duties.
8
<PAGE>
Section 4.4. Chairman of the Board. The Chairman of
the Board, if there be one, shall preside at all meetings of the
Board of Directors and shall perform such other duties as the Board
of Directors may direct.
Section 4.5. President. The President shall be the
Chief Executive Officer of the Corporation and shall, subject to
the direction of the Board of Directors, have the general
management of the affairs of the Corporation. The President shall
preside at all meetings of the shareholders. If there be no
Chairman of the Board, or in his absence or inability to act, the
President shall perform all duties of the Chairman of the Board,
subject, however, to the control of the Board of Directors.
Section 4.6. Vice Presidents. Any one or more of the
Vice Presidents may be designated by the Board of Directors as an
Executive Vice President. At the request of the President, or in
his absence or during his disability, the Executive Vice President
shall perform the duties and exercise the functions of the
President. If there be no Executive Vice President, or if there be
more than one, the Board of Directors may determine which one or
more of the Vice Presidents shall perform any of such duties or
exercise any of such functions; if such determination is not made
by the Board of Directors, the President may make such
determination; otherwise, any of the Vice Presidents may perform
any of such duties or exercise any of such functions. Each Vice
President shall have such other powers and duties as may be
properly designated by the Board of Directors and the President.
Section 4.7. Secretary. The Secretary shall have the
duty to record the proceedings of the meetings of the stockholders,
the Board of Directors and any committees in a book to be kept for
that purpose. He shall see that all notices are duly given in
accordance with the provisions of these by-laws or as required by
law. He shall be the custodian of the records and of the seal or
seals of the Corporation. He shall affix the corporate seal to all
documents, the execution of which on behalf of the Corporation,
under the seal, is duly authorized by the Board of Directors, and
when so affixed may attest the same. He shall have such other
powers and duties as may be properly designated by the Board of
Directors and the President.
Section 4.8. Treasurer. The Treasurer shall keep
correct and complete books and records of account for the
Corporation. Subject to the control and supervision of the Board
of Directors and the President, or such other officer as the
President may designate, the Treasurer shall establish and execute
programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
9
<PAGE>
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
ARTICLE 5
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman of the Board of
Directors, if any, or the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, of the Corporation, representing the number of
shares of stock in the Corporation owned by such holder. If such
certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other
signature on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
If the Corporation is authorized to issue more than one
class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and
the qualifications or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back
of the certificate that the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise
provided by law, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock
a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences
and/or rights.
Section 5.2. Lost, Stolen or Destroyed Stock
Certificates; Issuance of New Certificates. The Corporation may
issue a new certificate of stock in the place of any certificate
10
<PAGE>
theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal
representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE 6
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the
Corporation shall be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate
seal which shall have the name of the Corporation inscribed thereon
and shall be in such form as may be approved from time to time by
the Board of Directors. The corporate seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of
Stockholders, Directors and Committees. Whenever notice is
required to be given by law or under any provision of the
certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of
directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these by-laws.
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent
permitted by law any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the
request of the Corporation any other enterprise as a director,
officer or employee. The rights provided to any person by this
by-law shall be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving or
continuing to serve as a director, officer or employee as provided
11
<PAGE>
above. No amendment of this by-law shall impair the rights of any
person arising at any time with respect to events occurring prior
to such amendment. For purposes of this by-law, the term
'Corporation' shall include any predecessor of the Corporation and
any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or
merger.
Section 6.5. Form of Records. Any records maintained by
the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept
on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect
the same.
Section 6.6. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of
Directors, but the stockholders entitled to vote may adopt
additional by-laws and may amend or repeal any by-law whether or
not adopted by them.
12
<PAGE>
EXHIBIT 3.15
AMENDED ARTICLES OF INCORPORATION
OF
HUSMAN SNACK FOODS COMPANY, INC.
FIRST: The name of the corporation is HUSMAN SNACK
FOODS COMPANY, INC.
SECOND: The place in the State of Ohio where its
principal office is located is the City of Cincinnati, Hamilton
County.
THIRD: The purpose of the corporation is to engage in
any lawful act or activity for which a corporation may be organized
under the General Corporation Law.
FOURTH: The number of shares which the corporation is
authorized to have outstanding is Two Hundred (200), all of which
are common shares with no par value.
<PAGE>
EXHIBIT 3.16
BY-LAWS
of
HUSMAN SNACK FOODS COMPANY, INC.
ARTICLE 1
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such
date, time and place either within or without the State of Ohio as
may be designated by the Board of Directors from time to time. Any
other proper business may be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of
stockholders may be called at any time by the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President, the Board of Directors, or the holders of 25% of the
outstanding shares entitled to vote at such meeting, to be held at
such date, time and place either within or without the State of
Ohio as may be stated in the notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders
are required or permitted to take any action at a meeting, a
written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the written notice of any meeting
shall be given not less than seven nor more than sixty days before
the date of the meeting to each stockholder entitled to vote at
such meeting. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, postage prepaid, directed
to the stockholder at such stockholder's address as it appears on
the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders,
annual or special, may be adjourned from time to time, to reconvene
at the same or some other place, and notice need not be given of
any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders,
except where otherwise provided by law or the certificate of
incorporation or these by-laws, the holders of a majority of the
outstanding shares of stock entitled to vote on a matter at the
meeting, present in person or represented by proxy, shall
<PAGE>
constitute a quorum. For purposes of the foregoing, where a
separate vote by class or classes is required for any matter, the
holders of a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall
constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be
considered a single class if the holders thereof are entitled to
vote together as a single class at the meeting. In the absence of
a quorum of the holders of any class of stock entitled to vote on
a matter, the holders of such class so present or represented may,
by majority vote, adjourn the meeting of such class from time to
time in the manner provided by Section 1.4 of these by-laws until
a quorum of such class shall be so present or represented. Shares
of its own capital stock belonging on the record date for the
meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for
quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not
limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders
shall be presided over by the Chairman of the Board, if any, or in
the absence of the Chairman of the Board by the Vice Chairman of
the Board, if any, or in the absence of the Vice Chairman of the
Board by the President, or in the absence of the President by a
Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of
such designation by a chairman chosen at the meeting. The
Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the
absence of the Secretary and any Assistant Secretary the chairman
of the meeting may appoint any person to act as secretary of the
meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided
in the certificate of incorporation, each stockholder entitled to
vote at any meeting of stockholders shall be entitled to one vote
for each share of stock held by such stockholder that has voting
power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy.
Every proxy shall be in writing, subscribed by the shareholder or
his duly authorized attorney and dated. No proxy which is dated
more than eleven (11) months before the meeting at which it is
offered shall be accepted, unless such proxy shall, on its face,
name a longer period for which it is to remain in force. A duly
executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power,
2
<PAGE>
regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation
generally. A stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by
filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary of the
Corporation. Voting at meetings of stockholders need not be by
written ballot and need not be conducted by inspectors unless the
holders of a majority of the outstanding shares of all classes of
stock entitled to vote thereon present in person or represented by
proxy at such meeting shall so determine. Directors shall be
elected by a plurality of the votes of the shares present in person
or represented by proxy at the meeting and entitled to vote on the
election of directors. In all other matters, unless otherwise
provided by law or by the certificate of incorporation or these
by-laws, the affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the
stockholders. Where a separate vote by class or classes is
required, the affirmative vote of the holders of a majority of the
shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class or classes,
except as otherwise provided by law or by the certificate of
incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall
not be more than sixty days before the date of such meeting. If no
record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the
3
<PAGE>
Board of Directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required
by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered
to the Corporation by delivery to its registered office in the
State of Ohio, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by law, the record
date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date
is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least seven days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who
is present.
Section 1.10. Consent of Stockholders in Lieu of
Meeting. Unless otherwise provided in the certificate of
incorporation or by law, any action required by law to be taken at
any annual or special meeting of stockholders of the Corporation,
or any action that may be taken at any annual or special meeting of
4
<PAGE>
such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the Corporation by delivery to
(a) its registered office in the State of Ohio by hand or by
certified mail or registered mail, return receipt requested, (b)
its principal place of business, or (c) an officer or agent of the
Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent shall
bear the date of signature of each stockholder who signs the
consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of
the earliest dated consent delivered in the manner required by this
by-law to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation
by delivery to (a) its registered office in the State of Ohio by
hand or by certified or registered mail, return receipt requested,
(b) its principal place of business, or (c) an officer or agent of
the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE 2
Board of Directors
Section 2.1. Powers; Number; Qualifications. The
business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, except as may be
otherwise provided by law or in the certificate of incorporation.
The Board of Directors shall consist of three or more members, the
number thereof to be determined from time to time by the Board,
provided, however, that where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation;
Removal; Vacancies. Each director shall hold office until his or
her successor is elected and qualified or until his or her earlier
resignation or removal. Any director may resign at any time upon
written notice to the Board of Directors or to the President or the
Secretary of the Corporation. Such resignation shall take effect
at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to
5
<PAGE>
make it effective. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.
Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single class
or from any other cause may be filled by a majority of the
directors then in office, although less than a quorum, or by the
sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without the
State of Ohio and at such times as the Board may from time to time
determine, and if so determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or
without the State of Ohio whenever called by the Chairman of the
Board, if any, by the Vice Chairman of the Board, if any, by the
President or by any two directors. Reasonable notice thereof shall
be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference
Telephone Permitted. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the Board
of Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this by-law shall constitute presence in
person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors one-third of the entire Board
shall constitute a quorum for the transaction of business. The
vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board unless the
certificate of incorporation or these by-laws shall require a vote
of a greater number. In case at any meeting of the Board a quorum
shall not be present, the members of the Board present may adjourn
the meeting from time to time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if
any, or in the absence of the Chairman of the Board by the Vice
Chairman of the Board, if any, or in the absence of the Vice
Chairman of the Board by the President, or in their absence by a
chairman chosen at the meeting. The Secretary, or in the absence
of the Secretary an Assistant Secretary, shall act as secretary of
the meeting, but in the absence of the Secretary and any Assistant
6
<PAGE>
Secretary the chairman of the meeting may appoint any person to act
as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting.
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of
the Board or committee.
Section 2.9. Compensation of Directors. Unless
otherwise restricted by the certificate of incorporation or these
by-laws, the Board of Directors shall have the authority to fix the
compensation of directors.
ARTICLE 3
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors or in these by-laws, shall
have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee
shall have power or authority in reference to amending the
certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board of Directors,
fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into,
or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or
classes of stock of the Corporation or fix the number of shares of
any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or
7
<PAGE>
exchange of all or substantially all of the Corporation's property
and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the
resolution, these by-laws or the certificate of incorporation
expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock
or to adopt a certificate of ownership and merger.
Section 3.2. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board or a
provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a
meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board conducts
its business pursuant to Article 2 of these by-laws.
ARTICLE 4
Officers
Section 4.1. Officers; Election. As soon as practicable
after the annual meeting of stockholders in each year, the Board of
Directors shall elect a President and a Secretary, and it may, if
it so determines, elect from among its members a Chairman of the
Board and a Vice Chairman of the Board. The Board may also elect
one or more Vice Presidents, one or more Assistant Vice Presidents,
one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem
desirable or appropriate and may give any of them such further
designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person unless the
certificate of incorporation or these by-laws otherwise provide.
Section 4.2. Term of Office; Resignation; Removal;
Vacancies. Unless otherwise provided in the resolution of the
Board of Directors electing any officer, each officer shall hold
office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. Any officer may resign
at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise
specified therein no acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time. Any such removal shall be
8
<PAGE>
without prejudice to the contractual rights of such officer, if
any, with the Corporation, but the election of an officer shall not
of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or
otherwise may be filled by the Board at any regular or special
meeting.
Section 4.3. Powers and Duties. The officers of the
Corporation shall have such powers and duties in the management of
the Corporation as shall be stated in these by-laws or in a
resolution of the Board of Directors that is not inconsistent with
these by-laws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the
Board. The Board may require any officer, agent or employee to
give security for the faithful performance of his or her duties.
Section 4.4. Chairman of the Board. The Chairman of
the Board, if there be one, shall preside at all meetings of the
Board of Directors and shall perform such other duties as the Board
of Directors may direct.
Section 4.5. President. The President shall be the
Chief Executive Officer of the Corporation and shall, subject to
the direction of the Board of Directors, have the general
management of the affairs of the Corporation. The President shall
preside at all meetings of the shareholders. If there be no
Chairman of the Board, or in his absence or inability to act, the
President shall perform all duties of the Chairman of the Board,
subject, however, to the control of the Board of Directors.
Section 4.6. Vice Presidents. Any one or more of the
Vice Presidents may be designated by the Board of Directors as an
Executive Vice President. At the request of the President, or in
his absence or during his disability, the Executive Vice President
shall perform the duties and exercise the functions of the
President. If there be no Executive Vice President, or if there be
more than one, the Board of Directors may determine which one or
more of the Vice Presidents shall perform any of such duties or
exercise any of such functions; if such determination is not made
by the Board of Directors, the President may make such
determination; otherwise, any of the Vice Presidents may perform
any of such duties or exercise any of such functions. Each Vice
President shall have such other powers and duties as may be
properly designated by the Board of Directors and the President.
Section 4.7. Secretary. The Secretary shall have the
duty to record the proceedings of the meetings of the stockholders,
the Board of Directors and any committees in a book to be kept for
that purpose. He shall see that all notices are duly given in
accordance with the provisions of these by-laws or as required by
law. He shall be the custodian of the records and of the seal or
seals of the Corporation. He shall affix the corporate seal to all
9
<PAGE>
documents, the execution of which on behalf of the Corporation,
under the seal, is duly authorized by the Board of Directors, and
when so affixed may attest the same. He shall have such other
powers and duties as may be properly designated by the Board of
Directors and the President.
Section 4.8. Treasurer. The Treasurer shall keep
correct and complete books and records of account for the
Corporation. Subject to the control and supervision of the Board
of Directors and the President, or such other officer as the
President may designate, the Treasurer shall establish and execute
programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
ARTICLE 5
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman of the Board of
Directors, if any, or the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, of the Corporation, representing the number of
shares of stock in the Corporation owned by such holder. If such
certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other
signature on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
If the Corporation is authorized to issue more than one
class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and
the qualifications or restrictions of such preferences and/or
10
<PAGE>
rights shall be set forth in full or summarized on the face or back
of the certificate that the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise
provided by law, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock
a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences
and/or rights.
Section 5.2. Lost, Stolen or Destroyed Stock
Certificates; Issuance of New Certificates. The Corporation may
issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal
representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE 6
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the
Corporation shall be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate
seal which shall have the name of the Corporation inscribed thereon
and shall be in such form as may be approved from time to time by
the Board of Directors. The corporate seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of
Stockholders, Directors and Committees. Whenever notice is
required to be given by law or under any provision of the
certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
11
<PAGE>
of the stockholders, directors or members of a committee of
directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these by-laws.
Section 6.4. Indemnification of Directors, Officers and
Employees. The Corporation shall indemnify to the full extent
permitted by law any person made or threatened to be made a party
to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person or such person's testator or intestate is or was a director,
officer or employee of the Corporation or serves or served at the
request of the Corporation any other enterprise as a director,
officer or employee. The rights provided to any person by this
by-law shall be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving or
continuing to serve as a director, officer or employee as provided
above. No amendment of this by-law shall impair the rights of any
person arising at any time with respect to events occurring prior
to such amendment. For purposes of this by-law, the term
'Corporation' shall include any predecessor of the Corporation and
any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or
merger.
Section 6.5. Form of Records. Any records maintained by
the Corporation in the regular course of its business, including
its stock ledger, books of account and minute books, may be kept
on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect
the same.
Section 6.6. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of
Directors, but the stockholders entitled to vote may adopt
additional by-laws and may amend or repeal any by-law whether or
not adopted by them.
12
<PAGE>
EXHIBIT 3.17
CERTIFICATE OF INCORPORATION
OF
SEASONAL EMPLOYERS, INC.
Under Section 402 of the Business Corporation Law
1. The name of the corporation is Seasonal Employers,
Inc.
2. The purpose for which it is formed is to engage in
any lawful act or activity for which a corporation may be organized
under the Business Corporation Law, provided that the corporation
is not formed to, nor will it, 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.
3. The office of the corporation shall be located in
the City of Rochester, County of Monroe, State of New York.
4. No shareholder shall have any preemptive right to
purchase shares or other securities to be issued or subjected to
rights or options to purchase, as such preemptive right is defined
and construed under the laws of the State of New York.
5. The aggregate number of shares which the corporation
shall have authority to issue is 1,000, all of which are to be
common shares with no par value.
6. No director of the corporation shall be personally
liable to the corporation or its shareholders for damages for any
breach of duty in such capacity except where a judgment or other
final adjudication adverse to said director establishes: that the
director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law; that the
director personally gained a financial profit or other advantage to
which he was not entitled; or that the director's acts violated
Section 719 of the New York Business Corporation Law. The
corporation, to the fullest extent allowed by law, shall indemnify
any director of the corporation against all liability, judgments,
fines, amounts paid in settlement, costs, and reasonable expenses,
including attorney's fees, incurred by reason of the fact that he
is or was a director of the corporation or is or was serving at the
request of the corporation as a director or officer of any other
entity including, without limitation, corporations, partnerships,
joint ventures, trusts, or employee benefit plans.
7. The Secretary of State of the State of New York is
hereby designated as the agent of the corporation upon whom process
in any action or proceeding against it may be served and the
address to which the Secretary of State shall mail a copy of
process in any action or proceeding against the corporation which
may be served upon him is: Seasonal Employers, Inc., 90 Linden
<PAGE>
Place, Rochester, New York 14625.
2
<PAGE>
EXHIBIT 3.18
BY-LAWS
of
SEASONAL EMPLOYERS, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
of the Corporation shall be held on such date and hour as may be
fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such business as
may properly be brought before such meeting.
SECTION 2. Special Meetings. Special meetings of the shareholders
of the Corporation may be held at any time in the interval between
annual meetings. Special meetings may be called by the President,
or by request of a majority of the Board of Directors, which
written request shall state the purpose or purposes of the Meeting
and matters proposed to be acted upon thereat. Nothing contained
herein shall limit the right and power of directors and
shareholders to require a special meeting for the election of
directors pursuant to Section 603 of the Business Corporation Law,
as that Section may from time to time be amended.
SECTION 3. Place of Meetings. Annual and special meetings of the
shareholders of the Corporation shall be held at the principal
office of the Corporation or at such other place within or without
the State of New York as the Board of Directors may from time to
time determine.
SECTION 4. Notice of Meetings. Written or printed notice of the
date, time and place of all meetings of the shareholders shall be
given personally, or by first class mail, not less than ten (10)
days nor more than fifty (50) days before the day fixed for the
meeting, to each shareholder entitled to vote at said meeting, and,
unless the meeting is an annual meeting, such notice must also
state the purpose or purposes for which the meeting is called and
must indicate that it is being issued by or at the direction of the
person or persons calling the meeting. Such notice must also be
given to any shareholder who, by reason of any action proposed at
such meeting, would be entitled to have his stock appraised, if
such action were taken, and such notice must specify the proposed
action and state the fact that if the action is taken, the
dissenting shareholder shall have appraisal rights. Such notice
shall be given to the shareholder by leaving the same with him at
his residence or usual place of business or by mailing it, postage
prepaid and addressed to him at his address as it appears on the
books of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which event it
<PAGE>
shall be mailed to the address designated in such request. The
notices, as provided for in this Section, are not required to be
given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by
him. No notice of an adjourned meeting of shareholders need be
given, unless the Board of Directors fixes a new record date for
the adjourned meeting.
SECTION 5. Record Dates. For the purposes of determining the
shareholders entitled to notice of or to vote at a shareholders'
meeting or any adjournment thereof, the Board of Directors may fix
a date of record which shall not be more than fifty (50) days nor
less than ten (10) days before said meeting date. For the purpose
of determining shareholders entitled to express consent to or
dissent from any proposal without a meeting, or for determining
shareholders entitled to receive payment of a dividend or the
allotment of any rights, or for any other action, the Board of
Directors may fix a date of record which shall not be more than
fifty (50) days prior to such action.
SECTION 6. Quorum. At all meetings of shareholders, except as
otherwise provided by law, a quorum shall exist if there is present
in person or represented by proxy, shareholders owning a majority
in number of the shares of the Corporation issued and outstanding
and entitled to vote thereat, in order to constitute a quorum; but
if there be no quorum, the holders of such shares so present or
represented may by majority vote adjourn the meeting from time to
time, but not for a period of over thirty (30) days at any one
time, without notice other than by announcement at the meeting,
until a quorum shall attend. At any such adjournment of the
meeting, which a quorum shall attend, any business may be
transacted which might have been transacted at the meeting as
originally called. When a quorum is once present, it is not broken
by the subsequent withdrawal of any shareholder.
SECTION 7. Voting. At all meetings of the shareholders, each
shareholder entitled to vote thereat may vote in person or by
proxy, and shall have one (1) vote for each share standing in his
name on the books of the Corporation as of the record date fixed
for the meeting, unless otherwise provided in the Certificate of
Incorporation or any amendments thereto. Upon demand of the
shareholders holding ten percent (10%) in interest of the shares,
present in person or by proxy and entitled to vote, voting shall be
by ballot. A plurality of votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take
any other corporate action, except as otherwise provided by law or
these By-Laws.
SECTION 8. Proxies. Every proxy shall be in writing, subscribed
2
<PAGE>
by the shareholder or his duly authorized attorney and dated. No
proxy which is dated more than eleven (11) months before the
meeting at which it is offered shall be accepted, unless such proxy
shall, on its face, name a longer period for which it is to remain
in force.
