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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1999
REGISTRATION NOS. 333- , NO. 333- , NO. 333- , NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AGRILINK FOODS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
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NEW YORK 2030 16-0845824
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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AND ITS GUARANTORS
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PRO-FAC COOPERATIVE, INC. NEW YORK 2030 16-6036816
KENNEDY ENDEAVORS, INCORPORATED WASHINGTON 2096 91-1350382
LINDEN OAKS CORPORATION DELAWARE 9999 52-2043917
(EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
SPECIFIED IN ITS CHARTER) OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>
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90 LINDEN OAKS
P.O. BOX 20670
ROCHESTER, NEW YORK 14602
(716) 383-1850
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
EARL L. POWERS
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
AGRILINK FOODS, INC.
90 LINDEN OAKS, P.O. BOX 20670
ROCHESTER, NEW YORK 14602
(716) 383-1850
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
J. D. WEINBERG, ESQ.
HOWARD, SMITH & LEVIN LLP
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 841-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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==================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE FEE(2)
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11 7/8% Senior Subordinated Notes due 2008......................... $200,000,000 100% $200,000,000 $ 55,600
- ----------------------------------------------------------------------------------------------------------------------------------
Guarantees of 11 7/8% Senior Subordinated Notes due 2008........... $200,000,000 -- -- (3)
==================================================================================================================================
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act.
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act.
(3) Pursuant to Rule 457(n) under the Securities Act, no registration fee is
payable with respect to the Guarantees.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SEEKING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 5, 1999
AGRILINK FOODS, INC.
OFFER TO EXCHANGE OUR 11 7/8% SENIOR SUBORDINATED NOTES DUE 2008 FOR ANY AND ALL
OF OUR OUTSTANDING 11 7/8% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED
We are offering a total of $200,000,000 of our 11 7/8% Senior Subordinated
Notes due 2008, which will be freely transferable, in exchange for our
outstanding 11 7/8% Senior Subordinated Notes due 2008. We refer to this
Prospectus and the Letter of Transmittal that accompanies it as the 'Exchange
Offer.' We refer to the 11 7/8% Senior Subordinated Notes due 2008 being
offered in the Exchange Offer as the 'Exchange Notes' and we refer to the
outstanding 11 7/8% Senior Subordinated Notes due 2008 that can be exchanged
for Exchange Notes as the 'Initial Notes.' We refer to Exchange Notes and
Initial Notes together as the 'Notes.' The Notes are guaranteed, jointly and
severally, by our parent and certain of our subsidiaries on a senior
unsecured basis.
TERMS OF THE EXCHANGE OFFER
Expires 5 p.m., New York City time, on , 1999, unless
extended.
Subject to certain customary conditions, including the condition that the
Exchange Offer not violate any applicable law or any applicable
interpretation of the staff of the Securities and Exchange Commission.
Tenders of Initial Notes may be withdrawn any time prior to the expiration
of the Exchange Offer.
All Initial Notes that are validly tendered and not withdrawn will be
exchanged for Exchange Notes.
We will not receive any proceeds from the Exchange Offer.
All broker-dealers must comply with the registration and prospectus
delivery requirements of the Securities Act. See 'Plan of Distribution.'
We do not intend to apply for listing of the Exchange Notes on any
securities exchange or to arrange for them to be quoted on any quotation
system.
See 'The Exchange Offer' for more information.
TERMS OF THE EXCHANGE NOTES
The terms of the Exchange Notes are identical to the terms of the Initial
Notes, except that Exchange Notes will be freely transferable and will not
have any covenants regarding exchange and registration rights.
The Notes are redeemable at our option at any time on or after November 1,
2003, at the prices set forth in this Prospectus.
The Notes are redeemable at our option with the net cash proceeds of Equity
Offerings (as defined in this Prospectus) at any time prior to November 1,
2001, at a price equal to 111.875% of the principal amount of the Notes plus
accrued and unpaid interest, if any; provided that at least $130 million in
aggregate principal amount of the Notes remains outstanding after each such
redemption.
The Notes are subordinated to our senior indebtedness.
We must offer to repurchase the Notes for 101% of the principal amount of
the Notes, plus accrued and unpaid interest, if any, if there is a Change
of Control (as defined in this Prospectus).
Interest on Exchange Notes is payable semi-annually on May 1 and November 1
of each year. The first interest payment date is May 1, 1999.
Interest on the Exchange Notes will accrue from the most recent date to
which interest has been paid on the Initial Notes or, if no interest has
been paid on the Initial Notes, from November 18, 1998. No interest will be
payable on Initial Notes that are exchanged for Exchange Notes.
The Notes are guaranteed by our parent, Pro-Fac Cooperative, Inc., and
certain of our subsidiaries.
See 'Description of Notes' for more information about the Notes.
INVESTING IN THE EXCHANGE NOTES INVOLVES CERTAIN RISKS. SEE 'RISK FACTORS'
BEGINNING ON PAGE 12.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1999
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TABLE OF CONTENTS
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Where You Can Find More Information........................................................................ 2
Forward-Looking Information................................................................................ 3
Market and Industry Data................................................................................... 4
Prospectus Summary......................................................................................... 5
Risk Factors............................................................................................... 12
The Company and Pro-Fac.................................................................................... 21
The Transactions........................................................................................... 21
Use of Proceeds............................................................................................ 23
Capitalization............................................................................................. 23
The Exchange Offer......................................................................................... 24
Unaudited Pro Forma Financial Data of the Company.......................................................... 33
Selected Historical and Unaudited Pro Forma Consolidated Financial Data of Agrilink and DFVC............... 38
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 42
Business................................................................................................... 57
Description of Certain Indebtedness........................................................................ 59
Description of Notes....................................................................................... 62
Certain U.S. Federal Income Tax Considerations............................................................. 91
Plan of Distribution....................................................................................... 91
Legal Matters.............................................................................................. 92
Experts.................................................................................................... 93
Index to Consolidated Financial Statements and Other Information........................................... F-1
</TABLE>
------------------------
Our principal executive offices are located at 90 Linden Oaks, P.O. Box.
20670, Rochester, New York 14602. Our telephone number is 716-383-1850.
You should rely only on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus or incorporated by reference in this Prospectus. We
are not making offers to exchange Notes or soliciting offers to exchange Notes
in any jurisdiction in which such an offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make such offer or solicitation.
The information in this Prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this Prospectus
is accurate as of any other date.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the 'SEC' or the
'Commission') a registration statement on Form S-4 (the 'Registration
Statement') under the Securities Act of 1933, as amended (the 'Securities Act'),
covering the Exchange Notes. This Prospectus does not contain all of the
information included in the Registration Statement. Any statement made in this
Prospectus concerning the contents of any contract, agreement or other document
is not necessarily complete. If we have filed any such contract, agreement or
other document as an exhibit to the Registration Statement, you should read the
exhibit for a more complete understanding of the document or matter involved.
Each statement regarding a contract, agreement or other document is qualified in
its entirety by reference to the actual document.
We and our parent, Pro-Fac Cooperative, Inc. ('Pro-Fac'), are required to
file periodic reports and other information with the SEC under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'). In accordance therewith,
we and Pro-Fac file reports and other information with the Commission. In
addition, pursuant to the indenture governing the Notes, we have agreed to file
with the SEC financial and other information for public availability and to
deliver to the trustee, IBJ Schroder Bank & Trust Company (the 'Trustee'), for
forwarding to you, copies of all reports that we file with the
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SEC without any cost to you. We will also furnish such other reports as we may
determine or as the law requires.
You may read and copy the Registration Statement, including the attached
exhibits, and any reports, statements or other information that we file, at the
SEC's public reference room at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549-1004, and at the SEC's Midwest Regional Office located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and
its Northeast Regional Office located at 7 World Trade Center, Suite 1300, New
York, New York 10048. You can request copies of these documents, upon payment of
a duplicating fee, by writing to the SEC at its principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549-1004. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. The
Issuer's and Pro-Fac's SEC filings are also available to the public on the SEC's
Internet site (http://www.sec.gov).
The SEC allows us to 'incorporate by reference' the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. These incorporated documents contain important
business and financial information about us that is not included in or delivered
with this Prospectus. The information incorporated by reference is considered to
be part of this Prospectus, and later information filed with the SEC will update
and supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act prior to the Expiration Date of the Exchange Offer.
Our Annual Report on Form 10-K/A-1 for the year ended June 27, 1998 (the
'Company's Annual Report');
Pro-Fac's Annual Report on Form 10-K/A-1 for the year ended June 27, 1998;
Our and Pro-Fac's Current Reports on Form 8-K dated October 5, 1998;
Our Quarterly Report on Form 10-Q for the quarter ended September 26,
1998;
Pro-Fac's Quarterly Report on Form 10-Q for the quarter ended September
26, 1998; and
Our and Pro-Fac's Current Reports on Form 8-K dated December 3, 1998.
These filings are available at the SEC's offices and internet site
described above. They are also available to holders of Initial Notes, without
charge, directly from us. You may request a copy of these filings by writing or
telephoning us at the following address: Agrilink Foods, Inc., 90 Linden Oaks,
P.O. Box 20670, Rochester, New York 14602, Attention: Vice
President -- Communications; telephone: (716) 383-1850.
IN ORDER TO ENSURE TIMELY DELIVERY OF ANY COPIES OF FILINGS REQUESTED FROM
US, PLEASE WRITE OR TELEPHONE US NO LATER THAN , 1999 (FIVE BUSINESS
DAYS PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER).
FORWARD-LOOKING INFORMATION
This Prospectus contains forward-looking statements, which are statements
other than statements of historical facts. We have based these forward-looking
statements on our current expectations and projections about future events,
based on the information currently available to us. Such forward-looking
statements are principally contained in the sections 'Prospectus Summary,'
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' 'Unaudited Pro Forma Financial Data of the Company' and 'Business,'
and in the unaudited pro forma financial data and management's discussion and
analysis of financial condition and results of operations for Pro-Fac or in
statements using the phrases 'expects' or 'anticipates' located elsewhere
herein. The forward-looking statements include, among other things, our
expectations and estimates about the Company's and Pro-Fac's business
operations, strategy, future costs savings and integration of the acquired
businesses following the Acquisition and the Offering, and our expectations and
estimates about the Company's and Pro-Fac's future financial performance,
including their financial position, cash flows from operations, capital
expenditures and the ability to refinance indebtedness.
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The forward-looking statements are subject to risks, uncertainties and
assumptions about us and about the future, and could prove not to be correct.
Important factors that could cause actual results to differ materially from our
expectations are discussed in this Prospectus, including in conjunction with the
forward-looking statements included in this Prospectus and under 'Risk Factors.'
Among the factors that could impact the Company's ability to achieve its goals
are:
the impact of strong competition in the food industry;
the impact of weather on the volume and quality of raw products;
the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer
acceptance;
the extent to which anticipated cost savings in connection with our
acquisition of Dean Foods Vegetable Company and its subsidiaries will be
realized and the timing of any such realization;
our ability to integrate the Dean Foods Vegetable Company into our
business;
our success in integrating other acquired operations and the availability
to us of acquisition and alliance, as well as disposition, opportunities;
and
our ability to achieve gains in productivity and improvements in capacity
utilization.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Prospectus may not occur.
MARKET AND INDUSTRY DATA
Industry, market share and brand awareness data used in this Prospectus,
unless otherwise stated, was derived from consultants' reports and industry
publications. Consultants' reports and industry publications generally state
that the information they contain was obtained from sources believed by them to
be reliable, but they do not guarantee the accuracy and completeness of such
information. We have not independently verified such industry, market share and
brand awareness data and, although we believe it to be reliable, we cannot
guarantee that it is accurate or complete.
4
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
appearing elsewhere or incorporated by reference in this Prospectus. Unless the
context otherwise requires, as used in this Prospectus, 'we,' 'our,' 'us,' and
the 'Company,' mean Agrilink Foods, Inc. and its direct and indirect
subsidiaries; 'Agrilink' means Agrilink Foods, Inc. and its direct and indirect
subsidiaries before the Transactions (as defined in this Prospectus); the
'Issuer' means Agrilink Foods, Inc.; and 'Pro-Fac' means our parent corporation,
Pro-Fac Cooperative, Inc. For purposes of the financial and other information,
references to a 'fiscal year' and 'first fiscal quarter' mean a last Saturday of
June fiscal year end and last Saturday of September fiscal quarter end for the
Company and Pro-Fac, and a last Sunday of May fiscal year end and last Sunday of
August fiscal quarter end for Dean Foods Vegetable Company and its subsidiaries
(collectively, 'DFVC'). Other references to years mean calendar years.
THE COMPANY
GENERAL
We are a leading producer and marketer of diversified processed food
products, including frozen and canned vegetables and fruits, fruit fillings and
toppings, canned chilies and stews, salad dressings, pickles and snack foods.
Many of our products have well-recognized brand names which enjoy leading
national or regional market shares, including Birds Eye, Freshlike and Veg-All
frozen and canned vegetables, Comstock, Wilderness and Thank You fruit fillings
and toppings, Nalley chilies and stews and Bernstein's salad dressings. We also
sell our products to supermarkets, warehouse clubs and mass merchandisers under
private labels and to food service institutions such as restaurants, caterers,
bakeries and schools. We operate 29 strategically located processing facilities
throughout the United States and in Mexico, which provide us access to diverse
sources of raw agricultural products. We distribute our finished products to
over 13,000 customer distribution points through a nationwide network of
distribution centers and food brokers and a regional direct sales force.
We are a wholly owned subsidiary of Pro-Fac, a New York agricultural
cooperative corporation formed in 1960 to process and market crops grown by its
members. In 1994 we entered into the Pro-Fac Marketing and Facilitation
Agreement (as amended, the 'Marketing Agreement') with Pro-Fac. The Marketing
Agreement provides for Pro-Fac to supply crops and additional financing to us,
for us to provide marketing and management services to Pro-Fac and for Pro-Fac
to share in our profits or losses. See 'The Company and Pro-Fac.'
THE TRANSACTIONS
The Acquisition of DFVC
On September 24, 1998, we acquired (the 'Acquisition') DFVC, the frozen and
canned vegetable business of Dean Foods Company ('Dean Foods'), by acquiring
from Dean Foods all the outstanding capital stock of Dean Foods Vegetable
Company and Birds Eye de Mexico SA de CV ('Birds Eye Mexico'). In connection
with the Acquisition, we sold our aseptic business (the 'Aseptic Business') to
Dean Foods. We paid $360.0 million in cash, net of the sale of the Aseptic
Business, and issued to Dean Foods a $30.0 million unsecured subordinated
promissory note due November 22, 2008 (the 'Subordinated Promissory Note'), as
consideration for the Acquisition. We have the right, until July 15, 1999, to
require Dean Foods, jointly with us, to treat the Acquisition as an asset sale
for tax purposes under Section 338(h)(10) of the Internal Revenue Code of 1986,
as amended (the 'Code'). Upon exercising that election, which we intend to do,
we will pay an additional $13.2 million to Dean Foods.
After the Acquisition, Dean Foods Vegetable Company was merged into the
Issuer (the 'Merger'), and Dean Foods Vegetable Company became a division of the
Company known as 'Agrilink Foods Vegetable Company' or 'AFVC.' DFVC has been one
of the leading processors of vegetables in the United States, selling its
products under well-known brand names, such as Birds Eye,
5
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Freshlike and Veg-All, and private labels. We believe that the Acquisition
strengthens our competitive position by enhancing our brand recognition and
market position, providing opportunities for cost savings and operating
efficiencies, and increasing our product and geographic diversification.
The Refinancing
Concurrently with the Acquisition, we refinanced (the 'Refinancing') our
existing indebtedness, which included our 12.25% Senior Subordinated Notes due
2005 (the 'Old Notes') and our then existing bank debt. We conducted a tender
offer (the 'Tender Offer') for all the Old Notes and a consent solicitation (the
'Solicitation') to certain amendments of the indenture governing the Old Notes.
Substantially all of the $160.0 million aggregate principal amount of the Old
Notes were tendered and were purchased by us for an aggregate amount of
approximately $184.0 million, including accrued interest of $2.9 million. The
amendments to the indenture governing the Old Notes were adopted. We also
terminated our old credit facility (the 'Old Credit Facility') and repaid the
$176.5 million of indebtedness outstanding thereunder. We refer to the
Acquisition, the Merger, the sale of the Aseptic Business and the Refinancing
collectively as the 'Transactions.'
In order to consummate the Transactions and pay the related fees and
expenses, we:
entered into a new credit facility (the 'New Credit Facility') providing
for $455.0 million of term loan borrowings (the 'Term Loan Facility') and
up to $200.0 million of revolving credit borrowings (the 'Revolving Credit
Facility');
entered into a $200.0 million bridge loan facility (the 'Bridge
Facility'); and
issued the $30.0 million Subordinated Promissory Note to Dean Foods.
We repaid the Bridge Facility on November 18, 1998, principally with the
proceeds of the offering of the Initial Notes (the 'Initial Notes Offering').
RECENT DEVELOPMENTS
In December 1998, we and Pro-Fac announced that Pro-Fac has entered into a
letter of intent for Pro-Fac to acquire the business of Agripac, Inc.
('Agripac'), an Oregon cooperative. Agripac, which processes frozen and canned
vegetables in the Northwest, reported approximately $180.0 million in aggregate
sales for fiscal 1998 (including for both frozen and canned vegetables). Agripac
operates eight plant facilities located in the states of Oregon and Washington
and employs approximately 600 people. It currently sources from approximately
190 growers in the Northwest.
The transaction, if consummated, will involve a newly-formed subsidiary of
Pro-Fac acquiring the frozen (and not canned) vegetable assets and member-grower
contracts of Agripac in exchange for Pro-Fac stock and the repayment of certain
debt of Agripac with the proceeds of approximately $100.0 million of
indebtedness incurred by the new subsidiary. Most of the members of Agripac will
become members of Pro-Fac as a result. In order to consummate the transaction,
neither we nor Pro-Fac will loan or otherwise contribute any funds to the new
subsidiary or guarantee or otherwise secure with our or Pro-Fac's assets the
indebtedness to be incurred by the new subsidiary. We anticipate that our
management will manage and operate this new Pro-Fac subsidiary in exchange for a
management fee.
The transaction is subject to numerous conditions, including that Agripac's
existing lenders provide sufficient financing for the acquisition and for
working capital, finalization of agreements, board approval, regulatory approval
and due diligence.
Separately, we announced in December 1998 that we reached an agreement in
principle to sell our peanut butter business. We do not consider this to be a
significant transaction.
------------------------
Our executive offices are located at 90 Linden Oaks, P.O. Box 20670,
Rochester, New York 14602, telephone: (716) 383-1850.
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THE EXCHANGE OFFER
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Registration Rights Agreement................ We issued the Initial Notes on November 18, 1998 to Warburg Dillon
Read LLC and Nesbitt Burns Securities Inc. (the 'Initial
Purchasers'). The Initial Purchasers placed the Initial Notes with
institutional investors in transactions exempt from the
registration requirements of the Securities Act pursuant to
Section 4(2) and/or Regulation S under the Securities Act and
applicable state securities laws. In connection with this private
placement, the Company, Pro-Fac and the Initial Purchasers entered
into the Registration Rights Agreement, which provides, among
other things, for the Exchange Offer. See 'The Exchange Offer.'
The Exchange Offer........................... We are offering Exchange Notes in exchange for an equal principal
amount of Initial Notes. As of this date, there is $200,000,000
aggregate principal amount of Initial Notes outstanding. Initial
Notes may be tendered only in integral multiples of $1,000.
Resale of Exchange Notes..................... We believe that the Exchange Notes issued in the Exchange Offer
may be offered for resale, resold or otherwise transferred by you
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that:
you are acquiring the Exchange Notes in the ordinary course of
your business;
you are not participating, do not intend to participate, and
have no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes; and
you are not an 'affiliate' of ours.
If any of the foregoing are not true and you transfer any Exchange
Note without registering such Exchange Note and delivering a
prospectus meeting the requirements of the Securities Act, or
without an exemption from registration of your Exchange Notes from
such requirements, you may incur liability under the Securities
Act. We do not assume or indemnify you against such liability.
Each broker-dealer that is issued Exchange Notes for its own
account in exchange for Initial Notes that were acquired by such
broker-dealer as a result of market making or other trading
activities must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with
any resale of the Exchange Notes. A broker-dealer may use this
Prospectus for an offer to resell, resale or other retransfer of
the Exchange Notes. See 'Plan of Distribution.' Subject to certain
limitations, we will take steps to ensure that the issuance of the
Exchange Notes will comply with state securities or 'blue sky'
laws.
Consequences of Failure to Exchange Initial
Notes...................................... If you do not exchange your Initial Notes for Exchange
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Notes, you will no longer be able to compel us to register the
Initial Notes under the Securities Act. In addition, you will not
be able to offer or sell the Initial Notes unless they are
registered under the Securities Act (and we will have no
obligation to register them, except for some limited exceptions),
or unless you offer or sell them under an exemption from the
requirements of, or a transaction not subject to, the Securities
Act. See 'Risk Factors -- Failure to Participate in the Exchange
Offer Will Have Adverse Consequences' and 'The Exchange
Offer -- Effect of the Exchange Offer.'
Expiration of the Exchange Offer............. The Exchange Offer will expire at 5:00 p.m., New York City Time,
on , 1999 (the 'Expiration Date'), unless
we decide to extend the Expiration Date.
Interest on the Exchange Notes............... The Exchange Notes will accrue interest at 11 7/8% per year, from
either the last date we paid interest on the Initial Notes that
you exchanged, or, if no interest has been paid on the Initial
Notes, from November 18, 1998. We will pay interest on the
Exchange Notes on May 1 and November 1 of each year.
Conditions to the Exchange Offer............. The Exchange Offer is not subject to any condition other than
certain customary conditions, including that:
the Exchange Offer does not violate any applicable law or
applicable interpretation of law of the staff of the
Securities and Exchange Commission;
no litigation materially impairs our ability to proceed with
the Exchange Offer; and
we obtain all the governmental approvals we deem necessary for
the Exchange Offer. See 'The Exchange Offer -- Certain
Conditions to the Exchange Offer.'
Procedures for Tendering Initial Notes....... If you wish to accept the Exchange Offer, you must complete, sign
and date the Letter of Transmittal, or a facsimile of the Letter
of Transmittal, and transmit it together with all other documents
required by the Letter of Transmittal (including the Initial Notes
to be exchanged) to IBJ Schroder Bank & Trust Company, as exchange
agent (the 'Exchange Agent') at the address set forth on the cover
page of the Letter of Transmittal. In the alternative, you can
tender your Initial Notes by following the procedures for
book-entry transfer, as described in this document. For more
information on accepting the Exchange Offer and tendering your
Initial Notes, see 'The Exchange Offer -- Procedures for
Tendering' and ' -- Book-Entry Transfer.'
Guaranteed Delivery Procedures............... If you wish to tender your Initial Notes and you cannot get your
required documents to the Exchange Agent by the Expiration Date,
you may tender your Initial Notes according to the guaranteed
delivery procedure under the heading 'The Exchange
Offer -- Guaranteed Delivery Procedures.'
Special Procedure for Beneficial
Holders.................................... If you are a beneficial holder whose Initial Notes are registered
in the name of a broker, dealer, commercial bank,
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trust company or other nominee and you wish to tender your Initial
Notes in the Exchange Offer, you should contact the registered
holder promptly and instruct the registered holder to tender your
Initial Notes on your behalf. If you are a beneficial holder and
you wish to tender your Initial Notes on your own behalf, you
must, prior to delivering the Letter of Transmittal and your
Initial Notes to the Exchange Agent, either make appropriate
arrangements to register ownership of your Initial Notes in your
own name or obtain a properly completed bond power from the
registered holder. See 'The Exchange Offer -- Procedures for
Tendering.'
Withdrawal Rights............................ You may withdraw the tender of your Initial Notes at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw, you must send a written or facsimile transmission of
your notice of withdrawal to the Exchange Agent at its address set
forth herein under 'The Exchange Offer -- Exchange Agent' by 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Initial Notes and Delivery of
Exchange Notes............................. Subject to certain conditions, we will accept any and all Initial
Notes that are properly tendered in the Exchange Offer and not
withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. We will deliver the Exchange Notes promptly after
the Expiration Date. See 'The Exchange Offer -- Acceptance of
Initial Notes for Exchange; Delivery of Exchange Notes.'
Tax Considerations........................... We believe that the exchange of Initial Notes for Exchange Notes
will not be a taxable exchange for federal income tax purposes,
but you should consult your tax adviser about the tax consequences
of this exchange. See 'Certain U.S. Federal Income Tax
Considerations.'
Exchange Agent............................... IBJ Schroder Bank & Trust Company is serving as exchange agent in
connection with the Exchange Offer.
Fees and Expenses............................ We will bear all expenses related to consummating the Exchange
Offer and complying with the Registration Rights Agreement. See
'The Exchange Offer -- Fees and Expenses.'
Use of Proceeds.............................. We will not receive any cash proceeds from the issuance of the
Exchange Notes. We used the proceeds from the sale of the Initial
Notes, together with borrowings under the Revolving Credit
Facility, to repay our outstanding obligations under the Bridge
Facility. See 'Use of Proceeds' and 'Management's Discussion and
Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'
DESCRIPTION OF EXCHANGE NOTES
Notes Offered................................ $200,000,000 aggregate principal amount of 11 7/8% Senior
Subordinated Notes due 2008 issued by Agrilink Foods, Inc. The
form and terms of the Exchange Notes are the same as the form and
terms of the Initial Notes, except that the
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Exchange Notes will be registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and
will not be entitled to registration under the Securities Act. The
Exchange Notes will evidence the same debt as the Initial Notes
and both the Initial Notes and the Exchange Notes are governed by
the same indenture.
Maturity..................................... November 1, 2008.
Interest Payment Dates....................... May 1 and November 1 of each year, commencing May 1, 1999.
Sinking Fund................................. None.
Optional Redemption.......................... We have the right to redeem the Exchange Notes, in whole or in
part at any time and from time to time, on or after November 1,
2003, at the redemption prices described in this Prospectus under
the heading 'Description of Notes -- Optional Redemption of the
Notes,' plus accrued and unpaid interest, if any, to the date of
redemption. We also have the right to redeem up to 35% of the
aggregate principal amount of the Notes originally issued, at any
time prior to November 1, 2001, at a redemption price equal to
111.875% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the redemption date, with the net proceeds of
one or more Equity Offerings; provided, however, that at least
$130 million in aggregate principal amount of the Notes remains
outstanding following each such redemption. See 'Description of
Notes -- Optional Redemption of the Notes.'
Change of Control............................ Upon the occurrence of a Change of Control, we will be required to
offer to purchase all or any part of each holder's Notes at a
price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of purchase. We may not
have the financial resources necessary, or me may not be permitted
by our debt or other agreements (including the New Credit
Facility), to purchase the Notes upon a Change of Control. See
'Risk Factors -- Change of Control' and 'Description of
Notes -- Change of Control.'
Subordination................................ The Exchange Notes will be unsecured and will be subordinated in
right of payment to all existing and future Senior Indebtedness
(as defined in this Prospectus) of the Issuer, including the
borrowings under the New Credit Facility. At September 26, 1998,
as adjusted to give effect to the Initial Notes Offering and the
application of the net proceeds therefrom, we would have had
approximately $695.6 million of indebtedness outstanding
(excluding seasonal working capital borrowings under the Revolving
Credit Facility), of which approximately $465.6 million would have
constituted Senior Indebtedness. In addition, we maintain
significant borrowings for seasonal working capital needs, which
also constitute Senior Indebtedness to which the Exchange Notes
are subordinated. At September 26, 1998, seasonal working capital
borrowings
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under the Revolving Credit Facility were $94.0 million. See
'Description of Notes -- Subordination.'
Guarantees................................... The Exchange Notes will be unconditionally guaranteed (the 'Note
Guarantees'), jointly and severally, by each of Pro-Fac and
certain of the Issuer's subsidiaries (the 'Subsidiary Guarantors'
and, together with Pro-Fac, the 'Guarantors'). Each Note Guarantee
will be unsecured and subordinated to such Guarantor's guarantee
of the Issuer's obligations under the New Credit Facility and to
all other Senior Indebtedness of such Guarantor.
Restrictive Covenants........................ The indenture under which the Exchange Notes will be issued will
contain covenants for your benefit which, among other things and
subject to certain exceptions, restrict our ability to:
incur additional indebtedness;
issue capital stock of certain subsidiaries;
pay dividends, make distributions or make other restricted
payments;
create liens;
enter into certain transactions with affiliates; and
consolidate, merge, or sell substantially all of our assets.
See 'Description of Notes -- Certain Covenants.'
Absence of a Public Market for the Notes..... The Exchange Notes are new securities and there is currently no
established market for them.
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our unaudited consolidated ratios of
earnings to fixed charges on a historical basis and on a pro-forma basis,
adjusted to give effect to the Transactions and the Initial Notes Offering and
the application of the net proceeds therefrom as if they had occurred at the
dates referenced under 'Unaudited Pro Forma Financial Data of the Company.'
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, ------------------
1994 1995(1) 1996 1997 ACTUAL PRO FORMA
-------- -------- -------- -------- ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(coverage deficiency)........... 1.95x 1.30x $(18.7) 1.20x 1.39x 1.05x
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------
SEPTEMBER 26, 1998
SEPTEMBER 27, ---------------------
1997 ACTUAL PRO FORMA
---- ------ ---------
<S> <C> <C> <C>
Ratio of earnings to fixed charges
(coverage deficiency)........... 1.33x 1.24x $(5.5)
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- ------------
(1) Represents the sum of the results of operations for both the predecessor and
successor entities relating to the change of control of Agrilink in November
1994.
------------------------
For purposes of calculating these ratios, we determined our earnings by
adding fixed charges to income (or loss) before taxes and before cumulative
effect of an accounting change and extraordinary item. Fixed charges consist of
interest expense and the interest component of rental expense. For fiscal 1996
and the first quarter of fiscal 1999 on a pro forma basis, earnings before fixed
charges were insufficient to cover fixed charges and the dollar amount of the
coverage deficiency, instead of the ratio, is provided. We excluded the $64.2
million gain on the sale of the Aseptic Business in calculating the ratio of
earnings to fixed charges at September 26, 1998.
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RISK FACTORS
You should carefully consider the following factors together with the other
matters set forth herein or incorporated by reference herein before deciding
whether to exchange your Initial Notes for Exchange Notes in the Exchange Offer.
FAILURE TO PARTICIPATE IN THE EXCHANGE OFFER WILL HAVE ADVERSE CONSEQUENCES
If you do not exchange your Initial Notes for Exchange Notes pursuant to
the Exchange Offer, you will continue to be subject to the restrictions on
transfer of your Initial Notes, as set forth in the legend on your Initial
Notes. The restrictions on transfer of your Initial Notes arise because we
issued the Initial Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Initial Notes may not be offered or sold,
unless registered under the Securities Act and applicable state securities laws,
or pursuant to an exemption from such requirements. We do not intend to register
the Initial Notes under the Securities Act.
After completion of the Exchange Offer, holders of Initial Notes who do not
tender their Initial Notes in the Exchange Offer will no longer be entitled to
any exchange or registration rights under the Registration Rights Agreement,
except under limited circumstances.
If you exchange your Initial Notes in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes, you may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Initial Notes are tendered
and accepted in the Exchange Offer, the trading market, if any, for the Initial
Notes would be adversely affected. See 'The Exchange Offer.'
EXCHANGE OFFER PROCEDURES
We will issue the Exchange Notes in exchange for Initial Notes pursuant to
the Exchange Offer only after timely receipt by us of Initial Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents or an Agent's Message (as defined herein) in lieu thereof. Therefore,
holders of Initial Notes desiring to tender their Initial Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. We have
no duty to notify you of defects or irregularities with respect to your tender
of Initial Notes for exchange. Initial Notes that are not tendered, or are
tendered but not accepted, will continue to be subject to the existing
restrictions on transfer following the consummation of the Exchange Offer. In
addition, any holder of Initial Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Initial Notes, where
the Initial Notes were acquired by the broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of those Exchange Notes. See
'Plan of Distribution.'
REQUIREMENTS FOR TRANSFER OF EXCHANGE NOTES
We believe that the Holders (as defined in this Prospectus) of the Exchange
Notes issued in exchange for the Initial Notes in the Exchange Offer may offer
those Exchange Notes for resale, unless the Holder comes within the definition
of an 'affiliate' of the Company within the meaning of Rule 405 under the
Securities Act, without registering the Exchange Notes or delivering a
prospectus for the Exchange Notes, as long as the Holders acquire the Exchange
Notes in the ordinary course of business and the Holders have no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes. Our belief is based on interpretations of
no-action letters that the Commission issued to third parties.
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Each Holder, other than a broker-dealer, must tell us in writing, at our
request, that it is not an affiliate of the Company, is not engaged in, does not
intend to engage in, and has no arrangement or understanding to participate in a
distribution of Exchange Notes, and that it is acquiring the Exchange Notes in
its ordinary course of business. If any Holder is an affiliate of the Company,
is engaged in distribution of the Exchange Notes, intends to distribute the
Exchange Notes, or has an agreement to distribute the Exchange Notes the Holder
will receive in the Exchange Offer, or if the Holder is not acquiring the
Exchange Notes in its ordinary course of business, the Holder may not rely on
the applicable interpretations of the no-action letters issued by the Commission
and must register the Exchange Notes and deliver a prospectus for the Exchange
Notes before the Holder resells the Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Initial Notes that the broker-dealer acquired in market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus for the Exchange Notes if it resells the Exchange Notes. Each broker-
dealer that holds Initial Notes acquired for its own account as a result of
market-making activities or other trading activities, and that receives Exchange
Notes in exchange for such Initial Notes in the Exchange Offer, may be an
'underwriter' within the meaning of the Securities Act in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that a
broker-dealer who acknowledges that it acquired the Initial Notes in
market-making activities or other trading activities and delivers a prospectus
will not be deemed to admit that it is an 'underwriter' within the meaning of
the Securities Act. Broker-dealers may use this Prospectus, as it may be amended
or supplemented from time to time, when they resell Exchange Notes received in
exchange for Initial Notes where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, for 180 days after this Registration Statement
is declared effective by the Commission, we will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See 'Plan of
Distribution.'
In addition, to comply with the securities laws of certain jurisdictions,
it may be necessary to qualify the Exchange Notes for sale or register them
under such laws, prior to offering or selling such Exchange Notes in such
jurisdictions. We have agreed, pursuant to the Registration Rights Agreement,
subject to certain limitations specified therein, prior to any public offering
of Transfer Restricted Securities (as defined in this Prospectus) to register or
qualify the Transfer Restricted Securities for offer or sale under the
securities laws of such jurisdictions as any Holder requests. We do not intend
to register or qualify the sale of the Exchange Notes in any such jurisdiction
unless we receive a specific request from a Holder.
OUR SUBSTANTIAL LEVERAGE AND DEBT SERVICE REQUIREMENTS MAY HAVE ADVERSE
CONSEQUENCES
We are highly leveraged and have significant debt service requirements. Our
leverage and debt service requirements may increase as a result of future
borrowings to fund capital expenditures, working capital needs or for other
general corporate purposes. At September 26, 1998, as adjusted to give effect to
the Initial Notes Offering and the application of the net proceeds therefrom, we
would have had $695.6 million of indebtedness outstanding, not including
borrowings under our $200.0 million Revolving Credit Facility. At September 26,
1998, we had $94.0 million of indebtedness outstanding under the Revolving
Credit Facility, representing seasonal working capital borrowings, and we had
issued $14.3 million of letters of credit under the Revolving Credit Facility.
Our substantial level of debt has important consequences, including the
following:
our ability to obtain additional financing for working capital, capital
expenditures, general corporate purposes or other purposes may be
impaired;
a substantial portion of our cash flow from operations must be dedicated
to the payment of principal and interest on our indebtedness, thereby
reducing funds available to us for our operations or other purposes;
our substantial degree of leverage may limit our flexibility in planning
for or reacting to changing market conditions, reduce our ability to
withstand competitive pressures and make us more vulnerable to a downturn
in general economic conditions or in our business;
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we may be more highly leveraged than our competitors, which may place us
at a competitive disadvantage; and
to the extent we incur any indebtedness at variable or floating rates, we
will be vulnerable to increases in interest rates which could result in a
higher interest expense.
In addition, under the New Credit Facility, we are scheduled to make
principal payments of the Term Loans of $198.2 million in fiscal 2005 and $202.4
million in fiscal 2006. See 'Description of Certain Indebtedness -- New Credit
Facility.' We may be unable to pay such principal amounts unless we are able to
refinance our indebtedness. Our ability to make scheduled payments of principal
or interest or to refinance our indebtedness (including the Notes) will depend
on our future operating performance, which will be subject to economic,
financial, competitive and other factors beyond our control. If we are unable to
generate sufficient cash flow from operations to meet our principal and interest
payment obligations and to meet other cash requirements, we may be required to
sell assets, reduce capital expenditures, refinance all or a portion of our
existing debt (including the Notes) or obtain additional financing. We may not
be able to complete any such asset sales or refinancing, or obtain additional
financing, on terms acceptable to us. Factors which could affect our access to
the capital markets, or the cost of such capital, include changes in interest
rates, general economic conditions and the perception in the capital markets of
our business, results of operations, leverage, financial condition and business
prospects.
For additional information about our indebtedness, see 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources,' 'Capitalization,' 'Description
of Certain Indebtedness' and 'Description of Notes' herein.
THE NOTES AND THE NOTE GUARANTEES ARE SUBORDINATED TO OTHER INDEBTEDNESS
The payment of principal of, and interest or other amounts on, the Notes is
subordinated to the prior payment in full of all existing and future Senior
Indebtedness of the Issuer, including all amounts owing under the New Credit
Facility. The Note Guarantees are similarly subordinated to all existing and
future Senior Indebtedness of the Guarantors, including their guarantees of the
New Credit Facility. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Issuer or
a Guarantor, assets of the Issuer or such Guarantor will be available to pay
obligations on the Notes or the Note Guarantees only after all Senior
Indebtedness of the Issuer or such Guarantor has been paid in full. There may
not be sufficient assets to pay amounts due on the Notes after such Senior
Indebtedness has been paid.
In addition, in the event of certain defaults in respect of Designated
Senior Indebtedness (as defined herein), the Issuer and the Guarantors are
prohibited from paying principal, premium, interest or other amounts on account
of the Notes or any Note Guarantee under certain circumstances. The Notes and
the Note Guarantees are not secured by the assets of the Issuer or the
Guarantors and so are also effectively subordinated to all secured indebtedness
of the Issuer and the Guarantors to the extent of the value of the assets
securing such indebtedness. The New Credit Facility, on the other hand, is
secured by substantially all the assets of the Issuer and the Guarantors,
including a pledge of the capital stock of the Issuer and each Subsidiary
Guarantor. At September 26, 1998, as adjusted to give effect to the Initial
Notes Offering and the application of the net proceeds therefrom, the Company
would have had approximately $465.6 million of Senior Indebtedness outstanding,
excluding the seasonal working capital borrowings under the Revolving Credit
Facility. The Issuer maintains significant seasonal working capital borrowings,
which are also Senior Indebtedness. At September 26, 1998, an additional $94.0
million of seasonal working capital borrowings were outstanding under the $200.0
million Revolving Credit Facility. In addition, $14.3 million of letters of
credit were issued thereunder as of such date. Substantially all of such Senior
Indebtedness is secured. See 'Description of Notes -- Subordination.'
Pro-Fac does not have any independent operations or any significant assets
other than the capital stock of the Issuer. It is dependent upon the receipt of
payments under the Marketing Agreement described below under ' -- Relationship
with Pro-Fac; Potential Conflict of Interest,' and dividends or other
distributions from the Issuer to fund its obligations, including its obligations
under its Note
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Guarantee. In addition, the assets and operations of the Subsidiary Guarantors
are not a substantial portion of the assets and operations of the Company as a
whole. If the Issuer is not able to make interest or principal payments on the
Notes, then it is unlikely that Pro-Fac or the Subsidiary Guarantors would be
able to meet their obligations under their Note Guarantees.
RESTRICTIONS IMPOSED BY TERMS OF OUR INDEBTEDNESS
The Indenture and the New Credit Facility contain covenants imposing a
number of significant operating and financial restrictions on our business and
on Pro-Fac. These covenants, among other things, limit our ability to:
incur additional indebtedness,
incur or maintain liens,
pay dividends or other distributions,
redeem capital stock of Pro-Fac and the Issuer,
make other restricted payments,
enter into transactions with affiliates,
sell or dispose of assets and
merge, consolidate or sell all or substantially all of our or Pro-Fac's
assets.
See 'Description of Certain Indebtedness -- New Credit Facility' and
'Description of Notes -- Certain Covenants.'
In addition, we and Pro-Fac are required under the New Credit Facility to
maintain specified levels with regard to EBITDA, interest coverage, fixed
charges, leverage and net worth.
Our and Pro-Fac's ability to comply with these provisions in the Indenture
and the New Credit Facility will depend on our future performance, which may be
affected by prevailing economic, financial and business factors beyond our
control. We and Pro-Fac may not be able to comply with these or other provisions
in the Indenture or the New Credit Facility, in which case our or Pro-Fac's
failure to comply would result in a default thereunder. A default under the New
Credit Facility would allow the lenders to terminate their loan commitments
under the Revolving Credit Facility. Because we are highly dependent on the
Revolving Credit Facility for liquidity, the termination of the Revolving Credit
Facility could significantly impair our operations. In addition, certain
defaults under the Indenture or the New Credit Facility would allow our
creditors thereunder to require acceleration of the payment of principal and
interest on those notes or loans, causing all amounts owed thereunder, including
accrued and unpaid interest, to be immediately due and payable. If we become
unable to repay our indebtedness under the New Credit Facility, the lenders
could foreclose upon their collateral or exercise any other right or remedy
available under the New Credit Facility. If the indebtedness outstanding under
the New Credit Facility were to be accelerated, our assets may not be sufficient
to repay our obligations under the New Credit Facility, other Senior
Indebtedness or the Notes. See 'Description of Certain Indebtedness -- New
Credit Facility' and 'Description of Notes.'
DIFFICULTY IN INTEGRATING DFVC
Although we have acquired six businesses or product lines since June 1995,
our acquisition of DFVC represents by far our largest acquisition . The
integration and consolidation of DFVC into our business will require substantial
management, financial and other resources. While we believe we have sufficient
resources to integrate DFVC, such integration involves a number of significant
risks, including diversion of management's attention from other aspects of our
business. Moreover, we may not realize some or all of the cost savings that we
anticipate as a result of the acquisition of DFVC, or we may not realize those
costs savings until much farther in the future than we had originally
anticipated. For example, we may not realize the cost savings we anticipate from
the insourcing from DFVC of product we currently purchase from outside vendors
because we may not be able to achieve necessary production levels. Although we
have established a reserve of $11.0 million for restructuring initiatives
relating to the elimination of duplicative administrative costs in conjunction
with the Acquisition, the
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reserve may not be adequate to cover such costs or other costs related to the
Transactions. Our inability to integrate and manage DFVC successfully, or to
achieve a substantial portion of the anticipated cost savings within the time
frame we anticipate, could have a material adverse effect on our business,
financial condition or results of operations. See 'The Transactions,' 'Unaudited
Pro Forma Financial Data of the Company' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations.'
RELATIONSHIP WITH PRO-FAC; POTENTIAL CONFLICT OF INTEREST
Pro-Fac is an agricultural cooperative of over 600 members formed for the
purpose of developing and maintaining markets for its members' crops. The
principal reason Pro-Fac purchased Agrilink in 1994 was to provide a long-term
reliable market for Pro-Fac's members' crops. Although its members are also
seeking a favorable return on their equity investment in Pro-Fac and desire a
viable self-reliant business entity to assure continuity, the members' interest
in marketing their crops will at times conflict with our interest in maximizing
profits.
In 1994, the Issuer entered into the Marketing Agreement with Pro-Fac. The
Marketing Agreement provides, among other things, for our purchase of crops
grown by Pro-Fac's members. The Marketing Agreement, or similar marketing
agreements, have been continuously in effect between the Issuer and Pro-Fac
since the formation of these companies in the early 1960's. Under the Marketing
Agreement, we purchase crops from Pro-Fac at the Commercial Market Value of
those crops, which is generally defined in the Marketing Agreement as the
weighted average of the prices paid by other commercial processors for similar
crops sold under pre-season contracts and in the open market in the same or
competing market areas. Commercial Market Value of the crops we purchase may be
more or less than the price that we would have paid in the open market in the
absence of the Marketing Agreement. Under the Marketing Agreement, the Issuer
paid Pro-Fac $44.7 million in fiscal 1996, $51.4 million in fiscal 1997 and
$58.5 million in fiscal 1998 as Commercial Market Value for crops purchased from
Pro-Fac.
Commercial Market Value for each crop is determined by a joint committee of
the Boards of Directors of Pro-Fac and the Issuer. The joint committee consists
of the Chief Executive Officer of the Issuer and an equal number of 'Pro-Fac
Directors' (directors who are members or affiliates of Pro-Fac) and
'Disinterested Directors' (directors who are neither members of, nor affiliated
with, Pro-Fac). The Marketing Agreement requires a majority of the Disinterested
Directors to approve the recommendation of the joint committee. The volume and
type of crops to be purchased and sold under the Marketing Agreement are
determined by the same approval process as Commercial Market Value. In addition
to the arrangements between Pro-Fac and the Issuer governed by the Marketing
Agreement, as owner of the Issuer and through its representatives on the
Issuer's Board of Directors, Pro-Fac has significant influence over the
operations of the Issuer, including, without limitation, the acquisition and
disposition of assets and the making of capital expenditures. The Indenture
provides that a Change of Control will occur if, for a period of 120 consecutive
days, the number of Disinterested Directors on the Board of Directors of the
Issuer is less than the greater of: (i) two and (ii) the number of directors of
the Issuer who are Pro-Fac Directors. See 'Description of Notes -- Change of
Control.' There can be no assurance that the above-described management and
Board structure will eliminate the conflicts of interest described above.
Pro-Fac is considering merging us into Pro-Fac. Pro-Fac would be the
survivor of such merger and we would cease to exist. The Indenture permits such
a merger, subject to Pro-Fac assuming our obligations under the Notes and the
Indenture and the satisfaction of certain other conditions. In the event of our
merger into Pro-Fac, the Marketing Agreement will cease to be in effect. The
Indenture, as applicable after such merger, includes provisions that, among
other things, require a majority of the Disinterested Directors to approve the
final determination of Commercial Market Value. See 'Description of Notes'
including ' -- Payments Pursuant to the Pro-Fac Marketing Agreement;
Reinvestments by Pro-Fac; Borrowings by Pro-Fac.'
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DEPENDENCE ON PRO-FAC AS SUPPLIER
The crops purchased from Pro-Fac represented approximately 72% of all raw
agricultural crops purchased by the Issuer in fiscal 1996, 71% in 1997 and 76%
in 1998. Although the percentage of our crop needs that we purchase from Pro-Fac
is initially expected to decrease while we integrate DFVC into our operations,
we anticipate that we will return to purchasing a similar percentage of its raw
agricultural products from Pro-Fac. Pro-Fac anticipates adding new members over
the next two years in order to meet the increased demand due to the Acquisition.
However, Pro-Fac may not be able to add new members in that time frame. In such
event, our need for additional raw materials will likely not be able to be
fulfilled by current Pro-Fac members. The inability of Pro-Fac to supply our raw
agricultural product requirements after consummation of the Acquisition in
similar proportions to that of prior years could cause Pro-Fac to lose its
cooperative status and suffer adverse tax consequences. Pro-Fac's loss of
cooperative status would constitute a default under the New Credit Facility and
could have other material adverse effects on our business, financial condition
or results of operations.
GENERAL RISKS OF THE FOOD INDUSTRY
Food processors are subject to the risks of adverse changes in general
economic conditions; evolving consumer preferences and nutritional and
health-related concerns; changes in food distribution channels and increasing
buying power of large supermarket chains, warehouse clubs, mass merchandisers,
supercenters and other retail outlets that tend to resist price increases and
have stringent inventory and management requirements; federal, state and local
food processing controls; consumer product liability claims; and risks of
product tampering. The occurrence of any such change could have a material
adverse effect on our business, financial condition or results of operations.
COMPETITION
The food industry is highly competitive. All of our products, particularly
our branded products, compete with those of national and major regional food
processors including DelMonte, Green Giant, Heinz, Frito-Lay, Kraft, Vlasic and
similar major brands. Our products also compete 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. Many of these
manufacturers have substantially greater resources than we do. 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. We
may not be able to continue to compete successfully, and competition may have a
material adverse effect on our business, financial condition or results of
operations in the future.
PRODUCT LIABILITY AND RESULTING ADVERSE PUBLICITY
The packaging, marketing and distribution of food products entails an
inherent risk of product liability, product recall and resultant adverse
publicity. We may be subject to significant liability if the consumption of any
of our products causes injury, illness or death. We could be required to recall
certain of our products in the event of contamination or damage to the products.
In February 1997, we issued a nationwide recall of one of our products because
it had the potential to be contaminated with Listeria monocytogenes, a highly
infectious organism. We may be obligated to perform further recalls in the
future. In addition, we cannot guarantee that product liability claims will not
be asserted against us in the future, or that such claims will not create
adverse publicity that will have a material adverse effect on our ability to
successfully market our products and on our business, financial condition and
results of operations. See 'Management's Discussion and Analysis of Financial
Conditions and Results of Operations -- Product Recall.'
SEASONALITY; RAW MATERIALS
Our sales are not highly seasonal, although some of our products have
higher sales volumes in the cool weather months (such as canned fruits and
vegetables, chilies and fruit fillings and toppings) and others have higher
sales volumes in the warm weather months (such as potato chips and dressings).
