<PAGE>
52
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended June 29, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period from to
Registration Statement (Form S-4) Number 33-56517
CURTICE-BURNS FOODS, INC.
(Exact name of registrant as specified in its charter)
New York 16-0845824
(State of incorporation) (IRS Employer Identification Number)
90 Linden Place, PO Box 681 Rochester, NY 14603
(Address of Principal Executive Offices) Zip Code)
Registrant's telephone number, including area code: (716) 383-1850
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of the registrant:
NONE
Number of common shares outstanding at August 9, 1996:
Common Stock: 10,000
<PAGE>
FORM 10-K ANNUAL REPORT - 1996
CURTICE-BURNS FOODS, INC.
TABLE OF CONTENTS
PART I
ITEM 1. Description of Business
General Development of Business
Narrative Description of Business
Financial Information About Industry Segments
Packaging and Distribution
Trademarks
Raw Material Sources
Environmental Matters
Seasonality of Business
Practices Concerning Working Capital
Significant Customers
Backlog of Orders
Business Subject to Government Contracts
Competitive Conditions
New Products and Research and Development
Employees
ITEM 2. Description of Properties
ITEM 3. Legal Proceedings
ITEM 4. Submission of Matters to a Vote of Security Holders
PART II
ITEM 5. Market for Registrant's Common Stock and Related Stockholder Matters
ITEM 6. Selected Financial Data
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
ITEM 8. Financial Statements and Supplementary Data
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
ITEM 13. Certain Relationships and Related Transactions
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Curtice-Burns Foods, Inc. (the "Company" or "Curtice Burns") 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, Curtice Burns manufactures cans, which are both utilized by the
Company and sold to third parties.
On November 3, 1994, Pro-Fac Cooperative, Inc. ("Pro-Fac") acquired Curtice
Burns (the "Acquisition"), and Curtice Burns became a wholly-owned subsidiary of
Pro-Fac. Pro-Fac is an agricultural cooperative corporation formed in 1960 under
New York law to process and market crops grown by its members. In connection
with the Acquisition, shareholders of Curtice Burns received $19.00 per share in
cash for their shares of common stock of Curtice Burns. The purchase price and
fees and expenses related to the Acquisition were financed with borrowings under
a new credit agreement (the "New Credit Agreement") with CoBank ACB (the
"Bank"), and the proceeds of the Company's 12.25 percent Senior Subordinated
Notes due 2005 (the "Notes"). Pro-Fac has guaranteed the obligations of the
Company under the New Credit Agreement and the Notes.
Upon consummation of the Acquisition, Pro-Fac and Curtice Burns entered into the
Pro-Fac Marketing and Facilitation Agreement (the "Pro-Fac Marketing
Agreement").
As a result of the indebtedness incurred in connection with the Acquisition,
Curtice Burns is a much more highly leveraged company, with higher interest
expenses, than prior to the Acquisition. The New Credit Agreement and the Notes
restrict the ability of Pro-Fac to amend the Pro-Fac Marketing and Facilitation
Agreement. The New Credit Agreement and the Notes also restrict the amount of
dividends and other payments that may be made by the Company to Pro-Fac.
The Pro-Fac Marketing Agreement provides for Pro-Fac to supply crops and
additional financing to Curtice Burns, for Curtice Burns to provide a market and
management services to Pro-Fac, and for Pro-Fac to share in the profits and
losses of Curtice Burns. Pro-Fac will be required to reinvest at least 70
percent of the additional patronage income in Curtice Burns. To preserve the
independence of Curtice Burns, the Pro-Fac Marketing Agreement also requires
that certain of the directors of Curtice Burns be individuals who are not
employees or shareholders of, or otherwise affiliated with, Pro-Fac or the
Company ("Disinterested Directors") and requires that certain decisions,
including the amount to be paid for crops received from Pro-Fac, be approved by
the Disinterested Directors. See further discussion of the relationship with
Pro-Fac in NOTE 2 to the "Notes to Consolidated Financial Statements."
In January of 1995, the Boards of Directors of Curtice Burns and Pro-Fac
approved appropriate amendments to the Bylaws of Curtice -Burns Foods, Inc. to
allow the Company to qualify as a cooperative under Subchapter T of the Internal
Revenue Code. A private letter ruling agreeing to this change was received from
the Internal Revenue Service in August 1995. The effective date of the change
was June 25, 1995. As a cooperative, patronage income is deductible to the
extent distributed to its members.
Accordingly, taxation on patronage income is only imposed at the patron level.
Under the Pro-Fac Marketing Agreement, Curtice Burns to manages the business and
affairs of Pro-Fac and provides all personnel and systems required for its
management. Pro-Fac will pay Curtice Burns a quarterly fee of $25,000 for these
services. See "Certain Transactions."
NARRATIVE DESCRIPTION OF BUSINESS
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 who in turn use their own brand names on the
products and (iii) "foodservice" products, which are sold to foodservice
institutions such as restaurants, caterers, bakeries, and schools. In fiscal
1996, approximately 51.3 percent of the Company's net sales were branded and the
remainder were split between private label and foodservice. The Company's
branded products are listed under the "Trademarks" section of this report. The
Company's private label products include salad dressings, salsa, fruit fillings
and toppings, canned puddings, canned and frozen vegetables, Southern frozen
specialties, and frozen and breaded products which are sold to customers such as
A&P, Brunos, Kroger, Piggly Wiggly, Safeway, SuperValu, Topco, Wegman's and
Winn-Dixie. The Company's foodservice products include salad dressings, pickles,
fruit fillings and toppings, canned and frozen vegetables, frozen Southern
specialties, frozen breaded and battered products, canned puddings, cheese
sauces and canned and frozen fruit, which are sold to customers such as Carvel,
Church's, Disney, Foodservice of America, KFC, MBM, McDonald's, PYA, and Sysco.
<PAGE>
Comstock Michigan Fruit ("CMF"): CMF, the Company's largest division,
headquartered in Rochester, New York, produces products in four principal
categories: (i) fruit fillings and toppings; (ii) aseptically-produced products;
(iii) canned and frozen fruits and vegetables; and (iv) popcorn. In fiscal 1996,
approximately one-third of CMF's net sales represented branded products,
approximately one-third represented private label products and approximately
one-third represented foodservice products. CMF markets its branded products
under the "Thank You," "Comstock," "Wilderness," "Greenwood," "Silver Floss,"
"Blue Boy," "Super Pop," and "Pops-Rite" labels.
CMF estimates the national fruit fillings and toppings market to be
approximately $225.0 million. In fiscal 1996, CMF's fruit fillings and toppings
held a national market share of approximately 52 percent in the fruit filling
segment. In addition, CMF is also the major supplier of private label fruit
fillings to retailers. CMF's fruit fillings and toppings are sold both on the
retail level and to foodservice institutions such as restaurants, caterers,
bakeries, schools. In fiscal 1996, the Company introduced the Pro-Can "Flavor
Saver" container, a plastic container which has an easy-open end and can be
resealed and stored in the refrigerator for future use. The Company believes
this container has increased CMF's market share in the fruit fillings and
toppings category. On July 21, 1995, the Company acquired Packer Foods, Inc. and
merged this operation into CMF (see further discussion in NOTE 3 of "Notes to
Consolidated Financial Statements").
The aseptic operations produce puddings, cheese sauces and dips for sale by CMF.
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 is a state-of-the-art facility. In 1996, CMF's
aseptically processed puddings accounted for approximately 66 percent of the
national foodservice market and aseptically processed cheese sauces accounted
for approximately one-quarter of the national foodservice market.
The 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, among other things, by 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.
In the first quarter of fiscal 1997, sales and administrative functions of the
Brooks Foods division were integrated into CMF.
Nalley Fine Foods: Nalley is headquartered in Tacoma, Washington. It 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 under the "Nalley" brand and other premium brand names, such as
"Bernstein's" salad dressing, "Adams" natural peanut butter, and "Farman's"
pickles. Approximately three-quarters of Nalley products are branded; however,
private label accounts for a growing percentage of Nalley business.
The Nalley products have been a vehicle for both geographic expansion and line
extension. Several of Nalley products have leading market shares in the Pacific
Northwest, such as chili, which had a market share of approximately 55 percent,
and "Nalley" and "Farman's" pickles, which together had a market share of
approximately 45 percent, for the 52-week period ended May 1996. In the Pacific
Northwest, the Company's "Nalley" and "Bernstein's" brands of salad dressings
had a combined market share of approximately 23 percent for the same period.
Nalley has taken an aggressive position in growing its market share in the salad
dressing category. It is believed by management that over the last four years,
Nalley has been the only major salad dressing company on the West Coast to grow
its share consistently. It has done this by pursuing unique line extensions,
entering fast-growing market segments with superior-quality products (e.g.,
Bernstein's fat-free dressings), and by entering new markets, such as
refrigerated dressings (e.g., Bernstein's refrigerated dressings).
In line with the growing trend toward private label, Nalley has been
aggressively pursuing this profitable business segment. Specifically, Nalley has
been executing its store label strategy on specialty Mexican products, such as
chili and salsa, salad dressings and canned soups. The private label customer
base continues to expand on a national basis and includes Winn-Dixie in the
Southeast, Wegmans in Upstate New York, Topco in the Midwest, and Ralph's,
Safeway, QFC, Albertsons and Western Family on the West Coast. Specialty
businesses, such as International, continue to grow in both branded and private
label products.
Southern Frozen Foods: Southern Frozen Foods, headquartered in Montezuma,
Georgia, is one of the nation's leading suppliers in the production and sales of
frozen, Southern-specialty products such as black-eyed peas, okra, Southern
squash, and Southern specialty side dishes that include summer squash casserole,
Southern-style creamed corn, and Southern-style black-eyed peas in a savory
sauce as well as a line of traditional vegetables such as corn, peas, squash and
green beans.
Southern's products are marketed under the brand names of "McKenzie's,"
"McKenzie's Gold King," "Chill Ripe," "Southern Farms," and "Tropic Isle."
Approximately one-half of Southern's products are sold under the aforementioned
company brand labels. This results
<PAGE>
in Southern Frozen Foods being the No. 1 brand (maintaining an approximate 26
percent share of market on Southern vegetables) in their primary geographic
selling regions, on a consistent 52-week basis. The balance of Southern's sales
are split between the private label and foodservice business segments servicing
major accounts including SuperValu, Winn Dixie, Federated Foods, and Marketing
Management (for private label), and Church's, MBM, PYA, and Foodservice of
America (for foodservice needs).
In fiscal 1995, Southern Frozen Foods' breading and packaging operations were
destroyed by fire. In fiscal 1996, Southern Frozen Foods brought its newly
rebuilt facility on-line.
Snack Foods Group: The Snack Foods Group consists of three separate
divisions: Snyder, Tim's, and Husman.
Snyder of Berlin: Snyder of Berlin, headquartered in Berlin,
Pennsylvania, produces and markets several varieties of potato chips in
distinctive silver-colored bags, as well as several varieties of
corn-based snack products in conventional packaging, primarily under
the "Snyder of Berlin" brand. Snyder products are recognized for their
unique taste and freshness among users in Mid-Atlantic states, which
are some of the country's highest per capita snack consumption markets.
Tim's Cascade Chips: Tim's Cascade Chips, located in Auburn,
Washington, produces kettle-fried potato chips, popcorn, cheese curls,
and snack mix in the Washington, Northern Idaho, Oregon, and Montana
area. Kettle frying produces a potato chip that is thicker and crisper
than other potato chips.
Husman Snack Foods: Husman Snack Foods, located in Cincinnati, Ohio,
manufactures and markets potato chips, popcorn, and cheese curls and
distributes other snack items in Cincinnati and Dayton, Ohio and areas
of Northern Kentucky. Husman creates a unique product niche by
customizing its product development and promotions to local tastes.
Multi-packs and licensing agreements with local restaurants are two
ways Husman creates its value-added proposition.
Brooks Foods: Brooks Foods, located in Mt. Summit, Indiana, markets canned beans
and tomato products under their "Brooks" brand and private label or store
brands. The majority of sales, approximately 75 percent, are sold under the
Brooks brand and consist of value-added items such as Chili Hot Beans and stewed
tomatoes.
Brooks chili beans dominate the Midwest market with an average category share of
more than 65 percent. Brooks value-added canned tomatoes with chili seasonings
continue to grow shares under the "Just for Chili." Brooks "Rich & Tangy
Ketchup" brand continues to hold a visible position in all stores in Brooks
markets.
Brooks' growth in store-brand canned bean sales has continued, attributable in
large part to efficiency improvements and cost controls. Brooks has made great
strides in becoming a low-cost producer for these items and should see further
strides in this direction over the next two years. In the large-volume category,
opportunity continues to further decrease costs.
Brooks also co-packs for other companies and further opportunities are being
explored in this area.
In the first quarter of fiscal 1997, sales and administrative functions of
Brooks Foods were integrated into CMF.
Finger Lakes Packaging Company: Finger Lakes, headquartered in Lyons, New York,
manufactures various sizes of three-piece sanitary food cans for sale to the
Company and third parties. In fiscal 1996, approximately two-thirds of Finger
Lakes sales were to other divisions of the Company and one-third were to other
customers.
Finger Lakes' three-part, metal, sanitary cans are used in the retail,
foodservice and institutional markets. These cans are recyclable and provide
economical containers for the Company's products based on volume run and
customer base.
As previously announced, the Company is investigating the possible sale of this
subsidiary.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The business of the Company is principally conducted in one industry segment,
the processing and sale of various food products. The table set forth below
shows certain financial information relating to that industry segment for each
of the Company's last three fiscal
<PAGE>
years. The financial statements for the fiscal years ended June 29, 1996, June
24, 1995, and June 25, 1994, which are included in this report, reflect the
information set forth in the table. The fiscal 1995 amounts are the total of
Predecessor and Successor entities.
<TABLE>
(Dollars in Millions)
<CAPTION>
Fiscal Years
June 29, June 24, June 25,
1996* 1995* 1994*
<S> <C> <C> <C>
Net sales $739.1 $748.5 $829.1
Net (loss)/income $(11.9) $ 4.0 $ 10.1
Total assets $634.3 $672.3 $446.9
<FN>
* Includes restructuring charges, net (loss)/gain from division disposals of
$(5.9) million, $(8.4) million and $7.8 million for fiscal 1996, 1995, 1994
, respectively and change of control costs of $2.2 million and $3.5 million
in fiscal 1995 and 1994, respectively, and a gain on assets net of
additional costs incurred as a result of a fire of $4.1 million in fiscal
1995. See NOTES 2 and 3 to "Notes to Consolidated Financial Statements."
</FN>
</TABLE>
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 divisions are sold through food brokers which sell primarily to
supermarket chains and various institutional feeders. Nalley 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 products
are marketed through distributors (some of which are owned and operated by the
Company) who sell directly to retail outlets in the Mid-Atlantic and Pacific
Northwest.
Customer brand operations encompass the sale of products under private labels to
chain stores and under the controlled labels of buying groups. 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:
Product Brand Name
Chilies, stews and soups Brooks, Mariners Cove, Nalley, Riviera
Fruits and vegetables Blue Boy, Brooks, Chill-Ripe, Gold King,
Gracias, Greenwood, Hoosier Sweets, Just
for Chili, McKenzie's, McKenzie's Gold
King, 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 Pops-Rite, Super Pop
Puddings Gracias, Thank You
Salad dressings Bernstein's, Bernstein's Light Fantastic,
Nalley
<PAGE>
Product Brand Name
Sauerkraut Silver Floss, Farman's
Snack food Cheese Pleezers, Husman, La Restaurante,
Snyder of Berlin, Thunder Crunch, Tim's
Cascade Chips, Naturally Good, Matthews
Syrup Lumberjack
RAW MATERIAL SOURCES
In fiscal 1996, the Company acquired approximately 72 percent of its raw
agricultural products from Pro-Fac. The Company also purchased 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.
The vegetable portion of the 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. This results in depressed selling prices and reduced profitability on
the inventory produced from that year's crops. Excessive rain or drought
conditions can produce low crop yields and a shortage situation. This typically
results in higher selling prices and increased profitability. While the national
supply situation controls the pricing, the supply can differ regionally because
of variations in weather.
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.
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
waste water 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.
The Company is cooperating with environmental authorities in remedying 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 that is not significant.
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 1996, total capital expenditures of Pro-Fac and the Company were $19.5
million of which approximately $2.0 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, will be approximately $1.7 million for the 1997 fiscal year.
However, there can be no assurance that expenditures will not be higher.
<PAGE>
SEASONALITY OF BUSINESS
From the point of view of sales, the business of the Company is not highly
seasonal, since the demand for its products is fairly constant throughout the
year. Exceptions to this general rule include some products that have higher
sales volume in the cool weather months (such as canned fruits and vegetables,
chili, and fruit fillings and toppings), and others that have higher sales
volume in the warm weather months (such as potato chips and condiments). Since
many of the raw materials processed by the Company are agricultural crops,
production of these products is predominantly seasonal, occurring during and
immediately following the harvest seasons of such crops.
PRACTICES CONCERNING WORKING CAPITAL
The Company must maintain substantial inventories throughout the year of those
finished products produced from seasonal raw materials. These inventories are
generally financed through seasonal borrowings.
A short-term line of credit is extended to the Company under agreements with
CoBank, ACB. This line of credit is used primarily for seasonal borrowing, the
amount of which fluctuates during the year. The line of credit is subject to
annual renewal.
Both the maintenance of substantial inventories and the practice of seasonal
borrowing are common to the food processing industry.
SIGNIFICANT CUSTOMERS
The Company's one principal industry segment is not dependent upon the business
of a single customer or a few customers. The Company does not have any customers
to which sales are made in an amount which equals 10 percent or more of the
Company's net sales. The loss of even its biggest customer would not have a
materially adverse effect on the Company.
BACKLOG OF ORDERS
Backlog of orders has not historically been significant in the business of the
Company. Orders are filled shortly after receipt from inventories of packaged
and processed foods.
BUSINESS SUBJECT TO GOVERNMENTAL CONTRACTS
No material portion of the business of the Company is subject to renegotiation
of contracts with, or termination by, any governmental agency.
COMPETITIVE CONDITIONS
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, and 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. In this way, the problems inherent in attempting to supply markets
remote from its principal areas of operation are minimized, and the marketing
area is commensurate with the production and storage facilities.
Quality of product and uniformity of quality are also important methods of
competition. The Company's relationship with Pro-Fac gives the Company local
sources of supply, thus 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 mechanized growing and harvesting techniques. This factor is also an
advantage in producing uniform, high-quality food products.
The Company's 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.
<PAGE>
Although the relative importance of the above factors may vary 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.
Profit margins for canned and frozen fruits and vegetables are subject to
industry supply and demand fluctuations, attributable to changes in growing
conditions, acreage planted, inventory carryover, and other factors. The Company
has endeavored to protect against changing growing conditions through
geographical expansion of its sources of supply. The Company has emphasized the
merchandising of its own brands and expanded service and product development for
its high volume private label and foodservice customers. The percentage of sales
under brand names owned and promoted by the Company (including franchise brands)
amount to approximately 51.3 percent; sales to the foodservice industry
(restaurants and institutional customers) represent approximately 24.0 percent;
private label sales currently represent approximately 19.9 percent; and sales to
other manufacturers are approximately 4.8 percent of total sales.
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, 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.
NEW PRODUCTS AND RESEARCH AND DEVELOPMENT
The amount expensed during the last three fiscal years on Company-sponsored and
customer-sponsored research activities relating to the development of new
products or the improvement of existing products was not material, and the
number of employees engaged full-time in such research activities is also not
material. While the Company operates test kitchens and pilot plants for the
development of new products, the emphasis generally has been on the development
of related products or modifications of existing products for the Company's
brands and customized products for the Company's private label and foodservice
businesses. No new products which required the investment of a material amount
of assets have been publicly announced.
EMPLOYEES
As of June 29, 1996, the Company had 3,823 full-time employees, of whom 2,520
were engaged in production and the balance in management, sales and
administration. As of that date, the Company also employed approximately 626
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.
ITEM 2. DESCRIPTION OF PROPERTIES
All plants, warehouses, office space and other facilities used by Curtice Burns
in its business are either owned by Curtice Burns or one of its subsidiaries or
leased from third parties. All of the properties owned by Curtice Burns are
subject to mortgages in favor of the Bank. In general, each division occupies a
large facility in which its executive offices, a processing plant and warehouse
space are located. Some divisions have additional processing plants located in
rural areas that are convenient for the delivery of crops from Pro-Fac members
and/or additional warehouse locations dispersed to facilitate the distribution
of finished products. Curtice Burns believes that its facilities are in good
condition and suitable for the operations of the Company.
Five of the properties are held for sale. These properties are located in Wall
Lake, Iowa; Clifton, New Jersey; Alton, New York; South Dayton, New York; and
Rushville, New York.
The following table describes all facilities leased or owned by the Company
(other than the five properties held for sale 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.
<PAGE>
<TABLE>
FACILITIES UTILIZED BY THE COMPANY
<CAPTION>
Type of Property (By Division) Location Square Feet
COMSTOCK MICHIGAN FRUIT:
<S> <C> <C>
Office building, manufacturing plant and warehouse* Benton Harbor, MI 239,252
Distribution center Coloma, MI 400,000
Manufacturing plant and warehouse Fennville, MI 350,000
Canning plant and warehouse Lawton, MI 142,000
Warehouse Sodus, MI 243,138
Warehouse and office; public storage facility1 Vineland, NJ 191,710
Warehouse Alton, NY 60,060
Freezing plant; warehouse; office and dry storage Barker, NY 123,600
Freezing plant Bergen, NY 138,554
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 263,410
Canning plant and warehouse Red Creek, NY 153,076
Cutting, curing and canning plant Shortsville, NY 111,946
Cutting and curing plant Waterport, NY 21,626
Manufacturing plant Ridgway, IL 50,000
Receiving plant and warehouse North Bend, NE 50,000
NALLEY FINE FOODS:
Office building, warehouse and tank farm Enumclaw, WA 87,313
Office building, manufacturing plant and warehouse Tacoma, WA 438,000
Parking lot and yards1 Tacoma, WA 162,570
Warehouses1 Tacoma, WA 254,000
Receiving and grading station1 Cornelius, OR 11,700
Receiving and grading station1 Mount Vernon, WA 30,206
SOUTHERN FROZEN FOODS:
Office, freezing plant, cold storage and repackaging facility Montezuma, GA 563,442
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 - Tim's1 Auburn, WA 34,000
Plant, warehouse, and distribution center - Matthews1 Auburn, WA 37,442
SNACK FOODS GROUP (continued):
Office, plant and warehouse Cincinnati, OH 113,576
Distribution Center Elwood City, PA 8,000
Distribution Center Monessen, PA 10,000
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 office1 (Includes office space for CMF as well as
Corporate Conference Center) Rochester, NY 62,500
<FN>
*Also includes can manufacturing equipment operated by Finger Lakes Packaging.
1Leased from third parties, although certain related equipment is owned by the
Company.
</FN>
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
All of the capital stock of the Company is owned by Pro-Fac Cooperative, Inc.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
Curtice-Burns Foods, Inc.
FIVE YEAR SELECTED FINANCIAL DATA
(Dollars in Thousands)
<CAPTION>
Fiscal Year Ended June
1996 1995* 1994 1993 1992
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net sales $739,094 $748,525 $ 829,116 $ 878,627 $ 896,931
Cost of sales 562,926 530,139 592,621 632,663 652,347
-------- -------- --------- --------- ---------
Gross profit 176,168 218,386 236,495 245,964 244,584
Selling, administrative, and general expenses (156,067) (159,937) (186,934) (207,119) (201,327)
Restructuring (5,871) (8,415) 7,768 (61,037) 0
Change in control expenses 0 (2,150) (3,500) 0 0
Gain on assets net of additional costs incurred as a
result of the fire 0 4,154 0 0 0
-------- -------- --------- ---------
Operating income/(loss) before dividing with Pro-Fac 14,230 52,038 53,829 (22,192) 43,257
Interest expense (41,998) (32,414) (18,205) (19,550) (22,835)
-------- -------- --------- --------- ---------
Pretax (loss)/earnings before dividing with Pro-Fac (27,768) 19,624 35,624 (41,742) 20,422
Pro-Fac share of loss/(earnings) 9,037 (9,616) (16,849) 21,800 (9,505)
-------- -------- --------- --------- ---------
(Loss)/income before taxes (18,731) 10,008 18,775 (19,942) 10,917
Benefit/(provision) for taxes 6,853 (6,026) (8,665) (3,895) (4,769)
-------- -------- --------- -------- ---------
Net (loss)/income $(11,878) $ 3,982 $ 10,110 $(23,837) $ 6,148
======== ======== ========= ======== =========
Balance Sheet Data:
Working capital $107,875 $144,171 $ 104,049 $ 100,422 $ 101,706
Ratio of current assets to current liabilities 2.0:1 2.3:1 1.7:1 1.6:1 1.6:1
Total assets $634,250 $672,284 $ 446,938 $ 493,729 $ 529,739
Long-term debt and senior-subordinated notes (excludes
current portion) $309,683 $343,665 $ 79,061 $ 85,037 $ 70,345
Long-term obligations under capital leases (excludes
current portion) $ 1,125 $ 1,620 $ 124,973 $ 154,102 $ 167,291
Ratio of debt to equity 2.3:1 2.5:1 2.9:1 3.7:1 2.6:1
Other Statistics:
Average number of employees:
Regular 3,886 3,838 5,169 5,325 5,573
Seasonal 1,478 1,540 1,596 1,347 1,808
<FN>
* Represents the results of operations for both the Predecessor and Successor
entities for fiscal 1995.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion is to outline the most significant reasons for
changes in net sales, expenses and earnings from fiscal 1994 through 1996. The
following comparisons to the prior year periods present the results of the
Company during the period prior to its acquisition by Pro-Fac, ("Predecessor
entity") as well as the period subsequent to its acquisition, ("Successor
entity"). The financial statements of the Predecessor and Successor entities are
not comparable in certain respects because of differences between the cost bases
of the assets held by the Predecessor entity compared to that of the Successor
entity as well as the effect on the Successor entity's operations for
adjustments to depreciation, and interest expense.
The following tables illustrate the Company's results of operations by business
for the fiscal years ended June 29, 1996, June 24, 1995, and June 25, 1994, and
the Company's total assets by business as at June 29, 1996 and June 24, 1995.
<TABLE>
Net Sales
(Dollars in Millions)
<CAPTION>
Fiscal Years Ended
6/29/96 6/24/95 6/25/94
% of % of % of
$ Total $ Total $ Total
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit ("CMF") 336.2 45.5 332.1 44.4 333.4 40.2
Nalley Fine Foods 189.2 25.6 181.2 24.2 171.8 20.7
Southern Frozen Foods 98.7 13.3 96.6 12.9 94.3 11.4
Snack Foods Group 63.7 8.6 60.5 8.1 61.2 7.4
Brooks Foods 33.0 4.5 30.2 4.0 30.0 3.6
----- ----- ----- ----- ----- -----
Subtotal ongoing operations 720.8 97.5 700.6 93.6 690.7 83.3
Businesses sold or to be sold1 18.3 2.5 47.9 6.4 138.4 16.7
----- ----- ----- ----- ----- -----
Total 739.1 100.0 748.5 100.0 829.1 100.0
===== ===== ===== ===== ===== =====
<FN>
1 The Company sold the oats portion of the National Oats business, the Hiland
potato chips business, the meat snacks business, the Nalley US Chips and
Snacks business, Nalley Canada Ltd., and announced the intent to sell Finger
Lakes Packaging. See NOTE 3.