SECTION 9. Conduct of Meetings. Meetings of the shareholders
shall be presided over by the President of the Corporation or, in
his absence, by the Chairman of the Board of Directors, if any, or,
in the absence of both of them, by an Executive Vice President, if
any, or, in the absence of all such officers, by a Chairman to be
chosen at the Meeting. The Secretary of the Corporation shall act
as Secretary of the Meeting, if present.
SECTION 10. Action Without a Meeting. Whenever shareholders are
required or permitted to take any action by vote, such action may
be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Such written consent shall have the same
effect as a unanimous vote of shareholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The Board of Directors shall have
the management and control of the affairs and business of the
Corporation. The directors shall be elected by the shareholders at
each annual meeting of shareholders and each director shall serve
until his successor is elected or appointed and qualified, unless
his directorship be theretofore vacated by resignation, death,
removal or otherwise.
SECTION 2. Number. The number of directors constituting the
entire Board of Directors shall be such number, not less than three
(3), as shall be designated by resolution of the Board of Directors
adopted prior to the election of directors at the annual meeting of
shareholders. In the absence of such resolution the number of
directors to be elected at such annual meeting shall be the number
last fixed by the Board of Directors. Any Board action designating
a change in the number of directors shall require a vote of a
majority of the entire Board. The 'entire Board', as used in this
Article, shall mean the total number of directors which the
Corporation would have if there were no vacancies. Notwithstanding
the provisions of this Section, where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders.
SECTION 3. Vacancies. Vacancies in the Board of Directors
(including any resulting from an increase in the number of
3
<PAGE>
directors) created for any reason except the removal by the
shareholders of a director or directors without cause, may be
filled by vote of the Board of Directors. If, however, the number
of directors then in office is less than a quorum, vacancies may be
filled by a vote of a majority of the directors then in office. A
director elected by the Board of Directors to fill a vacancy under
this Section shall hold office until the next meeting of
shareholders at which the election of directors is in the regular
order of business, and until his successor has been duly elected or
appointed and qualified.
SECTION 4. Removal. At any meeting of the shareholders duly
called, any director may, by vote of the holders of a majority of
the shares entitled to vote in the election of directors, be
removed from office, with or without cause. In the case of removal
without cause, another director may be elected by the shareholders
in the place of the person so removed, to serve for the remainder
of the term.
SECTION 5. Meetings. Regular Meetings of the Board of Directors
shall be held at such times as the directors may from time to time
determine. Special meetings of the Board of Directors shall be
held at any time, upon call from the Chairman of the Board, the
President or at least one-third (1/3) of the directors.
SECTION 6. Place of Meetings. Regular and special meetings of the
Board of Directors shall be held at the principal office of the
Corporation or at such other place, within or without the State of
New York, as the Board of Directors may from time to time
determine.
SECTION 7. Notice of Meeting. Notice of the place, day and hour
of every regular and special meeting shall be given to each
director by delivering the same to him personally or sending the
same to him by telegraph or leaving the same at his residence or
usual place of business, at least one (1) day before the meeting,
or shall be mailed to each director, postage prepaid and addressed
to him at the last known mailing address according to the records
of the Corporation, at least three (3) days before the meeting. No
notice of any adjourned meeting of the Board of Directors need to
be given other than by announcement at the meeting, subject to the
provisions of Section 9 of this Article.
SECTION 8. Waiver of Notice. Notice of a meeting need not be
given to any director who submits a signed written waiver thereof,
whether before, during or after the meeting, nor to any director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
SECTION 9. Quorum. A majority of the entire Board shall be
necessary to constitute a quorum for the transaction of business at
each meeting of the Board of Directors; but if at any meeting there
4
<PAGE>
be less than a quorum present, a majority of those present may
adjourn the meeting from time to time without notice other than by
announcement at the meeting, until a quorum shall attend. At any
such adjournment, at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting
as originally called.
SECTION 10. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee
thereof at a duly held meeting may be taken without a meeting if
all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action.
Such resolution and the written consents thereto by the members of
the Board of Directors or committee shall be filed with the minutes
of the proceedings of the Board of Directors or the committee.
SECTION 11. Personal Attendance by Conference Communication
Equipment. Any one or more members of the Board of Directors or
any committee thereof may participate in a meeting of such Board or
committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at the meeting.
SECTION 12. Compensation. Directors as such shall not receive any
stated compensation for their services, but by resolution of the
Board of Directors a fixed sum and expenses of attendance may be
allowed for attendance at each special or regular meeting thereof.
Nothing in this Section will be construed to preclude a director
from serving the Corporation in any other capacity and from
receiving compensation therefor.
SECTION 13. Executive Committee and Other Committees. The Board
of Directors may, in its discretion, by an affirmative vote of a
majority of the entire Board, appoint an Executive Committee, or
any other committee, to consist of three (3) or more directors as
the Board of Directors may from time to time determine. The
Executive Committee shall have, and may exercise between meetings
of the Board of Directors, all the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
and other committees shall have those powers conferred upon them by
the Board of Directors, except that no committee shall have power:
(a) To submit to shareholders any action requiring share-
holder approval;
(b) To fill vacancies in the Board of Directors or in any
committee thereof;
(c) To fix compensation of directors for service on the Board
of Directors or any committee thereof;
5
<PAGE>
(d) To repeal, amend or adopt by-laws;
(e) To amend or repeal any Board resolution which is not, by
its terms, amendable or repealable by such committee;
In the absence of any member of the Executive Committee or of any
other committee, the members thereof present at any meeting may
appoint a member of the Board of Directors previously designated by
the Board of Directors as a committee alternate to act in place of
such absent member. The Board of Directors shall have the power at
any time to change the membership of any committee, to fill
vacancies in it, or dissolve it. The Executive Committee and any
other committee may make rules for the conduct of its business, and
may appoint such committees and assistants as may from time to time
be necessary, unless the Board of Directors shall provide
otherwise. A majority of the members of the Executive Committee
and of any other committee shall constitute a quorum.
ARTICLE III
OFFICERS
SECTION 1. Election of Officers. The Board of Directors (or the
Executive Committee), at any duly held meeting thereof, shall elect
a President, a Secretary and a Treasurer of the Corporation, and
may elect a Chairman of the Board from among the directors of the
Corporation, one or more Vice Presidents and any other officers.
Each such officer shall serve at the pleasure of the Board of
Directors or until his successor shall have been duly elected or
appointed and qualifies, or until he shall have resigned, shall
have deceased or shall have been removed in the manner provided in
Section 3 of this Article. Any two offices may be held by the same
person, except that no person shall hold the office of President
and Secretary concurrently. Notwithstanding the foregoing, if all
of the stock of the Corporation shall ever be owned by one person,
such person may hold all or any combination of offices. Any
vacancies in the above offices shall be filled by the Board.
SECTION 2. Assistant and Subordinate Officers. The Board of
Directors (or the Executive Committee) may elect one or more
Assistant Treasurers, one or more Assistant Secretaries and such
other subordinate officers or agents as it may deem proper from
time to time, who shall hold office at the pleasure of the Board of
Directors (or the Executive Committee). The Board of Directors may
from time to time authorize the President to appoint and remove
such assistant and subordinate officers and agents and prescribe
the powers and duties thereof.
SECTION 3. Removal. Any officers of the Corporation may be
removed with or without cause by a vote of the majority of the
entire Board of Directors of the Corporation then in office at a
6
<PAGE>
meeting called for that purpose (or, except in the case of an
officer elected by the Board of Directors, by the Executive
Committee) whenever in its judgment the best interests of the
Corporation may be served thereby.
SECTION 4. Compensation. The Board of Directors shall fix the
compensation of all officers of the Corporation who are elected or
appointed by the Board of Directors. The Board of Directors or the
Executive Committee shall fix the compensation of all other
officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such assistant
and subordinate officers and agents as he is authorized to appoint
and remove.
SECTION 5. Chairman of the Board. The Chairman of the Board, if
there be one, shall preside at all meetings of the Board of
Directors and shall perform such other duties as the Board of
Directors may direct.
SECTION 6. President. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of
the Board of Directors (or the Executive Committee), have the
general management of the affairs of the Corporation. The
President shall preside at all meetings of the shareholders. If
there be no Chairman of the Board, or in his absence or inability
to act, the President shall perform all duties of the Chairman of
the Board, subject, however, to the control of the Board of
Directors (or the Executive Committee).
SECTION 7. Vice Presidents. Any one or more of the Vice
Presidents may be designated by the Board of Directors (or the
Executive Committee) as an Executive Vice President. At the
request of the President, or in his absence or during his
disability, the Executive Vice President shall perform the duties
and exercise the functions of the President. If there be no
Executive Vice President, or if there be more than one (1), the
Board of Directors (or the Executive Committee) may determine which
one or more of the Vice Presidents shall perform any of such duties
or exercise any of such functions; if such determination is not
made by the Board of Directors (or the Executive Committee), the
President may make such determination; otherwise, any of the Vice
Presidents may perform any of such duties or exercise any of such
functions. Each Vice President shall have such other powers and
duties as may be properly designated by the Board of Directors (or
the Executive Committee) and the President.
SECTION 8. Secretary. The Secretary shall keep full minutes of
all meetings of the shareholders and of the Board of Directors in
books provided for that purpose. He shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as
required by law. He shall be the custodian of the records and of
the Seal or Seals of the Corporation. He shall affix the Corporate
7
<PAGE>
Seal to all documents, the execution of which on behalf of the
Corporation, under the Seal, is duly authorized by the Board of
Directors (or Executive Committee), and when so affixed may attest
the same. He shall have such other powers and duties as may be
properly designated by the Board of Directors (or the Executive
Committee) and the President.
SECTION 9. Treasurer. The Treasurer shall keep correct and
complete books and records of account for the Corporation. Subject
to the control and supervision of the Board of Directors (or the
Executive Committee) and the President, or such other officer as
the President may designate, the Treasurer shall establish and
execute programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors (or the Executive Committee)
and the President.
ARTICLE IV
SHARE CERTIFICATES
SECTION 1. Form and Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates for shares in
such form not inconsistent with the law or the Certificate of
Incorporation, and any amendments thereof, as the Board of
Directors may from time to time prescribe. The share certificates
shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary, and may be sealed with the
seal of the Corporation. Where any share certificate is
countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or its employee, or if the shares
are listed on a registered national security exchange, the
signatures of any such President, Vice President, Secretary, or
Assistant Secretary, may be facsimiles engraved or printed. In
case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such
officer before the share certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such
person had not ceased to be such officer.
SECTION 2. Transfer of Shares. The shares of the Corporation
shall be transferred on the books of the Corporation by the
8
<PAGE>
Registered holder thereof, in person or by his attorney, upon
surrender for cancellation of certificates for the same number of
shares, with a proper assignment and powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by
the certificate to be the owner of the shares represented thereby,
with such proof of the authenticity of the signature as the
Corporation, or its agents, may reasonably require. Such
certificate shall have affixed thereto all stock transfer stamps
required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may
deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation.
SECTION 3. Mutilated, Lost, Stolen or Destroyed Certificates. The
holder of any certificates representing shares of the Corporation
shall immediately notify the Corporation of any mutilation, loss,
theft or destruction thereof, and the Board of Directors may, in
its discretion, cause one or more new certificates, for the same
number of shares in aggregate, to be issued to such holder upon the
surrender of the mutilated certificate, or, in case of an alleged
loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction and the deposit of
indemnity, by way of bond or otherwise, in such form and amount and
with such sureties as the Board of Directors may require, to
indemnify the Corporation and transfer agent and registrar, if any,
against loss or liability by reason of the issuance of such new
certificates; but the Board of Directors may, in its discretion,
refuse to issue such new certificates save upon the order of some
court having jurisdiction in such matters.
SECTION 4. Stock Ledgers. The Stock Ledgers of the Corporation
containing the names and addresses of the shareholders and the
number of shares held by them respectively shall be maintained at
the principal office of the Corporation, or if there be a transfer
agent, at the office of such transfer agent, as the Board of
Directors shall determine.
SECTION 5. Transfer Agents and Registrars. The Corporation may
have one or more transfer agents and one or more registrars of its
stock or of any class or classes of its shares whose respective
duties the Board of Directors may from time to time determine.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify (a) any person made or threatened
to be made a party to any action or proceeding by reason of the
fact that he, his testator or intestate, is or was a director or
officer of the Corporation, and (b) any director or officer of the
Corporation who served any other company in any capacity at the
9
<PAGE>
request of the Corporation, in the manner and to the maximum extent
permitted by the Business Corporation Law of New York, as amended
from time to time; and the Corporation may, in the discretion of
the Board of Directors, indemnify all other corporate personnel to
the extent permitted by law.
ARTICLE VI
FINANCES
SECTION 1. Dividends. Subject to law and to the provisions of the
Certificate of Incorporation, and any amendments thereof, the Board
of Directors may declare dividends on the stock of the Corporation,
payable upon such dates as the Board of Directors may designate.
SECTION 2. Reserves. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for
dividends such sum or sums, as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the Board of Directors shall deem conducive
to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was
created.
SECTION 3. Bills, Notes, Etc. All checks or demands for money and
notes or other instruments evidencing indebtedness or obligations
of the Corporation shall be made in the name of the Corporation and
shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
ARTICLE VII
AMENDMENTS
SECTION 1. Power to Amend. The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws of the Corporation by
a majority vote of the entire Board at any meeting. However, any
By-Laws adopted by the Board of Directors may be amended or
repealed at any meeting of shareholders by a majority of the votes
cast at such meeting by the holders of shares entitled to vote
thereon.
SECTION 2. Notice of Amendment Affecting Election of Directors.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall
be set forth in the Notice of the next Meeting of shareholders for
the election of directors the By-Law so adopted, amended or
10
<PAGE>
repealed, together with a concise statement of the changes made.
11
<PAGE>
EXHIBIT 3.19
MEMORANDUM OF
NALLEY'S CANADA LIMITED
1. The name of the Company is 'Nalley's Canada
Limited'.
2. The authorized capital of the Company consists of
38,000 shares divided as follows:
(a) 500 Preference Shares with a par value of
$100.00 each;
(b) 37,500 Ordinary Shares with a par value of
$2.00 each.
3. The Preference Shares will have attached to them the
special rights and restrictions as set out in the Articles.
<PAGE>
EXHIBIT 3.20
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
of
NALLEY'S CANADA LIMITED
PART 1
INTERPRETATION
1.1. In these Articles, unless there is something in
the subject or context inconsistent therewith:
'Board' and 'the Directors' or 'the directors' mean the
Directors or sole Director of the Company for the time
being.
'Company Act' means the Company Act of the Province of
British Columbia as from time to time enacted and all
amendments thereto and includes the regulations made
pursuant thereto.
'Memorandum' means the Memorandum of the Company.
'month' means calendar month.
'proxyholder' means the person duly nominated by the
registered owner to represent him at the meeting and
includes the duly authorized representative of a
corporation which is the registered owner.
'registered owner' or 'registered holder' when used with
respect to a share in the authorized capital of the
Company means the person registered in the register of
members in respect of such share.
'seal' means the common seal of the Company.
'Securities Act' means the Securities Act of the Province
of British Columbia as from time to time enacted and all
amendments thereto and includes the regulations made
pursuant thereto.
Expressions referring to writing shall be construed as
including references to printing, lithography, typewriting,
photography and other modes of representing or reproducing words in
<PAGE>
a visible form.
Words importing the singular include the plural and vice
versa; and words importing male persons include female persons and
words importing persons shall include corporations.
1.2. The meaning of any words or phrases defined in the
Company Act shall, if not inconsistent with the subject or context,
bear the same meaning in these Articles.
1.3. The Rules of Construction contained in the
Interpretation Act shall apply, mutatis mutandis, to the
interpretation of these Articles.
PART 2
SHARES AND SHARE CERTIFICATES
2.1. Every member is entitled, without charge, to one
certificate representing the share or shares of each class held by
him; provided that, in respect of a share or shares held jointly
by several persons, the Company shall not be bound to issue more
than one certificate, and delivery of a certificate for a share to
one of several joint registered holders or to his duly authorized
agent shall be sufficient delivery to all; and provided further
that the Company shall not be bound to issue certificates
representing redeemable shares, if such shares are to be redeemed
within one month of the date on which they were allotted. Any
share certificate may be sent through the mail by registered
prepaid mail to the member entitled thereto at his address as
recorded in the register of members, and neither the Company nor
any transfer agent shall be liable for any loss occasioned to the
member owing to any such share certificate so sent being lost in
the mail or stolen.
2.2. If a share certificate
(i) is worn out or defaced, the Directors shall, upon
production to them of the said certificate and upon such
other terms, if any, as they may think fit, order the
said certificate to be cancelled and shall issue a new
certificate in lieu thereof;
(ii) is lost, stolen or destroyed, then, upon proof
thereof to the satisfaction of the Directors and upon
such indemnity, if any, as the Directors deem adequate
being given, a new share certificate in lieu thereof
shall be issued to the person entitled to such lost,
stolen or destroyed certificate; or
2
<PAGE>
(iii) represents more than one share and the registered
owner thereof surrenders it to the Company with a written
request that the Company issue in his name two or more
certificates each representing a specified number of
shares and in the aggregate representing the same number
of shares as the certificate so surrendered, the Company
shall cancel the Certificate so surrendered and issue in
lieu thereof certificates in accordance with such
request.
Such sum as the Directors may from time to time fix, but not
greater than the amount prescribed under the Company Act from time
to time, shall be paid to the Company for each certificate to be
issued under this Article.
2.3. Every share certificate shall be signed manually
by at least one officer or Director of the Company, or by or on
behalf of a registrar, branch registrar, transfer agent or branch
transfer agent of the Company and any additional signatures may be
printed or otherwise mechanically reproduced and, in such event, a
certificate so signed is as valid as if signed manually,
notwithstanding that any person whose signature is so printed or
mechanically reproduced shall have ceased to hold the office that
he is stated on such certificate to hold at the date of the issue
of a share certificate.
2.4. Except as required by law, statute or these
Articles, no person shall be recognized by the Company as holding
any share upon any trust, and the Company shall not be bound by or
compelled in any way to recognize (even when having notice thereof)
any equitable, contingent, future or partial interest in any share
or in any fractional part of a share or (except only as by law,
statute or these Articles provided or as ordered by a court of
competent jurisdiction) any other rights in respect of any share
except an absolute right to the entirety thereof in its registered
holder.
PART 3
ISSUE OF SHARES
3.1. Subject to these Articles and the Memorandum and
to any direction to the contrary contained in a resolution passed
at a general meeting authorizing any increase or alteration of
capital, the shares shall be under the control of the Directors who
may, subject to the Securities Act and to the rights of the holders
of the shares of the Company for the time being issued, issue,
allot, sell or otherwise dispose of and/or grant options on or
otherwise deal in, shares authorized but not outstanding or which,
having been previously issued, have been purchased or redeemed by
3
<PAGE>
the Company and are available to be sold or reissued at such times,
to such persons (including Directors), in such manner, upon such
terms and conditions, and at such price or for such consideration,
as they, in their absolute discretion, may determine.
3.2. If the Company is, or becomes, a company which is
not a reporting company and the Directors are required by the
Company Act before allotting any shares to offer them pro rata to
the members, the Directors shall, before allotting any shares,
comply with the applicable provisions of the Company Act.
3.3. Subject to the provisions of the Company Act, the
Company, or the Directors on behalf of the Company, may pay a
commission or allow a discount to any person in consideration of
his subscribing or agreeing to subscribe, whether absolutely or
conditionally, for any shares in the Company, or procuring or
agreeing to procure subscriptions, whether absolutely or
conditionally, for any such shares, provided that, if the Company
is not a specially limited company, the rate of the commission and
discount shall not in the aggregate exceed 25 per centum of the
amount of the subscription price of such shares.
3.4. No share may be issued until it is fully paid and
the Company shall have received the full consideration therefor in
cash, property or past services actually performed for the Company.
The value of property or services for the purpose of this Article
shall be an amount set by resolution of the Directors that is, in
all circumstances of the transaction, no greater than fair market
value.
4
<PAGE>
PART 4
SHARE REGISTERS
4.1. The Company shall keep or cause to be kept a
register of members, a register of transfers and a register of
allotments within British Columbia, all as required by the Company
Act, and may combine one or more of such registers. If the
Company's capital shall consist of more than one class or series of
shares, a separate register of members, register of transfers and
register of allotments may be kept in respect of each class or
series of shares. The Directors on behalf of the Company may
appoint a trust company registered under the Trust Company Act to
keep the register of members, register of transfers and register of
allotments or, if there is more than one class or series of shares,
the Directors may appoint a trust company, which need not be the
same trust company, to keep the register of members, the register
of transfers and the register of allotments for each class or
series of share. The Directors on behalf of the Company may also
appoint one or more trust companies, including the trust company
which keeps the said registers of its shares or of a class or
series thereof, as transfer agent for its shares or such class or
series thereof, as the case may be, and the same or another trust
company or companies as registrar for its shares or such class
thereof, as the case may be. The Directors may terminate the
appointment of any such trust company at any time and may appoint
another trust company in its place.
4.2. Subject to the Company Act, the Company may keep
or cause to be kept one or more branch registers of members at such
place or places, whether within or outside the Province of British
Columbia, as the Directors may from time to time determine.
4.3. The Company shall not at any time close its
register of members.
PART 5
TRANSFER AND TRANSMISSION
OF SHARES
5.1. Subject to the provisions of the Memorandum and of
these Articles that may be applicable, and subject to the
Securities Act, any member may transfer any of his shares by
instrument in writing executed by or on behalf of such member. The
instrument of transfer of any share of the Company shall be in the
form, if any, on the back of the Company's share certificates or in
such other form as the Directors may from time to time approve.
Except to the extent that the Company Act may otherwise provide,
the transferor shall be deemed to remain the holder of shares until
5
<PAGE>
the name of the transferee is entered in the register of members or
branch register of members in respect thereof.