However, many of the raw materials we process are agricultural crops, and the
production of our
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products using these crops is predominantly seasonal. As a result, we need
access to working capital financing to meet our production requirements during
these periods.
The canned and frozen vegetable portion of our business can be positively
or negatively affected by weather conditions nationally because of the weather's
impact on crop yields. Favorable weather conditions can produce high crop yields
and an oversupply situation in a given year. This oversupply typically will
result in depressed selling prices and reduced profitability on our products
produced from that year's crops. Excessive rain or drought conditions can
produce low crop yields and a shortage situation. This shortage typically will
result in higher selling prices and increased profitability for our products;
however, shortages could result in supply being insufficient to meet our
requirements. While the overall national supply situation controls pricing, the
supply can differ regionally because of variations in weather.
We purchase all of our requirements for nonagricultural products, including
containers, on the open market. Although we have not experienced any difficulty
in obtaining adequate supplies of such items, occasional periods of short supply
of certain raw materials may occur which could have a material adverse effect on
our business or results of operations.
COMPLIANCE WITH ENVIRONMENTAL LAWS
We are subject to various federal, state and local laws and regulations
relating to the protection of the environment. These environmental laws and
regulations govern the disposal of solid and liquid waste material, which
results from the preparation and processing of foods, and emissions into the
atmosphere, including odors inherent in the heating of foods during preparation.
These environmental 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, as well as operation and closure of
existing, waste treatment and related facilities. We cannot predict what
environmental legislation or regulations will be enacted in the future, how
existing or future laws or regulations will be administered or interpreted or
whether new environmental conditions may be found to exist. Enactment of more
stringent laws or regulations, more strict interpretation of existing laws and
regulations or identification of new conditions may require additional
expenditures by the Company, which expenditures may be material. See
'Description of Business -- Environmental Matters' in the Company's Annual
Report.
CHANGE OF CONTROL
If there is a Change of Control of the Issuer, then the Issuer will be
required to offer to purchase all of the outstanding Notes at 101% of their
principal amount, plus any accrued and unpaid interest on them to the purchase
date. A Change of Control under the Indenture will result in a default under the
New Credit Facility. The Issuer may not have, or may not have access to,
sufficient funds or it may not be contractually permitted under the terms of its
outstanding indebtedness (including the New Credit Facility) to pay the required
purchase price for all Notes tendered by holders. See 'Description of
Notes -- Change of Control' and 'Description of Certain Indebtedness -- New
Credit Facility.'
YEAR 2000 RISKS
Certain portions of our software identify years with two digits instead of
four. If not corrected, this would cause problems because the software may
recognize the year 2000 as the year 1900. We engage in a significant amount of
business and reporting activities that depend on accurate date information, such
as inventory control including monitoring dated food products. As a result, such
'Year 2000' problems could result in system failures or inaccurate reporting
that disrupts our operations. Prior to the Acquisition, Agrilink and DFVC
separately undertook full analyses of their business applications and related
software. Each identified certain portions of its software that we will be
required to modify or replace so that our computer systems will be cleared of
potential Year 2000 problems. The modifications and replacements of those
systems are being and will continue to be made in conjunction with our overall
information systems initiatives.
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We are contacting non-information technology vendors to ensure that any of
their products that are currently in use by us can adequately deal with the Year
2000 issue. Areas we are addressing include full reviews of manufacturing
equipment, telephone and voice mail systems, security systems and other
office/site support systems. We also may be vulnerable to business interruptions
caused by uncorrected Year 2000 problems of our customers and significant
suppliers of raw materials, products or services. We have initiated formal
communications with our significant suppliers and customers to determine the
extent to which we may be vulnerable to their failure to remedy their own Year
2000 issues.
We do not believe that we have any material exposure to significant
business interruption as a result of the Year 2000 issue. We expect that the
costs of addressing our potential Year 2000 problems will not have a material
adverse impact on our financial position, results of operations or cash flows in
future periods. However, we cannot guarantee that all of our Year 2000 issues
will be remedied and will not cause significant business interruptions or costs,
that the systems of customers or suppliers on which our business or systems rely
will be timely converted or that a failure to convert by customers or suppliers,
or a conversion that is incompatible with our systems, would not have material
adverse effect on our business and the results of our operations.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are new securities for which there currently is no
market. We do not intend to apply for listing of the Exchange Notes on any
securities exchange or for quotation through an automated quotation system. It
is not certain that any market for the Exchange Notes will develop or that any
such market would be liquid.
The market for 'high yield' securities, such as the Exchange Notes, is
volatile and unpredictable. This volatility and unpredictability may have an
adverse effect on the liquidity of, and prices for, such securities. The
Exchange Notes could trade at prices that may be lower than their initial
offering price as a result of many factors, including prevailing interest rates
and the Company's operating results. General declines in the market for similar
securities may adversely affect the liquidity of, and the trading market for,
the Exchange Notes. Such a decline may adversely affect liquidity and trading
markets independently of our financial performance and prospects.
FRAUDULENT TRANSFER STATUTES
Under the federal or state fraudulent transfer laws, a court could take
certain actions detrimental to you if it found that, at the time the Initial
Notes or guarantees of Pro-Fac or of our subsidiaries were issued:
we or a Guarantor issued the Initial Notes or a guarantee with the intent
of hindering, delaying or defrauding current or future creditors; or
we or a Guarantor received less than fair consideration or reasonably
equivalent value for incurring the indebtedness represented by the Initial
Notes or a guarantee,
and, in addition,
we or a Guarantor were insolvent or rendered insolvent by issuing the
Initial Notes or the guarantee;
we or a Guarantor were engaged (or about to engage) in a business or
transaction for which our assets were unreasonably small; or
we or a Guarantor intended to incur indebtedness beyond our ability to
pay, or believed or should have believed that we would incur indebtedness
beyond our ability to pay.
If a court made these findings, it could:
void all or part of our obligations, or a Guarantor's obligations, to the
holders of Exchange Notes; or
subordinate our obligations, or a Guarantor's obligations, to the holders
of Exchange Notes to other indebtedness of ours or of the Guarantor.
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The effect of the court's action would be to entitle the other creditors to
be paid in full before any payment could be made on the Exchange Notes. The
court could take other action detrimental to the holders of Exchange Notes,
including in certain circumstances, invalidating the Exchange Notes or a
guarantee of payment of the Exchange Note by one of our subsidiaries. In that
event, there would be no assurance that any repayment on the Exchange Notes
would ever be recovered by the holders of Exchange Notes.
The definition of insolvency varies among jurisdictions depending upon the
federal or state law applied in the proceeding. However, we or a Guarantor
generally would be considered insolvent at the time we or the Guarantor incur
the debt constituting the Initial Notes or a guarantee, if:
the fair market value (or fair salable value) of the relevant assets is
less than the amount required to pay our total existing debts and
liabilities (including the probable liability on contingent liabilities)
or those of the Guarantor, as they become absolute or matured; or
we or the Guarantor incur debts beyond our or its ability to pay as such
debts mature.
We cannot be sure what standard a court would apply in order to determine
whether we or a Guarantor were 'insolvent' as of the date the Initial Notes or
guarantees of payment of the Initial Notes by our subsidiaries were issued,
regardless of the method of valuation. We cannot be certain whether a court
would determine that we or a Guarantor were insolvent on that date. We also
cannot be certain whether a court would determine that the payments constituted
fraudulent transfers on another ground, regardless of whether we or a Guarantor
were insolvent on the date the Initial Notes or the guarantees were issued.
To the extent a court voids a guarantee of payment of the Initial Notes as
a fraudulent conveyance or holds it unenforceable for any other reason, holders
of Exchange Notes would cease to have any claim against the Guarantor. Holders
of Exchange Notes could proceed solely against us and against any Guarantor
whose guarantee was not voided or held unenforceable. The claims of the holders
of Exchange Notes against the issuer of an invalid guarantee (if a court allowed
any of those claims) would be subject to the prior payment of all liabilities
and preferred stock claims of that Guarantor. There can be no assurance that,
after providing for all prior claims and preferred stock interests, the
Guarantor's assets would be sufficient to satisfy the claims of the holders of
Exchange Notes relating to any voided portions of any of the guarantees.
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THE COMPANY AND PRO-FAC
On November 3, 1994, Pro-Fac, a New York agricultural cooperative
corporation formed in 1960 to process and market crops grown by its members,
acquired Agrilink (known as Curtice-Burns Foods, Inc. until September 1997).
Upon consummation of the acquisition, Pro-Fac and the Issuer entered into the
Marketing Agreement. The Marketing Agreement provides for Pro-Fac to supply
crops and additional financing to the Company, for the Company to provide
marketing and management services to Pro-Fac and for Pro-Fac to share in the
profits or losses of the Company. Under the Marketing Agreement, the Company
pays Pro-Fac the Commercial Market Value for all crops supplied by Pro-Fac.
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 area.
In addition, under the Marketing Agreement, the Issuer is required to have
Disinterested Directors (persons who are neither members of, nor affiliated
with, Pro-Fac) on its board of directors. The volume and type of crops to be
purchased by the Company under the Marketing Agreement are determined pursuant
to its annual profit plan which requires the approval of a majority of the
Disinterested Directors. 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, as additional patronage income, 90% of
such earnings, but in no case more than 50% of pre-tax earnings. In years in
which the Company has losses on Pro-Fac Products, the Company reduces the
Commercial Market Value it would otherwise pay to Pro-Fac by 90% of such losses,
but in no case by more than 50% of all pre-tax losses. Additional patronage
income is paid to Pro-Fac for services provided, including the provision of a
long term, stable crop supply, favorable payment terms for crops and the sharing
of risks of losses of certain operations of the business. Pro-Fac is required to
reinvest back into the Company at least 70% of the additional patronage income
received. The capital of Pro-Fac consists of common stock, preferred stock and
retained earnings allocated to members. Common stock is purchased by members
related to crops delivered. The majority of the preferred stock originated from
the conversion at par value of retained earnings allocated to members. Pro-Fac
Class A Cumulative Preferred Stock is listed under the symbol 'PFACP' on the
Nasdaq National Market System. Retained earnings allocated to members are
allocated to the accounts of members within 8.5 months of the end of each fiscal
year. See Pro-Fac's consolidated financial statements, management's discussion
and analysis of financial condition and results of operations and summary
selected historical and unaudited condensed consolidated pro forma financial
data set forth in the back of this Prospectus.
Pro-Fac is considering merging the Company into Pro-Fac, with Pro-Fac
surviving such merger and the Company ceasing to exist. The Indenture will
permit such a merger of the Company into Pro-Fac, subject to Pro-Fac assuming
the obligations of the Company under the Notes and the Indenture and the
satisfaction of certain other conditions. In the event of a merger of the
Company into Pro-Fac, the Marketing Agreement will cease to be in effect. The
Indenture, as applicable after such merger, would include provisions, among
other things, requiring a majority of the Disinterested Directors to approve the
final determination of Commercial Market Value. See 'Description of Notes'
including ' -- Payments Pursuant to the Pro-Fac Marketing Agreement;
Reinvestments by Pro-Fac; Borrowings by Pro-Fac.'
THE TRANSACTIONS
THE ACQUISITION
On September 24, 1998, Agrilink acquired DFVC, the frozen and canned
vegetable business of Dean Foods, by acquiring all the outstanding capital stock
of Dean Foods Vegetable Company and Birds Eye Mexico. In connection with the
Acquisition, Agrilink sold the Aseptic Business to Dean Foods. Agrilink paid
$360.0 million in cash, net of the sale of the Aseptic Business, and issued to
Dean Foods the $30.0 million Subordinated Promissory Note, as consideration for
the Acquisition. The Company has the right, exercisable until July 15, 1999, to
require Dean Foods, jointly with the Company, to treat the Acquisition as an
asset sale for tax purposes under Section 338(h)(10) of the Code. The Company
intends to exercise that election, because the Company anticipates that it would
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allow the Company to reduce its future tax liability through increased
depreciation and amortization deductions resulting from the stepped up basis for
the assets acquired from Dean Foods and the deductibility of goodwill. Upon
exercising that election, the Company will pay an additional $13.2 million to
Dean Foods.
After the Acquisition, Dean Foods Vegetable Company was merged into the
Issuer, and Dean Foods Vegetable Company became the AFVC division of the
Company. DFVC has been one of the leading processors of vegetables in the United
States, selling its products under well-known brand names, such as Birds Eye,
Freshlike and Veg-All, and private labels. The Company believes that the
Acquisition strengthens its competitive position by: (i) enhancing its brand
recognition and market position, (ii) providing opportunities for cost savings
and operating efficiencies and (iii) increasing its product and geographic
diversification. For the fiscal year ending May 31, 1998, DFVC had net sales
(adjusted to conform to Agrilink's presentation) of $620.2 million and EBITDA of
$58.9 million.
THE REFINANCING
Concurrently with the Acquisition, Agrilink consummated the Refinancing,
including consummating the Tender Offer and Solicitation and entering into the
New Credit Facility and the Bridge Facility. On August 24, 1998, the Issuer
commenced the Tender Offer and the Solicitation. Substantially all of the $160.0
million aggregate principal amount of the Old Notes were tendered and purchased
by the Issuer for aggregate consideration of approximately $184.0 million,
including accrued interest of $2.9 million. Agrilink terminated the Old Credit
Facility and repaid the $176.5 million of indebtedness outstanding thereunder.
In order to consummate the Transactions and pay the related fees and
expenses, Agrilink: (i) entered into the New Credit Facility providing for the
$455.0 million Term Loan Facility and the $200.0 million Revolving Credit
Facility, (ii) entered into the $200.0 million Bridge Facility and (iii) issued
its $30.0 million Subordinated Promissory Note to Dean Foods. The Bridge
Facility was repaid principally with the proceeds of the Initial Notes Offering.
The Bridge Facility was provided by affiliates of the Initial Purchasers: UBS
AG, Stamford Branch (an affiliate of Warburg Dillon Read LLC) and Bank of
Montreal, Chicago branch and Harris Trust and Savings Bank (each an affiliate of
Nesbitt Burns Securities Inc.). In addition, Warburg Dillon Read LLC acted as
financial advisor to Agrilink in connection with the Acquisition, as agent in
connection with the Bridge Facility and as dealer manager in connection with the
Tender Offer and Solicitation.
The following table sets forth the approximate cash sources and uses of
funds in connection with the Transactions and the Initial Notes Offering on a
pro forma basis as if they had occurred on June 27, 1998:
<TABLE>
<CAPTION>
PRO FORMA CASH SOURCES OF FUNDS PRO FORMA CASH USES OF FUNDS
- ------------------------------------------------------ ---------------------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
New Credit Facility(1)....................... $444.0 Cash consideration for the
Acquisition(3)............................ $360.0
Initial Notes Offering(2).................... 200.0 Repayment of Old Credit Facility(1)....... 72.3
Purchase of the Old Notes................. 160.0
Tender Offer and Solicitation premium..... 21.1
Transactions and Initial Notes Offering
discount, fees and expenses............. 30.6
------ ------
Total cash sources of funds............. $644.0 Total cash uses of funds.................. $644.0
------ ------
------ ------
</TABLE>
- ------------
(1) On September 26, 1998, $455.0 million of the Term Loan Facility was
outstanding, reflecting $444.0 million in borrowings made in order to
consummate the Transactions and $11.0 million in borrowings made to
refinance seasonal working capital borrowings under the Old Credit Facility.
In addition, as of such date, $94.0 million was outstanding under the
Revolving Credit Facility to fund seasonal working capital needs and $14.3
million face amount of letters of credit were issued under the Revolving
Credit Facility. See 'Description of Certain Indebtedness -- New Credit
Facility.'
(2) The net proceeds from the sale of the Initial Notes, together with
borrowings under the Revolving Credit Facility, were used to repay all the
indebtedness outstanding ($200.0 million plus accrued interest) under the
Bridge Facility. See 'Use of Proceeds.'
(3) Net of the sale of the Aseptic Business. In addition, the non-cash
consideration for the Acquisition included the $30.0 million Subordinated
Promissory Note issued by Agrilink.
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USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The full
amount of the net proceeds to the Company from the sale of the Initial Notes of
$194.5 million (before deducting expenses payable by the Company, estimated to
be $1.0 million), together with borrowings under the Revolving Credit Facility,
was used to repay all $200.0 million aggregate principal amount of indebtedness,
plus accrued interest, outstanding under the Bridge Facility. Such indebtedness
was drawn at the closing of the Acquisition and the Refinancing and used for
those purposes. The outstanding indebtedness under the Bridge Facility accrued
interest at an approximate rate per annum of 10.5%.
CAPITALIZATION
The following table sets forth, as of September 26, 1998, the consolidated
capitalization of the Company (i) on a historical basis and (ii) as adjusted to
give effect to the Initial Notes Offering and the application of the net
proceeds therefrom. This table should be read in conjunction with the
consolidated financial statements of Agrilink and DFVC and the related notes,
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and 'Unaudited Pro Forma Financial Data of the Company' included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 26, 1998
---------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Long-term debt, including current maturities:
New Credit Facility:
Revolving Credit Facility(1).................................................... $ 94.0 $100.5
Term loan A..................................................................... 100.0 100.0
Term loan B..................................................................... 175.0 175.0
Term loan C..................................................................... 180.0 180.0
Bridge Facility...................................................................... 200.0 --
Notes................................................................................ -- 200.0
Subordinated Promissory Note......................................................... 30.0 30.0
Other long-term debt................................................................. 10.5 10.5
------ -----------
Total long-term debt............................................................ $789.5 $796.0
Shareholder's equity(2)................................................................... 176.6 173.4
------ -----------
Total capitalization............................................................ $966.1 $969.4
------ -----------
------ -----------
</TABLE>
- ------------
(1) On September 26, 1998, an additional $14.3 million face amount of letters of
credit were issued under the Revolving Credit Facility. See 'Description of
Certain Indebtedness -- New Credit Facility.' The amount of the Revolving
Credit Facility outstanding on an as adjusted basis reflects additional
borrowings required in order to repay the Bridge Facility. See 'Use of
Proceeds.'
(2) Adjustments to shareholder's equity include $3.2 million in fees associated
with the Bridge Facility (net of income taxes and after split with Pro-Fac).
Such fees will be reflected in the Company's 1999 second fiscal quarter.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We sold the Initial Notes in a private offering on November 18, 1998, to
the Initial Purchasers pursuant to a purchase agreement dated as of November 13,
1998 by and among the Issuer, Pro-Fac and the Initial Purchasers (the 'Purchase
Agreement'). The Initial Purchasers subsequently resold the Initial Notes to
qualified institutional buyers in reliance, and subject to the restrictions
imposed under, Rule 144A under the Securities Act.
Under the Registration Rights Agreement which we and the Initial Purchasers
entered into in connection with the private offering of the Initial Notes, we
and the Guarantors are required to file, no more than 60 days following the date
the Initial Notes were originally issued (the 'Issue Date'), the Registration
Statement of which this Prospectus is a part providing for a registered exchange
offer of new notes identical in all material respects to the Initial Notes,
except that such new notes will be freely transferable and will not have any
covenants regarding exchange and registration rights. Under the Registration
Rights Agreement, we and Pro-Fac are required to, and are required to cause the
Subsidiary Guarantors to:
use reasonable best efforts to cause the Registration Statement to be
declared effective no later than 120 days after the Issue Date,
keep the Exchange Offer open for not less than 20 business days (or longer
if required by applicable law) after the date that notice of the Exchange
Offer is mailed to holders of the Initial Notes and
use reasonable best efforts to consummate the Exchange Offer as promptly
as practicable, but no later than 45 days after the Registration Statement
is declared effective.
The Registration Rights Agreement also provides that, under certain
circumstances, we and Pro-Fac will, and will cause the Subsidiary Guarantors to,
file with the Commission a shelf registration statement (the 'Shelf Registration
Statement') relating to the offer and sale of Initial Notes by holders of
Initial Notes who satisfy certain conditions regarding the provision to us of
information in connection with the Shelf Registration Statement.
The Exchange Offer being made by this Prospectus is intended to satisfy
your exchange and registration rights under the Registration Rights Agreement.
If we fail to fulfill such registration and exchange obligations, you, as a
holder of outstanding Initial Notes, are entitled to receive 'Additional
Interest' until we have fulfilled such obligations, in the amount of $.05 per
week per $1,000 principal amount of Notes constituting Transfer Restricted
Securities for the first 90-days, and an additional $.05 per week per $1,000
principal amount of Notes constituting Transfer Restricted Securities for each
subsequent 90-day period until we have fulfilled such obligations, up to a
maximum amount of Additional Interest of $.30 per week per $1,000 principal
amount of Notes constituting Transfer Restricted Securities. All amounts of
accrued Additional Interest will be payable in cash on the same interest payment
dates as the Notes. 'Transfer Restricted Securities' means each Initial Note or
Exchange Note until:
the date on which such Initial Note has been exchanged by a person other
than a broker-dealer for an Exchange Note in the Exchange Offer;
if such Exchange Note is received by a broker-dealer in exchange for an
Initial Note in the Exchange Offer, then the date on which such Exchange
Note is sold to a purchaser who receives from such broker-dealer a copy of
this Prospectus;
the date on which such Initial Note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf
Registration Statement; or
the date on which such Initial Note could be resold pursuant to Rule 144
under the Act.
For a more complete understanding of your exchange and registration rights,
you should refer to the Registration Rights Agreement, which is included as an
exhibit to the Registration Statement of which this Prospectus is a part, and a
copy of which is available as set forth under the heading 'Where You Can Find
More Information.'
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EFFECT OF THE EXCHANGE OFFER
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, we believe that you may offer for
resale, resell and otherwise transfer the Exchange Notes issued to you pursuant
to the Exchange Offer in exchange for your Initial Notes without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that you can represent that:
you are not an 'affiliate' (as defined in Rule 405 of the Securities Act)
of the Issuer or any Guarantor;
you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes;
you are acquiring the Exchange Notes in the ordinary course of your
business; and
you are not an Initial Purchaser who acquired Initial Notes directly from
us in the initial offering to resell pursuant to Rule 144A, Regulation S
or any other available exemption under the Securities Act.
If you are not able to make these representations, you are a 'Restricted
Holder.' As Restricted Holder, you will not be able to participate in the
Exchange Offer and may only sell your Initial Notes pursuant to a registration
statement containing the selling security holder information required by Item
507 of Regulation S-K under the Securities Act, or pursuant to an exemption from
the registration requirement of the Securities Act.
In addition, each broker-dealer (other than a Restricted Holder) that
receives Exchange Notes for its own account in exchange for Initial Notes, where
such Initial Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (a 'Participating Broker-
Dealer'), must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. Based upon interpretations by the staff of the
Commission, we believe that Exchange Notes issued pursuant to the Exchange Offer
to Participating Broker-Dealers may be offered for resale, resold and otherwise
transferred by a Participating Broker-Dealer upon compliance with the prospectus
delivery requirements, but without compliance with the registration
requirements, of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes received in exchange for Initial
Notes. The Issuer has agreed that, for a period of 180 days after the date the
Registration Statement is declared effective by the Commission, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. By acceptance of this Exchange Offer, each broker-dealer that
receives Exchange Notes pursuant to the Exchange Offer agrees to notify the
Issuer prior to using this Prospectus in connection with the sale or transfer of
Exchange Notes. See 'Plan of Distribution.'
To the extent Initial Notes are tendered and accepted in the Exchange
Offer, the principal amount of outstanding Initial Notes will decrease with a
resulting decrease in the liquidity in the market for the Initial Notes. Initial
Notes that are still outstanding following the consummation of the Exchange
Offer will continue to be subject to certain transfer restrictions.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, we will accept any and all Initial Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. As of the date of this Prospectus, an aggregate of $200.0
million principal amount of the Initial Notes is outstanding. We will issue
$1,000 principal amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Initial Notes accepted in the Exchange Offer. You may
tender some or all of your Initial Notes pursuant to the Exchange Offer.
However, Initial Notes may be tendered only in integral multiples of $1,000.
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By tendering Initial Notes in exchange for Exchange Notes and by executing
the Letter of Transmittal, you will be required to represent, among other
things, that:
you are not an 'affiliate' (as defined in Rule 405 of the Securities Act)
of the Issuer or any Guarantor;
you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes; and
you are acquiring the Exchange Notes in the ordinary course of your
business.
Each Participating Broker-Dealer must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See 'Plan of Distribution.'
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Initial Notes, except that:
the offering of the Exchange Notes has been registered under the
Securities Act;
the Exchange Notes will not be subject to transfer restrictions; and
the Exchange Notes will be issued free of any covenants regarding exchange
and registration rights (including that they will not provide for
Additional Interest).
The Exchange Notes will evidence the same debt as the Initial Notes and
will be entitled to the benefits of the Indenture under which the Initial Notes
were, and the Exchange Notes will be, issued.
This Prospectus, together with the accompanying Letter of Transmittal, is
initially being sent to all registered holders of Initial Notes on or about
, 1999. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Initial Notes being tendered. However, the
Exchange Offer is subject to certain customary conditions, which we may waive,
and to the terms and provisions of the Registration Rights Agreement. See
' -- Certain Conditions to the Exchange Offer.'
You do not have any appraisal or dissenters' rights under law or the
Indenture in connection with the Exchange Offer. We intend to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.
If we do not accept for exchange any tendered Initial Notes because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Initial Notes will be returned,
without expense to you, as promptly as practicable after the Expiration Date.
If you tender Initial Notes in the Exchange Offer you will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Initial
Notes pursuant to the Exchange Offer. We will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
' -- Fees and Expenses.'
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term 'Expiration Date' means 5:00 p.m., New York City time, on
, 1999, unless we, in our sole discretion, extend the Exchange
Offer, in which case the term 'Expiration Date' shall mean the latest date and
time to which the Exchange Offer is extended.
We have the right to delay accepting any Initial Notes, to extend the
Exchange Offer or, if any of the conditions set forth below under 'Certain
Conditions to the Exchange Offer' shall not have been satisfied, to terminate
the Exchange Offer, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent. We also have the right to amend the terms of
the Exchange Offer in any manner. If we delay acceptance of any Initial Notes,
or terminate or amend the Exchange Offer, we will make a public announcement
thereof as promptly as practicable. If we believe that we have made a material
amendment of the terms of the Exchange Offer, we will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of such
amendment and we will extend the Exchange Offer to the extent required by law.
We will notify the Exchange Agent of any extension of the Exchange Offer in
writing or orally (which we will promptly confirm in writing). Unless otherwise
required by applicable law or regulation, we will make a public announcement of
any
26
<PAGE>
<PAGE>
extension of the Expiration Date before 9:00 a.m., New York City time, on the
first business day after the previously-scheduled expiration date.
Without limiting the manner in which we may choose to make public
announcements of any delay, extension, termination or amendment of the Exchange
Offer, we shall have no obligation to publish, advise or otherwise communicate
any such public announcement, other than by making a timely press release
thereof.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue from the last interest payment
date on which interest was paid on the Initial Notes surrendered in exchange
therefor or, if no interest has been paid on the Initial Notes, from November
18, 1998. The Exchange Notes will bear interest at a rate of 11.875% per year.
Interest on the Exchange Notes will be payable semiannually on May 1 and
November 1 of each year, beginning May 1, 1999.
PROCEDURES FOR TENDERING
Each holder of Initial Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile, together
with the Initial Notes and any other required documents, to the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date (unless such
tender is being effected pursuant to the procedure for book-entry transfer
described below).
Any financial institution that is a participant in the book-entry transfer
facility system of The Depository Trust Company (the 'Depositary' or 'DTC') may
make book-entry delivery of the Initial Notes by causing DTC to transfer such
Initial Notes into the Exchange Agent's account and to deliver an Agent's
Message (as described below) on or prior to the Expiration Date in accordance
with DTC's procedures for such transfer and delivery. If delivery of Initial
Notes is effected through book-entry transfer into the Exchange Agent's account
at DTC and an Agent's Message is not delivered, the Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
required documents must be transmitted to and received or confirmed by the
Exchange Agent at its addresses set forth herein under ' -- Exchange Agent'
prior to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF
DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
The term 'Agent's Message' means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a confirmation of the
book-entry tender of Initial Notes into the Exchange Agent's account at DTC,
which states that DTC has received an express acknowledgment from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by, and makes the representations and warranties contained
in, the Letter of Transmittal and that we may enforce the Letter of Transmittal
against such participant.
The tender (as set forth above) by a holder of Initial Notes will
constitute an agreement between such holder and us in accordance with the terms
and subject to the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
the holders.
The method of delivery of Initial Notes, the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, we recommend that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. NO LETTER OF TRANSMITTAL OR INITIAL NOTES
SHOULD BE SENT TO US.
Only a holder of Initial Notes may tender such Initial Notes in the
Exchange Offer. The term 'holder' with respect to the Exchange Offer means any
person in whose name Initial Notes are registered on the register maintained by
the Trustee or any other person who has obtained a properly
27
<PAGE>
<PAGE>
completed bond power from the registered holder, or any person whose Initial
Notes are held of record by DTC who desires to deliver such Initial Notes by
book-entry transfer at DTC.
Any beneficial holder whose Initial Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Initial Notes, either
make appropriate arrangements to register ownership of the Initial Notes in such
holder's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal must be
guaranteed by:
a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
a commercial bank or trust company having an office or correspondent in
the United States; or
an 'eligible guarantor institution' within the meaning of Rule 17Ad-15
under the Exchange Act (an 'Eligible Institution')
unless the Initial Notes tendered pursuant thereto are tendered
by a registered holder who has not completed the box entitled 'Special
Issuance Instructions' or 'Special Delivery Instructions' on the Letter of
Transmittal; or
for the account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Initial Notes listed therein, such Initial Notes must
be endorsed or accompanied by appropriate bond powers which authorize such
person to tender the Initial Notes on behalf of the registered holder, and, in
either case, signed as the name of the registered holder or holders appears on
the Initial Notes.
If the Letter of Transmittal or any Initial Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Initial Notes will be
determined by us in our sole discretion, which determination will be final and
binding. We reserve the absolute right to reject any and all Initial Notes not
properly tendered or any Initial Notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the absolute right to waive
any irregularities or conditions of tender as to particular Initial Notes. Our
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Initial Notes must be cured within such time as we shall determine. Neither
we, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Initial
Notes nor shall we, the Exchange Agent or any other person incur any liability
for failure to give such notification. Tenders of Initial Notes will not be
deemed to have been made until such irregularities have been cured or waived.
Any Initial Notes received by the Exchange Agent that are not properly tendered,
and as to which the defects or irregularities have not been cured or waived,
will be returned without cost by the Exchange Agent to the tendering holder of
such Initial Notes unless otherwise provided in the Letter of Transmittal as
soon as practicable following the Expiration Date.
In addition, we reserve the right in our sole discretion to (a) purchase or
make offers for any Initial Notes that remain outstanding subsequent to the
Expiration Date, or, as set forth under ' -- Certain Conditions to the Exchange
Offer,' to terminate the Exchange Offer and (b) to the extent permitted by
applicable law, purchase Initial Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
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<PAGE>
<PAGE>
By tendering, each holder of Initial Notes will represent to us that, among
other things:
the Exchange Notes acquired pursuant to the Exchange Offer in exchange for
such holder's Initial Notes are being obtained in the ordinary course of
business of the person receiving such Exchange Notes, whether or not such
person is the holder;
that neither the holder nor any other person receiving such Exchange Notes
has an arrangement or understanding with any person to participate in the
distribution of the Exchange Notes; and
that neither the holder nor any such other person receiving such Exchange
Notes is an 'affiliate' of ours, within the meaning of Rule 405 under the
Securities Act or, if the holder or such person is an affiliate, then such
holder or such other person will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept, promptly after the Expiration Date, all Initial Notes properly
tendered and will issue the Exchange Notes promptly after acceptance of the
Initial Notes. See ' -- Certain Conditions to the Exchange Offer.' For each
Initial Note accepted for exchange, the holder of such Initial Notes will
receive an Exchange Note having a principal amount equal to that of the
surrendered Initial Note.
For purposes of the Exchange Offer, we shall be deemed to have accepted
properly tendered Initial Notes for exchange when, as and if we have given oral
or written notice thereof to the Exchange Agent, with written confirmation of
any oral notice to be given promptly thereafter.
In all cases, issuance of Exchange Notes for Initial Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Initial Notes and
a properly completed and duly executed Letter of Transmittal and all other
required documents or a timely book-entry confirmation of such Initial Notes
into the Exchange Agent's account at DTC. If any tendered Initial Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Initial Notes are submitted for a greater principal amount than the
holder desired to exchange, such unaccepted or non-exchanged Initial Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Initial Notes tendered by book-entry transfer into the Exchange Agent's account
at DTC pursuant to the book-entry procedures described below, such non-exchanged
Initial Notes will be credited to an account maintained with such book-entry
transfer facility) as promptly as practicable after the Expiration Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Initial Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in DTC's systems may make book-entry delivery of Initial
Notes by causing DTC to transfer such Initial Notes into the Exchange Agent's
account at DTC in accordance with DTC's procedures for transfer. However,
although delivery of Initial Notes may be effected through book-entry transfer
at DTC, the Letter of Transmittal (or a facsimile thereof or an Agent's Message
in lieu thereof), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth below under ' -- Exchange Agent' on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and who cannot deliver their
Initial Notes, the Letter of Transmittal, or any other required documents to the
Exchange Agent prior to the Expiration Date, or holders who cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:
The tender is made through an Eligible Institution;
Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission,
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<PAGE>
mail or hand delivery) setting forth the name and address of the holder of
the Initial Notes, the certificate number or numbers of such Initial Notes
and the principal amount of Initial Notes tendered, stating that the
tender is being made thereby, and guaranteeing that, within three business
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the Initial Notes
to be tendered in proper form for transfer and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
Such properly completed and executed Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing all tendered
Initial Notes in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Initial Notes
delivered electronically) and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within three business
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Initial Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Initial Notes in the Exchange Offer, a facsimile
transmission or letter notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must:
specify the name of the person having deposited the Initial Notes to be
withdrawn (the 'Depositor');
include a statement that the Depositor is withdrawing its election to have
Initial Notes exchanged and identify the Initial Notes to be withdrawn
(including the certificate number or numbers and principal amount of such
Initial Notes);
be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal by which such Initial Notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to permit the Trustee with respect to the
Initial Notes to register the transfer of such Initial Notes into the name
of the Depositor withdrawing the tender; and
specify the name in which any such Initial Notes are to be registered, if
different from that of the Depositor.
If Initial Notes have been tendered pursuant to the procedures for
book-entry transfer set forth in ' -- Procedures for Tendering' and
' -- Book-Entry Transfer,' the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Initial
Notes, in which case a notice of withdrawal will be effective if delivered to
the Exchange Agent by written, telegraphic, telex or facsimile transmission.
All questions as to the validity, form and eligibility (including time of
receipt) for such withdrawal notices will be determined by us, and our
determination shall be final and binding on all parties. Any Initial Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Initial Notes so withdrawn are validly re-tendered. Properly withdrawn
Initial Notes may be re-tendered by following one of the procedures described
above under ' -- Procedures for Tendering' at any time prior to the Expiration
Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer is not subject to any conditions, other than that:
the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the Commission; and
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<PAGE>
<PAGE>
there is no injunction, order or decree issued by any court or any
governmental agency that would prohibit, prevent or otherwise materially
impair our ability to proceed with the Exchange Offer.
There can be no assurance that any such condition will not occur. Holders of
Initial Notes will have certain rights against us under the Registration Rights
Agreement should we fail to consummate the Exchange Offer. If we determine that
we may terminate the Exchange Offer, as set forth above, we may:
refuse to accept any Initial Notes and return any Initial Notes that have
been tendered to the holders thereof;
extend the Exchange Offer and retain all Initial Notes tendered prior to
the Expiration Date, subject to the rights of such holders of tendered
Initial Notes to withdraw their tendered Initial Notes; or
waive such termination event with respect to the Exchange Offer and accept
all properly tendered Initial Notes that have not been withdrawn.
If such waiver constitutes a material change in the Exchange Offer, we will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered holder of Initial Notes, and we will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Initial Notes, if the Exchange Offer would otherwise expire
during such period.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, has
been appointed as Exchange Agent for the Exchange Offer. Questions and requests
for assistance and inquiries for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing Window,
Attention: Reorganization Operations Subcellar One (SC-1)
(REGISTERED OR CERTIFIED MAIL RECOMMENDED)
</TABLE>
Facsimile Transmission Number:
(212) 858-2611
(FOR ELIGIBLE
INSTITUTIONS ONLY)
Confirm by Telephone:
(212) 858-2103
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer.
We will pay the cash expenses to be incurred in connection with soliciting
tenders pursuant to the Exchange Offer. Such expenses include fees and expenses
of the Exchange Agent and the Trustee, accounting and legal fees and printing
costs, among others.
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TRANSFER TAXES
Holders who tender their Initial Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct us to register Exchange Notes in the name of, or request that Initial
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder, will be responsible for the
payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Initial Notes on the date of the exchange. Accordingly, we will not recognize
any gain or loss for accounting purposes. The expenses of the Exchange Offer and
the unamortized expenses relating to the issuance of the Initial Notes will be
amortized over the term of the Exchange Notes.
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UNAUDITED PRO FORMA FINANCIAL DATA OF THE COMPANY
The following unaudited pro forma condensed consolidated financial data
(the 'Pro Forma Financial Data') of the Company is derived from the historical
consolidated financial statements of Agrilink and DFVC included elsewhere
herein, adjusted to give effect on a preliminary basis to the Transactions and
the Initial Notes Offering and the application of the net proceeds therefrom.
The Pro Forma Financial Data reflect the assumption that the Company will elect
to treat the Acquisition as an asset sale for tax purposes under Section
338(h)(10) of the Code. The Unaudited Pro Forma Consolidated Statements of
Operations of the Company give effect to the Transactions and the Initial Notes
Offering and the application of the net proceeds therefrom as if they had
occurred as of June 29, 1997. No adjustment was made to the Pro Forma Financial
Data to conform DFVC's last Sunday of May fiscal year end or last Sunday of
August fiscal quarter end to Agrilink's last Saturday of June fiscal year end or
last Saturday of September fiscal quarter end, respectively. The Pro Forma
Financial Data do not purport to represent what the Company's results of
operations would actually have been had the Transactions and the Initial Notes
Offering in fact occurred on such date or what the Company's results of
operations will be for any future period. The Pro Forma Financial Data do not
give effect to any transactions other than the Transactions and the Initial
Notes Offering and the application of the net proceeds therefrom as discussed in
the notes to the Pro Forma Financial Data set forth below.
The Acquisition will be accounted for using the purchase method of
accounting. Under purchase accounting, tangible and identifiable intangible
assets acquired and liabilities assumed will be recorded at their respective
fair values. Information regarding the fair values of assets being acquired is
not currently available. Accordingly, no allocation of the excess of purchase
cost over net assets acquired has been made for purposes of this pro forma
presentation. The valuations and other studies which will provide the basis for
such an allocation have not progressed to a stage where there is sufficient
information to make a final allocation in the accompanying Pro Forma Financial
Data. Accordingly, the purchase accounting adjustments made in connection with
the Pro Forma Financial Data are preliminary and have been made solely for
purposes of developing the Pro Forma Financial Data. Once an allocation is
determined, in accordance with generally accepted accounting principles, any
remaining excess of purchase cost over net assets acquired will be recorded as
goodwill. The Company expects that significant goodwill will be recorded as a
result of the Acquisition.
Likewise, the value recorded for the Aseptic Business disposal, and the
resulting gain and other effects on the Pro Forma Financial Data, are based on
the appraisal given to Agrilink by the independent appraiser retained by
Agrilink. If the value ascribed to the Aseptic Business is determined to be
different than that recorded in the Pro Forma Financial Data due to a variance
from the appraisal or for any other reason, the change in such value would have
a corresponding effect on the Pro Forma Financial Data.
The pro forma adjustments are based on available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. The Pro Forma Financial Data and accompanying notes should be
read in conjunction with 'Management's Discussion and Analysis of Financial
Condition and Results of Operations,' the historical consolidated financial
statements of Agrilink and DFVC, including the notes thereto, and other
financial information pertaining to Agrilink incorporated by reference herein.
For unaudited pro forma condensed consolidated financial data of Pro-Fac,
see 'Unaudited Pro Forma Financial Data of Pro-Fac and Consolidated Subsidiary'
at the back of this Prospectus.
33
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AGRILINK FOODS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 27, 1998
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------------
ASEPTIC TRANSACTIONS
BUSINESS AND INITIAL
AGRILINK DFVC DISPOSAL NOTES OFFERING
(HISTORICAL) (HISTORICAL) ADJUSTMENTS(a) ADJUSTMENTS TOTAL
------------ ------------ -------------- -------------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 719.7 $ 541.2 $(97.9) $ 79.0 (b) $1,242.0
Cost of sales.............................. (524.1) (397.6) 81.3 (25.0)(c) (865.4)
------------ ------------ ------- ------- --------
Gross profit.......................... 195.6 143.6 (16.6) 54.0 376.6
Selling, administrative and general........ (141.9) (104.9) 0.1 (41.7)(d) (288.4)
Income from Great Lakes Kraut Company...... 1.9 -- -- -- 1.9
Amortization of unallocated excess of
purchase cost over net assets acquired... -- -- -- (10.4)(e) (10.4)
------------ ------------ ------- ------- --------
Operating income before extraordinary
items and before dividing with
Pro-Fac............................. 55.6 38.7 (16.5) 1.9 79.7
Total interest expense..................... (30.6) (9.2) 1.4 (34.5)(f) (72.9)
------------ ------------ ------- ------- --------
Pre-tax income before extraordinary
items and before dividing with
Pro-Fac............................. 25.0 29.5 (15.1) (32.6) 6.8
Pro-Fac share of income.................... (12.5) -- 7.6 1.5 (g) (3.4)
------------ ------------ ------- ------- --------
Income before taxes................... 12.5 29.5 (7.5) (31.1) 3.4
(Provision) benefit for taxes.............. (5.7) (11.8) 3.4 12.1 (h) (2.0)
------------ ------------ ------- ------- --------
Income (loss) before extraordinary
items............................... $ 6.8 $ 17.7 $ (4.1) $(19.0) $ 1.4
------------ ------------ ------- ------- --------
------------ ------------ ------- ------- --------
</TABLE>
- ------------
(a) To reflect the sale of the Aseptic Business to Dean Foods. In conjunction
with this transaction, Agrilink recognized a gain. Such gain has not been
reflected in the unaudited Pro Forma Condensed Consolidated Statement of
Operations, as the gain is considered non-recurring.
(b) Represents a reclassification of promotional expenses of DFVC to conform
presentation to that of Agrilink. Such amount is equal to the adjustment of
selling, administrative and general expenses in pro forma adjustment (d)
below.
(c) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Cost savings anticipated under existing contracts with the suppliers of product packaging......... $ 2.5
Reclassification of warehousing expenses of DFVC to conform presentation to that of Agrilink. Such
amount is equal to the adjustment of selling, administrative and general expenses in pro forma
adjustment (d) below............................................................................ (27.5)
------
$(25.0)
------
------
</TABLE>
(d) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Reclassification of promotional expenses of DFVC to conform presentation to that of Agrilink. Such
amount is equal to the adjustment to the net sales in pro forma adjustment (b) above............ $(79.0)
Reclassification of warehousing expenses to conform presentation to that of Agrilink. Such amount
is equal to the adjustment to the net sales in pro forma adjustment (c) above................... 27.5
To reflect the anticipated cost reductions under the plan formulated by management to eliminate
duplicate administrative costs, including primarily sales and marketing functions, finance
functions and logistics functions. Because both the Agrilink and DFVC personnel currently
contact the same customers, it is anticipated that no material negative impact to sales will
occur. The plan outlined is to be executed within one year from the consummation date of the
Acquisition..................................................................................... 9.8
------
$(41.7)
------
------
</TABLE>
(e) To reflect $10.4 million of additional goodwill amortization relating to
the Acquisition assuming an amortization period of 20 years. Depreciation
and amortization recorded by the Company subsequent to the Acquisition will
be determined based upon the fair values of acquired assets and their
related lives as ultimately recorded under purchase accounting.
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
(f) To reflect the net adjustment to interest expense as follows (dollars in
millions):
<TABLE>
<S> <C>
Notes at an interest rate of 11.875%.............................................................. $ 23.8
Borrowings under the New Credit Facility (at the rates applicable upon the syndication thereof)... 40.1
Subordinated Promissory Note at an interest rate of 5.0% (non-cash)............................... 1.5
Amortization of debt issuance costs............................................................... 3.2
Less historical interest expense net adjustment................................................... (33.3)
Less amortization of debt issuance costs related to debt repaid................................... (0.8)
------
$ 34.5
------
------
</TABLE>
The elimination of debt issuance costs and premiums to be paid to
extinguish existing debt was recognized as an extraordinary item ($18.0
million, net of a $10.5 million tax benefit and before allocation to
Pro-Fac) in the Company's statement of operations for the first fiscal
quarter of 1999. Such charge has not been reflected in the unaudited Pro
Forma Condensed Consolidated Statement of Operations.
Fees associated with obtaining commitments for the Bridge Facility have not
been reflected in the unaudited Pro Forma Consolidated Statement of
Operations as they are considered nonrecurring. Such fees, which will be
reflected in the Company's 1999 second fiscal quarter, are estimated to be
approximately $5.6 million (before allocation to Pro-Fac and before taxes).
(g) To reflect the anticipated effect of the earnings split with Pro-Fac for
pro forma adjustments assuming that the sharing of earnings provision under
the Marketing Agreement will continue.
(h) To reflect the income tax effect of the pro forma adjustments based on an
assumed statutory income tax rate of 39.0%.
35
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<PAGE>
AGRILINK FOODS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 26, 1998
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------
TRANSACTIONS
AND
ASEPTIC INITIAL
BUSINESS NOTES
AGRILINK DFVC DISPOSAL OFFERING
(HISTORICAL) (HISTORICAL) ADJUSTMENTS(a) ADJUSTMENTS TOTAL
------------ ------------ -------------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales............................. $182.6 $106.4 $(24.9) $ 15.5 (b) $ 279.6
Cost of sales......................... (135.9) (81.2) 20.8 (5.5)(c) (201.8)
------------ ------------ ------- --------- -------
Gross profit..................... 46.7 25.2 (4.1) 10.0 77.8
Selling, administrative and general... (34.9) (25.9) -- (6.9)(d) (67.7)
Income from Great Lakes Kraut
Company............................. 0.6 -- -- -- 0.6
Gain on the sale of the Aseptic
Business............................ 64.2 -- -- (64.2)(e) --
Amortization of unallocated excess of
purchase cost over net assets
acquired............................ -- -- -- (2.4)(f) (2.4)
------------ ------------ ------- --------- -------
Operating income before
extraordinary items and before
dividing with Pro-Fac.......... 76.6 (0.7) (4.1) (63.5) 8.3
Total interest expense................ (8.3) (2.0) 0.4 (9.3)(g) (19.2)
------------ ------------ ------- --------- -------
Pre-tax income (loss) before
extraordinary items and before
dividing with Pro-Fac.......... 68.3 (2.7) (3.7) (72.8) (10.9)
Pro-Fac share of (income) loss........ (5.7) -- 1.9 9.2 (h) 5.4
------------ ------------ ------- --------- -------
Income before taxes.............. 62.6 (2.7) (1.8) (63.6) (5.5)
(Provision) benefit for taxes......... (24.3) 1.1 0.8 24.8 (e)(i) 2.4
------------ ------------ ------- --------- -------
Income (loss) before
extraordinary items............ $ 38.3 $ (1.6) $ (1.0) $(38.8) $ (3.1)
------------ ------------ ------- --------- -------
------------ ------------ ------- --------- -------
</TABLE>
- ------------
(a) To reflect the sale of the Aseptic Business to Dean Foods which was
completed in conjunction with the Acquisition.
(b) Represents a reclassification of promotional expenses of DFVC to conform
presentation to that of Agrilink. Such amount is equal to the adjustment
of selling, administrative and general expenses in pro forma adjustment
(d) below.
(c) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Cost savings anticipated under existing contracts with the suppliers of product packaging......... $ 0.6
Reclassification of warehousing expenses of DFVC to conform presentation to that of Agrilink. Such
amount is equal to the adjustment of selling, administrative and general expenses in pro forma
adjustment (d) below.............................................................................. (6.1)
------
$ (5.5)
------
------
</TABLE>
(d) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Reclassification of promotional expenses of DFVC to conform presentation to that of Agrilink. Such
amount is equal to the adjustment to the net sales in pro forma adjustment (b) above.............. $(15.5)
Reclassification of warehousing expenses to conform presentation to that of Agrilink. Such amount
is equal to the adjustment to the net sales in pro forma adjustment (c) above..................... 6.1
To reflect the anticipated cost reductions under the plan formulated by management to eliminate
duplicate administrative costs, including primarily sales and marketing functions, finance
functions and logistics functions. Because both the Agrilink and DFVC personnel currently contact
the same customers, it is anticipated that no material negative impact to sales will occur. The
plan outlined is to be executed within one year from the consummation date of the Acquisition..... 2.5
------
$ (6.9)
------
------
</TABLE>
(footnotes continued on next page)
36
<PAGE>
<PAGE>
(footnotes continued from previous page)
(e) To eliminate the gain recognized on the sale of the Aseptic Business to
Dean Foods (net of income taxes of $25.0 million). Such income has not
been reflected in the unaudited Pro Forma Condensed Consolidated Statement
of Operations, as the gain is considered nonrecurring.
(f) To reflect $2.4 million of additional goodwill amortization relating to
the Acquisition assuming an amortization period of 20 years. Depreciation
and amortization recorded by the Company subsequent to the Acquisition
will be determined based upon the fair values of acquired assets and their
related lives as ultimately recorded under purchase accounting.