</FN>
</TABLE>
<TABLE>
Operating Income1
(Dollars in Millions)
<CAPTION>
Fiscal Years Ended
6/29/96 6/24/95 6/25/94
% of % of % of
$ Total $ Total $ Total
----- ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
CMF 17.9 126.0 31.9 61.3 29.6 54.9
Nalley Fine Foods (2.9) (20.4) 18.7 36.0 16.5 30.6
Southern Frozen Foods 2.1 14.8 9.2 17.7 10.2 18.9
Snack Foods Group 4.1 28.9 3.6 6.9 2.7 5.0
Brooks Foods 2.7 19.0 2.8 5.4 3.1 5.8
Corporate overhead (7.2) (50.7) (10.3) (19.8) (14.9) (27.6)
---- ----- ----- ----- ----- -----
Subtotal ongoing operations 16.7 117.6 55.9 107.5 47.2 87.6
Businesses sold or to be sold and other non-recurring1 (2.5) (17.6) (3.9) (7.5) 6.7 12.4
---- ----- ----- ----- ----- -----
Total 14.2 100.0 52.0 100.0 53.9 100.0
==== ===== ===== ===== ===== =====
<FN>
1 Includes restructuring (loss)/gain in fiscal 1996, 1995 and 1994, change in
control expense in fiscal 1995 and 1994, and gain on assets net of additional
costs incurred as a result of a fire claim recorded in fiscal 1995. The
Company sold the oats portion of the National Oats business, the Hiland
potato chips business, the meat snacks business, the Nalley US Chips and
Snacks business, Nalley Canada Ltd., and announced the intent to sell Finger
Lakes Packaging. See NOTE 3.
</FN>
</TABLE>
<PAGE>
<TABLE>
EBITDA
(Dollars in Millions)
<CAPTION>
Fiscal Years Ended
6/29/96 6/24/95 6/25/94
% of % of % of
$ Total $ Total $ Total
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
CMF 32.3 73.9 42.2 55.8 41.1 51.6
Nalley Fine Foods 2.3 5.3 22.9 30.3 19.5 24.5
Southern Frozen Foods 7.4 16.9 13.1 17.3 12.7 16.0
Snack Foods Group 6.0 13.7 5.4 7.1 4.7 5.9
Brooks Foods 3.6 8.2 3.5 4.6 3.7 4.6
Corporate (7.3) (16.6) (10.6) (13.9) (12.4) (15.5)
----- ----- ----- ------ ----- -----
Subtotal ongoing operations 44.3 101.4 76.5 101.2 69.3 87.1
Businesses sold or to be sold and other non recurring1 (0.6) (1.4) (0.9) (1.2) 10.3 12.9
----- ----- ----- ------- ----- -----
Total 43.7 100.0 75.6 100.0 79.6 100.0
==== ===== ===== ===== ===== =====
<FN>
1 Includes restructuring (loss)/gain in fiscal 1996, 1995 and 1994, change in
control expense in fiscal 1995 and 1994, and gain on assets net of additional
costs incurred as a result of a fire claim recorded in fiscal 1995. The
Company sold the oats portion of the National Oats business, the Hiland
potato chips business, the meat snacks business, the Nalley US Chips and
Snacks business, Nalley Canada Ltd., and announced the intent to sell Finger
Lakes Packaging. See NOTE 3. -
</FN>
</TABLE>
<TABLE>
Total Assets
(Dollars in Millions)
<CAPTION>
6/29/96 6/24/95
% of % of
$ Total $ Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
CMF 261.2 41.2 267.9 39.9
Nalley Fine Foods 134.1 21.1 158.9 23.6
Southern Frozen Foods 86.9 13.7 97.9 14.6
Snack Foods Group 27.8 4.4 28.4 4.2
Brooks Foods 20.8 3.3 20.9 3.1
Corporate 71.6 11.3 38.4 5.7
----- ----- ----- -------
Subtotal ongoing operations 602.4 95.0 612.4 91.1
Businesses sold or to be sold1 31.9 5.0 59.9 8.9
----- ----- ----- -------
Total 634.3 100.0 672.3 100.0
===== ===== ===== =====
<FN>
1 The Company sold the oats portion of the National Oats business, the Hiland
potato chips business, the meat snacks business, the Nalley US Chips and
Snacks business, Nalley Canada Ltd., and announced the intent to sell Finger
Lakes Packaging. See NOTE 3.
</FN>
</TABLE>
<PAGE>
The following table illustrates the Company's income statement data and the
percentage of net sales represented by these items for the fiscal years ended
June 29, 1996, June 24, 1995, and June 25, 1994.
<TABLE>
Consolidated Statement of Operations
(Dollars in Millions)
<CAPTION>
Fiscal Years Ended
6/29/96 6/24/95 6/25/94
% of % of % of
$ Sales $ Sales $ Sales
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales 739.1 100.0 748.5 100.0 829.1 100.0
Cost of sales 562.9 76.2 530.1 70.8 592.6 71.5
------ ----- ------ ------ ------ -----
Gross profit 176.2 23.8 218.4 29.2 236.5 28.5
Selling, administrative and
general expenses (156.1) (21.1) (159.9) (21.3) (186.9) (22.5)
Restructuring (5.9) (0.8) (8.4) (1.1) 7.8 0.9
Change in control expenses 0.0 0.0 (2.2) (0.3) (3.5) (0.4)
Gain on assets net of additional costs
incurred as result of a fire claim 0.0 0.0 4.1 0.5 0.0 0.0
------ ----- ------ ------- ------- -----
Operating income before dividing
with Pro-Fac 14.2 1.9 52.0 6.9 53.9 6.5
Interest expense (42.0) (5.7) (32.4) (4.3) (18.2) (2.2)
------ ----- ------ ------- ------- -----
Pretax (loss)/earnings before dividing
with Pro-Fac (27.8) (3.8) 19.6 2.6 35.7 4.3
Pro-Fac share of loss/(earnings) 9.0 1.2 (9.6) (1.3) (16.9) (2.0)
------ ----- ------ ------- ------- -----
(Loss)/income before taxes (18.8) (2.6) 10.0 1.3 18.8 2.3
Benefit/(provision) for taxes 6.9 1.0 (6.0) (0.8) (8.7) (1.1)
------ ----- ------ ------- -------- -----
Net (loss)/income (11.9) (1.6) 4.0 0.5 10.1 1.2
====== ===== ====== ======= ======= =====
</TABLE>
CHANGES FROM FISCAL 1995 TO FISCAL 1996
In conjunction with the Acquisition, net assets were adjusted to fair market
value and additional debt was incurred. Accordingly, depreciation and interest
expense have increased, making year-to-year comparisons difficult to analyze.
Nonetheless, earnings before interest, depreciation and amortization (EBITDA)
for ongoing businesses can be compared. EBITDA does not represent information
prepared in accordance with generally accepted accounting principles, nor is
such information considered superior to information presented in accordance with
generally accepted accounting principles.
EBITDA from ongoing businesses declined $32.2 million from $76.5 million in the
prior year to $44.3 million in fiscal 1996.
Depressed vegetable pricing has significantly impacted the Company's financial
results as well as much of the industry. The industry as a whole expected a
slight increase in pricing which has not happened. The Company's vegetable
category, which includes significant segments of both the CMF and Southern
Frozen Foods divisions, experienced a 71.2 percent reduction in EBITDA compared
to the prior year. Improvements in earnings of other product lines at the CMF
division have offset part of the vegetable earnings reduction.
Other issues impacting year-to-date results include the costly start up of the
Nalley dressing plant, other manufacturing variances and increased promotion
expenses at Nalley. Nalley EBITDA is $20.6 million lower versus the prior year.
Several steps have been taken to address these problems, including senior
management changes at the division and restructuring initiatives discussed
below.
A major inventory reduction program across all divisions was implemented in
fiscal 1996. Long-term debt was reduced $37.5 million more in this year than
during the same period last year due to significant cash flow generated from
these programs and from additional payments to the Company by Pro-Fac. (See
NOTES 2 and 5.)
During the fourth quarter of fiscal 1996, the Company initiated a corporate-wide
restructuring program. The overall objectives of the plan are to reduce expense,
improve productivity, and streamline operations. Total fiscal 1996 restructuring
charge amounted to $5.9 million, which includes a fourth quarter charge of
approximately $4.0 million (which will improve fiscal 1997 earnings by
approximately $3.0 million), primarily comprised of employee termination
benefits, and approximately $1.9 million for strategic consulting was incurred
<PAGE>
throughout the year. Efforts will focus on the consolidation of operations and
the elimination of approximately 8 percent of the work force. Reductions in
personnel will include operational and administrative positions. The majority of
such termination benefits will be liquidated with proceeds from operations
during the first six months of fiscal 1997. Work-force reductions have been
implemented at CMF, Nalley Fine Foods, and Southern Frozen Foods. In addition,
the sales and administrative functions of the Brooks Foods division were
integrated into the CMF division in the first quarter of fiscal 1997. Management
is continuing to evaluate whether further efforts to consolidate operations will
be required in the future.
Net Sales: The Company's net sales in fiscal 1996 of $739.1 million decreased
$9.4 million or 1.3 percent from $748.5 million in fiscal 1995. The net sales
attributable to businesses sold or to be sold discussed in NOTE 3 were $18.3
million in fiscal 1996 compared to $47.9 million in fiscal 1995. The Company's
net sales from ongoing operations excluding businesses sold or to be sold were
$720.8 million in fiscal 1996, an increase of $20.2 million or 2.9 percent from
$700.6 million in fiscal 1995.
Gross Profit: Gross profit of $176.2 million in fiscal 1996 decreased $42.2
million or 19.3 percent from $218.4 million in fiscal 1995. Of this net
decrease, a $7.4 million reduction was attributable to businesses sold or to be
sold, and a decrease of $34.8 million was attributable to decreased gross profit
at the Company's ongoing operations. This decrease of $34.8 million was the
result of variations in volume, selling prices, costs, product mix, and
increased depreciation due to the Acquisition. Division results are as follows:
<TABLE>
(In Millions)
<CAPTION>
<S> <C>
CMF $(18.3)
Southern Frozen Foods (5.9)
Nalley (13.5)
All others 2.9
------
$(34.8)
</TABLE>
The decreased gross profit at the Company's CMF and Southern Frozen Foods
operations primarily relates to depressed vegetable pricing.
The decreased gross profit at the Company's Nalley operation relates to higher
costs on all the product lines, but particularly in salad dressings due to plant
start-up activities.
Restructuring: Restructuring expenses amounted to $5.9 million in fiscal 1996 as
discussed above. Restructuring expenses in fiscal 1995 of $8.4 million reflect
the impact of the sale of certain assets of the Nalley US Chips and Snacks
business and other expenses relating to the disposal of this operation.
Change in Control Expenses: Change in control expenses recorded in fiscal 1995,
amounting to $2.2 million, reflect non-deductible expenses relating to the sale
of the Company which include legal, accounting, investment banking and other
expenses.
Gain on Assets Resulting From Fire Claim: The gain on assets resulting from the
fire claim recorded in fiscal 1995 amounted to $4.1 million. This represents the
replacement value in excess of the depreciated book value of the building and
equipment destroyed by fire on July 7, 1994 at the Southern Frozen Foods
division, net of additional costs incurred.
Selling, Administrative and General Expenses: Selling, administrative and
general expenses in fiscal 1996 of $156.1 million decreased $3.8 million or 2.4
percent from $159.9 million in fiscal 1995. This net decrease of $3.8 million
includes:
<TABLE>
(In Millions)
<CAPTION>
Businesses
Sold or
to be Sold Ongoing Total
<S> <C> <C> <C>
Change in trade promotions, advertising and selling costs $(7.1) $(0.5) $(7.6)
Change in other administrative expenses (0.4) 4.2 3.8
----- ----- -----
$(7.5) $ 3.7 $(3.8)
===== ===== =====
</TABLE>
The $0.5 million decrease in trade promotions, advertising and selling costs at
the Company's ongoing operations resulted from increased costs at Nalley of $3.7
million (primarily in the canned and dressing product lines), increased costs of
$1.0 million at the
<PAGE>
Snack Group, increased costs of $0.5 million at Southern Frozen Foods, and
increased costs at Brooks of $0.2 million, offset by decreases at CMF of $5.9
million primarily in the filling and topping product lines.
The $4.2 million increase in other administrative costs attributable to the
Company's ongoing operations was primarily related to increased expense at
Nalley. The increased expense at Nalley included administrative expenses which
previously had been allocated to Nalley Chips and Snacks and Nalley Canada Ltd.
The disposal of these businesses did not eliminate centralized functions leaving
costs which will be reduced over a period of time.
Interest Expense: Interest expense in fiscal 1996 of $42.0 million increased
$9.6 million or 29.6 percent from $32.4. million in fiscal 1995. This increase
was primarily attributable to the increased borrowing and increased rates
related to the acquisition of the Company by Pro-Fac which was reflected for the
full year in fiscal 1996 and for only a partial year in fiscal 1995.
Benefit/(Provision) for Taxes: The benefit for taxes in fiscal 1996 of $6.9
million compared to a provision of $6.0 million in fiscal 1995. See NOTE 6 of
"Notes to Consolidated Financial Statements."
CHANGES FROM FISCAL 1994 TO FISCAL 1995
General: Operating earnings for fiscal 1995 reflect changes in many product
lines. The chips and snacks segment posted gains, while the popcorn earnings at
CMF declined. Vegetable prices decreased during the year because there was an
ample national supply in the fall of 1994, but vegetable earnings for the year
were still ahead of fiscal 1994. Net income of $4.0 million for fiscal 1995
compared to $10.1 million a year ago. The decrease in net income is primarily
due to increased interest expense caused by the revised capital structure of the
Company and the gain on the sale of National Oats included in the fiscal 1994
results.
Net Sales: The Company's net sales in fiscal 1995 of $748.5 million decreased
$80.6 million or 9.7 percent from $829.1 million in fiscal 1994. The net sales
attributable to businesses sold or to be sold in connection with the Company's
restructuring program discussed in NOTE 3 were $32.5 million in fiscal 1995 and
$122.9 million in fiscal 1994. The Company's net sales from ongoing operations,
excluding businesses sold or to be sold, were $716.0 million in fiscal 1995, an
increase of $9.8 million or 1.4 percent from $706.2 million in fiscal 1994. This
net sales variance of $9.8 million for ongoing operations is primarily comprised
of a $9.4 million increase at Nalley with minor variations at other divisions.
An increase of $5.4 million in sales of pickles and relishes and an increase of
$2.7 million in dressing sales were the primary reasons for Nalley increase.
Gross Profit: Gross profit of $218.4 million in fiscal 1995 decreased $18.1
million or 7.7 percent from $236.5 million in fiscal 1994. Of this net decrease,
a $23.9 million reduction was attributable to businesses sold or to be sold, and
an increase of $5.8 million was attributable to increased gross profit at the
Company's ongoing operations. This increase of $5.8 million was the result of
variations in volume, selling prices, costs, product mix, and increased
depreciation due to the acquisition. The increase in gross profit for ongoing
operations is comprised of increases and decreases as follow:
<TABLE>
<CAPTION>
Gross
Profit
Variance
<S> <C>
CMF $(0.8)
Nalley Fine Foods 5.1
Southern Frozen Foods (0.9)
Snack Foods Group 0.5
All Other 1.9
-----
$ 5.8
</TABLE>
Nalley Fine Foods' increased gross profit primarily relates to improved margins
on canned entrees and soups ($3.4 million) and improved margins on dressings
($1.2 million).
Restructuring: Restructuring expenses resulted in a charge in fiscal 1995 of
$8.4 million to reflect the impact of the sale of certain assets of the Nalley
US Chips and Snack business and other expenses relating to the disposal of this
operation. Included in fiscal 1994 was a $7.8 million net gain from
restructuring, for a net increase in this expense from year to year of $16.2
million, all of which was incurred by the Predecessor entity. See NOTE 3.
Change in Control Expenses: Change in control expenses recorded in fiscal 1995
and fiscal 1994, amounting to $2.2 million and $3.5 million, respectively,
reflect non-deductible expenses relating to the sale of the Company covering
1
<PAGE>
legal, accounting, investment banking, and other expenses relative to the change
in control issue. All of these expenses were incurred by the Predecessor entity.
See NOTE 2 - "Change in Control of the Company."
Gain on Assets Net of Additional Costs Incurred as a Result of Fire Claim at
Southern Frozen Foods: The gain on assets net of additional costs incurred as a
result of a fire claim recorded in fiscal 1995 amounted to $4.1 million.
Selling, Administrative, and General Expenses: Selling, administrative, and
general expenses in fiscal 1995 of $159.9 million decreased $27.0 million or
14.4 percent from $186.9 million in fiscal 1994. This net decrease of $27.0
million includes primarily:
<TABLE>
(In Millions)
<CAPTION>
Businesses
Sold or
to be Sold Ongoing Total
<S> <C> <C> <C>
Change in trade promotions $ (8.1) $(2.8) $(10.9)
Change in advertising and selling costs (13.8) 2.0 (11.8)
All other (5.6) 1.3 (4.3)
------ ----- ------
Change in selling, administrative,
and general expenses $(27.5) $ 0.5 $(27.0)
====== ===== ======
</TABLE>
The $2.8 million decrease in trade promotions at the Company's ongoing
operations is primarily comprised of a decrease at CMF of $4.0 million (which
primarily relates to reduced spending on the fruit filling and topping category,
with minor increases in other categories) and increased trade promotions at
Nalley Fine Foods of $0.8 million (primarily related to increased spending on
canned entrees and soups and salad dressings, offsetting decreased spending on
other product lines).
The $2.0 million increase in advertising and selling costs at the Company's
ongoing operations represents increased costs at CMF ($1.5 million) and Nalley
Fine Foods ($1.6 million), with minor offsetting variations at other operations.
The increase at CMF primarily relates to fruit fillings and toppings, with minor
variations in other product lines. The increase at Nalley Fine Foods primarily
relates to costs associated with canned entrees and soups and salad dressings,
with minor variations in other product lines.
The $1.3 million increase in other administrative expenses primarily relates to
increased amortization of intangibles resulting from the acquisition and other
minor offsetting variances.
Interest Expense: Interest expense in fiscal 1995 of $32.4 million increased
$14.2 million or 78.0 percent from $18.2 million in fiscal 1994. This increase
was primarily attributable to the increased borrowing and increased interest
rates related to the acquisition of the Company by Pro-Fac.
Provision for Taxes: The provision for taxes in fiscal 1995 of $6.0 million
decreased $2.7 million or 31.0 percent from $8.7 million in fiscal 1994. The
effective tax rate in fiscal 1995 was 60.0 percent compared to 46.2 percent in
fiscal 1994. The non-deductibility of the amortization of excess purchase cost
over net assets acquired was primarily responsible for the significantly
increased rate.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion highlights the major variances in the "Consolidated
Statement of Changes in Cash Flows" for fiscal 1996 compared to fiscal 1995. The
fiscal 1995 amounts reflect the total of the successor and predecessor entities.
Net cash provided by operating activities increased $29.6 million or 132.1
percent from $22.4 million in fiscal 1995 to $52.0 million in fiscal 1996
despite a $15.9 million decrease in net income. The primary increase in net cash
provided by operations was due to a $33.3 million reduction in inventories as a
result of an inventory reduction program initiated in fiscal 1996; a $10.1
million increase in cash provided by accounts receivable, primarily the result
of proceeds from insurance claims; and a $13.2 million change in amounts
received from Pro-Fac due to the receipt by Pro-Fac of a tax refund and the
establishment of a seasonal borrowing facility which eliminated Pro-Fac
borrowings from the Company. The $6.2 million change in depreciation and
amortization from the prior year is primarily the result of the full year effect
in 1996 of the revaluation of assets in conjunction with the acquisition of the
Company by Pro-Fac versus the partial year effect in fiscal 1995.
Net cash used by investing activities amounted to $18.8 million in fiscal 1996
compared to $32.6 million in fiscal 1995. In fiscal 1996, $18.0 million was used
for the purchase of property, plant, and equipment compared to $32.6 million in
fiscal 1995. The fiscal
<PAGE>
1995 amount includes $12.6 million relating to the Southern Frozen Foods' fire
which was reimbursed by insurance proceeds. Also in fiscal 1996, $5.8 million
was used for the purchase of Packer Foods and Matthews Candy Co., and disposals
provided $5.0 million. The sale of Nalley Ltd. accounted for the majority of the
proceeds from disposals.
Net cash used in financing activities amounted to $28.5 million in fiscal 1996
compared to $11.4 million provided in fiscal 1995. Fiscal 1995 activity was
primarily related to financing resulting from the acquisition of the Company by
Pro-Fac. Long-term debt payments amounted to $43.1 million in fiscal 1996, and
long-term debt proceeds (to finance the Packer acquisition) amounted to $5.4
million. Included in the long-term debt payments was $18.0 million received from
Pro-Fac as a result of their obtaining seasonal financing.
Borrowings: Under the New Credit Agreement, as amended, Curtice Burns is able to
borrow up to $84.0 million for seasonal working capital purposes under the
Seasonal Facility, subject to a borrowing base limitation, and obtain up to
$14.2 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) the total
line and (ii) the sum of 60 percent of eligible accounts receivable plus 50
percent of eligible inventory.
On June 28, 1996, Pro-Fac established a seasonal line of credit with the Bank.
In doing so, the Bank limited the Company's availability under the seasonal line
of credit to $84.0 million less outstanding borrowings on Pro-Fac's line of
credit. Pro-Fac's outstanding borrowings under their seasonal line were $18.0
million at June 28, 1996.
As of June 29, 1996, (i) cash borrowings outstanding under the Seasonal Facility
were zero and (ii) additional availability under the Seasonal Facility, after
taking into account the amount of the borrowing base and Pro-Fac's outstanding
borrowings, was $66.0 million. In addition to its seasonal financing, as of June
29, 1996, the Company had $27.8 million available for long-term borrowings under
the Term Loan Facility and short-term investments of $5.3 million which was
applied to long-term debt after fiscal year end. Because of the additional debt
as a result of the acquisition of the Company by Pro-Fac, the cash flow of the
Company is the single, most important measure of performance. 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.
The New Credit Agreement and Indenture requires that Pro-Fac and Curtice Burns
meet certain financial tests and ratios and comply with certain other
restrictions and limitations. As of June 29, 1996, the Company is in compliance
with, or has obtained waivers for, all such covenants, restrictions and
limitations.
Short- and Long-Term Trends: The vegetable portion of the 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. This results in depressed selling
prices and reduced profitability on the inventory produced from that year's
crops. Excessive rain or drought conditions can produce low crop yields and a
shortage situation. This typically results in higher selling prices and
increased profitability. While the national supply situation controls the
pricing, the supply can differ regionally because of variations in weather.
As a result of the shortage situation of the national supply due to the low
yields from the 1993 crop year, many vegetable producers intentionally increased
planned production for the 1994 crop year attempting to return their own
inventories to normal. Favorable weather conditions in the 1994 growing season
produced high crop yields in addition to the increased planned production. This
resulted in somewhat depressed selling prices, increased inventory levels
throughout fiscal 1995, and a higher carryover inventory at the end of fiscal
1995 than at the end of fiscal 1994 for the Company. With the harvesting
completed for the smaller 1995 vegetable crop, it had been anticipated that
prices would gradually increase during the 1996 fiscal year. This did not occur,
however, to the degree expected.
The effect of the 1996 growing season on fiscal 1997 financial results cannot be
estimated until late fall 1996 or early calendar 1997 when harvesting is
complete and national supplies can be determined. The Company began fiscal 1997
with $29.6 million less inventories than the beginning of fiscal 1996. The
reduction in inventories was primarily accomplished as a result of decreased
production and increased sales and was planned to correct the higher carryover
inventory situation from the previous year and to improve the utilization of
capital. The spring of 1996 produced excessive rain in some of the Company's
growing areas and drought conditions in some others. These adverse weather
conditions delayed or reduced the processing of certain early 1996 crops which
further reduced inventory levels somewhat. The Company anticipates, however,
that all customers' needs will be met in fiscal 1997.
Required scheduled payments on long-term debt will approximate $8.0 million in
the next 12 months. In fiscal 1996, cash proceeds of approximately $4.4 million
from the sale of Nalley Canada Ltd. and other real estate that had been held for
sale were applied to long-term debt in accordance with the terms of the New
Credit Agreement.
<PAGE>
Effective June 30, 1996 (fiscal 1997), accounting procedures will be changed to
include in prepaids and other assets, general purpose spare parts previously
charged directly to expense. This change is preferable as it provides a better
matching of costs with related revenues. The estimated favorable cumulative
effect of the change, before the split with Pro-Fac, (net of income taxes of
approximately $1.6 to $1.9 million) is approximately $2.4 to $3.0 million.
Supplemental Information on Inflation: 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.
Finger Lakes Packaging: On April 9, 1996, the Company announced its intent to
sell its Finger Lakes Packaging Company subsidiary ("Finger Lakes"), a
can-making operation based in Lyons, New York. Finger Lakes also has an
operation in Benton Harbor, Michigan. Approximately 60 percent of the cans
manufactured by Finger Lakes are used by divisions of the Company. The Company
plans to enter into a long-term supply agreement in conjunction with the sale.
The Company anticipates that proceeds from the sale will be utilized to reduce
debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
ITEM
Curtice-Burns Foods, Inc. and Consolidated Subsidiaries:
Management's Responsibility for Financial Statements
Reports of Independent Accountants
Consolidated Financial Statements:
Consolidated Statement of Operations and Accumulated Earnings/(Deficit) for
the years ended June 29, 1996, June 24, 1995, and June 25, 1994
Consolidated Balance Sheet at June 29, 1996 and June 24, 1995
Consolidated Statement of Cash Flows for the years ended June 29 1996, June
24, 1995, and June 25, 1994 Notes to Consolidated Financial Statements
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation and integrity of the financial
statements and related notes which begins on the page following the "Report of
the Independent Accountants." These statements have been prepared in accordance
with generally accepted accounting principles.
The Company's accounting systems include internal controls designed to provide
reasonable assurance of the reliability of its financial records and the proper
safeguarding and use of its assets. Such controls are monitored through the
internal and external audit programs.
The financial statements have been audited by Price Waterhouse LLP, independent
accountants, who were responsible for conducting their examination in accordance
with generally accepted auditing standards. Their resulting reports are on the
subsequent pages.
The Board of Directors exercises its responsibility for these financial
statements. The independent accountants and internal auditors of the Company
have full and free access to the Board. The Board periodically meets with the
independent accountants and the internal auditors, without management present,
to discuss accounting, auditing and financial reporting matters.
/s/ Roy A. Myers /s/ William D. Rice
Roy A. Myers William D. Rice
President and Senior Vice President
Chief Executive Officer Chief Financial Officer
August 9, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and
Board of Directors of
Curtice-Burns Foods, Inc.
In our opinion, the consolidated balance sheets and the related consolidated
statements of operations and retained earnings and of cash flows listed under
Item 8 of this Form 10-K present fairly, in all material respects, the financial
position of Curtice-Burns Foods, Inc. and its subsidiaries ("Successor Company")
at June 29, 1996 and June 24, 1995, and the results of their operations and
their cash flows for the fiscal year ended June 29, 1996, and the period
November 4, 1994 to June 24, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Successor Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 the financial statements, as of November 3, 1994, the
Predecessor Company became a wholly owned subsidiary of Pro-Fac Cooperative,
Inc. In conjunction with this change in ownership, identifiable assets and
liabilities were adjusted to reflect their fair values at the date of
acquisition.
Our audits of the consolidated financial statements also included an audit of
the financial statement schedule listed in the accompanying index and appearing
under Item 14 of the Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein for the fiscal year ended June 29, 1996 and the period November 4, 1994
to June 24, 1995 when read in conjunction with the consolidated financial
statements.