5.2. The signature of the registered owner of any
shares, or of his duly authorized attorney, upon an authorized
instrument of transfer shall constitute a complete and sufficient
authority to the Company, its directors, officers and agents to
register, in the name of the transferee as named in the instrument
of transfer, the number of shares specified therein or, if no
number is specified, all the shares of the registered owner
represented by share certificates deposited with the instrument of
transfer. If no transferee is named in the instrument of transfer,
the instrument of transfer shall constitute a complete and
sufficient authority to the Company, its directors, officers and
agents to register, in the name of the person in whose behalf any
certificate for the shares to be transferred is deposited with the
Company for the purpose of having the transfer registered, the
number of shares specified in the instrument of transfer or, if no
number is specified, all the shares represented by all share
certificates deposited with the instrument of transfer.
5.3. Neither the Company nor any Director, officer or
agent thereof shall be bound to inquire into the title of the
person named in the form of transfer as transferee, or, if no
person is named therein as transferee, of the person on whose
behalf the certificate is deposited with the Company for the
purpose of having the transfer registered or be liable to any claim
by such registered owner or by any intermediate owner or holder of
the certificate or of any of the shares represented thereby or any
interest therein for registering the transfer, and the transfer,
when registered, shall confer upon the person in whose name the
shares have been registered a valid title to such shares.
5.4. Every instrument of transfer shall be executed by
the transferor and left at the registered office of the company or
at the office of its transfer agent or branch transfer agent or
registrar for registration together with the share certificate for
the shares to be transferred and such other evidence if any, as the
Directors or the transfer agent or branch transfer agent or
registrar or branch registrar may require to prove the title of the
transferor or his right to transfer the shares and the right of the
transferee to have the transfer registered. All instruments of
transfer where the transfer is registered shall be retained by the
Company or its transfer agent or branch transfer agent of registrar
or branch/registrar and any instrument of transfer, where the
transfer is not registered, shall be returned to the person
depositing the same together with the share certificate which
accompanied the same when tendered for registration.
5.5. There shall be paid to the Company in respect of
the registration of any transfer such sum, if any, as the Directors
may from time to time determine.
6
<PAGE>
5.6. In the case of the death of a member, the survivor
or survivors where the deceased was a joint registered holder, and
the legal personal representative of the deceased where he was the
sole holder, shall be the only persons recognized by the Company as
having any title to his interest in the shares. Before recognizing
any legal personal representative the Directors may require him to
deliver to the Company the documents required by the Company Act to
be produced by a person applying to effect transmission of shares
and such other evidence as the Directors may require of the
personal representatives appointment, and of the payment or
satisfaction of all taxes, duties, fees and other similar
assessments payable to any governmental authority in any applicable
jurisdiction with respect to the shares arising out of the members
death.
5.7. A guardian, committee, trustee, curator, tutor,
personal representative or trustee in bankruptcy of a member,
although not a member himself, shall have the same rights,
privileges and obligations that attach to the shares held by the
member if the documents required by the Company Act to be produced
by a person applying to effect transmission of shares shall have
been deposited with the Company together with such other evidence
as the Directors may require of the persons appointment. This
Article does not apply on the death of a member with respect to a
share registered in his name and the name of another person in
joint tenancy.
PART 6
ALTERATION OF CAPITAL
6.1. The Company may by ordinary resolution filed with
the Registrar alter the Memorandum to increase the authorized
capital of the Company by:
(i) creating shares with par value or shares without
par value, or both;
(ii) increasing the number of shares with par value or
shares without par value, or both; or
(iii) increasing the par value of a class of shares with
par value if no shares of that class are issued.
6.2. The Company may by special resolution alter the
Memorandum to subdivide, consolidate, change from shares with par
value to shares without par value, or from shares without par value
to shares with par value, or change the designation of, all or any
of its shares but only to such extent, in such manner and with such
consents of members holding a class or series of shares which is
7
<PAGE>
the subject of or affected by such alteration, as the Company Act
provides.
6.3. The Company may alter the Memorandum or these
Articles
(i) by special resolution, to create, define and attach
special rights or restrictions to any shares, and
(ii) by special resolution and by otherwise complying
with any applicable provision of its Memorandum or these
Articles, to vary or abrogate any special rights and
restrictions attached to any shares
and in each case by filing a certified copy of such resolution with
the Registrar but no right or special right attached to any issued
shares shall be prejudiced or interfered with unless all members
holding shares of each class or series whose right or special right
is so prejudiced or interfered with consent thereto in writing, or
unless a resolution consenting thereto is passed at a separate
class or series meeting of the holders of the shares of each such
class or series by a majority of three-fourths of the votes cast,
or such greater majority as may be specified by the special rights
attached to the class of shares.
6.4. If the Company is or becomes a reporting company,
no resolution to create, vary or abrogate any special right of
conversion or exchange attaching to any class or series of shares
shall be submitted to any meeting of members unless, if so required
by the Company Act, the Superintendent of Brokers appointed
pursuant to the Securities Act of British Columbia shall have
consented to the resolution.
6.5. Subject to the Company Act and unless these
Articles or the Memorandum otherwise provide, the provisions of
these Articles relating to general meetings shall apply, with the
necessary changes and so far as they are applicable, to a class or
series meeting of members holding a particular class or series of
shares but the quorum at a class or series meeting shall be one
person holding or representing by proxy one-third of the shares
affected.
PART 7
PURCHASE AND REDEMPTION
OF SHARES
7.1. Subject to the special rights and restrictions
attached to any class or series of shares, the Company may, by a
resolution of the Directors and in compliance with the Company Act,
8
<PAGE>
purchase any of its shares at the price and upon the terms
specified in such resolution or redeem any class or series of its
shares in accordance with the special rights and restrictions
attaching thereto. Unless the shares are to be purchased through
a stock exchange or the Company is purchasing the shares from
dissenting members pursuant to the requirements of the Company Act
or from an employee or former employee of the Company or of an
affiliate of the Company or from his personal representatives, the
Company shall make its offer to purchase pro rata to every member
who holds shares of the class or series, as the case may be, to be
purchased.
7.2. If the Company proposes at its option to redeem
some but not all of the shares of any class or series, the
Directors may, subject to the special rights and restrictions
attached to such class or series of shares, decide the manner in
which the shares to be redeemed shall be selected.
7.3. Subject to the provisions of the Company Act and
of the Securities Act, any shares purchased or redeemed by the
Company may be sold or if cancelled, reissued by it, but, while
such shares which have not been cancelled are held by the Company,
it shall not exercise any vote in respect of these shares and no
dividend or/other distribution shall be paid or made thereon.
PART 8
BORROWING POWERS
8.1. The Directors may from time to time on behalf of
the Company
(i) borrow money in such manner and amount, on
such security, from such sources and upon such
terms, and conditions as they think fit, and may
authorize the guaranteeing of any obligations of
any other person,
(ii) issue bonds, debentures, and other debt
obligations either outright or as security for any
liability or obligation of the Company or any
other person, and
(iii) mortgage, charge, whether by way of
specific or floating charge, or give other
security on the undertaking, or on the whole or
any part of the property and assets, of the
Company (both present and future).
8.2. Any bonds, debentures or other debt obligations of
9
<PAGE>
the Company may be issued at a discount, premium or otherwise, and
with any special privileges as to redemption, surrender, drawing,
allotment of or conversion into or exchange for shares or other
securities, attending and voting at general meetings of the
Company, appointment or election of Directors or otherwise and may
by their terms be assignable free from any equities between the
Company and the person to whom they were issued or any subsequent
holder thereof, all as the Directors may determine.
8.3. The Company shall keep or cause to be kept within
the Province of British Columbia in accordance with the Company Act
a register of its debentures and a register of debentureholders,
which registers may be combined, and, subject to the provisions of
the Company Act, may keep or cause to be kept one or more branch
registers of its debentureholders at such place or places as the
Directors may from time to time determine and the Directors may by
resolution, regulation or otherwise make such provisions as they
think fit respecting the keeping of such branch registers, provided
that any such branch register kept within British Columbia shall be
kept by a Trust Company.
8.4. Every bond, debenture or other debt obligation of
the Company shall be signed manually by at least one Director or
officer of the Company or by or on behalf of a trustee, registrar,
branch registrar, transfer agent or branch transfer agents for the
bond, debenture or other debt obligation appointed by the Company
or under any instrument under which the bond, debenture or other
debt obligation is issued or by or on behalf of a trustee who
certifies it in accordance with a trust indenture and any
additional signatures may be printed or otherwise mechanically
reproduced thereon and, in such event, a bond, debenture or other
debt obligation so signed is as valid as if signed manually
notwithstanding that the person whose signature is so printed or
mechanically reproduced shall have ceased to hold the office that
he is stated on such bond, debenture or other debt obligation to
hold at the date of the issue thereof.
8.5. If the Company is, or becomes, a company which is
a reporting company, the Company shall keep or cause to be kept a
register of its indebtedness to every Director or officer of the
Company or an associate of any of them in accordance with the
provisions of and to the extent required by the Company Act.
PART 9
GENERAL MEETINGS
9.1. Subject to any extensions of time permitted
pursuant to the Company Act, the first annual general meeting of
the amalgamated Company shall be held in accordance with the
10
<PAGE>
amalgamation agreement and thereafter an annual general meeting
shall be held once in every calendar year at such time (not being
more than thirteen months after the date that the last annual
general meeting was held or deemed to have been held) and place as
may be determined by the Directors.
9.2. If the Company is, or becomes, a company which is
not a reporting company and all the members entitled to attend and
vote at an annual general meeting consent in writing to all the
business which is required or desired to be transacted at the
meeting, the meeting need not be held.
9.3. All general meetings other than annual general
meetings are herein referred to as and may be called extraordinary
general meetings.
9.4. The Directors may, whenever they think fit,
convene an extraordinary general meeting. An extraordinary general
meeting, if requisitioned in accordance with the Company Act, shall
be convened by the Directors or, if not convened by the Directors,
may be convened by the requisitionists as provided in the Company
Act.
9.5. If the Company is or becomes a reporting company,
advance notice of any general meeting at which any Director is to
be elected shall be published in the manner required by the Company
Act.
9.6. A notice convening a general meeting specifying
the place, the date, and the hour of the meeting, and, in case of
special business, the general nature of that business, shall be
given as provided in the Company Act and in the manner hereinafter
in these Articles mentioned, or in such other manner (if any) as
may be prescribed by ordinary resolution, whether previous notice
thereof has been given or not, to such persons as are entitled by
law or under these Articles to receive such notice from the
Company. Accidental omission to give notice of a meeting to, or
the non-receipt of notice of a meeting, by any member shall not
invalidate the proceedings at that meeting.
9.7. All the members of the Company entitled to attend
and vote at a general meeting may, by unanimous consent in writing
given before, during or after the meeting, waive or reduce the
period of notice of such meeting and an entry in the minute book of
such waiver or reduction shall be sufficient evidence of the due
convening of the meeting.
9.8. Except as otherwise provided by the Company Act,
where any special business at a general meeting includes
considering, approving, ratifying, adopting or authorizing any
document or the execution thereof or the giving of effect thereto,
the notice convening the meeting shall, with respect to such
11
<PAGE>
document, be sufficient if it states that a copy of the document or
proposed document is or will be available for inspection by members
at the registered office or records office of the Company or at
some other place in British Columbia designated in the notice
during usual business hours up to the date of such general meeting.
12
<PAGE>
PART 10
PROCEEDINGS AT GENERAL MEETINGS
10.1. All business shall be deemed special business
which is transacted at
(i) an extraordinary general meeting other than the
conduct of and voting at, such meeting; and
(ii) an annual general meeting, with the exception of
the conduct of, and voting at, such meeting, the
consideration of the financial statement and of the
respective reports of the Directors and Auditor, fixing
or changing the number of directors, the election of
Directors, the appointment of the Auditor, the fixing of
the remuneration of the Auditor and of the Directors and
such other business as by these Articles or the Company
Act may be transacted at a general meeting without prior
notice thereof being given to the members or any business
which is brought under consideration by the report of the
Directors.
10.2. No business, other than election of the chairman
or the adjournment of the meeting, shall be transacted at any
general meeting unless a quorum of members, entitled to attend and
vote, is present at the commencement of the meeting, but the quorum
need not be present throughout the meeting.
10.3. Save as herein otherwise provided, a quorum shall
be two persons present and being, or representing by proxy, members
holding not less than one-twentieth of the issued shares entitled
to be voted at the meeting. If there is only one member the quorum
is one person present and being, or representing by proxy, such
member. The Directors, the Secretary or, in his absence, an
Assistant Secretary, and the solicitor of the Company shall be
entitled to attend at any general meeting but no such person shall
be counted in the quorum or be entitled to vote at any general
meeting unless he shall be a member or proxyholder entitled to vote
thereat.
10.4. If within half an hour from the time appointed for
a general meeting, a quorum is not present, the meeting, if
convened by requisition of the members, shall be dissolved; but
otherwise it shall stand adjourned to a place on a date and at a
time, to be fixed by the chairman of the meeting before the
adjournment, which shall be not more than two weeks following the
date for which the meeting was called, or failing such designation
then to the same day in the second week following the meeting at
the same time and place, in either case without giving further
notice. If at such adjourned meeting, a quorum is not present
13
<PAGE>
within half an hour from the time appointed, the person or persons
present and being, or representing by proxy, a member or members
entitled to attend and vote at the meeting, shall be a quorum.
10.5. The Chairman of the Board, if any, or in his
absence the President of the Company or in his absence a
Vice-President of the Company, if any, shall be entitled to preside
as chairman at every general meeting of the Company.
10.6. If at any general meeting neither the Chairman of
the Board nor President nor a Vice-President is present within
fifteen minutes after the time appointed for holding the meeting or
is willing to act as chairman, the Directors present shall choose
some one of their number to be chairman or if all the Directors
present decline to take the chair or shall fail to so choose or if
no Director be present, the members present shall choose one of
their number to be chairman.
10.7. The chairman may and shall, if so directed by the
meeting, adjourn the meeting from time to time and from place to
place, but no business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting from which
the adjournment took place. When a meeting is adjourned for thirty
days or more, notice, but not 'advance notice', of the adjourned
meeting shall be given as in the case of an original meeting or if
so determined by the Directors, by an advertisement published at
least once in a daily newspaper in Vancouver, British Columbia, or
in the city where the meeting commenced. Save as aforesaid, it
shall not be necessary to give any notice of an adjourned meeting
or of the business to be transacted at an adjourned meeting.
10.8. The chairman may propose or second a motion.
10.9. Subject to the provisions of the Company Act, at
any meeting a resolution put to the vote of the meeting shall be
decided on a show of hands, unless (before or on the declaration of
the result of the show of hands) a poll is directed by the chairman
or demanded by at least one member entitled to vote who is present
in person or by proxy. The chairman shall declare to the meeting
the decision on every question in accordance with the result of the
show of hands or the poll, and such decision shall be entered in
the book of proceedings of the Company. A declaration by the
chairman that a resolution has been carried, or carried
unanimously, or by a particular majority, or lost or not carried by
a particular majority and an entry to that effect in the book of
the proceedings of the Company shall be conclusive evidence of the
fact, without proof of the number or proportion of the votes
recorded in favour of, or against, that resolution.
10.10. In the case of an equality of votes, whether
on a show of hands or on a poll, the chairman of the meeting at
which the show of hands takes place or at which the poll is
14
<PAGE>
demanded shall not be entitled to a second or casting vote.
10.11. No poll may be demanded on the election of a
chairman. A poll demanded on a question of adjournment shall be
taken forthwith. A poll demanded on any other question shall be
taken as soon as, in the opinion of the chairman, is reasonably
convenient, but in no event later than seven days after the meeting
and at such time and place and in such manner as the chairman of
the meeting directs. The result of the poll shall be deemed to be
the resolution of and passed at the meeting at which the poll was
demanded. Any business other than that upon which the poll has
been demanded may be proceeded with pending the taking of the poll.
A demand for a poll may be withdrawn. In any dispute as to the
admission or rejection of a vote the decision of the chairman made
in good faith shall be final and conclusive.
10.12. Every ballot cast upon a poll and every proxy
appointing a proxyholder who casts a ballot upon a poll shall be
retained by the Secretary for such period and be subject to such
inspection as the Company Act may provide.
10.13. On a poll a person entitled to cast more than
one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
10.14. Unless the Company Act, the Memorandum or
these Articles otherwise provide, any action to be taken by a
resolution of the members may be taken by an ordinary resolution.
PART 11
VOTES OF MEMBERS
11.1. Subject to any special voting rights or
restrictions attached to any class or series of shares and the
restrictions on joint registered holders of shares, on a show of
hands every member who is present in person and entitled to vote
thereat shall have one vote and on a poll every member shall have
one vote for each share of which he is the registered holder and
may exercise such vote either in person or by proxyholder.
11.2. Any person who is not registered as a member but
is entitled to vote at any general meeting in respect of a share,
may vote the share in the same manner as if he were a member; but,
unless the Directors have previously admitted his right to vote at
that meeting in respect of the share, he shall satisfy the
directors of his right to vote the share before the time for
holding the meeting, or adjourned meeting, as the case may be, at
which he proposes to vote.
15
<PAGE>
11.3. Any corporation not being a subsidiary which is a
member of the Company may by resolution of its directors or other
governing body authorize such person as it thinks fit to act as its
representative at any general meeting or class meeting. The person
so authorized shall be entitled to exercise in respect of and at
such meeting the same powers on behalf of the corporation which he
represents as that corporation could exercise if it were an
individual member of the Company personally present, including,
without limitation, the right, unless restricted by such
resolution, to appoint a proxyholder to represent such corporation,
and shall, if present at the meeting, be counted for the purpose of
forming a quorum and be deemed to be a member present at the
meeting. Evidence of the appointment of any such representative
may be sent to the Company by written instrument, telegram, telex
or any method of transmitting legibly recorded messages.
Notwithstanding the foregoing, a corporation being a member may
appoint a proxyholder.
11.4. If a share is registered in the name of two or
more persons, the vote of the senior who exercises a vote, whether
in person or by proxyholder, shall be accepted to the exclusion of
the votes of the other joint registered holders; and for this
purpose seniority shall be determined by the order in which the
names stand in the register of members. Several legal personal
representatives of a deceased member whose shares are registered in
his sole name shall for the purpose of this Article be deemed to be
two or more persons, as the case may be.
11.5. A member of unsound mind entitled to attend and
vote, in respect of whom an order has been made by any court having
jurisdiction, may vote, whether on a show of hands or on a poll, by
his committee, curator bonis, or other person in the nature of a
committee or curator bonis appointed by that court, and any such
committee, curator bonis, or other person may appoint a
proxyholder.
11.6. Every member, including a member that is a
corporation, entitled to vote at a general meeting or a class
meeting of the Company may, by proxy, appoint a proxyholder as his
nominee to attend and act at the meeting in the manner, to the
extent and with the power conferred by the proxy. A member may
also appoint one or more alternate proxyholders to act in the place
and stead of an absent proxyholder.
11.7. A form of proxy shall be in writing under the hand
of the appointor or of his attorney duly authorized in writing, or,
if, the appointor is a corporation, either under the seal of the
corporation or under the hand of a duly authorized officer or
attorney. A proxyholder need not be a member of the Company if
(i) the Company is at the time a reporting
company, or
16
<PAGE>
(ii) the member appointing the proxyholder is a
corporation, or
(iii) the Company shall have at the time only one
member, or
(iv) the persons present in person or by proxy
and entitled to vote at the meeting by resolution
permit the proxyholder to attend and vote; for the
purpose of such resolution the proxyholder shall
be counted in the quorum but shall not be entitled
to vote
and in all other cases a proxyholder must be a member.
11.8. Unless otherwise ordered by the Directors, a form
of proxy and the power of attorney or other authority, if any,
under which it is signed, or a notarially certified copy thereof,
shall be deposited at the registered office of the Company, or at
such other place as is specified for that purpose in the notice
convening the meeting or in the information circular relating
thereto, not less than 48 hours (excluding Saturdays, Sundays and
holidays) before the time for holding the meeting in respect of
which the person named in the instrument is appointed. In addition
to any other method of depositing proxies provided for in these
Articles, the Directors may from time to time by resolution make
regulations relating to the depositing of proxies at any place or
places and fixing the time or times for depositing the proxies not
exceeding 48 hours (excluding Saturdays, Sundays and holidays)
preceding the meeting or adjourned meeting specified in the notice
calling a meeting of members or in the information circular
relating thereto and providing for particulars of such proxies to
be sent to the Company or any agent of the Company in writing or by
letter, telegram, telex or any method of transmitting legibly
recorded messages so as to arrive before the commencement of the
meeting or adjourned meeting at the off ice of the Company or of
any agent of the Company appointed for the purpose of receiving
such particulars and providing that proxies so deposited may be
acted upon as though the proxies themselves were deposited as
required by this Part and votes given in accordance with such
regulations shall be valid and shall be counted.
11.9. Unless the Company Act or any other statute or law
which is applicable to the Company or to any class or series of its
shares requires any other form of proxy, a proxy, whether for a
specified meeting or otherwise shall be in the form following, but
may also be in any other form that the Directors or the chairman of
the meeting shall approve:
(Name of Company)
The undersigned, being a member of the above named
17
<PAGE>
Company, hereby appoints
or
failing him
as proxyholder for the undersigned to attend, act and
vote for and on behalf of the undersigned at the
general meeting of the Company to be held on the
day of , and at any
adjournment thereof.
Signed this day of , 19
(Signature of member).
11.10. A vote given in accordance with the terms of
a proxy is valid notwithstanding the previous death or incapacity
of the member giving the proxy or the revocation of the proxy or of
the authority under which the form of proxy was executed or the
transfer of the share in respect of which the proxy is given,
provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered
office of the Company or by the chairman of the meeting or
adjourned meeting for which the proxy was given before the vote is
taken.