(g) To reflect the net adjustment to interest expense as follows (dollars in
millions):
<TABLE>
<S> <C>
Notes at an interest rate of 11.875%.............................................................. $ 5.9
Borrowings under the New Credit Facility (at the rates applicable upon the syndication thereof)... 10.3
Subordinated Promissory Note at an interest rate of 5.0% (non-cash)............................... 0.4
Amortization of debt issuance costs............................................................... 0.8
Less historical interest expense net adjustment................................................... (7.9)
Less amortization of debt issuance costs related to debt repaid................................... (0.2)
------
$ 9.3
------
------
</TABLE>
The elimination of debt issuance costs and premiums to be paid to
extinguish existing debt have been recognized as an extraordinary item
in the Statement of Operations for the quarter ended September 26, 1998.
See 'Unaudited Consolidated Statement of Operations' of Agrilink included
elsewhere herein. Such charge has not been reflected in the unaudited Pro
Forma Condensed Consolidated Statement of Operations.
Fees associated with obtaining commitments for the Bridge Facility have
not been reflected in the unaudited Pro Forma Consolidated Statement of
Operations as they are considered nonrecurring. Such fees, which will be
reflected in the Company's 1999 second fiscal quarter, are estimated to
be approximately $5.6 million (before allocation to Pro-Fac and before
taxes).
(h) To reflect the anticipated effect of the earnings split with Pro-Fac for
pro forma adjustments assuming that the sharing of earnings provision
under the Marketing Agreement will continue.
(i) To reflect the income tax effect of the pro forma adjustments based on
an assumed statutory income tax rate of 39.0%.
37
<PAGE>
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA OF AGRILINK AND DFVC
AGRILINK
The following selected historical consolidated financial data of Agrilink
and selected unaudited pro forma financial data with respect to the Company
should be read in conjunction with 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' the historical consolidated
financial statements of Agrilink and DFVC and the related notes and the
'Unaudited Pro Forma Financial Data of the Company' and the related notes, each
as included elsewhere herein. The selected historical consolidated financial
data for each of the years ended June 25, 1994, June 24, 1995, June 29, 1996,
June 28, 1997 and June 27, 1998 and as of the end of each such periods have been
derived from Agrilink's audited consolidated financial statements and reflect
the operations and financial position of Agrilink at the dates and for the
periods indicated. The selected historical consolidated financial data for the
fiscal quarters ended September 27, 1997 and September 26, 1998 and as of the
end of each of such periods have been derived from Agrilink's financial
statements included elsewhere herein which are unaudited but which, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position of Agrilink at the dates and for the periods
indicated. The selected unaudited pro forma financial data have been derived
from Agrilink's audited consolidated financial statements for the year ended and
as of June 27, 1998, Agrilink's unaudited consolidated financial statements for
the quarter ended and as of September 26, 1998, DFVC's audited consolidated
financial statements for the year ended and as of May 31, 1998 and DFVC's
unaudited consolidated financial statements for the quarter ended and as of
August 30, 1998. No adjustment was made to the unaudited pro forma financial
data to conform DFVC's last Sunday of May fiscal year end or last Sunday of
August fiscal quarter end to Agrilink's last Saturday of June fiscal year end or
last Saturday of September fiscal quarter end, respectively. The selected
unaudited pro forma financial data give effect to the Transactions and the
Initial Notes Offering and the application of the net proceeds therefrom as
described under 'The Transactions' and 'Use of Proceeds,' as if they had
occurred at the dates referenced under 'Unaudited Pro Forma Financial Data of
the Company.' The pro forma financial data reflect the assumption that the
Company will elect to treat the Acquisition as an asset sale for tax purposes
under Section 338(h)(10) of the Code. The selected unaudited pro forma financial
data do not purport to represent what the Company's results of operations or
financial position actually would have been if the transactions referred to
therein had been consummated on the date or for the periods indicated or what
such results will be for any future date or any future period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, --------------------
1994 1995(1) 1996 1997 ACTUAL PRO FORMA
--------- -------- -------- -------- ------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 829.1 $ 748.5 $ 739.1 $ 730.8 $ 719.7 $1,242.0
Cost of sales....................... (592.6) (530.1) (562.9) (539.1) (524.1) (865.4)
--------- -------- -------- -------- ------- ---------
Gross profit.................... 236.5 218.4 176.2 191.7 195.6 376.6
Selling, administrative and
general........................... (187.0) (159.9) (156.1) (145.4) (141.9) (288.4)
Income from Great Lakes Kraut
Company........................... -- -- -- -- 1.9 1.9
Gain on sale of Finger Lakes
Packaging......................... -- -- -- 3.6 -- --
Restructuring (including net
(losses) gains from
disposal)(2)...................... 7.8 (8.4) (5.9) -- -- --
Change in control expenses(3)....... (3.5) (2.2) -- -- -- --
Gain on assets net of additional
costs incurred as a result of a
fire.............................. -- 4.1 -- -- -- --
Amortization of unallocated excess
of purchase cost over net assets
acquired.......................... -- -- -- -- -- (10.4)
Gain on the sale of the Aseptic
Business.......................... -- -- -- -- -- --
--------- -------- -------- -------- ------- ---------
Operating income................ 53.8 52.0 14.2 49.9 55.6 79.7
Total interest expense.............. (18.2) (32.4) (42.0) (35.0) (30.6) (72.9)
--------- -------- -------- -------- ------- ---------
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------
SEPTEMBER 26, 1998
SEPTEMBER 27, ----------------------
1997 ACTUAL PRO FORMA
---- ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 176.4 $ 182.6 $ 279.6
Cost of sales....................... (130.8) (135.9) (201.8)
-------- ------- ---------
Gross profit.................... 45.6 46.7 77.8
Selling, administrative and
general........................... (33.0) (34.8) (67.7)
Income from Great Lakes Kraut
Company........................... 0.2 0.6 0.6
Gain on sale of Finger Lakes
Packaging......................... -- -- --
Restructuring (including net
(losses) gains from
disposal)(2)...................... -- -- --
Change in control expenses(3)....... -- -- --
Gain on assets net of additional
costs incurred as a result of a
fire.............................. -- -- --
Amortization of unallocated excess
of purchase cost over net assets
acquired.......................... -- -- (2.4)
Gain on the sale of the Aseptic
Business.......................... -- 64.2 --
-------- ------- ---------
Operating income................ 12.8 76.7 8.3
Total interest expense.............. (7.6) (8.3) (19.2)
-------- ------- ---------
</TABLE>
(table continued on next page)
38
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, --------------------
1994 1995(1) 1996 1997 ACTUAL PRO FORMA
--------- -------- -------- -------- ------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) before
dividing with Pro-Fac............. 35.6 19.6 (27.8) 14.9 25.0 6.8
Pro-Fac share of (income) loss...... (16.8) (9.6) 9.0 (7.4) (12.5) (3.4)
--------- -------- -------- -------- ------- ---------
Income (loss) before taxes and
cumulative effect of an accounting
change and extraordinary item..... 18.8 10.0 (18.8) 7.5 12.5 3.4
Tax (provision) benefit............. (8.7) (6.0) 6.9 (3.7) (5.7) (2.0)
--------- -------- -------- -------- ------- ---------
Income (loss) before cumulative
effect of an accounting change and
extraordinary item................ 10.1 4.0 (11.9) 3.8 6.8 1.4
Cumulative effect of an accounting
change, net(4).................... -- -- -- 1.7 -- --
Extraordinary item relating to the
early extinguishment of debt (net
of income taxes and after dividing
with Pro-Fac)..................... -- -- -- -- -- --
--------- -------- -------- -------- ------- ---------
Net income (loss)................... $ 10.1 $ 4.0 $ (11.9) $ 5.5 $ 6.8 $ 1.4
--------- -------- -------- -------- ------- ---------
--------- -------- -------- -------- ------- ---------
SELECTED FINANCIAL DATA:
EBITDA(5)........................... $ 79.6 $ 75.6 $ 43.7 $ 76.7 $ 77.3 $ 131.0
EBITDA margin(6).................... 9.6% 10.1% 5.9% 10.5% 10.7% 10.5%
Depreciation and amortization(7).... 25.8 23.6 29.5 26.8 21.7 51.3
Capital expenditures(8)............. 19.5 32.6 18.0 16.9 14.1 25.3
Ratio of earnings to fixed charges
(coverage deficiency)(9).......... 1.95x 1.30x (18.7) 1.20x 1.39x 1.05x
BALANCE SHEET DATA:
Working capital..................... $ 104.0 $ 144.2 $ 107.9 $ 84.1 $ 108.1
Total assets........................ 446.9 672.3 634.3 542.6 566.4
Total debt.......................... 271.6 357.6 319.4 232.3 238.8
Shareholder's equity................ 80.9 141.1 139.2 146.4 154.6
<CAPTION>
FISCAL QUARTER ENDED
-------------------------------------
SEPTEMBER 26, 1998
SEPTEMBER 27, ----------------------
1997 ACTUAL PRO FORMA
---- ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pre-tax income (loss) before
dividing with Pro-Fac............. 5.2 68.4 (10.9)
Pro-Fac share of (income) loss...... (2.6) (5.7) 5.4
--------- -------- ---------
Income (loss) before taxes and
cumulative effect of an accounting
change and extraordinary item..... 2.6 62.7 (5.5)
Tax (provision) benefit............. (1.2) (24.3) 2.4
--------- -------- ---------
Income (loss) before cumulative
effect of an accounting change and
extraordinary item................ 1.4 38.4 (3.1)
Cumulative effect of an accounting
change, net(4).................... -- -- --
Extraordinary item relating to the
early extinguishment of debt (net
of income taxes and after dividing
with Pro-Fac)..................... -- (16.4) --
---------- ------- ---------
Net income (loss)................... $ 1.4 $ 22.0 $ (3.1)
---------- ------- ---------
---------- ------- ---------
SELECTED FINANCIAL DATA:
EBITDA(5)........................... $ 18.4 $ 17.8 $ 21.1
EBITDA margin(6).................... 10.4% 9.7% 7.5%
Depreciation and amortization(7).... 5.6 5.3 12.8
Capital expenditures(8)............. 3.2 4.1 7.3
Ratio of earnings to fixed charges
(coverage deficiency)(9).......... 1.33x 1.24x (5.5)
BALANCE SHEET DATA:
Working capital..................... $ 96.7 $ 221.9
Total assets........................ 602.1 1257.0
Total debt.......................... 304.0 789.5
Shareholder's equity................ 147.9 176.6
</TABLE>
- ------------
(1) Represents the sum of the results of operations for both the predecessor and
successor entities relating to the change of control of Agrilink in November
1994.
(2) During fiscal 1994, Agrilink sold the oats operations of National Oats
realizing a gain of $10.9 million (before dividing such gain with Pro-Fac
and before taxes), which was offset by a $3.1 million charge (before
dividing such charge with Pro-Fac and before taxes) to adjust previous
estimates recorded regarding restructuring activities. During fiscal 1995,
Agrilink sold certain assets of the Nalley's United States Chips and Snacks
business. The restructuring expenses of $8.4 million (before dividing such
charge with Pro-Fac and before taxes) reflect the impact of this sale and
other expenses. During fiscal 1996, Agrilink initiated a company-wide
restructuring program. The restructuring charge amounted to $5.9 million
(before dividing such charge with Pro-Fac and before taxes). This amount
consisted of employee termination benefits of $4.0 million and $1.9 million
for strategic consulting expenses.
(3) Agrilink expensed $3.5 million and $2.2 million (before dividing such charge
with Pro-Fac and before taxes) in fiscal 1994 and 1995, respectively, for
legal, accounting, investment banking and other expenses in connection with
the change of control issue surrounding the sale of Agrilink to Pro-Fac.
(4) Represents cumulative effect of an accounting change, to include in prepaid
expenses and other current assets, manufacturing spare parts previously
charged directly to expense, net of split with Pro-Fac.
(5) EBITDA is defined as the sum of pre-tax income (loss) before dividing with
Pro-Fac and before the cumulative effect of an accounting change, interest
expense and depreciation and amortization of goodwill and other intangibles.
EBITDA should not be considered as an alternative to net income or cash
flows from operations or any other generally accepted accounting principles
measure of performance or as a measure of liquidity. EBITDA is included
herein because the Company believes EBITDA is a financial indicator of a
company's ability to service debt. EBITDA as calculated by the Company may
not be comparable to calculations as presented by other companies. EBITDA
(actual and pro forma) at September 26, 1998 excludes the $64.2 million gain
on the sale of the Aseptic Business. Had the gain on the sale of the Aseptic
Business been included, actual EBITDA at September 26, 1998 would have been
$82.0 million.
(6) EBITDA margin is defined as EBITDA divided by net sales.
(7) Amortization of intangibles for fiscal 1994 is defined as the sum of
amortization of goodwill and intangibles, including the amount of the
finance receivable relating to goodwill recognized by Pro-Fac. Through the
provisions of the earnings split, amortization of intangibles has been
recognized equally between Agrilink and Pro-Fac in the amount of $1.7
million for fiscal 1994.
(8) For fiscal 1994, includes capital expenditures of Agrilink of $9.5 million
and capital expenditures of Pro-Fac of $10.0 million.
(9) For purposes of calculating ratio of earnings to fixed charges, earnings are
determined by adding fixed charges to income (loss) before taxes and before
cumulative effect of an accounting change. Fixed charges consist of interest
expense and the interest component of rental expense. For fiscal 1996 and
the first quarter of fiscal 1999 on a pro forma basis, earnings before fixed
charges were insufficient to cover fixed charges and the dollar amount of
coverage deficiency, instead of the ratio, is disclosed. The $64.2 million
gain on the sale of the Aseptic Business has been excluded in calculating
the ratio of earnings to fixed charges at September 26, 1998.
------------------------
PRO-FAC
See 'Pro-Fac Cooperative, Inc. and Consolidated Subsidiary -- Selected
Historical and Unaudited Pro Forma Financial Data' at the back of this
Prospectus.
39
<PAGE>
<PAGE>
DFVC
The following table sets forth selected historical consolidated financial
data of DFVC for the periods indicated. The selected historical consolidated
financial data for each of the years ended May 26, 1996, May 25, 1997 and May
31, 1998 and as of the end of each of such periods have been derived from DFVC's
audited consolidated financial statements included elsewhere herein and reflect
the operations and financial positions of DFVC at the dates and for the periods
indicated. The selected historical consolidated financial data for the three
months ended August 30, 1998 and August 24, 1997 and as of the end of each of
such periods have been derived from DFVC's financial statements included
elsewhere herein which are unaudited but which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations and financial
position of DFVC at the dates and for the periods indicated. The information
below should be read in conjunction with DFVC's consolidated financial
statements and related notes thereto appearing elsewhere herein and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' appearing elsewhere herein. Following consummation of the Merger,
DFVC's results will be included in the Company's financial statements.
<TABLE>
<CAPTION>
FISCAL QUARTER
ENDED
FISCAL YEAR ENDED -------------------
--------------------------------- AUGUST AUGUST
MAY 26, MAY 25, MAY 31, 24, 30,
1996 1997 1998 1997 1998
--------- -------- -------- -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales(1)........................................ $646.6 $ 622.0 $ 620.2 $ 123.3 $ 121.9
Cost of sales(2).................................... (491.7) (438.4) (424.0) (95.3) (87.3)
------- ------- ------- ---------- ----------
Gross profit................................... 154.9 183.6 196.2 28.0 34.6
Selling, administrative and general(3).............. (150.3) (149.8) (158.7) (31.1) (35.5)
Special charge(4)................................... (37.3) (9.6) -- -- --
Other income........................................ 0.6 0.6 1.2 0.2 0.2
------- ------- ------- ---------- ----------
Operating income............................... (32.1) 24.8 38.7 (2.9) (0.7)
Total interest expense.............................. (12.0) (10.3) (9.2) (2.1) (2.0)
------- ------- ------- ---------- ----------
Pre-tax income (loss).......................... (44.1) 14.5 29.5 (5.0) (2.7)
Tax (provision)/benefit............................. 17.2 (5.8) (11.8) 2.0 1.1
------- ------- ------- ---------- ----------
Net income (loss).............................. $(26.9) $ 8.7 $ 17.7 $ (3.0) $ (1.6)
------- ------- ------- ---------- ----------
------- ------- ------- ---------- ----------
Selected Financial Data:
EBITDA(5)........................................... $ 29.8 $ 56.2 $ 58.9 $ 2.4 $ 4.6
EBITDA margin(6).................................... 4.6% 9.0% 9.5% 1.9% 3.8%
Depreciation and amortization....................... 24.6 21.8 20.2 5.3 5.3
Capital expenditures................................ 15.6 15.4 11.3 4.4 3.2
Balance Sheet Data:
Working capital..................................... $162.1 $ 141.9 $ 125.1 $ 134.2 $ 133.2
Total assets........................................ 425.3 396.2 359.8 394.3 394.1
Total debt.......................................... 4.4 3.7 3.0 3.5 2.8
Shareholder's equity(7)............................. 339.3 310.2 279.7 295.0 285.7
</TABLE>
- ------------
(1) Represents net sales after reclassification of promotional expenses of $76.7
million, $72.7 million, $79.0 million, $13.8 million and $15.5 million in
fiscal 1996, 1997, 1998, the first quarter of fiscal 1998 and the first
quarter of fiscal 1999, respectively, to conform presentation to that of
Agrilink.
(2) Represents cost of sales after reclassification of warehousing expenses of
$42.2 million, $32.8 million, $27.5 million, $6.1 million and $6.1 million
in fiscal 1996, 1997, 1998, the first quarter of fiscal 1998 and the first
quarter of fiscal 1999, respectively, to conform presentation to that of
Agrilink.
(3) Represents selling, administrative and general expenses after
reclassification of promotional expenses (see Note 1 above), warehousing
expenses (see Note 2 above), and amortization of $1.1 million, $1.1 million
and $1.2 million in fiscal 1996, 1997 and 1998, respectively, to conform
presentation to that of Agrilink.
(4) In May 1996, DFVC adopted a plan to reduce costs, rationalize production
capacity and provide for projected severance costs which resulted in a
restructuring charge before taxes of $37.3 million in fiscal 1996. This
amount provided for employee termination benefits of $2.2 million, $5.7
million in plant closings and $29.4 million relating to the disposition of
assets. In fiscal 1997, DFVC recorded additional restructuring charges of
$9.6 million before taxes. This amount provided for $0.7 million of employee
termination benefits and $8.9 million relating to plant closings.
(footnotes continued on next page)
40
<PAGE>
<PAGE>
(footnotes continued from previous page)
(5) EBITDA is defined as the sum of pre-tax income (loss), interest expense,
depreciation and amortization of goodwill and other intangibles, and the
special charge (see Note 4 above). EBITDA should not be considered as an
alternative to net income or cash flows from operations or any other
generally accepted accounting principles measure of performance or as a
measure of liquidity. EBITDA is included herein because the Company believes
EBITDA is a financial indicator of a company's ability to service debt.
EBITDA as calculated by the Company for DFVC may not be comparable to
calculations as presented by other companies.
(6) EBITDA margin is defined as EBITDA divided by net sales.
(7) Represents shareholder's equity after reclassification of intercompany
amounts of $36.7 million, $24.8 million, $33.5 million, $24.6 million and
$35.5 million in fiscal 1996, 1997, 1998, the first quarter of fiscal 1998
and the first quarter of fiscal 1999.
41
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- AGRILINK
Prior to the Acquisition, Agrilink had three primary business units:
Curtice Burns Foods ('CBF'), Nalley Fine Foods ('Nalley') and its Snack Food
Group. Each business unit offers different products. The majority of each
business units' net sales are within the United States. In addition, all of the
operating facilities of those business units are within the United States. A
fourth business unit, AFVC, which has a processing facility located in Mexico,
was added in connection with the Acquisition.
The CBF business unit produces products in several food categories,
including fruit fillings and toppings; aseptically-produced products (prior to
the sale of the Aseptic Business); canned and frozen fruits and vegetables and
popcorn. The Nalley business unit produces canned meat products (such as chilies
and stews), pickles, salad dressings, peanut butter, salsa and syrup. Agrilink's
snack foods business unit consists of the Snyder of Berlin, Husman Snack Foods
and Tim's Cascade Potato Chip businesses. This business unit produces and
markets potato chips and other salty-snack items. As part of the Acquisition,
Agrilink sold the Aseptic Business to Dean Foods. On December 10, 1998, the
Company announced that it had reached an agreement in principle to sell its
peanut butter business; the sale of the peanut butter business will not
constitute a significant transaction.
The following tables illustrate Agrilink's results of operations by
business unit for the fiscal years ended June 29, 1996, June 28, 1997 and June
27, 1998, and the fiscal quarters ended September 27, 1997 and September 26,
1998, and Agrilink's total assets by business at June 28, 1997, June 27, 1998,
September 27, 1997 and September 26, 1998. In fiscal 1996, Agrilink sold its
Nalley Canada Ltd. subsidiary and Nalley's United States Chips and Snacks
business. In fiscal 1997, Agrilink sold its Finger Lakes Packaging Company, Inc.
('Finger Lakes Packaging') subsidiary and a portion of its canned vegetable
business.
NET SALES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
----------------------------------------------------- ----------------------------------
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998
--------------- --------------- --------------- --------------- ---------------
% OF % OF % OF % OF % OF
$ TOTAL $ TOTAL $ TOTAL $ TOTAL $ TOTAL
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBF....................... $431.2 58.4% $440.2 60.2% $469.0 65.2% $ 87.7 49.7% $ 96.7 53.0%
Nalley Fine Foods......... 189.2 25.6 182.4 25.0 182.1 25.3 46.9 26.6 42.8 23.4
Snack Foods Group......... 63.7 8.6 67.3 9.2 68.6 9.5 17.3 9.8 18.2 10.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Subtotal ongoing
operations........... 684.1 92.6 689.9 94.4 719.7 100.0 151.9 86.1 157.7 86.4
Businesses sold(1)........ 55.0 7.4 40.9 5.6 -- -- 24.5 13.9 24.9 13.6
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total................... $739.1 100.0% $730.8 100.0% $719.7 100.0% $176.4 100.0% $182.6 100.0%
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
</TABLE>
- ------------
(1) Includes the sales of Finger Lakes Packaging, the portion of the canned
vegetable business sold, Nalley Canada Ltd. and Nalley's United States Chips
and Snacks business. See Note 3 to the 'Notes to Consolidated Financial
Statements' of Agrilink included elsewhere herein. Includes the net sales of
the Aseptic Business for the fiscal quarters ended September 27, 1997 and
September 26, 1998. See Note 2 to the 'Unaudited Consolidated Financial
Statements' of Agrilink included elsewhere herein.
42
<PAGE>
<PAGE>
OPERATING INCOME(1)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
-------------------------------- ------------------------------
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998(2)
-------- -------- -------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CBF................................................ $ 26.5 $ 40.5 $ 47.1 $ 6.1 $ 6.1
Nalley Fine Foods.................................. (2.9) 10.8 10.4 3.7 2.2
Snack Foods Group.................................. 4.1 5.9 6.9 2.1 2.3
Corporate.......................................... (6.8) (10.5) (8.8) (1.9) (1.3)
-------- -------- -------- ------ ------
Subtotal ongoing operations...................... 20.9 46.7 55.6 10.0 9.3
Businesses sold and other nonrecurring(3).......... (6.7) 3.2 -- 2.9 3.2
-------- -------- -------- ------ ------
Total(4)......................................... $ 14.2 $ 49.9 $ 55.6 $12.9 $12.5
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
- ------------
(1) Excludes cumulative effect of an accounting change in fiscal 1997. See Note
1 to the 'Notes to Consolidated Financial Statements' of Agrilink included
elsewhere herein.
(2) Excludes the gain on the sale of the Aseptic Business.
(3) In fiscal 1996, such amount includes restructuring initiatives and operating
activities of both Finger Lakes Packaging and the portion of the canned
vegetable business sold. In fiscal 1997, such amount includes the operating
earnings and gain on the sale of Finger Lakes Packaging, operating
activities of the portion of the canned vegetable business sold, final
settlement of an insurance claim and a loss on the disposal of property held
for sale. See Note 3 to the 'Notes to Consolidated Financial Statements' of
Agrilink included elsewhere herein. For the fiscal quarters ended September
27, 1997 and September 26, 1998, such amount represents the operating
earnings of the Aseptic Business.
(4) Operating income less interest expense of $7.6 million and $8.3 million for
the fiscal quarters ended September 27, 1997 and September 26, 1998,
respectively, results in pretax income before dividing with Pro-Fac and
before extraordinary item. Interest expense allocated to business units is
not considered a critical component by management when evaluating success.
EBITDA(1)(2)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
-------------------------------- ------------------------------
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998(3)
-------- -------- -------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CBF................................................ $ 44.4 $ 57.1 $ 61.0 $ 9.5 $ 8.9
Nalley Fine Foods.................................. 2.3 16.2 16.0 5.1 3.6
Snack Foods Group.................................. 6.0 7.6 8.8 2.6 2.8
Corporate.......................................... (6.9) (10.1) (8.5) (2.0) (1.3)
-------- -------- -------- ------ ------
Subtotal ongoing operations...................... 45.8 70.8 77.3 15.2 14.0
Businesses sold and other nonrecurring(4).......... (2.1) 5.9 -- 3.2 3.8
-------- -------- -------- ------ ------
Total............................................ $ 43.7 $ 76.7 $ 77.3 $18.4 $17.8
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
- ------------
(1) EBITDA is defined as the sum of pretax income (loss) of Agrilink (before
dividing with Pro-Fac and before cumulative effect of an accounting change
and extraordinary item) and interest expense, depreciation and amortization
of goodwill and other intangibles. EBITDA should not be considered as an
alternative to net income or cash flows from operations or any other
generally accepted accounting principles measure of performance or as a
measure of liquidity. EBITDA is included herein because Agrilink believes
EBITDA is a financial indicator of a company's ability to service debt.
EBITDA as calculated by Agrilink may not be comparable to calculations as
presented by other companies.
(2) Excludes cumulative effect of an accounting change in fiscal 1997. See Note
1 to the 'Notes to Consolidated Financial Statements' of Agrilink included
elsewhere herein.
(3) Excludes the gain on the sale of the Aseptic Business.
(4) In fiscal 1996, such amount includes restructuring initiatives and operating
activities of both Finger Lakes Packaging and the portion of the canned
vegetable business sold. In fiscal 1997, such amount includes the operating
earnings and gain on the sale of Finger Lakes Packaging, operating
activities of the portion of the canned vegetable business sold, final
settlement of an insurance claim and a loss on the disposal of property held
for sale. See Note 3 to the 'Notes to Consolidated Financial Statements' of
Agrilink included elsewhere herein. For the fiscal quarters ended September
27, 1997 and September 26, 1998, such amounts represent the operating
earnings of the Aseptic Business.
43
<PAGE>
<PAGE>
TOTAL ASSETS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
-------------------------------------------- ----------------------------------------------
JUNE 28, 1997 JUNE 27, 1998 SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
-------------------- -------------------- -------------------- ----------------------
$ % OF TOTAL $ % OF TOTAL $ % OF TOTAL $ % OF TOTAL
------ ---------- ------ ---------- ------ ---------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBF.............................. $329.0 60.6% $362.2 63.9% $346.7 57.6% $ 405.0 32.2%
AFVC............................. -- -- -- -- -- -- 592.0 47.1
Nalley Fine Foods................ 144.4 26.6 137.4 24.3 155.8 25.9 154.9 12.3
Snack Foods Group................ 26.7 4.9 28.0 4.9 26.5 4.4 32.1 2.6
Corporate........................ 42.5 7.9 38.8 6.9 45.4 7.5 72.9 5.8
------ ---------- ------ ---------- ------ ---------- -------- ----------
Subtotal ongoing operations.... 542.6 100.0 566.4 100.0 574.4 95.4 1,256.9 100.0
Businesses sold(1)............... -- -- -- -- 27.7 4.6 -- --
------ ---------- ------ ---------- ------ ---------- -------- ----------
Total.......................... $542.6 100.0% $566.4 100.0% $602.1 100.0% $1,256.9 100.0%
------ ---------- ------ ---------- ------ ---------- -------- ----------
------ ---------- ------ ---------- ------ ---------- -------- ----------
</TABLE>
- ------------
(1) Includes the assets of the Aseptic Business. See Note 2 to the 'Unaudited
Consolidated Financial Statements' of Agrilink included elsewhere herein.
44
<PAGE>
<PAGE>
CHANGES FROM FIRST QUARTER FISCAL 1998 TO FIRST QUARTER FISCAL 1999
Net income for the first quarter of fiscal 1999 of $22.0 million
represented a $20.6 million increase over the first quarter of fiscal 1998 net
income of $1.4 million. Total EBITDA for the first quarter of fiscal 1999 before
the extraordinary charge relating to the early extinguishment of debt was $82.0
million as compared to $18.4 million in the first fiscal quarter of fiscal 1998.
Excluding the operating results and gain from businesses sold, EBITDA for the
continuing business decreased $1.2 million, or 7.9%, to $14.0 million in the
first quarter of the current fiscal year from $15.2 million in the first quarter
of the prior fiscal year. This decline was impacted by a decrease at CBF of $0.6
million due to changes in product mix within the fruit category (approximately
$1.1 million) and an increase in advertising associated with the launch of
Breakfast Toppers (approximately $0.5 million). These decreases were offset by
an increase within the vegetable category of $1.0 million attributable to
improvements in volume. The decline at Nalley of $1.5 million was due primarily
to the recognition of a favorably settled outstanding tax claim with the state
of Washington for $1.4 million in the first quarter of the prior fiscal year.
The EBITDA within the Snack Foods Group increased $0.2 million due to increases
in net sales.
Net Sales. Total net sales for the fiscal quarter increased $6.2 million,
or 3.5%, to $182.6 million in the first fiscal quarter of fiscal 1999 from
$176.4 million in the first quarter of fiscal 1998. Excluding businesses sold,
net sales increased by $5.8 million, or 3.8%, to $157.7 million in the first
quarter of fiscal 1999 from $151.9 million in the first quarter of fiscal 1998.
The increase in net sales for ongoing operations came primarily from the
CBF business unit which reported an increase in net sales of $9.0 million. This
increase was attributable to improvements in volume primarily within frozen
vegetables. Net sales for the remaining categories at CBF were relatively
consistent with that of the first quarter of the prior fiscal year.
Net sales for Nalley decreased $4.1 million in the first quarter of fiscal
1999 as compared with the first quarter of the prior fiscal year as gains in the
pickle category were offset by reductions in the dressings and canned product
lines. Within the pickle category, net sales for the first quarter of fiscal
1999 increased $0.6 million as a result of increased volume in the food service
channel. Competitive pressures on volume and price resulted in a $2.6 million
decrease in net sales for dressings and a $2.0 million decrease in the canned
category. Net sales for the peanut butter category were flat with that of the
first quarter of the prior fiscal year. On December 10, 1998, the Company
announced that it had reached an agreement in principle to sell its peanut
butter business.
Net sales for the Snack Foods Group increased by $0.9 million, or 5.2%, to
$18.2 million in the first quarter of fiscal 1999 as a result of new business in
the Northwest and product line extensions, including Snyder of Berlin's kettle
chips.
Gross Profit. Gross profit of $46.7 million in the quarter ended September
26, 1998 represented an increase of approximately $1.1 million, or 2.4%, from
$45.6 million in the quarter ended September 27, 1997. Excluding the impact of
businesses sold, gross profit increased $0.7 million or 1.8%.
The increase in gross profit at the CBF business unit (excluding the
Aseptic Business) was $1.0 million. The vegetable category showed improvements
of $2.1 million resulting from increases in volume, while the fruit category
showed a decline of $0.7 million attributable to product mix and decreases
within other categories of $0.4 million due to changes in volume.
Overall, gross profit at Nalley decreased $0.8 million due primarily to the
reductions in net sales outlined above. The Nalley gross margin percentage has,
however, improved over the prior year to 35.9% from 34.4% in the first quarter
of fiscal 1998.
Increases in net sales within the Snack Foods Group resulted in profit
improvements of $0.5 million.
Selling, Administrative and General Expenses. Selling, administrative and
general expenses have increased $1.9 million in the first quarter of fiscal 1999
as compared with the first quarter of the prior fiscal year. As a percentage of
net sales, selling, administrative and general expenses increased to 19.1% in
the first quarter of fiscal 1999 from 18.7% in the first quarter of fiscal 1998.
This increase is primarily due to the impact of a favorably settled outstanding
tax claim with the state of Washington for $1.4
45
<PAGE>
<PAGE>
million recognized in the first quarter of fiscal 1998. All remaining expenses
were relatively flat with that of the prior year.
Income from Great Lakes Kraut Company. This amount represents earnings
received from the investment in Great Lakes Kraut Company, a joint venture
formed between Agrilink and Flanagan Brothers, Inc. See Note 5, 'Other
Matters -- Formation of New Sauerkraut Company,' to the 'Unaudited Consolidated
Financial Statements' of Agrilink included elsewhere herein.
Gain on Sale of Aseptic Business. In conjunction with the Acquisition, the
Company sold its Aseptic Business to Dean Foods. A gain of approximately $64.2
million was recognized on this disposal reflecting a value for this business of
approximately $83.0 million (based upon an appraised value given to the Company
by an independent appraiser).
Interest Expense. Interest expense increased $0.7 million, or 9.1%, to $8.3
million in the first quarter of fiscal 1999 from $7.6 million in the first
quarter of fiscal 1998. The increase is impacted by higher levels of seasonal
borrowings in the first quarter of fiscal 1999 due to the earlier intake of
crops in the current year and therefore the resultant increase in inventory
levels.
Provision for Taxes. The provision for taxes increased $23.2 million to
$24.3 million in the first quarter of fiscal 1999 from $1.1 million in the first
quarter of fiscal 1998. Of this increase, $25.0 million is attributable to the
provision associated with the gain on the sale of the Aseptic Business. The
remaining variance is impacted by the change in earnings before tax. Agrilink's
effective tax rate is negatively impacted by the non-deductibility of certain
amounts of goodwill.
Extraordinary Item Relating to the Early Extinquishment of Debt.
Concurrently with the Acquisition, the Company refinanced its existing
indebtedness, including the Old Notes and its then existing bank debt. Premiums
and breakage fees associated with early redemptions and other fees incurred
amounted to $16.4 million (net of income taxes of $10.4 million and after
allocation to Pro-Fac of $1.7 million).
CHANGES FROM FISCAL 1997 TO FISCAL 1998
Net income for fiscal 1998 of $6.8 million represented a $1.3 million or
23.6% increase over the prior year's net income of $5.5 million. Total EBITDA
before cumulative effect of an accounting change was $77.3 million as compared
to $76.7 million in the prior year. Excluding the impact of businesses sold and
other non-recurring activities, EBITDA increased $6.5 million or 9.2% to $77.3
million, while operating income increased $8.9 million or 19.1% to $55.6 million
from the prior year's $46.7 million. These improvements reflected the benefits
from numerous initiatives including: (i) increase in volume and new customers in
many of Agrilink's product lines; (ii) the continuing benefits from structural
changes made within the organization including the consolidation of operations
and facilities and (iii) a decrease in interest expense due to initiatives
undertaken in the prior year to reduce debt and focus on strategic product
lines.
Net Sales. Total net sales for the year decreased $11.1 million or 1.5% to
$719.7 in fiscal year 1998 from $730.8 million in the prior year. Excluding the
net sales of businesses sold by Agrilink, net sales increased by $29.8 million
or 4.3% to $719.7 million in fiscal year 1998 from $689.9 million in the prior
year.
The increase in net sales for ongoing operations came primarily from the
CBF business unit, which accounted for an increase of $28.8 million. Prior year
net sales include $13.8 million in sauerkraut sales, which are now accounted for
by the joint venture between Agrilink and Flanagan Brothers, Inc., created in
fiscal 1998. See Note 3, 'Acquisitions, Disposals and Restructuring -- Formation
of New Sauerkraut Company' to the financial statements of Agrilink included
elsewhere herein. Excluding the impact of sauerkraut sales from the prior year,
net sales from the CBF business unit increased $42.6 million, or 10.0%, from the
prior year. Such increases resulted from changes in volume, product mix, new
customers and improvements in prices. The increase was attributable to increases
in net sales from: (i) the vegetable category of $20.2 million, (ii) the fruit
category of $3.0 million and (iii) the Aseptic Business of $24.4 million. In
connection with the Acquisition, the Company sold its Aseptic Business to Dean
Foods.
46
<PAGE>
<PAGE>
Net sales for Nalley remained relatively flat with the prior year as gains
in the pickle and canned categories were offset by reductions in dressings and
peanut butter (on December 10, 1998, the Company announced it had reached an
agreement in principle to sell its peanut butter business). Within the pickle
category, net sales for fiscal 1998 increased $3.0 million as a result of
increased volume in the food service channel. Competitive pressures on volume
and price resulted in a $3.0 million decrease in net sales for dressing. In
addition, peanut butter experienced a $0.6 million decrease in net sales.
Net sales for the Snack Foods Group increased by $1.3 million or 1.9% to
$68.6 million in fiscal 1998 as a result of new business in the Northwest and
product line extensions, including kettle chips within Snyder of Berlin.
Gross Profit. Gross profit of $195.6 million in fiscal 1998 increased $3.9
million or 2.0% from $191.7 million in fiscal 1997. Excluding the impact of
businesses sold in fiscal 1997, gross profit increased $8.1 million. As a
percentage of net sales, gross profit increased from 26.2% to 27.2%. This
increase is attributable to improved margins in many of Agrilink's product
lines.
The increase in gross profit at the CBF business unit was $5.0 million. The
fruit category showed improvements of $5.5 million resulting from changes in
pricing and product mix. The vegetable category showed a decline of $0.9
million. However, excluding the impact of the canned vegetable business sold in
1997, the gross profit within the vegetable category improved $1.5 million. This
increase is lower than the increase in net sales described above primarily due
to weakened pricing within the industry. As highlighted under ' -- Liquidity and
Capital Resources -- Short- and Long-Term Trends,' the vegetable portion of
Agrilink's business can be impacted by the national market. During the third and
fourth quarters of fiscal 1998, pricing was negatively impacted by an oversupply
situation.
Overall, gross profit at Nalley decreased $0.5 million. While production
and purchasing efficiencies yielded benefits, such amounts were offset by volume
declines within the dressing category due to competitive pressures.
Increases in net sales within the Snack Foods Group resulted in profit
improvements of $0.7 million.
Selling, Administrative and General Expenses. Selling, administrative and
general expenses have decreased $3.6 million as compared with the prior year. As
a percentage of net sales, selling, administrative and general expenses declined
from 19.9% to 19.7%. This decrease is primarily due to: (i) reductions in
selling expenses of $1.4 million; (ii) reductions in incentive costs of $1.2
million; and (iii) the impact of a favorably settled outstanding tax claim with
the state of Washington for $1.4 million.
Income from Great Lakes Kraut Company. This amount represents earnings
received from the investment in Great Lakes Kraut Company, a joint venture
formed between Agrilink and Flanagan Brothers, Inc. See Note 3 'Other
Matters -- Formation of New Sauerkraut Company' to the consolidated financial
statements of Agrilink included elsewhere herein.
Interest Expense. Interest expense decreased $4.4 million or 12.6% to $30.6
million in fiscal 1998 from $35.0 million in fiscal 1997. This improvement is
primarily the result of management's focus on debt reduction during fiscal year
1997. Specific actions taken by management included the sale of Finger Lakes
Packaging, the sale of the canned vegetable business and the sale of the Georgia
distribution center. The reduction in debt accounted for $3.5 million of the
reduction in interest expense while changes in rate accounted for the remaining
$0.9 million reduction.
Provision for Taxes. The provision for taxes increased $2.0 million or
54.1% to $5.7 million in fiscal 1998 from $3.7 million in fiscal 1997. This
increase was a result of a $5.1 million increase in earnings before tax.
Agrilink's effective tax rate in fiscal 1998 was 45.5% which is negatively
impacted by the non-deductibility of goodwill. A further discussion of tax
matters is included at Note 6 to the 'Notes to Consolidated Financial
Statements' of Agrilink included elsewhere herein.
CHANGES FROM FISCAL 1996 TO FISCAL 1997
Net income for fiscal 1997 of $5.5 million represented a $17.4 million
increase over the prior year's loss of $11.9 million. Total EBITDA before
cumulative effect of an accounting change was $76.7 million for the year ended
June 28, 1997 as compared to $43.7 million in the prior year. EBITDA for ongoing
businesses reached $70.8 million as compared to the prior year's $45.8 million.
This significant improvement reflected the benefits from numerous initiatives
including: (i) a reduction in debt by $86.8
47
<PAGE>
<PAGE>
million which included the sales of Finger Lakes Packaging, the portion of the
canned vegetable business sold, the Georgia Distribution facility and idle
manufacturing facilities, and efforts to improve cash flow through better
management of working capital requirements (see Notes 3 and 5 to the 'Notes to
Consolidated Financial Statements' of Agrilink included elsewhere herein); (ii)
the implementation of structural changes within the organization, including the
consolidation of the operations of Brooks Foods and Southern Frozen Foods into
CBF; and (iii) the consolidation of support services such as human resources and
agricultural services. The reduction in interest expense as a result of the debt
reduction initiatives improved net income by $5.5 million and consolidation
efforts accounted for approximately $2.0 million of the $6.5 million reduction
in selling, administrative and general expenses.
Structural changes within Agrilink's business units included a review of
the Nalley operations and the consolidation of several other operations. EBITDA
for the Nalley business unit was $16.2 million for the year ended June 28, 1997
as compared to $2.3 million in the prior year. These results were driven by
organizational changes and the absence of the significant start-up costs for the
new salad dressing line which were incurred throughout fiscal 1996.
Net Sales. Total net sales decreased by $8.3 million or 1.1% to $730.8
million in fiscal 1997 from $739.1 million in fiscal 1996. Excluding business
sold, net sales increased $5.8 million or 0.8% to $689.9 million in fiscal 1997
from $684.1 million in fiscal 1996.
Net sales from ongoing operations at CBF increased $9.0 million or 2.1% to
$440.2 million in fiscal 1997 from $431.2 million in fiscal 1996. This increase
was due to improvements in pricing and increased sales from new customers.
Net sales from ongoing operations at Nalley decreased by $6.8 million or
3.6% to $182.4 million in fiscal 1997 from $189.2 million in fiscal 1996. While
the canned category showed increases of $1.5 million, such gains were offset by
reductions in all other categories of $8.3 million. Such reductions resulted
from competitive pressures on volume and price.
Net sales at the Snack Foods Group increased $3.6 million, or 5.7%, to
$67.3 million in fiscal 1997 from $63.7 million in fiscal 1996. Of this
increase, $0.9 million was attributable to the acquisition of Matthews Candy
Company during the fourth quarter of fiscal 1996. The $2.7 million increase from
the existing remaining business was due to the addition of new customers and
product line extensions. Management believes the acquisition of Matthews
broadened its line of products and, therefore, enhanced its earnings capability.
However, due to the competitive nature of the snack food industry, management is
unable to assess whether such increases within the Snack Foods Group will
continue to be realized.
Gross Profit. Gross profit of $191.7 million in fiscal 1997 increased $15.5
million or 8.8% from $176.2 million in fiscal 1996. As a percentage of net
sales, gross profit increased from 23.8% to 26.2%. This increase was
attributable to improved margins in all of Agrilink's business units.
The increase in gross profit was benefited by improved/increased pricing at
the CBF business unit. As highlighted under ' -- Liquidity and Capital
Resources -- Short- and Long-Term Trends,' the vegetable and fruit portions of
Agrilink's business can be positively or negatively impacted by the national
crop yields. The status of the national supply situation controls pricing.
During fiscal 1997, crop yields of commodities in markets in which Agrilink
operates were below that of the prior year and, therefore, pricing levels within
the commodities markets in which Agrilink competes were increased. The increase
in pricing favorably impacted gross profit by $9.5 million.
Gross profit increased at Nalley by $4.0 million in 1997. This improvement
was primarily attributable to operating improvements, primarily the elimination
of start-up costs on the salad dressing line introduced in 1996, reductions in
manufacturing variances and reductions in promotional expenses.
Increased sales from the Snack Foods Group also improved profitability. The
increase in sales within the Snack Foods Group contributed an increase to gross
profit of $1.5 million.
Selling, Administrative and General Expenses. Selling, administrative and
general expenses decreased $10.7 million in 1997 as compared with the prior
year. As a percentage of net sales, selling, administrative and general expenses
decreased from 21.1% to 19.9%. This decrease is net of the inclusion of expenses
(approximately $5.6 million) relating to Agrilink's incentive program. Payments
under the incentive programs in fiscal 1997 were attributable to the
significantly improved earnings. The net decrease is attributed to a $5.8
million decrease in selling ($1.7 million), advertising ($1.0 million)
48
<PAGE>
<PAGE>
and trade promotions expenses ($3.1 million), resulting from decreased spending
at Nalley. Reductions in other administrative expenses accounted for $10.5
million and were primarily attributable to benefits from the restructuring
initiative that began late in fiscal 1996. These initiatives included the
consolidation of the administrative functions at CBF and the sale of Finger
Lakes Packaging.
Gain on Sale of Finger Lakes Packaging. On October 9, 1996, Agrilink
completed the sale of Finger Lakes Packaging to Silgan Containers Corporation,
an indirect, wholly-owned subsidiary of Silgan Holdings, Inc., headquartered in
Stamford, Connecticut. A gain of approximately $3.6 million was recognized on
this disposal. Agrilink received proceeds of approximately $30.0 million which
were applied to reduce bank debt. The transaction also included a long-term
supply agreement.
Interest Expense. Interest expense decreased $7.0 million or 16.6% to $35.0
million in fiscal 1997 from $42.0 million in fiscal 1996. This improvement
resulted from both the inventory reduction and cash-flow-management programs
initiated in fiscal 1996. In addition, debt was reduced by the proceeds from the
sale of Finger Lakes Packaging, the canned vegetable business and idle
facilities.
Provision for Taxes. The provision for taxes increased $10.6 million to
$3.7 million in fiscal 1997 from a $6.9 million benefit in fiscal 1996.
Agrilink's effective tax rate in fiscal 1997 was 49.3% which was negatively
impacted by the non-deductibility of goodwill. A further discussion of tax
matters is included at Note 6 to the 'Notes to the Consolidated Financial
Statements' of Agrilink included elsewhere herein.
Cumulative Effect of a Change in Accounting. Effective June 30, 1996,
accounting procedures were changed to include in prepaid expenses and other
current assets, manufacturing spare parts previously charged directly to
expense. Management believes this change is preferable because it provides a
better matching of costs with related revenues when evaluating interim financial
statements. The favorable cumulative effect of the change (net of Pro-Fac's
share of $2.9 million and income taxes of $1.1 million) was $1.7 million. Pro
forma amounts for the cumulative effect of the accounting change on prior
periods are not determinable due to the lack of physical inventory counts
required to establish quantities at the respective dates. Management does not
believe that the difference in accounting methodologies for spare parts had any
material impact on Agrilink's historic financial statements.
RESULTS OF OPERATIONS -- PRO-FAC
See 'Pro-Fac Cooperative, Inc. and Consolidated Subsidiary -- Management's
Discussion and Analysis of Financial Condition and Results of Operations' at the
back of this Prospectus.
RESULTS OF OPERATIONS -- DFVC
The purpose of this discussion is to outline the significant reasons for
changes in the Consolidated Statements of Operations of DFVC from fiscal 1996
through fiscal 1998 and for the first quarter of each of fiscal 1998 and 1999.
The financial data included in this discussion correspond to the financial data
of DFVC included herein under 'Selected Historical Consolidated and Unaudited
Pro Forma Financial Data of Agrilink and DFVC -- DFVC,' which have been adjusted
to conform to Agrilink's presentation. See 'Selected Historical Consolidated and
Unaudited Pro Forma Financial Data of Agrilink and DFVC -- DFVC.' DFVC's results
of operations will no longer be separately reported as they now form a part of
the Company's consolidated financial statements.
CHANGES FROM FIRST QUARTER FISCAL 1998 TO FIRST QUARTER FISCAL 1999
Net loss for the three months ended August 30, 1998 was $1.6 million, a
reduction of $1.4 million, or 46.7%, from a net loss of $3.0 million for the
three months ended August 24, 1997. Total EBITDA was $4.6 million for the first
fiscal quarter of 1999 as compared to $2.4 million in the first quarter of the
prior fiscal year. Improvements resulted from the net increase in gross profit
due to the introduction of new products with higher profit margins offset by the
increase in promotional and marketing expenses to support such product launches.
Net Sales. Total net sales decreased $1.4 million, or 1.1%, to $121.9
million in the quarter ended August 30, 1998 from $123.3 million in the first
quarter of the prior fiscal year. The variance is primarily attributable to a
decline in private label food service and industrial unit sales volume of
approximately $8.7 million due to competitive market conditions. Offsetting this
decrease was an increase of
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approximately $7.3 million in branded sales resulting from new product
introductions including Chicken Voila! and Birds Eye Baby Vegetables.
Gross Profit. Gross profit was $34.6 million in the quarter ended August
30, 1998, an increase of $6.6 million, or 23.6%, from $28.0 million in the first
quarter of the prior fiscal year. As a percentage of net sales, gross profit
increased from 22.7% in the quarter ended August 24, 1997 to 28.4% in the
quarter ended August 30, 1998. The increase is primarily attributable to
favorable pricing for branded retail. The introduction of new products with
higher profit margins, such as Chicken Voila! and Birds Eye Baby Vegetables also
strengthened profit margins.
Selling, Administrative and General Expenses. Selling, administrative and
general expenses increased $4.4 million, or 14.1%, to $35.5 million in the
quarter ended August 30, 1998 from $31.1 million in the first quarter of the
prior fiscal year. As a percentage of net sales, selling, administrative and
general expenses increased from 25.2% in the quarter ended August 24, 1997 to
29.1% in the quarter ended August 30, 1998. This increase is primarily due to
increases within promotional and marketing expenses to support the new product
introductions discussed above.