/s/Price Waterhouse, LLP
Price Waterhouse, LLP
Rochester, New York
August 9, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and
Board of Directors of
Curtice-Burns Foods, Inc.
In our opinion, the consolidated statements of operations and retained earnings
and of cash flows listed under Item 8 of this Form 10-K present fairly, in all
material respects, the results of Curtice-Burns Foods, Inc. and its subsidiaries
("Predecessor Company") operations and for the period from June 26, 1994 to
November 3, 1994 and the fiscal year ended June 25, 1994, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Predecessor Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 the financial statements, as of November 3, 1994, the
Predecessor Company became a wholly owned subsidiary of Pro-Fac Cooperative,
Inc. In conjunction with this change in ownership, identifiable assets and
liabilities were adjusted to reflect their fair values at the date of
acquisition.
Our audits of the consolidated financial statements also included an audit of
the financial statement schedule listed in the accompanying index and appearing
under Item 14 of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein for the period from June 26, 1994 to November 3, 1994 and for the fiscal
year ended June 25, 1994 when read in conjunction with the related consolidated
financial statements.
/s/Price Waterhouse, LLP
Price Waterhouse, LLP
Rochester, New York
August 9, 1996
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Curtice-Burns Foods, Inc.
Consolidated Statement of Operations and Accumulated Earnings/(Deficit)
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor Predecessor Predecessor
<S> <C> <C> <C> <C>
Net sales $739,094 $471,904 $276,621 $ 829,116
Cost of sales 562,926 334,329 195,810 592,621
-------- -------- --------- ---------
Gross profit 176,168 137,575 80,811 236,495
Selling, administrative, and general expenses 156,067) (99,361) (60,576) (186,934)
Restructuring (5,871) 0 (8,415) 7,768
Change in control expenses 0 0 (2,150) (3,500)
Gain on assets net of additional costs incurred as a result of a fire 0 (2,315) 6,469 0
-------- -------- -------- ---------
Operating income before dividing with Pro-Fac 14,230 35,899 16,139 53,829
Interest expense (41,998) (24,790) (7,624) (18,205)
-------- -------- -------- ---------
Pretax (loss)/earnings before dividing with Pro-Fac (27,768) 11,109 8,515 35,624
Pro-Fac share of loss/(earnings) 9,037 (5,554) (4,062) (16,849)
-------- -------- -------- ---------
(Loss)/income before taxes (18,731) 5,555 4,453 18,775
Benefit/(provision) for taxes 6,853 (3,291) (2,735) (8,665)
-------- -------- -------- ---------
Net (loss)/income (11,878) 2,264 1,718 10,110
Accumulated earnings at beginning of period 0 0 58,121 53,541
Less cash dividends declared 0 (2,264) (1,390) (5,530)
-------- -------- -------- ---------
Accumulated (deficit)/earnings at end of period $(11,878) $ 0 $ 58,449 $ 58,121
======== ======== ======== =========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Balance Sheet
(Dollars in Thousands)
<CAPTION>
ASSETS
6/29/96 6/24/95
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 8,873 $ 4,158
Accounts receivable trade, less allowances for bad debts of
$836 and $673, respectively 47,259 47,341
Accounts receivable, other 8,959 19,812
Income taxes refundable 0 1,043
Current deferred tax asset 11,724 6,784
Inventories -
Finished goods 97,018 108,691
Raw materials and supplies 33,556 51,491
-------- --------
Total inventories 130,574 160,182
-------- --------
Receivable from Pro-Fac 0 1,001
Prepaid manufacturing expense 11,339 9,903
Prepaid expenses and other current assets 1,066 2,306
-------- --------
Total current assets 219,794 252,530
Investment in Bank 24,439 22,907
Property, plant, and equipment, net 268,389 272,192
Assets held for sale 5,368 13,863
Goodwill and other intangible assets less accumulated amortization of
$5,961 and $2,539, respectively 103,760 101,494
Other assets 12,500 9,298
-------- --------
Total assets $634,250 $672,284
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
6/29/96 6/24/95
Current liabilities:
Current portion of obligations under capital leases $ 547 $ 764
Current portion of long-term debt 8,075 11,552
Accounts payable 54,661 60,112
Income taxes payable 3,836 0
Due to Pro-Fac 2,215 0
Accrued interest 9,447 9,171
Accrued employee compensation 8,368 11,644
Other accrued expenses 24,770 15,116
-------- --------
Total current liabilities 111,919 108,359
Long-term debt 149,683 183,665
Senior subordinated notes 160,000 160,000
Obligations under capital leases 1,125 1,620
Deferred income tax liabilities 51,572 59,721
Other non-current liabilities 20,746 17,836
-------- --------
Total liabilities 495,045 531,201
------- --------
Commitments and Contingencies
Shareholder's Equity:
Common stock, par value $.01; 10,000 shares outstanding, owned by Pro-Fac 0 0
6/29/96 6/24/95
Additional paid-in capital:
Shareholder's paid-in capital $151,083 $151,083
Less capital contribution receivable 0 (10,000)
-------- --------
$151,083 $141,083 151,083 141,083
======== ========
Accumulated deficit (11,878) 0
-------- --------
Total shareholder's equity 139,205 141,083
-------- --------
Total liabilities and shareholder's equity $634,250 $672,284
======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor Predecessor Predecessor
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss)/income $(11,878) $ 2,264 $ 1,718 $ 10,110
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities -
Restructuring and division disposals:
Restructuring and net loss/(gain) from division disposals 5,871 0 5,567 (7,768)
Including net operating losses subsequent to decision to dispose 0 0 2,848 0
Gain on assets resulting from fire claim 0 0 (6,469) 0
Amortization of goodwill, other intangibles, and financing fees 4,222 3,218 753 1,685
Depreciation 26,081 13,864 6,228 22,322
(Benefit)/provision for deferred taxes (11,030) 4,205 (4,705) 2,670
Provision for losses on accounts receivable 528 91 292 709
Equity in undistributed earnings of Bank (1,532) (1,288) 0 0
Change in assets and liabilities:
Accounts receivable 11,309 11,540 (12,722) 5,704
Inventories 33,347 67,022 (70,961) 250
Income taxes payable/refundable 4,879 (1,043) 1,491 (9,283)
Accounts payable and accrued expenses (15,200) (13,140) (5,662) (7,313)
Payable to/receivable from Pro-Fac 2,754 (20,098) 9,650 834
Other assets and liabilities 2,663 15,012 8,733 2,055
Deferred taxes 0 517 3,481 0
------- -------- -------- --------
Net cash provided by/(used in) operating activities 52,014 82,164 (59,758) 21,975
------- -------- -------- --------
Cash Flows From Investing Activities:
Goodwill and other intangible assets 0 0 0 (1,637)
Purchase of property, plant, and equipment (18,038) (26,891) (5,689) (9,543)
Proceeds from disposals 5,005 0 0 45,068
Cash paid for acquisition (5,785) 0 0 0
-------- -------- -------- --------
Net cash (used in)/provided by investing activities (18,818) (26,891) (5,689) 33,888
-------- -------- -------- --------
Cash Flows From Financing Activities:
Receivable from/payable to Pro-Fac 0 (42,000) 42,000 (500)
Proceeds from issuance of short-term debt 0 0 30,000 0
Proceeds from issuance of long-term debt 5,400 359,000 10,886 40,378
Payments on short term debt 0 (30,000) 0 0
Payments on long-term debt including acquisition-related financing fees (43,056) (178,015) (350) (50,194)
Payments on capital leases (825) (1,259) (11,344) (44,293)
Stock activity relating to Predecessor's equity 0 0 52 688
Amounts paid to shareholders for acquisition 0 (167,800) 0 0
Capital contribution by Pro-Fac 10,000 3,888 0 0
Cash dividends paid 0 (2,264) (1,390) (5,530)
-------- -------- -------- --------
Net cash (used in)/provided by financing activities (28,481) (58,450) 69,854 (59,451)
-------- -------- -------- --------
Net change in cash and cash equivalents 4,715 (3,177) 4,407 (3,588)
Cash and cash equivalents at beginning of period 4,158 7,335 2,928 6,516
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 8,873 $ 4,158 $ 7,335 $ 2,928
======== ======== ======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for -
Interest (net of amount capitalized) $ 41,508 $ 17,531 $ 6,967 $ 18,623
======== ======== ========= ========
Income taxes, net $ (703) $ 5,567 $ 1,417 $ 15,077
======== ======== ======== ========
Acquisition of Packer Foods and Matthews Candy Co.:
Accounts receivable $ 1,282 $ 0 $ 0 $ 0
Inventories 3,902 0 0 0
Prepaid expenses and other current assets 270 0 0 0
Property, plant and equipment 6,044 0 0 0
Goodwill 493 0 0 0
Deferred tax asset 264 0 0 0
Accounts payable (4,954) 0 0 0
Accrued expenses (418) 0 0 0
Other non-current liabilities (1,098) 0 0 0
-------- -------- -------- --------
Cash paid for acquisition $ 5,785 $ 0 $ 0 $ 0
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows (Continued)
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor Predecessor Predecessor
<S> <C> <C> <C> <C>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
In conjunction with the purchase of Curtice Burns by Pro-Fac during fiscal
1995, the following non-cash transactions occurred:
Transfer of Investment in CoBank from Pro-Fac $ 21,619 $ 0 $ 0
Debt forgiven by Pro-Fac 110,576 0 0
Other assets contributed by Pro-Fac 5,000 0 0
-------- ---------- -------
$137,195 $ 0 $ 0
======== ========== =======
Capital lease obligations incurred $113 $ 1,562 $ 0 $10,723
==== ======== ========== =======
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<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, which requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Curtice Burns 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 manufacturers cans, which
are both utilized by the Company and sold to third parties. The vegetable and
fruit product lines account for approximately 70 percent of sales. The Company's
products are primarily distributed in the United States.
The Company is a wholly-owned subsidiary of Pro-Fac Cooperative, Inc.
("Pro-Fac"). The financial statements contained herein present the results of
the Company during the period prior to its acquisition by Pro-Fac (the
"Predecessor entity") as well as the period subsequent to its November 3, 1994
acquisition (the "Successor entity"). The financial statements of the
Predecessor entity and Successor entity are not comparable in certain respects
because of differences between the cost bases of the assets as well as the
effect on the Successor entity's operations for adjustments to depreciation and
interest expense. The acquisition was accounted for using the purchase method of
accounting. In conjunction with the change in ownership all identifiable assets
and liabilities were adjusted to reflect their fair values at the date of
acquisition.
Fiscal Year: The financial statements of the Predecessor entity include the
period from June 26, 1994 through November 3, 1994, the acquisition date. The
financial statements of the Successor entity include the period from November 3,
1994 through June 24, 1995, the fiscal year end (see NOTE 2). The fiscal year of
the Successor entity corresponds with that of its parent, Pro-Fac, and ends on
the last Saturday in June. Fiscal 1996 comprised 53 weeks and fiscal 1995 and
1994 each comprised 52 weeks.
Consolidation: The consolidated financial statements include the Company and its
wholly-owned subsidiaries after elimination of intercompany transactions and
balances.
Reclassification: Certain items for fiscal 1995 and 1994 have been reclassified
to conform with fiscal 1996 presentation.
Cash and Cash Equivalents: Cash and cash equivalents include short-term
investments with maturities of three months or less. Short-term investments
amounted to $5.3 million at June 29, 1996. There were no such short-term
investments at June 24, 1995.
Inventories: Inventories are stated at the lower of cost or market on the
first-in, first-out ("FIFO") method.
Investment in CoBank ("The Bank"): The Company's investment in the Bank is
required as a condition of borrowing. These securities are not physically issued
by the Bank, but the Company is notified as to their monetary value. The
investment is carried at cost plus the Company's share of the undistributed
earnings of the Bank (that portion of patronage refunds not distributed
currently in cash) which approximates market.
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 4 to 40 years.
Assets held for sale are separately classified on the balance sheet. The
recorded value represents an estimate of net realizable value.
Lease arrangements are capitalized when such leases convey substantially all of
the risks and benefits incidental to ownership. 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.
<PAGE>
Other Assets: Other assets are primarily comprised of debt issuance costs and a
long-term receivable issued in connection with the sale of Nalley Canada Ltd.
The debt issuance costs are amortized over the term of the debt. The receivable
relating to the sale of Nalley Canada Ltd. is due on various dates between the
years 1998 and 2005.
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 determined costs.
Pension liabilities are funded by periodic payments to the various pension plan
trusts.
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. Goodwill
and other intangible assets, stated net of accumulated amortization, are
amortized on a straight-line basis over 5 to 35 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 discounted future cash flows and the carrying value of goodwill.
Commodities Options Contracts: In connection with the purchase of certain
commodities for anticipated manufacturing requirements, the Company occasionally
enters into options contracts as deemed appropriate to reduce the effect of
price fluctuations. These options contracts are accounted for as hedges and,
accordingly, gains and losses are deferred and recognized in cost of sales as
part of the product cost. These activities are not significant to the Company's
operations as a whole.
Casualty Insurance: The Company is insured for workers compensation and
automobile liability through a self-insurance program. The Company accrues for
the estimated losses from both asserted and unasserted claims. The estimate of
the liability for unasserted claims arising from unreported incidents is based
on an analysis of historical claims data.
Earnings Per Share Data Omitted: Earnings per share amounts are not presented,
as subsequent to November 3, 1994, the Company is a wholly-owned subsidiary of
Pro-Fac.
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.
Advertising: Production costs of commercials and programming are charged to
operations in the year first aired. The costs of other advertising promotion and
marketing programs are charged in the year incurred. Advertising expense
incurred in fiscal year 1996, 1995, and 1994 amounted to $9,831,000,
$13,150,000, and $13,318,000, respectively.
NOTE 2. CHANGE IN CONTROL OF THE COMPANY
In 1993, the Company's management and Board of Directors began exploring several
strategic alternatives for the Company, including a possible sale of all the
equity of the Company. Those activities ultimately resulted in the Company
entering into an Agreement and Plan of Merger with Pro-Fac and its subsidiary
PFAC on September 27, 1994 (the "Merger Agreement"). Pursuant to the Merger
Agreement, 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 percent and 99 percent, 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.
In connection with the acquisition, PFAC sold $160.0 million of 12.25 percent
Senior Subordinated Notes (the "Notes") due 2005 and entered into a credit
agreement (the "New Credit Agreement") with the Bank, which provided for a term
loan, a term-loan facility, a seasonal-loan facility, and a letter-of-credit
facility. All obligations of PFAC under the Notes and the New Credit Agreement
have become obligations of the Company.
The acquisition was accounted for using the purchase method of accounting. In
conjunction with the change in ownership all other identifiable assets and
liabilities were adjusted to reflect their fair values at the date of
acquisition. These allocations were finalized in
<PAGE>
fiscal 1996. In recording the transaction, approximately $121.5 million was
recorded to adjust property, plant, and equipment to fair market value, and the
asset lives were adjusted for assets acquired. In addition, approximately $110.0
million of goodwill and other intangible assets were recorded as the excess of
purchase cost over net assets acquired. Included in this amount as approximately
$42.0 million for deferred tax adjustments to properly reflect the effects of
the acquisition in accordance with the SFAS No. 109, "Accounting for Income
Taxes." The resulting annual amortization of goodwill and other intangible
assets will approximate $3.0 million using lives ranging from 5 to 35 years.
Following, in capsule form, is the consolidated, unaudited results of operations
of Curtice Burns Foods for the fiscal years ended June 24, 1995 and June 25,
1994, assuming the acquisition by Pro-Fac took place at the beginning of the
1994 fiscal year. The column headed "Actual" for June 24, 1995 is the total of
Successor and Predecessor entities.
<TABLE>
(In Millions)
<CAPTION>
Fiscal Year Ended
(Pro Forma is Unaudited)
June 24, 1995 June 25, 1994
----------------------- ------------------------
Actual Pro Forma Actual Pro Forma
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Net sales $748.5 $748.5 $829.1 $829.1
Income before taxes $ 10.0 $ 7.0 $ 18.8 $ 9.1
Net income $ 4.0 $ 2.9 $ 10.1 $ 3.1
</TABLE>
Agreements with Pro-Fac: The contractual relationship between the two parties is
defined in the Pro-Fac Marketing and Facilitation Agreement. Under the Pro-Fac
Marketing and Facilitation Agreement, the Company pays Pro-Fac the commercial
market value ("CMV") for all crops supplied by Pro-Fac. CMV is defined as the
weighted average price paid by other commercial processors for similar crops
sold under preseason contracts and in the open market in the same or competing
market area. Although CMV is intended to be no more than the fair market value
of the crops purchased by Curtice Burns, it may be more or less than the price
Curtice Burns 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 Curtice
Burns 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, in any year in which the Company has
earnings on products which were processed from crops supplied by Pro-Fac
("Pro-Fac Products"), the Company pays to Pro-Fac up to 90 percent of such
earnings, but in no case more than 50 percent of all pretax earnings (before
dividing with Pro-Fac) of the Company. In years in which the Company has losses
on Pro-Fac Products, the Company reduces the CMV it would otherwise pay to
Pro-Fac by up to 90 percent of such losses, but in no case by more than 50
percent of all pretax losses (before dividing with Pro-Fac) of the Company.
Additional patronage income is paid to Pro-Fac for services provided to Curtice
Burns, 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 certain operations of the business. Earnings and losses
are determined at the end of the fiscal year, but are accrued on an estimated
basis during the year.
The capital contribution of Pro-Fac to the Company at acquisition primarily
included the cancellation of indebtedness and capital lease obligations.
Subsequent to the acquisition date, Pro-Fac invested an additional $13.9 million
in the Company (including reinvested Additional Patronage Income).
Funds made available by the distribution of investment certificates to members,
in lieu of cash by Pro-Fac, have historically been reinvested by Pro-Fac in the
Company. Under the Indentures related to the Notes, Pro-Fac will be required to
reinvest at least 70 percent of the additional Patronage income in Curtice
Burns.
Amounts received by Pro-Fac from Curtice Burns under both Agreements for the
fiscal years ended June 29, 1996, June 24, 1995, and June 25, 1994 include:
commercial market value of crops delivered, $44.7 million, $55.9 million, and
$59.2 million, respectively; interest income in fiscal 1995 and fiscal 1994,
$6.1 million and $15.6 million, respectively; and additional proceeds from
profit/(loss) sharing provisions, $(9.0) million, $9.6 million, and $16.8
million, respectively. The crops purchased by Curtice Burns from Pro-Fac
represented approximately 72 percent, 73 percent, and 65 percent of all raw
agricultural crops purchased by Curtice Burns in fiscal 1996, 1995, and 1994,
respectively. Payments by the Company to Pro-Fac for interest, amortization, and
lease financing payments ceased as of November 3, 1994.
<PAGE>
NOTE 3. RESTRUCTURING, ACQUISITIONS, AND DISPOSALS
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
Comstock Michigan Fruit ("CMF"). The sale of the oats business resulted in an
approximate $10.9 million pretax 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 for
approximately $5.0 million. There was no material gain or loss on this
transaction after taking into account a restructuring charge recorded in fiscal
1993. See further discussion at NOTE 6 - "Taxes on Income."
Sale of Nalley Canada Ltd.: On June 26, 1995, Curtice Burns sold its Canadian
subsidiary, Nalley Canada Ltd., located in Vancouver, British Columbia, to a
management group within the Canadian subsidiary. Nalley US has an ongoing supply
agreement with Nalley Canada Ltd. as a result of the sale.
Packer Foods: On July 21, 1995, the Company acquired Packer Foods, a privately
owned, Michigan-based food processor. The total cost of acquisition was
approximately $5.4 million in notes plus interest at 10 percent to be paid until
the notes mature in the year 2000. The transaction was accounted for as a
purchase. For its latest fiscal year ended December 31, 1994, Packer had net
sales of $13 million, operating income of $300,000, and income before
extraordinary items of $100,000. Packer Foods has been merged into the Company's
CMF operations.
Matthews Candy Co.: In the fourth quarter of fiscal 1996, the Company acquired
Matthews Candy Co., a privately owned Washington-based snack food distributor.
The total cost of the acquisition was approximately $0.4 million and was paid in
cash. Matthews Candy Co. has been merged into the Tim's Cascade Chips operation
of the Company's Snack Foods Group.
Finger Lakes Packaging: On April 9, 1996, the Company announced its intent to
sell its Finger Lakes Packaging Company subsidiary ("Finger Lakes"), a
can-making operation based in Lyons, New York. Finger Lakes also has an
operation in Benton Harbor, Michigan. Approximately 60 percent of the cans
manufactured by Finger Lakes are used by divisions of the Company. The Company
plans to enter into a long-term supply agreement in conjunction with the sale.
The business divestitures resulted in the following charges to earnings of the
company in fiscal 1994, 1995, and 1996:
Fiscal 1994 Restructuring Gain: Included in fiscal 1994 results was a
net gain of $7.8 million comprised of a gain on the sale of the
National Oats business of $10.9 million, net of a charge of $3.1
million to adjust previous estimates regarding restructuring activities
initiated in fiscal 1993.
Fiscal 1995 Restructuring Charge: Included in fiscal 1995 results was a
restructuring charge of $8.4 million to reflect the estimated impact of
the sale of certain assets of the Nalley US Chips and Snacks operation
and other expenses relating to the disposal of this operation. On
December 19, 1994 this operation was sold for approximately $2.0
million. This sale was contemplated by Pro-Fac in conjunction with the
acquisition.
Fiscal 1996 Restructuring Charge: During the fourth quarter of fiscal
1996, the Company began implementation of a corporate-wide
restructuring program. The overall objectives of the plan are to reduce
expenses, improve productivity, and streamline operations. The total
fiscal 1996 restructuring charge amounted to $5.9 million. A fourth
quarter charge of approximately $4.0 million which was primarily
comprised of employee termination benefits, and approximately $1.9
million for strategic consulting was incurred throughout the year.
Efforts will focus on the consolidation of operations and the
elimination of approximately 8 percent of the work force. Reductions in
personnel will include operational and administrative positions. The
majority of such termination benefits will be liquidated during the
first six months of fiscal 1997. Work-force reductions have been
implemented at CMF, Nalley Fine Foods, and Southern Frozen Foods. In
the first quarter of fiscal 1997, the sales and administrative
functions of the Brooks Foods division were integrated into the
Company's CMF division.
<PAGE>
NOTE 4. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS
The following is a summary of property, plant and equipment and related
obligations at June 29, 1996 and June 24, 1995.
<TABLE>
(Dollars in Thousands)
<CAPTION>
June 29, 1996 June 24, 1995
Owned Leased Owned Leased
Assets Assets Total Assets Assets Total
<S> <C> <C> <C> <C> <C> <C>
Land $ 6,005 $ 0 $ 6,005 $ 5,467 $ 0 $ 5,467
Land improvements 2,186 0 2,186 1,540 0 1,540
Buildings 98,310 690 99,000 92,215 795 93,010
Machinery and equipment 190,423 2,509 192,932 168,477 3,520 171,997
Construction in progress 11,881 0 11,881 18,719 0 18,719
-------- ------ -------- -------- ------- --------
308,805 3,199 312,004 286,418 4,315 290,733
Less accumulated depreciation 42,042 1,573 43,615 16,695 1,846 18,541
-------- ------ -------- -------- ------- --------
Net $266,763 $1,626 $268,389 $269,723 $2,469 $272,192
======== ====== ======== ======== ====== ========
Obligations under capital leases1 $1,672 $2,384
Less current portion 547 764
------ ------
Long-term portion $1,125 $1,620
====== ======
<FN>
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 10 percent.
</FN>
</TABLE>
Interest capitalized in conjunction with construction amounted to $470,000 and
$1,841,000 in fiscal 1996 and 1995, respectively.
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 29, 1996.
<TABLE>
(Dollars in Thousands)
<CAPTION>
Fiscal Year Ending Last Capital Operating Total Future
Saturday In June Leases Leases Commitment
<S> <C> <C> <C>
1997 $ 837 $ 6,064 $ 6,901
1998 647 4,794 5,441
1999 425 3,772 4,197
2000 96 2,114 2,210
2001 76 1,020 1,096
Later years 255 655 910
------ -------- -------
Net minimum lease payments 2,336 $18,419 $20,755
======= =======
Less amount representing interest 664
------
Present value of minimum lease payments $1,672
======
</TABLE>
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
$10,927,000, $10,297,000, and $11,721,000 for fiscal years 1996, 1995, and 1994,
respectively. The fiscal 1995 amount is comprised of $4,280,000 for the
Predecessor entity and $6,017,000 for the Successor entity.
NOTE 5. DEBT
New Credit Agreement: The Bank has provided the Company, subject to the terms
and conditions set out in the New Credit Agreement, as amended, 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
outstanding borrowings under the New Credit Agreement were $152.0 million at
June 29, 1996.
<PAGE>
The Bank also has provided the Company, subject to the terms and conditions set
out in the New Credit Agreement, as amended, with seasonal financing of up to
$66.0 million ("Seasonal Facility") and a $14.2 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."
Guarantees and Security: All obligations under the Bank Facility are
guaranteed by Pro-Fac and certain subsidiaries of Curtice Burns (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, contracts 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 percent, (ii) the
relevant prime rate plus 0.50 percent, or (iii) the relevant US
Treasury Rate plus 3.00 percent.
The Seasonal Facility provides for interest rates on amounts
outstanding thereunder at the Company's option equal to (i) the
relevant London interbank offered rate plus 1.75 percent, (ii) the
relevant prime rate minus 0.25 percent, or (iii) the relevant US
Treasury Rate plus 2.00 percent. 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 November 3, 1994. The weighted-average rate of interest
applicable to the Acquisition Facility was 8.7 percent per annum for
fiscal 1996.
Based on an estimated borrowing rate at fiscal year end 1995 of 9.0
percent for long-term debt with similar terms and maturities, the fair
value of the Company's long-term debt outstanding under the New Credit
Agreement was approximately $193.8 million at June 24, 1995.
Based on an estimated borrowing rate at fiscal year end 1996 of 9.6
percent for long-term debt with similar terms and maturities, the fair
value of the Company's long-term debt outstanding under the New Credit
Agreement was approximately $154.4 million at June 29, 1996.
Borrowings under the Seasonal Facility are payable at the expiration of
that portion of the facility, which is December 1996; except that for
15 consecutive calendar days during each year, the borrowings under the
Seasonal Facility must be zero. The average borrowing under the
Seasonal Facility was $53.7 million during fiscal 1996, and the
weighted-average interest rate on such borrowing was 7.4 percent. There
were no borrowings under this Seasonal Facility at June 29, 1996. The
Letter of Credit Facility provides for the issuance of letters of
credit through December 1996. Management anticipates timely renewals of
both the Seasonal Facility and the Letter of Credit Facility.
Certain Covenants: The Pro-Fac Bank Guarantee requires Pro-Fac, on a
consolidated basis, to maintain specified levels with regard to working
capital, tangible net worth, fixed charges, the incurrence of
additional debt, and limitations on dividends, investments,
acquisitions, and asset sales. The Company is in compliance with, or
has obtained waivers for, all covenants, restrictions and requirements
under the terms of the borrowing agreement.
Other Debt: Other debt of $5.8 million carries rates up to 11.0
percent at June 29, 1996.
Maturities: Total long-term debt maturities during each of the next
five fiscal years are as follows: 1997 through 1999, $8.0 million each;
2000, $16.4 million, and 2001, $24.8 million. Provisions of the Term
Loan Facility require annual payments in the years through 2000 on
October 1 of each year in an amount equal to the "annual cash sweep"
(equivalent to approximately 80 percent of net income adjusted for
certain cash and non-cash items) for the preceding fiscal year as
defined in the Acquisition Facility. Provisions of the Term Loan
Facility also require that cash proceeds from the sale of businesses be
applied to the Term Loan Facility.