11.11. Every proxy may be revoked by an instrument
in writing
(i) executed by the member giving the same or by
his attorney authorized in writing or, where the
member is a corporation, by a duly authorized
officer or attorney of the corporation; and
(ii) delivered either at the registered office of
the Company at any time up to and including the
last business day preceding the day of the
meeting, or any adjournment thereof at which the
proxy is to be used, or to the Chairman of the
meeting on the day of the meeting or any
adjournment thereof before any vote in respect of
which the proxy is to be used shall have been
taken
or in any other manner provided by law. A proxy shall cease to be
valid one year from its date.
PART 12
DIRECTORS
18
<PAGE>
12.1. The names of the first Directors of the Company
are as set out in the amalgamation agreement. The Directors to
succeed the first Directors shall be elected by the members
entitled to vote on the election of Directors. The number of
Directors, excluding additional Directors, may be fixed or changed
from time to time by ordinary resolution, whether previous notice
thereof has been given or not, but notwithstanding anything
contained in these Articles the number of Directors shall never be
less than one or, if the Company is or becomes a reporting company,
less than three.
12.2 The remuneration of the Directors as such may from
time to time be determined by the Directors or, if the Directors
shall so decide, by the members. Such remuneration may be in
addition to any salary or other remuneration paid to any officer or
employee of the Company as such who is also a Director. The
Directors shall be repaid such reasonable travelling, hotel and
other expenses as they incur in and about the business of the
Company and if any Director shall perform any professional or other
service for the Company that in the opinion of the Directors are
outside the ordinary duties of a Director or shall otherwise be
specially occupied in or about the Company's business, he may be
paid a remuneration to be fixed by the Board, or, at the option of
such Director, by the Company in general meeting, and such
remuneration may be either in addition to, or in substitution for
any other remuneration that he may be entitled to receive. The
Directors on behalf of the Company, unless otherwise determined by
ordinary resolution, may pay a gratuity or pension or allowance on
retirement to any Director who has held any salaried office or
place of profit with the Company or to his spouse or dependants and
may make contributions to any fund and pay premiums for the
purchase or provision of any such gratuity, pension or allowance.
12.3. A Director shall not be required to hold a share
in the capital of the Company as qualification for his office but
shall be qualified as required by the Company Acts to become or act
as a Director.
PART 13
ELECTION AND REMOVAL OF DIRECTORS
13.1. At each annual general meeting of the Company all
the Directors shall retire and the members entitled to vote thereat
shall elect a Board of Directors consisting of the number of
Directors for the time being fixed pursuant to these Articles. If
the Company is, or becomes a company that is not a reporting
company and the business to be transacted at any annual general
meeting is consented to in writing by all the members who are
entitled to attend and vote thereat such annual general meeting
19
<PAGE>
shall be deemed for the purpose of this Part to have been held on
such written consent becoming effective.
13.2. A retiring Director shall be eligible for
re-election.
13.3. Where the Company fails to hold an annual general
meeting in accordance with the Company Act, the Directors then in
office shall be deemed to have been elected or appointed as
Directors on the last day on which the annual general meeting could
have been held pursuant to these Articles and they may hold office
until other Directors are appointed or elected or until the day on
which the next annual general meeting is held.
13.4. If at any general meeting at which there should be
an election of Directors, the places of any of the retiring
Directors are not filled by such election, such of the retiring
Directors who are not re-elected as may be requested by the
newly-elected Directors shall, if willing to do so, continue in
office to complete the number of Directors for the time being fixed
pursuant to these Articles until further new Directors are elected
at a general meeting convened for the purpose. If any such
election or continuance of Directors does not result in the
election or continuance of the number of Directors for the time
being fixed pursuant to these Articles such number shall be fixed
at the number of Directors actually elected or continued in office.
13.5. Any casual vacancy occurring in the Board of
Directors may be filled by the remaining Directors or Director. A
vacancy resulting from an increase by the members in the number of
Directors may be filled by the members by ordinary resolution or by
the Directors.
13.6. Between successive annual general meetings the
Directors shall have power to appoint one or more additional
Directors but not more than one-third of the number of Directors
fixed pursuant to these Articles and in effect at the last general
meeting at which Directors were elected, and the number of
Directors shall be increased accordingly. Any Director so
appointed shall hold office only until the next following annual
general meeting of the Company, but shall be eligible for election
at such meeting and so long as he is an additional Director the
number of Directors shall be increased accordingly.
13.7. Any Director may by instrument in writing
delivered to the Company appoint any person to be his alternate to
act in his place at meetings of the Directors at which he is not
present unless the Directors shall have reasonably disapproved the
appointment of such person as an alternate Director and shall have
given notice to that effect to the Director appointing the
alternate Director within a reasonable time after delivery of such
instrument to the Company. Every such alternate shall be entitled
20
<PAGE>
to notice of meetings of the Directors and to attend and vote as a
Director at a meeting at which the person appointing him is not
personally present. A person may be appointed as an alternate
Director by more than one Director, and an alternate Director shall
be counted separately in determining the quorum for, and having a
separate vote on behalf of each Director he is representing, in
addition to being so counted and voting where he is himself a
Director. Every alternate Director, if authorized by the
instrument appointing them, may sign in place of the Director who
appointed him resolutions submitted to the Directors to be
consented to in writing as referred to in Article 16.9. Every
alternate Director shall be deemed not to be the agent of a
Director appointing him. An alternate Director shall be deemed to
be a Director for all purposes of these Articles in the performance
of any function authorized under this Article 13.7, but shall not
otherwise be deemed to be a Director or to have power to act as a
Director. A Director may at any time by instrument telegram, telex
or any method of transmitting legibly recorded messages delivered
to the Company revoke the appointment of an alternate appointed by
him. An alternate Director may be repaid by the Company such
expenses as might properly be repaid to him if he were a Director
and he shall be entitled to receive from the Company such
proportion, if any, of the remuneration otherwise payable to the
Director appointing him as such Director may from time to time
direct.
13.8. The office of Director shall be vacated if the
Director:
(i) resigns his office by notice in writing
delivered to the registered office of the Company;
or
(ii) is convicted of an indictable offence and the
other Directors shall have resolved to remove him;
or
(iii) ceases to be qualified to act as a Director
pursuant to the Company Act.
13.9. The Company may by special resolution remove any
Director before the expiration of his period of office, and may by
an ordinary resolution appoint another person in his stead.
PART 14
POWERS AND DUTIES OF DIRECTORS
14.1. The Directors shall manage, or supervise the
management of, the affairs and business of the Company and shall
21
<PAGE>
have the authority to exercise all such powers of the Company as
are not, by the Company Act or by the Memorandum or these Articles
required to be exercised by the Company in general meeting.
14.2. The Directors may from time to time by power of
attorney or other instrument under the seal, appoint any person to
be the attorney of the Company for such purposes, and with such
powers, authorities and discretions (not exceeding those vested in
or exercisable by the Directors under these Articles and excepting
the powers of the Directors relating to the constitution of the
Board and of any of its committees and the appointment or removal
of officers and the power to declare dividends) and for such
period, with such remuneration and subject to such conditions as
the Directors may think fit, and any such appointment may be made
in favour of any of the Directors or any of the members of the
Company or in favour of any corporation, or of any of the members.
directors, nominees or managers of any corporation, firm or joint
venture and any such power of attorney may contain such provisions
for the protection or convenience of persons dealing with such
attorney as the Directors think fit. Any such attorney may be
authorized by the Directors to sub-delegate all or any of the
powers, authorities and discretions for the time being vested in
him.
PART 15
DISCLOSURE OF INTEREST OF DIRECTORS
15.1. A Director who is, in any way, directly or
indirectly interested in a proposed contract or transaction with
the Company or who holds any office or possesses any property
whereby, directly or indirectly, a duty or interest might be
created to conflict with his duty or interest as a Director shall
declare the nature and extent of his interest in such contract or
transaction or of the conflict or potential conflict with his duty
and interest as a Director, as the case may be, in accordance with
the provisions of the Company Act.
15.2. A Director shall not vote in respect of any such
contract or transaction with the Company in which he is interested
and if he shall do so his vote shall not be counted, but he shall
be counted in the quorum present at the meeting at which such vote
is taken. Subject to the provisions of the Company Act, the
foregoing prohibitions shall not apply to
(i) any such contract or transaction relating to a
loan to the Company, which a Director or a specified
corporation or a specified firm in which he has an
interest has guaranteed or joined in guaranteeing the
repayment of the loan or any part of the loan;
22
<PAGE>
(ii) any contract or transaction made or to be made
with, or for the benefit of an affiliated corporation of
which a Director is a director or officer;
(iii) determining the remuneration of the Directors;
(iv) purchasing and maintaining insurance to cover
Directors against liability incurred by them as Directors
under Section 152 of the Company Act; or
(v) the indemnification of any Director by the Company
under Section 152 of the Company Act.
These exceptions may from time to time be suspended or amended to
any extent approved by the Company in general meeting and permitted
by the Company Act, either generally or in respect of any
particular contract or transaction or for any particular period.
15.3. A Director may hold any office or place of profit
with the Company (other than the office of auditor of the Company)
in conjunction with his office of Director for such period and on
such terms (as to remuneration or otherwise) as the Directors may
determine and no Director or intended Director shall be
disqualified by his office from contracting with the Company either
with regard to his tenure of any such other office or place of
profit or as vendor, purchaser or otherwise, and, subject to
compliance with the provisions of the Company Act, no contract or
transaction entered into by or on behalf of the Company in which a
Director is in any way interested shall be liable to be voided by
reason thereof.
15.4. Subject to compliance with the provisions of the
Company Act, a Director or his firm may act in a professional
capacity for the Company (except as auditor of the Company) and he
or his firm shall be entitled to remuneration for professional
services as if he were not a Director.
15.5. A Director may be or become a director or other
officer or employee of, or otherwise interested in, any corporation
or firm in which the Company may be interested as a shareholder or
otherwise, and, subject to compliance with the provisions of the
Company Act, such Director shall not be accountable to the Company
for any remuneration or other benefits received by him as director,
officer or employee of, or from his interest in, such other
corporation or firm, unless the Company in general meeting
otherwise directs.
PART 16
PROCEEDINGS OF DIRECTORS
23
<PAGE>
16.1. The Chairman of the Board, if any, or in his
absence, the Vice-Chairman or in his absence, the President shall
preside as chairman at every meeting of the Directors, or if
neither the Chairman of the Board nor the Vice-Chairman nor the
President is present within fifteen minutes of the time appointed
for holding the meeting or is willing to act as chairman, or, if
the Chairman of the Board, the Vice-Chairman, and the President
have advised the Secretary that they will not be present at the
meeting, the Directors present shall choose one of their number to
be chairman of the meeting.
16.2. The Directors may meet together for the dispatch
of business, adjourn and otherwise regulate their meetings, as they
think fit. Questions arising at any meeting shall be decided by a
majority of votes. In case of an equality of votes the chairman
shall not have a second or casting vote. Meetings of the Board
held at regular intervals may be held at such place, at such time
and upon such notice (if any) as the Board may by resolution from
time to time determine.
16.3. A meeting of the Directors or of any committee of
the Directors may take place by means of conference telephones or
other communications facilities by which means all Directors
participating in the meeting can hear each other and provided that
all such Directors agree to such meeting being held in such manner.
Directors participating in a meeting in accordance with this
Article shall be deemed to be present at the meeting and to have so
agreed and shall be counted in the quorum therefor and be entitled
to speak and vote thereat.
16.4. A Director may, and the Secretary or an Assistant
Secretary upon request of a Director shall, call a meeting of the
Board at any time. Reasonable notice of such meeting specifying
the place, day and hour of such meeting shall be given by mail,
postage prepaid, addressed to each of the Directors and alternate
Directors at his address as it appears on the books of the Company
or by leaving it at his usual business or residential address or by
telephone, telegram, telex, or any method of transmitting legibly
recorded messages. It shall not be necessary to give notice of a
meeting of Directors to any Director or alternate Directors (i) who
is at the time not in the Province of British Columbia or (ii) if
such meeting is to be held immediately following a general meeting
at which such Director shall have been elected or is the meeting of
Directors at which such Director is appointed. Accidental omission
to give notice of a meeting to or the nonreceipt of notice of a
meeting by, any Director or alternate Director shall not invalidate
the proceedings at the meeting.
16.5. Any Director of the Company may file with the
Secretary a document executed by him waiving notice of any past,
present or future meeting or meetings of the Directors being, or
required to have been, sent to him and may at any time withdraw
24
<PAGE>
such waiver with respect to meetings held thereafter. After filing
such waiver with respect to future meetings and until such waiver
is withdrawn no notice need be given to such Director and, unless
the Director otherwise requires in writing to the Secretary, to his
alternate Director of any meeting of Directors and all meetings of
the Directors so held shall be deemed not to be improperly called
or constituted by reason of notice not having been given to such
Director or alternate Director.
16.6. The quorum necessary for the transaction of the
business of the Directors may be fixed by the Directors and if not
so fixed shall be two Directors or, if the number of Directors is
fixed at one, shall be one Director.
16.7. The continuing Directors may act notwithstanding
any vacancy in their body, but, if and so long as their number is
reduced below the number fixed pursuant to these Articles as the
necessary quorum of Directors, the continuing Directors may act for
the purpose of increasing the number of Directors to that number,
or of summoning a general meeting of the Company, but for no other
purpose.
16.8. Subject to the provisions of the Company Act, all
acts done by any meeting of the Directors or of a committee of
Directors, or by any person acting as a Director, shall,
notwithstanding that it be afterwards discovered that there was
some defect in the qualification, election or appointment of any
such Directors or of the members of such committee or person acting
as aforesaid, or that they or any of them were disqualified, be as
valid as if every such person had been duly elected or appointed
and was qualified to be a Director.
16.9. A resolution consented to in writing, whether by
document, telegram, telex or any method of transmitting legibly
recorded messages or other means, by all of the Directors shall be
as valid and effectual as if it had been passed at a meeting of the
Directors duly called and held. Such resolution may be in two or
more counterparts which together shall be deemed to constitute one
resolution in writing. Such resolution shall be filed with the
minutes of the proceedings of the Directors and shall be effective
on the date stated thereon or on the latest date stated on any
counterpart.
PART 17
EXECUTIVE AND OTHER COMMITTEES
17.1. The Directors may by resolution appoint an
Executive Committee to consist of such member or members of their
body as they think fit, which Committee shall have, and may
25
<PAGE>
exercise during the intervals between the meetings of the Board,
all the powers vested in the Board except the power to fill
vacancies in the Board, the power to change the membership of, or
fill vacancies in, said Committee or any other committee of the
Board and such other powers, if any, as may be specified in the
resolution. The said Committee shall keep regular minutes of its
transactions and shall cause them to be recorded in books kept for
that purpose, and shall report the same to the Board of Directors
at such times as the Board of Directors may from time to time
require. The Board shall have the power at any time to revoke or
override the authority given to or acts done by the Executive
Committee except as to acts done before such revocation or
overriding and to terminate the appointment or change the
membership of such Committee and to fill vacancies in it. The
Executive Committee may make rules for the conduct of its business
and may appoint such assistants as it may deem necessary. A
majority of the members of said Committee shall constitute a quorum
thereof.
17.2. The Directors may from time to time by resolution
constitute, dissolve or reconstitute standing committees and other
committees consisting of such persons as the Board may determine.
Every committee constituted by the Board shall have the powers,
authorities and discretions delegated to it by the Board (which
shall not include the power to fill vacancies in the Board and the
power to change the membership of or fill vacancies in any
committee constituted by the Board or the power to appoint or
remove officers appointed by the Board) and shall conform to the
regulations which may from time to time be imposed upon it by the
Board.
17.3. The Executive Committee and any other committee
may meet and adjourn as it thinks proper. Questions arising at any
meeting shall be determined by a majority of votes of the members
of the committee present, and in case of an equality of votes the
chairman shall not have a second or casting vote. A resolution
approved in writing by all the members of the Executive Committee
or any other committee shall be as valid and effective as if it had
been passed at a meeting of such Committee duly called and
constituted. Such resolution may be in two or more counterparts
which together shall be deemed to constitute one resolution in
writing. Such resolution shall be filed with the minutes of the
proceedings of the committee and shall be effective on the date
stated thereon or on the latest date stated in any counterpart.
PART 18
OFFICERS
18.1. The Directors shall, from time to time, appoint a
26
<PAGE>
President and a Secretary and such other officers, if any, as the
Directors shall determine and the Directors may, at any time,
terminate any such appointment. No officer shall be appointed
unless he is qualified in accordance with the provisions of the
Company Act.
18.2. One person may hold more than one of such offices
except that the offices of President and Secretary must be held by
different persons unless the Company has only one member. Any
person appointed as the Chairman of the Board, the President or the
Managing Director shall be a Director. The other officers need not
be Directors. The remuneration of the officers of the Company as
such and the terms and conditions of their tenure of office or
employment shall from time to time be determined by the Directors;
such remuneration may be by way of salary, fees, wages, commission
or participation in profits or any other means or all of these
modes and an officer may in addition to such remuneration be
entitled to receive after he ceases to hold such office or leaves
the employment of the Company a pension or gratuity. The Directors
may decide what functions and duties each officer shall perform and
may entrust to and confer upon him any of the powers exercisable by
them upon such terms and conditions and with such restrictions as
they think fit and may from time to time revoke, withdraw, alter or
vary all or any of such functions, duties and powers. The Secretary
shall, inter alia, perform the functions of the Secretary specified
in the Company Act.
18.3. Every officer of the Company who holds any office
or possesses any property whereby, whether directly or indirectly,
duties or interests might be created in conflict with his duties or
interests as an officer of the Company shall, in writing, disclose
to the President the fact and the nature, character and extent of
the conflict.
PART 19
INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
19.1. Subject to the provisions of the Company Act, the
Directors shall cause the Company to indemnify a Director or former
Director of the Company and the Directors may cause the Company to
indemnify a director or former director of a corporation of which
the Company is or was a shareholder and the heirs and personal
representatives of any such person against all costs, charges and
expenses, including an amount paid to settle an action or satisfy
a judgment, actually and reasonably incurred by him or them
including an amount paid to settle an action or satisfy a judgment
in a civil, criminal or administrative action or proceeding to
which he is or they are made a party by reason of his being or
27
<PAGE>
having been a Director of the Company or a director of such
corporation, including any action brought by the Company or any
such corporation. The Company shall apply to the court for all
approvals of the court which may be required to make any indemnity
referred to in this Part effective and enforceable. Each Director
of the Company on being elected or appointed shall be deemed to
have contracted with the Company on the terms of the foregoing
indemnity.
19.2. Subject to the provisions of the Company Act, the
Directors may cause the Company to indemnify any officer, employee
or agent of the Company or of a corporation of which the Company is
or was a shareholder (notwithstanding that he is also a Director)
and his heirs and personal representatives against all costs,
charges and expenses whatsoever incurred by him or them and
resulting from his acting as an officer, employee or agent of the
Company or such corporation. In addition the Company shall
indemnify the Secretary or an Assistant Secretary of the Company
(if he shall not be a full time employee of the Company and
notwithstanding that he is also a Director) and his respective
heirs and legal representatives against all costs, charges and
expenses whatsoever incurred by him or them and arising out of the
functions assigned to the Secretary by the Company Act or these
Articles and each such Secretary and Assistant Secretary shall on
being appointed be deemed to have contracted with the Company on
the terms of the foregoing indemnity.
19.3. The failure of a Director or officer of the
Company to comply with the provisions of the Company Act or of the
Memorandum or these Articles shall not invalidate any indemnity to
which he is entitled under this Part.
19.4. The Directors may cause the Company to purchase
and maintain insurance for the benefit of any person who is or was
serving as a Director, officer, employee or agent of the Company or
as a director, officer, employee or agent of any corporation of
which the Company is or was a shareholder and his heirs or personal
representatives against any liability incurred by him as such
Director, director, officer, employee or agent.
PART 20
DIVIDENDS AND RESERVE
20.1. The Directors may from time to time declare and
authorize payment of such dividends, if any, as they may deem
advisable and need not give notice of such declaration to any
member. No dividend shall be paid otherwise than out of funds
and/or assets properly available for the payment of dividends and
a declaration by the Directors as to the amount of such funds or
28
<PAGE>
assets available for dividends shall be conclusive. The Company
may pay any such dividend wholly or in part by the distribution of
specific assets and in particular by paid up shares, bonds,
debentures or other securities of the Company or any other
corporation or in any one or more such ways as may be authorized by
the Company or the Directors and where any difficulty arises with
regard to such a distribution the Directors may settle the same as
they think expedient, and in particular may fix the value for
distribution of such specific assets or any part thereof, and may
determine that cash payments in substitution for all or any part of
the specific assets to which any members are entitled shall be made
to any members on the basis of the value so fixed in order to
adjust the rights of all parties and may vest any such specific
assets in trustees for the persons entitled to the dividend as may
seem expedient to the Directors.
20.2. Any dividend declared on shares of any class or
series by the Directors may be made payable on such date as is
fixed by the Directors.
20.3. Subject to the rights of members (if any) holding
shares with special rights as to dividends, all dividends on shares
of any class or series shall be declared and paid according to the
number of such shares held.
20.4. The Directors may, before declaring any dividend,
set aside out of the funds properly available for the payment of
dividends such sums as they think proper as a reserve or reserves,
which shall, at the discretion of the Directors, be applicable for
meeting contingencies, or for equalizing dividend, or for any other
purpose to which such funds of the Company may be properly applied,
and pending such application may, at the like discretion, either be
employed in the business of the Company or be invested in such
investments as the Directors may from time to time think fit. The
Directors may also, without placing the same in reserve, carry
forward such funds, which they think prudent not to divide.
20.5. If several persons are registered as joint holders
of any share, any one of them may given an effective receipt for
any dividend, bonuses or other moneys payable in respect of the
share.
20.6. No dividend shall bear interest against the
Company. Where the dividend to which a member is entitled includes
a fraction of a cent, such fraction shall be disregarded in making
payment thereof and such payment shall be deemed to be payment in
full.