Interest expense. Interest expense decreased $0.1 million, or 4.8%, to $2.0
million in the quarter ended August 30, 1998 from $2.1 million in the quarter
ended August 24, 1997. Interest expense was allocated to DFVC by Dean Foods
based on a formula which takes into consideration the percentage of certain
assets and liabilities in relation to the total for Dean Foods.
Provision for Taxes. The benefit for taxes decreased $0.9 million, or
45.0%, to $1.1 million in the quarter ended August 30, 1998 from $2.0 million in
the quarter ended August 24, 1997. This decrease was a result of the improvement
in earnings described above. DFVC's effective tax rate in the current and prior
year was approximately 40.0%.
CHANGES FROM FISCAL 1997 TO FISCAL 1998
Net income for fiscal 1998 of $17.7 million represented an increase of $9.0
million, or 103.0%, over the prior year's net income of $8.7 million. Total
EBITDA was $58.9 million as compared to $46.6 million in the prior year. Fiscal
1997 earnings, however, included a $9.6 million charge to provide for employee
and asset relocation costs associated with plant consolidations. Excluding this
special charge, EBITDA for fiscal 1998 increased approximately $2.7 million or
4.8%, while net income increased approximately $3.2 million. Improvements
resulted from the benefits of the restructuring initiatives implemented in the
prior year.
Net Sales. Total net sales for the year decreased $1.8 million or 0.3% to
$620.2 million in fiscal 1998 from $622.0 million in the prior year. Competitive
market conditions were largely responsible for lower private label unit sales
volume. Improved pricing for branded retail partially offset the decline in
private label unit sales volume.
Gross Profit. Gross profit of $196.2 million in fiscal 1998 increased $12.6
million or 6.9% from $183.6 million in fiscal 1997. As a percentage of net
sales, gross profit increased from 29.5% in fiscal 1997 to 31.6% in fiscal 1998.
The increase is primarily attributable to favorable pricing for branded retail.
During 1998, DFVC also introduced new products with higher profit margins such
as Baby Vegetables and eliminated several products with low profit margins.
Selling, Administrative and General Expenses. Selling, administrative, and
general expenses increased $8.9 million, or 5.9%, to $158.7 million in fiscal
1998 from $149.8 million in the prior fiscal year. As a percentage of net sales,
selling, administrative and general expenses increased from 24.1% in fiscal 1997
to 25.6% in fiscal 1998. This increase is primarily due to increases of
approximately $6.3 million within promotional expenses to support new product
introductions, such as Baby Vegetables, and existing product lines.
Interest Expense. Interest expense decreased $1.1 million, or 10.7%, to
$9.2 million in fiscal 1998 from $10.3 million in fiscal 1997. This decrease is
due to improvements in working capital management resulting from operating
efficiencies benefited by both restructuring initiatives and the strategic plan
outlined in fiscal 1997.
Provision for Taxes. The provision for taxes increased $6.0 million or
103.4% to $11.8 million in fiscal 1998 from $5.8 million in fiscal 1997. This
increase was a result of the improvement in earnings described above. DFVC's
effective tax rate in fiscal 1998 was 40.0%. A further summary of tax matters
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is included at Note 7 to the 'Notes to Consolidated Financial Statements' of
DFVC included elsewhere herein.
CHANGES FROM FISCAL 1996 TO FISCAL 1997
Net income for fiscal 1997 of $8.7 million represented a $35.6 million
increase over the fiscal 1996 net loss of $26.9 million. Total EBITDA was $46.6
million as compared to $(7.5) million in the prior fiscal year. Both the fiscal
1996 and fiscal 1997 results, however, included a special charge of $37.3
million and $9.6 million, respectively, related to the adoption of a strategic
plan to reduce costs, rationalize production capacity, and provide for employee
severance. Excluding the special charge in both years, fiscal 1997 EBITDA was
$56.2 million, representing an increase of $26.4 million, from fiscal 1996
EBITDA of $29.8 million. Excluding the special charge in both years, fiscal 1997
net income was approximately $14.5 million, representing an increase of $18.6
million from the fiscal 1996 net loss of approximately $4.1 million. The
improved results principally resulted from favorable manufacturing variances,
including reductions in procurement costs, increased operating efficiencies,
lower warehousing costs, and reduced operating expenses. Many of these
improvements resulted from the restructuring initiatives implemented. In
addition, fiscal 1996 results were negatively impacted by weather-related higher
costs associated with the poor 1995 Midwest harvest, industry-wide excess
inventory levels and highly competitive market conditions that prevailed
throughout fiscal 1996.
Net Sales. Total net sales for the year decreased $24.6 million or 3.8% to
$622.0 million in fiscal 1997 from $646.6 million in the prior year. The
decrease in net sales is principally due to a decline in private label sales and
planned reductions in products used in the business. Competitive market
conditions were largely responsible for lower private label unit sales volume
and a slight decline in branded retail unit sales volume. Partially offsetting
the decline in branded retail and private label unit sales volume, were improved
pricing for both frozen and canned vegetables over the prior year and an
increase in bulk frozen sales.
Gross Profit. Gross profit of $183.6 million in fiscal 1997 increased $28.7
million or 18.5% from $154.9 million in fiscal 1996. As a percentage of net
sales, gross profit increased from 24.0% in fiscal 1996 to 29.5% in fiscal 1997.
The increase is attributable to lower product costs resulting from the
restructuring initiatives implemented in fiscal 1996 and fiscal 1997. These
efforts improved procurement practices, increased operating efficiencies and
lowered warehouse/delivery expense. These cost savings were, however, partially
offset by lower sales volume experiences in fiscal 1997 as a result of
deliberate inventory rationalization and product reductions.
Selling, Administrative and General Expenses. Selling, administrative, and
general expenses decreased $0.5 million to $149.8 million in fiscal 1997 from
$150.3 million in fiscal 1996. This change is primarily due to reductions in
general and administrative costs relating to improvements in working capital
management resulting from operating efficiencies benefited by restructuring and
the strategic plan outlined. As a percentage of net sales, selling,
administrative and general expenses increased from 23.2% in fiscal 1996 to 24.0%
in fiscal 1997.
Interest Expense. Interest expense decreased $1.7 million or 14.2% to $10.3
million in fiscal 1997 from $12.0 million in fiscal 1996. This decrease was
primarily due to lower weighted average interest rates during fiscal 1997 in
comparison to fiscal 1996.
Special Charge. Special charges of $9.6 million and $37.3 million were
recognized in fiscal 1997 and 1996, respectively. The fiscal 1996 charge was
part of a plan to reduce costs, rationalize production capacity, and provide for
projected severance costs. The plan included the elimination of more than 200
manufacturing and administrative positions, closure of five manufacturing
facilities, and the disposition of certain assets held by two other facilities.
In fiscal 1997, DFVC recorded an additional charge of $9.6 million to provide
for employee and asset relocation costs associated with plant consolidations.
Provision for Taxes. The provision for taxes increased $23.0 million to
$5.8 million in fiscal 1997 from a benefit of $17.2 million in fiscal 1996. The
benefit for taxes recognized in fiscal 1996 reflected the fiscal 1996 net loss
and the impact of the special charge to earnings. DFVC's effective tax rate in
fiscal 1997 was 40.0%. A further summary of tax matters is included in Note 7 to
the 'Notes to Consolidated Financial Statements' of DFVC included elsewhere
herein.
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LIQUIDITY AND CAPITAL RESOURCES
Agrilink. The following discussion highlights the major variances in the
'Unaudited Consolidated Statement of Changes in Cash Flows' included elsewhere
herein for Agrilink's first quarter of fiscal 1999 compared to its first quarter
of fiscal 1998 and in the 'Consolidated Statement of Changes in Cash Flows'
included in the consolidated financial statements of Agrilink, included
elsewhere herein, for fiscal 1998 compared to fiscal 1997.
Net cash used in operating activities increased $35.8 million in the first
quarter of fiscal 1999 over the first quarter of the prior fiscal year. This
increase is primarily due to variances within inventory including: (i) an
increase of $1.5 million in inventory to support additional business regarding
the Sam's national club stores; (ii) an increase of $2.5 million associated with
the acquisition of DelAgra; and (iii) changes in growing areas, early harvesting
of crops, the size of the crop intake, and other changes in inventory necessary
to support operations (approximately $15.3 million).
In addition, cash used in operating activities in the first quarter of
fiscal 1999 increased over the first quarter of the prior fiscal year due to the
timing of liquidation of outstanding accounts payable and accrued expenses.
Net cash used in investing activities increased significantly in the first
quarter of fiscal 1999 as compared with the first quarter of fiscal 1998 due to
the acquisition of DFVC offset by the sale of the Aseptic Business. The purchase
of property, plant and equipment increased $0.9 million to $4.1 million for the
quarter ended September 26, 1998 from $3.2 million for the quarter ended
September 27, 1997 and was for general operating purposes.
Net cash provided by financing activities also increased significantly in
the first quarter of fiscal 1999 as compared with the first quarter of fiscal
1998 due to the acquisition of DFVC and the activities completed concurrent with
the Acquisition to refinance existing indebtedness. See Note 4, 'Debt,' to the
'Unaudited Consolidated Financial Statements' of Agrilink included elsewhere
herein.
Net cash provided by operating activities decreased in fiscal 1998
primarily due to an increase in inventory of approximately $25.7 million. This
increase is primarily due to: (i) an increase of $8.0 million in inventory to
support additional business regarding the Sam's national club stores as
described below; (ii) an increase of $4.0 million of inventory associated with
the acquisition of DelAgra; and (iii) changes in growing areas/timing of crop
intake and early harvesting of crops resulting from the 1998 growing season
(approximately $11.0 million).
During October of 1997, Agrilink became the sole supplier of frozen
vegetables for the Sam's national club stores. The executed contract extends for
a two-year period and required an $11.0 million prepayment for volume discounts.
Due to the time frame required for the incumbent supplier to exit these
operations and for Agrilink to implement full distribution, this contract did
not significantly impact fiscal 1998 earnings. However, the Company anticipates
this arrangement will have a favorable impact on fiscal 1999 earnings, although
there can be no assurance it will do so.
An offsetting increase in cash provided by operating activities resulted
from the changes in accounts payable and accrued expenses due to the timing of
liquidation.
Net cash provided by investing activities decreased significantly in fiscal
1998, primarily due to the sales in fiscal 1997 of Finger Lakes Packaging, a
portion of the canned vegetable business, the Georgia distribution center and
several idle facilities. In fiscal 1998 the only significant disposal consisted
of the sale of the distribution center in Coloma, Michigan. All proceeds from
asset sales were applied to repay bank debt in accordance with the terms of the
Old Credit Facility. In addition, in fiscal 1998, acquisitions accounted for the
use of $7.4 million of investing cash flow. These proceeds were utilized to
purchase DelAgra Corporation of Bridgeville, Delaware and C&O Distributing
Company of Canton, Ohio. The purchase of property, plant and equipment decreased
by $2.8 million or 16.6% to $14.1 million in fiscal 1998 from $16.9 million in
fiscal 1997 and was for general operating purposes.
Financing activities provided $11.4 million of cash in fiscal 1998 compared
to using $85.6 million in cash in fiscal 1997. Cash used in fiscal 1997 included
$104.9 million of debt repayment which resulted from the cash provided by the
sale of certain assets during the year.
Pro-Fac. See 'Pro-Fac Cooperative, Inc. and Consolidated
Subsidiary -- Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources' at the back of this
Prospectus.
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DFVC. The following discussion highlights the major variances in the
'Unaudited Condensed Consolidated Statement of Cash Flows' of DFVC, included
elsewhere herein, for DFVC's first quarter of fiscal 1999 compared to its first
quarter of fiscal 1998 and in the 'Consolidated Statement of Changes in Cash
Flows' included in the consolidated financial statements of DFVC, included
elsewhere herein, for fiscal 1998 compared to fiscal 1997.
Operating activities used $1.0 million of cash in the first quarter of
fiscal 1999 compared to providing $17.7 million in the first quarter of fiscal
1998. This change was primarily attributable to: (i) an increase in inventory of
$29.1 million due to timing of crop intake and (ii) an increase in accounts
receivable of $5.9 million. These uses of funds were partially offset by an
increase within accounts payable and other accrued expenses of approximately
$15.5 million resulting from the timing and liquidation of outstanding
obligations.
Net cash used in investing activities decreased by approximately $1.2
million in the first quarter of fiscal 1999 due to a decrease in the purchase of
property, plant and equipment. Capital spending decreased by approximately $1.2
million, or 27.3%, to $3.2 million in the first quarter of fiscal 1999 from $4.4
million in the first quarter of fiscal 1998. Capital spending for both quarters
was for general operating purposes.
Financing activities for DFVC primarily resulted from advances and payments
between the operating entity and its former parent, Dean Foods. Dean Foods
maintained a centralized cash management system, whereby substantially all cash
receipts and disbursements were recorded at the corporate level. Net cash
provided by financing activities of $4.4 million in the first quarter of fiscal
1999 represented the repatriation to Dean Foods of cash flows generated by
operating activities as compared to $13.2 million used in financing activities
in the first quarter of fiscal 1998.
Net cash provided by operating activities increased in fiscal 1998 to $72.5
million from $49.3 million in the prior year. This improvement was primarily due
to an increase in cash of approximately $22.6 million resulting from the timing
and liquidation of outstanding obligations within accounts payable and other
accrued expenses.
Net cash used in investing activities decreased by approximately $4.2
million in fiscal 1998, primarily due to purchasing activities surrounding
property, plant and equipment. The purchase of property, plant and equipment
decreased by $4.1 million or 26.6% to $11.3 million in fiscal 1998 from $15.4
million in fiscal 1997 and was for general operating purposes.
Financing activities for DFVC in fiscal 1998 and 1997 primarily resulted
from advances and payments between the operating entity and its former parent,
Dean Foods. Dean Foods maintained a centralized cash management system, whereby
substantially all cash receipts and disbursements were recorded at the corporate
level. Net cash used in financing activities of $61.6 million in fiscal 1998
represented the repatriation to Dean Foods of excess cash flow generated by
operating activities as compared to $34.2 million used in financing activities
in fiscal 1997.
New Credit Facility. In connection with the Acquisition, the Company
entered into the New Credit Facility, which consists of the Revolving Credit
Facility and the Term Loan Facility. The Term Loan Facility consists of the Term
A Facility, which has a maturity of five years, the Term B Facility, which has a
maturity of six years, and the Term C Facility, which has a maturity of seven
years. The Revolving Credit Facility has a maturity of five years. As of
September 26, 1998, $455 million of the Term Loan Facility was drawn, consisting
of $100.0 million, $175.0 million and $180.0 million of loans under the Term A
Facility, Term B Facility and Term C Facility, respectively. Additionally, as of
such date, $94.0 million was drawn under the Revolving Credit Facility in
connection with seasonal working capital needs and an additional $14.3 million
of such Facility was used as credit support in the form of letters of credit.
During December 1998, the Company's primary lender exercised its right under the
New Credit Facility to transfer $50.0 million from the Term A Facility to the
Term B and Term C Facilities in increments of $25.0 million. Principal
repayments under the Term Loan Facility will amortize in quarterly installments
commencing in the third quarter of fiscal 1999 through the respective final
maturities of the tranches comprising the Term Loan Facility in the amounts of
$0.4 million, $8.3 million, $10.8 million, $10.8 million, $10.8 million, $13.3
million, $198.2 million and $202.4 million during the fiscal years 1999 through
2006 (inclusive), respectively.
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The New Credit Facility bears interest, at the Company's option, at the
Administrative Agent's alternate base rate (which is equal to the greater of:
(i) the prime commercial rate as announced by the Administrative Agent and (ii)
the Federal Funds rate plus 0.50%) or the reserve-adjusted London Interbank
Offered Rate ('LIBOR') plus, in each case, applicable margins of: (i) in the
case of alternate base rate loans, (x) 1.00% for the Revolving Credit Facility
and Term A Facility, (y) 2.75% for the Term B Facility and (z) 3.00% for the
Term C Facility and (ii) in the case of LIBOR loans, (x) 2.75% for the Revolving
Credit Facility and Term A Facility, (y) 3.75% for the Term B Facility and (z)
4.00% for the Term C Facility. In addition, the Company pays a commitment fee
calculated at a rate of 0.50% per annum on the daily average unused commitment
under the Revolving Credit Facility. For a more detailed description of the New
Credit Facility, see 'Description of Certain Indebtedness -- New Credit
Facility' included elsewhere herein.
Interest Rate Protection Agreements. The Company is subject to market risk
from exposure to changes in interest rates based on its financing activities.
The Company has entered into certain financial instrument transactions to
maintain the desired level of exposure to the risk of interest rate fluctuations
and to minimize interest expense. More specifically, the Company has entered
into two interest rate swap agreements with the Bank of Montreal. The agreements
provide for fixed interest rate payments by the Company in exchange for payments
received at the three-month LIBOR rate.
The following is a summary of the Company's interest rate swap agreements
by major type:
<TABLE>
<S> <C>
Interest Rate Swap:
Variable to Fixed -- notional amount............................................. $250,000,000
Average pay rate................................................................. 4.96 - 5.32%
Average receive rate............................................................. 5.3125%
Maturities....................................................................... 2001
</TABLE>
The Company has the option of extending one of the interest rate swap
agreements, with a notional amount of $100,000,000 and expiration date of
October 5, 2001, for an additional two years through October 5, 2003.
While there is potential that interest rates will fall, and hence minimize
the benefits of the Company's hedge position, it is the Company's belief that on
a long-term basis, the possibility of interest rates increasing exceeds the
likelihood of interest rates decreasing. The Company will, however, monitor
market conditions to adjust its position as it considers necessary.
Capital Expenditures. The Company anticipates that capital expenditures for
fiscal years 1999 and 2000, including capital expenditures relating to DFVC,
will be approximately $25.0 million per annum.
As a result of the Acquisition and the Merger, the Company may in the
current fiscal year be required to repay prior to maturity industrial revenue
bonds under which the Issuer, as successor to DFVC, is obligated, in the
principal amount of approximately $2.5 million, plus accrued and unpaid
interest.
Based on the current level of operations, the Company believes that it will
be able to meet the debt service requirements on its indebtedness (including the
Notes) and meet its working capital needs and fund its capital expenditures and
other operating expenses out of cash flow from operations and available
borrowings under the Revolving Credit Facility. However, there can be no
assurance that the Company's business will generate cash flow at levels
sufficient to meet these requirements. In addition, under the New Credit
Facility, the Company has scheduled principal amortization payments of the Term
Loans of $198.2 million in fiscal 2005 and $202.4 million in fiscal 2006. See
'Description of Certain Indebtedness -- New Credit Facility.' The Company may be
unable to repay such principal amounts under the New Credit Facility due in
fiscal 2005 and fiscal 2006 unless it is able to refinance such indebtedness.
See 'Risk Factors -- Our Substantial Leverage and Debt Service Requirements May
Have Adverse Consequences.'
Short- and Long-Term Trends. Throughout fiscal 1998 and 1997 Agrilink has
focused on its core businesses and growth opportunities. A complete description
of the acquisition and disposal activities completed is outlined at Note 3 to
the 'Notes to Consolidated Financial Statements' of Agrilink included elsewhere
herein.
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As a result of the financings entered into in connection with the
Acquisition, the Company is highly leveraged. The Company will therefore be
heavily focused on managing its operations with a view toward making timely
payments of scheduled debt repayments. Such leverage and demands on the Company
could have significant adverse effects. See 'Risk Factors -- Our Substantial
Leverage and Debt Service Requirements May Have Adverse Consequences.'
The vegetable and fruit portions of the Company's business, which includes
AFVC and CBF, 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.
The crop and yields resulting from the 1997 growing season has resulted in an
increased supply throughout the industry. Accordingly, pricing and sales volume
have been negatively impacted in the third and fourth quarters of fiscal 1998.
In the first quarter of fiscal 1998, the Company reclassified a $9.4
million demand receivable due from Pro-Fac reflecting the conversion of such
receivable to a non-interest bearing long-term obligation due from Pro-Fac
having a 10-year maturity.
Additional Payment to Dean Foods. The Company expects to pay an additional
$13.2 million to Dean Foods in connection with the anticipated election by the
Company to treat the Acquisition as an asset sale for tax purposes under Section
338(h)(10) of the Code and to fund such payment by borrowing that amount under
the Revolving Credit Facility. The Company anticipates that such election would
allow the Company to reduce its future tax liability through increased
depreciation and amortization deductions resulting from the stepped up basis for
the assets acquired from Dean Foods and deductibility of goodwill.
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.
OTHER MATTERS
Restructuring. During the fourth quarter of fiscal 1996, Agrilink initiated
a corporate-wide restructuring program. The overall objectives of the plan were
to reduce expenses, improve productivity and streamline operations. Efforts
focused on the consolidation of operations and the elimination of approximately
900 positions. The total fiscal 1996 restructuring charge amounted to $5.9
million. This amount included 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 incurred throughout the
year. There were not any noncash write-offs included in the fiscal 1996
restructuring charge. The cost of the strategic consulting activities was
liquidated through payment in fiscal 1996. The $4.0 million reserve for employee
terminations is being liquidated in accordance with severance agreements reached
with such employees. During fiscal 1997, approximately $2.0 million of this
reserve was liquidated. During 1998, all remaining material amounts were
liquidated.
During the fourth quarter of fiscal 1996, DFVC initiated a restructuring
program to reduce costs, rationalize production capacity and provide for
projected severance costs. The restructuring charge of $37.3 million recorded by
DFVC in fiscal 1996 consisted of: (i) approximately $2.2 million in employee
termination benefits, (ii) approximately $5.7 million relating to plant closing
costs and (iii) approximately $29.4 million in noncash asset write-offs. An
additional $9.6 million of restructuring charges were incurred by DFVC in fiscal
1997, consisting primarily of $8.9 million relating to plant closures and
approximately $0.7 million in employee termination benefits. At May 31, 1998,
the remaining reserve attributable to employee termination benefits, which is
expected to be used for continuing severance benefits, was $2.1 million. A
reserve of $2.5 million outstanding on May 31, 1998 relates to a litigation
settlement that is not being assumed by the Company in connection with the
Acquisition.
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1998 Growing Season. The effect of the calendar 1998 growing season on
fiscal 1999 financial results cannot be estimated until early calendar 1999 when
harvesting is complete and national supplies can be determined.
Year 2000 and Information Services Reorganization. A full inventory and
analysis of business applications and related software of the Company was
performed, and the Company has determined that it will be required to modify or
replace certain portions of its software so that its computer systems will be
Year 2000 compliant. These modifications and replacements are being and will
continue to be made in conjunction with the Company's overall information
systems initiatives. No major delay in these initiatives is anticipated.
In addition, the Company is contacting non-information technology vendors
to ensure that any of their products that are currently in use can adequately
deal with the change in century. Areas being addressed include full reviews of
manufacturing equipment, telephone and voice mail systems, security systems and
other office/site support systems. Based upon preliminary information, the costs
of addressing potential problems are not expected to have a material adverse
impact on the Company's financial position, results of operations or cash flows
in future periods. Accordingly, the cost of the project is being funded through
operating cash flows.
The Company has initiated formal communications with significant suppliers
and customers to determine the extent to which it is vulnerable to those third
parties' failure to remediate their own Year 2000 issues. However, there can be
no assurance that the systems of other companies on which the Company's systems
rely will be converted on a timely basis, or that a failure to convert by
another company, or a conversion that is incompatible with the Company's
systems, would not have material adverse effect on the Company. Accordingly, the
Company plans to devote the necessary resources to resolve all significant Year
2000 issues in a timely manner.
The Company expects to complete the Year 2000 project during the fall of
1999. Based on the progress made to date (which includes compliant systems in
place and in production), the Company does not believe any material exposure to
significant business interruption exists. In the event some of the remaining
elements of the Company's Year 2000 compliance project are delayed, procedures
have been developed to ensure alternative workaround initiatives are completed.
In June 1997, Systems & Computer Technology Corporation ('SCT') and
Agrilink announced a major outsourcing services and software agreement effective
June 30, 1997. The ten-year agreement, valued at approximately $50.0 million, is
for SCT's OnSite outsourcing services, ADAGE ERP software and implementation
services and assistance in solving the Year 2000 issue.
Agrilink has verified that AFVC's general ledger, payroll and human
resources systems are Year 2000 compliant. The software utilized by AFVC for
such functions, however, is contracted directly to Dean Foods. Dean Foods will
provide these systems to the Company for a six-month transition period following
the Acquisition to allow the Company to transfer these systems to its Year 2000
compliant software. The Company has reviewed and verified the current status of
AFVC's remaining software and its Year 2000 compliance implementation plan and
has confirmed that AFVC is prepared to bring all of its other functions into
Year 2000 compliance no later than the fall of 1999.
See also 'Risk Factors -- Year 2000 Risks.'
Product Recall. In February 1997, Agrilink issued a nationwide recall of
all 'Tropic Isle' brand fresh frozen coconut produced in Costa Rica because it
had the potential to be contaminated with Listeria monocytogenes, an organism
which can cause serious and sometimes fatal infections in small children, frail
or elderly people and others with weakened immune systems. The total estimated
cost of the product recall was $0.5 million. This amount was recognized as an
expense in fiscal 1997. Agrilink received closure of this matter by the FDA on
March 11, 1998. Should any material costs associated with this recall develop,
it is anticipated that such amounts will be covered under the Company's
insurance policies.
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BUSINESS
The Company is a leading producer and marketer of diversified processed
food products. The Company's broad product offering includes frozen and canned
vegetables and fruits, fruit fillings and toppings, canned chilies and stews,
salad dressings, pickles and snack foods. Many of the Company's products are
marketed under well-recognized brand names which enjoy leading national or
regional market shares, including Birds Eye, Freshlike and Veg-All frozen and
canned vegetables, Comstock, Wilderness and Thank You fruit fillings and
toppings, Nalley chilies and stews and Bernstein's salad dressings. The Company
also markets its products to supermarkets, warehouse clubs and mass
merchandisers under private labels and to food service institutions including
restaurants, caterers, bakeries and schools. Finished products are
well-diversified among branded (60% of fiscal 1998 pro forma net sales), private
label (17%) and food service and industrial products (23%). For fiscal 1998, the
Company had pro forma net sales of $1.2 billion and pro forma EBITDA of $131.0
million. See 'Summary Selected Historical and Unaudited Pro Forma Financial
Data.'
The Company operates 29 strategically located processing facilities
throughout the United States and in Mexico, which provide access to diversified
sources of raw agricultural products. The Company distributes finished products
to over 13,000 customer distribution points through a nationwide network of
distribution centers and food brokers and a regional direct sales force. Snack
products are marketed through direct store distributors (some of which are owned
and operated by the Company) that ship directly to retail outlets. The Company's
customers include supermarket chains throughout the United States, including
Kroger, A&P and Publix, as well as food service providers such as Sysco, Alliant
Food Service and U.S. Foodservice. No single customer accounted for more than 5%
of fiscal 1998 pro forma gross sales.
The Company is a wholly-owned subsidiary of Pro-Fac, a New York
agricultural cooperative corporation formed in 1960 to process and market crops
grown by its members. In 1994, Pro-Fac and Agrilink entered into the Marketing
Agreement. The Marketing Agreement provides for Pro-Fac to supply crops and
additional financing to Agrilink, for Agrilink to provide marketing and
management services to Pro-Fac and for Pro-Fac to share in the profits or losses
of Agrilink. See 'The Company and Pro-Fac.'
OPERATIONS
The Company operates throughout the United States and in Western Canada
through four primary business units: CBF, Nalley Fine Foods, Snack Foods Group
and, with the Acquisition, AFVC.
Curtice Burns Foods. CBF, headquartered in Rochester, New York, consists of
the Company's Comstock Michigan Fruit, Southern Frozen Foods and Brooks Foods
business units, which were consolidated on September 18, 1997, and are now
called Curtice Burns Foods. CBF produces products in several food categories,
including fruit fillings and toppings, canned and frozen fruits and vegetables
and popcorn. The Company's branded pie fillings are ranked first nationally in
the branded market, with a 55% share of that market. The vegetables and fruits
processed by CBF include corn, cherries, beans, peas, cucumbers, blueberries,
apples, potatoes, cabbage, beets and asparagus. In fiscal 1998, excluding the
Aseptic Business, approximately 44% of CBF's net sales represented branded
products, approximately 22% represented private label products and approximately
34% represented food service/industrial products. Well-known brand names of
CBF's products include Chill Ripe, Comstock, Greenwood, Just for Chili,
McKenzie's, McKenzie's Gold King, Pops-Rite, Rich and Tangy, Super Pop, Southern
Farms, Thank You, Tropic Isle and Wilderness. CBF processes fruits and
vegetables under Agrilink brands and private labels. Additional products include
value-added items such as canned specialty fruits, frozen vegetable blends,
Southern-specialty products such as black-eyed peas, okra and Southern squash
and Southern specialty side dishes. Canned beans and tomato products are sold in
several Midwestern states under the Brook's label. This product category
includes value-added items such as Chili Hot Beans and stewed tomatoes. CBF also
supplies branded and private label fruit fillings to retailers and food service
institutions such as restaurants, caterers, bakeries and schools. In fiscal
1998, CBF had net sales and unit operating income of $469.0 million and $47.1
million, respectively. The Aseptic Business accounted for net sales and
operating income of approximately $97.9 million and $16.5 million, respectively,
in fiscal 1998.
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AFVC. The Company's AFVC business unit became the Company's newest and
largest business unit upon consummation of the Acquisition and the Merger. AFVC
is a producer and marketer of canned and frozen vegetables and is based in Green
Bay, Wisconsin. AFVC is one of the largest processors of frozen vegetables in
the United States. The vegetables processed by AFVC include corn, beans, peas,
broccoli, spinach, cauliflower and carrots. In fiscal 1998, approximately 60% of
DFVC's net sales were branded and the remainder were split between private label
and other business. Branded products include Birds Eye frozen vegetables,
Freshlike canned and frozen vegetables and Veg-All canned mixed vegetables.
Birds Eye is the second leading frozen vegetable brand in terms of market share
in the United States. Based on an independent marketing survey dated December
1997, Birds Eye has total brand awareness of 98% and unaided brand awareness of
59%. The Company intends to use the Birds Eye label's strength as leverage to
continue to acquire market share through the introduction of new products. In
June 1997, DFVC introduced Baby Vegetables, a line of gourmet frozen vegetables
under the Birds Eye brand. In fiscal 1998, Baby Vegetables accounted for
approximately $31.0 million in retail sales. In March 1998, DFVC introduced
Chicken Voila! under the Birds Eye brand as a ready meal solutions product for
time-constrained consumers who are willing to pay for value-added convenience
products. DFVC also entered the $1.1 billion fresh pre-cut vegetables market in
1998 under the Birds Eye brand. The Company will continue to market AFVC'S
private label vegetables primarily to large retail grocery chains and
wholesalers. AFVC's other business segment consists of food service, industrial
and export sales, which together accounted for 24% of DFVC's fiscal 1998 sales.
The food service business primarily sells to major food service providers such
as Alliant, Sysco and U.S. Foodservice. Industrial customers include Campbell
Soup Company, ConAgra and Stillwell. AFVC will continue to export predominantly
private label products to Canada, the Far East, Europe and Mexico. In fiscal
1998, DFVC had net sales (adjusted to conform to Agrilink's presentation) and
operating income of approximately $620.2 million and $38.7 million,
respectively.
Nalley Fine Foods. The Nalley Fine Foods business unit markets canned meat
products such as chilies and stews, pickles, salsa, salad dressings, peanut
butter and syrup. Nalley's products are primarily branded, accounting for
approximately 74% of Nalley's fiscal 1998 net sales. However, private label and
food service accounts for a growing percentage of Nalley's business. Several of
Nalley's branded products have leading market shares in the fast-growing Pacific
Northwest region (defined as the principal metropolitan areas of the states of
Idaho, Oregon, Utah and Washington), such as Nalley chili with a 57% market
share, and Nalley and Farman's pickles with a 47% market share, based on dollar
sales. In the Pacific Northwest, the Company's Nalley and Bernstein's brands of
salad dressings have a combined market share of approximately 13%. On December
10, 1998, the Company announced that it had reached an agreement in principle to
sell its peanut butter business. In fiscal 1998, Nalley had net sales and unit
operating income of $182.1 million and $10.4 million, respectively.
Snack Foods Group. Agrilink's Snack Foods Group consists of Snyder of
Berlin (Snyder) and Husman Snack Foods (Husman), which produce and distribute
their snack food products primarily in the Mid-Atlantic and Midwest regions of
the country, and Tim's Cascade Chips (Tim's), which produces and distributes
kettle-fried chips, popcorn, cheese curls and snack mix in the Pacific
Northwest. In fiscal 1998, the Snack Foods Group had net sales and unit
operating income of $68.6 million and $6.9 million, respectively.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The businesses of Agrilink, Pro-Fac and DFVC are principally conducted in
one industry segment, the processing and sale of various food products. The
financial statements for the fiscal years 1996, 1997 and 1998, which are
included elsewhere herein, reflect the information relating to that segment for
the last three fiscal years for each of Agrilink, Pro-Fac and DFVC.
PRO-FAC COOPERATIVE, INC.
The Company is a wholly-owned subsidiary of Pro-Fac, an agricultural
cooperative formed under New York State law to process and market crops grown by
its members. Only growers of crops marketed through Pro-Fac, or associations of
such growers, can become members of Pro-Fac. A grower becomes a member of
Pro-Fac through the purchase of common stock of Pro-Fac. Pro-Fac's
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approximately 600 members are located principally in Florida, Georgia, Illinois,
Iowa, Michigan, Nebraska, New York, Oregon, Pennsylvania and Washington.
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
In connection with the Acquisition, the Company has entered into the New
Credit Facility with Harris Bank as Administrative Agent and Bank of Montreal as
Syndication Agent and the lenders thereunder. The Credit Facility consists of
the $200.0 million Revolving Credit Facility and the $455.0 million Term Loan
Facility. The Term Loan Facility is comprised of the Term A Facility, which has
a maturity of five years, the Term B Facility, which has a maturity of six
years, and the Term C Facility, which has a maturity of seven years. The
Revolving Credit Facility has a maturity of five years.
The New Credit Facility bears interest, at the Company's option, at the
Administrative Agent's alternate base rate or LIBOR plus, in each case,
applicable margins of: (i) in the case of alternate base rate loans, (x) 1.00%
for loans under the Revolving Credit Facility and the Term A Facility, (y) 2.75%
for loans under the Term B Facility and (z) 3.00% for loans under the Term C
Facility and (ii) in the case of LIBOR loans, (x) 2.75% for loans under the
Revolving Credit Facility and the Term A Facility, (y) 3.75% for loans under the
Term B Facility and (z) 4.00% for loans under the Term C Facility. The
Administrative Agent's 'alternate base rate' is defined as the greater of: (i)
the prime commercial rate as announced by the Administrative Agent and (ii) the
Federal Funds rate plus 0.50%. In addition, the Company will pay a commitment
fee calculated at a rate of 0.50% per annum on the daily average unused
commitment under the Revolving Credit Facility. Upon consummation of the
Acquisition, the Company drew $455.0 million under the Term Loan Facility,
consisting of $100.0 million, $175.0 million and $180.0 million of loans under
the Term A Facility, Term B Facility and Term C Facility, respectively.
Additionally, the Company drew $93.0 million under the Revolving Credit Facility
for seasonal working capital needs and $14.3 million under that Facility was
used for credit support in the form of letters of credit.
During December 1998, the Company's primary lender exercised its right
under the New Credit Facility to transfer $50.0 million from the Term A Facility
to the Term B and Term C Facilities in increments of $25.0 million.
Beginning with the reporting period ending March 31, 1999, the applicable
margins for the New Credit Facility will be subject to possible reductions based
on the ratio of consolidated Debt to EBITDA (each as defined in the New Credit
Facility).
The Term Loan Facility will be subject to the following amortization
schedule:
<TABLE>
<CAPTION>
FISCAL TERM TERM TERM
YEAR LOAN A LOAN B LOAN C TOTAL
- ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1999.. $ 0.0 $ 0.2 $ 0.2 $ 0.4
2000.. 7.5 0.4 0.4 8.3
2001.. 10.0 0.4 0.4 10.8
2002.. 10.0 0.4 0.4 10.8
2003.. 10.0 0.4 0.4 10.8
2004.. 12.5 0.4 0.4 13.3
2005.. -- 197.8 0.4 198.2
2006.. -- -- 202.4 202.4
------ ------ ------ ------
$50.0 200.0 205.0 $455.0
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
The Term Loan Facility is subject to mandatory prepayment with: (i) 100% of
the net cash proceeds from the issuance of debt, subject to certain exceptions;
(ii) 100% of the net cash proceeds from asset dispositions, subject to certain
exceptions; (iii) a percentage of the Company's excess cash flow (as defined in
the New Credit Facility) equal to (x) 75% if the leverage ratio (as defined in
the New Credit Facility) computed as of the last day of the immediately
preceding fiscal year is at least 4.5 to 1.0, (y) 66 2/3% if the leverage ratio
as of such day is less than 4.5 to 1.0 and (z) 0%, subsequent to the end
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of fiscal 1999, if the leverage ratio is less than 3.0 to 1.0 as of the last day
of the most recently completed two consecutive fiscal quarters; (iv) 50% of the
net cash proceeds of any equity offering unless, subsequent to the end of fiscal
1999, the leverage ratio is less than 3.0 to 1.0 as of the last day of the most
recently completed two consecutive fiscal quarters and (v) any pension or other
employee benefit plan reversions.
The Company's obligations under the New Credit Facility are secured by a
first-priority lien on: (i) substantially all existing or after-acquired assets,
tangible or intangible, (ii) the capital stock of certain of Pro-Fac's current
and future subsidiaries, including the Company, and (iii) all of the Company's
rights (principally indemnification rights) under the agreement to acquire DFVC
and the Marketing Agreement. The Company's obligations under the New Credit
Facility will be guaranteed by Pro-Fac and certain of the Company's current and
future subsidiaries.
The New Credit Facility contains customary covenants and restrictions on
the Company's ability to engage in certain activities, including, but not
limited to: (i) limitations on the incurrence of indebtedness and liens, (ii)
limitations on sale-leaseback transactions, consolidations, mergers, sale of
assets, transactions with affiliates and investments and (iii) limitations on
dividend and other distributions. The New Credit Facility also contains
financial covenants requiring Pro-Fac to maintain a minimum level of
consolidated EBITDA, a minimum consolidated interest coverage ratio, a minimum
consolidated fixed charge coverage ratio, a maximum consolidated leverage ratio
and a minimum level of consolidated net worth.
INTEREST RATE PROTECTION AGREEMENTS
The Company has entered into a three-year interest rate swap agreement with
the Bank of Montreal in the notional amount of $150.0 million. The swap
agreement provides for an interest rate of 4.96% over the term of the swap
payable by the Company in exchange for payments at published three-month LIBOR.
In addition, the Company entered into a separate interest rate swap agreement
with Bank of Montreal in the notional amount of $100.0 million for an initial
period of three years, which may be extended, at the Company's option, for an
additional two year period. The swap agreement provides for an interest rate of
5.32% over the term of the swap, including the two-year extension period if the
Company elects to extend, payable by the Company in exchange for payments at
published three-month LIBOR. The Company entered into these agreements in order
to manage its interest rate risk by exchanging its floating rate interest
payments for fixed rate interest payments.
The following is a summary of the Company's interest rate swap agreements
by major type:
<TABLE>
<S> <C>
Interest Rate Swap:
Variable to Fixed -- notional amount..................................... $250,000,000
Average pay rate......................................................... 4.96 - 5.32%
Average receive rate..................................................... 5.3125%
Maturities............................................................... 2001
</TABLE>
SUBORDINATED PROMISSORY NOTE
As partial consideration for the Acquisition, the Issuer issued to Dean
Foods the Subordinated Promissory Note for $30.0 million aggregate principal
amount due November 22, 2008. Interest on the Subordinated Promissory Note is
payable quarterly in arrears commencing December 31, 1998, at a rate per annum
of 5% until November 22, 2003, and at a rate of 10% thereafter. Interest
accruing through November 22, 2003 is required to be paid in kind through the
issuance by the Company of additional subordinated promissory notes identical to
the Subordinated Promissory Note in the principal amount of the interest due.
Interest accruing after November 22, 2003 is payable in cash. The Subordinated
Promissory Note may be prepaid at the Issuer's option without premium or
penalty.
The Subordinated Promissory Note is expressly subordinate to the Notes and
the New Credit Facility and contains no financial covenants. The Subordinated
Promissory Note is guaranteed by Pro-Fac on a subordinated basis to the same
extent that the Subordinated Promissory Note is subordinated to the Notes and
the New Credit Facility.
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The Subordinated Promissory Note is subject to a mandatory early redemption
at any time that the aggregate amount of credit available under the New Credit
Facility is increased above $700.0 million in connection with the financing of
an acquisition by the Company of the assets, stock or business of another
person, if, or as soon as, the Subordinated Promissory Note may be redeemed
without breaching or creating a default under the terms of the Notes. In
addition, principal and interest on the Subordinated Promissory Note may be
declared due and payable earlier than its expressed maturity, but no payment may
be made until all 'Senior Indebtedness' (which, as defined in the Subordinated
Promissory Note, includes the Notes and the New Credit Facility) is paid in
full. Accordingly, the Subordinated Promissory Note may be repaid in full prior
to its expressed maturity and prior to payment of the Notes only if permitted by
the Indenture.
12 1/4% SENIOR SUBORDINATED NOTES DUE 2005
In connection with the Acquisition and the Refinancing, Agrilink
repurchased $159,985,000 of its Old Notes, of which $160.0 million principal
amount was previously outstanding. Agrilink paid a total of approximately $184.0
million to purchase the Old Notes, including interest accrued thereon of $2.9
million. Holders who sold their Old Notes to Agrilink consented to certain
amendments to the indenture governing the Old Notes, which eliminated or amended
substantially all the restrictive covenants and certain events of default
contained in such indenture. The Company may repurchase the remaining Old Notes
in the future in open market transactions, privately negotiated purchases or
otherwise.
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DESCRIPTION OF NOTES
The Initial Notes were, and the Exchange Notes will be, issued pursuant to
the Indenture among the Company, the Guarantors and IBJ Schroder Bank and Trust
Company, as trustee (the 'Trustee'), a copy of which will be made available to
prospective purchasers of the Notes upon request. The following is a summary of
the material terms and provisions of the Notes. The terms of the Notes include
those set forth in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the 'Trust Indenture
Act'). The Notes are subject to all such terms, and holders of the Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary does not purport to be a complete description of the Notes
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Indenture. Capitalized terms that are used but not otherwise
defined herein have the meanings assigned to them in the Indenture and such
definitions are incorporated herein by reference. For purposes of this section,
references to the 'Company' include only the Issuer and not its subsidiaries.
GENERAL
The Notes are senior subordinated unsecured obligations of the Company
limited to an aggregate principal amount of $200.0 million, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company
(including the Company's obligations under the New Credit Facility) as described
below under ' -- Subordination.' The Notes are unconditionally guaranteed, on a
joint and several basis, by each Guarantor on a senior subordinated basis, with
each such Note Guarantee subordinated to the Guarantor's guarantee of the
obligations of the Company under the New Credit Facility and to all other Senior
Indebtedness of such Guarantor.
The Notes bear interest at the rate shown on the cover page of this
Prospectus from their original issue date, payable on May 1 and November 1 of
each year, commencing on May 1, 1999, to holders of record at the close of
business on April 15 or October 15, as the case may be, immediately preceding
the relevant interest payment date. The Notes will mature on November 1, 2008.
They were issued in registered form, without coupons, and in denominations of
$1,000 and integral multiples thereof. The Notes are payable as to principal,
premium, if any, and interest at the office or agency of the Company maintained
for such purpose within the City and State of New York or, at the option of the
Company, by wire transfer of immediately available funds or, in the case of
certificated securities only, by mailing a check to the registered address of
the holder. See ' -- Book-Entry, Delivery and Form of Securities.' Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose.
The interest rate on the Notes is subject to increase in certain
circumstances if the Company and the Guarantors do not file a registration
statement relating to the Exchange Offer on a timely basis, if such registration
statement is not declared effective on a timely basis or if certain other
conditions are not satisfied, all as further described below under
' -- Registration Rights.'
SUBORDINATION
The payment by the Company of principal of and premium (if any) and
interest (including Additional Interest) on the Notes, and by each Guarantor of
such amounts under its Note Guarantee (collectively, the 'Note Indebtedness'),
is subordinated to the prior payment in full in cash when due of the principal
of and premium, if any, and accrued and unpaid interest on and all other amounts
owing in respect of all existing and future Senior Indebtedness of the Company
and of such Guarantor, as the case may be. At September 26, 1998, as adjusted to
give effect to the Initial Notes Offering and the application of the net
proceeds therefrom, the Company would have had approximately $465.6 million of
Senior Indebtedness outstanding (including $11.0 million borrowed under the Term
Loan Facility to refinance seasonal working capital borrowings under the Old
Credit Facility but excluding seasonal working capital borrowings under the
Revolving Credit Facility). In addition, the Company maintains significant
borrowings during each fiscal year to finance seasonal working capital needs,
which also constitute Senior Indebtedness. At September 26, 1998, an additional
$94.0 million of seasonal working capital indebtedness was outstanding under the
$200.0 million Revolving Credit Facility. In addition,
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$14.3 million of letters of credit were issued thereunder as of such date.
Substantially all of such Senior Indebtedness is secured. Subject to certain
limitations, the Company and its Subsidiaries (including the Subsidiary
Guarantors) may incur additional Indebtedness in the future, including Senior
Indebtedness. See ' -- Certain Covenants -- Limitations on Additional
Indebtedness.'
The Indenture provides that, upon any payment or distribution to creditors
of the Company or any Guarantor of the assets of the Company or such Guarantor,
as the case may be, of any kind or character in a total or partial liquidation
or dissolution of the Company or such Guarantor, as the case may be, or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or such Guarantor, as the case may be, whether voluntary
or involuntary (including any assignment for the benefit of creditors and
proceedings for marshaling of assets and liabilities of the Company or such
Guarantor, as the case may be), the holders of all Senior Indebtedness of the
Company or such Guarantor, as the case may be, then outstanding will be entitled
to payment in full in cash (including interest accruing subsequent to the filing
of petition of bankruptcy or insolvency at the rate specified in the document
relating to the applicable Senior Indebtedness, whether or not such interest is
an allowed claim enforceable against the Company or such Guarantor, as the case
may be, under applicable law) before the holders of Notes are entitled to
receive any payment (other than payments made from a trust previously
established pursuant to provisions described under ' -- Satisfaction and
Discharge of Indenture; Defeasance') on or with respect to the Note Indebtedness
from the Company or such Guarantor, as the case may be, and until the holders of
all Senior Indebtedness of the Company or such Guarantor, as the case may be,
receive payment in full in cash, any distribution to which the holders of Notes
would be entitled from the Company or such Guarantor, as the case may be, will
be made to holders of Senior Indebtedness of the Company or such Guarantor, as
the case may be.
Upon the occurrence of any default in the payment of any principal of or
interest on or other amounts due on any Designated Senior Indebtedness of the
Company or any Guarantor (a 'Payment Default'), no payment of any kind or
character shall be made by the Company or such Guarantor, as the case may be,
(or by any other Person on its behalf) with respect to the Note Indebtedness
(other than payments made from a trust previously established pursuant to
provisions described under ' -- Satisfaction and Discharge of Indenture;
Defeasance') unless and until (i) such Payment Default shall have been cured or
waived in accordance with the instruments governing such Designated Senior
Indebtedness or shall have ceased to exist, (ii) such Designated Senior
Indebtedness has been discharged or paid in full in cash in accordance with the
instruments governing such Indebtedness or (iii) the benefits of this sentence
have been waived by the holders of such Designated Senior Indebtedness or their
representative immediately after which the Company or such Guarantor, as the
case may be, must resume making any and all required payments, including missed
payments, in respect of its obligations under the Notes.
Upon (1) the occurrence and continuance of an event of default (other than
a Payment Default) relating to Designated Senior Indebtedness, as such event of
default is defined therein or in the instrument or agreement under which such
Designated Senior Indebtedness is outstanding, which event of default, pursuant
to the instruments governing such Designated Senior Indebtedness, entitles the
holders (or a specified portion of the holders) of such Designated Senior
Indebtedness or their designated representative to immediately accelerate
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace period, the maturity of
such Designated Senior Indebtedness (whether or not such acceleration has
actually occurred) (a 'Non-payment Default') and (2) the receipt by the Trustee
and the Company from the trustee or other representative of holders of such
Designated Senior Indebtedness of written notice (a 'Payment Blockage Notice')
of such occurrence, no payment is permitted to be made by the Company or such
Guarantor, as the case may be (or by any other Person on its behalf), in respect
of the Note Indebtedness (other than payments made from a trust previously
established pursuant to provisions described under ' -- Satisfaction and
Discharge of Indenture; Defeasance') for a period (a 'Payment Blockage Period')
commencing on the date of receipt by the Trustee of such Payment Blockage Notice
and ending on the earliest to occur of the following events (subject to any
blockage of payments that may then be in effect due to a Payment Default on
Designated Senior Indebtedness): (w) such Non-payment Default has been cured or
waived or has ceased to exist; (x) a 179-consecutive-day period commencing on
the date such Payment Blockage Notice is received by the Trustee has elapsed;
(y) such
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Payment Blockage Period has been terminated by written notice to the Trustee
from the trustee or other representative of holders of such Designated Senior
Indebtedness, whether or not such Non-payment Default has been cured or waived
or has ceased to exist; and (z) such Designated Senior Indebtedness has been
discharged or paid in full in cash, immediately after which, in the case of
clause (w), (x), (y) or (z), the Company or such Guarantor, as the case may be,
must resume making any and all required payments, including missed payments, in
respect of its obligations under the Notes.