The Senior Subordinated Notes ("Notes"): 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).
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 12.25
percent 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
<PAGE>
Notes accrues from the most recent date to which interest has been paid.
Interest is computed on the basis of a 360-day year, comprised of 12 30-day
months.
Each of the 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.
The Indenture limited the amount Pro-Fac can borrow from the Company to $10.0
million and provided that, if Pro-Fac borrowed from a source other than the
Company, Pro-Fac was restricted from borrowing from the Company. On June 28,
1996, Pro-Fac established a line of credit with the Bank. Accordingly, proceeds
of $18.0 million from such borrowing were utilized to extinguish outstanding
obligations with the Company.
The Indenture also limits the amount and timing of dividends and other payments
("Restricted Payments") from the Company to Pro-Fac or to holders of other
Curtice Burns debt or equity. No dividends or other Restricted Payments may be
made if there is an existing event of default under the Notes or if Curtice
Burns' Fixed Charge Coverage Ratio (as defined in the Indenture, a ratio of cash
flow to interest and tax-adjusted dividends) for the preceding four quarters,
after giving effect to the Restricted Payment, is not at least 1.75 to 1.00. The
amount of all dividends and other Restricted Payments subsequent to the date of
the Indenture is subject to an overall limit that is based on the Company's net
income and the amount of additional equity invested in the Company.
Based on an estimated borrowing rate at 1995 fiscal year end of 11.6 percent for
borrowings with similar terms and maturities, the fair value of the Notes was
$149.8 million at June 24, 1995.
Based on an estimated borrowing rate at 1996 fiscal year end of 12.5 percent for
borrowings with similar terms and maturities, the fair value of the Notes was
$163.3 million at June 29, 1996.
Short-Term Borrowings: Short-term borrowings for the three years ended June 29,
1996 were as follows:
<TABLE>
(Dollars in Thousands)
<CAPTION>
Fiscal Fiscal Fiscal
1996 1995 1994
<S> <C> <C> <C>
Balance at end of period $ 0 $ 0 $11,500
Rate at fiscal year end 0.0% 0.0% 5.5%
Maximum outstanding during the period $94,000 $94,000 $81,000
Average amount outstanding during the period $53,739 $66,541 $51,516
Weighted average interest rate during the period 7.4% 7.3% 4.6%
</TABLE>
The above amounts include borrowings from commercial banks and from Pro-Fac
under existing and pre-existing loan agreements.
<PAGE>
NOTE 6. TAXES ON INCOME
Taxes on income include the following:
<TABLE>
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor Predecessor Predecessor
<S> <C> <C> <C> <C>
Federal -
Current $ 0 $(1,368) $ 5,834 $4,047
Deferred (5,990) 3,810 (3,529) 1,831
------- ------- ------- ------
(5,990) 2,442 2,305 5,878
------- ------- ------- ------
State and foreign -
Current 0 (46) 1,106 1,948
Deferred (863) 895 (676) 839
------- ------- ------- ------
(863) 849 430 2,787
------- ------- ------- ------
$(6,853) $ 3,291 $ 2,735 $8,665
======= ======= ======= ======
</TABLE>
A reconciliation of the Company's effective tax rate to the amount computed by
applying the federal income tax rate to income before taxes, is as follows:
<TABLE>
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor Predecessor Predecessor
<S> <C> <C> <C> <C>
Income tax (benefit)/provision at 34% in 1996 and 35% in 1995 and 1994 $(6,380) $1,942 $1,558 $6,571
State income taxes, net of federal income tax effect (859) 552 294 900
Goodwill amortization 784 637 167 480
Valuation allowance 0 0 0 (850)
Dividend received reduction (521) 0 0 0
Statutory rate change 0 0 0 480
Non-deductible legal and advisory expenses 0 0 753 1,058
Other, net 123 160 (37) 26
------- ------ ------ ------
$(6,853) $3,291 $2,735 $8,665
======= ====== ====== ======
Effective Tax Rate 36.5% 59.3% 61.4% 46.2%
======= ===== ====== =====
</TABLE>
<PAGE>
The deferred tax (liabilities)/assets consist of the following at June 29, 1996:
<TABLE>
Fiscal Fiscal
1996 1995
<S> <C> <C>
Liabilities
Depreciation $(61,350) $(65,292)
Non-compete agreements (766) (1,120)
Long-term receivables (426) (626)
Prepaid manufacturing (4,411) (3,827)
Other (39) (45)
-------- --------
(66,992) (70,910)
-------- --------
Assets
Inventory 2,203 3,416
Allowance for doubtful accounts 313 382
Capital and operating loss carryforwards 23,302 3,738
Accrued employee benefits 3,014 3,711
Insurance accruals 2,031 1,659
Pension/OPEB accruals 6,368 6,237
Restructuring reserves 1,731 280
Other 2,377 2,377
-------- --------
41,339 21,800
-------- --------
Net deferred liabilities (25,653) (49,110)
Valuation allowance (14,195) (3,827)
-------- --------
$(39,848) $(52,937)
======== ========
</TABLE>
The Company has recorded a benefit for the net operating loss carryforwards
resulting from fiscal 1995 and 1996. As of June 29, 1996 the net operating loss
carryforward available is $22.1 million ($8.6 million net of tax). Such amounts
expire between 2010 and 2011.
During fiscal year 1996, the Company sold the stock of its wholly-owned
subsidiary Curtice Burns Meat Snacks, Inc. Substantially all of the assets of
this subsidiary were previously sold. The sale resulted in a capital loss of
$36.3 million ($14.2 million net of tax). A full valuation allowance has been
recorded against the capital loss carryforward, as it is more likely than not
that a tax benefit will not be realized. The increase to the Company's capital
loss carryforward corresponds to the increase in the valuation allowance. The
capital loss carryforward expires in 2001. In conjunction with the Acquisition
of the Company by Pro-Fac, any future recognition of the capital loss
carryforward will reduce goodwill.
In January 1995, the Boards of Directors of Curtice Burns and Pro-Fac approved
appropriate amendments to the Bylaws of Curtice Burns to allow the company to
qualify as a cooperative under Subchapter T of the Internal Revenue Code. In
August 1995, Curtice Burns and Pro-Fac received a favorable ruling from the
Internal Revenue Service approving the change in tax treatment effective for
fiscal 1996.
During the second quarter of fiscal 1996 the net deferred taxes liabilities of
the Company were reduced by approximately $22 million. The adjustment was made
in conjunction with the Company obtaining its' cooperative tax status and was
applied against goodwill, as it represented an uncertainty related to income
taxes outstanding at the date of the acquisition. Based on further guidance from
outside counsel, it was later determined that such an adjustment was not
warranted. Accordingly, the net deferred taxes were re-established during the
fourth quarter. The reversal had no material effect on the operations of the
Company.
NOTE 7. 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 US government obligations.
The Company also participates in several union sponsored pension plans. It is
not possible to determine the Company's relative share of the accumulated
benefit obligations or net assets for these plans.
<PAGE>
Pension cost for fiscal years ended 1996, 1995, and 1994 includes the following
components:
<TABLE>
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor Predecessor Predecessor
<S> <C> <C> <C> <C>
Service cost -- benefits earned during the period $ 3,141 $ 2,427 $ 1,270 $ 3,958
Interest cost on projected benefit obligation 6,544 4,365 2,225 6,815
Return on assets
Actual gain (19,430) 0 (1,717) (2,044)
Deferred gain 12,123 (4,789) (678) (5,213)
--------- ------- ------- -------
Total gain (7,307) (4,789) (2,395) (7,257)
Amortization of transition amount at June 29, 1985 0 0 (265) (1,001)
Amortization of prior service cost 0 0 61 426
Recognition of curtailment gain 0 0 0 (874)
Amortization of (gain)/loss (64) 0 57 6
--------- ------- ------- -------
2,314 2,003 953 2,073
Union and other pension costs 385 147 1,182 593
--------- ------- ------- -------
Net pension cost $ 2,699 $ 2,150 $ 2,153 $ 2,666
========= ======= ======= =======
</TABLE>
As a result of the change of control of the Company, the plan assets and
obligations were remeasured on November 3, 1994, and the entire balance of the
transition obligation, unrecognized prior service costs, and outstanding gains
and losses totaling $5,167,266 were adjusted at the time of the acquisition.
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 plan's funded status was as follows:
<TABLE>
(Dollars in Thousands)
<CAPTION>
June 29, 1996 June 24, 1995 June 25, 1994
------------- ------------- -------------
Assets Assets Accumulated
Exceed Exceed Benefits
Accumulated Accumulated Exceed
Benefits Benefits Assets
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(74,108) $(65,350) $(71,302)
======== ======== ========
Accumulated benefit obligation $(77,035) $(69,449) $(76,649)
======== ======== ========
Projected benefit obligation $(85,307) $(78,809) $(87,744)
Plan assets at fair value 89,716 74,897 71,875
-------- -------- --------
Plan assets in excess of/(less than) projected benefit obligation 4,409 (3,912) (15,869)
Unrecognized net (gain)/loss (18,456) (8,787) 11,075
Unrecognized prior service cost (266) 0 1,088
Unrecognized net asset at year end 0 0 (4,408)
Liability for unfunded accumulated
benefit obligation 0 0 (1,401)
-------- -------- --------
(14,313) (12,699) (9,515)
Union and other pension plans (2,318) (2,243) (958)
-------- -------- --------
Pension liability at year end $(16,631) $(14,942) $(10,473)
======== ======== ========
</TABLE>
<PAGE>
In 1996, 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
percent, 10.0 percent, and 4.50 percent, respectively. The year end projected
obligation increased by approximately $7,587,000 due to the decrease in the
discount rate from 8.5 percent to 7.75 percent.
In 1995, the assumed discount rate, assumed long-term rate of return on plan
assets, and the assumed long-term rate of compensation increase were 8.50
percent, 10.0 percent, and 4.50 percent, respectively.
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
percent, 10.0 percent and 4.50 percent, respectively.
Provisions of the Financial Accounting Standards Board SFAS No. 87, "Employers
Accounting for Pensions," 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 primarily from a decrease in the discount rate and the general
performance of investment markets.
Profit Sharing/401(k): Under the prior Deferred Profit Sharing Plan and the
Non-Qualified Profit Sharing Plan, the Company allocated to all salaried exempt
employees a percentage of its earnings in excess of 7.0 percent in 1994 and 5.0
percent in 1995 of the combined long-term debt and equity (as defined) of
Pro-Fac and the Company. In fiscal 1995 and 1994, $1,400,000 and $1,171,000,
respectively, was allocated to the plans.
On October 1, 1995, the Company merged the Deferred Profit Sharing Plan into the
401(k) Investment Plan. Under the new combined plan, the Retirement Savings and
Incentive Plan ("RSIP"), the Company makes an incentive contribution to the Plan
if certain pre-established divisional earnings goals are achieved. The maximum
incentive contribution is 3 percent of base salary earned during the fiscal
year. In addition, the Company contributes 401(k) matching contributions to the
Plan for the benefit of employees who elect to defer a portion of their salary
into the plan. During fiscal 1996 the Company allocated $400,000 in the form of
matching contributions and $211,000 in the form of incentive contributions for
the benefit of its employees.
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.
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.
The plan's funded status was as follows:
<TABLE>
(Dollars In Thousands)
<CAPTION>
June 29, 1996 June 24, 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Fully eligible active participants $ 141 $ 113
Other active participants 108 244
Retirees 2,446 2,386
------- -------
Total 2,695 2,743
Less Plan assets at fair value 0 0
------- -------
Accumulated postretirement benefit obligation in excess of fair value of assets (2,695) (2,743)
Unrecognized gains (443) (274)
------- -------
Accrued postretirement benefit cost $(3,138) $(3,017)
======= =======
</TABLE>
<PAGE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
(Dollars in Thousands)
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94
Successor Successor Predecessor
<S> <C> <C> <C>
Service cost $ 23 $ 15 $ 8
Interest cost 222 154 74
Net amortization and deferral 0 0 46
---- ---- ----
Net periodic postretirement benefit cost $245 $169 $128
==== ==== ====
</TABLE>
As a result of the change in control, the entire balance of the transition
obligation and the outstanding gains and losses totaling $2,538,000 were charged
to goodwill at the time of the sale.
The weighted-average, assumed-discount rate used to measure the benefit
obligations was 8.50 percent at the beginning and 7.75 percent at the end of
fiscal 1996.
The annual rate of increase in the per capita cost of health care benefits was
assumed to be 12 percent for 1995 and 11 percent for 1996. The rate was assumed
to decrease gradually to 5.0 percent 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>
(Dollars in Thousands)
<CAPTION>
Successor Predecessor Predecessor
Fiscal 1996 11/4/94 - 6/24/95 6/26/94 - 11/3/94
------------------------- -------------------------- --------------------------
Current 1% Higher Current 1% Higher Current 1% Higher
Trend Trend Trend Trend Trend Trend
<S> <C> <C> <C> <C> <C> <C>
APBO $2,695 $2,798 $2,743 $2,874 $2,948 $3,118
Service cost + interest cost $ 245 $ 255 $ 170 $ 178 $ 82 $ 86
</TABLE>
Employee Stock Purchase Plan: During fiscal 1996 the Company introduced an
Employee Stock Purchase Plan which affords employees the opportunity to purchase
semi-annually, in cash or via payroll deduction, shares of Class B Cumulative
Pro-Fac Preferred Stock to a maximum value of 5 percent of salary. The purchase
of price of such shares is par value, $10 per share. During fiscal 1996, 33,364
shares were purchased by employees, and 3,447 shares were subscribed to as of
June 29, 1996.
Long-Term Incentive Plan: On June 24, 1996, the Company introduced a long-term
incentive program, the Curtice Burns Foods Equity Value Plan, which provides
performance units to a select group of management. The future value of the
performance units is determined by the Company's performance on earnings and
debt repayment. The performance units vest 25 percent each year after the first
anniversary of the grant, becoming 100 percent vested after five years. The
performance units expire upon the tenth anniversary of grant. The appreciated
value of units in excess of the initial grant price converts to cash
compensation upon expiration of the units. The total units granted on June 24,
1996 under this Plan were 248,511 at $13.38 per unit.
The value of the June 24, 1996 grants from the Curtice Burns Foods Equity Value
Plan will be based on the Company's earnings and debt repayment in fiscal 1997.
The beginning value of these performance units was set at a level requiring
improved earnings and debt-repayment performance. If future performance equals
fiscal 1996 performance, no payouts will be made from the plan relative to the
option granted on June 24, 1996.
NOTE 8. OTHER MATTERS
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.
<PAGE>
Southern Frozen Foods Fire: In July 1994, a plant operated by the Company's
Southern Frozen Foods Division, located in Montezuma, Georgia, was damaged by
fire. All material costs associated with the facility repairs and business
interruption were covered under the Company's insurance policies. A gain on
assets destroyed in the fire was recognized by Curtice Burns prior to the
acquisition.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Management and Directors: Effective upon consummation of the Acquisition,
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
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. Both the New Credit Agreement and the
Indenture provide 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.
Set forth below is certain information concerning the individuals who serve as
directors and officers of the Company as well as other corporate officers and
the individuals who serve as presidents and chief executive officers of certain
of the Company's divisions.
<TABLE>
Year of
Name Birth Positions
<CAPTION>
<S> <C> <C>
Roy A. Myers(1) 1931 President and Chief Executive Officer and Director
Dennis M. Mullen 1953 Chief Operating Officer and Executive Vice President
William D. Rice 1934 Chief Financial Officer, Senior Vice President, and Secretary
Diana Bartalo 1946 Treasurer and Director of Financial Reporting
Robert E. McMahon 1941 Vice President Information Systems
Blaine B. Petersen 1928 Vice President Operations
Earl L. Powers 1944 Vice President and Controller
Beatrice B. Slizewski 1943 Vice President Corporate Communications
Lois J. Warlick-Jarvie 1958 Vice President Human Resources
Stephen R. Wright 1947 Senior Vice President - Procurement
Carl W. Caughran 1953 President and Chief Executive Officer of Nalley Fine Foods
Thomas A. Collins 1938 President and Chief Executive Officer of Southern Frozen Foods
Ronald R. Fithen 1946 President and Chief Executive Officer of Finger Lakes Packaging
Bernhard Frega 1950 President and Chief Executive Officer of Comstock Michigan Fruit
Michael A. Gaffney 1950 President and Chief Executive Officer of Snyder
Eugene W. Hermenet 1936 President and Chief Executive Officer of Brooks Foods
Tim Kennedy 1948 President and Chief Executive Officer of Tim's Cascade Chips
David R. Ray 1945 President and Chief Executive Officer of Husman
Robert V. Call, Jr.(2) 1926 Director and Chairman of the Board
Bruce R. Fox(2) 1947 Director
Cornelius D. Harrington, Jr.(3) 1927 Director
Steven D. Koinzan(2) 1948 Director
</TABLE>
<PAGE>
<TABLE>
Year of
Name Birth Positions
<CAPTION>
<S> <C> <C>
Walter F. Payne(3) 1936 Director
Frank M. Stotz(3) 1930 Director
<FN>
(1) Management Director.
(2) Pro-Fac Director.
(3) Disinterested Director.
</FN>
</TABLE>
Roy A. Myers has been the Chief Executive Officer and a Director of the Company
since the completion of the Acquisition. Mr. Myers served as a Director and
Executive Vice President of the Company from 1987 to the completion of the
Acquisition (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 Acquisition, having served as Assistant General Manager
from 1983 to 1987.
Dennis M. Mullen has been Chief Operating Officer of the Company since May 1996
and Executive Vice President since January 1996. He had been President and Chief
Executive Officer of CMF from March 1993 to May 1996. He was Senior Vice
President and Business Unit Manager Foodservice of CMF from 1991 to 1993, and
Senior Vice President-Custom Pack Sales for Nalley from 1990 to 1991. Prior to
employment with the Company, he was President and Chief Executive Officer of
Globe Products Company.
William D. Rice has been Senior Vice President, Chief Financial Officer, and
Secretary of the Company since 1991, Secretary of the Company since 1989. He was
Treasurer of the Company from 1975 to 1996. He was Vice President-Finance of the
Company from 1969 to 1991. He has been Assistant Treasurer of Pro-Fac since 1970
(Management Chief Financial Officer for Pro-Fac).
Diana Bartalo has been Treasurer since March 1996 and Director of Financial
Reporting since 1992; Assistant Treasurer since from 1988 to March 1996;
Corporate Accounting Manager 1976-1992. She held several administrative staff
positions 1970-1976 and has been Assistant Treasurer of Pro-Fac since 1987.
Robert E. McMahon has been Vice President Information Systems since November
1993; prior to that he was Vice President, Information Systems for the Comstock
Michigan Fruit Division 1992-1993 and Director of Corporate Information Systems
since December 1991. He joined the Comstock Michigan Fruit Division as Systems
Integration Manager in 1989 and became Director of Information Systems for that
Division in 1990. Prior to employment with Curtice Burns, he held management,
executive and technical positions with such organizations as Abbott Labs, BASF,
IBM, MTech, and Price Waterhouse.
Blaine B. Petersen has been Vice President Operations since 1991; prior to that
he was Director of Operations since 1990. Before joining Curtice Burns, he was
Vice President Plant Operations, Grace Culinary Systems Division of W.R. Grace &
Co. 1988-1990, and Vice President Operations, Fishery Products, Inc. 1983-1988.
He held various executive management positions 1969-1983.
Earl L. Powers has been Vice President and Controller since March 1993, and Vice
President Finance and Management Information Systems, Comstock Michigan Fruit
Division of the Company from 1991 to March 1993. Prior to joining the Company,
he was Controller of various Pillsbury Company divisions 1987-1990 and various
other executive management positions at the Pillsbury Company 1976-1987.
Beatrice B. Slizewski has been Vice President of Corporate Communications for
Curtice Burns and Pro-Fac since March 1995. She joined the Company as Director
of Corporate Communications in 1991. Prior to joining Curtice Burns (1988-1991),
she worked as a marketing and public relations consultant for J.P. Associates, a
small business consulting agency in Rochester, New York. Previous food industry
experience includes 14 years with the R.T. French Company (1974-1988) -- eight
years in public relations and seven years in various accounting functions.
Lois J. Warlick-Jarvie has been Vice President Human Resources since January
1993; Corporate Director Human Resources July 1991 to January 1993; Manager
Compensation, Benefits and Risk Management January 1989 to July 1991; various
administrative staff positions within the Company 1982 to 1989.
<PAGE>
Stephen R. Wright has been Senior Vice President - Procurement of the Company
since the completion of the Acquisition. 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. He
became General Manager of Pro-Fac in March 1995.
Carl W. Caughran has been President and Chief Executive Officer of Nalley Fine
Foods since March 1996. Prior to joining the Company, he was Vice
President/General Manager of Borden's Eastern Snacks Group 1993 to 1995, Vice
President/General Manager of Borden's Western Snacks Group 1991 to 1993, and
held various executive positions at Borden 1983 to 1991.
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.
Bernhard Frega has been President and Chief Executive Officer of CMF since May
1996. He had been Executive Vice President and Chief Operating Officer of CMF
from December 1995 to May 1996. Prior to that he held increasingly responsible
positions at CMF, beginning in 1974 in sales and marketing. He became Marketing
Director in 1984, Vice President Private Label in 1987 and Senior Vice President
for Consumer Products in 1995.
Michael A. Gaffney has been President and Chief Executive Officer of Snyder
since 1995. He was Executive Vice President and Chief Operating Officer of
Snyder from 1990 to 1995. Prior to 1990, he held various management and
executive positions with State Line Snacks, Frito-Lay, Gallo, and Procter and
Gamble.
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.
Tim Kennedy has been President and Chief Executive Officer of Tim's since its
acquisition by the Company in 1989. Prior to that, he was President and Chief
Executive Officer at Tim's which was a privately-held corporation since its
inception in 1986.
David R. Ray has been President and Chief Executive Officer of Husman since
1995. He was Executive Vice President and Chief Operating Officer of Husman 1990
to 1995 and Director of Sales for Chips and Snacks at Nalley 1987 to 1990.
Robert V. Call, Jr. has been a Director of the Company since the completion of
the Acquisition. Mr. Call had been a Director of the Company since 1986 until
completion of the Acquisition (at which time he resigned and was reappointed).
He has been a Director of Pro-Fac since 1962. He was President of Pro-Fac from
1986 to March 27, 1995, having served as Treasurer from 1973 to 1984. He has
been 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
Acquisition. He has been a Director of Pro-Fac since 1974. He was Treasurer of
Pro-Fac from 1984 until March 27, 1995, when he was elected President. He has
been 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, prior to his retirement, 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
Acquisition. He has been a Director of Pro-Fac since 1983. He was Secretary of
Pro-Fac from March 1993 until March 27, 1995, when he was elected Treasurer. He
has been a member of Pro-Fac since 1979. Mr. Koinzan is a popcorn, field corn
and soybean farmer (Koinzan Farms; Norden, Nebraska).
Walter F. Payne has been a Director of the Company since January 1996 and
President and Chief Executive Officer of Blue Diamond Growers since 1992. He
held various positions at Blue Diamond Growers between 1973 and 1992. He is
currently on the Board of Directors of the Almond Board of California and the
International Nut Council, a board alternate for the National Council of Farmer
Cooperatives, and a member of the Board of Trustees for the Graduate Institute
of Cooperative Leadership.
<PAGE>
Frank M. Stotz has been a Director of the Company since the completion of the
Acquisition. Mr. Stotz retired in 1994 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 with 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 the shareholder 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.
There are no family relationships between any Director, executive officer, or
any person nominated or chosen by the Company to become a Director or executive
officer. Officers of the Company serve for a term of office from the date of
election to the next organization meeting of the Board of Directors or until
their respective successors are elected and qualified, except in the case of
death, resignation, or removal.
ITEM 11. EXECUTIVE COMPENSATION
The following tables show the cash compensation and certain other components of
the compensation of the chief executive officer and certain other most highly
compensated executive officers of the Company, earned during fiscal years ended
June 29, 1996, June 24, 1995, and June 25, 1994 (collectively, the "Named
Executive Officers").
<TABLE>
Executive Compensation
Summary Compensation Table
<CAPTION>
RSIP/
Matching
Contributions
Annual Deferred
Compensation1 Profit
Name and Principal Position Year Salary Bonus2 Sharing
<S> <C> <C> <C> <C>
Roy A. Myers - 1996 $410,154 $ 0 $ 2,672
President, CEO, and Director 1995 $339,927 $200,539 $10,609
1994 $228,615 $101,231 $ 7,886
Dennis M. Mullen - 1996 $216,107 $ 0 $ 1,465
Executive Vice President and 1995 $179,558 $ 71,207 $ 7,265
Chief Operating Officer 1994 $170,128 $101,643 $ 5,761
William D. Rice - 1996 $249,642 $ 0 $ 1,656
Senior Vice President, CFO, and Secretary 1995 $240,065 $116,143 $ 9,791
1994 $230,912 $102,248 $ 7,993
Stephen R. Wright 1996 $156,789 $ 0 $ 1,627
Senior Vice President - Procurement 1995 $128,685 $ 51,628 $ 4,520
1994 $101,345 $ 29,552 $ 3,408
Earl L. Powers 1996 $157,990 $ 0 $ 1,642
Vice President and Controller 1995 $150,392 $ 60,333 $ 6,099
1994 $142,865 $ 50,917 $ 4,813
<FN>
1 No Named Executive Officer has received personal benefits during the period
in excess of the lesser of $50,000 or 10 percent of annual salary.
2 Pursuant to the Management Incentive Plan of the Company (the "Incentive
Plan"), additional compensation is paid if justified by the activities of
the officers and employees eligible under the Incentive Plan and by the
earnings of the Company and of Pro-Fac Cooperative, Inc. ("Pro-Fac").
</FN>
</TABLE>
<PAGE>
<TABLE>
Long-Term Incentive Plan - Awards in Last Fiscal Year
<CAPTION>
Estimated Future Payouts
(b) (c) Under Non-Stock Price Based Plans
Number of Shares Performance or Other (d) (e)
(a) Units or Other Period Until Maturation Threshold Target
Name Rights Granted (1) or Payout ($ or #) ($ or #)(2)
<S> <C> <C> <C> <C>
Roy A. Myers 46,637 6/24/2006 $0 $0
Dennis M. Mullen 32,085 6/24/2006 $0 $0
William D. Rice 23,636 6/24/2006 $0 $0
Stephen R. Wright 13,970 6/24/2006 $0 $0
Earl L. Powers 14,056 6/24/2006 $0 $0
<FN>
(1) On June 24, 1996, the Company introduced a long-term incentive program, the
Curtice Burns Foods Equity Value Plan ("EVP"), which provides performance
units to a select group of management. The future value of the performance
units is determined by the Company's performance on earnings and debt
repayment. The performance units vest 25 percent each year after the first
anniversary of the grant, becoming 100 percent vested after five years. The
performance units expire upon the tenth anniversary of grant. The
appreciated value of units in excess of the initial grant price converts to
cash compensation upon expiration of the units.
(2) The value of the June 24, 1996 grants from the Curtice Burns Foods Equity
Value Plan will be based on the Company's earnings and debt repayment in
fiscal 1997. The beginning value of these performance units was set at a
level requiring improved earnings and debt-repayment performance. The
target payouts shown above are based on the value of the performance units
at fiscal 1996 earnings and debt levels and would yield no payout from the
plan at those levels. If future performance equals fiscal 1996 performance,
no payouts will be made from the plan relative to the option granted on
June 24, 1996.