20.7. Any dividend, bonuses or other moneys payable in
cash in respect of shares may be paid by cheque or warrant sent
through the post directed to the registered address of the holder,
or in the case of joint holders, to the registered address of that
29
<PAGE>
one of the joint holders who is first named on the register, or to
such person and to such address as the holder or joint holders may
direct in writing. Every such cheque or warrant shall be made
payable to the order of the person to whom it is sent. The mailing
of such cheque or warrant shall, to the extent of the sum
represented thereby (plus the amount of any tax required by law to
be deducted) discharge all liability for the dividend, unless such
cheque or warrant shall not be paid on presentation or the amount
of tax so deducted shall not be paid to the appropriate taxing
authority.
20.8. Notwithstanding anything contained in these
Articles, but subject to the Securities Act, the Directors may from
time to time capitalize any undistributed surplus on hand of the
Company and may from time to time issue as fully paid and
non-assessable any unissued shares, or any bonds, debentures or
debt obligations of the Company as a dividend representing such
undistributed surplus on hand or any part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
21.1. The Company shall keep at its records office or at
such other place as the Company Act may permit, the documents,
copies registers, minutes, and records which the Company is
required by the Company Act to keep at its records office or such
other place, as the case may be.
21.2. The Company shall cause to be kept proper books of
account and accounting records in respect of all financial and
other transactions of the Company in order properly to record the
financial affairs and condition of the Company and to comply with
the Company Act.
21.3. Unless the Directors determine otherwise, or
unless otherwise determined by an ordinary resolution, no member of
the Company shall be entitled to inspect the accounting records of
the Company.
21.4. The Directors shall from time to time at the
expense of the Company cause to be prepared and laid before the
Company in general meeting such financial statements and reports as
are required by the Company Act.
21.5. Every member shall be entitled to be furnished
once gratis on demand with a copy of the latest annual financial
statement of the Company and, if so required by the Company Act, a
copy of each such annual financial statement and interim financial
statement shall be mailed to each member.
30
<PAGE>
PART 22
NOTICES
22.1. A notice, statement or report may be given or
delivered by the Company to any member either by delivery to him
personally or by sending it by mail to him to his address as
recorded in the register of members. Where a notice, statement or
report is sent by mail, service or delivery of the notice,
statement or report shall be deemed to be effected by properly
addressing, prepaying and mailing the notice, statement or report
and to have been given on the day, Saturdays, Sundays and holidays
excepted, following the date of mailing. A certificate signed by
the Secretary or other officer of the Company or of any other
corporation acting in that behalf for the Company that the letter,
envelope or wrapper containing the notice, statement or report was
so addressed, prepaid and mailed shall be conclusive evidence
thereof.
22.2. A notice, statement or report may be given or
delivered by the Company to the joint holders of a share by giving
the notice to the joint holder first named in the register of
members in respect of the share.
22.3. A notice, statement or report may be given or
delivered by the Company to the persons entitled to a share in
consequence of the death, bankruptcy or incapacity of a member by
sending it through the mail prepaid addressed to them by name or by
the title of representatives of the deceased or incapacitated
person or trustee of the bankrupt, or by any like description, at
the address (if any) supplied to the Company for the purpose by the
persons claiming to be so entitled, or (until such address has been
so supplied) by giving the notice in a manner in which the same
might have been given if the death, bankruptcy or incapacity had
not occurred.
22.4. Notice of every general meeting or meeting of
members holding a class or series of shares shall be given in a
manner hereinbefore authorized to every member holding at the time
of the issue of the notice or the date fixed for determining the
members entitled to such notice, whichever is the earlier, shares
which confer the right to notice of and to attend and vote at any
such meeting. No other person except the auditor of the Company
and the Directors of the Company shall be entitled to receive
notices of any such meeting.
PART 23
RECORD DATES
31
<PAGE>
23.1. The Directors may fix in advance a date, which
shall not be more than the maximum number of days permitted by the
Company Act preceding the date of any meeting of members or any
class or series thereof or of the payment of any dividend or of the
proposed taking of any other proper action requiring the
determination of members as the record date for the determination
of the members entitled to notice of, or to attend and vote at, any
such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend or for any other proper purpose and,
in such case, notwithstanding anything elsewhere contained in these
Articles, only members of record on the date so fixed shall be
deemed to be members for the purposes aforesaid.
23.2. Where no record date is so fixed for the
determination of members as provided in the preceding Article the
date on which the notice is mailed or on which the resolution
declaring the dividend is adopted, as the case may be, shall be the
record date for such determination.
PART 24
SEAL
24.1. The Directors may provide a seal for the Company
and, if they do so, shall provide for the safe custody of the seal
which shall not be affixed to any instrument except in the presence
of the following persons, namely,
(i) any two Directors, or
(ii) one of the Chairman of the Board, the President,
the Managing Director, a Director and a Vice-President
together with one of the Secretary, the Treasurer, the
Secretary-Treasurer, an Assistant Secretary, an Assistant
Treasurer and an Assistant Secretary-Treasurer, or
(iii) if the Company shall have only one member, the
President or the Secretary, or
(iv) subject to Article 8.4., such person or persons as
the Directors may from time to time by resolution appoint
and the said Directors, officers, person or persons in whose
presence the seal is so affixed to an instrument shall sign such
instrument. For the purpose of certifying under seal true copies
of any document or resolution the seal may be affixed in the
presence of any one of the foregoing persons.
24.2. To enable the seal of the Company to be affixed to
32
<PAGE>
any bonds, debentures, share certificates, or other securities of
the Company, whether in definitive or interim form, on which
facsimiles of any of the signatures of the Directors or officers of
the Company are, in accordance with the Company Act and/or these
Articles, printed or otherwise mechanically reproduced there may be
delivered to the firm or company employed to engrave, lithograph or
print such definitive or interim bonds, debentures, share
certificates or other securities one or more unmounted dies
reproducing the Company's seal and the Chairman of the Board, the
President, the Managing Director or a Vice-President and the
Secretary, Treasurer, Secretary-Treasurer, an Assistant Secretary,
an Assistant Treasurer or an Assistant Secretary-Treasurer may by
a document authorize such firm or company to cause the Company's
seal to be affixed to such definitive or interim bonds, debentures,
share certificates or other securities by the use of such dies.
Bonds, debentures, share certificates or other securities to which
the Company's seal has been so affixed shall for all purposes be
deemed to be under and to bear the Company's seal lawfully affixed
thereto.
24.3. The Company may have for use in any other
province, state, territory or country an official seal and all of
the powers conferred by the Company Act with respect thereto may be
exercised by the Directors or by a duly authorized agent of the
Company.
PART 25
PROHIBITIONS
25.1. No shares or debt obligations issued by the
Company shall be offered for sale to the public.
25.2. No shares shall be transferred without the
previous consent of the Directors expressed by a resolution of the
Board and the Directors shall not be required to give any reason
for refusing to consent to any such proposed transfer.
33
<PAGE>
EXHIBIT 3.21
CERTIFICATE OF INCORPORATION
OF
PRO-FAC HOLDING COMPANY OF IOWA, INC.
Under Section 402 of the Business Corporation Law
1. The name of the corporation is PRO-FAC HOLDING
COMPANY OF IOWA, INC.
2. The purpose for which it is formed is to engage in
any lawful act or activity for which a corporation may be organized
under the Business Corporation Law, provided that the corporation
is not formed to, nor will it, 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.
3. The office of the corporation shall be located in
the County of Monroe, State of New York.
4. No shareholder shall have any preemptive right to
purchase shares or other securities to be issued or subjected to
rights or options to purchase, as such preemptive right is defined
and construed under the laws of the State of New York.
5. The aggregate number of shares which the corporation
shall have authority to issue is Two Hundred (200), all of which
are to be common shares with no par value.
6. No director of the corporation shall be personally
liable to the corporation or its shareholders for damages for any
breach of duty in such capacity except where a judgment or other
final adjudication adverse to said director establishes: that the
director's acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that said
director personally gained a financial profit or other advantage to
which he was not entitled, or the director's acts violated Section
719 of the New York Business Corporation Law.
7. The Secretary of State of the State of New York is
hereby designated as the agent of the corporation upon whom process
in any action or proceeding against it may be served and the
address to which the Secretary of State shall mail a copy of
process in any action or proceeding against the corporation which
may be served upon him is: 90 Linden Place, Rochester, New York
14625.
<PAGE>
BY-LAWS
of
PRO-FAC HOLDING COMPANY OF IOWA, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
of the Corporation shall be held on such date and hour as may be
fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such business as
may properly be brought before such meeting.
SECTION 2. Special Meetings. Special meetings of the shareholders
of the Corporation may be held at any time in the interval between
annual meetings. Special meetings may be called by the President,
or by request of a majority of the Board of Directors, which
written request shall state the purpose or purposes of the Meeting
and matters proposed to be acted upon thereat. Nothing contained
herein shall limit the right and power of directors and
shareholders to require a special meeting for the election of
directors pursuant to Section 603 of the Business Corporation Law,
as that Section may from time to time be amended.
SECTION 3. Place of Meetings. Annual and special meetings of the
shareholders of the Corporation shall be held at the principal
office of the Corporation or at such other place within or without
the State of New York as the Board of Directors may from time to
time determine.
SECTION 4. Notice of Meetings. Written or printed notice of the
date, time and place of all meetings of the shareholders shall be
given personally, or by first class mail, not less than ten (10)
days nor more than fifty (50) days before the day fixed for the
meeting, to each shareholder entitled to vote at said meeting, and,
unless the meeting is an annual meeting, such notice must also
state the purpose or purposes for which the meeting is called and
must indicate that it is being issued by or at the direction of the
person or persons calling the meeting. Such notice must also be
given to any shareholder who, by reason of any action proposed at
such meeting, would be entitled to have his stock appraised, if
such action were taken, and such notice must specify the proposed
action and state the fact that if the action is taken, the
dissenting shareholder shall have appraisal rights. Such notice
shall be given to the shareholder by leaving the same with him at
his residence or usual place of business or by mailing it, postage
prepaid and addressed to him at his address as it appears on the
books of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which event it
<PAGE>
shall be mailed to the address designated in such request. The
notices, as provided for in this Section, are not required to be
given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by
him. No notice of an adjourned meeting of shareholders need be
given, unless the Board of Directors fixes a new record date for
the adjourned meeting.
SECTION 5. Record Dates. For the purposes of determining the
shareholders entitled to notice of or to vote at a shareholders'
meeting or any adjournment thereof, the Board of Directors may fix
a date of record which shall not be more than fifty (50) days nor
less than ten (10) days before said meeting date. For the purpose
of determining shareholders entitled to express consent to or
dissent from any proposal without a meeting, or for determining
shareholders entitled to receive payment of a dividend or the
allotment of any rights, or for any other action, the Board of
Directors may fix a date of record which shall not be more than
fifty (50) days prior to such action.
SECTION 6. Quorum. At all meetings of shareholders, except as
otherwise provided by law, a quorum shall exist if there is present
in person or represented by proxy, shareholders owning a majority
in number of the shares of the Corporation issued and outstanding
and entitled to vote thereat, in order to constitute a quorum; but
if there be no quorum, the holders of such shares so present or
represented may by majority vote adjourn the meeting from time to
time, but not for a period of over thirty (30) days at any one
time, without notice other than by announcement at the meeting,
until a quorum shall attend. At any such adjournment of the
meeting, which a quorum shall attend, any business may be
transacted which might have been transacted at the meeting as
originally called. When a quorum is once present, it is not broken
by the subsequent withdrawal of any shareholder.
SECTION 7. Voting. At all meetings of the shareholders, each
shareholder entitled to vote thereat may vote in person or by
proxy, and shall have one (1) vote for each share standing in his
name on the books of the Corporation as of the record date fixed
for the meeting, unless otherwise provided in the Certificate of
Incorporation or any amendments thereto. Upon demand of the
shareholders holding ten percent (10%) in interest of the shares,
present in person or by proxy and entitled to vote, voting shall be
by ballot. A plurality of votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take
any other corporate action, except as otherwise provided by law or
these By-Laws.
SECTION 8. Proxies. Every proxy shall be in writing, subscribed
2
<PAGE>
by the shareholder or his duly authorized attorney and dated. No
proxy which is dated more than eleven (11) months before the
meeting at which it is offered shall be accepted, unless such proxy
shall, on its face, name a longer period for which it is to remain
in force.
SECTION 9. Conduct of Meetings. Meetings of the shareholders
shall be presided over by the President of the Corporation or, in
his absence, by the Chairman of the Board of Directors, if any, or,
in the absence of both of them, by an Executive Vice President, if
any, or, in the absence of all such officers, by a Chairman to be
chosen at the Meeting. The Secretary of the Corporation shall act
as Secretary of the Meeting, if present.
SECTION 10. Action Without a Meeting. Whenever shareholders are
required or permitted to take any action by vote, such action may
be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Such written consent shall have the same
effect as a unanimous vote of shareholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The Board of Directors shall have
the management and control of the affairs and business of the
Corporation. The directors shall be elected by the shareholders at
each annual meeting of shareholders and each director shall serve
until his successor is elected or appointed and qualified, unless
his directorship be theretofore vacated by resignation, death,
removal or otherwise.
SECTION 2. Number. The number of directors constituting the
entire Board of Directors shall be such number, not less than three
(3), as shall be designated by resolution of the Board of Directors
adopted prior to the election of directors at the annual meeting of
shareholders. In the absence of such resolution the number of
directors to be elected at such annual meeting shall be the number
last fixed by the Board of Directors. Any Board action designating
a change in the number of directors shall require a vote of a
majority of the entire Board. The 'entire Board', as used in this
Article, shall mean the total number of directors which the
Corporation would have if there were no vacancies. Notwithstanding
the provisions of this Section, where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders.
SECTION 3. Vacancies. Vacancies in the Board of Directors
(including any resulting from an increase in the number of
3
<PAGE>
directors) created for any reason except the removal by the
shareholders of a director or directors without cause, may be
filled by vote of the Board of Directors. If, however, the number
of directors then in office is less than a quorum, vacancies may be
filled by a vote of a majority of the directors then in office. A
director elected by the Board of Directors to fill a vacancy under
this Section shall hold office until the next meeting of
shareholders at which the election of directors is in the regular
order of business, and until his successor has been duly elected or
appointed and qualified.
SECTION 4. Removal. At any meeting of the shareholders duly
called, any director may, by vote of the holders of a majority of
the shares entitled to vote in the election of directors, be
removed from office, with or without cause. In the case of removal
without cause, another director may be elected by the shareholders
in the place of the person so removed, to serve for the remainder
of the term.
SECTION 5. Meetings. Regular Meetings of the Board of Directors
shall be held at such times as the directors may from time to time
determine. Special meetings of the Board of Directors shall be
held at any time, upon call from the Chairman of the Board, the
President or at least one-third (1/3) of the directors.
SECTION 6. Place of Meetings. Regular and special meetings of the
Board of Directors shall be held at the principal office of the
Corporation or at such other place, within or without the State of
New York, as the Board of Directors may from time to time
determine.
SECTION 7. Notice of Meeting. Notice of the place, day and hour
of every regular and special meeting shall be given to each
director by delivering the same to him personally or sending the
same to him by telegraph or leaving the same at his residence or
usual place of business, at least one (1) day before the meeting,
or shall be mailed to each director, postage prepaid and addressed
to him at the last known mailing address according to the records
of the Corporation, at least three (3) days before the meeting. No
notice of any adjourned meeting of the Board of Directors need to
be given other than by announcement at the meeting, subject to the
provisions of Section 9 of this Article.
SECTION 8. Waiver of Notice. Notice of a meeting need not be
given to any director who submits a signed written waiver thereof,
whether before, during or after the meeting, nor to any director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
SECTION 9. Quorum. A majority of the entire Board shall be
necessary to constitute a quorum for the transaction of business at
each meeting of the Board of Directors; but if at any meeting there
4
<PAGE>
be less than a quorum present, a majority of those present may
adjourn the meeting from time to time without notice other than by
announcement at the meeting, until a quorum shall attend. At any
such adjournment, at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting
as originally called.
SECTION 10. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee
thereof at a duly held meeting may be taken without a meeting if
all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action.
Such resolution and the written consents thereto by the members of
the Board of Directors or committee shall be filed with the minutes
of the proceedings of the Board of Directors or the committee.
SECTION 11. Personal Attendance by Conference Communication
Equipment. Any one or more members of the Board of Directors or
any committee thereof may participate in a meeting of such Board or
committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at the meeting.
SECTION 12. Compensation. Directors as such shall not receive any
stated compensation for their services, but by resolution of the
Board of Directors a fixed sum and expenses of attendance may be
allowed for attendance at each special or regular meeting thereof.
Nothing in this Section will be construed to preclude a director
from serving the Corporation in any other capacity and from
receiving compensation therefor.
SECTION 13. Executive Committee and Other Committees. The Board
of Directors may, in its discretion, by an affirmative vote of a
majority of the entire Board, appoint an Executive Committee, or
any other committee, to consist of three (3) or more directors as
the Board of Directors may from time to time determine. The
Executive Committee shall have, and may exercise between meetings
of the Board of Directors, all the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
and other committees shall have those powers conferred upon them by
the Board of Directors, except that no committee shall have power:
(a) To submit to shareholders any action requiring share-
holder approval;
(b) To fill vacancies in the Board of Directors or in any
committee thereof;
(c) To fix compensation of directors for service on the Board
of Directors or any committee thereof;
5
<PAGE>
(d) To repeal, amend or adopt by-laws;
(e) To amend or repeal any Board resolution which is not, by
its terms, amendable or repealable by such committee;
In the absence of any member of the Executive Committee or of any
other committee, the members thereof present at any meeting may
appoint a member of the Board of Directors previously designated by
the Board of Directors as a committee alternate to act in place of
such absent member. The Board of Directors shall have the power at
any time to change the membership of any committee, to fill
vacancies in it, or dissolve it. The Executive Committee and any
other committee may make rules for the conduct of its business, and
may appoint such committees and assistants as may from time to time
be necessary, unless the Board of Directors shall provide
otherwise. A majority of the members of the Executive Committee
and of any other committee shall constitute a quorum.
6
<PAGE>
ARTICLE III
OFFICERS
SECTION 1. Election of Officers. The Board of Directors (or the
Executive Committee), at any duly held meeting thereof, shall elect
a President, a Secretary and a Treasurer of the Corporation, and
may elect a Chairman of the Board from among the directors of the
Corporation, one or more Vice Presidents and any other officers.
Each such officer shall serve at the pleasure of the Board of
Directors or until his successor shall have been duly elected or
appointed and qualifies, or until he shall have resigned, shall
have deceased or shall have been removed in the manner provided in
Section 3 of this Article. Any two offices may be held by the same
person, except that no person shall hold the office of President
and Secretary concurrently. Notwithstanding the foregoing, if all
of the stock of the Corporation shall ever be owned by one person,
such person may hold all or any combination of offices. Any
vacancies in the above offices shall be filled by the Board.
SECTION 2. Assistant and Subordinate Officers. The Board of
Directors (or the Executive Committee) may elect one or more
Assistant Treasurers, one or more Assistant Secretaries and such
other subordinate officers or agents as it may deem proper from
time to time, who shall hold office at the pleasure of the Board of
Directors (or the Executive Committee). The Board of Directors may
from time to time authorize the President to appoint and remove
such assistant and subordinate officers and agents and prescribe
the powers and duties thereof.
SECTION 3. Removal. Any officers of the Corporation may be
removed with or without cause by a vote of the majority of the
entire Board of Directors of the Corporation then in office at a
meeting called for that purpose (or, except in the case of an
officer elected by the Board of Directors, by the Executive
Committee) whenever in its judgment the best interests of the
Corporation may be served thereby.
SECTION 4. Compensation. The Board of Directors shall fix the
compensation of all officers of the Corporation who are elected or
appointed by the Board of Directors. The Board of Directors or the
Executive Committee shall fix the compensation of all other
officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such assistant
and subordinate officers and agents as he is authorized to appoint
and remove.
SECTION 5. Chairman of the Board. The Chairman of the Board, if
there be one, shall preside at all meetings of the Board of
Directors and shall perform such other duties as the Board of
Directors may direct.
7
<PAGE>
SECTION 6. President. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of
the Board of Directors (or the Executive Committee), have the
general management of the affairs of the Corporation. The
President shall preside at all meetings of the shareholders. If
there be no Chairman of the Board, or in his absence or inability
to act, the President shall perform all duties of the Chairman of
the Board, subject, however, to the control of the Board of
Directors (or the Executive Committee).
SECTION 7. Vice Presidents. Any one or more of the Vice
Presidents may be designated by the Board of Directors (or the
Executive Committee) as an Executive Vice President. At the
request of the President, or in his absence or during his
disability, the Executive Vice President shall perform the duties
and exercise the functions of the President. If there be no
Executive Vice President, or if there be more than one (1), the
Board of Directors (or the Executive Committee) may determine which
one or more of the Vice Presidents shall perform any of such duties
or exercise any of such functions; if such determination is not
made by the Board of Directors (or the Executive Committee), the
President may make such determination; otherwise, any of the Vice
Presidents may perform any of such duties or exercise any of such
functions. Each Vice President shall have such other powers and
duties as may be properly designated by the Board of Directors (or
the Executive Committee) and the President.
SECTION 8. Secretary. The Secretary shall keep full minutes of
all meetings of the shareholders and of the Board of Directors in
books provided for that purpose. He shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as
required by law. He shall be the custodian of the records and of
the Seal or Seals of the Corporation. He shall affix the Corporate
Seal to all documents, the execution of which on behalf of the
Corporation, under the Seal, is duly authorized by the Board of
Directors (or Executive Committee), and when so affixed may attest
the same. He shall have such other powers and duties as may be
properly designated by the Board of Directors (or the Executive
Committee) and the President.