Notwithstanding the foregoing, (a) not more than one Payment Blockage
Period may be commenced in any period of 360 consecutive days and (b) no default
or event of default with respect to the Designated Senior Indebtedness of the
Company or such Guarantor, as the case may be, that was the subject of a Payment
Blockage Notice which existed or was continuing on the date of the giving of any
Payment Blockage Notice shall be or serve as the basis for the giving of a
subsequent Payment Blockage Notice whether or not within a period of 360
consecutive days unless such default or event of default shall have been cured
or waived for a period of at least 90 consecutive days after such date.
Notwithstanding anything to the contrary, in no event may the total number of
days during which any Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any 360 day consecutive period.
Notwithstanding the foregoing, Noteholders may receive and retain Permitted
Junior Securities and payment from the money or the proceeds held in any
defeasance trust described under ' -- Satisfaction and Discharge of Indenture;
Defeasance' below, and no such receipt or retention will be contractually
subordinated in right of payment to any Senior Indebtedness or subject to the
restrictions described in this 'Subordination' section.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or any Guarantor, whether in cash,
property or securities, shall be received by the Trustee or the holders of Notes
at a time when such payment or distribution is prohibited by the foregoing
provisions, such payment or distribution shall be segregated from other funds or
assets and held in trust for the benefit of the holders of Senior Indebtedness
of the Company or such Guarantor, as the case may be, and shall be paid or
delivered by the Trustee or such holders, as the case may be, to the holders of
the Senior Indebtedness of the Company or such Guarantor, as the case may be,
remaining unpaid or unprovided for or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any of such Senior Indebtedness of the Company or such
Guarantor, as the case may be, may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness of the
Company or such Guarantor, as the case may be, held or represented by each, for
application to the payment of all Senior Indebtedness of the Company or such
Guarantor, as the case may be, remaining unpaid, to the extent necessary to pay
or to provide for the payment in full in cash of all such Senior Indebtedness
after giving effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not such failure is on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the holders of Notes to
accelerate the maturity of the Notes. See ' -- Events of Default.'
By reason of the subordination provisions contained in the Indenture, in
the event of bankruptcy, liquidation, insolvency or other similar proceedings,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and creditors of the Company who
are not holders of Senior Indebtedness may recover less, ratably, than holders
of Senior Indebtedness and may recover more, ratably, than the holders of the
Notes.
GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the 'Note Guarantees') by Pro-Fac and by each Subsidiary Guarantor.
Each Note Guarantee is an unsecured senior subordinated obligation of the
Guarantor providing it, and ranks junior in right of payment to all existing and
future Senior Indebtedness of such Guarantor, including such Guarantor's
guarantee of the Company's obligations under the New Credit Facility. The
Indenture provides that the
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obligations of each Guarantor under its Note Guarantee will be limited to an
amount not to exceed the maximum amount that can be guaranteed by such Guarantor
without constituting a fraudulent conveyance under applicable law.
The Indenture permits, subject to the satisfaction of certain conditions,
the merger of the Company with and into Pro-Fac with Pro-Fac as the surviving
corporation (the 'Pro-Fac Merger'). Upon the consummation of the Pro-Fac Merger,
Pro-Fac will assume all of the obligations of the Company under the Indenture
and the Notes and Pro-Fac's Note Guarantee will be released. See ' -- Certain
Covenants -- Limitations on Mergers and Certain Other Transactions.' Unless the
context otherwise requires, on and after consummation of the Pro-Fac Merger,
references to Pro-Fac and the Company in this Description of Notes shall be
deemed to be references to Pro-Fac as the surviving corporation of the Pro-Fac
Merger.
The Indenture provides that no Guarantor (other than a Subsidiary Guarantor
whose Note Guarantee is to be released in accordance with the terms of the Note
Guarantee and the Indenture in connection with any transaction complying with
the 'Limitation on Asset Sales' covenant) may consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) another Person
whether or not affiliated with such Guarantor unless (i) the Person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) assumes all of the obligations of such Guarantor pursuant to a
supplemental indenture, in form and substance satisfactory to the Trustee, under
the Notes and the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) immediately after
giving effect to any such transaction involving a Subsidiary Guarantor, the
Coverage Ratio Incurrence Condition would be met; provided, however, that the
foregoing shall not apply to the Pro-Fac Merger (the Pro-Fac Merger being
governed by the covenant described under ' -- Limitation on Mergers and Certain
Other Transactions.')
Separate financial statements of the Subsidiary Guarantors are not included
herein because such Subsidiary Guarantors are jointly and severally liable with
respect to the Company's obligations pursuant to the Notes, and the aggregate
net assets, earnings and equity of the Subsidiary Guarantors and the Company are
substantially equivalent to the net assets, earnings and equity of the Company
on a consolidated basis.
OPTIONAL REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to November 1, 2003, but will be
redeemable at the option of the Company, in whole or in part, at any time on or
after November 1, 2003, at the following redemption prices (expressed as
percentages of principal amount), together with accrued and unpaid interest, if
any, thereon to the redemption date, if redeemed during the twelve-month period
beginning November 1:
<TABLE>
<CAPTION>
OPTIONAL
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------- ----------
<S> <C>
2003................................................................... 105.938%
2004................................................................... 103.958%
2005................................................................... 101.979%
2006 and thereafter.................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
originally issued with the net cash proceeds of one or more Equity Offerings at
a redemption price equal to 111.875% of the principal amount thereof, plus
accrued and unpaid interest and Additional Interest, if any, to the redemption
date; provided that (a) at least $130.0 million aggregate principal amount of
the Notes remains outstanding immediately after the occurrence of such
redemption and (b) such redemption occurs within 60 days of the date of the
closing of any such Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
the Notes to be redeemed will be made by the Trustee from among the outstanding
Notes on a pro rata basis, by lot or by any other method permitted in the
Indenture. Notice of redemption will be mailed at least 30 days but not
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more than 60 days before the redemption date to each holder whose Notes are to
be redeemed at the registered address of such holder. On and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes will
have the right to require that the Company repurchase all or any portion of such
holder's Notes for a cash price (the 'Change of Control Purchase Price') equal
to 101% of the principal amount of the Notes, plus accrued and unpaid interest
and Additional Interest, if any, to the date of repurchase, all in accordance
with the following paragraph.
Within 30 days following any Change of Control, the Company will mail to
the Trustee (who shall mail to each holder at the Company's expense) a notice
(i) describing the transaction or transactions that constitute the Change of
Control, (ii) offering to repurchase, pursuant to the procedures required by the
Indenture and described in such notice (a 'Change of Control Offer'), on a date
specified in such notice (which shall be a business day not earlier than 30 days
or later than 60 days from the date such notice is mailed) and for the Change of
Control Purchase Price, all Notes properly tendered by such holder (in integral
multiples of $1,000) pursuant to such offer to purchase for the Change of
Control Purchase Price and (iii) describing the procedures that holders must
follow to accept the Change of Control Offer. The Change of Control Offer is
required to remain open for at least 20 business days or for such longer period
as is required by law.
The occurrence of the events constituting a Change of Control under the
Indenture will result in an event of default in respect of the New Credit
Facility and may result in an event of default in respect of other Indebtedness
of the Company and its Subsidiaries permitting the lenders thereunder to require
repayment of such Indebtedness in full. If a Change of Control Offer is made,
there can be no assurance that the Company will have available funds sufficient
to pay for all or any of the Notes that might be delivered by holders of Notes
seeking to accept the Change of Control Offer. There can be no assurance that in
the event of a Change of Control the Company will be able to obtain the consents
necessary to consummate a Change of Control Offer from the lenders under
agreements governing outstanding Indebtedness (including the New Credit
Facility) which may prohibit such an offer. The Company's obligation to make a
Change of Control Offer will be satisfied if a third party makes the Change of
Control Offer in the manner and at the times and otherwise in compliance with
the requirements applicable to a Change of Control Offer made by the Company and
purchases all Notes properly tendered and not withdrawn under such Change of
Control Offer. The definition of Change of Control includes the sale of 'all or
substantially all' of the assets of the Company or Pro-Fac, the determination of
which depends upon the circumstances of any such sale and is subject to
interpretation under applicable legal precedent.
The Change of Control feature of the Notes, by requiring a Change of
Control Offer, may in certain circumstances make more difficult or discourage a
sale or takeover of the Company, and, thus, the removal of incumbent management.
The Change of Control feature, however, is not part of a plan by management to
adopt a series of antitakeover provisions. Instead, the Change of Control
feature is a result of negotiations between the Company and the Initial
Purchasers. Subject to the limitations discussed below, the Company could, in
the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of Indebtedness
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings.
The Company will comply with the applicable tender offer rules, including
the requirements of Rule 14e-1 under the Exchange Act and any other applicable
laws and regulations in connection with the purchase of Notes pursuant to a
Change of Control Offer.
CERTAIN COVENANTS
Limitations on Additional Indebtedness. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, incur any Indebtedness
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(including without limitation Acquired Indebtedness); provided that (i) the
Company and its Restricted Subsidiaries may incur Permitted Indebtedness and
(ii) if no Default or Event of Default shall have occurred and be continuing at
the time of or as a consequence of the incurrence of any such Indebtedness, the
Company may incur additional Indebtedness if, after giving effect thereto, the
Company's Consolidated Interest Coverage Ratio on the date thereof would be at
least 2.0 to 1.0, determined on a pro forma basis as if the incurrence of such
additional Indebtedness, and the application of the net proceeds therefrom, had
occurred at the beginning of the four-quarter period used to calculate the
Company's Consolidated Interest Coverage Ratio.
Payments Pursuant to the Pro-Fac Marketing Agreement; Reinvestments by
Pro-Fac; Borrowings by Pro-Fac. As promptly as practicable, and in any event
within ten Business Days, after receipt from the Company of any payment made in
excess of the Commercial Market Value for crops and other services pursuant to
the Pro-Fac Marketing Agreement, Pro-Fac will invest in cash as common equity
interests (other than Disqualified Capital Stock) in the Company an amount equal
to 70% of such excess. Without the consent of the Holders of at least 75% in
principal amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Notes), the Company
will not: (a) amend the calculation of amounts payable to Pro-Fac under the
Pro-Fac Marketing Agreement in a manner which would increase the payments made
to Pro-Fac, (b) amend the Pro-Fac Marketing Agreement to require that Affiliate
Transactions involving Pro-Fac be approved by less than a majority of the
Disinterested Directors or (c) amend the provisions of the Indenture containing
this and the previous sentence or the definition of 'Commercial Market Value.'
The Indenture governing the Notes will permit the Company to make demand loans
to Pro-Fac for working capital purposes in amounts not exceeding $40.0 million
at any time outstanding, each such loan to bear interest at a rate equal to the
rate in effect on the date of such loan under the Revolving Loan Facility. The
loan balance must be reduced to zero for a period of not less than 15
consecutive days in each fiscal year. Except for the foregoing provision and
except for (x) Pro-Fac's Note Guarantee and (y) Pro-Fac's Guarantee of the
Obligations under the New Credit Facility, as long as Pro-Fac has the right to
borrow under the Pro-Fac Marketing Agreement, the Indenture does not permit
Pro-Fac to incur any other Indebtedness.
Notwithstanding the foregoing, the Indenture provides that the preceding
paragraph shall not apply on and after the consummation of the Pro-Fac Merger.
The Indenture provides that, on and after the consummation of the Pro-Fac
Merger, any payment to any member of Pro-Fac in cash or property (other than
Capital Stock) for crops in excess of Commercial Market Value shall be deemed to
be a Restricted Payment under the Indenture. In addition, Pro-Fac will cause its
certificate of incorporation and/or by-laws to be amended no later than the
consummation of the Pro-Fac Merger to require (i) that there shall be at least
two Disinterested Directors on the Board of Directors of Pro-Fac at all times,
(ii) the formation and maintenance of a committee of the Board of Directors of
Pro-Fac to recommend Commercial Market Value, which committee shall include at
least two Disinterested Directors at all times, (iii) approval by a majority of
the Disinterested Directors of the annual profit plan of Pro-Fac (including the
raw product section of the profit plan) and the final determination of
Commercial Market Value, and (iv) precluding the further amendment of the
certificate of incorporation and by-laws of Pro-Fac concerning (i), (ii), and
(iii) above without the consent of the Holders of at least 75% in principal
amount of the Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for the Notes). Without the consent of the
Holders of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), the Company and Pro-Fac will not amend the provisions of the
Indenture containing this paragraph or the definition of 'Commercial Market
Value.'
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries. The
Indenture provides that the Company will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of its Capital Stock
(including options, warrants or other rights to purchase shares of such Capital
Stock) except (i) to the Company or a Wholly-Owned Restricted Subsidiary, (ii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary or (iii) to the
extent such shares represent directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Wholly-Owned
Restricted Subsidiary. The proceeds of any sale of Capital Stock permitted
hereunder and referred to in clauses
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(ii) and (iii) above will be treated as Net Available Proceeds and must be
applied in a manner consistent with the provisions of the covenant described
under ' -- Limitations on Asset Sales.'
Limitations on Layering Debt. The Indenture provides that neither the
Company nor any Guarantor will incur any Indebtedness that is subordinate or
junior in right of payment to any Senior Indebtedness of the Company or such
Guarantor, as the case may be, unless such Indebtedness by its terms is pari
passu with, or subordinated to, the Notes or the Note Guarantee of such
Guarantor, as the case may be.
Limitations on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any Restricted Payment (except as permitted below) if at the
time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(ii) the Company would be unable to meet the Coverage Ratio Incurrence
Condition; or
(iii) the amount of such Restricted Payment, when added to the
aggregate amount of all other Restricted Payments (except as expressly
provided in the second following paragraph) made on or after the first day
of the last completed fiscal quarter of the Company ending immediately
prior to the Issue Date, exceeds the sum of (A) 50% of the Company's
Consolidated Net Income (taken as one accounting period) from the first day
of the last completed fiscal quarter of the Company ending immediately
prior to the Issue Date to the end of the Company's most recently ended
fiscal quarter for which financial statements are available at the time of
such Restricted Payment (or, if such aggregate Consolidated Net Income
shall be a deficit, minus 100% of such aggregate deficit) plus (B) the net
cash proceeds from the issuance and sale (other than to a Subsidiary of the
Company or Pro-Fac) after the Issue Date of (1) the Company's Capital Stock
that is not Disqualified Capital Stock (excluding amounts contributed to
the Company pursuant to clause (E) of this paragraph and excluding Capital
Stock purchased with the proceeds of loans from the Company or any of its
Subsidiaries) or (2) debt securities of the Company that have been
converted into the Company's Capital Stock that is not Disqualified Capital
Stock and that is not then held by a Subsidiary of the Company, plus (C) to
the extent that any Restricted Investment that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (x) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (y) the initial
amount of such Restricted Investment, plus (D) the amount of any Restricted
Investment outstanding in an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company in accordance with the definition of 'Unrestricted Subsidiary,'
plus (E) 40% of the aggregate contributions by Pro-Fac to the Company
pursuant to the covenant entitled ' -- Payments Pursuant to the Pro-Fac
Marketing Agreement; Reinvestments by Pro-Fac; Borrowings by Pro-Fac'
subsequent to the Issue Date but prior to the consummation of the Pro-Fac
Merger, plus (F) $7.5 million.
The foregoing provisions of clauses (ii) and (iii) of the immediately
preceding paragraph will not prohibit (1) the payment of any dividend by
the Company or any Restricted Subsidiary within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (2) the redemption,
repurchase, retirement or other acquisition of any Capital Stock of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company or Pro-Fac) of
other Capital Stock of the Company (other than any Disqualified Capital
Stock); (3) the defeasance, redemption, repurchase or other retirement of
Subordinated Indebtedness in exchange for, or out of the proceeds of, the
substantially concurrent issue and sale of Capital Stock of the Company
(other than (x) Disqualified Capital Stock, (y) Capital Stock sold to a
Subsidiary of the Company or Pro-Fac and (z)Capital Stock purchased with
the proceeds of loans from the Company or any of its Subsidiaries); (4) the
payment of amounts prior to the consummation of the Pro-Fac Merger required
to fund Pro-Fac's reasonable operating expenses, not in excess of $250,000,
as adjusted to reflect changes in the Consumer Price Index between the
Issue Date and the date of any such payment, in any fiscal year; (5)(x) the
payments of dividends or distributions to Pro-Fac solely in amounts and at
the times necessary to permit Pro-Fac, or (y) any payment to members of
Pro-Fac
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on and after the consummation of the Pro-Fac Merger solely in amounts and
at the times necessary, in each case to purchase, redeem, acquire, cancel
or otherwise retire for value Capital Stock of Pro-Fac (i) held by
officers, directors or employees or former officers, directors or employees
(or their transferees, estates or beneficiaries under their estates), or a
trust established for the benefit of any of the foregoing, of Pro-Fac, the
Company or its Subsidiaries, upon death, disability, retirement, severance
or termination of employment or service or pursuant to any agreement under
which such Capital Stock or related rights were issued or (ii) held by
members or former members of Pro-Fac, upon the departure of such Persons as
members of Pro-Fac or upon the discontinuance by any such Person of one or
more crops; provided that the amount of such payments under this clause
(5) does not exceed in the aggregate $2.0 million in any fiscal year; or
(6) Restricted Investments the amount of which, together with the amount of
all other Restricted Investments made pursuant to this clause (6) after the
Issue Date, does not exceed $15.0 million.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payments referred to in clauses (2) and (3) thereof,
and, to the extent deducted in determining Consolidated Net Income in any
period, the Restricted Payments referred to in clause (5) thereof) shall be
included once in calculating whether the conditions of clause (iii) of the
second preceding paragraph have been met with respect to any subsequent
Restricted Payments. For purposes of determining compliance with this
'Limitation on Restricted Payments' covenant, in the event that a transaction
meets the criteria of more than one of the types of Restricted Payments
described in the clauses of the immediately preceding paragraph or of the
exceptions in the definition of 'Restricted Payment,' the Company, in its sole
discretion, shall classify such transaction and only be required to include the
amount and type of such transaction in one of such clauses. If an issuance of
Capital Stock of the Company is applied to make a Restricted Payment pursuant to
clause (2) or (3) above, then, in calculating whether the conditions of clause
(iii) of the second preceding paragraph have been met with respect to any
subsequent Restricted Payments, the proceeds of any such issuance shall be
included under such clause (iii) only to the extent such proceeds are not
applied as so described in this sentence.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant 'Limitations on Restricted Payments' were computed,
which calculations shall be based upon the Company's latest available financial
statements.
Limitations on Restrictions on Distributions from Restricted Subsidiaries.
The Indenture provides that the Company will not, and will not permit any of its
Restricted Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any Payment Restriction with respect to any of its Restricted
Subsidiaries, except for (a) any such Payment Restriction in effect on the Issue
Date under the New Credit Facility or any similar Payment Restriction under any
similar credit facility, or any amendment, restatement, renewal, replacement or
refinancing of any of the foregoing, provided that such similar Payment
Restrictions are not, taken as a whole, materially more restrictive than the
Payment Restrictions in effect on the Issue Date under the New Credit Facility;
(b) any such Payment Restriction under any agreement evidencing any Acquired
Indebtedness that was permitted to be incurred pursuant to the Indenture in
effect at the time of such incurrence and not created in contemplation of such
event, provided that such Payment Restriction is not extended to apply to any of
the assets of the entities not previously subject thereto; (c) any such Payment
Restriction arising in connection with Refinancing Indebtedness; provided that
any such Payment Restrictions that arise under such Refinancing Indebtedness are
not, taken as a whole, materially more restrictive than those under the
agreement creating or evidencing the Indebtedness being refunded or refinanced;
(d) any such restriction by reason of customary provisions restricting
assignments, subletting or other transfers contained in leases, licenses and
similar agreements entered into in the ordinary course of business; and (e)
Payment Restrictions arising under applicable law.
Limitations on Transactions with Affiliates. The Indenture provides that
the Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, in one transaction or a series of related transactions,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an 'Affiliate
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Transaction'), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction (or series of related
transactions) involving Pro-Fac (including, without limitation, any amendment to
or waiver under the Pro-Fac Marketing Agreement and any agreement for the
purchase of crops entered into pursuant to the Pro-Fac Marketing Agreement)
prior to the consummation of the Pro-Fac Merger or involving aggregate payments
in excess of $1.0 million, an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and which sets forth and
authenticates a resolution that has been adopted by a vote of a majority of the
Disinterested Directors approving such Affiliate Transaction and (b) with
respect to any Affiliate Transaction (or series of related transactions)
involving aggregate payments in excess of $5.0 million (other than any Affiliate
Transaction (or series of related transactions) occurring prior to the
consummation of the Pro-Fac Merger and relating to the Pro-Fac Marketing
Agreement or any agreement for the purchase of crops entered into pursuant to
the Pro-Fac Marketing Agreement), the Officers' Certificate described in the
preceding clause (a) and an opinion as to the fairness to the Company or such
Subsidiary from a financial point of view of such Affiliate Transaction (or
series of related transactions) issued by an Independent Financial Advisor;
provided, however, that the following shall not be deemed to be Affiliate
Transactions: (i) transactions exclusively between or among (1) the Company and
one or more Restricted Subsidiaries or (2) Restricted Subsidiaries, provided, in
each case, that no Affiliate of the Company (other than another Restricted
Subsidiary) owns Capital Stock of any such Restricted Subsidiary; (ii)
transactions between the Company or any Restricted Subsidiary and any qualified
employee stock ownership plan established for the benefit of the Company's
employees, or the establishment or maintenance of any such plan; (iii)
reasonable director, officer and employee compensation and other benefit and
indemnification arrangements entered into in the ordinary course of business and
consistent with past practice; (iv) transactions permitted by the 'Limitations
on Restricted Payments' covenant or excluded from the definition of 'Restricted
Payments'; (v) the pledge of Capital Stock of Unrestricted Subsidiaries to
support the Indebtedness thereof; (vi) transactions between the Company or any
Restricted Subsidiary and any Affiliate of the Company or such Restricted
Subsidiary that is a joint venture, provided that no direct or indirect holder
of an equity interest in such joint venture (other than the Company or a
Restricted Subsidiary) is an Affiliate of the Company or such Restricted
Subsidiary; and (vii) except as set forth in clause (a) above, the Pro-Fac
Marketing Agreement and any transaction effected pursuant thereto.
Limitations on Liens. The Indenture provides that the Company shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, incur
or permit to exist any Lien of any nature whatsoever on any property of the
Company or any Restricted Subsidiary (including Capital Stock of a Restricted
Subsidiary), or any proceeds, income or profit therefrom, whether owned at the
Issue Date or thereafter acquired, which secures Indebtedness that is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or if such Lien secures Indebtedness
that is subordinated to the Notes, prior to) such Indebtedness for so long as
such Indebtedness is secured by a Lien.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date securing Indebtedness outstanding on the Issue Date; (ii) Liens in
favor of the Company; (iii) Liens to secure Non-Recourse Purchase Money
Indebtedness; (iv) Liens securing Acquired Indebtedness permitted to be incurred
under the Indenture, provided that the Liens do not extend to property or assets
not subject to such Lien at the time of acquisition (other than improvements
thereon); (v) Liens on property of a Person existing at the time such Person is
acquired or merged with or into or consolidated with the Company or any such
Restricted Subsidiary (and not created in anticipation or contemplation
thereof); or (vi) Liens to secure Refinancing Indebtedness of Indebtedness
secured by Liens referred to in the foregoing clauses (iv) and (v), provided
that in each case such Liens do not extend to any additional property or assets
(other than improvements thereon).
Limitations on Asset Sales. (a) The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, consummate
any Asset Sale unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair
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Market Value of the assets included in such Asset Sale (evidenced by the
delivery by the Company to the Trustee of an Officers' Certificate certifying
that such Asset Sale complies with this clause (i)), (ii) immediately after
giving effect to such Asset Sale, no Default or Event of Default shall have
occurred and be continuing, and (iii) at least 80% of the consideration received
by the Company or such Restricted Subsidiary therefor is in the form of cash
paid at the closing thereof. The amount (without duplication) of any (x)
Indebtedness (other than Subordinated Indebtedness) of the Company or such
Restricted Subsidiary that is expressly assumed by the transferee in such Asset
Sale and with respect to which the Company or such Restricted Subsidiary, as the
case may be, is unconditionally released by the holder of such Indebtedness, and
(y) any Cash Equivalents, or other notes, securities or items of property
received from such transferee that are promptly (but in any event within 15
days) converted by the Company or such Restricted Subsidiary to cash (to the
extent of the cash actually so received), shall be deemed to be cash for
purposes of clause (iii) of the preceding sentence and, in the case of clause
(x) above, shall also be deemed to constitute a repayment of, and a permanent
reduction in, the amount of such Indebtedness for purposes of the following
paragraph (b). If at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then the date of such conversion or disposition shall be deemed to constitute
the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall
be applied in accordance with this covenant. A transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a
Restricted Subsidiary will not be deemed to be an Asset Sale, and a transfer of
assets that is excluded from the definition of 'Restricted Payment,' or that
constitutes a Restricted Investment and that is permitted under ' -- Limitations
on Restricted Payments,' will not be deemed to be an Asset Sale.
(b) The Indenture provides that if the Company or any Restricted Subsidiary
engages in an Asset Sale, the Company or any Restricted Subsidiary shall, no
later than 270 days after such Asset Sale (i) apply all or any of the Net
Available Proceeds therefrom to repay amounts outstanding under the New Credit
Facility or any other Senior Indebtedness; provided, in each case, that the
related loan commitment (if any) of any Indebtedness constituting revolving
credit debt is thereby permanently reduced by the amount of any such revolving
credit debt so repaid and/or (ii) invest all or any part of the Net Available
Proceeds thereof in the purchase of fixed assets to be used by the Company and
its Restricted Subsidiaries in a Related Business (together with any short-term
assets incidental thereto), or the making of a Related Business Investment. The
amount of such Net Available Proceeds not applied or invested as provided in
this paragraph will constitute 'Excess Proceeds.'
(c) The Indenture provides that when the aggregate amount of Excess
Proceeds equals or exceeds $10.0 million, the Company will be required to make
an offer to purchase, from all holders of the Notes, an aggregate principal
amount of Notes equal to the amount of such Excess Proceeds as follows:
(i) The Company will make an offer to purchase (a 'Net Proceeds
Offer') from all holders of the Notes in accordance with the procedures set
forth in the Indenture the maximum principal amount (expressed as a
multiple of $1,000) of Notes that may be purchased out of the amount (the
'Payment Amount') of such Excess Proceeds.
(ii) The offer price for the Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Notes tendered pursuant
to a Net Proceeds Offer, plus accrued and unpaid interest and Additional
Interest, if any, to the date such Net Proceeds Offer is consummated (the
'Offered Price'), in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate Offered Price of Notes tendered
pursuant to a Net Proceeds Offer is less than the Payment Amount relating
thereto (such shortfall constituting a 'Net Proceeds Deficiency'), the
Company may use such Net Proceeds Deficiency, or a portion thereof, for
general corporate purposes, subject to the limitations of the 'Limitations
on Restricted Payments' covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis (with such adjustments as
may be appropriate so that only Notes in denominations of $1,000, or
integral multiples thereof, will be purchased).
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(iv) Upon completion of such Net Proceeds Offer in accordance with the
foregoing provisions, the amount of Excess Proceeds in respect of such Net
Proceeds Offer shall be deemed to be zero.
(d) Notwithstanding the foregoing, in the event that any other Indebtedness
of the Company which ranks pari passu with the Notes (the 'Other Indebtedness')
requires an offer to purchase to be made to repurchase such Other Indebtedness
upon the consummation of an Asset Sale, the Company may apply the Excess
Proceeds otherwise required to be applied to a Net Proceeds Offer to offer to
purchase such Other Indebtedness and to a Net Proceeds Offer so long as the
amount of such Excess Proceeds applied to purchase the Notes is not less than
the Note Portion of Excess Proceeds. With respect to any Excess Proceeds, the
Company shall make the Net Proceeds Offer in respect thereof at the same time as
the analogous offer to purchase is made pursuant to any Other Indebtedness and
the purchase date in respect of the Net Proceeds Offer shall be the same as the
purchase date in respect of the offer to purchase pursuant to such Other
Indebtedness.
For purposes of this covenant, 'Note Portion of Excess Proceeds,' in
respect of a Net Proceeds Offer, means (1) if no Other Indebtedness is
concurrently being offered to be purchased, the amount of the Excess Proceeds in
respect of such Net Proceeds Offer and (2) if Other Indebtedness is concurrently
being offered to be purchased, an amount equal to the product of (x) the Excess
Proceeds in respect of such Net Proceeds Offer and (y) a fraction the numerator
of which is the principal amount of all Notes tendered pursuant to such Net
Proceeds Offer (the 'Note Amount') and the denominator of which is the sum of
the Note Amount and the lesser of the aggregate principal face amount or
accreted value as of the relevant purchase date of all Other Indebtedness
tendered pursuant to a concurrent offer to purchase such Other Indebtedness made
at the time of such Net Proceeds Offer.
The Indenture provides that the Company will not permit any Subsidiary to
enter into or suffer to exist any agreement that would place any restriction of
any kind (other than pursuant to law or regulation) on the ability of the
Company to make a Net Proceeds Offer following any Asset Sale. The Indenture
provides that the Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder, if applicable, in the
event that an Asset Sale occurs and the Company is required to purchase Notes as
described above.
Limitations on Mergers and Certain Other Transactions. The Indenture
provides that the Company will not, in a single transaction or a series of
related transactions, (i) consolidate or merge with or into (other than a merger
with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Company's jurisdiction of incorporation to another State of the United States;
provided that clauses (a) and (d) below are complied with), or sell, lease,
transfer, convey or otherwise dispose of or assign all or substantially all of
the assets of the Company or the Company and its Subsidiaries (taken as a
whole), or permit any of its Restricted Subsidiaries to do so if such
transaction would result in the transfer of all or substantially all of the
assets of the Company and its Subsidiaries (taken as a whole), or assign any of
its obligations under the Notes and the Indenture, to any Person or (ii) adopt a
Plan of Liquidation unless, in either case: (a) the Person formed by or
surviving such consolidation or merger (if other than the Company) or to which
such sale, lease, conveyance or other disposition or assignment shall be made
(or, in the case of a Plan of Liquidation, any Person to which assets are
transferred) (collectively, the 'Successor'), is a corporation or a cooperative
corporation organized and existing under the laws of any State of the United
States of America or the District of Columbia, and the Successor assumes by
supplemental indenture in a form satisfactory to the Trustee all of the
obligations of the Company under the Notes and the Indenture; (b) immediately
prior to and immediately after giving effect to such transaction and the
assumption of the obligations as set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing; provided
however, that in the case of the Pro-Fac Merger, the foregoing clause (b) shall
be deemed to be satisfied if immediately after giving effect the Pro-Fac Merger
and the assumption of the obligations set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of Default shall have occurred and be continuing; and (c)
immediately after and giving effect to such transaction and the assumption of
the obligations set forth in clause (a) above and the incurrence of any
Indebtedness to be incurred in connection therewith, and the use of any net
proceeds therefrom on a pro forma basis, (x) in the case of the Pro-Fac Merger
only, the Consolidated Coverage Ratio shall be at least equal to or
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greater than the Consolidated Coverage Ratio immediately prior to the
consummation of the Pro-Fac Merger and the assumption of the obligations set
forth in clause (a) above and the incurrence of any Indebtedness to be incurred
in connection therewith, and (y) in the case of any other such transaction, the
Company or the Successor, as the case may be, could meet the Coverage Ratio
Incurrence Condition; and (d) each Guarantor, unless it is the other party to
the transactions described above, shall have by amendment to its guarantee
confirmed that its guarantee of the Notes shall apply to the obligations of the
Company or the Successor under the Notes and the Indenture. For purposes of this
covenant, any Indebtedness of the Successor which was not Indebtedness of the
Company immediately prior to the transaction shall be deemed to have been
incurred in connection with such transaction.
Additional Note Guarantees. The Indenture provides that if the Company or
any of its Subsidiaries shall acquire or create another Subsidiary (other than
(x) any Foreign Subsidiary so long as such Foreign Subsidiary is not a guarantor
of any Senior Indebtedness of the Company or (y) a Subsidiary that has been
designated as an Unrestricted Subsidiary or (z) an Immaterial Subsidiary), then
such newly acquired or created Subsidiary will be required to execute a Note
Guarantee, in accordance with the terms of the Indenture.
Reports. Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the 'Commission'), so long as any Notes are
outstanding, each of the Company and Pro-Fac will file with the Commission, to
the extent such filings are accepted by the Commission, and will furnish (within
15 days after such filing) to the Trustee and to the holders of Notes all
quarterly and annual reports and other information, documents and reports that
would be required to be filed with the Commission pursuant to Section 13 of the
Exchange Act if the Company or Pro-Fac, as the case may be, were required to
file under such section. In addition, each of the Company and Pro-Fac will make
such information available to prospective purchasers of the Notes, securities
analysts and broker-dealers who request it in writing. Each of the Company and
Pro-Fac has agreed that, for so long as any Notes remain outstanding, it will
furnish to the holders and beneficial holders of Notes and to prospective
purchasers of Notes designated by the holders of Transfer Restricted Securities
and to broker dealers, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Indenture
provides that on and after consummation of the Pro-Fac Merger, only Pro-Fac, as
successor corporation to the Company, shall be required to comply with this
covenant.
EVENTS OF DEFAULT
An 'Event of Default' is defined in the Indenture as (i) failure by the
Company to pay interest or Additional Interest on any of the Notes when it
becomes due and payable and the continuance of any such failure for 30 days
(whether or not such payment shall be prohibited by the subordination provisions
of the Indenture); (ii) failure by the Company to pay the principal or premium,
if any, on any of the Notes when it becomes due and payable, whether at stated
maturity, upon redemption (including, without limitation, the failure to make a
payment to purchase Notes tendered pursuant to a Change of Control Offer or Net
Proceeds Offer), upon acceleration or otherwise (whether or not such payment
shall be prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company to comply with any of its agreements or covenants
described above under 'Certain Covenants -- Limitations on Mergers and Certain
Other Transactions,' or in respect of its obligations to make a Change of
Control Offer or a Net Proceeds Offer described in 'Change of Control' and
'Certain Covenants -- Limitations on Asset Sales,' respectively, or failure by
Pro-Fac to comply with the provisions described in 'Certain
Covenants -- Payments Pursuant to the Pro-Fac Marketing Agreement; Reinvestments
by Pro-Fac; Borrowings by Pro-Fac'; (iv) failure by the Company or any Guarantor
to comply with any other covenant in the Indenture and continuance of such
failure for 60 days after notice of such failure has been given to the Company
by the Trustee or by the holders of at least 25% of the aggregate principal
amount of the Notes then outstanding; (v) failure by either the Company or any
of its Restricted Subsidiaries to make any principal payment at final maturity
after the expiration of any applicable grace period in respect of any
Indebtedness of the Company or any of such Restricted Subsidiaries, or the
acceleration of the maturity of such Indebtedness by the holders thereof because
of a default, with an aggregate outstanding principal amount for all such
Indebtedness under this clause
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(v) of $7.5 million or more; (vi) one or more final, non-appealable judgments or
orders that exceed $7.5 million in the aggregate for the payment of money have
been entered by a court or courts of competent jurisdiction against the Company
or any Restricted Subsidiary of the Company and such judgment or judgments have
not been satisfied, stayed, annulled or rescinded within 60 days of being
entered; (vii) certain events of bankruptcy, insolvency or reorganization
involving Pro-Fac, the Company or any Significant Subsidiary; and (viii) except
as permitted by the Indenture, any Note Guarantee ceases to be in full force and
effect or any Note Guarantee is declared to be null and void and unenforceable
or is found to be invalid or any Guarantor repudiates its obligations under any
Note Guarantee.
In the case of an Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes, an equivalent
premium shall also become and be immediately due and payable, to the extent
permitted by law, upon the acceleration of the Notes. If an Event of Default
occurs prior to November 1, 2003 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to November 1, 2003,
then, upon acceleration of the Notes, an additional premium shall also become
and be immediately due and payable, to the extent permitted by law, in an amount
equal to 10.0%.
If an Event of Default (other than an Event of Default specified in clause
(vii) above with respect to the Company), shall have occurred and be continuing
under the Indenture, the Trustee, by written notice to the Company, or the
holders of at least 25% in aggregate principal amount of the Notes then
outstanding by written notice to the Company and the Trustee, may declare all
amounts owing under the Notes to be due and payable immediately. Upon such
declaration of acceleration, the aggregate principal of, premium, if any, and
interest on the outstanding Notes shall immediately become due and payable. If
an Event of Default specified in clause (vii) with respect to the Company shall
have occurred, all outstanding Notes shall become due and payable without any
further action or notice. In certain cases, the holders of a majority in
aggregate principal amount of the Notes then outstanding may waive an existing
Default or Event of Default and its consequences, except a default in the
payment of principal of, premium, if any, and interest on the Notes.
The holders may not enforce the provisions of the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, holders of
a majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power; provided, however, that such
direction does not conflict with the terms of the Indenture. The Trustee may
withhold from the holders notice of any continuing Default or Event of Default
(except any Default or Event of Default in payment of principal of, premium, if
any, or interest or Additional Interest on the Notes) if the Trustee determines
that withholding such notice is in the holders' interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and, upon any Officer of the Company
becoming aware of any Default or Event of Default, a statement specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its and the Guarantors' obligations under the
Indenture at any time by delivering all outstanding Notes to the Trustee for
cancellation and paying all sums payable by it thereunder. The Company, at its
option, and the Guarantors (i) will be discharged from any and all obligations
with respect to the Notes (except for certain obligations of the Company to
register the transfer or exchange of such Notes, replace stolen, lost or
mutilated Notes, maintain paying agencies and hold moneys for payment in trust)
or (ii) need not comply with certain of the restrictive covenants with respect
to the Indenture, if the Company deposits with the Trustee, in trust, U.S. Legal
Tender or U.S. Government Obligations or a combination thereof that, through the
payment of interest and premium thereon and principal amount at maturity in
respect thereof in accordance with their terms, will be sufficient to pay all
the principal amount at maturity of and interest and premium on the Notes on the
dates such payments are due in accordance with the terms of such Notes as well
as the Trustee's fees and expenses. To exercise either such option, the Company
is required to deliver to the Trustee
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(A) an Opinion of Counsel and, in connection with a discharge pursuant to clause
(i) above, confirmation of such counsel that (I) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (II)
since the date of the Indenture there has been a change in the applicable
federal income tax law, in either case to the effect that the holders of the
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of the deposit and related defeasance and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised, (B) subject to
certain qualifications, an Opinion of Counsel to the effect that funds so
deposited will not violate the Investment Company Act of 1940 and will not be
subject to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law and (C) an Officers'
Certificate and an Opinion of Counsel to the effect that the Company has
complied with all conditions precedent to the defeasance.
TRANSFER AND EXCHANGE
A holder will be able to register the transfer of or exchange Notes only in
accordance with the provisions of the Indenture. The Registrar may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. Without the prior consent of the Company, the Registrar is not
required (i) to register the transfer of or exchange any Note selected for
redemption or (ii) to register the transfer of or exchange any Note for a period
of 15 days before the mailing of a notice of redemption and ending on the date
of such mailing. The registered holder of a Note will be treated as the owner of
such Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes or the Note
Guarantees may be amended or supplemented with the consent (which may include
consents obtained in connection with a tender offer or exchange offer for Notes)
of the holders of at least a majority in principal amount of the Notes then
outstanding, and any existing Default under, or compliance with any provision
of, the Indenture may be waived (other than any continuing Default or Event of
Default in the payment of the principal of, premium, if any, or interest or
Additional Interest on the Notes (except as set forth in (B)(iv) below)) with
the consent (which may include consents obtained in connection with a tender
offer or exchange offer for Notes) of the holders of a majority in principal
amount of the Notes then outstanding; provided that:
(A) no such modification or amendment may, without the consent of the
holders of 75% in aggregate principal amount of Notes then outstanding,
amend or modify the obligation of the Company under the caption 'Change of
Control' or the definitions related thereto that could adversely affect the
rights of any holder of the Notes; and
(B) without the consent of each holder affected, the Company and the
Trustee may not: (i) reduce the principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver; (ii) reduce the
principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes; (iii) reduce the
rate of or change the time for payment of interest on any Note; (iv) waive
a Default or Event of Default in the payment of principal of or premium, if
any, or interest on the Notes (except a rescission of acceleration of the
Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration); (v) make any Note payable in money other than that stated in
the Notes; (vi) make any change in the provisions of the Indenture relating
to waivers of past Defaults or of the right of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Note; (viii) take any
action that would subordinate the Notes or the Note Guarantees to any other
Indebtedness of the Company or any of Guarantors, respectively (except as
provided under 'Subordination' above), or otherwise affect the ranking of
the Notes or the Note Guarantees; or (ix) release any Guarantor from any of
its payment obligations under its Note Guarantee or the Indenture otherwise
in accordance with the Indenture.
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Without the consent of any holder, the Company, the Guarantors and the
Trustee may amend or supplement the Indenture or the Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to holders in the case of a merger
or acquisition, or to make any change that does not adversely affect the
rights of any holder.
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture and
has been appointed by the Company as Registrar and Paying Agent with regard to
the Notes. The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Indenture), it must eliminate such conflict or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
occurs and is not cured, the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent person in similar circumstances in
the conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any holder, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee.
GOVERNING LAW
Each of the Indenture, the Notes and the Note Guarantees provides that it
will be governed by, and construed in accordance with, the laws of the State of
New York.
BOOK-ENTRY, DELIVERY AND FORM OF SECURITIES
The Exchange Notes will be issued in the form of one or more Global
Exchange Notes. The Global Exchange Notes will be deposited with, or on behalf
of, DTC and registered in the name of DTC or its nominee. Except as set forth
below, the Global Exchange Notes may be transferred, in whole and not in part,
only to DTC or another nominee of DTC. Investors may hold their beneficial
interests in the Global Exchange Notes directly through DTC if they have an
account with DTC or indirectly through organizations which have accounts with
DTC.
Exchange Notes that are issued as described below under ' -- Certificated
Notes' will be issued in definitive form. Upon the transfer of an Exchange Note
of any series in definitive form, such Exchange Note will, unless the Global
Exchange Notes for such series have previously been exchanged for Notes in
definitive form, be exchanged for an interest in a Global Exchange Note
representing the principal amount of Notes being transferred.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a 'clearing corporation' within the meaning of the New
York Uniform Commercial Code, and a 'clearing agency' registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of institutions that have accounts with DTC ('participants') and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (which may include the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's
book-entry system is also available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, whether directly or indirectly.
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Upon the issuance of the Global Exchange Notes in exchange for the Initial
Notes pursuant to the Exchange Offer, DTC will credit, on its internal system,
the respective principal amounts of the individual beneficial interests
represented by such Global Exchange Notes to the accounts of the persons who
surrendered Initial Notes for exchange. Ownership of beneficial interests in the
Global Exchange Notes will be limited to participants or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Exchange Notes will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Investors may hold their
interests in the Global Exchange Notes directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system. The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Exchange Notes.
So long as DTC, or its nominee, is the registered holder and owner of the
Global Exchange Notes, DTC or such nominee, as the case may be, will be
considered the sole legal owner and holder of the related Notes for all purposes
of such Exchange Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Exchange Notes will not be entitled to have
the Exchange Notes represented by the Global Exchange Notes registered in their
names, will not receive or be entitled to receive physical delivery of
certificated Exchange Notes in definitive form and will not be considered to be
the owners or holders of any Exchange Notes under the Global Exchange Notes. The
Company understands that under existing industry practice, in the event an owner
of a beneficial interest in the Global Exchange Notes desires to take any action
that DTC, as the holder of the Global Exchange Notes, is entitled to take, DTC
would authorize the participants to take such action, and that the participants
would authorize beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
Payment of principal of and interest on Exchange Notes represented by the
Global Exchange Notes registered in the name of and held by DTC or its nominee
will be made to DTC or its nominee, as the case may be, as the registered owner
and holder of the Global Exchange Notes.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal of or interest on the Global Exchange Notes, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Exchange Notes as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Exchange Notes held
through such participants will be governed by standing instructions and
customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Exchange Notes for any Exchange Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between DTC and
its participants or the relationship between such participants and the owners of
beneficial interests in the Global Exchange Notes owning through such
participants.
Unless and until it is exchanged in whole or in part for certificated
Exchange Notes in definitive form, each Global Exchange Note may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Notes among participants of DTC,
it is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Trustee nor the
Company will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
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CERTIFICATED NOTES
The Exchange Notes of any series represented by the Global Exchange Notes
with respect to such series are exchangeable for certificated Notes in
definitive form of like tenor as such Notes in denominations of U.S. $1,000 and
integral multiples thereof if (i) DTC notifies the Company that it is unwilling
or unable to continue as DTC of such Global Exchange Notes or if at any time DTC
ceases to be a clearing agency registered under the Exchange Act and a successor
depository is not appointed by the Company within 90 days, (ii) the Company in
its discretion at any time determines not to have all of the Exchange Notes of
such series represented by such Global Exchange Notes or (iii) an Event of
Default has occurred and is continuing. Any Exchange Note that is exchangeable
pursuant to the preceding sentence is exchangeable for certificated Exchange
Notes issuable in authorized denominations and registered in such names as DTC
shall direct. Subject to the foregoing, the Global Exchange Notes are not
exchangeable, except for a Global Exchange Note of the same aggregate
denomination to be registered in the name of DTC or its nominee. Certificated
Exchange Notes will not be issued in exchange for beneficial interests in the
Global Exchange Notes in any other circumstances except as described above.
REGISTRATION RIGHTS
On September 18, 1998, The Company, Pro-Fac and the Initial Purchasers
entered into the Registration Rights Agreement. Holders of Exchange Notes are
not entitled to any registration rights with respect to the Exchange Notes. The
Company has agreed for a period of 180 days after the date the Registration
Statement is declared effective by the Commission to make available a prospectus
meeting the requirements of the Securities Act to any broker-dealer for use in
connection with any resale of any Exchange Notes. The Registration Statement of
which this Prospectus is a part constitutes the registration statement for the
Exchange Offer which is the subject of the Registration Rights Agreement. Upon
the closing of the Exchange Offer, subject to certain limited exceptions,
Holders of untendered Initial Notes will not retain any rights under the
Registration Rights Agreement.
For a discussion of the terms of the Exchange Offer pursuant to the
Registration Rights Agreement, See 'The Exchange Offer.'
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture or
the Registration Rights Agreement without charge by contacting the Company at 90
Linden Oaks, P.O. Box 20670, Rochester, New York 14602, Attention: Vice
President -- Communications, or by telephone at 716-383-1850.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms.
'Acquired Indebtedness' means (a) with respect to any Person that becomes a
Restricted Subsidiary after the date of the Indenture, Indebtedness of such
Person and its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary that was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (b) with
respect to the Company or any of its Restricted Subsidiaries, any Indebtedness
of a Person (other than the Company or a Restricted Subsidiary) existing at the
time such Person is merged with or into the Company or a Restricted Subsidiary,
or Indebtedness assumed by the Company or any of its Restricted Subsidiaries in
connection with the acquisition of an asset or assets from another Person, which
Indebtedness was not, in any case, incurred by such other Person in connection
with, or in contemplation of, such merger or acquisition. For purposes of the
Pro-Fac Merger only, Indebtedness of Pro-Fac existing at the time the Company is
merged with and into Pro-Fac, but not incurred in connection with, or in
contemplation of, the Pro-Fac Merger, shall be deemed incurred at the time of
the consummation of the Pro-Fac Merger, but the incurrence thereof shall not
require compliance with the covenant described under ' -- Certain
Covenants -- Limitations on Additional Indebtedness.'
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'Acquisition' means the acquisition by the Company of Dean Foods Vegetable
Company and the transfer by the Company of its aseptic business, in each case on
September 23, 1998 pursuant to and in accordance with terms of the Stock
Purchase Agreement dated as of July 24, 1998 by and between Dean Foods Company
and the Company and the Asset Transfer Agreement dated as of July 24, 1998 by
and between Dean Foods Company and the Company.
'Affiliate' of any specified Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and (ii) with respect to Pro-Fac and the
Company, any member of Pro-Fac that is a director of Pro-Fac or that has
beneficial ownership of more than 1% of the outstanding voting securities of
Pro-Fac. For purposes of this definition, 'control' (including, with correlative
meanings, the terms 'controlling,' 'controlled by' and under 'common control
with'), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; provided, however, that beneficial ownership of 10%
or more of the voting securities of a Person shall be deemed to be control.
'Asset Sale' means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or any of
its Restricted Subsidiaries (including, without limitation, by means of a Sale
and Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a 'transfer'), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary or (b) any other properties or assets of the Company or
any of its Restricted Subsidiaries other than transfers of cash, Cash
Equivalents, accounts receivable, inventory or other properties or assets in the
ordinary course of business. For the purposes of this definition, the term
'Asset Sale' shall not include any of the following: (i) any transfer of
properties or assets (including Capital Stock) that is governed by, and made in
accordance with, the provisions described under 'Covenants -- Limitations on
Mergers and Certain Other Transactions'; (ii) any transfer of properties or
assets to an Unrestricted Subsidiary, if permitted under the 'Limitations on
Restricted Payments' covenant; (iii) sales of damaged, worn-out or obsolete
equipment or assets that, in the Company's reasonable judgment, are either no
longer used or useful in the business of the Company or its Subsidiaries,
provided that the proceeds thereof are used to purchase replacement or similar
assets for use in the business of the Company and its Subsidiaries; and (iv) any
transfers that, but for this clause (iv), would be an Asset Sale, if after
giving effect to such transfers, the aggregate Fair Market Value of the
properties or assets transferred in such transaction or any such series of
related transactions does not exceed $500,000.