</FN>
</TABLE>
Retirement Plans: The Company's Master Salaried Retirement Plan (the "Pension
Plan") provides defined retirement benefits for its officers and all salaried
and clerical personnel. The compensation upon which the pension benefits are
determined is included in the salary columns of the "Summary Compensation
Table."
For retirement before age 65, the annual benefits are reduced by an amount for
each year prior to age 65 at which such retirement occurs so that if retirement
occurs at age 55, the benefits are 70 percent of those payable at age 65.
The approximate number of years of Plan participation under the Company's
Pension Plan as of June 29, 1996, of the Executive Officers listed in the
Summary Compensation Table are as follows: Roy A. Myers-34, Dennis M. Mullen-6,
William D. Rice-24, Stephen R. Wright-22, and Earl L. Powers-4.
On January 28, 1992, the Company adopted an Excess Benefit Retirement Plan which
serves to provide employees with the same retirement benefit they would have
received from the Company's Master Salaried Retirement Plan under the career
average base pay formula, but for changes required under the 1986 Tax Reform Act
and the compensation limitation under Section 401(a)(17) of the Internal Revenue
Code, which was $150,000 on January 1, 1994, having been revised in the 1992
Omnibus Budget Reform Act.
<PAGE>
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 Company's Master Salaried Retirement Plan and
the Excess Benefit Retirement Plan.
<TABLE>
Pension Plan Table
<CAPTION>
Years of Plan Participation
Final ------------------------------------------------------------------------------
Average Pay 15 20 25 30 35
----------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $22,437 $ 29,342 $ 36,160 $ 43,133 $ 50,278
150,000 27,687 36,342 44,910 53,633 62,528
175,000 32,937 43,342 53,660 64,133 74,778
200,000 38,187 50,342 62,410 74,633 87,028
225,000 43,437 57,342 71,160 85,133 99,278
250,000 48,687 64,342 79,910 95,633 111,528
275,000 53,937 71,342 88,660 106,113 123,778
300,000 59,187 78,342 97,410 116,633 136,028
325,000 64,437 85,342 106,160 127,133 148,278
350,000 69,687 92,342 114,910 137,633 160,528
375,000 74,937 99,342 123,660 148,133 172,778
400,000 80,187 106,342 132,410 158,633 185,028
</TABLE>
Change of Control Provisions of Severance and Other Benefit Plans: The Company
has adopted a Change of Control Severance Plan concerning certain key employees
and Executive Officers (the "Plan"). The Plan provides salary and benefit
continuation to designated executives (including the named executives listed in
the 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 Plan.
The Plan will remain in existence until November 3, 1996. The Plan provides for
salary and benefit continuation upon termination other than for cause within the
two-year period following a Change of Control as follows: one year of salary and
benefit continuation for Messrs. Petty, Myers and Rice; two years of salary and
benefit continuation for the other designated executives including Messrs.
Mullen, and Powers, or until the executive obtains other employment at an annual
salary not less than 75 percent of his annual salary at termination, whichever
occurs first.
Under the terms of the Agreement, Messrs. Myers and Rice would be entitled to a
supplemental retirement benefit equal to the benefit they would receive from the
Curtice Burns Foods Master Salaried Retirement Plan if they were to continue
working until age 65 at their current salary level, less their actual retirement
benefit from this Plan. In all cases, the supplemental retirement benefits begin
at the end of the salary and benefit continuation period. Also, upon a Change of
Control all stock options granted prior to February 18, 1994 became exercisable.
The Incentive Plan also contains a change of control provision pursuant to
which, in the event of a change of control of the Company, participants in such
plan who are terminated within two years following a change in control are
entitled to an allocation of benefits under such plan for the fiscal year of
their termination on a pro rata basis for the part of the year they were
employed.
Directors Compensation: In fiscal 1996, non-employee directors who were
designated by Pro-Fac received an annual stipend of $6,000 per year, plus $200
per day for attending Board or Committee meetings. In fiscal 1996, all other
outside directors, Messrs. Harrington, Payne, and Stotz received an annual rate
of $18,000 in addition to $600 per day. The Chairman of the Board receives a
fixed amount in lieu of the standard attendance fees and annual stipend. The
Company accrued an annual stipend of $24,700 for Mr. Call as Chairman of the
Board. Mr. Myers was not paid directors' fees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of he Company is owned by Pro-Fac
Cooperative, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Borrowings by Pro-Fac: The Indenture governing the Notes permitted the Company
to make demand loans to Pro-Fac for working capital purposes in amounts not to
exceed $10.0 million at any time, 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 was required to 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 Notes and the New
<PAGE>
Credit Agreement, as long as Pro-Fac has the right to borrow under the Pro-Fac
Marketing and Facilitation Agreement, the Indenture does not permit Pro-Fac to
incur any other indebtedness. During fiscal 1996, Pro-Fac repaid amounts due the
Company and incurred debt from the Bank.
Equity Ownership in CoBank: 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 represent a percentage of the previous five-years'
average borrowings from the Bank. As of June 29, 1996, the amount of Pro-Fac's
investment in the Bank was approximately $24.4 million.
Purchase of Crops From 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 and Facilitation Agreement. Prior to the Acquisition, these crops were
sold to the Company pursuant to the Integrated Agreement. During fiscal 1996,
the following directors and executive officers of Pro-Fac directly or through
sole proprietorships or corporations, sold crops to Pro-Fac and provided
harvesting, trucking and waste removal services to Curtice Burns for the
following aggregate amounts:
<TABLE>
RELATIONSHIP GROSS PURCHASES
NAME TO PRO-FAC IN FISCAL 1996
<CAPTION>
<S> <C> <C>
Dale E. Burmeister................................................ Director $ 122,000
Robert V. Call, Jr................................................ Director 2,147,000
Glen Lee Chase.................................................... Director 139,000
Tommy R. Croner................................................... Director and Secretary 236,000
Albert P. Fazio................................................... Director and Vice President 4,000
Bruce R. Fox...................................................... Director and President 880,000
Steven D. Koinzan................................................. Director and Treasurer 163,000
Kenneth A. Mattingly.............................................. Director 527,000
Paul E. Roe....................................................... Director 654,000
Allan D. Mitchell................................................. Director 177,000
Allan W. Overhiser................................................ Director 21,000
Edward L. Whitaker................................................ Director 2,000
</TABLE>
DIRECTORS AND OFFICERS LIABILITY INSURANCE
As authorized by New York law and in accordance with the policy of that state,
the Company has obtained insurance from Chubb Group Insurance insuring the
Company against any obligation it incurs as a result of its indemnification of
its officers and directors, and insuring such officers and directors for
liability against which they may not be indemnified by the Company. This
insurance has a term expiring on August 15, 1997, at an annual cost of
approximately $23,500. As of this date, no sums have been paid to any officers
or directors of the Company under this indemnification insurance contract.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
The Following Appear in ITEM 8 of This Report
ITEM
Curtice-Burns Foods, Inc. and Consolidated Subsidiaries:
Management's Responsibility for Financial Statements
Reports of Independent Accountants
Consolidated Financial Statements:
Consolidated Statement of Operations and Accumulated Earnings/(Deficit) for
the years ended June 29, 1996, June 24, 1995, and June 25, 1994
Consolidated Balance Sheet at June 29, 1996 and June 24, 1995
Consolidated Statement of Cash Flows for the years ended June 29 1996, June
24, 1995, and June 25, 1994 Notes to Consolidated Financial
Statements
(2) The following additional financial data are set forth herein:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
SCHEDULE II
Curtice-Burns Foods, Inc.
Valuation and Qualifying Accounts
For the Three Fiscal Years Ended June 29, 1996
<CAPTION>
Fiscal 1995
11/4/94 - 6/26/94 -
Fiscal 1996 6/24/95 11/3/94 Fiscal 1994
Successor Successor* Predecessor* Predecessor
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Balance at beginning of period $ 673,000 $ 683,000 $1,066,000 $ 801,000
Additions charged to expense 537,000 91,000 292,000 702,000
Deductions (374,000) (101,000) (427,000) (437,000)
--------- --------- ---------- ----------
Balance at end of period $ 836,000 $ 673,000 $ 931,000 $1,066,000
========= ========= ========== ==========
Inventory reserve**
Balance at beginning of period $ 144,000 $ 0 $ 379,000 $1,189,000
Net change (144,000) 144,000 635,000 (810,000)
--------- --------- ---------- ----------
Balance at end of period $ 0 $ 144,000 $1,014,000 $ 379,000
========= ========= ========== ==========
<FN>
* Valuation accounts were revalued by the acquiring company.
** Difference between FIFO cost and market applicable to canned and
frozen fruit and vegetable inventories.
</FN>
</TABLE>
Schedules other than those listed above are omitted because they are either not
applicable or not required, or the required information is shown in the
financial statements or the notes thereto.
<PAGE>
(3) The following exhibits are filed herein or have been previously
filed with the Securities and Exchange Commission:
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed in the fourth quarter of
fiscal 1996:
Item Date of Event
Item 5 - Other Events March 25, 1996
Item 5 - Other Events May 10, 1996
(c) EXHIBITS:
Exhibit
Number Description
3.3** Certificate of Incorporation of Curtice Burns.
3.4*** Bylaws of Curtice Burns.
10.1** 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' 12.25 percent Senior Subordinated Notes due
2005 (the "Notes").
10.2** 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.
10.3** Parent Guaranty, dated as of November 3, 1994, by
Pro-Fac in favor of the Bank.
10.4** Parent Security Agreement, dated as of November 3,
1994 between Pro-Fac and the Bank.
10.5** 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.
10.6** Marketing and Facilitation Agreement, dated as
of November 3, 1994, between Pro-Fac and Curtice
Burns.
10.7** Management Incentive Plan, as amended.
10.8** Supplemental Executive Retirement Plan, as amended.
10.9** Key Executive Severance Plan, as amended.
10.10** Master Salaried Retirement Plan, as amended.
10.11** Non-Qualified Profit Sharing Plan, as amended.
10.12** Excess Benefit Retirement Plan.
10.13* Modification A of Term Loan, Term Loan Facility,
and Seasonal Loan Agreement, dated as of January
26, 1995, between Curtice Burns and the Bank.
10.14* Second Amendment to Non-Qualified Profit Sharing
Plan.
10.15*** Modifications B - D of Term Loan, Term Loan
Facility, and Seasonal Loan Agreement Between
Curtice Burns and the Bank.
10.16 Modifications E - F of Term Loan, Term Loan
Facility, and Seasonal Loan Agreement Between
Curtice Burns and the Bank.
10.17 Equity Value Plan Adopted on June 24, 1996.
10.18 Seasonal Loan Agreement Between Pro-Fac and the
Bank Dated June 28, 1996.
<PAGE>
(c) EXHIBITS (Continued):
Exhibit
Number Description
21.1 List of Subsidiaries.
27 Financial Data Schedule.
* Incorporated by reference from Registration Statement No. 33-60273.
** Incorporated by reference from Registration Statement No.33-56517,
as amended.
*** Incorporated by reference from the Registrant's 1995 Annual Report
on Form 10-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CURTICE-BURNS FOODS, INC.
Date: August 21, 1996 By: /s/ William D. Rice
------------------------ ----------------------------
WILLIAM D. Rice
Senior Vice President and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints ROY A. MYERS and WILLIAM D. RICE, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Annual Report on Form 10-K and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
SIGNATURE TITLE DATE
<CAPTION>
<S> <C> <C>
/s/ Robert V. Call, Jr. Chairman of the Board; Director August 21, 1996
- ---------------------------------------------------------- ---------------
(ROBERT V. CALL, JR.)
/s/ Bruce R. Fox Director August 21, 1996
- ---------------------------------------------------------- ---------------
(BRUCE R. FOX)
/s/ Cornelius D. Harrington Director August 21, 1996
- ---------------------------------------------------------- ---------------
(CORNELIUS D. HARRINGTON)
/s/ Steven D. Koinzan Director August 21, 1996
- ---------------------------------------------------------- ---------------
(STEVEN D. KOINZAN)
/s/ Walter F. Payne Director August 21, 1996
- ---------------------------------------------------------- ---------------
(WALTER F. PAYNE)
/s/ Frank M. Stotz Director August 21, 1996
- ---------------------------------------------------------- ---------------
(FRANK M. STOTZ)
/s/ Roy A. Myers President and Chief Executive Officer August 21, 1996
- ---------------------------------------------------------- ---------------
(ROY A. MYERS) (Principal Executive Officer)
/s/ William D. Rice Senior Vice President and Secretary August 21, 1996
- ---------------------------------------------------------- ---------------
(WILLIAM D. RICE) (Principal Financial Officer)
/s/ Diana Bartalo Treasurer August 21, 1996
(DIANA BARTALO)
<FN>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
NO ANNUAL REPORT OR PROXY MATERIAL HAS BEEN SENT TO REGISTRANT'S SHAREHOLDER AND
NONE IS INTENDED TO BE SENT.
</FN>
</TABLE>
<PAGE>
1
Exhibit 10.16
CoBANK, ACB
LOAN AGREEMENT NO. T-6184-E, T-6186-E,
S-6183-E, and S-6181-E
December 18, 1995
CURTICE-BURNS FOODS, INC.
- -------------------------------------------------------------------------------
MODIFICATION OF
TERM LOAN, TERM LOAN FACILITY AND SEASONAL LOAN AGREEMENT
IT IS AGREED, That the Term Loan, Term Loan Facility and Seasonal Loan Agreement
dated as of November 3, 1994, entered into between Curtice-Burns Foods, Inc.
(successor to merger between PF Acquisition Corp. and Curtice-Burns Foods, Inc.)
("Borrower") and Springfield Bank for Cooperatives, now known as CoBank, ACB
("Bank"),as amended January 26,1995, July 19, 1995, August 30, 1995 and
September 1, 1995 is hereby further amended as follows:
(1) Section 2.7 entitled Seasonal Loan Facility is modified to allow the Bank to
make Seasonal Loans to the Borrower from time to time during the period from
January 1, 1996 through January 2, 1996. The Bank may, at its option, renew the
Seasonal Loan Commitment for one or more successive one (1)-year periods from
and after January 2, 1996.
(2) Section 2.9 entitled Repayment of Seasonal Loans is deleted in its entirety
and therefor a new section is substituted reading as follows:
Repayment of Seasonal Loans. The principal amount of the Seasonal Loans
shall be repaid in full on or before January 3, 1996, provided, however, that to
the extent the outstanding amount thereof exceeds, at the end of any month, the
Borrowing Base at the end of such month, such excess(es) shall be immediately
due and payable upon demand by the Bank.
All terms of the Term Loan, Term Loan Facility and Seasonal
Loan Agreement and any other related loan and collateral documents (collectively
"Loan Documents") remain in full force and effect and are hereby ratified and
confirmed, except to the extent modified by this Agreement, by Borrower.
All Financial Statements and disclosures submitted to the Bank
under the Loan Documents are true and accurate in all material respects. Except
as previously disclosed to the Bank, there has been no material adverse change
in the financial condition or operations of Borrower.
The Loan Documents are not subject to any offset, claim, or defense by Borrower.
All liens granted by Borrower to the Bank (i) remain in full force and effect,
(ii) are not subject to any claim or defense, and (iii) retain a first priority
lien position.
To the best of Borrower's knowledge, there are no liens, other than liens
granted under the Loan Documents, on any real or personal property of Borrower.
(The Borrower agrees to execute such additional documents and to take such other
action as may be reasonably requested by the Bank to give effect to this
Modification.
The Term Loan, Term Loan Facility and Seasonal Loan Agreement is hereby amended
accordingly but otherwise shall remain in full force and effect.
<PAGE>
2
CoBANK, ACB (formerly known as Springfield
Bank for Cooperatives)
By /s/ Ralph Lawrence
Its Vice President
ACCEPTED AND AGREED TO: 12/22/95
(Date)
CURTICE-BURNS FOODS, INC. (successor to merger between PF
Acquisition Corp. and Curtice-Burns Foods, Inc.)
By /s/ Roy A. Myers
Its President
ACKNOWLEDGED AND AGREED TO: 12/22/95
(Date)
PRO-FAC COOPERATIVE, INC.
By /s/ William D. Rice
Its Assistant Treasurer
ACKNOWLEDGED AND AGREED TO: 12/22/95
(Date)
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.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By /s/ William D. Rice
Its Vice President
<PAGE>
1
3
CoBANK, ACB
LOAN AGREEMENT NO. T-6184-F,
T-6186-F, S-6183-F, and S-6181-F
December 18, 1995
CURTICE-BURNS FOODS, INC.
- --------------------------------------------------------------------------------
MODIFICATION OF
TERM LOAN, TERM LOAN FACILITY AND SEASONAL LOAN AGREEMENT
IT IS AGREED, That the Term Loan, Term Loan Facility and Seasonal Loan Agreement
dated as of November 3, 1994, entered into between Curtice-Burns Foods, Inc.
(successor to merger between PF Acquisition Corp. and Curtice-Burns Foods, Inc.)
("Borrower") and Springfield Bank for Cooperatives, now known as CoBank, ACB
("Bank"),as amended January 26,1995, July 19, 1995, August 30, 1995, September
1, 1995 and December 15, 1995 is hereby further amended as follows:
(1) Section 2.7 entitled Seasonal Loan Facility is modified by increasing the
Seasonal Loans to an aggregate principal amount not to exceed at any time
outstanding the lesser of (a) Eighty-Four Million Dollars ($84,000,000) or (b)
the Borrowing Base (the "Seasonal Loan Commitment") and is modified to allow the
Bank to make Seasonal Loans to the Borrower from time to time during the period
from January 3, 1996 through January 2, 1997. The Bank may, at its option, renew
the Seasonal Loan Commitment for one or more successive one (1)-year periods
from and after January 2, 1997.
(2) Section 2.9 entitled Repayment of Seasonal Loans is deleted in its entirety
and therefor a new section is substituted reading as follows:
Repayment of Seasonal Loans. The principal amount of the Seasonal Loans
shall be repaid in full on or before January 3, 1997, provided, however, that to
the extent the outstanding amount thereof exceeds, at the end of any month, the
Borrowing Base at the end of such month, such excess(es) shall be immediately
due and payable upon demand by the Bank.
(3) Section 2.10 entitled Annual Repayment Period is modified so that the
Borrower is obligated to repay the Seasonal Loans in full and to maintain the
Seasonal Loans in such fully paid status for a period of fifteen (15)
consecutive calendar days during each calendar year, each of which fifteen (15)
day periods shall be selected by the Borrower.
(4) Section 2.14 entitled Fees is modified by deleting paragraph (c) in its
entirety and substituting a paragraph reading as follows:
(c) The Borrower agrees to pay an origination fee ("Origination Fee") of
5/10 of 1 percent (.50%) on the Seasonal Loan Facility to be billed
by the Bank.
(5) Section 3.1 entitled Letter of Credit Accommodations is modified to allow
the Bank to provide the Borrower with a Letter of Credit Facility during the
period from January 1, 1996 through January 2, 1997. The Bank may, at its sole
option, renew the Commitment for Letter of Credit Accommodations for one or more
successive one (1)- year periods from and after January 2, 1997.
(6) Section 3.7 entitled L/C Limit is modified by decreasing the L/C Limit
outstanding at any time to Thirteen Million Dollars ($13,000,000).
All terms of the Term Loan, Term Loan Facility and Seasonal Loan Agreement and
any other related loan and collateral documents (collectively "Loan Documents")
remain in full force and effect and are hereby ratified and confirmed, except to
the extent modified by this Agreement, by Borrower.
<PAGE>
4
All Financial Statements and disclosures submitted to the Bank under the Loan
Documents are true and accurate in all material respects. Except as previously
disclosed to the Bank, there has been no material adverse change in the
financial condition or operations of Borrower.
The Loan Documents are not subject to any offset, claim, or defense by Borrower.
All liens granted by Borrower to the Bank (i) remain in full force and effect,
(ii) are not subject to any claim or defense, and (iii) retain a first priority
lien position.
To the best of Borrower's knowledge, there are no liens, other than liens
granted under the Loan Documents, on any real or personal property of Borrower.
(The Borrower agrees to execute such additional documents and to take such other
action as may be reasonably requested by the Bank to give effect to this
Modification.
The Term Loan, Term Loan Facility and Seasonal Loan Agreement is hereby amended
accordingly but otherwise shall remain in full force and effect.
CoBANK, ACB (formerly known as Springfield
Bank for Cooperatives)
By /s/ Ralph Lawrence
Its Vice President
ACCEPTED AND AGREED TO: 12/22/95
(Date)
CURTICE-BURNS FOODS, INC. (successor to merger between PF
Acquisition Corp. and Curtice-Burns Foods, Inc.)
By /s/ Roy A. Myers
Its President
ACKNOWLEDGED AND AGREED TO: 12/22/95
(Date)
PRO-FAC COOPERATIVE, INC.
By /s/ William D. Rice
Its Assistant Treasurer
ACKNOWLEDGED AND AGREED TO: 12/22/95
(Date)
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.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By /s/ William D. Rice
Its Vice President
<PAGE>
5
CoBank, ACB
LOAN AGREEMENT NO. T-6184-F, T-6186-F,
S-6183-F, and S-6181-F
June 28, 1996
CURTICE-BURNS FOODS, INC.
- -------------------------------------------------------------------------------
MODIFICATION OF
TERM LOAN, TERM LOAN FACILITY AND SEASONAL LOAN AGREEMENT
IT IS AGREED, That the Term Loan, Term Loan Facility and Seasonal Loan
Agreement, dated as of November 3, 1994, entered into between Curtice-Burns
Foods, Inc. (successor to merger between PF Acquisition Corp. and Curtice-Burns
Foods, Inc.) ("Borrower") and Springfield Bank for Cooperatives, now known as
CoBank, ACB ("Bank"), as amended January 26, 1995, July 19, 1995, August 30,
1995, September 1, 1995, December 15, 1995 and December 18, 1995 is hereby
further amended as follows:
Section 1.1 entitled Defined Terms is modified by inserting therein in
alphabetical order the following definitions:
"Curtice-Burns Maximum Credit" means, at any time, the Maximum Credit
less the aggregate outstanding principal amount of Parent Seasonal Loans.
"Maximum Credit" means, at any time, Eighty-Four Million ($84,000,000).
"Parent Loan Agreement" means the Seasonal Loan Agreement, dated as of
June 28, 1996, between the Parent and the Bank.
"Parent Seasonal Loans" means "Seasonal Loans", as defined in the
Parent Loan Agreement, made by the Bank to the Parent pursuant to the Parent
Loan Agreement.
Section 2.7 entitled Seasonal Loan Facility is modified by limiting the
Seasonal Loans to an aggregate principal amount not to exceed at any time
outstanding the lesser of (a) the lesser of (i) Eighty-Four Million Dollars
($84,000,000) and (ii) the Borrowing Base, and (b) the Curtice-Burns Maximum
Credit (the "Seasonal Loan Commitment").
Subsection (g) of Section 7.8 entitled Investments is deleted
and the following is substituted therefor:
(g) [intentionally deleted].
Section 9.1 entitled Events of Default is modified by adding thereto a
new subsection (u) reading as follows:
(u) an "Event of Default" shall have occurred under and as
defined in the Parent Loan Agreement.
All terms of the Term Loan, Term Loan Facility and Seasonal Loan Agreement and
any other related loan and collateral documents (collectively "Loan Documents")
remain in full force and effect and are hereby ratified and confirmed, except to
the extent modified by this Agreement, by Borrower.
All Financial Statements and disclosures submitted to the Bank under the Loan
Documents were true and accurate as of the date thereof in all material
respects. Except as previously disclosed to the Bank, there has been no material
adverse change in the financial condition or operations of Borrower since the
date of the most recent Financial Statements submitted to the Bank under the
Loan Documents.
<PAGE>
6
The Loan Documents are not subject to any offset, claim, or defense by Borrower.
All liens granted by Borrower to the Bank and not released by the Bank (i)
remain in full force and effect, (ii) except as otherwise permitted, are not
subject to any claim or defense, and (iii) to the extent such liens have had a
first priority position, such liens retain a first priority position.
To the best of Borrower's knowledge, there are no liens, other than liens
granted under the Loan Documents and Permitted Liens, on any real or personal
property of Borrower.
The Borrower agrees to execute such additional documents and to take such other
action as may be reasonably requested by the Bank to give effect to this
Modification.
This Term Loan, Term Loan Facility and Seasonal Loan Agreement is hereby amended
accordingly but otherwise shall remain in full force and effect.
[CONTINUED ON FOLLOWING PAGE]
[CONTINUED FROM PREVIOUS PAGE]
CoBANK, ACB (formerly known as Springfield
Bank for Cooperatives)
By /s/ Ralph Lawrence
Its Vice President
ACCEPTED AND AGREED TO: June 28, 1996
(Date)
CURTICE-BURNS FOODS, INC. (successor to merger between
PF Acquisition Corp. and Curtice-Burns Foods, Inc.)
By /s/ William D. Rice
Its Senior Vice President
ACKNOWLEDGED AND AGREED TO: June 28, 1996
(Date)
PRO-FAC COOPERATIVE, INC.
By /s/ William D. Rice
Its Assistant Treasurer
ACKNOWLEDGED AND AGREED TO: June 28, 1996
(Date)
CURTICE-BURNS EXPRESS, INC.
FINGER LAKES PACKAGING COMPANY, INC.
HUSMAN SNACK FOODS COMPANY, INC.
KENNEDY ENDEAVORS, INCORPORATED
SEASONAL EMPLOYERS, INC.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By /s/ William D. Rice
Its Vice President
<PAGE>
4
1
Exhibit 10.17
CURTICE-BURNS FOODS, INC.
EQUITY VALUE PLAN
1. PURPOSE. The purpose of the Curtice-Burns Foods, Inc. Equity Value Plan
(the "Plan") is to incent its officers and other key employees who are
primarily responsible for the management of the business to create and
improve the long-term value of the Company, and to align management's
financial objectives with those of the Company's owners and stakeholders.
It is intended that this objective will be effected through the granting of
units of "phantom stock", (hereafter referred to as "EVP units"). It is the
intent of the Curtice-Burns Foods, Inc. (the "Company") that the Plan shall
constitute a "top hat plan" for a select group of management employees, as
such term is used in the Employee Retirement Income Security Act of 1974.
The Plan is a cash-based compensation program. No securities are actually
issued to the participating employees. Rather, EVP units are created. These
EVP units have a value, in this case based on a formula which incorporates
various performance factors. The value of the EVP units fluctuates based on
the performance of the Company. The criteria which control unit values
fluctuate in a manner similar to the performance criteria which normally
impact a Company's stock value.
2. ADMINISTRATION AND INTERPRETATION OF THE PLAN. The Plan shall be
administered by the Phantom Stock Plan Committee (the "Committee") which
shall consist of at least three (3) employees of the Company. The members
of the Committee shall be appointed by and shall serve at the pleasure of
the Curtice-Burns Foods, Inc. Board of Directors (the "Board"). The
Committee shall have the authority to adopt rules and regulations for
carrying out the Plan, and shall conclusively determine all questions and
disputes involving the interpretation or construction of the Plan unless
otherwise determined by the Board.
3. ELIGIBILITY. Eligibility for participation in the Plan is based upon
approval by the Board. EVP units may be granted to all key employees
(including officers, whether or not they are directors) of the Company, and
of any subsidiary corporation of the Company who are selected by the
Committee to receive such EVP units. The term "Company," wherever used in
this Plan, shall include any such subsidiary corporation.
4. EVP UNIT GRANTS. The grant of EVP units will be reserved to the Board. EVP
units shall be evidenced by a notice of grant prepared in such form
consistent with this Plan as the Committee shall approve from time to time.