SECTION 9. Treasurer. The Treasurer shall keep correct and
complete books and records of account for the Corporation. Subject
to the control and supervision of the Board of Directors (or the
Executive Committee) and the President, or such other officer as
the President may designate, the Treasurer shall establish and
execute programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
8
<PAGE>
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors (or the Executive Committee)
and the President.
ARTICLE IV
SHARE CERTIFICATES
SECTION 1. Form and Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates for shares in
such form not inconsistent with the law or the Certificate of
Incorporation, and any amendments thereof, as the Board of
Directors may from time to time prescribe. The share certificates
shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary, and may be sealed with the
seal of the Corporation. Where any share certificate is
countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or its employee, or if the shares
are listed on a registered national security exchange, the
signatures of any such President, Vice President, Secretary, or
Assistant Secretary, may be facsimiles engraved or printed. In
case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such
officer before the share certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such
person had not ceased to be such officer.
SECTION 2. Transfer of Shares. The shares of the Corporation
shall be transferred on the books of the Corporation by the
Registered holder thereof, in person or by his attorney, upon
surrender for cancellation of certificates for the same number of
shares, with a proper assignment and powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by
the certificate to be the owner of the shares represented thereby,
with such proof of the authenticity of the signature as the
Corporation, or its agents, may reasonably require. Such
certificate shall have affixed thereto all stock transfer stamps
required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may
deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation.
SECTION 3. Mutilated, Lost, Stolen or Destroyed Certificates. The
holder of any certificates representing shares of the Corporation
shall immediately notify the Corporation of any mutilation, loss,
theft or destruction thereof, and the Board of Directors may, in
its discretion, cause one or more new certificates, for the same
number of shares in aggregate, to be issued to such holder upon the
9
<PAGE>
surrender of the mutilated certificate, or, in case of an alleged
loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction and the deposit of
indemnity, by way of bond or otherwise, in such form and amount and
with such sureties as the Board of Directors may require, to
indemnify the Corporation and transfer agent and registrar, if any,
against loss or liability by reason of the issuance of such new
certificates; but the Board of Directors may, in its discretion,
refuse to issue such new certificates save upon the order of some
court having jurisdiction in such matters.
SECTION 4. Stock Ledgers. The Stock Ledgers of the Corporation
containing the names and addresses of the shareholders and the
number of shares held by them respectively shall be maintained at
the principal office of the Corporation, or if there be a transfer
agent, at the office of such transfer agent, as the Board of
Directors shall determine.
SECTION 5. Transfer Agents and Registrars. The Corporation may
have one or more transfer agents and one or more registrars of its
stock or of any class or classes of its shares whose respective
duties the Board of Directors may from time to time determine.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify (a) any person made or threatened
to be made a party to any action or proceeding by reason of the
fact that he, his testator or intestate, is or was a director or
officer of the Corporation, and (b) any director or officer of the
Corporation who served any other company in any capacity at the
request of the Corporation, in the manner and to the maximum extent
permitted by the Business Corporation Law of New York, as amended
from time to time; and the Corporation may, in the discretion of
the Board of Directors, indemnify all other corporate personnel to
the extent permitted by law.
ARTICLE VI
FINANCES
SECTION 1. Dividends. Subject to law and to the provisions of the
Certificate of Incorporation, and any amendments thereof, the Board
of Directors may declare dividends on the stock of the Corporation,
payable upon such dates as the Board of Directors may designate.
SECTION 2. Reserves. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for
10
<PAGE>
dividends such sum or sums, as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the Board of Directors shall deem conducive
to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was
created.
SECTION 3. Bills, Notes, Etc. All checks or demands for money and
notes or other instruments evidencing indebtedness or obligations
of the Corporation shall be made in the name of the Corporation and
shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
ARTICLE VII
AMENDMENTS
SECTION 1. Power to Amend. The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws of the Corporation by
a majority vote of the entire Board at any meeting. However, any
By-Laws adopted by the Board of Directors may be amended or
repealed at any meeting of shareholders by a majority of the votes
cast at such meeting by the holders of shares entitled to vote
thereon.
SECTION 2. Notice of Amendment Affecting Election of Directors.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall
be set forth in the Notice of the next Meeting of shareholders for
the election of directors the By-Law so adopted, amended or
repealed, together with a concise statement of the changes made.
11
<PAGE>
EXHIBIT 3.22
BY-LAWS
of
PRO-FAC HOLDING COMPANY OF IOWA, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders
of the Corporation shall be held on such date and hour as may be
fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such business as
may properly be brought before such meeting.
SECTION 2. Special Meetings. Special meetings of the shareholders
of the Corporation may be held at any time in the interval between
annual meetings. Special meetings may be called by the President,
or by request of a majority of the Board of Directors, which
written request shall state the purpose or purposes of the Meeting
and matters proposed to be acted upon thereat. Nothing contained
herein shall limit the right and power of directors and
shareholders to require a special meeting for the election of
directors pursuant to Section 603 of the Business Corporation Law,
as that Section may from time to time be amended.
SECTION 3. Place of Meetings. Annual and special meetings of the
shareholders of the Corporation shall be held at the principal
office of the Corporation or at such other place within or without
the State of New York as the Board of Directors may from time to
time determine.
SECTION 4. Notice of Meetings. Written or printed notice of the
date, time and place of all meetings of the shareholders shall be
given personally, or by first class mail, not less than ten (10)
days nor more than fifty (50) days before the day fixed for the
meeting, to each shareholder entitled to vote at said meeting, and,
unless the meeting is an annual meeting, such notice must also
state the purpose or purposes for which the meeting is called and
must indicate that it is being issued by or at the direction of the
person or persons calling the meeting. Such notice must also be
given to any shareholder who, by reason of any action proposed at
such meeting, would be entitled to have his stock appraised, if
such action were taken, and such notice must specify the proposed
action and state the fact that if the action is taken, the
dissenting shareholder shall have appraisal rights. Such notice
shall be given to the shareholder by leaving the same with him at
his residence or usual place of business or by mailing it, postage
prepaid and addressed to him at his address as it appears on the
books of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, in which event it
<PAGE>
shall be mailed to the address designated in such request. The
notices, as provided for in this Section, are not required to be
given to any shareholder who submits a signed waiver of notice, in
person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by
him. No notice of an adjourned meeting of shareholders need be
given, unless the Board of Directors fixes a new record date for
the adjourned meeting.
SECTION 5. Record Dates. For the purposes of determining the
shareholders entitled to notice of or to vote at a shareholders'
meeting or any adjournment thereof, the Board of Directors may fix
a date of record which shall not be more than fifty (50) days nor
less than ten (10) days before said meeting date. For the purpose
of determining shareholders entitled to express consent to or
dissent from any proposal without a meeting, or for determining
shareholders entitled to receive payment of a dividend or the
allotment of any rights, or for any other action, the Board of
Directors may fix a date of record which shall not be more than
fifty (50) days prior to such action.
SECTION 6. Quorum. At all meetings of shareholders, except as
otherwise provided by law, a quorum shall exist if there is present
in person or represented by proxy, shareholders owning a majority
in number of the shares of the Corporation issued and outstanding
and entitled to vote thereat, in order to constitute a quorum; but
if there be no quorum, the holders of such shares so present or
represented may by majority vote adjourn the meeting from time to
time, but not for a period of over thirty (30) days at any one
time, without notice other than by announcement at the meeting,
until a quorum shall attend. At any such adjournment of the
meeting, which a quorum shall attend, any business may be
transacted which might have been transacted at the meeting as
originally called. When a quorum is once present, it is not broken
by the subsequent withdrawal of any shareholder.
SECTION 7. Voting. At all meetings of the shareholders, each
shareholder entitled to vote thereat may vote in person or by
proxy, and shall have one (1) vote for each share standing in his
name on the books of the Corporation as of the record date fixed
for the meeting, unless otherwise provided in the Certificate of
Incorporation or any amendments thereto. Upon demand of the
shareholders holding ten percent (10%) in interest of the shares,
present in person or by proxy and entitled to vote, voting shall be
by ballot. A plurality of votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take
any other corporate action, except as otherwise provided by law or
these By-Laws.
SECTION 8. Proxies. Every proxy shall be in writing, subscribed
2
<PAGE>
by the shareholder or his duly authorized attorney and dated. No
proxy which is dated more than eleven (11) months before the
meeting at which it is offered shall be accepted, unless such proxy
shall, on its face, name a longer period for which it is to remain
in force.
SECTION 9. Conduct of Meetings. Meetings of the shareholders
shall be presided over by the President of the Corporation or, in
his absence, by the Chairman of the Board of Directors, if any, or,
in the absence of both of them, by an Executive Vice President, if
any, or, in the absence of all such officers, by a Chairman to be
chosen at the Meeting. The Secretary of the Corporation shall act
as Secretary of the Meeting, if present.
SECTION 10. Action Without a Meeting. Whenever shareholders are
required or permitted to take any action by vote, such action may
be taken without a meeting on written consent, setting forth the
action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. Such written consent shall have the same
effect as a unanimous vote of shareholders.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The Board of Directors shall have
the management and control of the affairs and business of the
Corporation. The directors shall be elected by the shareholders at
each annual meeting of shareholders and each director shall serve
until his successor is elected or appointed and qualified, unless
his directorship be theretofore vacated by resignation, death,
removal or otherwise.
SECTION 2. Number. The number of directors constituting the
entire Board of Directors shall be such number, not less than three
(3), as shall be designated by resolution of the Board of Directors
adopted prior to the election of directors at the annual meeting of
shareholders. In the absence of such resolution the number of
directors to be elected at such annual meeting shall be the number
last fixed by the Board of Directors. Any Board action designating
a change in the number of directors shall require a vote of a
majority of the entire Board. The 'entire Board', as used in this
Article, shall mean the total number of directors which the
Corporation would have if there were no vacancies. Notwithstanding
the provisions of this Section, where all of the shares are owned
beneficially and of record by less than three (3) shareholders, the
number of directors may be less than three (3), but not less than
the number of shareholders.
SECTION 3. Vacancies. Vacancies in the Board of Directors
(including any resulting from an increase in the number of
3
<PAGE>
directors) created for any reason except the removal by the
shareholders of a director or directors without cause, may be
filled by vote of the Board of Directors. If, however, the number
of directors then in office is less than a quorum, vacancies may be
filled by a vote of a majority of the directors then in office. A
director elected by the Board of Directors to fill a vacancy under
this Section shall hold office until the next meeting of
shareholders at which the election of directors is in the regular
order of business, and until his successor has been duly elected or
appointed and qualified.
SECTION 4. Removal. At any meeting of the shareholders duly
called, any director may, by vote of the holders of a majority of
the shares entitled to vote in the election of directors, be
removed from office, with or without cause. In the case of removal
without cause, another director may be elected by the shareholders
in the place of the person so removed, to serve for the remainder
of the term.
SECTION 5. Meetings. Regular Meetings of the Board of Directors
shall be held at such times as the directors may from time to time
determine. Special meetings of the Board of Directors shall be
held at any time, upon call from the Chairman of the Board, the
President or at least one-third (1/3) of the directors.
SECTION 6. Place of Meetings. Regular and special meetings of the
Board of Directors shall be held at the principal office of the
Corporation or at such other place, within or without the State of
New York, as the Board of Directors may from time to time
determine.
SECTION 7. Notice of Meeting. Notice of the place, day and hour
of every regular and special meeting shall be given to each
director by delivering the same to him personally or sending the
same to him by telegraph or leaving the same at his residence or
usual place of business, at least one (1) day before the meeting,
or shall be mailed to each director, postage prepaid and addressed
to him at the last known mailing address according to the records
of the Corporation, at least three (3) days before the meeting. No
notice of any adjourned meeting of the Board of Directors need to
be given other than by announcement at the meeting, subject to the
provisions of Section 9 of this Article.
SECTION 8. Waiver of Notice. Notice of a meeting need not be
given to any director who submits a signed written waiver thereof,
whether before, during or after the meeting, nor to any director
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
SECTION 9. Quorum. A majority of the entire Board shall be
necessary to constitute a quorum for the transaction of business at
each meeting of the Board of Directors; but if at any meeting there
4
<PAGE>
be less than a quorum present, a majority of those present may
adjourn the meeting from time to time without notice other than by
announcement at the meeting, until a quorum shall attend. At any
such adjournment, at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting
as originally called.
SECTION 10. Action Without a Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee
thereof at a duly held meeting may be taken without a meeting if
all members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action.
Such resolution and the written consents thereto by the members of
the Board of Directors or committee shall be filed with the minutes
of the proceedings of the Board of Directors or the committee.
SECTION 11. Personal Attendance by Conference Communication
Equipment. Any one or more members of the Board of Directors or
any committee thereof may participate in a meeting of such Board or
committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at the meeting.
SECTION 12. Compensation. Directors as such shall not receive any
stated compensation for their services, but by resolution of the
Board of Directors a fixed sum and expenses of attendance may be
allowed for attendance at each special or regular meeting thereof.
Nothing in this Section will be construed to preclude a director
from serving the Corporation in any other capacity and from
receiving compensation therefor.
SECTION 13. Executive Committee and Other Committees. The Board
of Directors may, in its discretion, by an affirmative vote of a
majority of the entire Board, appoint an Executive Committee, or
any other committee, to consist of three (3) or more directors as
the Board of Directors may from time to time determine. The
Executive Committee shall have, and may exercise between meetings
of the Board of Directors, all the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
and other committees shall have those powers conferred upon them by
the Board of Directors, except that no committee shall have power:
(a) To submit to shareholders any action requiring share-
holder approval;
(b) To fill vacancies in the Board of Directors or in any
committee thereof;
(c) To fix compensation of directors for service on the Board
of Directors or any committee thereof;
5
<PAGE>
(d) To repeal, amend or adopt by-laws;
(e) To amend or repeal any Board resolution which is not, by
its terms, amendable or repealable by such committee;
In the absence of any member of the Executive Committee or of any
other committee, the members thereof present at any meeting may
appoint a member of the Board of Directors previously designated by
the Board of Directors as a committee alternate to act in place of
such absent member. The Board of Directors shall have the power at
any time to change the membership of any committee, to fill
vacancies in it, or dissolve it. The Executive Committee and any
other committee may make rules for the conduct of its business, and
may appoint such committees and assistants as may from time to time
be necessary, unless the Board of Directors shall provide
otherwise. A majority of the members of the Executive Committee
and of any other committee shall constitute a quorum.
6
<PAGE>
ARTICLE III
OFFICERS
SECTION 1. Election of Officers. The Board of Directors (or the
Executive Committee), at any duly held meeting thereof, shall elect
a President, a Secretary and a Treasurer of the Corporation, and
may elect a Chairman of the Board from among the directors of the
Corporation, one or more Vice Presidents and any other officers.
Each such officer shall serve at the pleasure of the Board of
Directors or until his successor shall have been duly elected or
appointed and qualifies, or until he shall have resigned, shall
have deceased or shall have been removed in the manner provided in
Section 3 of this Article. Any two offices may be held by the same
person, except that no person shall hold the office of President
and Secretary concurrently. Notwithstanding the foregoing, if all
of the stock of the Corporation shall ever be owned by one person,
such person may hold all or any combination of offices. Any
vacancies in the above offices shall be filled by the Board.
SECTION 2. Assistant and Subordinate Officers. The Board of
Directors (or the Executive Committee) may elect one or more
Assistant Treasurers, one or more Assistant Secretaries and such
other subordinate officers or agents as it may deem proper from
time to time, who shall hold office at the pleasure of the Board of
Directors (or the Executive Committee). The Board of Directors may
from time to time authorize the President to appoint and remove
such assistant and subordinate officers and agents and prescribe
the powers and duties thereof.
SECTION 3. Removal. Any officers of the Corporation may be
removed with or without cause by a vote of the majority of the
entire Board of Directors of the Corporation then in office at a
meeting called for that purpose (or, except in the case of an
officer elected by the Board of Directors, by the Executive
Committee) whenever in its judgment the best interests of the
Corporation may be served thereby.
SECTION 4. Compensation. The Board of Directors shall fix the
compensation of all officers of the Corporation who are elected or
appointed by the Board of Directors. The Board of Directors or the
Executive Committee shall fix the compensation of all other
officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such assistant
and subordinate officers and agents as he is authorized to appoint
and remove.
SECTION 5. Chairman of the Board. The Chairman of the Board, if
there be one, shall preside at all meetings of the Board of
Directors and shall perform such other duties as the Board of
Directors may direct.
7
<PAGE>
SECTION 6. President. The President shall be the Chief Executive
Officer of the Corporation and shall, subject to the direction of
the Board of Directors (or the Executive Committee), have the
general management of the affairs of the Corporation. The
President shall preside at all meetings of the shareholders. If
there be no Chairman of the Board, or in his absence or inability
to act, the President shall perform all duties of the Chairman of
the Board, subject, however, to the control of the Board of
Directors (or the Executive Committee).
SECTION 7. Vice Presidents. Any one or more of the Vice
Presidents may be designated by the Board of Directors (or the
Executive Committee) as an Executive Vice President. At the
request of the President, or in his absence or during his
disability, the Executive Vice President shall perform the duties
and exercise the functions of the President. If there be no
Executive Vice President, or if there be more than one (1), the
Board of Directors (or the Executive Committee) may determine which
one or more of the Vice Presidents shall perform any of such duties
or exercise any of such functions; if such determination is not
made by the Board of Directors (or the Executive Committee), the
President may make such determination; otherwise, any of the Vice
Presidents may perform any of such duties or exercise any of such
functions. Each Vice President shall have such other powers and
duties as may be properly designated by the Board of Directors (or
the Executive Committee) and the President.
SECTION 8. Secretary. The Secretary shall keep full minutes of
all meetings of the shareholders and of the Board of Directors in
books provided for that purpose. He shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as
required by law. He shall be the custodian of the records and of
the Seal or Seals of the Corporation. He shall affix the Corporate
Seal to all documents, the execution of which on behalf of the
Corporation, under the Seal, is duly authorized by the Board of
Directors (or Executive Committee), and when so affixed may attest
the same. He shall have such other powers and duties as may be
properly designated by the Board of Directors (or the Executive
Committee) and the President.
SECTION 9. Treasurer. The Treasurer shall keep correct and
complete books and records of account for the Corporation. Subject
to the control and supervision of the Board of Directors (or the
Executive Committee) and the President, or such other officer as
the President may designate, the Treasurer shall establish and
execute programs for the provision of the capital required by the
Corporation, including negotiating the procurement of capital and
maintaining adequate sources for the Corporation's current
borrowing from lending institutions. He shall maintain banking
arrangements to receive, have custody of and disburse the
Corporation's moneys and securities. He shall invest the
Corporation's funds as required, establish and coordinate policies
8
<PAGE>
for investment of pension and other similar trusts, and provide
insurance coverage as required. He shall direct the granting of
credit and the collection of accounts due the Corporation. He
shall have such other powers and duties as may be properly
designated by the Board of Directors (or the Executive Committee)
and the President.
ARTICLE IV
SHARE CERTIFICATES
SECTION 1. Form and Signatures. The interest of each shareholder
of the Corporation shall be evidenced by certificates for shares in
such form not inconsistent with the law or the Certificate of
Incorporation, and any amendments thereof, as the Board of
Directors may from time to time prescribe. The share certificates
shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary, and may be sealed with the
seal of the Corporation. Where any share certificate is
countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or its employee, or if the shares
are listed on a registered national security exchange, the
signatures of any such President, Vice President, Secretary, or
Assistant Secretary, may be facsimiles engraved or printed. In
case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such
officer before the share certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such
person had not ceased to be such officer.
SECTION 2. Transfer of Shares. The shares of the Corporation
shall be transferred on the books of the Corporation by the
Registered holder thereof, in person or by his attorney, upon
surrender for cancellation of certificates for the same number of
shares, with a proper assignment and powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by
the certificate to be the owner of the shares represented thereby,
with such proof of the authenticity of the signature as the
Corporation, or its agents, may reasonably require. Such
certificate shall have affixed thereto all stock transfer stamps
required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may
deem expedient concerning the issue, transfer and registration of
certificates for shares of the Corporation.
SECTION 3. Mutilated, Lost, Stolen or Destroyed Certificates. The
holder of any certificates representing shares of the Corporation
shall immediately notify the Corporation of any mutilation, loss,
theft or destruction thereof, and the Board of Directors may, in
its discretion, cause one or more new certificates, for the same
number of shares in aggregate, to be issued to such holder upon the
9
<PAGE>
surrender of the mutilated certificate, or, in case of an alleged
loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction and the deposit of
indemnity, by way of bond or otherwise, in such form and amount and
with such sureties as the Board of Directors may require, to
indemnify the Corporation and transfer agent and registrar, if any,
against loss or liability by reason of the issuance of such new
certificates; but the Board of Directors may, in its discretion,
refuse to issue such new certificates save upon the order of some
court having jurisdiction in such matters.
SECTION 4. Stock Ledgers. The Stock Ledgers of the Corporation
containing the names and addresses of the shareholders and the
number of shares held by them respectively shall be maintained at
the principal office of the Corporation, or if there be a transfer
agent, at the office of such transfer agent, as the Board of
Directors shall determine.
SECTION 5. Transfer Agents and Registrars. The Corporation may
have one or more transfer agents and one or more registrars of its
stock or of any class or classes of its shares whose respective
duties the Board of Directors may from time to time determine.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify (a) any person made or threatened
to be made a party to any action or proceeding by reason of the
fact that he, his testator or intestate, is or was a director or
officer of the Corporation, and (b) any director or officer of the
Corporation who served any other company in any capacity at the
request of the Corporation, in the manner and to the maximum extent
permitted by the Business Corporation Law of New York, as amended
from time to time; and the Corporation may, in the discretion of
the Board of Directors, indemnify all other corporate personnel to
the extent permitted by law.