'Attributable Indebtedness,' when used with respect to any Sale and
Leaseback Transaction, means, as at the time of determination, the present value
(discounted at a rate equivalent to the Company's then-current weighted average
cost of funds for borrowed money as at the time of determination, compounded on
a semi-annual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in any such Sale and Leaseback
Transaction.
'Board Resolution' means a duly adopted resolution of the Board of
Directors of the Company.
'Business Day' means any day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York are authorized by law or
regulation or executive order to remain closed.
'Capital Stock' of any Person means (i) any and all shares or other equity
interests (including without limitation common stock, preferred stock and
partnership interests) in such Person and (ii) all rights to purchase, warrants
or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) such shares or other
interests in such Person.
'Capitalized Lease Obligations' of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
'Cash Equivalents' means (i) marketable obligations with a maturity of 360
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or
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instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) U.S. dollar denominated
time deposits and certificates of deposit of any financial institution (a) that
is a member of the Federal Reserve System having combined capital and surplus
and undivided profits of not less than $500 million or (b) whose short-term
commercial paper rating or that of its parent company is at least A-1 or the
equivalent thereof from S&P or P-1 or the equivalent thereof from Moody's (any
such bank, an 'Approved Bank'), in each case with a maturity of 360 days or less
from the date of acquisition; (iii) commercial paper issued by any Approved Bank
or by the parent company of any Approved Bank and commercial paper issued by, or
guaranteed by, any industrial or financial company with a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, or guaranteed by any industrial company with
a long term unsecured debt rating of at least A or A2, or the equivalent of each
thereof, from S&P or Moody's, as the case may be, and in each case maturing no
more than 360 days from the date of acquisition; (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any commercial bank meeting the
specifications of clause (ii)(a) above; and (v) investments in money market or
other mutual funds substantially all of whose assets comprise securities of the
types described in clauses (i) through (iv) above.
'Change of Control' means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of Pro-Fac's or the Company's assets to any Person or group
(as such term is used in Section 13(d)(3) of the Exchange Act); provided,
however, that the Pro-Fac Merger shall not constitute a Change of Control under
this clause (i); (ii) the consummation of any transaction the result of which is
that any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act) (other than Pro-Fac in the case of clause (y)) owns, directly or
indirectly, (A) more than 50% of the voting power of the voting stock of either
(x) Pro-Fac or (y) the Company or (B) more than 30% of the voting power of the
voting stock of the Company if Pro-Fac owns, directly or indirectly, a lesser
percentage than such Person or group of the voting power of the voting stock of
the Company; (iii) the first date on which any Person or group (as defined
above) shall have elected, or caused to be elected, a sufficient number of its
or their nominees to the Board of Directors of Pro-Fac or the Company such that
the nominees so elected (regardless of when elected) shall collectively
constitute a majority of the Board of Directors of Pro-Fac or the Company, as
the case may be; or (iv) (A) prior to consummation of the Pro-Fac Merger, for a
period of 120 consecutive days, the number of Disinterested Directors on the
Board of Directors of the Company being less than the greater of (x) two and (y)
the number of directors of the Company who are Pro-Fac Directors and (B) on and
after consummation of the Pro-Fac Merger, for a period of 120 consecutive days,
the number of Disinterested Directors on the Board of Directors of Pro-Fac, as
successor corporation to the Company, being less than two. For purposes of this
definition, any transfer of an equity interest of an entity that was formed for
the purpose of acquiring voting stock of Pro-Fac or the Company shall be deemed
to be a transfer of such portion of the voting stock owned by such entity as
corresponds to the portion of the equity of such entity that has been so
transferred.
'Commercial Market Value' means Commercial Market Value determined in
accordance with the Pro-Fac Marketing Agreement (as in effect on the Issue Date
and whether or not in effect at the time of determination).
'Consolidated Amortization Expense' for any period means the amortization
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
'Consolidated Depreciation Expense' for any period means the depreciation
expense of the Company and its Restricted Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income), determined on a
consolidated basis in accordance with GAAP.
'Consolidated Income Tax Expense' for any period means the provision for
taxes based on income and profits of the Company and its Restricted Subsidiaries
to the extent such income or profits were included in computing Consolidated Net
Income for such period.
'Consolidated Interest Coverage Ratio' means, with respect to any
determination date, the ratio of (a) EBITDA for the four full fiscal quarters
immediately preceding the determination date (for any
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determination, the 'Reference Period'), to (b) Consolidated Interest Expense for
such Reference Period. In making such computations, (i) EBITDA and Consolidated
Interest Expense shall be calculated on a pro forma basis assuming that (A) the
Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and
all other Indebtedness incurred or Disqualified Capital Stock issued after the
first day of such Reference Period referred to in the covenant described under
' -- Certain Covenants Limitations on Additional Indebtedness' through and
including the date of determination), and (if applicable) the application of the
net proceeds therefrom (and from any other such Indebtedness or Disqualified
Capital Stock), including the refinancing of other Indebtedness, had been
incurred on the first day of such Reference Period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with EBITDA
(including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) attributable to the
assets which are the subject of such acquisition being included in such pro
forma calculation and (B) any acquisition or disposition by the Company or any
Restricted Subsidiary of any properties or assets outside the ordinary course of
business or any repayment of any principal amount of any Indebtedness of the
Company or any Restricted Subsidiary prior to the stated maturity thereof, in
either case since the first day of such Reference Period through and including
the date of determination, had been consummated on such first day of such
Reference Period; (ii) the Consolidated Interest Expense attributable to
interest on any Indebtedness required to be computed on a pro forma basis in
accordance with the covenant described under ' -- Certain
Covenants -- Limitations on Additional Indebtedness' and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of interest,
shall be computed by applying, at the option of the Company, either the fixed or
floating rate; (iii) the Consolidated Interest Expense attributable to interest
on any Indebtedness under a revolving credit facility required to be computed on
a pro forma basis in accordance with the covenant described under ' -- Certain
Covenants -- Limitations on Additional Indebtedness' shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period, provided that such average daily balance shall be reduced by the amount
of any repayment of Indebtedness under a revolving credit facility during the
applicable period, which repayment permanently reduced the commitments or
amounts available to be reborrowed under such facility; (iv) notwithstanding the
foregoing clauses (ii) and (iii), interest on Indebtedness determined on a
floating rate basis, to the extent such interest is covered by agreements
relating to Hedging Obligations, shall be deemed to have accrued at the rate per
annum resulting after giving effect to the operation of such agreements; and (v)
if after the first day of the applicable Reference Period and before the date of
determination, the Company has permanently retired any Indebtedness out of the
net proceeds of the issuance and sale of shares of Capital Stock (other than
Disqualified Capital Stock) of the Company within 60 days of such issuance and
sale, Consolidated Interest Expense shall be calculated on a pro forma basis as
if such Indebtedness had been retired on the first day of such period.
'Consolidated Interest Expense' for any period means the sum, without
duplication, of the total interest expense of the Company and its consolidated
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP and including, without limitation (i) imputed interest on
Capitalized Lease Obligations and Attributable Indebtedness; (ii) commissions,
discounts and other fees and charges owed with respect to letters of credit
securing financial obligations and bankers' acceptance financing; (iii) the net
costs associated with Hedging Obligations; (iv) amortization of other financing
fees and expenses; (v) the interest portion of any deferred payment obligations;
(vi) amortization of debt discount or premium, if any; (vii) all other non-cash
interest expense; (viii) capitalized interest, (ix) all cash dividend payments
(and non-cash dividend payments in the case of a Restricted Subsidiary) on any
series of preferred stock of the Company or any Restricted Subsidiary; (x) all
interest payable with respect to discontinued operations; and (xi) all interest
on any Indebtedness of any other Person guaranteed by the Company or any
Restricted Subsidiary to the extent paid by the Company or such Restricted
Subsidiary.
'Consolidated Net Income' for any period means the net income (or loss) of
the Company and its consolidated Restricted Subsidiaries for such period
determined on a consolidated basis in accordance
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with GAAP; provided that there shall be excluded from such net income (to the
extent otherwise included therein), without duplication (i) the net income (or
loss) of any Person (other than a Restricted Subsidiary) in which any Person
other than the Company and its Restricted Subsidiaries has an ownership
interest, except to the extent that any such income has actually been received
by the Company and its Restricted Subsidiaries (unless and to the extent such
Restricted Subsidiary is subject to clause (iii) below) in the form of cash
dividends or distributions during such period; (ii) except to the extent
includible in the consolidated net income of the Company pursuant to the
foregoing clause (i), the net income (or loss) of any Person that accrued prior
to the date that (a) such Person becomes a Restricted Subsidiary or is merged
into or consolidated with the Company or any Restricted Subsidiary or (b) the
assets of such Person are acquired by the Company or any Restricted Subsidiary;
(iii) the net income of any Restricted Subsidiary during such period to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary of that income (a) is not permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary during such period or (b) would be subject to any taxes payable on
such dividend or distribution; (iv) any gain (or, only in the case of a
determination of Consolidated Net Income as used in EBITDA, any loss), together
with any related provisions for taxes on any such gain (or, if applicable, the
tax effects of such loss), realized during such period by the Company or any
Restricted Subsidiary upon (a) the acquisition of any securities, or the
extinguishment of any Indebtedness, of the Company or any Restricted Subsidiary
or (b) any Asset Sale by the Company or any of its Restricted Subsidiaries;
provided, however, that there shall be excluded from Consolidated Net Income for
all purposes any loss realized by the Company or any Restricted Subsidiary upon
the acquisition of any securities, or the extinguishment of any Indebtedness, of
the Company or any Restricted Subsidiary, or the write-off of deferred financing
costs, in connection with the Acquisition and all refinancings of Indebtedness
consummated in connection therewith; (v) any extraordinary gain (or, only in the
case of a determination of Consolidated Net Income as used in EBITDA, any
extraordinary loss), together with any related provision for taxes on any such
extraordinary gain (or, if applicable, the tax effects of such extraordinary
loss), realized by the Company or any Restricted Subsidiary during such period;
(vi) any restructuring charges recognized during such period in an amount not to
exceed $7.0 million in the aggregate after the Issue Date so long as such
restructuring charges are recognized within 24 months after the Issue Date; and
(vii) in the case of a successor to the Company by consolidation, merger or
transfer of its assets, any earnings of the successor prior to such merger,
consolidation or transfer of assets; and provided, further, that any gain in
excess of return of capital referred to in clauses (iv) and (v) above that
relates to a Restricted Investment and which is received in cash by the Company
or a Restricted Subsidiary during such period shall be included in the
Consolidated Net Income of the Company.
'Consolidated Net Worth' means, with respect to any Person as of any date,
the consolidated equity of the common stockholders of such Person and its
consolidated Subsidiaries as determined in accordance with GAAP as of such date,
less all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within twelve months after the acquisition of such business) subsequent to the
Issue Date in the book value of any asset owned by such Person or a Subsidiary
of such Person.
'Coverage Ratio Incurrence Condition' would be met at any specified time
only if the Company (or its Successor, as the case may be) would be able to
incur $1.00 of additional Indebtedness at such specified time pursuant to the
Consolidated Interest Coverage Ratio test set forth in the covenant described
under ' -- Certain Covenants -- Limitations on Additional Indebtedness.'
'Default' means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
'Designated Senior Indebtedness' means (i) Indebtedness under the New
Credit Facility (whether incurred pursuant to the definition of Permitted
Indebtedness or pursuant to the covenant described under ' -- Limitations on
Additional Indebtedness' covenant) and (ii) any other Indebtedness constituting
Senior Indebtedness that, at the date of determination, has an aggregate
principal amount outstanding of at least $25.0 million and that is specifically
designated by the Company, in the
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instrument creating or evidencing such Senior Indebtedness or in an Officer's
Certificate delivered to the Trustee, as 'Designated Senior Indebtedness.'
'Disinterested Directors' means (i) prior to the consummation of the
Pro-Fac Merger, directors of the Company who are not employees, shareholders (at
the time of becoming directors) or otherwise Affiliates (other than by reason of
being a director of the Company) of either Pro-Fac or the Company and (ii) on
and after consummation of the Pro-Fac Merger, directors of Pro-Fac, as the
successor corporation to the Company, who are not employees, shareholders (at
the time of becoming directors) or otherwise Affiliates (other than by reason of
being a director of Pro-Fac) of Pro-Fac.
'Disqualified Capital Stock' means any Capital Stock of a Person or any of
its Subsidiaries that, by its terms, by the terms of any agreement related
thereto or by the terms of any security into which it is convertible, puttable
or exchangeable, is, or upon the happening of any event or the passage of time
would be, required to be redeemed or repurchased by such Person or any to its
Subsidiaries, whether or not at the option of the holder thereof, or matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
in whole or in part, on or prior to the final maturity date of the Notes;
provided, however, that in the case of Pro-Fac, Disqualified Capital Stock shall
not include (x) retained earnings allocated to members of Pro-Fac, (y) common
stock of Pro-Fac issued to members of Pro-Fac and (z) Class B Preferred Stock
(having substantially the same terms as in effect on the Issue Date) of Pro-Fac
issued to officers, directors or employees of Pro-Fac.
'EBITDA' for any period means, without duplication, the sum of the amounts
for such period of (i) Consolidated Net Income, plus (ii) in each case to the
extent deducted in determining Consolidated Net Income for such period (and
without duplication), (A) Consolidated Income Tax Expense, (B) Consolidated
Amortization Expense (but only to the extent not included in Consolidated
Interest Expense), (C) Consolidated Depreciation Expense, (D) Consolidated
Interest Expense, (E) all other non-cash items reducing the Consolidated Net
Income (excluding any such non-cash charge that results in an accrual of a
reserve for cash charges in any future period) for such period, in each case
determined on a consolidated basis in accordance with GAAP, plus (iii) in the
case of the Company, for any period that includes a fiscal quarter beginning on
or prior to consummation of the Pro-Fac Merger, the Pro-Fac share of earnings
(loss) as determined in accordance with the Pro-Fac Marketing Agreement for such
period through the date of consummation of the Pro-Fac Merger, minus (iv) the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period.
'Equity Offering' means an underwritten primary offering of Capital Stock
(other than Disqualified Capital Stock) of Pro-Fac (to the extent that the net
cash proceeds thereof are contributed to the equity capital of the Company
(other than as Disqualified Capital Stock)) or the Company pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act or pursuant to a private placement pursuant to an available
exemption from registration under the Securities Act to the extent, in the case
of such private placement, such Capital Stock is not sold to Pro-Fac, the
Company, any Subsidiary or any Affiliate (without giving effect to clause (ii)
in the definition thereof) thereof.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Existing Indebtedness' means all of the Indebtedness of the Company and
its Restricted Subsidiaries that is outstanding on the Issue Date and any
additional promissory notes issued in accordance with the terms of the
Subordinated Promissory Note as in effect on the Issue Date.
'Fair Market Value' of any asset or item means the fair market value of
such asset or item as determined in good faith by the Board of Directors and
evidenced by a Board Resolution.
'Foreign Subsidiary' means any Subsidiary of the Company that is not
incorporated or organized in the United States or in any State thereof or the
District of Columbia.
'GAAP' means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
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'Guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
'Guarantors' means each of the Subsidiary Guarantors and Pro-Fac, and
'Guarantor' means any one of the foregoing.
'Hedging Obligations' of any Person means the obligations of such Person
pursuant to (i) any interest rate swap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to protect such Person
against fluctuations in interest rates, (ii) agreements or arrangements designed
to protect such Person against fluctuations in foreign currency exchange rates
in the conduct of its operations, or (iii) any forward contract, commodity swap
agreement, commodity option agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in commodity prices, in
each case, entered into in the ordinary course of business for bona fide hedging
purposes and not for the purpose of speculation.
'Immaterial Subsidiary' means any Restricted Subsidiary of the Company that
has, together with all other Immaterial Subsidiaries in the aggregate, assets,
revenues and net income comprising less than 2.00% of the assets, revenues and
net income of the Company and its Subsidiaries taken as a whole.
'incur' means, with respect to any Indebtedness or Obligation, incur,
create, issue, assume, Guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to such Indebtedness or
Obligation; provided that (i) the Indebtedness of a Person existing at the time
such Person became a Restricted Subsidiary shall be deemed to have been incurred
by such Restricted Subsidiary and (ii) neither the accrual of interest nor the
accretion of accreted value shall be deemed to be an incurrence of Indebtedness.
'Indebtedness' of any Person at any date means, without duplication: (i)
all liabilities, contingent or otherwise, of such Person for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof); (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto); (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred by
such Person in the ordinary course of business in connection with obtaining
goods, materials or services, which payable is not overdue by more than 60 days
according to the original terms of sale unless such payable is being contested
in good faith; (v) the maximum fixed redemption or repurchase price of all
Disqualified Capital Stock of such Person; (vi) all Capitalized Lease
Obligations of such Person; (vii) all Indebtedness of others secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by such
Person; (viii) all Indebtedness of others guaranteed by such Person to the
extent of such Guarantee; provided that Indebtedness of the Company or its
Restricted Subsidiaries that is guaranteed by the Company or the Company's
Restricted Subsidiaries shall only be counted once in the calculation of the
amount of Indebtedness of the Company and its Restricted Subsidiaries on a
consolidated basis; (ix) all Attributable Indebtedness; and (x) to the extent
not otherwise included in this definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above, the
maximum liability of such Person for any such contingent obligations at such
date and, in the case of clause (vii), the lesser of (A) the Fair Market Value
of any asset subject to a Lien securing the Indebtedness of others on the date
that the Lien attaches and (B) the amount of the Indebtedness secured. For
purposes of the preceding sentence, the 'maximum fixed redemption or repurchase
price' of any Disqualified Capital Stock that does not have a fixed redemption
or repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
or redeemed on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock (or any equity security
for which it may be exchanged or converted), such fair market value shall be
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution.
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'Independent Financial Advisor' means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Company's Board of Directors, qualified to perform
the task for which it has been engaged and disinterested and independent with
respect to the Company and its Affiliates.
'Investments' of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business) or similar credit extensions constituting
Indebtedness of such Person, and any Guarantee of Indebtedness of any other
Person, (ii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (iii) all other items that would be classified as investments (including
without limitation purchases of assets outside the ordinary course of business)
on a balance sheet of such Person prepared in accordance with GAAP.
'Issue Date' means the date the Notes are initially issued.
'Lien' means, with respect to any asset or property, any mortgage, deed of
trust, lien (statutory or other), pledge, lease, easement, restriction,
covenant, charge, security interest or other encumbrance of any kind or nature
in respect of such asset or property, whether or not filed, recorded or
otherwise perfected under applicable law, including without limitation any
conditional sale or other title retention agreement, and any lease in the nature
thereof, any option or other agreement to sell, and any filing of, or agreement
to give, any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction (other than cautionary filings in
respect of operating leases).
'Moody's' means Moody's Investors Service, Inc., and its successors.
'Net Available Proceeds' means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in the
properties or assets subject to the Asset Sale or having a Lien therein and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pensions and other postemployment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee; provided, however, that any
amounts remaining after adjustments, revaluations or liquidations of such
reserves shall constitute Net Available Proceeds.
'New Credit Facility' means the Credit Agreement dated as of September 23,
1998 by and among the Company, Pro-Fac, the other guarantors, Harris Trust and
Savings Bank, individually and as Administrative Agent, Bank of Montreal,
individually and as a Syndication Agent, and the other lenders party thereto,
together with any guarantees, security agreements or other collateral documents
and any other related documents, as any of the foregoing may be subsequently
amended, restated, refinanced, or replaced from time to time, and shall include
agreements in respect of Hedging Obligations designed to protect against
fluctuations in interest rates and entered into with respect to loans
thereunder.
'Non-Recourse Purchase Money Indebtedness' means Indebtedness of the
Company or any of its Restricted Subsidiaries incurred (a) to finance the
purchase of any assets of the Company or any of its Restricted Subsidiaries
within 90 days of such purchase, (b) to the extent the amount of Indebtedness
thereunder does not exceed 100% of the purchase cost of such assets, (c) to the
extent the purchase cost of such assets is or should be included in 'additions
to property, plant and equipment' in accordance
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with GAAP, and (d) to the extent that such Indebtedness is non-recourse to the
Company or any of its Restricted Subsidiaries or any of their respective assets
other than the assets so purchased.
'Obligation' means any principal, interest (including, in the case of
Senior Indebtedness, interest accruing subsequent to the filing of a petition in
bankruptcy or insolvency at the rate specified in the document relating to such
Senior Indebtedness, whether or not such interest is an allowed claim permitted
to be enforced against the obligor under applicable law), penalties, fees,
indemnification, reimbursements, costs, expenses, damages and other liabilities
payable under the documentation governing any Indebtedness.
'Officer' means any of the following of the Company: the Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer, the President,
any Vice President, the Treasurer or the Secretary.
'Officers' Certificate' means a certificate signed by any two Officers.
'Old Notes' means the Company's 12 1/4% Senior Subordinated Notes due 2005.
'Opinion of Counsel' means a written opinion from legal counsel (such
counsel may be an employee of or counsel to the Company or the Trustee) that
complies with the requirements of the Indenture.
'Payment Restriction' with respect to a Subsidiary of any Person, means any
encumbrance, restriction of limitation, whether by operation of the terms of its
charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i) such Subsidiary
to (a) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (b) make loans or advances to such Person or
any other Subsidiary or such Person, (c) Guarantee any Indebtedness of such
Person or any other Subsidiary of such Person or (d) transfer any of its
properties or assets to such Person or any other Subsidiary of such Person
(other than customary restrictions on transfers of property subject to a Lien
permitted under the Indenture) or (ii) such Person or any other Subsidiary of
such Person to receive or retain any such dividends, distributions or payments,
loans or advances, guarantee, or transfer of properties or assets.
'Permitted Indebtedness' means any of the following:
(i) Indebtedness of the Company and the related guarantees of the
Subsidiary Guarantors under the New Credit Facility in an aggregate
principal amount at any time outstanding not to exceed (a) under the Term
Loan Facilities, $455.0 million, less any required permanent repayments
actually made thereunder (excluding any such repayment to the extent
refinanced and replaced at the time of payment), and (b) under the
Revolving Loan Facility, the greater of (x) $200.0 million, and (y) the sum
of (A) 80% of the book amount of all accounts receivable owned by the
Company and its Restricted Subsidiaries and (B) 50% of the book value of
all inventory owned by the Company and its Restricted Subsidiaries, in each
case computed in accordance with GAAP as of the end of the last fiscal
month of the Company, reduced by any required permanent repayments actually
made (which are accompanied by a corresponding permanent commitment
reduction) in respect of the Revolving Loan Facility (excluding any such
repayment and commitment reductions to the extent refinanced and replaced
at the time of payment);
(ii) Indebtedness under the Notes, the Note Guarantees and the
Indenture;
(iii) Existing Indebtedness;
(iv) Indebtedness under Hedging Obligations, provided that (1) such
Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the 'Limitations on
Additional Indebtedness' covenant, and (2) the notional principal amount of
such Hedging Obligations at the time incurred does not exceed the principal
amount of such Indebtedness to which such Hedging Obligations relate;
(v) Indebtedness of the Company to a Subsidiary Guarantor and
Indebtedness of any Subsidiary Guarantor to the Company or any other
Subsidiary Guarantor; provided, however, that upon either (1) the
subsequent issuance (other than directors' qualifying shares), sale,
transfer or other disposition of any Capital Stock or any other event which
results in any such Subsidiary
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Guarantor ceasing to be a Subsidiary Guarantor or (2) the transfer or other
disposition of any such Indebtedness (except to the Company or a Subsidiary
Guarantor), the provisions of this clause (v) shall no longer be applicable
to such Indebtedness and such Indebtedness shall be deemed, in each case,
to be incurred and shall be treated as an incurrence for purposes of the
'Limitations on Additional Indebtedness' covenant at the time the
Subsidiary Guarantor in question ceased to be a Subsidiary Guarantor or the
time such transfer or other disposition occurred;
(vi) Indebtedness in respect of bid, performance or surety bonds or
insurance of self-reinsurance obligations (including to secure worker's
compensation and other similar insurance coverage) issued for the account
of the Company in the ordinary course of business consistent with past
practice, including guarantees or obligations of the Company with respect
to letters of credit supporting such bid, performance or surety obligations
or such insurance or self-insurance obligations (in each case other than
for an obligation for money borrowed);
(vii) Indebtedness in respect of Non-Recourse Purchase Money
Indebtedness incurred by the Company or any Restricted Subsidiary;
(viii) Refinancing Indebtedness;
(ix) Indebtedness in respect of the guaranty by the Company of
revolving credit indebtedness incurred by Great Lakes Kraut Company in an
aggregate principal amount at any time outstanding not to exceed $10.0
million; and
(x) Indebtedness incurred by the Company or any Subsidiary Guarantor,
in addition to Indebtedness incurred pursuant to the foregoing clauses of
this definition, with an aggregate principal face or stated amount (as
applicable) at any time outstanding for all such Indebtedness incurred
pursuant to this clause not in excess of $25.0 million.
'Permitted Junior Securities' means any securities of the Company provided
for by a plan of reorganization or readjustment that are subordinated in right
of payment to all Senior Indebtedness that may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Indebtedness.
'Person' means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint-stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof or other entity of any kind.
'Plan of Liquidation' with respect to any Person, means a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
'Pro-Fac' means Pro-Fac Cooperative, Inc., a New York cooperative
corporation.
'Pro-Fac Director' means any Person who, as a director, officer or other
designee of Pro-Fac, serves as a director of the Company.
'Pro-Fac Marketing Agreement' means the Marketing and Facilitation
Agreement between Pro-Fac and the Company in the form existing as of the Issue
Date, as such agreement may be amended, restated, renewed, extended or replaced
in accordance with the Indenture.
'Refinancing Indebtedness' means Indebtedness of the Company or a
Restricted Subsidiary issued in exchange for, or the proceeds from the issuance
and sale or disbursement of which are used substantially concurrently to repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, 'repay'), or constituting an amendment, modification or
supplement to or a deferral or renewal of (collectively, an 'amendment'), any
Indebtedness of the Company or any Restricted Subsidiary (the 'Refinanced
Indebtedness') in a principal amount not in excess of the principal amount of
the Refinanced Indebtedness (or, if such Refinancing Indebtedness refinances
Indebtedness under a revolving credit facility or other agreement providing a
commitment for subsequent borrowings, with a maximum commitment not to exceed
the maximum commitment under
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such revolving credit facility or other agreement), plus the amount of accrued
but unpaid interest thereon and the amount of any reasonably determined
prepayment premium necessary to accomplish such refinancing and such reasonable
fees and expenses incurred in connection therewith; provided that: (i) the
Refinancing Indebtedness is the obligation of the same Person as that of the
Refinanced Indebtedness; (ii) if the Refinanced Indebtedness was subordinated to
or pari passu with the Note Indebtedness, then such Refinancing Indebtedness, by
its terms, is expressly pari passu with (in the case of Refinanced Indebtedness
that was pari passu with) the Note Indebtedness, or subordinate in right of
payment to (in the case of Refinanced Indebtedness that was subordinated to) the
Note Indebtedness at least to the same extent as the Refinanced Indebtedness;
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a Weighted Average Life
to Maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the Weighted Average Life to Maturity of the portion of the
Refinanced Indebtedness being repaid that is scheduled to mature on or prior to
the maturity date of the Notes; and (iv) the Refinancing Indebtedness is secured
only to the extent, if at all, and by the assets (which may include
after-acquired assets), that the Refinanced Indebtedness is secured.
'Related Business' means any business in which the Company and its
Subsidiaries operate on the Issue Date, or that is closely related to or
complements the business of the Company and its Subsidiaries, as such business
exists on the Issue Date.
'Related Business Investment' means any Investment directly by the Company
or its Restricted Subsidiaries in any Related Business.
'Restricted Debt Payment' means any purchase, redemption, defeasance
(including without limitation in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Restricted Subsidiary, prior to the scheduled maturity or prior to any scheduled
repayment of principal or sinking fund payment, as the case may be, in respect
of Subordinated Indebtedness.
'Restricted Investment' means any Investment by the Company or any
Restricted Subsidiary (other than investments in Cash Equivalents) in any Person
that is not the Company or a Restricted Subsidiary, including in any
Unrestricted Subsidiary, but shall not include (i) Investments by the Company or
any Restricted Subsidiary in a Person, if as a result of such Investment (a)
such Person becomes a Restricted Subsidiary of the Company that is engaged in a
Related Business or (b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that is
engaged in a Related Business; (ii) loans by the Company or any of its
Restricted Subsidiaries to employees of the Company or any of its Restricted
Subsidiaries the proceeds of which are applied to purchase Capital Stock of
Pro-Fac in amount not to exceed $2.0 million at any time outstanding; (iii) the
guaranty by the Company of revolving credit indebtedness incurred by Great Lakes
Kraut Company in an aggregate principal amount at any time outstanding not to
exceed $10.0 million; or (iv) demand loans for working capital purposes from the
Company to Pro-Fac made prior to consummation of the Pro-Fac Merger, not
exceeding $40.0 million at any time outstanding, which will be reduced to zero
for a period of not less than 15 consecutive days in each fiscal year.
'Restricted Payment' means with respect to any Person: (i) the declaration
or payment of any dividend (other than a dividend declared and paid (x) by a
Wholly-Owned Restricted Subsidiary to holders of its Capital Stock, or (y) by a
Subsidiary (other than a Wholly-Owned Restricted Subsidiary) to its shareholders
on a pro rata basis, but only to the extent of the dividends actually received
by the Company or a Restricted Subsidiary) or the making of any other payment or
distribution of cash, securities or other property or assets in respect of such
Person's Capital Stock (except that a dividend payable solely in Capital Stock
(other than Disqualified Capital Stock) of such Person shall not constitute a
Restricted Payment) (it being understood that the allocation of retains to
Pro-Fac's members on and after consummation of the Pro-Fac Merger shall not be
deemed a Restricted Payment); (ii) any payment on account of the purchase,
redemption, retirement or other acquisition for value of (A) the Capital Stock
of the Company or (B) the Capital Stock of any Restricted Subsidiary, or any
other payment or distribution made in respect thereof, either directly or
indirectly (other than a payment solely in Capital Stock that is not
Disqualified Capital Stock, and excluding any such payment
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to the extent actually received by the Company or a Restricted Subsidiary);
(iii) any Restricted Investment; or (iv) any Restricted Debt Payment.
'Restricted Subsidiary' means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
'Revolving Loan Facility' means the revolving loan facility provided under
the New Credit Facility.
'S&P' means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
'Sale and Leaseback Transactions' means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person of any property or asset of such Person which has been or is being sold
or transferred by such Person to such lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or asset.
'Securities Act' means the U.S. Securities Act of 1933, as amended.
'Senior Indebtedness' means, with respect to the Company or any Guarantor,
all Indebtedness and other Obligations specified below payable directly or
indirectly by the Company or such Guarantor, as the case may be, whether
outstanding on the Issue Date or thereafter created, incurred or assumed by the
Company or such Guarantor: (i) the principal of and interest on and all other
Indebtedness and Obligations related to the New Credit Facility (including,
without limitation, all loans, letters of credit and unpaid drawings with
respect thereto and other extensions of credit under the New Credit Facility,
and all expenses, fees, reimbursements, indemnities and other amounts owing
pursuant to the New Credit Facility), (ii) amounts payable in respect of any
Hedging Obligations, (iii) in addition to the amounts described in (i) and (ii),
all Indebtedness not prohibited by the 'Limitations on Additional Indebtedness'
covenant that is not expressly pari passu with, or subordinated to, the Notes or
the Note Guarantees, as the case may be, (iv) all Capital Lease Obligations
outstanding on the Issue Date, and (v) all Refinancing Indebtedness permitted
under the Indenture of Indebtedness specified in clauses (i) through (iv).
Notwithstanding anything to the contrary, Senior Indebtedness will not include
(a) any Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Senior Indebtedness, (b) any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business, (c) Indebtedness incurred (but only to the extent incurred)
in violation of the Indenture as in effect at the time of the respective
incurrence, (d) any Indebtedness of the Company that, when incurred, was without
recourse to the Company, (e) any Indebtedness to any employee of the Company or
any of its respective Subsidiaries, (f) any liability for taxes owned or owing
by the Company, (g) any Indebtedness represented by the Company's Old Notes and
any Guarantee thereof by Pro-Fac or any Subsidiary Guarantor, or (h) any
Subordinated Indebtedness. Indebtedness represented by the Old Notes and any
Guarantee thereof by Pro-Fac or any Subsidiary Guarantor shall be pari passu
with the Notes and the Note Guarantees, respectively.
'Senior Subordinated Indebtedness' of the Company means the Notes and any
other Indebtedness of the Company (including the Old Notes) that specifically
provides that such Indebtedness is to rank pari passu with the Notes in right of
payment and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Company which is not Senior
Indebtedness. 'Senior Subordinated Indebtedness' of any Guarantor has a
correlative meaning.
'Significant Subsidiary' means any Subsidiary of the Company that would be
a 'Significant Subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issue Date, except all references to '10 percent' in such definition shall
be changed to '2 percent'.
'Subordinated Indebtedness' means Indebtedness of the Company or any
Restricted Subsidiary that is subordinated in right of payment to the Notes or
the Note Guarantee of such Restricted Subsidiary, respectively, including,
without limitation, the Subordinated Promissory Note and any additional
promissory notes issued in accordance with the terms thereof as in effect on the
Issue Date.
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'Subordinated Promissory Note' means the Subordinated Promissory Note dated
as of September 23, 1998 made by the Company to Deans Food Company in principal
amount of $30.0 million issued in connection with the consummation of the
Acquisition.
'Subsidiary' of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Voting Stock is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Voting Stock of such
entity entitling the holder thereof to vote or otherwise participate in the
selection of the governing body, partners, managers or others that control the
management and policies of such entity. Unless otherwise specified, 'Subsidiary'
means a Subsidiary of the Company.
'Subsidiary Guarantor' means each domestic Restricted Subsidiary of the
Company (other than an Immaterial Subsidiary) and each other person who is
required to become (or whom the Company otherwise causes to become) a Subsidiary
Guarantor by the terms of the Indenture.
'Term Loan Facilities' means the Term Loan Facilities provided under the
New Credit Facility.
'Unrestricted Subsidiary' means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of the Company in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Restricted Subsidiary to be an Unrestricted Subsidiary, and any such
designation shall be deemed to be a Restricted Investment at the time of and
immediately upon such designation by the Company and its Restricted Subsidiaries
in the amount of the Consolidated Net Worth of such designated Subsidiary and
its consolidated Subsidiaries at such time, provided that such designation shall
be permitted only if (A) the Company and its Restricted Subsidiaries would be
able to make the Restricted Investment deemed made pursuant to such designation
at such time, (B) no portion of the Indebtedness or any other obligation
(contingent or otherwise) of such Subsidiary (x) is Guaranteed by the Company or
any Restricted Subsidiary, (y) is recourse to the Company or any Restricted
Subsidiary or (z) subjects any property or asset of the Company or any
Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof and (C) no default or event of default with respect to any
Indebtedness of such Subsidiary would permit any holder of any Indebtedness of
the Company or any Restricted Subsidiary to declare such Indebtedness of the
Company or any Restricted Subsidiary due and payable prior to its maturity. The
Board of Directors of the Company may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary, and any such designation shall be deemed to be an
incurrence by the Company and its Restricted Subsidiaries of the Indebtedness
(if any) of such Subsidiary so designated for purposes of the ' -- Limitations
on Additional Indebtedness' covenant as of the date of such designation,
provided that such designation shall be permitted only if immediately after
giving effect to such designation and the incurrence of any such additional
Indebtedness deemed to have been incurred thereby (x) the Company would meet the
Coverage Ratio Incurrence Condition and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
described in the two preceding sentences shall be evidenced to the Trustee by
the filing with the Trustee of a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and setting forth the
underlying calculations of such certificate.
'Voting Stock' with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all times
or only so long as no senior class of stock or other relevant equity interest
has voting power by reason of any contingency) to vote in the election of
members of the board of directors of such Person.
'Weighted Average Life to Maturity,' when applied to any Indebtedness at
any date, means the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment by (ii) the then outstanding principal
amount of such Indebtedness.
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'Wholly-Owned Restricted Subsidiary' means a Restricted Subsidiary of which
100% of the Capital Stock (except for directors' qualifying shares or certain
minority interests owned by other Persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose) is owned directly by the Company or through
one or more Wholly-Owned Restricted Subsidiaries.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States
federal income tax consequences to holders of Initial Notes who exchange their
Initial Notes for Exchange Notes pursuant to the Exchange Offer. This discussion
is based on currently existing provisions of the Internal Revenue Code of 1986,
as amended (the 'Code'), existing, temporary and proposed Treasury regulations
promulgated thereunder, and administrative and judicial interpretations thereof,
all as in effect or proposed on the date hereof and all of which are subject to
change, possibly with retroactive effect, or different interpretations. This
discussion is limited to holders of Initial Notes who hold the Notes as capital
assets, within the meaning of section 1221 of the Code. Moreover, this
discussion is for general information only and does not address all of the tax
consequences that may be relevant to holders of Initial Notes and Exchange Notes
in light of their personal circumstances or to certain types of holders of
Initial Notes and Exchange Notes (such as certain financial institutions,
insurance companies, tax-exempt entities, dealers in securities or persons who
have hedged the risk of owning a Note). In addition, this discussion does not
address any tax consequences arising under the laws of any state, locality or
foreign jurisdiction, or any estate or gift tax considerations.
EXCHANGE OFFER
The exchange of Initial Notes for Exchange Notes pursuant to the Exchange
Offer should not be treated as an exchange or other taxable event for United
States Federal income tax purposes. Accordingly, there should be no United
States Federal income tax consequences to holders who exchange Initial Notes for
Exchange Notes pursuant to the Exchange Offer and any such holder should have
the same adjusted tax basis and holding period in the Exchange Notes as it had
in the Initial Notes immediately before the exchange.
PLAN OF DISTRIBUTION
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an 'affiliate' (as defined
in Rule 405 of the Securities Act) of the Company or any Subsidiary Guarantor
(ii) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Exchange Notes and (iii) it is acquiring the Exchange Notes in the
ordinary course of its business. A Restricted Holder will not be able to
participate in the Exchange Offer and may only sell its Initial Notes pursuant
to a registration statement containing the selling security holder information
required by Item 507 of Regulation S-K under the Securities Act, or pursuant to
an exemption from the registration requirement of the Securities Act.
Each Participating Broker-Dealer must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such Exchange Notes. Based upon interpretations by the staff of the Commission,
the Issuer believes that Exchange Notes issued pursuant to the Exchange Offer to
Participating Broker-Dealers may be offered for resale, resold, and otherwise
transferred by a Participating Broker-Dealer upon compliance with the prospectus
delivery requirements, but without compliance with the registration
requirements, of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by all persons subject to the
prospectus delivery requirements of the Securities Act, including Participating
Broker-Dealers, in connection with resales of Exchange Notes received in
exchange for Initial Notes where such Initial Notes were acquired as a result of
market-making activities or other trading activities. The Issuer has agreed
that, for a period of 180 days after the Registration Statement has been
declared effective by the Commission, it will make this Prospectus, as amended
or supplemented, available to any Participating Broker-Dealer
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for use in connection with any such resale. If the Issuer is not so notified by
any Participating Broker-Dealers that they may be subject to such requirements
or if it is later notified by all such Participating Broker-Dealers that they
are no longer subject to such requirements, the Issuer will not be required to
maintain the effectiveness of the Exchange Offer Registration Statement or to
amend or supplement this Prospectus following the consummation of the Exchange
Offer or following such date of notification, as the case may be. The Issuer
believes that during such period of time, delivery of this Prospectus, as it may
be amended or supplemented, will satisfy the prospectus delivery requirements of
a Participating Broker-Dealer engaged in market-making or other trading
activities.
Based on interpretations by the staff of the Commission, the Issuer
believes that Exchange Notes issued pursuant to the Exchange Offer may be
offered for resale, resold, and otherwise transferred by a Holder thereof (other
than a Restricted Holder or a Participating Broker-Dealer) without compliance
with the registration and prospectus delivery requirements of the Securities
Act.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers (including Participating Broker-Dealers). Exchange Notes
received by Participating Broker-Dealers for their own accounts pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the- counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer and/or the purchasers of any such Exchange Notes.
Any Participating Broker-Dealer that resells Exchange Notes may be deemed to be
an 'underwriter' within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an 'underwriter' within the meaning of the Securities Act.
The Issuer has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
By acceptance of the Exchange Offer, each Participating Broker-Dealer that
receives Exchange Notes pursuant to the Exchange Offer hereby agrees to notify
the Issuer prior to using the Prospectus in connection with the sale or transfer
of Exchange Notes, and acknowledges and agrees that, upon receipt of notice from
the Issuer of the happening of any event that makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
(which notice the Issuer agrees to deliver promptly to such Participating
Broker-Dealer), such Participating Broker-Dealer will suspend use of the
Prospectus until the Issuer has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such Participating Broker-Dealer.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon on behalf of the
Issuer by Howard, Smith & Levin LLP, New York, New York.
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EXPERTS
The consolidated financial statements of Agrilink and the consolidated
financial statements of Pro-Fac at June 27, 1998 and June 28, 1997 and for each
of the three years in the period ended June 27, 1998, included elsewhere in the
Prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of DFVC at May 31, 1998, May 25, 1997
and May 26, 1996 and for each of the three years in the period ended May 31,
1998, included elsewhere in the Prospectus, have been so included in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
93
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGRILINK FOODS, INC. -- CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants.......................................................................... F-2
Consolidated Statement of Operations and Accumulated Deficit for the years ended June 27, 1998, June 28,
1997, and June 26, 1996.................................................................................. F-3
Consolidated Balance Sheets as of June 27, 1998 and June 28, 1997.......................................... F-4
Consolidated Statements of Cash Flows for the years ended June 27, 1998, June 28, 1997, and June 26,
1996..................................................................................................... F-5
Notes to Consolidated Financial Statements................................................................. F-7
Unaudited Consolidated Statement of Operations for the three months ended September 26, 1998 and September
27, 1997................................................................................................. F-23
Unaudited Consolidated Balance Sheets as of September 26, 1998 and September 27, 1997...................... F-24
Unaudited Consolidated Statement of Cash Flows for the three months ended September 26, 1998 and September
27, 1997................................................................................................. F-25
Notes to Unaudited Consolidated Financial Statements....................................................... F-27
DEAN FOODS VEGETABLE COMPANY -- FINANCIAL STATEMENTS
Report of Independent Accountants.......................................................................... F-33
Consolidated Statements of Income for the years ended May 31, 1998, May 25, 1997 and May 26, 1996.......... F-34
Consolidated Balance Sheets as of May 31, 1998, May 25, 1997 and May 26, 1996.............................. F-35
Consolidated Statements of Cash Flows for the years ended May 31, 1998, May 25, 1997 and May 26, 1996...... F-36
Notes to Consolidated Financial Statements................................................................. F-37
Unaudited Condensed Consolidated Statements of Income for the three months ended August 30, 1998 and August
24, 1997................................................................................................. F-45
Unaudited Condensed Consolidated Balance Sheets as of August 30, 1998 and August 24, 1997.................. F-46
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended August 30, 1998 and
August 24, 1997.......................................................................................... F-47
Notes to Unaudited Condensed Consolidated Financial Statements............................................. F-48
PRO-FAC COOPERATIVE, INC. AND CONSOLIDATED SUBSIDIARY
Report of Independent Accountants.......................................................................... F-49
Consolidated Statement of Operations and Net Proceeds for the years ended June 27, 1998, June 28, 1997 and
June 29, 1996............................................................................................ F-50
Consolidated Balance Sheets as of June 27, 1998 and June 28, 1997.......................................... F-51
Consolidated Statement of Cash Flows for the years ended June 27, 1998, June 28, 1997 and June 29, 1996.... F-52
Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Redeemable Stock for the
years ended June 27, 1998, June 28, 1997 and June 29, 1996............................................... F-54
Notes to Consolidated Financial Statements................................................................. F-55
Unaudited Consolidated Statement of Operations and Net Proceeds for the three months ended September 26,
1998 and September 27, 1997.............................................................................. F-73
Unaudited Consolidated Balance Sheets as of September 26, 1998 and September 27, 1997...................... F-74
Unaudited Consolidated Statement of Cash Flows for three months ended September 26, 1998 and September 27,
1997..................................................................................................... F-76
Notes to Unaudited Consolidated Financial Statements....................................................... F-78
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... F-84
Selected Historical and Unaudited Pro Forma Financial Data................................................. F-96
Unaudited Pro Forma Financial Data......................................................................... F-98
</TABLE>
The Company's obligations under the New Credit Agreement and the Notes are
guaranteed by Kennedy Endeavors, Incorporated and Linden Oaks Corporation each a
wholly-owned subsidiary of the Company, in addition to Pro-Fac. All subsidiaries
of the Company, other than Kennedy Endeavors, Incorporated and Linden Oaks
Corporation, are inactive and consequently maintain no assets or are active but
maintain insignificant assets. Financial information of the Company and the
Subsidiary Guarantors is substantially the same as that presented in the
Consolidated Financial Statements of the Company.
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
AGRILINK FOODS, INC.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and accumulated deficit and of
cash flows present fairly, in all material respects, the financial position of
Agrilink Foods, Inc. and its subsidiaries at June 27, 1998 and June 28, 1997,
and the results of their operations and their cash flows for each of the three
fiscal years in the period ended June 27, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for spare parts in 1997.