The notice shall specify the number of EVP units granted, the date on which
the EVP units are granted, and the beginning value of the EVP units.
5. VALUATION OF EVP UNITS. The determination of the beginning value of EVP
units at the time of grant will be reserved to the Board. This value will
be expressed as (a) a level of the Company's earnings before interest,
taxes, depreciation and amortization (EBITDA) multiplied by a factor of six
(6), less (b) a level of the Company's interest-bearing debt; the sum of
which shall be divided by ten million (10,000,000) EVP units. The potential
value of future payments from the Plan is equal to the appreciation in the
value the EVP units determined at the end of each fiscal year subsequent to
the grant date. This value will be expressed as (a) the Company's fiscal
year end earnings before interest, taxes, depreciation and amortization
(EBITDA) multiplied by a factor of six (6), less (b) the Company's
interest-bearing debt at the end of each fiscal year; the sum of which
shall be divided by ten million (10,000,000) EVP units. Notwithstanding the
2
<PAGE>
foregoing, no appreciated value in the EVP units will accrue nor will any
EVP units vest, in any fiscal year in which less than 100% of Commercial
Market Value is paid to Pro-Fac Cooperative members for product purchased
by the Company. Commercial Market Value is defined as the weighted average
price paid by other commercial processors for similar crops sold under
preseason contracts and in the open market in the same or competing market
areas.
6. VESTING OF EVP UNITS. Subject to the provisions of paragraphs 10, 11 and 12
hereof concerning a termination of employment by reason of retirement,
death or permanent disability, each EVP unit granted thereunder shall vest
in 25% intervals on each of the first four anniversaries of the grant of
the EVP unit. This results in full vesting on the fourth anniversary of the
date of grant. Notwithstanding the foregoing, the Board shall have the
authority to vary the vesting of an EVP unit at the time of grant, or
accelerate the vesting of EVP units, in which case the EVP unit shall be
exercised at such time and in such manner as specified by the Board.
7. INVESTMENT PROVISIONS. All EVP units must remain invested within the Plan
for a period of at least five years. During this period, the units are
valued according to the valuation formula as defined in paragraph 5 hereof.
An election to lock in the appreciated value of the EVP unit may be made at
any time after the fifth anniversary of the date of grant and prior to the
tenth anniversary of the date of grant. The "locked in" value of units that
are no longer "in the market" will be converted to a fixed rate of return
under the Company's Non-qualified Retirement Savings and Incentive Plan.
Upon the tenth anniversary of the date of grant, the appreciated value of
the EVP units are either paid to the employee in the form of cash
compensation, or will remain in the Non-qualified Retirement Savings and
Incentive Plan, pursuant to the distribution election made by the employee
at the time of grant in accordance with paragraph 8.
8. DISTRIBUTION PROVISIONS. At the time of grant, each employee must make a
distribution election for the EVP units. The first distribution alternative
available to the employee is for payment of the value of the units at the
tenth anniversary of the date of grant. Such a distribution is paid in a
single sum as compensation taxable to the employee at that time.. The Board
may, in its sole discretion, grant EVP units with a cash payout date
earlier than the tenth anniversary of the date of grant. The second
distribution alternative is to convert the EVP units into a deferred
compensation account pursuant to the terms of the Curtice-Burns Foods Inc.
Non-qualified Retirement Savings and Incentive Plan at the tenth
anniversary of the date of grant. This distribution election is made at the
date of grant. The election sets forth the attained age and distribution
amounts applicable to the converted units, in accordance with the
distribution election provisions of the Non-qualified Retirement Savings
and Incentive Plan.
9. TERMINATION IN THE ORDINARY COURSE. In the event that the employment of an
employee terminates for any reason other than death, disability, or
retirement, the unvested portion of any EVP units will be immediately
forfeited. Upon termination of employment, the accumulated value of any
vested EVP units will immediately be paid to the employee in the form of
cash compensation.
10. DISABILITY. In the event that the employment of the employee with the
Company is terminated by reason of the employee's disability, any unvested
EVP units will immediately vest, and the accumulated value of such EVP
units will be paid in the form of cash compensation to the employee in a
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<PAGE>
single sum. For purposes of the Plan, disability is defined as a permanent
and total disability which the Committee in its sole discretion is of a
nature that prevents the employee from performing his or her normal duties
and responsibilities, and which lasts for a period of twelve or more
consecutive months.
11. DEATH. In the event of the death of an employee either (a) while an
employee of the Company, or (b) during the three (3) year period following
the employee's termination of employment by reason of retirement as defined
below, any unvested EVP units will immediately vest. The accumulated value
of such EVP units will be paid to the employee's beneficiary as designated
on the beneficiary election made for the Curtice-Burns Foods Non-qualified
Retirement Savings and Incentive Plan, or, if no such beneficiary
designation has been made, to the employee's estate.
12. RETIREMENT. In the event of a termination of employment by reason of
retirement, all unvested EVP units will continue to vest in accordance
paragraph for a period of three (3) years following the retirement date of
the employee. At the end of the three year period following the employee's
retirement date, the accumulated value of all vested EVP units will be paid
to the employee in the form of cash compensation in a single sum.. The
Board may, in its sole discretion, accelerate the vesting schedule for
employees who are approaching or have attained normal retirement age.
13. NON-ASSIGNABILITY OF EVP UNITS. No EVP units shall be assignable or
transferable by the employee except by will or by the laws of descent and
distribution.
14. TERMINATION AND AMENDMENT OF THE PLAN. The Board may terminate this Plan at
any time. Termination of the Plan will not affect rights and obligations
theretofore granted and then in effect. The Board may at any time, without
limitation, and from time to time modify or amend this Plan or the terms of
EVP units hereunder in any respect whatsoever, provided, however, that no
termination, modifications or amendment to the Plan or any agreement
thereunder shall, without the consent of the employee to whom any grant
shall theretofore have been made, alter or impair the rights of such
employee, unless such termination, modifications or amendment to the Plan
are made in compliance with any law or regulation applicable to the Plan,
or are required to avoid any penalties or excise taxes relating to such
laws or regulations.
15. CONSOLIDATION OR MERGER. No provision of this Plan shall prevent the
consolidation or merger of the Company with or into any corporation, or
prevent the sale or transfer by the Company of its property or any part
thereof. The successor corporation resulting from any consolidation,
merger, or transfer shall succeed the Company and become a party hereto.
16. TERMINATION IN EVENT OF MERGER, ETC. If the Company merges or consolidates
with another corporation, or sells or transfers all or substantially all of
its assets, and if the successor corporation refuses to succeed the Company
and become a party to this Plan, the participants (and beneficiaries) of
the Plan shall be entitled to all legal and equitable remedies, including
injunctive relief and other equitable relief to prevent the transfer of all
or substantially all of the Company's assets.
17. LIMITATIONS ON CONSOLIDATION, MERGER OF PLAN OR TRANSFER OF PLAN ASSETS. In
the event of this Plan's merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each participant in the Plan (if
the Plan then terminates) shall be entitled to receive a benefit
immediately after such merger, consolidation or transfer which is equal to
or greater than the benefit he or she would have been entitled to receive
<PAGE>
immediately before the merger, consolidation or transfer (if the Plan had
then terminated).
18. GOVERNING LAW. This Plan has been executed in the State of New York and all
questions pertaining to its validity, construction an administration shall
be determined in accordance with the laws of New York or, if applicable,
the provisions of ERISA.
19. EMPLOYMENT RIGHTS. It is understood that the establishment of this Plan
gives no rights whatever to a participant to be retained in the employment
or service of the Company, and all participants shall remain subject to
discharge to the same extent as if this instrument had never been executed.
Nothing contained herein shall be construed as a contract of employment.
20. UNFUNDED, UNSECURED OBLIGATION. The Company's obligation to participants
represents nothing more than it unfunded, unsecured promise to make the
payments described in this Plan.
IN WITNESS WHEREOF, the undersigned has established this plan
effective for all purposes as of June 24, 1996.
CURTICE-BURNS FOODS, INC.
BY: /s/ Lois Warlick-Jarvie
Vice President Human Resources
<PAGE>
1
Exhibit 10.18
[EXECUTION COPY]
SEASONAL LOAN AGREEMENT
between
PRO-FAC COOPERATIVE, INC.
and
COBANK, ACB
Dated as of June 28, 1996
<PAGE>
2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms
Section 1.2 Accounting Terms
SECTION 2. AMOUNT AND TERMS OF THE LOANS
Section 2.1 [Intentionally Omitted]
Section 2.2 [Intentionally Omitted]
Section 2.3 [Intentionally Omitted]
Section 2.4 [Intentionally Omitted]
Section 2.5 [Intentionally Omitted]
Section 2.6 [Intentionally Omitted]
Section 2.7 Seasonal Loans
Section 2.8 Seasonal Loan Note
Section 2.9 Repayment of Seasonal Loans
Section 2.10 [Intentionally Omitted]
Section 2.11 Notice and Manner of Borrowing
Section 2.12 [Intentionally Omitted]
Section 2.13 Interest.
Section 2.14 Facility Fee
Section 2.15 Authorization for Note
Section 2.16 Prepayments
Section 2.17 Method of Payment
Section 2.18 Use of Proceeds
Section 2.19 Illegality
Section 2.20 [Intentionally Omitted]
Section 2.21 [Intentionally Omitted]
Section 2.22 [Intentionally Omitted]
Section 2.23 [Intentionally Omitted]
Section 2.24 [Intentionally Omitted]
Section 2.25 Security
SECTION 3. [Intentionally Omitted]
Section 3.1 [Intentionally Omitted]
Section 3.2 [Intentionally Omitted]
Section 3.3 [Intentionally Omitted]
Section 3.4 [Intentionally Omitted]
Section 3.5 [Intentionally Omitted]
Section 3.6 [Intentionally Omitted]
Section 3.7 [Intentionally Omitted]
Section 3.8 [Intentionally Omitted]
SECTION 4. CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Loans as of Closing Date
Section 4.2 Conditions Precedent to all Loans
SECTION 5. REPRESENTATIONS AND WARRANTIES
Section 5.1 Incorporation, Good Standing, and Due Qualification
Section 5.2 Corporate Power and Authority
Section 5.3 Legally Enforceable Agreement
Section 5.4 Labor Disputes and Acts of God
Section 5.5 Other Agreements
Section 5.6 Litigation
Section 5.7 No Defaults on Outstanding Judgments or Orders
<PAGE>
3
Section 5.8 Ownership and Liens
Section 5.9 Subsidiaries and Ownership of Stock
Section 5.10 ERISA
Section 5.11 Operation of Business
Section 5.12 Taxes
Section 5.13 Debt
Section 5.14 Environment
Section 5.15 [Intentionally Omitted]
Section 5.16 Eligible Borrower Status
SECTION 6. AFFIRMATIVE COVENANTS
Section 6.1 Maintenance of Existence
Section 6.2 Maintenance of Records
Section 6.3 Maintenance of Properties
Section 6.4 Conduct of Business
Section 6.5 Maintenance of Insurance
Section 6.6 Compliance With Laws
Section 6.7 Right of Inspection
Section 6.8 Environment
Section 6.9 Monthly Borrowing Base Certificates
Section 6.10 [Intentionally Omitted]
Section 6.11 Reporting Requirements
SECTION 7. NEGATIVE COVENANTS
Section 7.1 Liens
Section 7.2 Debt
Section 7.3 Mergers, Etc.
Section 7.4 Leases
Section 7.5 Sale and Leaseback
Section 7.6 Dividends; Patronage
Section 7.7 Sale of Assets
Section 7.8 Investments
Section 7.9 Guaranties, Etc.
Section 7.10 Transactions With Affiliates
Section 7.11 Fiscal Year
SECTION 7A. FINANCIAL COVENANTS
Section 7A.1 Minimum Working Capital
Section 7A.2 Minimum Tangible Net Worth
Section 7A.3 Long Term Debt to Equity Ratio
Section 7A.4 Total Net Worth
Section 7A.5 Consequence of Non-Compliance
SECTION 8. INVESTMENT BY BORROWER IN STOCK OF BANK
Section 8.1 Initial Investment in Class C Stock
Section 8.2 Capitalization
Section 8.3 Security for Bank Stock Purchase Obligations
Section 8.4 Pledge of Bank Stock and Patron's Equities
SECTION 9. EVENTS OF DEFAULT
Section 9.1 Events of Default
Section 9.2 Remedies
SECTION 10. MISCELLANEOUS
Section 10.1 Account Stated
Section 10.2 Amendments, Etc.
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4
Section 10.3 Notices
Section 10.4 No Waiver
Section 10.5 Successors and Assigns
Section 10.6 Assignments and Participations
Section 10.7 Costs, Expenses, and Taxes
Section 10.8 Integration
Section 10.9 Indemnity
Section 10.10 Governing Law
Section 10.11 Consent to Jurisdiction
Section 10.12 Waiver of Jury Trial
Section 10.13 [Intentionally Omitted]
Section 10.14 Severability of Provisions
Section 10.15 Headings
Section 10.16 Counterparts
<PAGE>
3
5
SEASONAL LOAN AGREEMENT
SEASONAL LOAN AGREEMENT, dated as of June 28, 1996, between PRO-FAC
COOPERATIVE, INC., a New York cooperative corporation (the "Borrower") and
COBANK, ACB, a corporation established under the laws of the United States of
America and continuing as a federally-chartered instrumentality of the United
States under the Farm Credit Act of 1971, as amended (the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower has requested seasonal loans from the Bank;
WHEREAS, the Borrower is an eligible farmers' cooperative association
as defined in the Farm Credit Act of 1971, as amended; and
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Bank is willing to make seasonal loans to the Borrower;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. Terms used and not otherwise defined in this
Agreement shall have the meanings set forth in the Curtice-Burns Loan Agreement
(as defined below). As used in this Agreement, the following terms have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
"Affiliate" means any Person (A) which directly or indirectly controls,
or is controlled by, or is under common control with the Borrower or a
Subsidiary; (B) which directly or indirectly beneficially owns or holds five
percent (5%) or more of any class of voting stock of the Borrower or any
Subsidiary; or (C) five percent (5%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Borrower or a
Subsidiary; provided that the Bank shall not be deemed an Affiliate of Parent or
any of its Subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Seasonal Loan Agreement, as amended,
supplemented, or modified from time to time.
"Bank Stock" shall have the meaning assigned to such term in Section
8.1.
"Bankruptcy Code" shall mean title 11 of the United States Code as
enacted in 1978, as the same may have heretofore been or may hereafter be
amended, recodified, modified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
"Borrower" shall have the meaning assigned to such term in the first
sentence of this Agreement.
"Borrowing Base Certificate" shall have the meaning assigned to such
term in Section 6.9.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks in New York City are authorized or required to close
<PAGE>
under the laws of the State of New York and, if the applicable day relates to a
LIBOR Loan, LIBOR Interest Period, or notice with respect to a LIBOR Loan,
a day on which
dealings in Dollar deposits are also carried on in the London Interbank Market
and banks are open for business in London.
"Capital Leases" means all leases which have been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Closing Date" means June 28, 1996 or such other date as may be agreed upon
by the parties hereto.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations and published interpretations thereof.
"Collateral" means all property which is subject or is to be subject to the
Lien granted by the Borrower pursuant to the Parent Security Agreement.
"Commitment" shall have the meaning ascribed to such term in Section 2.7.
"Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
414(b) or 414(c) of the Code.
"Curtice-Burns" means Curtice-Burns Foods, Inc., a New York corporation,
and a wholly-owned subsidiary of the Borrower.
"Curtice-Burns Loan Agreement" means the Term Loan, Term Loan Facility and
Seasonal Loan Agreement, dated as of November 3, 1994, by and among PF
Acquisition Corp., Curtice-Burns, Inc. (successor by merger to PF Acquisition
Corp.) and CoBank, ACB (successor by merger to Springfield Bank for
Cooperatives) as amended, supplemented or modified from time to time.
"Curtice-Burns Seasonal Loans" means the "Seasonal Loans" (as defined in
the Curtice-Burns Loan Agreement) made by the Bank to Curtice-Burns pursuant to
the Curtice-Burns Loan Agreement.
"Debt" means, with respect to any Person, without duplication, all items
which, in accordance with GAAP, should be included in determining total
liabilities as shown on the liability side of a balance sheet as of the date on
which such Debt is to be determined and includes, whether or not so reflected,
(a) indebtedness or liability for borrowed money; (b) obligations evidenced by
bonds, debentures, notes, or other similar instruments; (c) obligations for the
deferred purchase price of property or services (including trade obligations
arising in the ordinary course of business, deferred compensation arrangements
for employees and obligations under the Marketing Agreement); (d) all
indebtedness arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property); (e) obligations
as lessee under Capital Leases; (f) current liabilities in respect of unfunded
vested benefits under Plans covered by ERISA; (g) monetary obligations under
letters of credit; (h) monetary obligations under acceptance facilities; (i) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to assure a creditor
against loss.
"Default" means any event or condition that would become an Event of
Default after notice, or passage of time, or both.
"Disinterested Directors" means directors of the Borrower who are not
affiliates of either the Borrower or Curtice-Burns.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"Event of Default" shall have the meaning assigned to such term in Section
9.1.
"Facility Fee" shall have the meaning assigned to such term in Section
2.14.
"Fiscal Year" means each fiscal year ending on the last Saturday of June.
<PAGE>
7
"Funding Date" shall mean, with respect to any Loan, the date of the
funding thereof by the Bank.
"GAAP" means generally accepted accounting principles in the United States.
"Good Faith" means honesty in fact in the conduct or transaction concerned,
without regard to whether standards which might be deemed commercially
reasonable have been observed.
"Insolvency Event" shall have the meaning assigned to such term in Section
9.1.
"Interest Rate" means eleven and sixty-five hundredths percent (11.65%) per
annum.
"Liabilities" means, at any given time, all liabilities of Borrower and its
Subsidiaries on a consolidated basis which would be classified as liabilities
under GAAP.
"Lien" means any mortgage, deed of trust, statutory trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction to evidence
any of the foregoing).
"Loans" shall have the meaning assigned to such term in Section 2.7.
"Loan Documents" means, collectively, this Agreement, the Seasonal Note,
the Parent Security Agreement and all related documents, instruments and
agreements executed and delivered in connection therewith, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
"Marketing Agreement" means the Marketing and Facilitation Agreement, dated
as of November 3, 1994, between the Borrower and Curtice-Burns, as such
agreement has been or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
"Maximum Credit" means, at any time, Eighty-Four Million Dollars
($84,000,000).
"Member Equity" means all net proceeds received by the Borrower at any time
subsequent to the Closing Date from the sale and issuance by the Borrower to its
members of equity securities and/or (solely for the purposes of this definition)
subordinated debentures (other than the Subordinated Notes) permitted under the
Parent Guaranty.
"Modification of Curtice-Burns Loan Agreement" means the Modification of
the Curtice-Burns Loan Agreement, dated as of the date hereof, between
Curtice-Burns and the Bank.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA.
"Note" shall have the meaning assigned to such term in Section 2.8.
"Obligations" means any and all obligations, liabilities and indebtedness
of the Borrower to the Bank of every kind and description now existing and
hereafter arising under this Agreement or any other Loan Documents, however
evidenced, whether direct or indirect, absolute or contingent, joint or several,
secured or unsecured, due or not due, primary or secondary, liquidated or
unliquidated, whether arising before, during or after the initial or any renewal
term hereof, or after the commencement of any case with respect to the Borrower
under the Bankruptcy Code or any similar statute, including, without limitation,
all principal, interest, financing charges, fees, commissions and expenses
payable to the Bank, including, but not limited to, reasonable attorneys' fees
and disbursements, chargeable to Borrower and due from the Borrower under this
Agreement or any other Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
<PAGE>
8
"Permitted Liens" shall have the meaning assigned to such terms in Section
7.1.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any pension plan which is covered by Title IV of ERISA and in
respect of which the Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA.
"Principal Office" means the Bank's office at 5500 S. Quebec Street,
Englewood, Colorado 80111.
"Pro-Fac Maximum Credit" means, at any time, the Maximum Credit less the
aggregate outstanding principal amount of the Curtice-Burns Seasonal Loans.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Retains" means patronage income allocated but not distributed to members
of the Borrower and retained as such members' equity in the Borrower.
"Seasonal Loan Commitment" shall have the meaning assigned to such term in
Section 2.7.
"Seasonal Loans" shall have the meaning assigned to such term in Section
2.7.
"Seasonal Note" shall have the meaning assigned to such term in Section
2.8.
"Subordinated Notes" means, collectively, the Subordinated Notes issued by
Curtice-Burns pursuant to the Subordinated Notes Indenture and any senior
subordinated notes issued upon exchange thereof, substantially as described in
the Offering Memorandum dated October 24, 1994.
"Subordinated Notes Indenture" means the Indenture dated November 3, 1994
executed by and between Curtice-Burns and the Trustee, pursuant to which the
Subordinated Notes have been issued and payment and performance thereof are
governed and any indenture entered into in replacement thereof in connection
with the exchange of the Subordinated Notes issued on or about November 3, 1994.
"Subsidiary" means, as to the Borrower or as to Curtice-Burns, as the case
may be, a corporation of which shares of stock having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by the Borrower or by Curtice-Burns, as the case may be.
"Trustee" means IBJ Schroder Bank & Trust Company and any successor thereto
appointed pursuant to the Subordinated Notes Indenture.
Section 1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in paragraph 7.4 of
the Parent Guaranty, and all financial data submitted pursuant to this Agreement
shall be prepared in accordance with such principles.
SECTION 2. AMOUNT AND TERMS OF THE LOANS
Section 2.1 [Intentionally Omitted]
Section 2.2 [Intentionally Omitted]
<PAGE>
9
Section 2.3 [Intentionally Omitted]
Section 2.4 [Intentionally Omitted]
Section 2.5 [Intentionally Omitted]
Section 2.6 [Intentionally Omitted]
Section 2.7 Seasonal Loans. The Bank agrees, upon the terms and subject to
the conditions set forth in this Agreement, to make seasonal loans (the
"Seasonal Loans" or "Loans") to the Borrower from time to time during the period
from the Closing Date through January 1, 1997 in an aggregate principal amount
(the "Seasonal Loan Commitment" or "Commitment") not to exceed at any time
outstanding the lesser of (a) the lesser of (i) Twenty Million Dollars
($20,000,000) from the Closing Date through August 31, 1996 and Ten Million
Dollars ($10,000,000) thereafter and (ii) the Borrowing Base, and (b) the
Pro-Fac Maximum Credit. Within the limits of the Seasonal Loan Commitment, the
Borrower may borrow, repay pursuant to Section 2.16 and reborrow under this
Section 2.7. The Bank may, at its option, renew the Seasonal Loan Commitment for
one or more successive one (1) year periods from and after the expiration of the
initial term of the Seasonal Loan Commitment.
Section 2.8 Seasonal Loan Note. The Seasonal Loans shall be evidenced by a
promissory note (the "Seasonal Loan Note" or "Note") in form and substance
satisfactory to the Borrower and the Bank. The Seasonal Loan Note shall be
repaid with interest in accordance with this Agreement and the Seasonal Loan
Note.
Section 2.9 Repayment of Seasonal Loans. The principal amount of the
Seasonal Loans shall be repaid in full on or before January 2, 1997; provided,
however, that to the extent that the outstanding principal amount thereof
exceeds, at the end of any month, the Borrowing Base and/or the Pro-Fac Maximum
Credit at the end of such month, such excess(es) shall be immediately due and
payable upon demand by the Bank.
Section 2.10 [Intentionally Omitted]
Section 2.11 Notice and Manner of Borrowing.
(a) The Borrower shall give the Bank written notice (effective upon
receipt) of its request for each Loan on or before the requested
Funding Date for such Loan specifying (i) the requested Funding
Date for such Loan; and (ii) the amount of such Loan. In lieu of
delivering the above-described written notice of a requested
Loan, the Borrower may give the Bank a telephonic notice of any
requested Loan by the time required under this Section 2.11;
provided, that such notice shall be confirmed in writing by
delivery to the Bank (1) immediately of a telecopy of a written
notice of a requested Loan which has been signed by an authorized
officer of the Borrower and (2) promptly (and in no event later
than three (3) Business Days after the Funding Date) of a written
notice of a requested Loan containing the original signature of
an authorized officer of the Borrower.
(b) The Borrower shall notify the Bank in writing of the names of the
officers authorized to request Loans on behalf of the Borrower,
and shall provide the Bank with a specimen signature of each such
officer. The Bank shall be entitled to rely conclusively on such
officer's authority to request Loans on behalf of the Borrower,
until the Bank receives written notice to the contrary. The Bank
shall have no duty to verify the authenticity of the signature
appearing on any notice of a requested Loan or other writing
delivered pursuant to Section 2.11(a), and with respect to an
oral request for Loans, the Bank shall have no duty to verify the
identity of any individual representing herself/himself as one of
the officers authorized to make such request on behalf of the
Borrower. Not later than 3:00 P.M. New York time on the Funding
Date of the proposed Loan and upon fulfillment of the applicable
conditions set forth in Section 4, the Bank will make such Loan
available to the Borrower in immediately available funds by
crediting the amount thereof to such account as the Borrower
shall specify
(c) All notices given under this Section 2.11 shall be irrevocable
and shall be given not later than 12:00 Noon New York time on the
day which is not less than the number of Business Days specified
in Section 2.11(a) for such notice. The Bank shall not incur any
liability to the Borrower as a result of acting upon any
telephonic notice referred to in this Section 2.11, which notice
the Bank believes in Good Faith to have been given by a duly
authorized officer or other individual authorized to request
Loans on behalf of the Borrower or for otherwise acting in Good
Faith under this Section 2.11 and, upon the funding of any Loan
by the Bank in accordance with this Agreement pursuant to any
such telephonic notice, the Borrower shall be deemed to have
borrowed such Loan.
<PAGE>
10
Section 2.12 [Intentionally Omitted]
Section 2.13 Interest.
(a) The Borrower shall pay interest to the Bank on the outstanding
and unpaid principal amount of the Loans at the Interest Rate.
(b) Interest on each Loan shall be calculated n the basis of a
year of 360 days for the actual number of days elapsed. In
calculating interest, the date each Loan is made shall be
included and the date each Loan is repaid shall be excluded from
such calculation.
(c) Interest on the Loans shall be paid in immediately available
funds at the Bank's Principal Office monthly, in arrears, on the
first Business Day of each calendar month commencing August 1,
1996. (d) Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until
paid in full, payable on demand of the Bank at a rate equal to
the Interest Rate, plus two percent (2%).
Section 2.14 Facility Fee. The Borrower agrees to pay to the Bank a
non-refundable facility fee (the "Facility Fee") in the amount of Two Hundred
Fifty Thousand Dollars ($250,000). The Facility Fee shall be deemed earned and
shall be payable in full on the Closing Date.
Section 2.15 Authorization for Note. The Bank is hereby authorized by the
Borrower to endorse on any schedule attached to the Note the amount of each Loan
and each payment of principal amount received by the Bank on account of such
Loan, which endorsement shall, in the absence of manifest error, be conclusive
as to the outstanding balance of such Loan made by the Bank; provided, however
that the failure to make such notation with respect to any Loan or payment shall
not limit or otherwise affect the obligations of the Borrower under this
Agreement or the Note evidencing such Loan.
Section 2.16 Prepayments. The Borrower may upon at least one (1) Business
Days' notice to the Bank prepay the Note in whole or in part with accrued
interest to the date of such prepayment on the amount prepaid.
Section 2.17 Method of Payment.