ARTICLE VI
FINANCES
SECTION 1. Dividends. Subject to law and to the provisions of the
Certificate of Incorporation, and any amendments thereof, the Board
of Directors may declare dividends on the stock of the Corporation,
payable upon such dates as the Board of Directors may designate.
SECTION 2. Reserves. Before payment of any dividends, there may
be set aside out of any funds of the Corporation available for
10
<PAGE>
dividends such sum or sums, as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the Board of Directors shall deem conducive
to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was
created.
SECTION 3. Bills, Notes, Etc. All checks or demands for money and
notes or other instruments evidencing indebtedness or obligations
of the Corporation shall be made in the name of the Corporation and
shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
ARTICLE VII
AMENDMENTS
SECTION 1. Power to Amend. The Board of Directors shall have the
power to adopt, amend or repeal the By-Laws of the Corporation by
a majority vote of the entire Board at any meeting. However, any
By-Laws adopted by the Board of Directors may be amended or
repealed at any meeting of shareholders by a majority of the votes
cast at such meeting by the holders of shares entitled to vote
thereon.
SECTION 2. Notice of Amendment Affecting Election of Directors.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall
be set forth in the Notice of the next Meeting of shareholders for
the election of directors the By-Law so adopted, amended or
repealed, together with a concise statement of the changes made.
11
<PAGE>
EXHIBIT 5.1
[Letterhead of Howard, Darby & Levin]
December 16, 1994
Curtice-Burns Foods, Inc.
90 Linden Place
P.O. Box 681
Rochester, New York 14603
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933, as
amended (the 'Act'), pursuant to the Registration Statement (No. 33-56517) on
Form S-4 (the 'Registration Statement') filed with the Securities and Exchange
Commission, of (a) $160,000,000 aggregate principal amount of 12 1/4% Senior
Subordinated Notes due 2005 (the 'New Notes') of Curtice-Burns Foods, Inc., a
New York corporation (the 'Company'), and (b) Guarantees of the New Notes
(together with the New Notes, the 'Securities') by Pro-Fac Cooperative, Inc., a
New York cooperative corporation ('Pro-Fac'), and Curtice-Burns Express, Inc., a
New York corporation, Curtice Burns Meat Snacks, Inc., a Delaware corporation,
Finger Lakes Packaging Company, Inc., a New York corporation, Husman Snack Foods
Company, Inc., an Ohio corporation, Kennedy Endeavors, Incorporated, a
Washington corporation, Nalley's Canada Limited, a British Columbia corporation,
Quality Snax of Maryland, Inc., a Maryland corporation, Seasonal Employers,
Inc., a New York corporation, and Pro-Fac Holding Company of Iowa, Inc., a New
York corporation (collectively, the 'Subsidiary Guarantors'), we have reviewed
such corporate records, certificates and other documents, and such questions of
law, as we have considered necessary or appropriate for the purposes of this
opinion.
We have assumed that each of the Company, Pro-Fac and the Subsidiary
Guarantors is duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and that it has or had all requisite
power and authority to execute, deliver and perform the Indenture, dated as of
November 3, 1994, as supplemented by the First Supplemental Indenture, dated as
of November 3, 1994, among the Company, Pro-Fac, the Subsidiary Guarantors and
IBJ Schroder Bank & Trust Company, as Trustee (the 'Indenture'), and to issue
the Securities and that each of Pro-Fac and the Subsidiary Guarantors has duly
authorized, executed and delivered the Indenture and has duly authorized the
transactions contemplated thereby.
Upon the basis of such examination and subject to the foregoing assumptions,
we advise you that, in our opinion, when the Registration Statement has become
effective under the Act, and the Securities have been duly executed and
authenticated in accordance with the Indenture and issued in exchange for the
12 1/4% Senior Subordinated Notes due 2005 previously issued by the Company and
the guarantees thereof of Pro-Fac and the Subsidiary Guarantors in accordance
with the exchange offer contemplated by the Registration Statement, the
Securities will constitute the valid and binding obligations of the Company,
Pro-Fac and the Subsidiary Guarantors, as the case may be, enforceable against
each such party in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights, to general
equity principles, and to the exception that the waivers contained in Section
4.16 of the Indenture may be unenforceable.
We are members of the bar of the State of New York. We do not purport to be
experts in, and we do not express any opinion on, any laws other than the law of
the State of New York and the Federal law of the United States of America.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the heading 'Legal
Matters' in the Prospectus. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
/s/ Howard, Darby & Levin
<PAGE>
EXHIBIT 5.2
[Letterhead of Harris Beach & Wilcox]
December 15, 1994
Curtice-Burns Foods, Inc.
90 Linden Place
Rochester, New York 14625
You have requested this opinion in connection with the registration under
the Securities Act of 1933, as amended (the 'Act'), pursuant to the Registration
Statement (No. 33-56517) on Form S-4 (the 'Registration Statement') filed with
the Securities and Exchange Commission (the 'Commission'), of $160,000,000 in
aggregate principal amount of 12 1/4% Senior Subordinated Notes Due 2005 (the
'New Notes') of Curtice-Burns Foods, Inc. ('Curtice Burns'), and related
Guarantees.
As to various questions of fact material to our opinion, we have relied upon
certificates of officers of Curtice Burns and Pro-Fac and the subsidiaries of
Curtice Burns identified on Schedule A (the 'Covered Subsidiaries'). We have
also examined such certificates of public officials, corporate documents and
records and other certificates and instruments and have made such other
investigations as we have deemed necessary in connection with the opinions
hereinafter set forth.
Based on the foregoing, it is our opinion that:
1. Pro-Fac is a cooperative corporation duly organized, validly existing
and in good standing under the laws of the State of New York.
2. Curtice Burns is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York.
3. Each of the Covered Subsidiaries is a corporation validly existing
and in good standing under the laws of its jurisdiction of incorporation.
4. Pro-Fac has all requisite corporate power to execute and deliver the
trust indenture dated as of November 3, 1994, as supplemented by the First
Supplemental Indenture, dated as of November 3, 1994 among Curtice Burns,
Pro-Fac, the Covered Subsidiaries, Nalley's Canada Limited and IBJ Schroder
Bank & Trust Company, as trustee (the 'Indenture'), and the Guarantee to
which it is a party (the 'Pro-Fac Guarantee') and to perform its obligations
thereunder.
5. Curtice Burns has all requisite corporate power to execute and
deliver the Indenture and the New Notes and to perform its obligations
thereunder.
6. Each of the Covered Subsidiaries has all requisite corporate power to
execute and deliver the Indenture and the Guarantee to which it is a party
and to perform its respective obligations thereunder.
7. The Indenture and the Pro-Fac Guarantee have been duly authorized by
all necessary corporate action by Pro-Fac. The Indenture has been duly
executed and delivered by Pro-Fac.
8. The Indenture and the Guarantees have been duly authorized by all
necessary corporate action by the Covered Subsidiaries (to the extent each
such Covered Subsidiary is a party thereto). The Indenture has been duly
executed and delivered by each Covered Subsidiary.
Except as set forth in paragraphs 3, 6 and 8, we express no opinion as to
the laws of any jurisdiction other than the federal laws of the United States of
America and the laws of the State of New York. We hereby consent to the filing
of this opinion as an exhibit to the Registration Statement and to the reference
to our firm under the heading 'Legal Matters' in the Prospectus forming part of
the Registration Statement, without implying or admitting that we are experts
within the meaning of the Act or the rules and regulations of the Commission
issued thereunder, with respect to any part of the Registration Statement,
including this exhibit.
Very truly yours,
HARRIS BEACH & WILCOX
By: /s/ Thomas M. Hampson
<PAGE>
Schedule A
COVERED SUBSIDIARIES
Curtice-Burns Express, Inc.
Curtice Burns Meat Snacks, Inc.
Husman Snack Foods Company, Inc.
Finger Lakes Packaging Company, Inc.
Kennedy Endeavors, Incorporated
Pro-Fac Holding Company of Iowa, Inc.
Quality Snax of Maryland, Inc.
Seasonal Employers, Inc.
<PAGE>
EXHIBIT 5.3
[Letterhead of Bull, Housser & Tupper]
December 15, 1994
Curtice-Burns Foods, Inc.
90 Linden Place
P.O. Box 681
Rochester, New York 14603
Dear Sirs:
In connection with the registration under the Securities Act of 1933, as
amended (the 'Act'), pursuant to the Registration Statement (No. 33-56517) on
Form S-4 filed with the Securities and Exchange Commission, of (a) $160,000,000
aggregate principal amount of 12 1/4% Senior Subordinated Notes due 2005 (the
'New Notes') of Curtice-Burns Foods, Inc., a New York corporation (the
'Company'), and (b) Guarantees of the New Notes (the 'New Guarantees') by
Pro-Fac Cooperative, Inc., a New York cooperative corporation, and Curtice-Burns
Express, Inc., a New York corporation, Curtice Burns Meat Snacks, Inc., a
Delaware corporation, Finger Lakes Packaging Company, Inc., a New York
corporation, Husman Snack Foods Company, Inc., an Ohio corporation, Kennedy
Endeavors, Incorporated, a Washington corporation, Nalley's Canada Limited, a
British Columbian corporation ('Nalley's Canada'), Quality Snax of Maryland,
Inc., a Maryland corporation, Seasonal Employers, Inc., a New York corporation,
and Pro-Fac Holding Company of Iowa, Inc., a New York corporation (collectively,
the 'Guarantors'), we have examined such certificates of public officials,
corporate documents and records and other certificates and instruments and have
made such other investigations as we have deemed necessary in connection with
the opinions hereinafter set forth.
As to various questions of fact material to our opinion, we have relied upon
certificates of officers of Nalley's Canada.
Based on the foregoing, it is our opinion that:
1. Nalley's Canada is a company duly amalgamated and validly existing in
good standing with respect to the filing of annual returns under the laws of
the Province of British Columbia.
2. Nalley's Canada has or had all requisite corporate power to execute,
deliver and perform the First Supplemental Indenture, dated November 3,
1994, among the Company, Nalley's Canada and the other Guarantors, and IBJ
Schroder Bank & Trust Company, as Trustee (the 'Supplemental Indenture'),
and to endorse a notation of the New Guarantee on each New Note.
3. Nalley's Canada has duly authorized, executed and delivered the
Supplemental Indenture and has duly authorized the transactions contemplated
thereby.
We express no opinion as to the laws of any jurisdiction other than the law
of the Province of British Columbia and the federal law of Canada, as applicable
therein, all as of the date hereof.
This opinion is solely for the benefit of the addressee and may not be
relied upon by any other person or circulated, quoted or otherwise referred to
for any other purpose except with our consent.
We hereby consent to the filing of this opinion as Exhibit 5.3 to the
Registration Statement and to the reference to our firm under the heading 'Legal
Matters' in the Prospectus. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Act.
Yours truly,
/s/ Bull, Housser & Tupper
<PAGE>
EXHIBIT 12.1
PRO-FAC COOPERATIVE, INC. AND CURTICE-BURNS FOODS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FOR THE THREE MONTHS ENDED
--------------------------------------------------------------- ------------------------------
JUNE 25, 1994 SEPT. 24, 1994
JUNE 29, JUNE 28, JUNE 26, JUNE 26, ------------------- SEPT. 23, -------------------
1990 1991 1992 1993 ACTUAL PRO FORMA 1993 ACTUAL PRO FORMA
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Excess/(deficiency) of
revenues before taxes,
dividends and allocation
of net proceeds.......... $ 14.8 $ 8.3 $ 12.8 ($ 17.5) $ 23.7 $ 3.9 $ 3.7
Income (loss) before taxes
and cumulative effect of
an accounting change..... $ 12.9 $ 1.8
Equity in undistributed
earnings of Springfield
Bank for Cooperatives.... (0.8) (0.7) (1.1) (1.5) (1.5) (1.5)
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Adjusted earnings (loss)... 14.0 7.6 11.7 (19.0) 22.2 11.4 3.9 3.7 1.8
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Fixed charges:
Interest expense and
amortization of debt issue
costs...... 19.6 20.3 17.2 13.8 11.6 37.2 3.2 2.9 9.9
Rentals (A)................ 0.8 0.2
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Total fixed charges... 19.6 20.3 17.2 13.8 11.6 38.0 3.2 2.9 10.1
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Adjusted earnings (loss)
and fixed charges........ $ 33.6 $ 27.9 $ 28.9 ($ 5.2) $ 33.8 $ 49.4 $ 7.1 $ 6.6 $ 11.9
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Ratio of earnings to fixed
charges.................. 1.71 1.37 1.68 (B) 2.91 1.30 2.22 2.28 1.18
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
</TABLE>
- ------------
(A) Rentals deemed representative of the interest factor included in rent
expense.
(B) As a result of the restructuring charge incurred by Curtice-Burns Foods,
Inc. during fiscal 1993, earnings did not cover fixed charges by $19.0
million. The Integrated Agreement with Curtice-Burns included a 50%
profit/loss sharing provision whereby Pro-Fac shared in Curtice-Burns'
earnings and losses. Excluding such charges the ratio would have been 1.84.
<PAGE>
CURTICE-BURNS FOODS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FOR THE THREE MONTHS ENDED
--------------------------------------------------------------- ------------------------------
JUNE 25, 1994 SEPT. 24, 1994
JUNE 29, JUNE 28, JUNE 26, JUNE 26, ------------------- SEPT. 23, -------------------
1990 1991 1992 1993 ACTUAL PRO FORMA 1993 ACTUAL PRO FORMA
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes
and cumulative effect of
an accounting change..... $ 12.5 $ 6.9 $ 10.9 ($ 19.9) $ 18.8 $ 6.8 $ 3.1 $ 1.7 $ 1.0
Equity in undistributed
earnings of Springfield
Bank for Cooperatives.... ($ 1.5)
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Adjusted earnings (loss)... $ 12.5 $ 6.9 $ 10.9 ($ 19.9) $ 18.8 $ 5.3 $ 3.1 $ 1.7 $ 1.0
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Fixed charges:
Interest expense and
amortization of debt issue
costs...... 25.9 26.1 22.8 19.6 18.2 37.2 4.8 5.1 9.9
Rentals (A)................ 1.0 0.8 1.0 0.9 0.8 0.8 0.2 0.2 0.2
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Total fixed charges... 26.9 26.9 23.8 20.5 19.0 38.0 5.0 5.3 10.1
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Adjusted earnings (loss)
and fixed charges........ $ 39.4 $ 33.8 $ 34.7 $ 0.6 $ 37.8 $ 43.3 $ 8.1 $ 7.0 $ 11.1
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
Ratio of earnings to fixed
charges.................. 1.47 1.26 1.46 (B) 1.98 1.14 1.62 1.32 1.10
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
--------- --------- --------- --------- ------- ---------- --------- ------- ----------
</TABLE>
- ------------
(A) Rentals deemed representative of the interest factor included in rent
expense.
(B) As a result of the restructuring charge incurred during fiscal 1993,
earnings did not cover fixed charges by $19.9 million. Excluding such
charge, the ratio is 1.52 for the year ended June 26, 1993.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Curtice-Burns Foods, Inc. of our report
dated September 28, 1994 (which report contains an explanatory paragraph
relative to disputes between Curtice-Burns Foods, Inc. and Pro-Fac Cooperative,
Inc.) relating to the financial statements of Pro-Fac Cooperative, Inc. which
appears in such Prospectus. We also consent to the reference to us under the
heading 'Experts' in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Rochester, NY 14604
December 13, 1994
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Curtice-Burns Foods, Inc. of our report
dated August 10, 1994 (except as to Note 3, which is as of September 22, 1994
and which report contains an explanatory paragraph relative to disputes between
Curtice-Burns Foods, Inc. and Pro-Fac Cooperative, Inc.) relating to the
consolidated financial statements of Curtice-Burns Foods, Inc. which appears in
such Prospectus. We also consent to the reference to us under the heading
'Experts' in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Rochester, NY 14604
December 13, 1994
<PAGE>
LETTER OF TRANSMITTAL
CURTICE-BURNS FOODS, INC.
(AS SUCCESSOR BY MERGER TO PF ACQUISITION CORP.)
OFFER TO EXCHANGE ITS
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
PURSUANT TO THE PROSPECTUS DATED DECEMBER 16, 1994
THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 18, 1995, UNLESS EXTENDED.
The Exchange Agent for the Exchange Offer is
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 Transmission (for One State Street
Bowling Green Station eligible financial New York, New York 10004
New York, New York 10274-0084 institutions only): Attn: Securities Processing
Attn: Reorganization Operations Department (212) 858-2611 Window, Subcellar One
To Confirm Facsimile
Transmissions Call:
(212) 858-2103
(call collect)
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION NUMBER OTHER THAN THE
ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the Prospectus,
dated December 16, 1994 (the 'Prospectus'), of Curtice-Burns Foods, Inc. (the
'Company') and this Letter of Transmittal (the 'Letter of Transmittal'), which
together constitute the Company's offer (the 'Exchange Offer') to exchange its
12 1/4% Senior Subordinated Notes due 2005 (the 'New Notes'), which have been
registered under the Securities Act of 1933, as amended (the 'Securities Act'),
for an equal principal amount of its outstanding 12 1/4% Senior Subordinated
Notes due 2005 (the 'Old Notes' and, together with the New Notes, the 'Notes').
The terms of the New Notes are identical in all material respects to the terms
of the Old Notes, except for certain transfer restrictions under the Securities
Act and registration and other rights relating to the exchange of the Old Notes
for New Notes. The term 'Expiration Date' shall mean 5:00 p.m., New York City
time, on January 18, 1995, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. Capitalized terms used but not defined
herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used either if certificates for Old
Notes are to be forwarded herewith or if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company ('DTC'), pursuant to the procedures set forth in 'The
Exchange Offer -- Procedures for Tendering' in the Prospectus. Delivery of this
Letter of Transmittal and any other required documents should be made to the
Exchange Agent. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
The term 'Holder' with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
<PAGE>
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent
prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption 'The
Exchange Offer -- Guaranteed Delivery Procedures.' See Instruction 2.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD NOTES
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OLD NOTES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
PRINCIPAL
AGGREGATE AMOUNT TENDERED
PRINCIPAL (MUST BE IN
AMOUNT INTEGRAL
CERTIFICATE REPRESENTED BY MULTIPLES OF
NUMBER(S)(1) OLD NOTE(S)(1) $1,000)(2)
TOTAL
(1) Need not be completed by Holders tendering by book-entry transfer.
(2) Unless otherwise indicated, the Holder will be deemed to have tendered the entire aggregate principal amount represented by such
Old Notes.
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED HEREWITH
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING (ONLY
PARTICIPANTS IN DTC MAY DELIVER OLD NOTES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution .............................................
Account No. .............................. at .............................
Transaction Code Number ....................................................
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ..............................................
Name of Eligible Institution that Guaranteed Delivery ......................
If delivered by book-entry transfer:
Account No. ................................................................
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its true and lawful agent and attorney-in-fact (with full knowledge that
the Exchange Agent also acts as the agent of the Company) with respect to the
tendered Old Notes with full power of substitution to (i) deliver certificates
for such Old Notes to the Company and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company and (ii) present
such Old Notes for transfer on the books of the Company and receive all benefits
and otherwise exercise all rights of beneficial ownership of such Old Notes, all
in accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
<PAGE>
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the sale, assignment and transfer of the Old Notes tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the 'SEC') that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
'affiliate' of the Company or any Guarantor within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such New
Notes. If the undersigned is not a broker-dealer or is a broker-dealer but will
not receive New Notes for its own account in exchange for Old Notes, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer hereby agrees to notify the Company prior
to using the Prospectus in connection with the sale or transfer of New Notes and
acknowledges and agrees that, upon receipt of notice from the Company of the
happening of any event which makes any statement in the Prospectus untrue in any
material respect or which requires the making of any changes in the Prospectus
in order to make the statements therein not misleading (which notice the Company
agrees to deliver promptly to such broker-dealer), such broker-dealer will
suspend use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder is not engaged in, and does not intend to engage in,
and has no arrangements or understandings with any person to participate in, the
distribution of such New Notes, and (iii) such holder is not an 'affiliate,' as
defined in Rule 405 under the Securities Act, of the Company or any Guarantor.
All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be withdrawn only in accordance with the procedures set forth in the
Prospectus and the instructions contained in this Letter of Transmittal.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described under 'The Exchange Offer -- Procedures for
Tendering' in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer.
The undersigned understands that if its Old Notes are accepted for
exchange, such holder will not receive accrued interest thereon and, if
applicable, Additional Payments or Liquidated Damages (as such terms are defined
in the Indenture) on the date of exchange. Instead, if the date of exchange is
before February 1, 1995, interest and, if applicable, Additional Payments and
Liquidated Damages accruing from and including November 3, 1994 through and
including January 31, 1995 will be payable on the Old Notes on February 1, 1995
to the registered holders thereof as of January 13, 1995, and interest will not
begin accruing on the New Notes until February 1, 1995. If the date of exchange
is on or after February 1, 1995, interest and, if applicable, Additional
Payments and Liquidated Damages accruing from and including February 1, 1995
through the date of exchange will be payable on the New Notes on August 1, 1995
to the registered holders thereof as of July 14, 1995.
Unless otherwise indicated herein in the box entitled 'Special Issuance
Instructions' below, the undersigned hereby requests that the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) be issued in the name of the undersigned. Similarly, unless otherwise
indicated under the box entitled 'Special Delivery Instructions' below, the
undersigned hereby requests that the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) be sent to
the undersigned at the address shown above in the box
<PAGE>
entitled 'Description of Old Notes.' In the event that both 'Special Issuance
Instructions' and 'Special Delivery Instructions' are completed, the undersigned
hereby requests that the New Notes (and, if applicable, substitute certificates
representing Old Notes for any Old Notes not exchanged) be issued in the name
of, and mailed to, the person(s) so indicated. The undersigned recognizes that
the Company has no obligation, pursuant to the 'Special Issuance Instructions,'
to transfer any Old Notes from the name of the registered holder(s) thereof if
the Company does not accept for exchange any of the Old Notes so tendered.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of and sent to someone other than
the undersigned.