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
July 31, 1998
F-2
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................................. $ 719,665 $ 730,823 $ 739,094
Cost of sales............................................................. (524,082) (539,081) (562,926)
----------- ----------- -----------
Gross profit.............................................................. 195,583 191,742 176,168
Selling, administrative, and general expenses............................. (141,837) (145,392) (156,067)
Income from Great Lakes Kraut Company..................................... 1,893 0 0
Gain on sale of Finger Lakes Packaging.................................... 0 3,565 0
Restructuring charge...................................................... 0 0 (5,871)
----------- ----------- -----------
Operating income before dividing with Pro-Fac............................. 55,639 49,915 14,230
Interest expense.......................................................... (30,633) (35,030) (41,998)
----------- ----------- -----------
Pretax income/(loss) before dividing with Pro-Fac and before cumulative
effect of an accounting change.......................................... 25,006 14,885 (27,768)
Pro-Fac share of (income)/loss before cumulative effect of an accounting
change.................................................................. (12,503) (7,442) 9,037
----------- ----------- -----------
Income/(loss) before taxes and cumulative effect of an accounting
change.................................................................. 12,503 7,443 (18,731)
Tax (provision)/benefit................................................... (5,689) (3,668) 6,853
----------- ----------- -----------
Income/(loss) before cumulative effect of an accounting change............ 6,814 3,775 (11,878)
Cumulative effect of an accounting change before dividing with Pro-Fac.... 0 4,606 0
Pro-Fac share of an accounting change..................................... 0 (2,859) 0
----------- ----------- -----------
Net income/(loss)......................................................... 6,814 5,522 (11,878)
Accumulated deficit at beginning of period................................ (11,878) (11,878) 0
Cash dividends to Pro-Fac................................................. (6,814) (5,522) 0
----------- ----------- -----------
Accumulated deficit at end of period...................................... $ (11,878) $ (11,878) $ (11,878)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 5,046 $ 2,836
Accounts receivable trade, less allowances for bad debts of $774 and $970,
respectively.................................................................. 55,046 48,661
Accounts receivable, other..................................................... 3,575 2,813
Current deferred tax asset..................................................... 4,642 8,198
Inventories --
Finished goods............................................................ 111,153 87,904
Raw materials and supplies................................................ 30,433 27,001
------------- -------------
Total inventories.................................................... 141,586 114,905
------------- -------------
Current investment in Bank..................................................... 1,994 946
Prepaid manufacturing expense.................................................. 8,404 8,265
Prepaid expenses and other current assets...................................... 12,989 6,323
------------- -------------
Total current assets................................................. 233,282 192,947
Investment in Bank.................................................................. 22,377 24,321
Investment in Great Lakes Kraut Company............................................. 6,584 0
Property, plant, and equipment, net................................................. 194,615 217,923
Assets held for sale at net realizable value........................................ 2,662 3,259
Goodwill and other intangible assets less accumulated amortization of $13,634 and
$10,053, respectively............................................................. 94,744 96,429
Other assets........................................................................ 12,175 7,682
------------- -------------
Total assets......................................................... $ 566,439 $ 542,561
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of obligations under capital leases............................ $ 256 $ 558
Current portion of long-term debt.............................................. 8,071 8,075
Accounts payable............................................................... 70,125 49,231
Income taxes payable........................................................... 3,943 5,152
Accrued interest............................................................... 8,559 8,540
Accrued employee compensation.................................................. 8,598 11,063
Other accrued expenses......................................................... 19,013 21,956
Due to Pro-Fac................................................................. 6,642 4,312
------------- -------------
Total current liabilities............................................ 125,207 108,887
Obligations under capital leases.................................................... 503 817
Long-term debt...................................................................... 69,937 62,829
Senior subordinated notes........................................................... 160,000 160,000
Deferred income tax liabilities..................................................... 33,154 40,902
Other non-current liabilities....................................................... 23,053 22,687
------------- -------------
Total liabilities.................................................... 411,854 396,122
------------- -------------
Commitments and contingencies
Shareholder's equity:
Common stock, par value $.01; 10,000 shares outstanding, owned by Pro-Fac...... 0 0
Minimum pension liability adjustment........................................... (608) 0
Additional paid-in capital..................................................... 167,071 158,317
Accumulated deficit............................................................ (11,878) (11,878)
------------- -------------
Total shareholder's equity........................................... 154,585 146,439
------------- -------------
Total liabilities and shareholder's equity........................... $ 566,439 $ 542,561
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss)..................................................... $ 6,814 $ 5,522 $ (11,878)
Adjustments to reconcile net income/(loss) to net cash (used
in)/provided by operating activities:
Restructuring and net (gain)/loss from disposals................. 0 (3,565) 5,871
Cumulative effect of an accounting change........................ 0 (4,606) 0
Amortization of goodwill and other intangibles................... 3,581 4,092 3,422
Amortization of debt issue costs................................. 800 800 800
Depreciation..................................................... 18,009 22,680 26,081
Provision/(benefit) for deferred taxes........................... 281 2,787 (6,853)
Provision for losses on accounts receivable...................... 0 445 528
Equity in undistributed earnings of Bank......................... (715) (1,143) (1,532)
Change in assets and liabilities:
Accounts receivable......................................... (6,744) (1,856) 11,309
Inventories................................................. (25,654) (1,636) 33,347
Income taxes payable........................................ (1,209) 205 4,879
Accounts payable and accrued expenses....................... 15,737 (1,751) (15,200)
Payable to Pro-Fac.......................................... (1,720) 466 2,754
Other assets and liabilities................................ (11,322) 548 (1,514)
----------- ----------- -----------
Net cash (used in)/provided by operating activities........................ (2,142) 22,988 52,014
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant, and equipment............................ (14,056) (16,876) (18,038)
Proceeds from disposals............................................... 12,794 68,716 4,408
Proceeds from sales of idle facilities................................ 0 4,465 597
Proceeds from investment in CoBank.................................... 1,611 315 0
Cash paid for acquisitions............................................ (7,423) 0 (5,785)
----------- ----------- -----------
Net cash (used in)/provided by investing activities........................ (7,074) 56,620 (18,818)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.............................. 18,180 18,000 5,400
Payments on long-term debt............................................ (8,076) (104,854) (43,056)
Payments on capital leases............................................ (616) (503) (825)
Capital contribution by Pro-Fac....................................... 8,752 7,234 10,000
Cash dividends paid to Pro-Fac........................................ (6,814) (5,522) 0
----------- ----------- -----------
Net cash provided by/(used in) financing activities........................ 11,426 (85,645) (28,481)
----------- ----------- -----------
Net change in cash and cash equivalents.................................... 2,210 (6,037) 4,715
Cash and cash equivalents at beginning of period........................... 2,836 8,873 4,158
----------- ----------- -----------
Cash and cash equivalents at end of period................................. $ 5,046 $ 2,836 $ 8,873
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(table continued on next page)
F-5
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized)............................. $30,062 $ 35,587 $ 41,508
----------- ----------- -----------
----------- ----------- -----------
Income taxes, net................................................ $ 6,617 $ 676 $ (703)
----------- ----------- -----------
----------- ----------- -----------
Acquisition of DelAgra:
Accounts receivable......................................... $ 403 $ 0 $ 0
Inventories................................................. 3,212 0 0
Prepaid expenses and other current assets................... 81 0 0
Property, plant, and equipment.............................. 1,842 0 0
Goodwill.................................................... 1,508 0 0
Other accrued expenses...................................... (433) 0 0
----------- ----------- -----------
$ 6,613 $ 0 $ 0
----------- ----------- -----------
----------- ----------- -----------
Acquisition of C&O Distributing Company:
Property, plant and equipment............................... $ 54 $ 0 $ 0
Goodwill.................................................... 756 0 0
----------- ----------- -----------
$ 810 $ 0 $ 0
----------- ----------- -----------
----------- ----------- -----------
Investment in Great Lakes Kraut Company:
Inventories................................................. $ 2,175 $ 0 $ 0
Prepaid expenses and other current assets................... 409 0 0
Property, plant, and equipment.............................. 6,966 0 0
Other accrued expenses...................................... (62) 0 0
----------- ----------- -----------
$ 9,488 $ 0 $ 0
----------- ----------- -----------
----------- ----------- -----------
Acquisition of Packer Foods and Matthews Candy Co.:
Accounts receivable......................................... $ 0 $ 0 $ 1,282
Inventories................................................. 0 0 3,902
Prepaid expenses and other current assets................... 0 0 270
Property, plant and equipment............................... 0 0 6,044
Goodwill.................................................... 0 0 493
Deferred tax asset.......................................... 0 0 264
Accounts payable............................................ 0 0 (4,954)
Other accrued expenses...................................... 0 0 (418)
Other non-current liabilities............................... 0 0 (1,098)
----------- ----------- -----------
Cash paid for acquisition................................... $ 0 $ 0 $ 5,785
----------- ----------- -----------
----------- ----------- -----------
Supplemental schedule of non-cash investing and financing activities:
In conjunction with the purchase of certain businesses of Nalley
Canada Ltd. by Agrilink in fiscal 1997, the following non-cash
transactions occurred:
Notes forgiven................................................... $ 0 $ 4,986 $ 0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
Agrilink Foods, Inc. ('Agrilink' or the 'Company') is a producer and
marketer of processed food products, including canned and frozen fruits and
vegetables, canned desserts and condiments, fruit fillings and toppings, canned
chilies and stews, salad dressings, pickles, peanut butter and snack foods. The
vegetable and fruit product lines account for approximately 49 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 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.
FISCAL YEAR
The fiscal year of Agrilink corresponds with that of its parent, Pro-Fac,
and ends on the last Saturday in June. Fiscal 1998 and 1997 comprised 52 weeks,
and fiscal 1996 comprised 53 weeks.
CONSOLIDATION
The consolidated financial statements include the Company and its
wholly-owned subsidiaries after elimination of intercompany transactions and
balances. Investments in affiliates, owned more than 20 percent but not in
excess of 50 percent, are recorded under the Equity Method of accounting.
CHANGE IN ACCOUNTING PRINCIPLE
Effective June 30, 1996, accounting procedures were changed to include in
prepaid expenses and other current assets, manufacturing spare parts previously
charged directly to expense. Management believes this change is preferable
because it provides a better matching of costs with related revenues when
evaluating interim financial statements. The favorable cumulative effect of the
change (net of Pro-Fac's share of $2.9 million and income taxes of $1.1 million)
was $1.7 million. Pro forma amounts for the cumulative effect of the accounting
change on prior periods are not determinable due to the lack of physical
inventory counts required to establish quantities at the respective dates.
Management does not believe that the difference in accounting methodologies for
spare parts had any material impact on the Cooperative's historic financial
statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term investments with maturities of
three months or less. There were no such short-term investments at June 28, 1997
or June 27, 1998.
INVENTORIES
Inventories are stated at the lower of cost or market on the first-in,
first-out ('FIFO') method. Reserves recorded at June 27, 1998 and June 28, 1997
were $391,000 and $362,000, respectively.
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).
F-7
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings on the Company's investment in the Bank in fiscal years 1998,
1997, and 1996 amounted to $1,023,000, $1,633,000, and $2,188,000, respectively.
MANUFACTURING OVERHEAD
Allocation of manufacturing overhead to finished goods produced is on the
basis of a production period; thus at the end of each period, manufacturing
costs incurred by seasonal plants, subsequent to the end of previous pack
operations, are deferred and included in the accompanying balance sheet under
the caption 'Prepaid manufacturing expense.' Such costs are applied to finished
goods during the next production period and recognized as an element of cost of
goods sold.
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.
OTHER ASSETS
Other assets are primarily comprised of debt issuance. Debt issuance costs
are amortized over the term of the debt. Amortization expense incurred in fiscal
1998, 1997, and 1996 was $800,000.
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
F-8
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 primarily self-insured 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. The accrual for casualty insurance at June 27, 1998
and June 28, 1997 was $3.3 million and $2.9 million, respectively.
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 years 1998, 1997, and 1996 amounted to $9,878,000, $8,376,000, and
$9,831,000, respectively.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL STATEMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, Accounts Receivable, Accounts Payable, and Other Accrued Expenses
The carrying amount approximates fair value because of the short maturity
of these instruments.
Long-Term Investments
The carrying value of the investment in the Bank was $24.4 million at June
27, 1998. As there is no market price for this investment, a reasonable estimate
of fair value is not possible.
Long-Term Debt
The fair value of long-term debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered for debt
of the same remaining maturities.
F-9
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. AGREEMENTS WITH PRO-FAC
Effective November 3, 1994, the Company became a wholly-owned subsidiary of
Pro-Fac.
In connection with the acquisition, Pro-Fac sold $160.0 million of 12.25
percent Senior Subordinated Notes (the 'Notes') due 2005 and entered into a
credit agreement (the 'Credit Agreement') with the Bank, which provided for a
term loan, a term-loan facility, and a letter-of-credit facility. All
obligations of Pro-Fac under the Notes and the Credit Agreement have become
obligations of the Company.
The Company's contractual relationship with Pro-Fac is defined in the
Pro-Fac Marketing and Facilitation Agreement ('Agreement'). Under the 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 Agrilink, it
may be more or less than the price Agrilink would pay in the open market in the
absence of the Agreement. For the fiscal years ended 1998, 1997, and 1996 the
CMV for all crops supplied by Pro-Fac amounted to $58.5 million, $51.4 million,
and $44.7 million, respectively.
Under the Agreement the Company is required to have on its board of
directors some persons who are neither members of, nor affiliated with Pro-Fac
('Disinterested Directors'). The number of Disinterested Directors must at least
equal the number of directors who are members of Pro-Fac. The volume and type of
crops to be purchased by Agrilink under the Agreement are determined pursuant to
its annual profit plan, which requires the approval of a majority of the
Disinterested Directors. In addition, under the agreement, 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, as additional
patronage income, 90 percent of such earnings, but in no case more than 50
percent of all pretax earnings 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 90 percent of such losses, but in no case by more than 50 percent
of all pretax losses of the Company. Additional patronage income is paid to
Pro-Fac for services provided to Agrilink, including the provision of a long
term, stable crop supply, favorable payment terms for crops, and the sharing of
risks of 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. For the fiscal years ended 1998, 1997, and 1996 such additional
patronage income/(loss) amounted to $12.5 million, $10.3 million, and $(9.0)
million, respectively. Under the Indentures related to the Notes, Pro-Fac is
required to reinvest at least 70 percent of the additional Patronage income in
Agrilink.
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 $29.9 million
in the Company (including reinvested Additional Patronage Income).
NOTE 3. ACQUISITIONS, DISPOSALS, AND RESTRUCTURING
FISCAL 1998
Nutrition Medical
Effective May 1, 1998, the Company acquired the private label adult
nutrition formula business from Nutrition Medical, Inc. Nutrition Medical will
be paid royalty payments for two years.
F-10
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Michigan Distribution Center
Effective March 31, 1998, the Company entered into a multiyear logistics
agreement under which GATX Logistics will provide freight management, packaging
and labeling services, and distribution support to and from production
facilities owned by the Company in and around Coloma, Michigan. The agreement
included the sale of the Company's labeling equipment and distribution center.
The Company received proceeds of $12.6 million for the equipment and facility
which were applied to outstanding bank loans. No significant gain or loss
occurred as a result of this transaction.
DelAgra Corp.
Effective March 30, 1998, the Company acquired the majority of assets and
the business of DelAgra Corp. of Bridgeville, Delaware. DelAgra Corp. is a
producer of private label frozen vegetables. The acquisition was accounted for
as a purchase. The purchase price was approximately $6.9 million. Goodwill of
approximately $0.6 million and $0.9 million for a covenant not to compete were
recorded in conjunction with this transaction. These amounts are being amortized
over 30 and 5 years, respectively.
C&O Distributing Company
Effective March 9, 1998, the Company acquired the majority of assets and
the business of C&O Distributing Company of Canton, Ohio. C&O distributes snack
products for Snyder of Berlin, one of the Company's businesses included within
its snack foods unit. The acquisition was accounted for as a purchase. The
purchase price was approximately $0.8 million. Intangibles of approximately $0.8
million were recorded in conjunction with this transaction and are being
amortized over 30 years.
Formation of New Sauerkraut Company
Effective July 1, 1997, the Company and Flanagan Brothers, Inc. of Bear
Creek, Wisconsin contributed all their assets involved in sauerkraut production
to form a new sauerkraut company. This new company, Great Lakes Kraut Company,
operates as a New York limited liability company with ownership and earnings
divided equally between the two companies. The joint venture is accounted for
using the Equity Method of accounting. Summarized financial information of Great
Lakes Kraut Company is as follows:
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
1998
-----------
(DOLLARS IN
THOUSANDS)
<S> <C>
Net sales..................................................... $27,620
Gross profit.................................................. $ 7,439
Operating income.............................................. $ 4,411
Net income.................................................... $ 3,786
CONDENSED BALANCE SHEET
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
Current assets................................................ $10,648
Noncurrent assets............................................. $18,884
Current liabilities........................................... $ 6,463
Noncurrent liabilities........................................ $ 6,261
</TABLE>
F-11
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL 1997
Georgia Frozen Distribution Center
On June 27, 1997, Americold acquired the Company's frozen foods
distribution center in Montezuma, Georgia. In addition, the two companies
entered into a long-term logistics agreement under which Americold manages its
facility and all frozen food transportation operations of Agrilink in Georgia
and New York. The Company received proceeds of approximately $9.1 million which
were applied to outstanding Bank loans. No significant gain or loss occurred as
a result of this transaction.
Information Services Reorganization
On June 19, 1997, Systems & Computer Technology Corporation ('SCT') and the
Company announced they signed a major outsourcing services and software
agreement effective June 30, 1997. The ten-year agreement, valued at
approximately $50.0 million, is for SCT's OnSite outsourcing services and ADAGE
ERP software and implementation services.
Sale of New York Canned Vegetable Businesses
On May 6, 1997, Seneca Foods Corporation ('Seneca') acquired the Agrilink
Leicester, New York production facility and the LeRoy, New York distribution
center, as well as the Blue Boy brand.
Seneca and the Company have also forged a long-term strategic alliance to
combine their agricultural departments into one organization to be managed by
Agrilink. The objective is to maximize sourcing efficiencies of New York State
vegetable requirements for both companies. This agreement initially has a
minimum ten-year term.
The Company received proceeds of approximately $29.4 million which were
applied to outstanding Bank loans. No significant gain or loss occurred as a
result of this transaction.
Brooks Foods
On April 30, 1997, Hoopeston Foods acquired certain assets from the Brooks
Foods operating facility. The purchase price of approximately $2.1 million was
paid with $400,000 in cash and a $1.7 million ten-year note. The proceeds were
applied to outstanding Bank loans. No significant gain or loss occurred as a
result of this transaction. In addition, the two companies entered into a copack
and warehouse agreement under which Hoopeston will produce, package, and
warehouse certain products.
Nalley Canada Ltd.
On June 26, 1995, Agrilink sold Nalley Canada Ltd., located in Vancouver,
British Columbia, to a management group. The operations were sold for
approximately $8.0 million. Approximately, $4.0 million was received in cash.
The remainder of the proceeds were received through a series of long-term notes
with maturities between 1998 and 2005. The notes beared interest at a rate of
12 1/4 percent.
In April 1997, the Company acquired certain businesses from Nalley Canada
Ltd. The acquired operations include a $12.0 million consumer products business,
which markets throughout the western Provinces of Canada. The purchase price of
approximately $5.0 million was paid through the forgiveness of various long-term
receivables (including interest earned) issued to the Company in connection with
its sale of the stock of Nalley Canada Ltd. in 1995.
Finger Lakes Packaging
On October 9, 1996, the Company completed the sale of Finger Lakes
Packaging, Inc. ('Finger Lakes Packaging'), a subsidiary of the Company to
Silgan Containers Corporation, an indirect, wholly-owned subsidiary of Silgan
Holdings, Inc., headquartered in Stamford, Connecticut. A gain of
F-12
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $3.6 million was recognized on this transaction. The Company
received proceeds of approximately $30.0 million. Proceeds were applied to
outstanding Bank loans. The transaction also included a long-term supply
agreement between Silgan and Agrilink.
FISCAL 1996
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
the year ended December 31, 1994, Packer had net sales of $13.0 million,
operating income of $300,000, and income before extraordinary items of $100,000.
Packer Foods has been merged into the Company's CBF 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.
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
were to reduce expenses, improve productivity, and streamline operations.
Efforts focused on the consolidation of operations and the elimination of
approximately 900 positions. The total fiscal 1996 restructuring charge amounted
to $5.9 million. This amount included 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 incurred throughout the
year. Reductions in personnel included both operational and administrative
positions.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS
The following is a summary of property, plant and equipment and related
obligations at June 27, 1998 and June 28, 1997:
<TABLE>
<CAPTION>
JUNE 27, 1998 JUNE 28, 1997
------------------------------ -------------------------------
OWNED LEASED OWNED LEASED
ASSETS ASSETS TOTAL ASSETS ASSETS TOTAL
-------- ------ -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Land.......................................... $ 5,772 $ 0 $ 5,772 $ 5,755 $ 0 $ 5,755
Land improvements............................. 3,949 0 3,949 2,117 0 2,117
Buildings..................................... 71,342 395 71,737 80,739 645 81,384
Machinery and equipment....................... 163,177 990 164,167 167,155 2,397 169,552
Construction in progress...................... 14,421 0 14,421 13,053 0 13,053
-------- ------ -------- -------- ------- --------
258,661 1,385 260,046 268,819 3,042 271,861
Less accumulated depreciation................. (64,678) (753) (65,431) (52,194) (1,744) (53,938)
-------- ------ -------- -------- ------- --------
Net........................................... $193,983 $ 632 $194,615 $216,625 $ 1,298 $217,923
-------- ------ -------- -------- ------- --------
-------- ------ -------- -------- ------- --------
Obligations under capital leases(1)........... $ 759 $ 1,375
Less current portion.......................... (256) (558)
------ -------
Long-term portion............................. $ 503 $ 817
------ -------
------ -------
</TABLE>
- ------------
(1) Represents the present value of net minimum lease payments calculated at the
Company's incremental borrowing rate at the inception of the leases, which
ranged from 6.3 to 9.8 percent.
F-13
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest capitalized in conjunction with construction amounted to
approximately $248,000 and $342,000 in fiscal 1998 and 1997, 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 27, 1998.
<TABLE>
<CAPTION>
TOTAL
FISCAL YEAR ENDING LAST CAPITAL OPERATING FUTURE
SATURDAY IN JUNE LEASES LEASES COMMITMENT
- -------------------------------------------------------------------- ------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1999........................................................ $ 356 $ 5,418 $ 5,774
2000........................................................ 224 3,582 3,806
2001........................................................ 145 1,977 2,122
2002........................................................ 78 1,012 1,090
2003........................................................ 56 204 260
Later years......................................................... 144 40 184
------- --------- ----------
Net minimum lease payments.......................................... 1,003 $12,233 $ 13,236
--------- ----------
--------- ----------
Less amount representing interest................................... (244)
-------
Present value of minimum lease payments............................. $ 759
-------
-------
</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 $12,250,000, $11,204,000, and $10,927,000 for fiscal years 1998,
1997, and 1996, respectively (including the current portion).
NOTE 5. DEBT
BANK FACILITY
The Bank Facility includes Term Loan, Seasonal, and Letter of Credit
facilities. The outstanding borrowings under the Term Loan were $72.4 million at
June 27, 1998. The Seasonal Facility provides seasonal financing of up to $82.0
million. The Letter of Credit Facility provides $18.0 million.
Terms
The Bank has extended to a portion of the Term Loan 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 Term Loan was 7.4 percent per annum for fiscal
1998.
Borrowings under the Seasonal Facility are payable at the expiration of
that portion of the facility, which is December 1998; except that for 15
consecutive calendar days during each calendar year, the borrowings under the
Seasonal Facility must be zero.
Guarantees and Security
All obligations under the Bank Facility are guaranteed by Pro-Fac and
certain subsidiaries of Agrilink (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.
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
all covenants, restrictions and requirements under the terms of the borrowing
agreement.
F-14
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Commitment Fees
The Bank assesses commitment fees of 0.35 percent on the seasonal line and
0.25 percent on the unused portion of the Term Loan.
Seasonal and Letter of Credit Facilities
Seasonal borrowings for the three years ended June 27, 1998 were as
follows:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at end of period..................................... $ 0 $ 0 $ 0
Rate at fiscal year end...................................... 0.0% 0.0% 0.0%
Maximum outstanding during the period........................ $66,000 $65,000 $94,000
Average amount outstanding during the period................. $51,300 $24,900 $53,700
Weighted average interest rate during the period............. 7.0% 7.3% 7.4%
</TABLE>
The Letter of Credit Facility provides for the issuance of letters of
credit through December 1998. Management anticipates timely renewals of both the
Seasonal and the Letter of Credit facilities.
Fair Value
Based on an estimated borrowing rate at fiscal year-end 1998 of 7.2 percent
for long-term debt with similar terms and maturities, the fair value of the
Company's long-term debt outstanding under the Bank Facility was approximately
$72.5 million at June 27, 1998.
Based on an estimated borrowing rate at fiscal year end 1997 of 8.7 percent
for long-term debt with similar terms and maturities, the fair value of the
Company's long-term debt outstanding under the Bank Facility was approximately
$64.8 million at June 28, 1997.
THE SENIOR SUBORDINATED NOTES ('NOTES')
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.
Guarantees and Security
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 Credit Agreement).
Certain Covenants
The Notes also limit the amount and timing of dividends and other payments
('Restricted Payments') from the Company to Pro-Fac or to holders of other
Agrilink 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 Agrilink's Fixed
Charge Coverage Ratio (as defined in the Indenture, a ratio of cash flow to
interest) for the preceding four quarters 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.
F-15
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value
Based on an estimated borrowing rate at 1998 fiscal year-end of 11.2
percent for borrowings with similar terms and maturities, the fair value of the
Notes was $171.4 million at June 27, 1998.
Based on an estimated borrowing rate at 1997 fiscal year end of 11.1
percent for borrowings with similar terms and maturities, the fair value of the
Notes was $174.7 million at June 28, 1997.
OTHER DEBT
Other debt of $5.6 million carries rates up to 10.0 percent at June 27,
1998.
MATURITIES
Total long-term debt maturities during each of the next five fiscal years
are as follows: 1999, $8.1 million; 2000, $10.6 million; 2001, $18.6 million;
2002, $13.1 million; and 2003, $13.1 million. Provisions of the Term Loan
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 of June 27, 1998, the Company had satisfied its
obligation under this provision. Provisions of the Term Loan also require that
cash proceeds from the sale of businesses be applied to the Term Loan.
NOTE 6. TAXES ON INCOME
Taxes on income before the cumulative effect of a change in accounting
include the following:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal --
Current............................................ $ 4,534 $ 567 $ 0
Deferred........................................... 730 2,639 (5,990)
----------- ----------- -----------
5,264 3,206 (5,990)
----------- ----------- -----------
State and foreign --
Current............................................ 874 314 0
Deferred........................................... (449) 148 (863)
----------- ----------- -----------
425 462 (863)
----------- ----------- -----------
$ 5,689 $ 3,668 $(6,853)
----------- ----------- -----------
----------- ----------- -----------
</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 and cumulative
effect of a change in accounting is as follows:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision/(benefit) at 35% in 1998, 34% in 1997 and
1996............................................................ $ 4,376 $ 2,530 $(6,380)
State income taxes, net of federal income tax effect.............. 571 484 (859)
Goodwill amortization............................................. 961 1,041 784
Dividend received reduction....................................... (305) (472) (521)
Other, net........................................................ 86 85 123
----------- ----------- -----------
$ 5,689 $ 3,668 $(6,853)
----------- ----------- -----------
----------- ----------- -----------
Effective tax rate................................................ 45.5% 49.3% (36.5)%
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-16
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The deferred tax (liabilities)/assets consist of the following at June 27,
1998 and June 28, 1997:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------- -----------
<S> <C> <C>
Liabilities:
Depreciation.................................................... $ (44,611) $ (49,357)
Non-compete agreements.......................................... (333) (462)
Other receivables............................................... (4) (538)
Prepaid manufacturing........................................... (3,270) (3,215)
Accounts receivable............................................. (197) 0
Other........................................................... 0 (215)
----------- -----------
(48,415) (53,787)
----------- -----------
Assets:
Inventory....................................................... 2,089 2,322
Accounts receivable............................................. 0 377
Capital and operating loss carryforwards........................ 6,573 6,147
Accrued employee benefits....................................... 3,594 3,431
Insurance accruals.............................................. 1,987 2,058
Pension/OPEB accruals........................................... 6,928 7,128
Restructuring reserves.......................................... 321 1,332
Promotional reserves............................................ 1,648 1,592
Other........................................................... 2,313 2,908
----------- -----------
25,453 27,295
----------- -----------
Net deferred liabilities........................................ (22,962) (26,492)
Valuation allowance............................................. (5,550) (6,212)
----------- -----------
$ (28,512) $ (32,704)
----------- -----------
----------- -----------
</TABLE>
During fiscal year 1998, the Company utilized $9.2 million of net operating
loss carryforwards ($3.2 million of tax). Additionally, approximately $11.0
million of net operating loss carryforwards ($3.9 million of tax) were
transferred from Pro-Fac. The benefits for these net operating losses had been
recorded in previous years.
During fiscal year 1997, however, the Company disposed of its Finger Lakes
Packaging subsidiary, its New York canned vegetable operation, and a
distribution center in Georgia. During fiscal year 1998, a distribution center
in Michigan was also disposed of. As a result of these disposals, the Company
utilized $26.8 million of its capital loss carryforward. As the related
valuation allowance was established in conjunction with the acquisition of the
Company by Pro-Fac, the recognition of this capital loss carryforward reduced
goodwill. 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. This sale and other sales
resulted in a capital loss of $40.4 million ($15.7 million of tax). As of the
date of sale, a full valuation allowance had been recorded against the capital
loss carryforward as it was more likely than not that a tax benefit would not be
realized. As of June 27, 1998, the Company has $13.6 million of a capital loss
carryforward available. The capital loss carryforward expires in 2001, and any
future recognition of this capital loss carryforward will also reduce goodwill.
In January 1995, the Boards of Directors of Agrilink and Pro-Fac approved
appropriate amendments to the Bylaws of Agrilink to allow the Company to qualify
as a cooperative under Subchapter T of the Internal Revenue Code. In August
1995, Agrilink and Pro-Fac received a favorable ruling from the Internal Revenue
Service approving the change in tax treatment effective for fiscal 1996.
Subsequent to this date, a consolidated return has been filed incorporating
Agrilink and Pro-Fac. Tax expense is allocated to Agrilink based on its
operations.
F-17
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Pension cost for fiscal years ended 1998, 1997, and 1996 includes the
following components:
<TABLE>
<CAPTION>
PENSION BENEFITS
-----------------------------------------
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period.................... $ 86,775 $ 87,674 $ 80,752
Service cost................................................. 2,796 2,915 3,162
Interest cost................................................ 6,776 6,637 6,703
Plan participants' contributions............................. 168 279 213
Amendments................................................... 74 0 (265)
Actuarial loss/(gain)........................................ 14,193 (2,171) 2,786
Benefits paid................................................ (8,295) (8,559) (5,677)
----------- ----------- -----------
Benefit obligation at end of period..................... 102,487 86,775 87,674
----------- ----------- -----------
Change in plan assets:
Fair value of assets at beginning of period.................. 88,979 89,716 74,897
Actual return on Plan assets................................. 25,129 4,884 19,430
Employer contribution........................................ 257 2,659 853
Plan participants' contributions............................. 168 279 213
Benefits paid................................................ (8,295) (8,559) (5,677)
----------- ----------- -----------
Fair value of assets at end of period................... 106,238 88,979 89,716
----------- ----------- -----------
Plan funded status................................................ 3,751 2,204 2,042
Unrecognized prior service cost.............................. (147) (243) (265)
Unrecognized net transition asset or obligation.............. 0 0 0
Unrecognized actuarial loss/(gain)........................... (17,057) (15,421) (18,115)
Union plans.................................................. (106) (122) (293)
----------- ----------- -----------
(Accrued benefit liability) prior to additional minimum
liability............................................. (13,559) (13,582) (16,631)
Amounts recognized in the statement of financial position consist
of:
Prepaid benefit cost (accrued benefit liability)............. (14,167) (13,997) (16,835)
Accumulated other comprehensive income....................... 608 415 204
----------- ----------- -----------
Net amount recognized................................... $ (13,559) $ (13,582) $ (16,631)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(table continued on next page)
F-18
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
PENSION BENEFITS
-----------------------------------------
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Weighted-average assumptions:
Discount rate................................................ 7.0% 8.0% 7.75%
Expected return on plan assets............................... 10.0% 10.0% 10.0%
Rate of compensation increase................................ 4.5% 4.5% 4.5%
Components of net periodic benefit cost:
Service cost................................................. $ 2,796 $ 2,915 $ 3,162
Interest cost................................................ 6,776 6,637 6,703
Expected return on plan assets............................... (8,708) (8,947) (7,307)
Amortization of prior service cost........................... (22) (22) 0
Amortization of (gain)/loss.................................. (593) (802) (64)
Union costs.................................................. 88 70 205
----------- ----------- -----------
Net periodic cost/(benefit).................................. $ 337 $ (149) $ 2,699
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the two non-qualified retirement plans with accumulated
benefit obligations in excess of plan assets were:
<TABLE>
<CAPTION>
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
-----------------------------------------
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
<S> <C> <C> <C>
Projected benefit obligation.......... $ 1,939 $ 1,843 $ 1,913
Accumulated benefit obligation........ 1,939 1,843 1,913
Plan assets........................... 0 0 0
<CAPTION>
EXCESS BENEFIT
RETIREMENT PLAN
--------------------------------------
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
<S> <C> <C> <C>
Projected benefit obligation.......... $ 850 $ 652 $ 453
Accumulated benefit obligation........ 651 575 315
Plan assets........................... 0 0 0
</TABLE>
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>
<CAPTION>
OTHER BENEFITS
-----------------------------------------
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period.................... $ 2,604 $ 2,695 $ 2,743
Service cost................................................. 6 8 23
Interest cost................................................ 198 199 222
Actuarial loss/(gain)........................................ 322 49 (168)
Benefits paid................................................ (372) (347) (125)
----------- ----------- -----------
Benefit obligation at end of period..................... 2,758 2,604 2,695
----------- ----------- -----------
</TABLE>
(table continued on next page)
F-19
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
OTHER BENEFITS
-----------------------------------------
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Change in plan assets:
Fair value of assets at beginning of period.................. 0 0 0
Employer contribution........................................ 372 347 125
Benefits paid................................................ (372) (347) (125)
----------- ----------- -----------
Fair value of assets at end of period................... 0 0 0
----------- ----------- -----------
Plan funded status................................................ (2,758) (2,604) (2,695)
Unrecognized actuarial gain.................................. (46) (378) (443)
----------- ----------- -----------
Accrued benefit liability prior to additional minimum
liability............................................. (2,804) (2,982) (3,138)
Amounts recognized in the statement of financial position consist
of:
Accrued benefit liability.................................... (2,804) (2,982) (3,138)
----------- ----------- -----------
Net amount recognized................................... $(2,804) $(2,982) $(3,138)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average assumptions:
Discount rate................................................ 7.0% 8.0% 7.75%
Expected return on plan assets............................... N/A N/A N/A
Rate of compensation increase................................ N/A N/A N/A
Components of net periodic benefit cost:
Service cost................................................. $ 6 $ 8 $ 23
Interest cost................................................ 198 199 222
Amortization of (gain)/loss.................................. (10) (15) 0
----------- ----------- -----------
Net periodic benefit cost.................................... $ 194 $ 192 $ 245
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
For measurement purposes, a 9.5 percent rate of increase in the per capita
cost covered health care benefits was assumed for fiscal 1998. The rate was
assumed to decrease gradually to 5.0 percent for 2007 and remain at that level
thereafter.
The Company sponsors benefit plans that provide postretirement medical and
life insurance benefits for certain current and former employees. For the most
part, current employees are not eligible for the postretirement medical
coverage. As such, the assumed health care trend rates have an insignificant
effect on the amounts reported for the postretirement benefits plan.
One-percentage point change in the assumed health care trend rates would have
the following effect:
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components................. $ 7,361 $ (7,435)
Effect on postretirement benefit obligation............................. $113,206 $ (108,742)
</TABLE>
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 5.0 percent of the combined long-term
debt and equity (as defined) of Pro-Fac and the Company.
Under the Retirement Savings and Incentive Plan ('RSIP' or the 'Plan'), the
Company makes an incentive contribution to the Plan if certain pre-established
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
F-20
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
portion of their salary into the plan. During fiscal 1998, 1997 and 1996 the
Company allocated $475,000, $500,000 and $400,000, respectively, in the form of
matching contributions and $400,000, $400,000 and $211,000, respectively, in the
form of incentive contributions for the benefit of its employees.
LONG-TERM INCENTIVE PLAN
On June 24, 1996, the Company introduced a long-term incentive program, the
Agrilink 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 on the fourth anniversary of grant. One-third of the appreciated
value of units in excess of the initial grant price is paid as cash compensation
over the subsequent three years. The final value of the performance units is
determined on the fourth anniversary of grant. The total units granted were
278,357 at $21.88 per unit in June 1998, 176,278 at $25.04 per unit, and 7,996
at $13.38 per unit in June 1997, and 248,511 at $13.38 per unit in June 1996.
Units forfeited during the year included 27,251 at $13.38 and 19,978 at $25.04.
During fiscal 1997, approximately $1.5 million was allocated to this plan.
The value of the grants from the Agrilink Foods Equity Value Plan will be
based on the Company's future earnings and debt repayment.
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 price of such shares is par
value, $10 per share. During fiscal 1998, 1997, and 1996, 27,043, 31,435 and
33,364 shares, respectively, were held by employees, and 580 shares were
subscribed to as of June 27, 1998.
NOTE 8. SUBSEQUENT EVENTS AND OTHER MATTERS
DEAN FOODS VEGETABLE COMPANY
On July 27, 1998, the Company announced that it had reached a definitive
agreement with Dean Foods Company ('Dean') of Franklin Park, Illinois, to
acquire Dean's vegetable operations which include the nationally known Birds Eye
brand and Dean's Freshlike and VegAll brands. The Dean Foods Vegetable Company
('DFVC') reported net sales of $620.2 million (on a basis consistent with that
reported by Agrilink) and operating earnings of $38.7 million. DFVC employs
approximately 2,000 full-time employees in 13 plants, located in California,
Minnesota, New York, Texas, and Wisconsin. The acquisition is expected to close
in September 1998 and will be accounted for as a purchase.
SEYFERT FOODS, INC.
On May 6, 1998, the Company and Heath Investment Capital, Inc., announced
that they were unable to reach a definitive agreement regarding the Company's
effort to acquire the assets of Seyfert Foods, Inc. of Ft. Wayne, Indiana.
J.A. HOPAY DISTRIBUTING CO., INC.
Effective July 21, 1998, the Company acquired J.A. Hopay Distributing Co.,
Inc. of Pittsburgh, Pennsylvania. Hopay distributes snack products for Snyder of
Berlin. The acquisition was accounted for as a purchase. The purchase price was
approximately $3.1 million.
F-21
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LEGAL MATTERS
The Company is party to various litigation and claims arising in the
ordinary course of business. Management and legal counsel for the Company are of
the opinion that none of these legal actions will have a material effect on the
financial position of the Company.
COMMITMENTS
The Company's Curtice Burns Foods business unit has guaranteed an
approximate $1.4 million loan for the City of Montezuma to renovate a sewage
treatment plant operated in Montezuma on behalf of the City.
F-22
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales.......................................................................... $ 182,579 $ 176,397
Cost of sales...................................................................... (135,882) (130,748)
------------- -------------
Gross profit....................................................................... 46,697 45,649
Selling, administrative and general expenses....................................... (34,867) (32,954)
Income from Great Lakes Kraut Company.............................................. 636 164
Gain on sale of aseptic operations................................................. 64,202 0
------------- -------------
Operating income before dividing with Pro-Fac...................................... 76,668 12,859
Interest expense................................................................... (8,336) (7,638)
------------- -------------
Pretax income before dividing with Pro-Fac and before extraordinary item........... 68,332 5,221
Pro-Fac share of income before extraordinary item.................................. (5,658) (2,611)
------------- -------------
Income before taxes and before extraordinary item.................................. 62,674 2,610
Tax provision...................................................................... (24,334) (1,193)
------------- -------------
Income before extraordinary item................................................... 38,340 1,417
Extraordinary item relating to the early extinguishment of debt (net of income
taxes and after dividing with Pro-Fac)........................................... (16,366) 0
------------- -------------
Net Income......................................................................... $ 21,974 $ 1,417
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-23
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 26, JUNE 27, SEPTEMBER 27,
1998 1998 1997
------------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 9,057 $ 5,046 $ 3,995
Accounts receivable trade, net................................... 98,911 55,046 65,053
Accounts receivable, other....................................... 11,053 3,575 3,863
Current deferred tax asset....................................... 13,129 4,642 8,198
Inventories --
Finished goods.............................................. 349,451 111,153 140,056
Raw materials and supplies.................................. 45,829 30,433 25,413
------------- -------- -------------
Total inventories...................................... 395,280 141,586 165,469
------------- -------- -------------
Current investment in CoBank..................................... 1,330 1,994 631
Prepaid manufacturing expense.................................... 98 8,404 84
Prepaid expenses and other current assets........................ 17,288 12,989 8,464
------------- -------- -------------
Total current assets........................................ 546,146 233,282 255,757
Investment in CoBank.................................................. 22,377 22,377 24,320
Investment in Great Lakes Kraut Company............................... 7,223 6,584 6,585
Property, plant and equipment, net.................................... 317,025 194,615 209,216
Assets held for sale at net realizable value.......................... 2,711 2,662 3,259
Goodwill and other intangible assets, net............................. 327,650 94,744 95,503
Other assets.......................................................... 24,418 12,175 7,507
Note receivable due from Pro-Fac...................................... 9,400 0 0
------------- -------- -------------
Total assets........................................... $ 1,256,950 $566,439 $ 602,147
------------- -------- -------------
------------- -------- -------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes payable.................................................... $ 94,000 $ 0 $ 64,000
Current portion of obligations under capital leases.............. 256 256 558
Current portion of long-term debt................................ 1,023 8,071 8,073
Accounts payable................................................. 84,493 70,125 38,931
Income taxes payable............................................. 12,420 3,943 4,234
Accrued interest................................................. 690 8,559 3,960
Accrued employee compensation.................................... 14,329 8,598 7,981
Other accrued expenses........................................... 89,746 19,013 21,681
Current liability due to Pro-Fac...................................... 27,254 6,642 9,659
------------- -------- -------------
Total current liabilities.............................. 324,211 125,207 159,077
Obligations under capital leases...................................... 503 503 817
Long-term debt........................................................ 463,700 69,937 70,528
Senior subordinated notes............................................. 15 160,000 160,000
Subordinated bridge facility.......................................... 200,000 0 0
Subordinated promissory note.......................................... 30,000 0 0
Deferred income tax liabilities....................................... 35,341 33,154 40,902
Other non-current liabilities......................................... 26,626 23,053 22,967
------------- -------- -------------
Total liabilities...................................... 1,080,396 411,854 454,291
------------- -------- -------------
Commitments and contingencies
Shareholder's Equity:
Common stock, par value $.01;
10,000 shares outstanding, owned by Pro-Fac.................... 0 0 0
Accumulated other comprehensive income:
Minimum pension liability adjustment............................. (608) (608) 0
Cumulative foreign currency adjustment........................... (5) 0 0
Additional paid-in capital............................................ 167,071 167,071 158,317
Retained earnings (accumulated deficit)............................... 10,096 (11,878) (10,461)
------------- -------- -------------
Total shareholder's equity............................. 176,554 154,585 147,856
------------- -------- -------------
Total liabilities and shareholder's equity............. $ 1,256,950 $566,439 $ 602,147
------------- -------- -------------
------------- -------- -------------
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-24
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income.................................................................... $ 21,974 $ 1,417
Adjustments to reconcile net income to net cash used in operating
activities --
Gain on the sale of the aseptic operation................................ (64,202) 0
Extraordinary item relating to the early extinguishment of debt.......... 16,366 0
Amortization of goodwill and other intangibles........................... 926 990
Amortization of debt issue costs......................................... 200 199
Depreciation............................................................. 4,385 4,597
Equity in undistributed earnings of Great Lakes Kraut Company............ (636) (164)
Change in assets and liabilities:
Accounts receivable................................................. (22,222) (17,442)
Inventories......................................................... (72,038) (52,739)
Income taxes payable................................................ 18,940 (918)
Accounts payable and other accrued expenses......................... (23,305) (9,994)
Due to Pro-Fac...................................................... 12,870 5,347
Other assets and liabilities........................................ (26) (2,291)
------------- -------------
Net cash used in operating activities.............................................. (106,768) (70,998)
------------- -------------
Cash Flows From Investing Activities:
Purchase of property, plant and equipment..................................... (4,094) (3,231)
Proceeds from disposals....................................................... 83,000 375
Proceeds from investment in CoBank............................................ 664 316
Cash paid for acquisitions.................................................... (445,918) 0
------------- -------------
Net cash used in investing activities.............................................. (366,348) (2,540)
------------- -------------
Cash Flows From Financing Activities:
Proceeds from issuance of short-term debt..................................... 177,000 64,000
Payments on short-term debt................................................... (83,000) 0
Proceeds from issuance of long-term debt...................................... 677,100 9,000
Proceeds from Great Lakes Kraut Company....................................... 0 3,000
Payments on long-term debt.................................................... (276,450) (1,303)
Cash paid for debt issuance costs............................................. (17,523) 0
------------- -------------
Net cash provided by financing activities.......................................... 477,127 74,697
------------- -------------
Net change in cash and cash equivalents............................................ 4,011 1,159
Cash and cash equivalents at beginning of period................................... 5,046 2,836
------------- -------------
Cash and cash equivalents at end of period......................................... $ 9,057 $ 3,995
------------- -------------
------------- -------------
</TABLE>
(table continued on next page)
F-25
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Supplemental disclosure of cash flow information:
Acquisition of Dean Foods Vegetable Company
Accounts receivable...................................................... $ 28,701
Inventories.............................................................. 191,619
Prepaid expenses and other current assets................................ 2,871
Current deferred tax asset............................................... 6,300
Property, plant and equipment............................................ 131,648
Goodwill and other intangible assets..................................... 230,609
Accounts payable......................................................... (37,802)
Accrued employee compensation............................................ (8,437)
Other accrued expenses................................................... (66,748)
Long-term debt........................................................... (2,752)
Subordinated promissory note............................................. (30,000)
Other assets and liabilities, net........................................ (2,404)
-------------
$ 443,605
-------------
-------------
Acquisition of J.A. Hopay Distributing Co., Inc.:
Accounts receivable........................................................... $ 420
Inventories................................................................... 153
Property, plant and equipment................................................. 51
Goodwill and other intangible assets.......................................... 3,303
Other accrued expenses........................................................ (251)
Obligation for covenant not to compete........................................ (1,363)
-------------
$ 2,313
-------------
-------------
Investment in Great Lakes Kraut Company:
Inventories................................................................... $ 2,175
Prepaid expenses and other current assets..................................... 409
Property, plant and equipment................................................. 6,966
Other accrued expenses........................................................ (62)
-------------
$ 9,488
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-26
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, and in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for these periods. Agrilink Foods, Inc. ('Agrilink' or the 'Company')
is a wholly owned subsidiary of Pro-Fac Cooperative, Inc. ('Pro-Fac' or the
'Cooperative'). These financial statements should be read in conjunction with
the financial statements and accompanying notes contained in the Company's
audited financial statements beginning on page F-2.
CONSOLIDATION
The consolidated financial statements include the Company and its wholly
owned subsidiaries after elimination of intercompany transactions and balances.
Investments in affiliates, owned more than 20 percent but not in excess of 50
percent, are recorded under the equity method of accounting.
RECLASSIFICATION
Certain items for fiscal 1998 have been reclassified to conform with the
current presentation.
ADOPTION OF SFAS NO. 130
Effective June 28, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, 'Reporting Comprehensive Income.'
Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances from non-owner
sources. Under SFAS No. 130, the term 'comprehensive income' is used to describe
the total of net earnings plus other comprehensive income which for the Company
includes foreign currency translation adjustments and minimum pension liability
adjustments. The adoption of SFAS No. 130 did not have a material effect on the
Company's results of operations or financial position.
ADOPTION OF SFAS NO. 131
Effective June 28, 1998 the Company adopted SFAS No. 131, 'Disclosures
about Segments of an Enterprise and Related Information.' SFAS No. 131
supersedes SFAS No. 14, 'Financial Reporting for Segments of a Business
Enterprise,' replacing the 'industry segment' approach with the 'management'
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS No. 131 did not affect the Company's results of operations
or financial position.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not engage in interest rate speculation. Derivative
financial instruments are utilized to hedge interest rate risks and are not held
for trading purposes.
The Company enters into interest rate swap agreements to limit exposure to
interest rate movements. Net payments or receipts are accrued into prepaid
expenses and other current assets and/or other accrued expenses and are recorded
as adjustments to interest expense. Interest rate instruments are entered into
for periods no greater than the life of the underlying transaction being hedged.
Management anticipates that all interest rate derivatives will be held to
maturity. Any gains or losses on prematurely terminated interest rate
derivatives will be recognized over the remaining life, if any, of the
underlying transaction as an adjustment to interest expense.
F-27
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. ACQUISITION OF DEAN FOODS VEGETABLE COMPANY
On September 24, 1998, Agrilink acquired the Dean Foods Vegetable Company
('DFVC'), the frozen and canned vegetable business of Dean Foods Company ('Dean
Foods'), by acquiring all the outstanding capital stock of Dean Foods Vegetable
Company and Birds Eye de Mexico SA de CV (the 'Acquisition'). In connection with
the Acquisition, Agrilink sold its aseptic business to Dean Foods. Agrilink paid
$360 million in cash, net of the sale of the Aseptic Business, and issued to
Dean Foods a $30 million unsecured subordinated promissory note due November 22,
2008 (the 'Subordinated Promissory Note'), as consideration for the Acquisition.
The Company has the right, exercisable until July 15, 1999, to require Dean
Foods, jointly with the Company, to treat the Acquisition as an asset sale for
tax purposes under Section 338(h)(10) of the Internal Revenue Code. In order to
exercise that election, the Company will pay $13.2 million to Dean Foods. The
Company intends to exercise that election.
After the Acquisition, DFVC was merged into the Company, and Dean Foods
Vegetable Company became a business unit of the Company known as Agrilink Foods
Vegetable Company ('AFVC'). DFVC has been one of the leading processors of
vegetables in the United States, selling its products under well-known brand
names, such as Birds Eye, Freshlike and Veg-All, and private labels. The Company
believes that the Acquisition strengthens its competitive position by: (i)
enhancing its brand recognition and market position, (ii) providing
opportunities for cost savings and operating efficiencies and (iii) increasing
its product and geographic diversification.
The Acquisition was accounted for under the purchase method of accounting.
Under purchase accounting, tangible and identifiable intangible assets acquired
and liabilities assumed will be recorded at their respective fair values. The
valuations and other studies which will provide the basis for such an allocation
have not progressed to a stage where there is sufficient information to make a
final allocation in the accompanying financial statements. Accordingly, the
purchase accounting adjustments made in the accompanying financial statements
are preliminary. Once an allocation is determined, in accordance with generally
accepted accounting principles, any remaining excess of purchase cost over net
assets acquired will be adjusted through goodwill.
Due to insignificance, the results of operations of AFVC for the period
September 24 through 26, 1998 have not been included in the Company's
Consolidated Statement of Operations for the three months ended September 26,
1998.
Concurrently with the Acquisition, Agrilink refinanced its existing
indebtedness (the 'Refinancing'), including its 12.25 percent Senior
Subordinated Notes due 2005 (the 'Old Notes') and its then existing bank debt.
On August 24, 1998, Agrilink commenced a tender offer (the 'Tender Offer') for
all the Old Notes and consent solicitation to certain amendments under the
indenture governing the Old Notes to eliminate substantially all the restrictive
covenants and certain events of default therein. Substantially all of the $160.0
million aggregate principal amount of the Old Notes were tendered and purchased
by Agrilink for aggregate consideration of approximately $184 million, including
accrued interest of $2.9 million. Agrilink also terminated its existing bank
facility (including seasonal borrowings) and repaid the $176.5 million,
excluding interest owed and breakage fees outstanding thereunder.
In order to consummate the Acquisition and the Refinancing and to pay the
related fees and expenses, Agrilink: (i) entered into a new credit facility (the
'New Credit Facility') providing for $455.0 million of term loan borrowings (the
'Term Loan Facility') and up to $200.0 million of revolving credit borrowings
(the 'Revolving Credit Facility'), (ii) entered into a $200.0 million bridge
loan facility (the 'Bridge Facility') and (iii) issued a $30.0 million
Subordinated Promissory Note to Dean Foods. The Bridge Facility will be repaid
principally with the proceeds from a new long-term take-out financing. The
Bridge Facility was provided by Warburg Dillon Read LLC, as Arranger and
Syndication Agent; and UBS AG, Stamford Branch, as Administrative Agent; and the
Bank of Montreal and Harris Trust and Savings Bank as additional lenders.
F-28
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. AGREEMENTS WITH PRO-FAC
The Company's contractual relationship with Pro-Fac is defined in the
Pro-Fac Marketing and Facilitation Agreement ('Agreement'). Under the 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 Agrilink, it
may be more or less than the price Agrilink would pay in the open market in the
absence of the Agreement.