(a) The Borrower shall make each payment under this Agreement and
under the Note not later than 12:00 Noon New York time on the
date when due in lawful money of the United States to the Bank at
its Principal Office in immediately available funds.
(b) The Borrower hereby authorizes the Bank, if and to the extent
payment of any of the Obligations is not made when due, whether
under this Agreement, under the Note, or otherwise, to make, at
its option, and subject to the terms and provisions of this
Agreement, a Loan for the account of the Borrower in the amount
of such past due payment, the proceeds of which shall be used to
satisfy such past due payment. Nothing contained herein, however,
shall in any manner affect, limit or impair the liability of the
Borrower for such past due payment, which liability shall remain
absolute until the past due payment is made in full.
(c) Whenever any payment to be made under this Agreement or under the
Note shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of the payment of interest due on the Loan
evidenced thereby.
Section 2.18 Use of Proceeds. The proceeds of the Loans shall be used by
the Borrower for working capital purposes. The Borrower will not, directly or
indirectly, use any part of such proceeds in a manner that gives rise to a
violation of Regulation U of the Board of Governors of the Federal Reserve
System or Regulation X of such Board of Governors.
<PAGE>
11
Section 2.19 Illegality. Notwithstanding any other provision in this
Agreement, if the Bank determines that any applicable law, rule, or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank, or comparable agency shall make it unlawful or
impossible for the Bank to maintain its Commitment then upon notice to the
Borrower by the Bank the Commitment of the Bank shall terminate.
Section 2.20 [Intentionally Omitted]
Section 2.21 [Intentionally Omitted]
Section 2.22 [Intentionally Omitted]
Section 2.23 [Intentionally Omitted]
Section 2.24 [Intentionally Omitted]
Section 2.25 Security.Security
(a) The Obligations shall be secured by the Parent Security
Agreement.
(b) All references in the Parent Security Agreement to the
"Guaranteed Obligations", as defined therein, are amended to be
references to the "Guaranteed Obligations and the Obligations" as
"Obligations" is defined herein.
SECTION 3. [Intentionally Omitted].
Section 3.1 [Intentionally Omitted].
Section 3.2 [Intentionally Omitted].
Section 3.3 [Intentionally Omitted].
Section 3.4 [Intentionally Omitted].
Section 3.5 [Intentionally Omitted].
Section 3.6 [Intentionally Omitted].
Section 3.7 [Intentionally Omitted].
Section 3.8 [Intentionally Omitted].
SECTION 4. CONDITIONS PRECEDENT
Section 4.1 Conditions Precedent to Loans as of Closing Date. The Bank
shall have no obligation to make or provide any Loans to the Borrower on the
Closing Date unless prior to or concurrently with the making of the Loans all of
the following conditions have been satisfied:
(a) Waiver of Right to Borrow from Curtice-Burns. The Bank shall have
received from the Borrower an irrevocable waiver, effective no
later than June 27, 1996, of the Borrower's right at any time
thereafter to borrow from Curtice-Burns under the Marketing
Agreement.
<PAGE>
12
(b) Modification of Curtice-Burns Loan Agreement. The Modification of
the Curtice-Burns Loan Agreement shall have been duly executed
and delivered by Curtice-Burns.
(c) Compliance with Section 4.12 of the Subordinated Notes Indenture.
In connection with the execution and delivery of the Modification
of the Curtice-Burns Loan Agreement, the Bank shall have received
a certified copy of the Officer's Certificate executed and
delivered by Curtice-Burns to the Trustee in accordance with
Section 4.12 (ii)(a) of the Subordinated Notes Indenture.
(d) Agreement and Note. This Agreement and the Note shall have been
duly executed and delivered by the Borrower.
(e) Borrowing Base Certificate. The Bank shall have received a
Borrowing Base Certificate from Curtice-Burns showing as of the
Closing Date a Borrowing Base in an amount not less than the sum
of (i) the amount of the initial Loans requested to be made to
the Borrower on the Closing Date, plus (ii) the amount of
Seasonal Loans then outstanding to Curtice-Burns.
(f) Evidence of Corporate Action; Incumbency of Officers. The Bank
shall have received (i) certified (as of the Closing Date) copies
of all corporate action taken by the Borrower, including
resolutions of its Boards of Directors, authorizing the
execution, delivery, and performance of the Loan Documents and
(ii) a certificate (dated as of the Closing Date) of the
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign the
Loan Documents.
(g) Good Standing. The Bank shall have received certificates of good
standing for the Borrower from its jurisdiction of incorporation
and each jurisdiction in which it is qualified as a foreign
corporation, as set forth in Schedule 4.1(g).
(h) Representations True; No Event of Default. The Borrower shall
have delivered to the Bank an officer's certificate, dated the
Closing Date, stating that (i) the representations and warranties
contained in this Agreement are true and correct on and as of the
Closing Date, and (ii) no Default or Event of Default has
occurred and is continuing, or would result after giving effect
to any of the Loans.
(i) Opinions of counsel for the Borrower. The Bank and its counsel
shall have received from each of Howard, Darby & Levin and Harris
Beach and Wilcox, counsel for the Borrower and Curtice-Burns,
opinions dated the Closing Date, in form and substance
satisfactory to the Bank and its counsel.
(j) Fees and Disbursements of Counsel for the Bank. Counsel for the
Bank shall have received payment of any statements rendered for
its reasonable fees and disbursements posted through the date of
such statement for services rendered and disbursements made in
connection with this Agreement and the transactions contemplated
hereby (with the understanding that supplemental statements for
reasonable fees and disbursements subsequently posted will be
rendered thereafter).
(k) Proceedings Satisfactory. All proceedings and actions taken on or
prior to the Closing Date in connection with the transactions
contemplated by this Agreement shall be in form and substance
reasonably satisfactory to the Bank and its counsel, and the Bank
and its counsel shall have received copies of all documents that
the Bank or its counsel may reasonably request in connection with
such proceedings, actions and transactions.
Section 4.2 Conditions Precedent to all Loans. The obligation of the Bank
to make each Loan (including the initial Loans) shall be subject to the further
conditions precedent that on the date of such Loan:
(a) The following statements shall be true and, at the Bank's
request, the Bank shall have received a certificate signed by a
duly authorized officer of the Borrower dated the date of such
Loan, as the case may be, stating that:
(i) The representations and warranties contained in Section 5 of
this Agreement (other than Sections 5.5, 5.6, 5.9, 5.10,
5.13 and 5.14) and in the Parent Security Agreement (other
than Sections 4(e) through (h), inclusive,) thereof are
correct in all material respects on and as of the date of
such Loan, as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and is
continuing or would result from such Loan; and
<PAGE>
13
(b) If requested by the Bank in connection with any Loan, the Bank shall
have received a Borrowing Base Certificate from Curtice-Burns, dated
as of the Funding Date.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Bank the following, each of which shall survive the closing of
the transactions contemplated hereby:
Section 5.1 Incorporation, Good Standing, and Due Qualification. The
Borrower and each of its operating Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own
its assets and to transact the business in which it is now engaged or proposes
to be engaged in; and is duly qualified as a foreign corporation and in good
standing under the laws of each other jurisdiction in which such qualification
is required, except where the failure to be so qualified would not have a
material adverse effect on the Borrower and its operating subsidiaries, taken as
a whole.
Section 5.2 Corporate Power and Authority. The execution, delivery, and
performance by the Borrower of the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action and do not and will not
(a) require any consent or approval of the stockholders of the Borrower that has
not been obtained; (b) contravene the Borrower's charter or bylaws; (c) violate
any provision of any law, rule, regulation (including, without limitation
Regulations U and X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination, or award presently in
effect having applicability to the Borrower; (d) result in a breach of or
constitute a default under any material indenture, including, without
limitation, the Subordinated Notes Indenture, or material loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected; or (e) result
in, or require, the creation or imposition of any Lien upon or with respect to
any of the properties now owned or hereafter acquired by the Borrower except as
contemplated by the Loan Documents.
Section 5.3 Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of the Borrower, enforceable against the Borrower,
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
Section 5.4 Labor Disputes and Acts of God. Neither the business nor
the properties of the Borrower or any Subsidiary are affected by any fire,
explosion, accident, strike, lockout, or other labor dispute, drought, storm,
hail, earthquake, embargo, act of God or of a public enemy, or other casualty
(whether or not covered by insurance), materially and adversely affecting such
business or properties or the operation of the Borrower and it Subsidiaries,
taken as a whole, except as has been disclosed to the Bank.
Section 5.5 Other Agreements. Except as set forth in Schedule 5.5, neither
the Borrower nor any Subsidiary is a party to any indenture, loan or credit
agreement or to any lease or other agreement or instrument or subject to any
charter or corporate restriction which is reasonably likely to have a material
adverse effect on the business, properties, assets, operations or conditions,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole,
or the ability of the Borrower to carry out its obligations under the Loan
Documents. Except as set forth in Schedule 5.5, neither the Borrower nor any
Subsidiary is in default in any material respect of the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument material to its business to which it is a party.
Section 5.6 Litigation. Except as disclosed in Schedule 5.6, there is no
pending or, to the Borrower's knowledge, threatened action or proceeding against
or affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which is reasonably likely to, in any one
case or in the aggregate, materially adversely affect the financial condition,
operations, properties or business of the Borrower and its Subsidiaries, taken
as a whole, or the ability of the Borrower or any Subsidiary to perform its
obligations under the Loan Documents to which it is a party.
Section 5.7 No Defaults on Outstanding Judgments or Orders. The Borrower
and its Subsidiaries have complied with their respective obligations under all
judgments in
<PAGE>
14
excess of Five Hundred Thousand Dollars ($500,000) and neither the Borrower nor
any Subsidiary is in default with respect to any material judgment, writ,
injunction, decree, rule, or regulation of any court, arbitrator or federal,
state, municipal, or other governmental authority, commission, board, bureau,
agency or instrumentality domestic or foreign.
Section 5.8 Ownership and Liens. The Borrower and each Subsidiary has title
to, or valid leasehold interests in, all of their properties and assets, real
and personal, and none of the properties and assets owned by the Borrower or any
Subsidiary and none of their leasehold interests is subject to any Lien, except
for Permitted Liens, and except for such interests, properties and assets as are
no longer used or useful in the conduct of its business or as have been disposed
of in the ordinary course of business.
Section 5.9 Subsidiaries and Ownership of Stock. Set forth in Schedule 5.9
is a complete and accurate list of the Subsidiaries of the Borrower, showing
which Subsidiaries are operating, the jurisdiction of incorporation of each and
showing the ownership of the outstanding stock of each Subsidiary. All of the
outstanding capital stock of each such Subsidiary has been validly issued, is
fully paid and nonassessable and, other than Curtice Burns, is owned by
Curtice-Burns free and clear of all Liens, except for "Permitted Liens", as
defined in the Curtice-Burns Loan Agreement. All of the outstanding capital
stock of Curtice-Burns is owned by the Borrower free and clear of all Liens,
except for Permitted Liens.
Section 5.10 ERISA. The Borrower and each Subsidiary are in compliance in
all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction is continuing with respect to any
Plan; except as set forth in Schedule 5.10, no notice of intent to terminate a
Plan has been filed nor has any Plan been terminated since September 1, 1989; no
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate or appoint a trustee to administer a Plan, nor has the
PBGC instituted any such proceedings; except as set forth in Schedule 5.10,
neither the Borrower nor any Commonly Controlled Entity has completely or
partially withdrawn from a Multiemployer Plan since September 1, 1989; the
Borrower and each Commonly Controlled Entity have met their minimum funding
requirements under ERISA with respect to all of their Plans and, except as set
forth in Schedule 5.10, the present value of all vested benefits under each Plan
does not exceed the fair market value of all Plan assets allocable to such
benefits, as determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA; and neither the Borrower nor any
Commonly Controlled Entity has incurred any liability to the PBGC under ERISA.
Section 5.11 Operation of Business. The Borrower and its Subsidiaries
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
trade names or rights thereto, to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted and the
Borrower and its Subsidiaries are not in violation of any valid rights of others
with respect to any of the foregoing, except where the failure to possess or any
such violation would not have a material adverse effect on the Borrower and its
Subsidiaries, taken as a whole.
Section 5.12 Taxes. Except as set forth in Schedule 5.12, the Borrower and
each of its Subsidiaries have filed all tax returns (federal, state, and local)
required to be filed and have paid all taxes, assessments, and governmental
charges and levies thereon to be due including interest and penalties. The
federal income tax liabilities of the Borrower and its Subsidiaries have been
audited by the Internal Revenue Service and have been finally determined and
satisfied for all taxable years up to and including the taxable year 1988.
Section 5.13 Debt. Schedule 5.13 is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital Leases,
and other agreements, and arrangements presently in effect providing for or
relating to extensions of credit for borrowed money (including agreements and
arrangements for the issuance of letters of credit or for acceptance financing)
in respect of which the Borrower or any Subsidiary is in any manner directly or
contingently obligated in an aggregate principal amount in excess of Two Hundred
Fifty Thousand Dollars $250,000; and the maximum principal or face amounts of
the credit in question outstanding, as of March 30, 1996, are correctly stated,
and all Liens of any nature given or agreed to be given as security therefor are
correctly described or indicated in such Schedule.
Section 5.14 Environment. Except as set forth in Schedule 5.14, to the best
of the Borrower's knowledge, the Borrower and each Subsidiary have duly complied
with and their businesses, operations, assets, equipment, property, leaseholds
or other facilities are in compliance with the provisions of all federal, state
and local environmental, health and safety laws, codes and ordinances and all
rules and regulations promulgated thereunder. To the best of the Borrower's
knowledge, the Borrower and each Subsidiary have been issued all required
federal, state and local permits, licenses, certificates and approvals relating
to (a) air emissions; (b) discharges to surface water or groundwater; (c) noise
emissions; (d) solid or liquid waste disposal; (e) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or wastes (intended
hereby and hereafter to include any and all such
<PAGE>
15
materials listed in any federal, state, or local law, code or ordinance and all
rules and regulations promulgated thereunder as hazardous or potentially
hazardous); or (f) other environmental, health, or safety matters. A true,
accurate, complete and current list of all such permits, licenses, certificates
and approvals has been delivered to the Bank. Except as set forth in Schedule
5.14, neither the Borrower nor any Subsidiary has received notice of, nor knows
of nor suspects facts which might constitute any violations of, any federal,
state, or local environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder with respect to its businesses,
operations, assets, equipment, property, leaseholds, or other facilities. Except
as described in Schedule 5.14, to the best of the Borrower's knowledge, there
has been no emission, spill, release, or discharge into or upon (a) the air; (b)
soils, or any improvements located thereon; (c) surface water or groundwater; or
(d) the sewer, septic system or waste treatment, storage or disposal system
servicing the premises, in violation of any applicable law, of any toxic or
hazardous substances or wastes at or from the premises; and the premises of the
Borrower and its Subsidiaries are free of all such toxic or hazardous substances
or wastes. Except as set forth in Schedule 5.14, to the best of the Borrower's
knowledge, there has been no complaint, order, directive, claim, citation, or
notice by any governmental authority or any person or entity with respect to (a)
air emissions; (b) spills releases, or discharges to soils or improvements
located thereon surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (c) noise
emissions; (d) solid or liquid waste disposal; (f) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or waste; or (g)
other environmental, health or safety matters affecting the Borrower or any of
their businesses, operations, assets, equipment, property, leaseholds, or other
facilities. To the best of the Borrower's knowledge, neither the Borrower nor
its Subsidiaries have any indebtedness, obligations, or liability, absolute or
contingent, matured or not matured, with respect to the storage, treatment,
cleanup or disposal of any solid wastes, hazardous wastes, or other toxic or
hazardous substances (including without limitation any such indebtedness,
obligation or liability with respect to any current regulation, law, or statute
regarding such storage, treatment, cleanup, or disposal) which is not shown on
Schedule 5.14. Set forth in Schedule 5.14 is a list of all real property owned
or leased by the Borrower and its Subsidiaries at any time since November 3,
1994 wherever located, and a brief description of the business conducted at such
location.
Section 5.15 [Intentionally Omitted]. itted].
Section 5.16 Eligible Borrower Status. The Borrower is an eligible borrower
under the Farm Credit Act of 1971, as amended.
SECTION 6. AFFIRMATIVE COVENANTS. So long as any Obligations shall remain
unpaid or the Bank shall have any Commitment under this Agreement, the Borrower
will:
Section 6.1 Maintenance of Existence. Preserve and maintain, and cause each
operating Subsidiary to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each operating Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
required, except where the failure to be so qualified would not have a material
adverse effect on the Borrower and its operating Subsidiaries, taken as a whole,
and except as otherwise contemplated by Section 7.3.
Section 6.2 Maintenance of Records. Keep, and cause each operating
Subsidiary to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP (in all material respects)
consistently applied, reflecting all financial transactions of the Borrower and
its operating Subsidiaries.
Section 6.3 Maintenance of Properties. Maintain, keep, and preserve, and
cause each operating Subsidiary to maintain, keep, and preserve, all of its
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted.
Section 6.4 Conduct of Business. Continue, and cause each operating
Subsidiary to continue, to engage in a business of the same general type as
conducted by it on the date of this Agreement and to not permit any
non-operating Subsidiary to engage in a business other than one of the same
general type as conducted by the Borrower or any Subsidiary on the date of this
Agreement.
Section 6.5 Maintenance of Insurance. Maintain, and cause each Subsidiary
to maintain, insurance with financially sound and reputable insurance companies
or associations in such amounts and covering such risks as are usually carried
by companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
<PAGE>
16
Section 6.6 Compliance With Laws. Comply, and cause each Subsidiary to
comply, in all material respects with all applicable laws, rules, regulations,
and orders, such compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments, and governmental charges imposed
upon it or upon its property, except for such taxes, assessments and other
charges being contested in Good Faith by appropriate proceedings and for which
appropriate reserves are maintained.
Section 6.7 Right of Inspection. At any reasonable time and from time to
time, upon at least two (2) Business Days' notice prior to the occurrence of an
Event of Default and at any time and without prior notice upon and during the
continuance of an Event of Default, permit the Bank or any agent or
representative thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrower and
any Subsidiary, and to discuss the affairs, finances, and accounts of the
Borrower and any Subsidiary with any of their respective officers and directors
and the Borrower's independent accountants.
Section 6.8 Environment. Except as set forth in Schedule 5.14, be and
remain, and cause each Subsidiary to be and remain, in compliance in all
material respects with the provisions of all federal, state, and local
environmental, health and safety laws, codes and ordinances, and all rules and
regulations issued thereunder, provided that, with respect to the matters set
forth in Schedule 5.14, diligently exercise its reasonable commercial efforts to
remedy, and cause each Subsidiary to diligently exercise its reasonable
commercial efforts to remedy, same; notify the Bank immediately of any notice of
a hazardous discharge or environmental complaint received from any governmental
agency or any other party; notify the Bank promptly after becoming aware of any
hazardous discharge from or affecting its premises; immediately contain and
remove the same, in compliance with all applicable laws; promptly pay any fine
or penalty assessed in connection therewith, except as such fine or penalty is
being contested in Good Faith by appropriate proceedings and for which
appropriate reserves are maintained; permit the Bank to, upon reasonable notice
prior to the occurrence of an Event of Default and at any time and without prior
notice upon and during the continuance of an Event of Default, inspect the
premises, to conduct tests thereon and to inspect all books, correspondence, and
records pertaining thereto.
Section 6.9 Monthly Borrowing Base Certificates. At any time a Loan is
outstanding, cause Curtice-Burns to furnish to the Bank within twenty (20) days
of the end of each month a Borrowing Base Certificate ("Borrowing Base
Certificate") in substantially the form of Exhibit M to the Curtice-Burns Loan
Agreement.
Section 6.10 [Intentionally Omitted]. mitted]
Section 6.11 Reporting Requirements. Furnish to the Bank:
(a) Quarterly financial statements. As soon as available, and in any
event within forty-five (45) days after the end of each of the
first three quarters of each Fiscal Year of the Borrower,
consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as of the end of such quarter, consolidated
statements of cash flow and net proceeds of the Borrower and its
consolidated Subsidiaries for the period commencing at the end of
the previous Fiscal Year and ending with the end of such quarter,
and consolidated statements of changes in shareholders' and
members' capitalization of the Borrower and its consolidated
Subsidiaries for the portion of the Fiscal Year ended with the
last day of such quarter, all in reasonable detail and stating in
comparative form the respective figures for the corresponding
date and period in the previous Fiscal Year and all prepared in
accordance with GAAP, consistently applied (except for the
absence of footnotes and subject to year-end adjustments), and
certified by the chief financial officer of the Borrower;
(b) Annual financial statements. As soon as available, and in any
event within ninety (90) days after the end of each Fiscal Year
of the Borrower, consolidated balance sheets of the Borrower and
its consolidated Subsidiaries as of the end of such Fiscal Year,
and consolidated statements of cash flow and net proceeds of the
Borrower and its consolidated Subsidiaries for such Fiscal Year,
and consolidated statements of changes in shareholders' and
members' capitalization of the Borrower and its consolidated
Subsidiaries for such Fiscal Year, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the prior Fiscal Year and all
prepared in accordance with GAAP, consistently applied, and as to
the consolidated statements, accompanied by an opinion thereon by
Price Waterhouse LLP or other independent certified public
accountants selected by the Borrower and reasonably acceptable to
the Bank.
<PAGE>
17
(c) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Subsidiary by
independent certified public accountants in connection with
examination of the financial statements of the Borrower or any
Subsidiary made by such accountants;
(d) Certificate of No Default. Within forty-five (45) days after the
end of each of the first three fiscal quarters of each Fiscal
Year of the Borrower and within ninety (90) days after the end of
each Fiscal Year of the Borrower, a certificate of the chief
financial officer of the Borrower (i) certifying that to the best
of his knowledge no Default or Event of Default has occurred and
is continuing, or if a Default or Event of Default has occurred
and is continuing, a statement as to the nature thereof and the
action which is proposed to be taken with respect thereto; and
(ii) with computations demonstrating compliance with the
covenants contained in Section 7A.
(e) Accountant's Report. Simultaneously with the delivery of the
annual financial statements referred to in Section 6.11(b), a
certificate of the independent public accountants who audited
such statements to the effect that, in making the examination
necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes a Default
or Event of Default under Section 7.2, 7.6, 7.8 or 7A.1 through
7A.6, inclusive, or if such accountants shall have obtained
knowledge of any such condition or event, specify in such
certificate each such condition or event of which they have
knowledge and the nature and status thereof;
(f) Notice of Litigation. Promptly after becoming aware of the same,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower or
any Subsidiary which is reasonably likely to have a material
adverse effect on the financial condition, properties, or
operations of the Borrower or such Subsidiary;
(g) Notice of Defaults and Events of Default. As soon as possible and
in any event within five (5) Business Days after becoming aware
of the occurrence of each Default or Event of Default, a written
notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the
Borrower with respect thereto;
(h) ERISA Reports. As soon as possible, and in any event within
thirty (30) days after the Borrower knows or has reason to know
that any circumstances exist that constitute grounds entitling
the PBGC to institute proceedings to terminate a Plan subject to
ERISA with respect to the Borrower or any Commonly Controlled
Entity, and promptly, but in any event within two (2) Business
Days of receipt by the Borrower or any Commonly Controlled Entity
of notice that the PBGC intends to terminate a Plan or appoint a
trustee to administer the same, and promptly, but in any event
within five (5) Business Days of the receipt of notice concerning
the imposition of withdrawal liability in excess of Two Hundred
Fifty Thousand Dollars ($250,000) with respect to the Borrower or
any Commonly Controlled Entity, the Borrower will deliver to the
Bank a certificate of the chief financial officer of the Borrower
setting forth all relevant details and the action which the
Borrower proposes to take with respect thereto;
(i) Reports to Other Creditors. Promptly after the furnishing
thereof, copies of any statement or report furnished to any other
party pursuant to the terms of any indenture including without
limitation, the Subordinated Notes Indenture, loan, credit, or
similar agreement and not otherwise required to be furnished to
the Bank pursuant to any other clause of this Section 6.11;
(j) Financial Reports. Promptly after the sending or filing thereof,
copies of all financial statements, and reports which the
Borrower sends to its stockholders generally and copies of all
regular, periodic and special reports and all registration
statements which the Borrower or any Subsidiary files with the
Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national
securities exchange;
(k) Financial Plans. No later than sixty (60) days prior to the
commencement of each Fiscal Year, provide the Bank with a
financial plan for such Fiscal Year, prepared in a manner
substantially consistent with the Borrower's past practice. The
Bank shall advise the Borrower within ten (10) days after its
receipt of such plan if such plan is not reasonably satisfactory
to the Bank. Following receipt of such notice, the Borrower and
the Bank will work in Good Faith to develop such a plan that is
reasonably satisfactory to the Borrower and the Bank.
(l) Such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any Subsidiary as the
Bank may from time to time reasonably request.
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18
SECTION 7. NEGATIVE COVENANTS. So long as any Obligations shall remain
unpaid or the Bank shall have any Commitment under this Agreement, the Borrower
will not:
Section 7.1 Liens. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Lien, upon or with
respect to any of its properties now owned or hereafter acquired, except the
following (collectively, the "Permitted Liens"):
(a) Liens in favor of the Bank;
(b) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they
are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
(c) Liens imposed by law, such as mechanics', materialmen's,
landlord's, warehousemen's, and carrier's Liens, and other
similar Liens, securing obligations incurred in the ordinary
course of business which are not past due for more than ninety
(90) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have
been established;
(d) Liens under workers' compensation, unemployment insurance, Social
Security, or similar legislation, securing obligations that are
not past due and for which appropriate reserves have been
established;
(e) Monetary deposits or pledges or bonds to secure the performance
of bids, tenders, contracts (other than contracts for the payment
of money), leases (permitted under the terms of this Agreement),
public or statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds, or other similar obligations
arising in the ordinary course of business;
(f) Judgment and other similar Liens other than those, or any portion
thereof, for which an insurance company has unconditionally
agreed to provide coverage, securing Debt in an amount not in
excess of $250,000 arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(g) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere
with the occupation, use, and enjoyment by the Borrower or any
Subsidiary of the property or assets encumbered thereby in the
normal course of its business or materially impair the value of
the property subject thereto;
(h) Liens securing obligations of a Subsidiary to the Borrower,
Curtice-Burns or another Subsidiary;
(i) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such
acquisition (and not created in contemplation of such
acquisition), or a Lien incurred in connection with any
conditional sale or other title retention agreement; provided
that:
(i) Any property subject to any of the foregoing is acquired by
the Borrower or any Subsidiary in the ordinary course of its
respective business and the Lien on any such property
attaches to such asset concurrently or within twenty (20)
days after the acquisition thereof;
(ii) The obligation secured by any Lien so created, assumed or
existing shall not exceed the lesser of the cost or the fair
market value as of the time of acquisition of the property
covered thereby to the Borrower or Subsidiary acquiring the
same;
(iii)Each such Lien shall attach only to the property so
acquired and fixed improvements thereon;
(iv) The Debt secured by all such Liens shall not exceed One
Hundred Thousand Dollars ($100,000) at any time outstanding
in the aggregate; and
(v) The Debt secured by such Lien is permitted by the provisions
of Section 7.2, and the related expenditure is permitted
under Section 7A.6;
<PAGE>
19
(j) Liens permitted under any of the other Loan Documents;
(k) Subject to compliance by the Borrower and its Subsidiaries with
the covenants contained in the Parent Security Agreement and the
Subsidiaries Security Agreement, respectively, (a) Liens on farm
products purchased by the Borrower or any Subsidiary and on
accounts arising from the sale thereof in favor of the sellers of
such farm products, or any secured lender to any such seller, and
(b) statutory trusts created under the Perishable Agricultural
Commodities Act in favor of the Borrower's or any Subsidiary's
suppliers of food products derived from perishable agricultural
commodities; and
(l) Liens pursuant to Capital Leases permitted under Section 7.2(i).