Issue certificates to:
Name: ...................................................................
(PLEASE PRINT)
Address: ................................................................
.........................................................................
(INCLUDE ZIP CODE)
.........................................................................
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that shown in the box above entitled
'Description of Old Notes.'
Mail check and/or certificates to:
Name: ...................................................................
(PLEASE PRINT)
Address: ................................................................
.........................................................................
(INCLUDE ZIP CODE)
<PAGE>
IMPORTANT
<TABLE>
<S> <C>
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
..........................................................................
..........................................................................
SIGNATURE(S) OF OWNER(S)
Dated: ............................................................ , 1995
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for the Old Notes or by person(s) authorized to become
registered holder(s) by certificates and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5.)
Name(s): .................................................................
(PLEASE PRINT)
..........................................................................
Capacity (full title) (See Instruction 5): ...............................
Address: .................................................................
..........................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone No.: .............................................
Taxpayer Identification or Social Security No.: ..........................
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: ....................................................
Name: ....................................................................
(PLEASE PRINT)
Name of Firm: ............................................................
Address: .................................................................
..........................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone No.: .............................................
Dated: ............................................................ , 1995
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
PAYER'S NAME: CURTICE-BURNS FOODS, INC.
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number or
AT RIGHT AND CERTIFY BY SIGNING AND DATING Employer Identification Number
BELOW. ........................................
PART 2 -- Certification -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the
'IRS') that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instructions -- You must cross out Item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out such Item (2).
SIGNATURE..........................DATE ......... , 1995 PART 3
AWAITING TIN [ ]
</TABLE>
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ('TIN')
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<CAPTION>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
<S> <C>
I certify under penalties of perjury that a taxpayer identification number has not been
issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld, but that such amounts will be refunded to
me if I then provide a taxpayer identification number within sixty (60) days.
Signature..................................................... Date ..................... , 1995
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a bank, broker,
dealer, credit union, savings association or other entity that is a member of a
recognized Medallion Program approved by The Securities Transfer Association,
Inc. (an 'Eligible Institution'). Signatures on this Letter of Transmittal need
not be guaranteed (a) if this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes tendered herewith and such holder(s) have not
completed the instruction entitled 'Special Issuance Instructions' or 'Special
Delivery Instructions' on this Letter of Transmittal or (b) if such Old Notes
are tendered for the account of an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Old Notes; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be used either if Old Notes are to
be forwarded herewith or if delivery of Old Notes is to be made by book-entry
transfer pursuant to the procedures set forth in 'The Exchange Offer-Procedures
for Tendering' in the Prospectus. Certificates for physically delivered Old
Notes, or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC of Old Notes delivered electronically, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the front page of this
Letter of Transmittal by the Expiration Date.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH DTC,
IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE.
IF OLD NOTES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
If a Holder desires to tender Old Notes and such Holder's Old Notes are not
immediately available or time will not permit such Holder's Letter of
Transmittal, Old Notes (or a confirmation of book-entry transfer of Old Notes
into the Exchange Agent's account at DTC) or other required documents to reach
the Exchange Agent before the Expiration Date, such Holder may nevertheless
tender Old Notes if:
(a) such tender is made by or through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that, within five New York Stock Exchange, Inc. trading days after the
Expiration Date, a duly executed Letter of Transmittal (or facsimile hereof)
together with the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), and any other documents
required by this Letter of Transmittal and the instructions hereto, will be
deposited by such Eligible Institution with the Exchange Agent; and
(c) this properly completed and executed Letter of Transmittal (or
facsimile hereof) and all tendered Old Notes in proper form for transfer (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at DTC) and all other documents required by this Letter of Transmittal
are received by the Exchange Agent within five New York Stock Exchange, Inc.
trading days after the Expiration Date.
No alternative, conditional or contingent tenders will be accepted. By
executing this Letter of Transmittal (or facsimile hereof), the tendering Holder
waives any right to receive any notice of the acceptance for exchange of the Old
Notes.
3. Inadequate Space. If the space provided herein is inadequate, the
aggregate principal amount of Old Notes being tendered and the certificate
number thereof should be listed on a separate schedule attached hereto.
4. Partial Tenders (not applicable to Holders who tender by book-entry
transfer). Old Notes may only be tendered in integral multiples of $1,000. If
less than the entire principal amount of any Old Notes is tendered, the
tendering Holder should fill in the principal amount to be tendered in the box
entitled 'Principal Amount Tendered.' In such case, a new certificate for the
principal amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange for Old Notes will be sent to the
person(s) signing this Letter of Transmittal, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as promptly as practicable
following the expiration or termination of the Exchange Offer. The entire
principal amount of Old Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Bond Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the Old Notes without alteration, enlargement or any
change whatsoever.
<PAGE>
If any of the Old Notes tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on different
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby and the certificate(s) for New Notes issued in
exchange therefor is to be issued (or any untendered principal amount of Old
Notes is to be reissued) to the registered holder, no endorsements of
certificates or separate bond powers are required. If this Letter of Transmittal
is signed by the registered holder(s) of the Old Notes tendered hereby and the
certificate(s) for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to a person other
than the registered holder(s), the registered holder(s) must properly endorse
the Old Notes or transmit a properly completed separate bond power with this
Letter of Transmittal. Signatures on any such Old Notes or bond powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Old Notes tendered hereby, such Old Notes must be
endorsed or accompanied by appropriate bond powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on such Old Notes.
Signature(s) on any such Old Notes or bond powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any Old Notes or bond power is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
6. Transfer Taxes. The Company will pay any transfer taxes with respect to
the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be registered, or are to be issued in the name of, or
delivered to, any person other than the registered holder(s), or if tendered Old
Notes are registered in the name of any person other than the person signing
this Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder(s) or any
other persons) will be payable by the tendering Holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering Holder.
It will not be necessary for Transfer Tax Stamps to be affixed to the Old
Notes listed in this Letter of Transmittal.
7. Special Issuance and Delivery Instructions. Tendering Holders should
indicate in the applicable box the name and address to which New Notes issued
pursuant to the Exchange Offer, or Old Notes in a principal amount not tendered,
are to be issued or sent, if different from the name or address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. If no such instructions are given, any New Notes, or Old
Notes in a principal amount not tendered, will be issued in the name of, and
delivered to, the name or address of the person signing this Letter of
Transmittal and any Old Notes not accepted for exchange will be returned to the
name or address of the person signing this Letter of Transmittal.
8. Waiver of Conditions. Subject to the terms of the Exchange Offer, the
Company reserves the absolute right in its sole discretion to waive any of the
specified conditions of the Exchange Offer, in whole or in part, in the case of
any Old Notes tendered.
9. 31% Backup Withholding; Substitute Form W-9. U.S. Federal income tax law
requires each tendering Holder to provide the Company with such Holder's correct
taxpayer identification number ('TIN') on Substitute Form W-9 above. If the
Company is not provided with the correct TIN, the Internal Revenue Service may
subject the Holder to a $50 penalty. In addition, payments that are made to such
Holder or other payee with respect to New Notes issued pursuant to the Exchange
Offer may be subject to 31% backup withholding.
Certain Holders (including among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
In order for a foreign individual to qualify as an exempt recipient, the Holder
must submit a Form W-8, signed under penalties of perjury, attesting to that
individual's exempt status. A Form W-8 can be obtained from the Exchange Agent.
See the enclosed 'Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9' for more instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payments made on account of the New Notes. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service, provided that the required information is given to the Internal
Revenue Service.
<PAGE>
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering Holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
Holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number above in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Company will withhold
31% on all payments made on account of the New Notes prior to the time a
properly certified TIN is provided to the Company. However, such amounts will be
refunded to such Holder if a TIN is provided to the Company within 60 days.
The Holder is required to give the Company the TIN (e.g., social security
number or employer identification number) of the record owner of the New Notes
or of the last transferee appearing on the transfers attached to, or endorsed
on, the Old Notes. If the Old Notes are in more than one name or are not in the
name of the actual owner, consult the enclosed 'Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9' for additional guidance
on which number to report.
10. Requests for Assistance or Additional Copies. Questions and requests
for assistance or additional copies of the Prospectus and this Letter of
Transmittal should be directed to the Exchange Agent at its address set forth
below or at (212) 858-2103.
11. Lost, Destroyed or Stolen Certificates. If any Old Notes have been
lost, destroyed or stolen, the Holder should promptly notify the Exchange Agent.
The Holder will then be instructed as to the steps that must be taken in order
to replace the certificate(s). This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost or destroyed
certificates have been followed.
12. Acceptance of Tendered Old Notes and Issuance of New Notes; Return of
Old Notes. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted validly tendered Old Notes when, as and if the
Company has given written or oral (promptly confirmed in writing) notice thereof
to the Exchange Agent. If any tendered Old Notes are not exchanged pursuant to
the Exchange Offer for any reason, such unexchanged Old Notes will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
13. Withdrawal Rights. Tendered Old Notes may be withdrawn only pursuant to
the procedures set forth in 'The Exchange Offer-Withdrawal of Tenders' in the
Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY HEREOF (TOGETHER
WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED
OLD NOTES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
<PAGE>
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<S> <C> <C> <C>
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF -- NUMBER OF --
</TABLE>
<TABLE>
<S> <C>
1. An individual's account The individual 6.A valid trust, estate, or The legal entity (Do not
2.Two or more individuals (joint The actual owner of the pension trust furnish the identifying
account) account or, if combined number of the personal
funds, any one of the representative or
individuals(1) trustee unless the legal
3.Custodian account of a minor The minor(2) entity itself is not
(Uniform Gift to Minors Act) designated in the
4. A.The usual revocable savings The grantor- trustee(1) account title.)(4)
trust account (grantor is 7.Corporate account The corporation
also trustee) 8.Religious, charitable, or The organization
B.So-called trust account that The actual owner(1) educational organization
is not a legal or valid trust account
under State law 9.Partnership The partnership
5.Sole proprietorship account The owner(3) 10.Association, club, or other The organization
tax-exempt organization
11.A broker or registered nominee The broker or nominee
12.Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
A corporation.
A financial institution.
An organization exempt from tax under section 501(a), or an
individual retirement plan.
The United States or any agency or instrumentality thereof.
A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
An international organization or any agency, or instrumentality
thereof.
A registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
A real estate investment trust.
A common trust fund operated by a bank under section 584(a).
An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1).
<PAGE>
An entity registered at all times under the Investment Company Act of
1940.
A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
Payments to nonresident aliens subject to withholding under section
1441.
Payments to partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
Payments of patronage dividends where the amount received is not paid
in money.
Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include
the following:
Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
Payments described in section 6049(b)(5) to non-resident aliens.
Payments on tax-free covenant bonds under section 1451.
Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS. ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
The Exchange Agent for the Exchange Offer is
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile By Hand or Overnight Delivery:
P.O. Box 84 Transmission (for One State Street
Bowling Green Station eligible financial New York, New York 10004
New York, New York 10274-0084 institutions only): Attn: Securities Processing
Attn: Reorganization Operations (212) 858-2611 Window, Subcellar One
Department
To Confirm Facsimile
Transmissions Call:
(212) 858-2103
(call collect)
</TABLE>
<PAGE>
CURTICE-BURNS FOODS, INC.
(AS SUCCESSOR BY MERGER TO PF ACQUISITION CORP.)
NOTICE OF GUARANTEED DELIVERY
OF
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
As set forth in the Prospectus, dated December 16, 1994 (as the same may be
amended from time to time, the 'Prospectus'), of Curtice-Burns Foods, Inc. (the
'Company'), under the caption 'The Exchange Offer -- Guaranteed Delivery
Procedures' and in Instruction 2 to the related Letter of Transmittal, this form
must be used to accept the Company's offer (the 'Exchange Offer') to exchange
its 12 1/4% Senior Subordinated Notes due 2005 (the 'New Notes'), which have
been registered under the Securities Act of 1933, as amended (the 'Securities
Act'), for an equal principal amount of its outstanding 12 1/4% Senior
Subordinated Notes due 2005 (the 'Old Notes'), if (i) certificates representing
the Old Notes to be exchanged are not immediately available or (ii) time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined in the Prospectus). Any holder that wishes to tender
Old Notes pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Capitalized
terms not defined herein have the meaning ascribed to them in the Prospectus or
the related Letter of Transmittal.
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission By Hand or Overnight Delivery:
P.O. Box 84 (for eligible financial One State Street
Bowling Green Station institutions only): New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attn: Securities Processing
Attn: Reorganization Operations Window, Subcellar One
Department
To Confirm Facsimile
Transmissions Call:
(212) 858-2103
(call collect)
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned hereby tender(s) for exchange to the Company, upon the
terms and subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal, receipt of which is hereby acknowledged, the principal
amount of Old Notes specified below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption 'The Exchange
Offer -- Guaranteed Delivery Procedures' and in Instruction 2 of the Letter of
Transmittal. The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
<S> <C> <C>
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD AGGREGATE PRINCIPAL AMOUNT AGGREGATE PRINCIPAL
NOTES OR ACCOUNT NUMBER AT DTC REPRESENTED AMOUNT TENDERED
</TABLE>
<PAGE>
SIGN HERE
Name(s) of Registered or Acting Holder: .......................................
Signature(s): .................................................................
Name(s): ......................................................................
(PLEASE PRINT)
Address: ......................................................................
......................................................................
Telephone Number: .............................................................
Date: .........................................................................
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an 'eligible guarantor institution' within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Old Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at DTC) and any other required documents, all
by 5:00 p.m., New York City time, on the fifth New York Stock Exchange, Inc.
trading day after the Expiration Date.
SIGN HERE
Name of firm: ...............................................................
Authorized Signature: .......................................................
Name: .......................................................................
(PLEASE PRINT)
Address: ....................................................................
....................................................................
....................................................................
Telephone Number: ...........................................................
Date: .......................................................................
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
2
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM OWNER
OF
CURTICE-BURNS FOODS, INC.
(AS SUCCESSOR BY MERGER TO PF ACQUISITION CORP.)
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
To Registered Holder and/or Participant in the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
December 16, 1994 (as the same may be amended from time to time, the
'Prospectus') of Curtice-Burns Foods, Inc., a New York corporation (the
'Company'), and the accompanying Letter of Transmittal (the 'Letter of
Transmittal'), relating to the Company's offer (the 'Exchange Offer') to
exchange its 12 1/4% Senior Subordinated Notes due 2005, (the 'New Notes'),
which have been registered under the Securities Act of 1933, as amended (the
'Securities Act'), for an equal principal amount of its outstanding 12 1/4%
Senior Subordinated Notes due 2005 (the 'Old Notes'), upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$ of the 12 1/4% Senior Subordinated Notes due 2005.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Old Notes held by you for the account of
the undersigned (insert principal amount of Old Notes to be
tendered, if any):
$ of the 12 1/4% Senior Subordinated Notes due 2005.
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the New Notes in
the ordinary course of business of the undersigned, (iii) the undersigned is not
engaged in, does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the New
Notes, (iv) the undersigned is not an 'affiliate,' as defined in Rule 405 under
the Securities Act, of the Company or any Guarantor, and (v) the undersigned
acknowledges that any person participating in the Exchange Offer for the purpose
of distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction involving the New Notes acquired by such person and cannot
rely on the position of the staff of the Securities and Exchange Commission set
forth in no-action letters that are discussed in the section of the Prospectus
entitled 'The Exchange Offer -- Purpose and Effect of the Exchange Offer'; (b)
to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and (c) to take such other action as necessary under the Prospectus
or the Letter of Transmittal to effect the valid tender of such Old Notes.
<PAGE>
SIGN HERE
Name of beneficial owner(s): .............................................
Signature(s): ............................................................
Name(s) (please print): ..................................................
Address: .................................................................
.................................................................
Telephone Number: ........................................................
Taxpayer identification or Social Security Number: .......................
Date: ....................................................................
2
<PAGE>
CURTICE-BURNS FOODS, INC.
(AS SUCCESSOR BY MERGER TO PF ACQUISITION CORP.)
OFFER TO EXCHANGE ITS
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 18, 1995, UNLESS EXTENDED.
December 16, 1994
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Curtice-Burns Foods, Inc., a New York corporation (the 'Company'), is
offering upon the terms and conditions set forth in the Prospectus, dated
December 16, 1994 (as the same may be amended from time to time, the
'Prospectus'), and in the related Letter of Transmittal enclosed herewith, to
exchange (the 'Exchange Offer') its 12 1/4% Senior Subordinated Notes due 2005
(the 'New Notes'), which have been registered under the Securities Act of 1933,
as amended, for an equal principal amount of its outstanding 12 1/4% Senior
Subordinated Notes due 2005 (the 'Old Notes' and together with the New Notes,
the 'Notes'). As set forth in the Prospectus, the terms of the New Notes are
identical in all material respects to the terms of the Old Notes, except for
certain transfer restrictions and registration and other rights relating to the
exchange of the Old Notes for New Notes. Old Notes may only be tendered in
integral multiples of $1,000.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE 'THE EXCHANGE
OFFER -- CONDITIONS' IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal (including Guidelines of the Internal
Revenue Service for Certification of Taxpayer Identification Number on
Substitute Form W-9) for your use and for the information of your clients;
3. A form of letter which may be sent to your clients for whose
accounts you hold Notes registered in your name or in the name of your
nominee;
4. A Notice of Guaranteed Delivery;
5. A Letter of Instruction; and
6. A return envelope addressed to IBJ Schroder Bank & Trust Company,
the Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED, WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JANUARY 18, 1995, UNLESS EXTENDED. PLEASE FURNISH COPIES
OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD NOTES
REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY AS POSSIBLE.
In all cases, exchanges of Old Notes accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
certificates representing such Notes (or
<PAGE>
evidence of a book-entry delivery into the Exchange Agent's Account at the
Depository Trust Company), the Letter of Transmittal (or facsimile thereof)
properly completed and duly executed with any required signature guarantee, and
any other documents required by the Letter of Transmittal.
The Exchange Offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
The Company will not pay any fees or commissions to brokers, dealers or
other persons for soliciting exchanges of Notes pursuant to the Exchange Offer.
The Company will, however, upon request, reimburse you for customary clerical
and mailing expenses incurred by you in forwarding any of the enclosed materials
to your clients. The Company will pay or cause to be paid any transfer taxes
payable on the transfer of Notes to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or
for copies of the Prospectus and Letter of Transmittal may be directed to the
Exchange Agent at its address set forth in the Prospectus or at (212) 858-2103.
Very truly yours,
CURTICE-BURNS FOODS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY, THE EXCHANGE AGENT, OR ANY
AFFILIATE OF EITHER OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
2
<PAGE>
CURTICE-BURNS FOODS, INC.
(AS SUCCESSOR BY MERGER TO PF ACQUISITION CORP.)
OFFER TO EXCHANGE ITS
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 18, 1995, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is a Prospectus, dated December 16, 1994
(as the same may be amended from time to time, the 'Prospectus'), a Letter of
Transmittal (the 'Letter of Transmittal') and a Letter of Instruction (the
'Letter of Instruction') relating to the offer (the 'Exchange Offer') by
Curtice-Burns Foods, Inc. (the 'Company') to exchange its 12 1/4% Senior
Subordinated Notes due 2005 (the 'New Notes'), which have been registered under
the Securities Act of 1933, as amended, for an equal principal amount of its
outstanding 12 1/4% Senior Subordinated Notes due 2005 (the 'Old Notes'), upon
the terms and subject to the conditions set forth in the Prospectus and in the
Letter of Transmittal. As set forth in the Prospectus, the terms of the New
Notes are identical in all material respects to the terms of the Old Notes,
except for certain transfer restrictions and registration and other rights
relating to exchange of the Old Notes for New Notes. The Exchange Offer is
subject to certain customary conditions. See 'The Exchange Offer' in the
Prospectus. Old Notes may be tendered only in integral multiples of $1,000.
THE MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF OLD NOTES
HELD BY US FOR YOUR ACCOUNT OR BENEFIT BUT NOT REGISTERED IN YOUR NAME. AN
EXCHANGE OF ANY OLD NOTES MAY ONLY BE MADE BY US AS THE REGISTERED HOLDER AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
INFORMATIONAL PURPOSES ONLY AND MAY NOT BE USED BY YOU TO EXCHANGE NOTES HELD BY
US AND REGISTERED IN OUR NAME FOR YOUR ACCOUNT OR BENEFIT.
Accordingly, we request instructions as to whether you wish us to exchange
any or all such Old Notes held by us for your account or benefit, pursuant to
the terms and conditions set forth in the Prospectus and the Letter of
Transmittal. We urge you to read carefully the Prospectus and the Letter of
Transmittal before instructing us to exchange your Old Notes.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount of New
Notes for each $1,000 principal amount of Old Notes, of which $160,000,000
aggregate principal amount of the Old Notes was outstanding as of December 16,
1994. The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration and other rights relating to the exchange of the Old Notes for New
Notes.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE 'THE EXCHANGE
OFFER -- CONDITIONS' IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New
York City time, on January 18, 1995, unless extended.
4. The Company has agreed to pay the expenses of the Exchange Offer.
<PAGE>
5. Any transfer taxes incident to the transfer of Notes from the tendering
holder to the Company will be paid by the Company, except as otherwise provided
in the Prospectus and the Letter of Transmittal.
If you wish us to exchange any or all of your Old Notes held by us for your
account or benefit, please so instruct us by completing, executing and returning
to us the enclosed Letter of Instruction. An envelope to return your
instructions to us is enclosed. If you do not instruct us to tender your Old
Notes, they will not be tendered.
The Exchange Offer is not being made to, nor will exchanges be accepted
from or on behalf of, holders of Old Notes residing in any jurisdiction in which
the making of the Exchange Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction.
2