Section 7.2 Debt. Create incur, assume, or suffer to exist, or permit any
Subsidiary to create incur, assume, or suffer to exist any Debt, except:
(a) Debt of the Borrower under this Agreement or the Parent Guaranty,
Debt of Curtice-Burns under the Curtice-Burns Loan Agreement and
Debt of any Subsidiary Guarantor under a Subsidiary Guaranty;
(b) Debt described in Schedule 7.2(b), but no voluntary prepayment,
renewals, extensions, or refinancings thereof, except for
renewals or extensions of Capital Leases or as described on such
Schedule.
(c) The Debt evidenced by the Subordinated Notes (and guarantees
thereof by the Borrower and the Subsidiaries) and other Debt of
the Borrower subordinated on terms reasonably satisfactory to the
Bank to the Borrower's obligations under this Agreement;
(d) Debt of any Subsidiary to the Borrower or another Subsidiary;
(e) Accounts payable to trade creditors for goods or services and
current operating liabilities (other than for borrowed money), of
which an aggregate amount not in excess of One Hundred Thousand
Dollars ($100,000) is more than ninety (90) days past due at any
time, in each case incurred in the ordinary course of business,
as presently conducted, and paid within the specified time,
unless contested in good faith and by appropriate proceedings;
(f) Debt of the Borrower or any Subsidiary secured by purchase-money
Liens permitted by Section 7.1(i);
(g) Debt arising under the Marketing Agreement;
(h) Debt of the Borrower or any Subsidiary in respect of any Capital
Lease in an aggregate principal amount not in excess of Four
Million Dollars ($4,000,000) at any time outstanding;
(i) Debt of the Borrower for the purpose of fixing or hedging
interest rate risk of other Debt permitted under this Agreement;
(j) Debt with respect to deferred compensation arrangements,
post-retirement benefits and other employee, unemployment or
retiree benefits, in each case incurred in the ordinary course of
business and consistent with past practice;
(k) Debt for taxes payable (but not past due, unless being contested
in Good Faith by appropriate proceedings and for which
appropriate reserves have been made) or deferred in accordance
with the Code or other applicable law;
(l) Debt of the Borrower to its members incurred in the ordinary
course of business and consistent with past practice;
(m) Debt arising under guaranties permitted under Section 7.9; and
(n) Debt (other than Debt permitted pursuant to clauses (a) through
(m) of this Section 7.2) in an aggregate amount not to exceed One
Million Dollars ($1,000,000) at any time outstanding.
Section 7.3 Mergers, Etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into or convey, sell, assign, transfer,
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of the
assets or the business of any Person, or permit any Subsidiary to do so, except
subject to prior written notice to the Bank, (a) that any Subsidiary may merge
into or transfer assets to Curtice-Burns, (b) that any Subsidiary, other than
Curtice-Burns, may merge into or consolidate with or transfer assets to any
other Subsidiary, and (c) in connection with any of the transactions described
in Schedule 7.3.
Section 7.4 Leases. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any obligation as
lessee for the rental or hire of any real or personal property, except: (a)
Capital Leases permitted by Section 7.2(h), (b) leases (other than Capital
Leases) which do not in the aggregate require the Borrower and its Subsidiaries
on a consolidated basis to make payments (including taxes, insurance,
maintenance, and similar expenses which the Borrower or any Subsidiary is
required to pay under the terms of any lease) in any Fiscal Year of the Borrower
in excess of Fifteen Million Dollars ($15,000,000); and (c) leases between the
Borrower and any Subsidiary or between any Subsidiaries.
Section 7.5 Sale and Leaseback. Sell, transfer, or otherwise dispose of, or
permit any Subsidiary to sell, transfer or otherwise dispose of any real or
personal property to any Person and thereafter directly or indirectly lease back
the same or similar property.
Section 7.6 Dividends; Patronage.atronage.
(a) Declare or pay any dividends; or purchase, redeem, retire, or
otherwise acquire for value any of its capital stock now or
hereafter outstanding; or allocate or otherwise set apart any sum
for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of any shares of its capital
stock; or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or
permit any of its Subsidiaries to purchase or otherwise acquire
for value any stock of the Borrower (collectively, a "Restricted
Payment"), except that, solely from legally available funds and
provided no Event of Default has occurred and is continuing, or
will occur as a result of a Restricted Payment, (i) any
Subsidiary may make a Restricted Payment to any other Subsidiary
or to the Borrower (ii) the Borrower may issue preferred stock or
other equity securities in respect of outstanding securities or
Retains solely in accordance with the Borrower's current member's
equity program, previously submitted to the Bank, which members
equity program shall not be amended in any manner or replaced
without the prior written consent of the Bank, (iii) the Borrower
may make a Restricted Payment with respect to its capital stock
in an aggregate amount not to exceed Seven Million Five Hundred
Thousand Dollars ($7,500,000) and (iv) payments permitted under
Section 7.6(b).
(b) Make any cash distribution to its stockholders (other than
Restricted Payments permitted by Section 7.6(a) and payments of
Commercial Market Value for crops), except that the Borrower may
make cash distributions to its members to the extent of one
hundred percent (100%) of "net proceeds available to members" of
the Borrower, as that term is used in the Borrower's then most
recent audited financial statements for the immediately preceding
Fiscal Year ("Available Net Proceeds"), provided, however, that
if any Event of Default has occurred or would occur as a result
of any such cash distribution, then the cash distributions
described in this Section 7.6(b) shall not exceed that amount of
Available Net Proceeds that is equal to the then minimum
percentage of Available Net Proceeds required to be distributed
by the Borrower to its stockholders in order to qualify the
distribution as a deductible patronage distribution for federal
income tax purposes.
Section 7.7 Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of or permit any Subsidiary to sell, lease, assign, transfer, or
otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, accounts receivable, and leasehold interests), except: (a)
inventory disposed of in the ordinary course of business; (b) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
(c) that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to another Subsidiary located in the Continental United States; (d) as
contemplated by the transactions described in Schedule 7.3; (e) assets
(including shares of stock disposed of that have a fair market value not
exceeding Five Hundred Thousand Dollars ($500,000) in the aggregate for each
Fiscal Year of the Borrower; and (f) assets (including shares of stock) disposed
of for net proceeds not in excess of Five Hundred Thousand Dollars ($500,000) in
the aggregate for such Fiscal Year.
Section 7.8 Investments. Make, or permit any Subsidiary to make, any loan
or advance to any Person or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital contribution to, or
otherwise invest in or acquire any interest in any Person, or participate as a
partner or joint venturer with any other Person, except: (a) direct obligations
of the United States or any agency thereof with maturities of one year or less
from the date of acquisition; (b) commercial paper of a domestic issuer rated at
least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors
Service, Inc.; (c) time deposits and certificates of deposit with
<PAGE>
21
maturities of one year or less from the date of acquisition issued by any United
States commercial bank having capital and surplus in excess of One Hundred
Million Dollars ($100,000,000) in an amount for each time deposit account and
each such certificate of deposit not in excess of the maximum FDIC insured
amount with respect thereto; and (d) stock, obligations or securities received
in settlement of debts (created in the ordinary course of business) owing to the
Borrower or any Subsidiary; (e) pursuant to the Marketing Agreement, (f) equity
securities held by the Borrower or any Subsidiary in another Subsidiary, and (g)
investments permitted or required under Section 8.
Section 7.9 Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or
become directly or contingently responsible or liable, or permit any Subsidiary
to assume, guaranty, endorse, or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods, or services, or to supply or advance any
funds, assets, goods, or services, or an agreement to maintain or cause such
Person to maintain a minimum working capital or net worth, or otherwise to
assure the creditors of any Person against loss), for obligations of any Person,
except guaranties pursuant to the Loan Documents and by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and guaranties of Debt permitted under Section 7.2.
Section 7.10 Transactions With Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except (a) neither Curtice-Burns nor any other Subsidiary will be prohibited
from declaring or paying any lawful dividend so long as, immediately after
giving effect thereto, no Default shall have occurred and be continuing, (b)
transactions and conduct entered into pursuant to the Marketing Agreement shall
not be prohibited, (c) transactions and conduct permitted by Section 9.6 of the
Parent Guaranty or otherwise by this Agreement shall not be prohibited and (d)
the Borrower and its Subsidiaries shall be entitled to enter into transactions
in the ordinary course of and pursuant to the reasonable requirements of the
Borrower's or such Subsidiary's business and upon terms no less favorable to the
Borrower or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 7.11 Fiscal Year. Change, or permit any Subsidiary to change, its
Fiscal Year.
SECTION 7A. FINANCIAL COVENANTS. Until the Obligations have been paid in
full and the Bank has no Commitment under the Agreement:
Section 7A.1 Minimum Working Capital. The Borrower will achieve and
maintain consolidated working capital of not less than One Hundred Million
Dollars ($100,000,000) as of June 29, 1996 and the end of each month thereafter.
Section 7A.2 Minimum Tangible Net Worth. At the end of each month during
the term of this Agreement, the Borrower will achieve and maintain at all times
consolidated tangible net worth of not less than the amount set forth in the
Borrower's calculation of its consolidated tangible net worth as of the time
immediately after the consummation of the Merger, as it may have been adjusted
in accordance with GAAP, which calculation was delivered to the Bank within one
hundred twenty (120) days after the Merger.
Section 7A.3 Long Term Debt to Equity Ratio. The Borrower will maintain a
consolidated long term debt to equity ratio of not greater than 2.7 to 1.0 at
the end of each month during the term of this Agreement.
Section 7A.4 Total Net Worth. The Borrower and its Subsidiaries will
achieve and maintain a consolidated total net worth (including capital stock,
earnings allocated to members of the Borrower and earned surplus) of not less
than fifteen percent (15%) of total assets as at the end of each month during
the term of this Agreement.
Section 7A.5 Consequence of Non-Compliance. If the Borrower fails to comply
with any of the financial covenants set forth in Sections 7A.1 through 7A.4,
inclusive, then, without in any way limiting or waiving any of the Bank's rights
or remedies under this Agreement or the other Loan Documents, the Borrower shall
make no cash payments to growers for raw products in excess of ninety percent
(90%) of Commercial Market Value therefor in any Fiscal Year in which such
covenant default occurs.
<PAGE>
22
SECTION 8. INVESTMENT BY BORROWER IN STOCK OF BANK
Section 8.1 Initial Investment in Class E Stock. The Borrower shall
purchase from the Bank on the Closing Date Class E Stock of the Bank (the "Bank
Stock") with an aggregate par value equal to the lesser of (a) One Thousand
Dollars ($1,000) and (b) two percent (2%) of the aggregate Loans made on the
Closing Date.
Section 8.2 Capitalization. In addition to the initial purchase of Bank
Stock required by Section 8.1, the Borrower shall purchase additional Bank Stock
from the Bank in such amount as is established in the Bank's capitalization
by-laws and capitalization plan, at such purchase price and in such amounts as
shall be established in the Bank's capitalization by-laws and capitalization
plan as in effect from time to time.
Section 8.3 Security for Bank Stock Purchase Obligations. The obligations
of the Borrower to purchase Bank Stock set forth in Sections 8.1 and 8.2 shall
be secured by the Collateral.
Section 8.4 Pledge of Bank Stock and Patron's Equities. All shares of Bank
Stock and equity interests now or hereafter acquired by the Borrower in and to
the allocated contingency reserves and allocated surplus of the Bank, now or
hereafter existing, shall be and hereby are pledged to the Bank as security for
payment of all Obligations of the Borrower to the Bank, including, without
limitation, the obligation to purchase Bank Stock set forth in Sections 8.1 and
8.2. If an Event of Default shall occur, in addition to and not in limitation of
the Bank's rights and remedies set forth in Section 9, the Bank may, at its
option, and in accordance with any applicable regulations of the Farm Credit
Administration, (a) retire and cancel all or any part of the Bank Stock owned by
the Borrower, whereupon the Bank shall credit against the then outstanding
obligations an amount equal to the fair market value of such cancelled Bank
Stock, but not exceeding par value thereof, and/or (b) cancel all or part of the
Borrower's equity interests and interests in the allocated contingency reserves
and allocated surplus of the Bank, the aggregate amount of which shall thereupon
be credited against the then outstanding Obligations.
SECTION 9. EVENTS OF DEFAULT
Section 9.1 Events of Default. The occurrence or existence of any one or
more of the following events or conditions shall constitute an "Event of
Default":
(a) The Borrower fails to make any payment or prepayment of the
principal of, the Note, as and when the same becomes due and
payable, whether at maturity, at a date fixed for prepayment,
upon acceleration or otherwise and such failure continues for
thirty (30) Business Days; or
(b) The Borrower fails to make any payment of interest under the Note
as and when the same becomes due and payable and such failure
continues for thirty (30) Business Days following the date on
which such payment was due and payable after the Bank gives
notice thereof to the Borrower; or
(c) The Borrower fails to pay any other amounts due and payable under
this Agreement as and when due and payable and such failure
continues for thirty (30) Business Days after the Bank gives
notice thereof to the Borrower; or
(d) Any representation or warranty made or deemed made by the
Borrower in this Agreement or in any other Loan Document or which
is contained in any financial or other statement furnished at any
time pursuant to any Loan Document, shall prove to have been
incorrect, incomplete, or misleading in any material respect on
or as of the date made or deemed made, unless the facts
underlying such representation or warranty are susceptible of
being changed and are in fact changed within thirty (30) days
after notice to the Borrower of such inaccuracy so that such
representation or warranty would, upon such change, be correct in
all material respects;
(e) The Borrower shall default in the due and punctual performance of
or compliance with any covenant, condition or agreement to be
performed or observed by it under Sections 7.1, 7.3, 7.5, 7.6,
7.7, 7A.1, 7A.2, 7A.3 or 7A.4 or shall use the proceeds of the
Loans other than as required by Section 2.18; or
<PAGE>
23
(f) The Borrower or any Subsidiary shall fail to duly and punctually
perform or observe any term, covenant or agreement contained in
any Loan Document on its part to be performed or observed, other
than those described in Sections 9.1(a), (b), (c) (d) and (e),
and any such failure shall continue unremedied for thirty (30)
days after the Bank gives notice thereof to the Borrower; or
(g) The Borrower or any Subsidiary shall (i) fail to pay any Debt for
borrowed money in excess of Five Hundred Thousand Dollars
($500,000) of the Borrower or such Subsidiary (as the case may
be) when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise), or (ii) fail to perform or
observe any term, covenant, agreement or condition on its part to
be performed or observed under any agreement or instrument
relating to any such indebtedness when required to be performed
or observed, if the effect of such failure to perform or observe
is to accelerate, or to permit the acceleration of, the maturity
of such indebtedness, which such failure to perform or observe
shall not have been waived by the holder of such or any such
indebtedness shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(h) The Borrower, Curtice-Burns or any Subsidiary Guarantor (i) shall
generally not pay, or shall be unable to pay, or shall admit in
writing its inability to pay its debts as such debts become due;
or (ii) makes an assignment for the benefit of creditors, makes
or sends notice of a bulk transfer or calls a general meeting of
its creditors or principal creditors or petitions or applies to
any tribunal for the appointment of a custodian, receiver, or
trustee for it or a substantial part of its assets; or (iii)
files any petition or application for relief under the Bankruptcy
Code or any other bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or (iv)
shall have had any such petition or application filed against it
in which an order for relief is entered or an adjudication or
appointment is made, and which remains undismissed for a period
of sixty (60) days or more; or (v) takes any corporate action
indicating its consent to, approval of, or acquiescence in any
such petition, application, proceeding, or order for relief or
the appointment of a custodian, receiver, or trustee for all or
any substantial part of its properties; or (vi) suffers any such
custodianship, receivership, or trusteeship to continue
undischarged for a period of sixty (60) days or more (each of the
Events of Default set forth in this Section 9.1(h) being
individually referred to herein as an "Insolvency Event"); or
(i) One or more final judgments, decrees, or orders for the payment
of money in excess of Five Hundred Thousand Dollars ($500,000) in
the aggregate (or its equivalent in another currency) shall be
rendered against the Borrower, Curtice-Burns or any Subsidiary
Guarantor, and (i) is not adequately covered by insurance or an
indemnity, in each case satisfactory to the Bank, or (ii) such
judgment, decree or order continues unsatisfied and in effect for
a period of sixty (60) consecutive days without being vacated,
discharged, satisfied, or stayed or bonded pending appeal, or
(iii) enforcement proceedings shall have been commenced with
respect to such judgment, decree or order; or
(j) The Parent Security Agreement shall for any reason cease (i) to
create a valid and perfected first priority Lien in and to the
Collateral purported to be subject thereto (except for a
Permitted Lien); or (ii) to be in full force and effect or shall
be declared null and void, or the validity or enforceability
thereof shall be contested by the Borrower or the Borrower shall
deny it has any further liability or obligation thereunder; or
(k) An event of default shall have occurred under and as defined in
the Parent Security Agreement; or
(l) Any of the following events shall occur or exist with respect to
the Borrower and any Commonly Controlled Entity under ERISA
(except for the events described on Schedule 5.10): any
Reportable Event shall occur; complete or partial withdrawal from
any Multiemployer Plan shall take place; any Prohibited
Transaction shall occur; a notice of intent to terminate a Plan
shall be filed, or a Plan shall be terminated; or circumstances
shall exist which constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan, or the PBGC shall
institute such proceedings; and in each case above, such event or
condition, together with all other events or conditions, if any,
could subject the Borrower to any tax, penalty, or other
liability which in the aggregate may exceed Five Hundred Thousand
Dollars ($500,000); or
(m) The occurrence of a Change of Control; or
(n) The occurrence of any default or event of default under and as
defined in the Subordinated Notes Indenture and/or any of the
Subordinated Notes; or
(o) The Borrower ceases to be an eligible borrower under the Farm
Credit Act of 1971, as amended; or
<PAGE>
24
(p) An "Event of Default" shall have occurred under and as defined in
the Curtice Burns Loan Agreement; or
(q) The Borrower fails to purchase Bank Stock in accordance with
Section 8.
Section 9.2 Remedies. (a) Upon the commencement and during the pendency of
an involuntary case under the Bankruptcy Code of under any other applicable
bankruptcy, insolvency or similar now or hereafter in effect, the Bank shall
have no obligation to make Loans, (b) upon the occurrence of any Insolvency
Event, all the Commitments shall automatically terminate and the unpaid
principal amount of all of the Obligations shall automatically become due and
payable together with interest accrued thereon and together with all other
amounts payable under any of the Loan Documents, without presentment, demand,
protest or notice, all of which are hereby expressly waived by the Borrower, and
(c) upon the occurrence and continuance of any other Event of Default, the Bank
may, by written notice to the Borrower, (i) cease making Loans and (ii) declare
all of the Obligations due and payable, whereupon (A) the Note shall mature and
become due and payable, together with interest accrued thereon and together with
all other amounts payable under any of the Loan Documents, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, and (B) the Bank shall have all rights and
remedies provided in the Parent Security Agreement and other Loan Documents, and
all the rights of a secured party under the Uniform Commercial Code or other
applicable law. All rights and remedies of the Bank are cumulative and not
exclusive and are enforceable, at the Bank's option, alternatively,
successively, or concurrently on any one or more occasions and in any order the
Bank may determine.
SECTION 10. MISCELLANEOUS
Section 10.1 Account Stated. The Bank's books and records showing the
account between the Bank and the Borrower shall be admissible in evidence in any
action or proceeding as prima facie proof of the items therein set forth, and
the Bank's statement delivered to the Borrower, to the extent to which no
written objection is made within thirty (30) days after the date of receipt
thereof by the Borrower, shall constitute an account stated between the Bank and
the Borrower and be binding on the Borrower. The Bank may apply all payments,
proceeds of Collateral and all other amounts received from or for the account of
the Borrower to the Obligations in such order and manner as the Bank shall in
its sole discretion determine, except as otherwise provided in this Agreement or
any other Loan Document.
Section 10.2 Amendments, Etc. No amendment, modification, termination, or
waiver of any provision of any Loan Document to which the Borrower is a party,
nor consent to any departure by the Borrower from any Loan Document to which it
is a party, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 10.3 Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing and shall be deemed to have been
duly given or made: if by hand, immediately upon delivery; if by telecopier,
immediately upon sending, provided it is sent on a Business Day, but if not,
then immediately upon the beginning of the first Business Day after being sent;
if by Federal Express, Express Mail or any other overnight delivery service, one
(1) day after dispatch; and if mailed by United States first class certified
mail, return receipt requested, five (5) days after mailing. All notices,
requests and demands are to be given or made to the respective parties at the
following addresses (or to such other addresses as either party may designate by
notice in accordance with the provisions of this Section 10.3):
If to the Borrower: Pro-Fac Cooperative, Inc.
c/o Curtice-Burns Foods, Inc.
90 Linden Place
Rochester, New York 14625
Attention: Mr. William D. Rice
Senior Vice President and
Chief Financial Officer
Telecopier: (716) 383-1568
<PAGE>
26
25
If to the Bank: CoBank, ACB
67 Hunt Street
Agawam, Massachusetts 01001
Attention: Mr. Ralph Lawrence
Telecopier: (413) 821-0250
Section 10.4 No Waiver. No failure or delay on the part of the Bank in
exercising any right, power, or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy hereunder. The rights and remedies provided herein
are cumulative and are not exclusive of any other rights, powers, privileges, or
remedies, now or hereafter existing, at law or in equity or otherwise.
Section 10.5 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights under any Loan Document to which the Borrower is a party without
the prior written consent of the Bank.
Section 10.6tion 10Assignments and Participations. The Bank shall not
assign any of its rights or delegate any of its obligations under this Agreement
and the other Loan Documents without the prior consent of the Borrower, which
shall not be unreasonably withheld. The Bank may, without the prior consent of
the Borrower, sell participations in all or any part of the Loans or any other
interest herein to a bank or other entity. Any such participant shall have, to
the extent of such participation, the same rights and benefits as it would have
had if it were the Bank hereunder, except as otherwise provided by the terms of
such participation; provided, that in the event of any such sale by the Bank of
participating interests under the Loan Documents, the Bank's obligations under
this Agreement to the Borrower shall remain unchanged, the Bank shall remain
solely responsible for the performance thereof, the Bank shall remain the holder
of the Note for all purposes under this Agreement and the other Loan Documents,
and the Borrower shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement and the
other Loan Documents; and provided further that no such participant shall be
entitled to receive any greater amount pursuant to Section 2.19 of this
Agreement than the Bank would have been entitled to receive in respect of the
amount of the participation transferred to such participant had no such transfer
occurred. The Bank may furnish any information concerning the Borrower or any
Guarantor in the possession of the Bank from time to time to assignees and
participants (including prospective assignees and participants).
Section 10.7 Costs, Expenses, and Taxes. The Borrower agrees to pay on
demand all costs and expenses incurred by the Bank in connection with the
preparation, execution, delivery, filing, and administration of the Loan
Documents, and of any amendment, modification, or supplement to the Loan
Documents, including, without limitation, filing and recording fees and the
reasonable fees and out-of-pocket expenses of counsel for the Bank, incurred in
connection with advising the Bank as to its rights and responsibilities
hereunder. The Borrower also agrees to pay all such costs and expenses,
including court costs, incurred in connection with enforcement of the Loan
Documents, or any amendment, modification, or supplement thereto, whether by
negotiation, legal proceedings, or otherwise. In addition, the Borrower shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, and recording of any
of the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agrees to hold the Bank harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or failing
to pay such taxes and fees. This provision shall survive termination of this
Agreement.
Section 10.8 Integration. This Agreement and the Loan Documents contain the
entire agreement between the parties relating to the subject matter hereof and
supersede any and all oral statements and prior writings with respect thereto.
Section 10.9 Indemnity. The Borrower hereby agrees to defend, indemnify,
and hold the Bank and its officers, directors, employees, affiliates, agents and
controlling persons harmless from and against any and all losses, claims,
damages, liabilities, judgments, penalties, costs, and reasonable expenses joint
or several (including reasonable attorney fees and court costs now or hereafter
arising from the enforcement of this clause) to which any such Person may become
subject arising directly or indirectly from (a) this Agreement or the use of the
proceeds of the Loans as provided in Sections 2.18, or any related transaction,
regardless of whether any of such indemnified parties is a party thereto, and to
reimburse each of such indemnified parties upon demand for any reasonable legal
or other expenses incurred in connection with investigating or defending any of
the foregoing, provided that such indemnified parties will not be indemnified
for any such losses, claims, damages, liabilities or expenses resulting from the
gross negligence or willful misconduct of the Bank and (b) the activities of the
Borrower and each of the Guarantors, their respective predecessors in interest,
or third parties with whom it has a contractual relationship, or arising
directly or indirectly from the violation of any environmental protection,
health, or safety law, whether such claims are asserted by any governmental
agency or any other Person. This indemnity shall survive termination of this
Agreement.
Section 10.10 Governing Law. This Agreement and the Note shall be governed
by, and construed in accordance with, the laws of the State of New York, without
reference to the conflicts of laws principles of said State.
Section 10.11 Consent to Jurisdiction. The Borrower hereby irrevocably
submits and consents to the non-exclusive jurisdiction of the State and Federal
Courts in the State of New York, in connection with any action or proceeding
arising out of or relating to this Agreement, the Notes or any of the other Loan
Documents, or any matter arising therefrom or relating thereto.
Section 10.12 Waiver of Jury Trial. THE BANK AND THE BORROWER HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS TO WHICH THE BORROWER IS A
PARTY. NO OFFICER OF THE BANK HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS
PROVISION.
Section 10.13 [Intentionally Omitted].
Section 10.14 Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 10.15 Headings. Article and Section headings in the Loan Documents
are included in such Loan Documents for the convenience of reference only and
shall not constitute a part of the applicable Loan Documents for any other
purpose.
Section 10.16 Counterparts. This Agreement may be executed in one or more
counterparts, and by each of the Borrower and the Bank in separate counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRO-FAC COOPERATIVE, INC.
By: /s/William D. Rice
Title: Assistant Treasurer
COBANK, ACB
By: /s/Ralph Lawrence
Title: Vice President
<PAGE>
1
EXHIBIT 21.1
CURTICE-BURNS FOODS, INC.
SUBSIDIARIES OF THE REGISTRANT
Curtice Burns Export Corporation
Curtice Burns Express, Inc.
Finger Lakes Packaging Co., Inc.
Kennedy Endeavors, Inc.
La Restaurante, Inc.*
Quality Snax, Inc.*
Snyder's Potato Chips, Inc.*
Seasonal Employers, Inc.
Husman Potato Chips, Inc.
Comstock Michigan Fruit Company of Canada Limited
*Inactive Corporations
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000026285
<NAME> CURTICE BURNS FOODS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
<CASH> 8,873
<SECURITIES> 0
<RECEIVABLES> 56,218
<ALLOWANCES> 836
<INVENTORY> 130,574
<CURRENT-ASSETS> 219,794
<PP&E> 312,004
<DEPRECIATION> 43,615
<TOTAL-ASSETS> 634,250
<CURRENT-LIABILITIES> 111,919
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 139,205
<TOTAL-LIABILITY-AND-EQUITY> 634,250
<SALES> 739,094
<TOTAL-REVENUES> 739,094
<CGS> 562,926
<TOTAL-COSTS> 562,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 537
<INTEREST-EXPENSE> 41,998
<INCOME-PRETAX> (18,731)
<INCOME-TAX> (6,853)
<INCOME-CONTINUING> (11,878)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,878)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