Under the Agreement, the Company is required to have on its board of
directors some persons who are neither members of nor affiliated with Pro-Fac
('Disinterested Directors'). The number of Disinterested Directors must at least
equal the number of directors who are members of Pro-Fac. The volume and type of
crops to be purchased by Agrilink under the Agreement are determined pursuant to
its annual profit plan, which requires the approval of a majority of the
Disinterested Directors. In addition, under the Agreement, 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, as additional
patronage income, 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 Agrilink, including the provision of a long term, stable
crop supply, favorable payment terms for crops, and the sharing of risks of
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. Under the Agreement, Pro-Fac is required to reinvest at least 70 percent
of the additional Patronage income in Agrilink.
Amounts received by Pro-Fac from Agrilink for the quarters ended September
26, 1998 and September 27, 1997 include: commercial market value of crops
delivered, $44.3 and $40.6 million, respectively; and additional proceeds from
profit/(loss) sharing provisions, $4.0 million and $2.6 million, respectively.
In the first quarter of fiscal 1999, the Company reclassified a $9.4
million demand receivable due from Pro-Fac reflecting the conversion of such
receivable to a non-interest bearing long-term obligation due from Pro-Fac
having a 10-year maturity.
NOTE 4. DEBT
NEW CREDIT FACILITY
In connection with the Acquisition, the Company has entered into the New
Credit Facility with Harris Bank as Administrative Agent and Bank of Montreal as
Syndication Agent, and the lenders thereunder. The Credit Facility consists of
the $200.0 million Revolving Credit Facility and the $455.0 million Term Loan
Facility. The Term Loan Facility is comprised of the Term A Facility, which has
a maturity of five years, the Term B Facility, which has a maturity of six
years, and the Term C Facility, which has a maturity of seven years. The
Revolving Credit Facility has a maturity of five years.
The New Credit Facility bears interest, at the Company's option, at the
Administrative Agent's alternate base rate or the London Interbank Offered Rate
('LIBOR') plus, in each case, applicable margins of: (i) in the case of
alternate base rate loans, (x) 1.00 percent for loans under the Revolving Credit
Facility and the Term A Facility, (y) 2.75 percent for loans under the Term B
Facility and (z) 3.00 percent for loans under the Term C Facility and (ii) in
the case of LIBOR loans, (x) 2.75 percent for loans under the Revolving Credit
Facility and the Term A Facility, (y) 3.75 percent for loans under the Term B
Facility and (z) 4.00 percent for loans under the Term C Facility. The
Administrative Agent's
F-29
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
'alternate base rate' is defined as the greater of: (i) the prime commercial
rate as announced by the Administrative Agent or (ii) the Federal Funds rate
plus 0.50 percent. In addition, the Company will pay a commitment fee calculated
at a rate of 0.50 percent per annum on the daily average unused commitment under
the Revolving Credit Facility.
Beginning with the reporting period ending March 31, 1999, the applicable
margins for the New Credit Facility will be subject to possible reductions based
on the ratio of consolidated debt to earnings before interest, taxes,
depreciation and amortization ('EBITDA') (each as defined in the New Credit
Facility).
Upon consummation of the Acquisition, the Company drew $455.0 million under
the Term Loan Facility, consisting of $100 million, $175 million and $180
million of loans under the Term A Facility, Term B Facility and Term C Facility,
respectively. Additionally, the Company drew $93.0 million under the Revolving
Credit Facility for seasonal working capital needs and $14.3 million under the
Revolving Credit Facility was issued for letters of credit. During December
1998, the Company's primary lender exercised its right under the New Credit
Facility to transfer $50.0 million from the Term A Facility to the Term B and
Term C Facilities in increments of $25.0 million.
The Term Loan Facility will be subject to the following amortization
schedule.
<TABLE>
<CAPTION>
FISCAL YEAR TERM LOAN A TERM LOAN B TERM LOAN C TOTAL
- -------------------- ----------- ----------- ----------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1999................ $ 0.0 $ 0.2 $ 0.2 $ 0.4
2000................ 7.5 0.4 0.4 8.3
2001................ 10.0 0.4 0.4 10.8
2002................ 10.0 0.4 0.4 10.8
2003................ 10.0 0.4 0.4 10.8
2004................ 12.5 0.4 0.4 13.3
2005................ 0.0 197.8 0.4 198.2
2006................ 0.0 0.0 202.4 202.4
----------- ------- ----------- ------
$50.0 $ 200.0 $ 205.0 $455.0
----------- ------- ----------- ------
----------- ------- ----------- ------
</TABLE>
The Term Loan Facility is subject to mandatory prepayment under various
scenarios as defined in the New Credit Facility.
The Company's obligations under the New Credit Facility are secured by a
first-priority lien on: (i) substantially all existing or after-acquired assets,
tangible or intangible, (ii) the capital stock of certain of Pro-Fac's current
and future subsidiaries, and (iii) all of the Company's rights (principally
indemnification rights) under the agreement to acquire DFVC and the Pro-Fac
Marketing and Facilitation Agreement. The Company's obligations under the New
Credit Facility are guaranteed by Pro-Fac and certain of the Company's current
and future subsidiaries, if any.
The New Credit Facility contains customary covenants and restrictions on
the Company's ability to engage in certain activities, including, but not
limited to: (i) limitations on the incurrence of indebtedness and liens, (ii)
limitations on sale-leaseback transactions, consolidations, mergers, sale of
assets, transactions with affiliates and investments and (iii) limitations on
dividend and other distributions. The New Credit Facility also contains
financial covenants requiring Pro-Fac to maintain a minimum level of EBITDA, a
minimum interest coverage ratio, a minimum fixed charge coverage ratio, a
maximum leverage ratio and a minimum level of net worth. The Company is in
compliance with all covenants, restrictions and requirements under the terms of
the New Credit Facility.
INTEREST RATE PROTECTION AGREEMENTS
The Company has entered into a three-year interest rate swap agreement with
the Bank of Montreal in the notional amount of $150 million. The swap agreement
provides for an interest rate of
F-30
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4.96 percent over the term of the swap payable by the Company in exchange for
payments at the published three-month LIBOR. In addition, the Company entered
into a separate interest rate swap agreement with the Bank of Montreal in the
notional amount of $100 million for an initial period of three years, which may
be extended, at the Company's option, for an additional two-year period. This
swap agreement provides for an interest rate of 5.32 percent over the term of
the swap, including the two-year extension period if the Company elects to
extend, payable by the Company in exchange for payments at the published
three-month LIBOR. The Company entered into these agreements in order to manage
its interest rate risk by exchanging its floating rate interest payments for
fixed rate interest payments.
SUBORDINATED BRIDGE FACILITY
To complete the Acquisition, the Company also entered into a Subordinated
Bridge Facility (the 'Bridge Facility'). The Bridge Facility was provided by
Warburg Dillon Read LLC, as Arranger and Syndication Agent; and UBS AG, Stamford
Branch, as Administrative Agent; and the Bank of Montreal and Harris Trust and
Savings Bank as additional lenders. The interest rate under the Bridge Facility
resets monthly on the basis of LIBOR plus a spread of 5 percent for the first
90 days, which spread increases by an additional 1 percent each subsequent
90-day period. In no event will the interest rate exceed 16 percent per annum.
The Company anticipates that the Bridge Facility will be repaid principally with
the proceeds of a new long-term take-out financing. Should the Company be unable
to complete its long-term take-out financing, the Bridge Facility, if not repaid
within one year, may thereafter be converted to permanent financing with
consistent interest rates and a maturity of September, 2006.
SUBORDINATED PROMISSORY NOTE
As partial consideration for the Acquisition, the Company issued to Dean
Foods a Subordinated Promissory Note for $30 million aggregate principal amount
due November 22, 2008. Interest on the Subordinated Promissory Note is payable
quarterly in arrears commencing December 31, 1998, at a rate per annum of 5
percent until November 22, 2003, and at a rate of 10 percent thereafter.
Interest accruing through November 22, 2003 is required to be paid in kind
through the issuance by the Company of additional subordinated promissory notes
identical to the Subordinated Promissory Note. Interest accruing after November
22, 2003 is payable in cash. The Subordinated Promissory Note may be prepaid at
the Company's option without premium or penalty.
The Subordinated Promissory Note is expressly subordinate to the
Subordinated Bridge Facility, any long-term take-out financing, and the New
Credit Facility and contains no financial covenants. The Subordinated Promissory
Note is guaranteed by Pro-Fac.
12 1/4 PERCENT SENIOR SUBORDINATED NOTES (DUE 2005)
In conjunction with the Acquisition, the Company repurchased $159,985,000
principal amount of its Old Notes, of which $160 million aggregate principal
amount was previously outstanding. The Company paid a total of approximately
$184 million to repurchase the Old Notes, including interest accrued thereon of
$2.9 million. Holders who tendered consented to certain amendments to the
indenture relating to the Old Notes, which eliminated or amended substantially
all the restrictive covenants and certain events of default contained in such
indenture. The Company may repurchase the remaining Old Notes in the future in
open market transactions, privately negotiated purchases or otherwise.
F-31
<PAGE>
<PAGE>
AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. OTHER MATTERS
J.A. HOPAY DISTRIBUTING CO., INC.
Effective July 21, 1998, the Company acquired J.A. Hopay Distributing Co.,
Inc. ('Hopay') of Pittsburgh, Pennsylvania. Hopay distributes snack products for
Snyder of Berlin, one of the Company's business units within its Snack Foods
Group. The acquisition was accounted for as a purchase. The purchase price (net
of liabilities assumed) was approximately $2.3 million. Intangibles of
approximately $3.3 million were recorded in conjunction with this transaction
and are being amortized over 30 years.
FORMATION OF NEW SAUERKRAUT COMPANY
Effective July 1, 1997, the Company and Flanagan Brothers, Inc. of Bear
Creek, Wisconsin, contributed all their sauerkraut production related assets to
form a new sauerkraut company. This new company, Great Lakes Kraut Company,
operates as a New York limited liability company, with ownership split equally
between the two companies. The joint venture is accounted for using the equity
method of accounting.
F-32
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
DEAN FOODS COMPANY
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and of cash flows present fairly, in
all material respects, the financial position of Dean Foods Vegetable Company
and subsidiaries ('DFVC'), a division of Dean Foods Company ('DFC'), at May 31,
1998, May 25, 1997 and May 26, 1996, and the results of their operations and
their cash flows for each of the three years in the period ended May 31, 1998,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
August 31, 1998
F-33
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MAY 31, MAY 25, MAY 26,
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales (Note 2)........................................................... $541,243 $549,286 $569,836
Operating costs and expenses:
Cost of products sold (Note 2).......................................... 397,577 406,703 450,599
Selling, general and administrative expenses (Note 3)................... 106,256 108,809 114,606
Special charge (Note 13)................................................ -- 9,644 37,346
Interest expense -- related parties (Note 3)............................ 9,170 10,270 12,010
Other, net.............................................................. (1,193) (648) (560)
-------- -------- --------
511,810 534,778 614,001
-------- -------- --------
Net income (loss) before income taxes........................................ 29,433 14,508 (44,165)
Provision (benefit) for income taxes (Notes 2 and 7)......................... 11,773 5,803 (17,224)
-------- -------- --------
Net income (loss)............................................................ $ 17,660 $ 8,705 $(26,941)
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, MAY 25, MAY 26,
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash (Note 2)........................................................... $ 301 $ 235 $ 227
Accounts receivable, less allowance for doubtful accounts of $500, $500
and $510, respectively (Notes 2 and 3)................................ 32,451 35,315 36,758
Inventories (Notes 2 and 4)............................................. 125,717 143,561 158,390
Deferred tax assets (Notes 2 and 7)..................................... 12,868 15,450 18,697
Prepaid Slotting (Note 2)............................................... 5,092 3,677 3,576
Other................................................................... 3,837 4,648 6,791
-------- -------- --------
Total current assets............................................... 180,266 202,886 224,439
-------- -------- --------
Property, plant and equipment, net (Notes 2 and 5)........................... 133,276 145,374 150,595
Other assets:
Goodwill, net of amortization of $2,570, $1,978 and $1,397, respectively
(Note 2).............................................................. 20,673 21,265 21,846
Other intangible assets, net of amortization of $2,965, $2,293 and
$1,634, respectively (Note 2)......................................... 23,130 23,802 24,462
Other................................................................... 2,400 2,844 3,971
-------- -------- --------
Total assets....................................................... $359,745 $396,171 $425,313
-------- -------- --------
-------- -------- --------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable........................................................ $ 22,422 $ 28,432 $ 26,237
Accounts payable to related parties (Note 3)............................ 23,943 11,220 15,521
Accrued liabilities (Notes 8 and 13).................................... 32,244 31,869 35,408
Current portion of note payable to related parties (Note 3)............. 5,370 5,056 8,633
Current portion of long-term debt (Note 9).............................. 503 712 692
-------- -------- --------
Total current liabilities.......................................... 84,482 77,289 86,491
-------- -------- --------
Long-term liabilities:
Long-term debt (Note 9)................................................. 2,450 2,995 3,669
Note payable to related parties (Note 3)................................ 4,208 8,501 12,505
Deferred income taxes (Notes 2 and 7)................................... 19,151 19,152 17,329
Other................................................................... 3,257 2,824 2,664
-------- -------- --------
Total long-term liabilities........................................ 29,066 33,472 36,167
-------- -------- --------
Commitments and contingencies (Note 15)...................................... -- -- --
-------- -------- --------
Equity:
Investments by and advances from DFC (Note 3)........................... 246,197 285,410 302,655
-------- -------- --------
Total equity....................................................... 246,197 285,410 302,655
-------- -------- --------
Total liabilities and equity....................................... $359,745 $396,171 $425,313
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MAY 31, MAY 25, MAY 26,
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)........................................................ $ 17,660 $ 8,705 $(26,941)
Adjustments to reconcile net income (loss) to net cash provided from
operations:
Depreciation and amortization....................................... 19,167 20,658 23,494
Deferred income taxes............................................... 2,581 5,070 (13,211)
Other current assets................................................ 10,485 8,195 4,981
Other long-term assets.............................................. 444 1,127 (666)
Special charge...................................................... -- 9,644 37,346
Other............................................................... 7,765 3,622 (6,287)
Change in working capital items:
Decrease in accounts receivable................................ 2,864 1,443 6,807
(Increase) decrease in inventories............................. 17,844 14,829 12,534
Increase in other current assets............................... (11,089) (6,153) (9,830)
Increase (decrease) in accounts payable and other accrued
expense...................................................... 4,745 (17,890) (2,647)
-------- -------- --------
Net cash provided from operations................................... 72,466 49,250 25,580
-------- -------- --------
Cash flows from investing activities:
Capital expenditures..................................................... (11,253) (15,373) (15,585)
Proceeds from dispositions of property, plant and equipment.............. 459 316 763
Acquisitions, net of cash received....................................... -- -- (21,748)
-------- -------- --------
Net cash used in investing activities............................... (10,794) (15,057) (36,570)
-------- -------- --------
Cash flows from financing activities:
Repayments of long-term debt............................................. (754) (654) (636)
Net repayments of notes payable to related parties....................... (3,979) (7,581) (17,614)
Increase (decrease) in advances from DFC (Note 3)........................ (56,873) (25,950) 29,429
-------- -------- --------
Net cash provided from (used in) financing activities............... (61,606) (34,185) 11,179
-------- -------- --------
Net increase in cash.......................................................... 66 8 189
Cash, beginning of year....................................................... 235 227 38
-------- -------- --------
Cash, end of year............................................................. $ 301 $ 235 $ 227
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Dean Foods Vegetable Company and its subsidiaries ('DFVC') is a division of
Dean Foods Company ('DFC') and is principally engaged in the processing,
distribution and sales of frozen and canned vegetables in the United States. As
part of a reorganization of DFC in fiscal 1994, the vegetable businesses within
DFC were combined with the Birds Eye Frozen Vegetable business to form DFVC. The
Birds Eye Frozen Vegetable business was acquired from the All-American Gourmet
Company, a wholly-owned subsidiary of Kraft General Foods, Inc., on December 27,
1993.
The accompanying consolidated financial statements reflect the 'carve-out'
financial position, results of operations and cash flows of DFVC and its
majority owned subsidiaries for the periods presented. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial information included herein does not necessarily
reflect what the consolidated financial position and results of operations of
DFVC would have been had it operated as a stand alone entity during the periods
covered, and may not be indicative of future operations or financial position.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
DFVC's fiscal year ends on the last Sunday in May. There were 53 weeks in
the fiscal year ended May 1998, whereas there were 52 weeks in fiscal 1997 and
1996.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND TEMPORARY CASH INVESTMENTS
DFVC considers temporary cash investments with an original maturity of
three months or less to be cash equivalents.
RECEIVABLES
Accounts receivable are presented net of certain promotional and marketing
allowances.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for finished frozen and canned products
and by the first-in, first-out (FIFO) method for all other inventories. The FIFO
method would approximate the actual cost. Market for raw materials is based on
replacement costs and for other inventory classifications on net realizable
value.
PREPAID SLOTTING
Slotting allowances are capitalized and amortized over twelve months.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Major renewals and
betterments are capitalized while repairs and maintenance which do not improve
or extend useful life are expensed currently. Upon sale, retirement, abandonment
or other disposition of property, the cost and related accumulated depreciation
are eliminated from the accounts and any gain or loss is reflected in income.
F-37
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
For financial statement purposes, depreciation is calculated by the
straight-line method over the following useful lives: buildings and
improvements, 10 to 40 years; machinery and equipment, 3 to 12 years;
transportation equipment, 4 years. For income tax purposes, depreciation is
calculated using accelerated methods for certain assets.
Certain land, buildings, and machinery and equipment having a net carrying
value of $6,796 were mortgaged or otherwise encumbered against related debt of
$503 at May 31, 1998.
GOODWILL AND INTANGIBLE ASSETS
Excess of cost over fair market value of net identifiable assets of
acquired companies and other intangible assets are amortized on a straight-line
basis over estimated useful lives not exceeding forty years.
LONG-LIVED ASSETS
DFVC continually reviews intangible assets and property plant and equipment
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. An estimate of the
undiscounted future cash flows or, in the case of goodwill, undiscounted
operating earnings, over the remaining life of the asset is compared to the
carrying amount to determine whether an impairment exists. DFVC believes that no
indicators of impairment of long-lived assets existed at May 31, 1998.
INCOME TAXES
DFVC is included in the consolidated U.S. federal and state income tax
returns of DFC. The provision for income taxes has been determined as if DFVC
had filed separate tax returns under its existing structure for the periods
presented. Accordingly, the effective tax rate of DFVC in future years could
vary from its historical effective rates depending on DFVC's future legal
structure and tax elections. All income taxes are settled with DFC on a current
basis through the 'Investments by and advances from DFC' account.
Provision has been made for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes.'
REVENUE RECOGNITION
Revenues are recognized when products are shipped.
COST OF PRODUCTS SOLD
Cost of products sold includes raw materials, labor and overhead.
ADVERTISING EXPENSES
DFVC expenses all costs associated with advertising as incurred or when the
advertising takes place. Advertising expense was $13,918, $14,252 and $15,344
for the years ended 1998, 1997 and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of DFVC's financial instruments, which primarily
include cash, accounts receivable, accounts payable and accrued expenses,
approximates fair value due to the relatively short maturity of such
instruments.
F-38
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONCENTRATIONS OF CREDIT RISK
Financing instruments, which potentially subject DFVC to significant
concentrations of credit risk, consist principally of trade accounts receivable.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers and their dispersion across many
geographic areas. DFVC had gross sales in excess of 10% to one customer in 1998
amounting to approximately $55,700.
NOTE 3. RELATED PARTY TRANSACTIONS
DFC provides DFVC certain purchasing, credit, legal, accounting, treasury
and tax services. An allocation of the estimated costs, which in the opinion of
DFC management approximates actual costs, of these services is charged directly
to DFVC each month by DFC corporate using varying historical allocation bases.
The allocation process is consistent with the methodology used by DFC corporate
to allocate costs of similar services provided to its other business units. In
the opinion of management, these allocated costs are reasonable; however, the
terms of these transactions may differ from those that would result from
transactions among unrelated parties. The allocated costs of these services,
which aggregated $2,808, $2,648 and $2,743 for the fiscal years ended May 1998,
1997 and 1996, respectively, were reflected in selling, general and
administrative expenses in the accompanying consolidated statements of income.
DFC maintains a transportation and distribution division that is used by
DFVC and other of DFC's divisions. DFVC is charged for shipments at estimated
standard carrier rates which may differ from prices that would result from
transactions among unrelated parties. The allocated costs for these services,
which aggregated $11,330, $8,950 and $9,307 for the fiscal years ended May 1998,
1997 and 1996, respectively, were reflected in selling, general and
administrative expenses in the accompanying consolidated statements of income.
DFVC incurs an annual charge for interest expense from DFC based on a
formula which takes into consideration its percentage of certain assets and
liabilities in relation to the total for DFC of these assets and liabilities
(net invested capital). Management believes that the basis used for allocating
corporate interest is reasonable; however, the terms of these transactions may
differ from those that would result from transactions among unrelated parties.
Interest expense is reflected as a separate component in the accompanying
consolidated statements of income.
DFC maintains a centralized cash management system and substantially all
cash receipts and disbursements are recorded at the corporate level. DFVC is
charged or credited for the net of cash receipts and disbursements each month.
DFVC and DFC's other divisions engage in transactions with certain of the
same customers. In certain instances, due to the resulting collections from
these customers, related party receivables and payables arise. Related party
payables also arise from DFVC's relationship with DFC's transportation and
distribution division. Also, DFVC has related party notes payable to DFC. All of
these relationships are reflected in the accompanying consolidated balance
sheet.
The aforementioned related party activity is primarily settled through the
Investments by and advancements from DFC account. The following table sets forth
the net activity in the Investments by and advances from DFC account for the
fiscal years ended May 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year......................................... $285,410 $302,655 $300,167
Net income (loss).................................................. 17,660 8,705 (26,941)
(Charges) advances from DFC, net................................... (56,873) (25,950) 29,429
-------- -------- --------
Balance, end of year............................................... $246,197 $285,410 $302,655
-------- -------- --------
-------- -------- --------
</TABLE>
F-39
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4. INVENTORIES
Inventories at May 31, 1998, May 25, 1997 and May 26, 1996 consisted of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Raw materials...................................................... $ 15,126 $ 16,167 $ 18,960
Work-in-process.................................................... 31,518 43,520 50,986
Finished goods..................................................... 84,474 92,011 92,913
-------- -------- --------
FIFO Inventory..................................................... 131,118 151,698 162,859
LIFO Reserve....................................................... (5,401) (8,137) (4,469)
-------- -------- --------
LIFO Inventory..................................................... $125,717 $143,561 $158,390
-------- -------- --------
-------- -------- --------
</TABLE>
During fiscal 1998 and 1997, LIFO inventory quantities were reduced
resulting in a partial liquidation of the LIFO basis, the effect of which was
not significant.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at May 31, 1998, May 25, 1997 and May 26,
1996 consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Land............................................................... $ 8,114 $ 8,574 $ 8,444
Buildings and improvements......................................... 69,324 68,028 64,259
Machinery and equipment............................................ 182,821 192,423 184,332
Transportation equipment........................................... 1,782 1,980 1,988
Construction in progress........................................... 5,416 11,047 10,589
-------- -------- --------
267,457 282,052 269,612
Less: Accumulated depreciation..................................... (134,181) (136,678) (119,017)
-------- -------- --------
$133,276 $145,374 $150,595
-------- -------- --------
-------- -------- --------
</TABLE>
NOTE 6. OPERATING LEASES
DFVC leases manufacturing, warehouse and office facilities and certain
equipment. Future minimum lease payments required under leases having initial or
remaining noncancelable leases terms in excess of one year are set forth below.
Sublease rental income is not significant.
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1999............................................................................... $ 948
2000............................................................................... 908
2001............................................................................... 829
2002............................................................................... 124
2003............................................................................... 45
Thereafter......................................................................... 52
---------
Total minimum rentals.............................................................. $ 2,906
---------
---------
</TABLE>
Rental expense under all operating leases for the years ended 1998, 1997
and 1996 was $3,499, $3,602 and $4,263, respectively.
F-40
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7. INCOME TAXES
The provision (benefit) for income taxes for the fiscal years ended May
1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ --------
<S> <C> <C> <C>
Current tax expense (benefit):
Federal........................................................... $ 7,583 $ 605 $ (3,311)
State............................................................. 1,609 128 (702)
------- ------ --------
9,192 733 (4,013)
------- ------ --------
Deferred tax expense (benefit):
Federal........................................................... 2,129 4,183 (10,899)
State............................................................. 452 887 (2,312)
------- ------ --------
2,581 5,070 (13,211)
------- ------ --------
Provision (benefit) for income taxes................................... $11,773 $5,803 $(17,224)
------- ------ --------
------- ------ --------
</TABLE>
The effective tax rate differs from the prevailing statutory federal rate
for the fiscal years ended May 1998, 1997 and 1996 as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ------
<S> <C> <C> <C>
Statutory federal tax rate.................................................... 35.0% 35.0% (35.0)%
State, net of federal benefit................................................. 4.6 4.6 (4.4)
Other, net.................................................................... 0.4 0.4 0.4
---- ---- ------
Effective tax rate............................................................ 40.0% 40.0% 39.0 %
---- ---- ------
---- ---- ------
</TABLE>
The components of the deferred income tax assets and liabilities at May 31,
1998, May 25, 1997 and May 26, 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets (net):
Accounts receivable............................................ $ (478) $ 108 $ 1,395
Inventory...................................................... 3,698 4,215 4,611
Employee benefits.............................................. 1,871 2,344 3,743
Vacation pay................................................... 658 538 1,095
Marketing accruals............................................. 6,604 4,542 4,220
Future benefit of special charge............................... (525) 1,009 3,576
Other.......................................................... 1,040 2,694 57
-------- -------- --------
Total deferred tax assets (net)..................................... $ 12,868 $ 15,450 $ 18,697
-------- -------- --------
-------- -------- --------
Deferred tax liabilities (net):
Fixed assets................................................... $(13,115) $(15,138) $(14,560)
Deferred compensation.......................................... 302 362 913
Intangibles.................................................... (6,299) (5,662) (5,251)
Future benefit of special charge............................... (361) 960 1,216
Other.......................................................... 322 326 353
-------- -------- --------
Total deferred tax liabilities (net)................................ $(19,151) $(19,152) $(17,329)
-------- -------- --------
-------- -------- --------
</TABLE>
F-41
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8. ACCRUED LIABILITIES
The components of accrued liabilities at May 31, 1998, May 25, 1997 and May
26, 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Special charge (Note 13)............................................... $ 4,597 $ 5,793 $10,357
Accrued payroll and employee benefits.................................. 8,176 7,942 7,619
Accrued bonuses........................................................ 2,508 3,529 2,049
Workers' compensation liability........................................ 3,929 4,159 4,494
Accrued coupons and marketing.......................................... 5,676 5,780 4,918
Other.................................................................. 7,358 4,666 5,971
------- ------- -------
$32,244 $31,869 $35,408
------- ------- -------
------- ------- -------
</TABLE>
NOTE 9. DEBT
The long-term obligations outstanding at May 31, 1998, May 25, 1997 and
May 26, 1996 primarily relate to a $2,450 floating interest rate industrial
revenue bond which matures on February 1, 2000. The average borrowing rates
during fiscal 1998, 1997 and 1996 were 3.76%, 3.52% and 3.73%, respectively. The
obligation is guaranteed by DFC.
DFVC also has a note payable which matures in various installments through
December 1, 1998 and bears interest at 9.00%. The long-term portion of the notes
payable was $473 and $983 at May 25, 1997 and May 26, 1996, respectively.
NOTE 10. PENSION LIABILITIES
DFVC's salaried employees are included in DFC-sponsored defined benefit
plans which cover substantially all of the salaried employees of the divisions
of DFC. DFVC's hourly employees are included in DFC-sponsored defined benefit or
multi-employer union plans. Net periodic pension expense is based upon
determinations made by independent actuaries. The funded status of the plans
relative to DFVC's participation is not separately determined and accordingly,
no pension obligation other than current expense allocations are included in the
accompanying financial statements.
The DFC-sponsored plans covering defined benefit plans are based on
employees' years of service and compensation during employment with DFVC. The
majority of pension benefits are based upon the participant's highest average
'total compensation' paid during any sixty consecutive months out of the last
180 months of service accumulated for each year of service. DFVC through DFC
makes contributions to the defined benefit plans at least equal to the minimum
funding requirements under the Employee Retirement Income Security Act of 1974
(ERISA). Plan assets are primarily invested in bonds, stocks and real estate.
DFVC's pension cost for these defined benefit plans was $3,218, $1,397 and
$1,905 for the fiscal years ended May 1998, 1997 and 1996, respectively.
The DFC-sponsored multi-employer plans principally cover production
workers. DFVC's pension expense under these plans was $868, $951 and $1,162 for
the fiscal years ended May 1998, 1997 and 1996, respectively.
NOTE 11. PROFIT SHARING PLAN
DFC maintains noncontributory profit sharing plans for certain of DFVC's
employees. DFVC contributions under these plans are made at the discretion of
DFC's Board of Directors. Expense for these plans was $1,405, $1,317 and $1,295
in 1998, 1997 and 1996, respectively. In addition, certain DFVC employees
participate in DFC employee stock option plans.
F-42
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
DFC sponsors healthcare and life insurance benefit plans for certain of
DFVC's retired employees and eligible dependents. Employees are eligible for
such benefits subject to minimum age and service requirements. Eligible
employees that retire before the normal retirement age, along with their
dependants, are entitled to benefits on a shared contribution basis.
Substantially all benefits terminate at age sixty-five. DFC maintains the right
to modify or eliminate these benefits.
The net postretirement benefit expense for active employees is based on an
actuarial valuation. For purposes of these financial statements, the net
postretirement benefit expense for retired employees of DFVC participating in
the DFC-sponsored plans was computed based on the active employees at DFVC.
Management believes that this method of allocation is reasonable.
The net postretirement benefit expense for 1998, 1997 and 1996 was not
significant.
The accumulated postretirement benefit obligation for active employees of
DFVC included in DFC-sponsored plans was approximately $665, $655 and $565 at
May 31, 1998, May 25, 1997 and May 26, 1996, respectively. The accumulated
benefit obligation for retirees of DFVC included in DFC-sponsored plans was
approximately $1,400, $1,250 and $1,000 at May 31, 1998, May 25, 1997 and May
26, 1996, respectively. The accumulated postretirement benefit obligation was
determined by an actuarial valuation which used a discount rate of 7.25% in 1998
and 8.00% in 1997 and 1996, respectively, and an assumed compensation increase
of 5.00% for each year. The health care cost trend rates were assumed to be
7.00% in 1998, gradually declining to 5.00% over four years and remaining at
that level thereafter. In 1997, the cost trend rates were assumed to be 7.50%,
gradually declining to 5.00% over five years. In 1996, the cost trend rates were
assumed to be 8.00%, gradually declining to 5.00% over six years. A one
percentage point increase in the assumed health care cost trend rates would not
significantly impact the accumulated postretirement benefit obligation or the
net periodic benefit expense in any of the three years ended May 31, 1998. The
short-term and long-term portions of the postretirement benefit obligation as of
May 31, 1998, May 25, 1997 and May 26, 1996 were reflected in the accompanying
consolidated balance sheets.
NOTE 13. SPECIAL CHARGE
In May 1996, DFVC adopted a plan to reduce costs, rationalize production
capacity and provide for projected severance costs which reduced fiscal 1996
income before taxes by $37,346. The implementation of the plan included the
elimination of more than 200 manufacturing and administrative positions, closure
of five manufacturing facilities and the disposition of certain assets held by
two other facilities. In fiscal 1997, DFVC recorded an additional charge of
$9,644 to provide for employee and asset relocation costs associated with plant
consolidation.
As of May 1998, DVFC had disposed of or closed five manufacturing
facilities and eliminated 413 positions. The remaining reserves are anticipated
to be used for continuing severance benefits and certain exit costs related to a
facility in the process of being closed.
The following table sets forth the activity for the special charge reserve
for 1998, 1997 and 1996 and the reserve balances at May 31, 1998, May 25, 1997
and May 26, 1996 which are included in accrued liabilities in the accompanying
balance sheets.
F-43
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EMPLOYEE
PLANT ASSET RELATED
CLOSURE COSTS WRITE-OFFS COSTS TOTAL
------------- ---------- -------- --------
<S> <C> <C> <C> <C>
1996 charge..................................................... $ 5,677 $ 29,450 $ 2,219 $ 37,346
Cash payments................................................... (753) -- (51) (804)
Non-cash charges................................................ -- (26,185) -- (26,185)
------------- ---------- -------- --------
Balance at May 26, 1996......................................... 4,924 3,265 2,168 10,357
Provision....................................................... 8,935 -- 709 9,644
Cash payments................................................... (9,733) -- -- (9,733)
Non-cash charges................................................ 42 (3,253) (1,264) (4,475)
------------- ---------- -------- --------
Balance at May 25, 1997......................................... 4,168 12 1,613 5,793
Cash payments................................................... (10,021) -- (1,060) (11,081)
Non-cash charges................................................ -- (5,782) -- (5,782)
Net transfers (to) from DFC..................................... 8,353 5,770 1,544 15,667
------------- ---------- -------- --------
Balance at May 31, 1998......................................... $ 2,500 $ -- $ 2,097 $ 4,597
------------- ---------- -------- --------
------------- ---------- -------- --------
</TABLE>
NOTE 14. BUSINESS ACQUISITIONS
In August 1995, DFVC purchased substantially all of the assets of a frozen
vegetable processor and distributor with annual sales of approximately $40.0
million. The acquisition was accounted for by the purchase method and the
purchase price of $21.7 million was allocated primarily to inventory and fixed
assets. The results of operations of the acquisition have been included in the
consolidated financial statements of DFVC from the acquisition date. On a pro
forma basis, the results of operations (unaudited) of the company acquired would
not have had a material effect on DFVC's net income in fiscal 1996.
NOTE 15. COMMITMENTS AND CONTINGENCIES
DFVC is involved in litigation and in administrative proceedings and
investigations in various jurisdictions relating to certain civil,
environmental, product liability and employment matters. It is DFVC's policy to
accrue for legal and environmental matters when it is probable that a liability
has been incurred and an amount is reasonably estimable. DFVC believes that
recorded reserves are sufficient to provide for exposures meeting this
definition.
An action has been brought against DFVC for damages and lost profits
related to an alleged breach of contract. The plaintiff filed a suit claiming
that DFVC had entered into an outputs or requirements contract subject to the
Uniform Commercial Code related to the hauling of vegetable 'by-product' from
the Hartford, Michigan processing plant of DFVC and that the closure of the
Hartford, Michigan facility was not in good faith. DFVC terminated its
relationship with the plaintiff upon the closure of the Hartford facility as
part of the rationalization of production capacity discussed in Note 13. In
August 1998, a final judgment against DFVC was rendered in favor of the
plaintiff in the amount of $2.5 million. At May 31, 1998, management believes
that DFVC had adequate reserves allocated to this contingency in the special
charge reserve discussed in Note 13.
NOTE 16. SUBSEQUENT EVENT
On July 25, 1998, Agrilink Foods, Inc. ('Agrilink'), a wholly-owned
subsidiary of Pro-Fac Cooperative, Inc., acquired from DFC substantially all of
the net operating assets of DFVC for cash of approximately $400.0 million and
Agrilink's aseptic food business. Agrilink's aseptic food business has annual
sales of approximately $100.0 million. Upon completion of this transaction, DFC
will no longer actively sell products in the frozen and canned vegetables
markets.
F-44
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED AUGUST 30, 1998 AND AUGUST 24, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
AUGUST 30, AUGUST 24,
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................................................ $106,440 $109,575
Costs of products sold................................................................... 81,199 89,166
Selling, general and administrative expenses............................................. 26,126 23,476
Interest expense......................................................................... 2,002 2,077
Other income............................................................................. 180 201
---------- ----------
Loss before income taxes................................................................. (2,707) (4,943)
Income tax benefit....................................................................... (1,083) (1,977)
---------- ----------
Net loss................................................................................. $ (1,624) $ (2,966)
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-45
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 30, 1998 AND AUGUST 24, 1997
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 24,
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................................ $ 575 $ 385
Accounts receivable, less allowance for doubtful accounts of $500 in 1998 and
1997............................................................................... 28,317 25,273
Inventories......................................................................... 166,009 154,762
Other current assets................................................................ 21,862 27,853
---------- ----------
Total Current Assets........................................................... 216,763 208,273
---------- ----------
Properties:
Property, plant and equipment, net.................................................. 131,855 138,769
Other assets............................................................................. 45,521 47,306
---------- ----------
Total Assets................................................................... $394,139 $394,348
---------- ----------
---------- ----------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities............................................ $ 83,224 $ 73,366
Accounts payable to related parties................................................. 27,008 11,965
Current portion of note payable to related parties.................................. 5,438 5,143
Current portion of long-term debt................................................... 344 731
---------- ----------
Total Current Liabilities...................................................... 116,014 91,205
---------- ----------
Long-term liabilities
Long-term debt...................................................................... 2,449 2,794
Note payable to related parties..................................................... 3,087 7,455
Deferred income taxes............................................................... 22,386 22,476
---------- ----------
Total Long-Term Liabilities.................................................... 27,922 32,725
---------- ----------
Equity -- Investments by and advances from DFC........................................... 250,203 270,418
---------- ----------
Total Liabilities and Equity................................................... $394,139 $394,348
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-46
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 30, 1998 AND AUGUST 24, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
AUGUST 30, AUGUST 24,
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Net cash (used by)/provided from operations.............................................. $ (956) $ 17,673
---------- ----------
Cash flows from investing activities:
Capital expenditures................................................................ (3,187) (4,356)
---------- ----------
Net cash used in investing activities.................................................... (3,187) (4,356)
---------- ----------
Cash flows from financing activities:
Repayment of long-term debt......................................................... (159) (182)
Net repayments of notes payable to related parties.................................. (1,054) (959)
Increase (decrease) in advances from DFC............................................ 5,630 (12,026)
---------- ----------
Net cash provided by (used for) financing activities..................................... 4,417 (13,167)
---------- ----------
Increase in cash......................................................................... 274 150
Cash -- beginning of period.............................................................. 301 235
---------- ----------
Cash -- end of period.................................................................... $ 575 $ 385
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
F-47
<PAGE>
<PAGE>
DEAN FOODS VEGETABLE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Dean Foods Vegetable Company and its subsidiaries ('DFVC') is a division of
Dean Foods Company ('DFC') and is principally engaged in the processing,
distribution and sales of frozen and canned vegetables in the United States. As
part of a reorganization of DFC in fiscal 1994, the vegetable businesses within
DFC were combined with the Birds Eye Frozen Vegetable business to form DFVC. The
Birds Eye Frozen Vegetable business was acquired from the All-American Gourmet
Company, a wholly-owned subsidiary of Kraft General Foods, Inc., on December 27,
1993.
The accompanying unaudited condensed consolidated financial statements
reflect the 'carve-out' financial position, results of operations and cash flows
of DFVC and its majority owned subsidiaries for the periods presented. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The unaudited condensed consolidated financial information
included herein does not necessarily reflect what the consolidated financial
position and results of operations of DFVC would have been had it operated as a
stand alone entity during the periods covered, and may not be indicative of
future operations or financial position.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 2. UNAUDITED QUARTERLY INFORMATION
In the opinion of DFC, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the unaudited condensed
consolidated financial statements have been included herein. Certain information
and footnote disclosures normally included in the financial statements have been
omitted. These unaudited condensed consolidated financial statements should be
read in conjunction with DFC's Consolidated Financial Statements for the year
ended May 31, 1998.
NOTE 3. INVENTORIES
The following is an unaudited tabulation of inventories by class at August
30, 1998 and August 24, 1997.
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 24,
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies..................................................... $ 12,989 $ 14,207
Materials in process........................................................... 49,017 50,329
Finished goods................................................................. 108,937 97,613
---------- ----------
170,943 162,149
Less: Excess of current cost over stated value of last-in, first-out
inventories.................................................................. 4,934 7,387
---------- ----------
Total inventories......................................................... $166,009 $154,762
---------- ----------
---------- ----------
</TABLE>
NOTE 4. SALE OF DFVC
On September 24, 1998, Agrilink Foods, Inc. ('Agrilink'), a wholly-owned
subsidiary of Pro-Fac Cooperative, Inc., acquired from DFC substantially all of
the net operating assets of DFVC for consideration of approximately $360.0
million in cash, net of the sale to DFC of Agrilink's aseptic business and the
issuance to DFC by Agrilink of a $30.0 million subordinated promissory note due
November 22, 1998.
F-48
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
PRO-FAC COOPERATIVE, INC.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and net proceeds, of cash flows
and statements of changes in shareholders' and members' capitalization and
redeemable stock present fairly, in all material respects, the financial
position of Pro-Fac Cooperative, Inc. and its subsidiary at June 27, 1998 and
June 28, 1997, and the results of their operations and their cash flows for each
of the three fiscal years in the period ended June 27, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Cooperative's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the
Cooperative changed its method of accounting for spare parts in 1997.
PRICEWATERHOUSECOOPERS LLP
Rochester, New York
July 31, 1998
F-49
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND NET PROCEEDS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------
JUNE 27, JUNE 28, JUNE 29,
1998 1997 1996
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................................. $ 719,665 $ 730,823 $ 739,094
Cost of sales............................................................. (524,082) (539,081) (562,926)
--------- --------- ---------
Gross profit.............................................................. 195,583 191,742 176,168
Selling, administrative, and general expenses............................. (141,739) (145,214) (151,671)
Income from Great Lakes Kraut Company..................................... 1,893 0 0
Gain on sale of Finger Lakes Packaging.................................... 0 3,565 0
Restructuring charge...................................................... 0 0 (5,871)
Interest income........................................................... 0 0 770
--------- --------- ---------
Operating income.......................................................... 55,737 50,093 19,396
Interest expense.......................................................... (30,767) (36,473) (41,998)
--------- --------- ---------
Pretax income/(loss) before dividends and allocation of net proceeds...... 24,970 13,620 (22,602)
Tax (provision)/benefit................................................... (7,840) (5,529) 13,071
--------- --------- ---------
Income/(loss) before cumulative effect of an accounting change, dividends,
and allocation of net proceeds.......................................... 17,130 8,091 (9,531)
Cumulative effect of an accounting change................................. 0 4,606 0
--------- --------- ---------
Net income/(loss).......................................... $ 17,130 $ 12,697 $ (9,531)
--------- --------- ---------
--------- --------- ---------
Allocation of net proceeds:
Net income/(loss).................................................... $ 17,130 $ 12,697 $ (9,531)
Dividends on common and preferred stock.............................. (6,328) (5,503) (8,993)
--------- --------- ---------
Net proceeds/(deficit)............................................... 10,802 7,194 (18,524)
Allocation (to)/from earned surplus.................................. (4,662) (3,661) 18,524
--------- --------- ---------
Net proceeds available to members.......................... $ 6,140 $ 3,533 $ 0
--------- --------- ---------
--------- --------- ---------
Allocation of net proceeds available to members:
Payable to members currently (25% of qualified proceeds available to
members in fiscal 1998 and 1997, respectively)..................... $ 1,535 $ 883 $ 0
Allocated to members but retained by the Cooperative:
Qualified retains............................................... 4,605 2,650 0
--------- --------- ---------
Net proceeds available to members.......................... $ 6,140 $ 3,533 $ 0
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-50
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1998 1997
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 5,049 $ 2,838
Accounts receivable, trade, less allowances for bad
debts of $774 and $970, respectively.............. 55,046 48,661
Accounts receivable, other......................... 3,575 2,795
Current deferred tax assets........................ 4,849 12,312
Inventories
Finished goods................................. 111,153 87,904
Raw Materials and supplies..................... 30,433 27,001
-------- --------
Total inventories.......................... 141,586 114,905
-------- --------
Current investment in Bank......................... 1,994 946
Prepaid manufacturing expense...................... 8,404 8,265
Prepaid expenses and other current assets.......... 12,989 6,323
-------- --------
Total current assets....................... 233,492 197,045
Investment in Bank..................................... 22,377 24,321
Investment in Great Lakes Kraut Company................ 6,584 0
Property, plant, and equipment, net.................... 194,615 217,923
Assets held for sale at net realizable value........... 2,662 3,259
Goodwill and other intangible assets, less accumulated
amortization of $13,634 and $10,053, respectively.... 94,744 96,429
Other assets........................................... 12,234 7,700
-------- --------
Total assets............................... $566,708 $546,677
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' AND MEMBERS'
CAPITALIZATION
Current liabilities:
Current portion of obligations under capital
leases............................................ $ 256 $ 558
Current portion of long-term debt.................. 8,071 8,075
Accounts payable................................... 70,158 49,256
Income taxes payable............................... 4,046 5,672
Accrued interest................................... 8,559 8,663
Accrued employee compensation...................... 8,598 11,063
Other accrued expenses............................. 19,065 21,956
Dividends payable.................................. 0 61
Amounts due members................................ 20,636 15,791
-------- --------
Total current liabilities.................. 139,389 121,095
Obligations under capital leases....................... 503 817
Long-term debt......................................... 69,937 69,829
Senior subordinated notes.............................. 160,000 160,000
Deferred income tax liabilities........................ 32,457 39,591
Other non-current liabilities.......................... 23,053 22,682
-------- --------
Total liabilities.......................... 425,339 414,014
-------- --------
Commitments and contingencies
Class B Cumulative Redeemable Preferred Stock,
liquidation preference $10 per share, authorized
500,000 shares; issued and outstanding 27,043 and
31,435, respectively................................. 270 315
Common stock, par value $5, authorized -- 5,000,000
shares
<CAPTION>
JUNE 27, JUNE 28,
1998 1997
--------- ---------
<S> <C> <C> <C> <C>
Shares issued............. 1,825,863 1,788,815
Shares subscribed......... 160,629 54,557
--------- ---------
Total subscribed
and issued...... 1,986,492 1,843,372
Less subscriptions
receivable in
installments............ (160,629) (54,557)
--------- ---------
Total issued and
outstanding..... 1,825,863 1,788,815 9,129 8,944
--------- ---------
--------- ---------
Shareholders' and members'
capitalization:
Retained earnings allocated to members............. 29,765 31,920
Non-qualified allocation to members................ 2,660 2,960
Minimum pension liability adjustment............... (608) 0
Non-cumulative Preferred Stock, par value $25,
authorized -- 5,000,000 shares; issued and
outstanding -- 45,001 and 53,797, respectively.... 1,125 1,345
Class A Cumulative Preferred Stock, liquidation
preference $25 per share; authorized 49,500,000
shares; issued and outstanding 3,503,199 and
3,215,709, respectively........................... 87,580 80,393
Earned surplus..................................... 11,448 6,786
-------- --------
Total shareholders' and members'
capitalization............................ 131,970 123,404
-------- --------
Total liabilities and capitalization....... $566,708 $546,677
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-51
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
JUNE 27, JUNE 28, JUNE 29,
1998 1997 1996
-------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss)......................................................... $ 17,130 $ 12,697 $ (9,531)
Amount payable to members currently....................................... (1,535) (883) 0
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities:
Restructuring and net (gain)/loss from disposals..................... 0 (3,565) 5,871
Cumulative effect of an accounting change............................ 0 (4,606) 0
Amortization of goodwill and other intangibles....................... 3,581 4,092 3,422
Amortization of debt issue costs..................................... 800 800 800
Depreciation......................................................... 18,009 22,680 26,081
Provision/(benefit) for deferred taxes............................... 752 4,557 (8,212)
Provision for losses on accounts receivable.......................... 0 445 528
Equity in undistributed earnings of the Bank......................... (715) (1,143) (1,532)
Change in assets and liabilities:
Accounts receivable............................................. (6,762) (3,983) 13,482
Inventories..................................................... (25,654) (1,636) 33,347
Income taxes payable............................................ (1,626) 2,272 12,395
Accounts payable and accrued expenses........................... 15,613 (922) (15,027)
Amounts due to members.......................................... 4,845 7,033 (5,935)
Other assets and liabilities.................................... (11,360) 530 (1,385)
-------- --------- --------
Net cash provided by operating activities...................................... 13,078 38,368 54,304
-------- --------- --------
Cash flows from investing activities:
Purchase of property, plant, and equipment................................ (14,056) (13,691) (19,453)
Proceeds from disposals................................................... 12,794 68,716 4,408
Proceeds from sales of idle facilities.................................... 0 4,465 597
Proceeds from investment in Bank.......................................... 1,611 315 0
Cash paid for acquisition................................................. (7,423) 0 (5,785)
-------- --------- --------
Net cash (used in)/provided by investing activities............................ (7,074) 59,805 (20,233)
-------- --------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.................................. 11,180 0 5,400
Payments on long-term debt................................................ (8,076) (97,854) (25,056)
Payments on capital leases................................................ (616) (503) (825)
Issuance of stock, net of repurchases..................................... 140 (260) 124
Cash paid in lieu of fractional shares.................................... (9) 0 (6)
Cash portion of non-qualified conversion.................................. (84) (88) (122)
Cash dividends paid....................................................... (6,328) (5,503) (8,865)
-------- --------- --------
Net cash used in financing activities.......................................... (3,793) (104,208) (29,350)
-------- --------- --------
Net change in cash and cash equivalents........................................ 2,211 (6,035) 4,721
Cash and cash equivalents at beginning of period............................... 2,838 8,873 4,152
-------- --------- --------
Cash and cash equivalents at end of period..................................... $ 5,049 $ 2,838 $ 8,873
-------- --------- --------
-------- --------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized)................................. $ 30,319 $ 36,907 $ 41,508
-------- --------- --------
-------- --------- --------
Income taxes, net.................................................... $ 8,714 $ (1,300) $ (9,206)
-------- --------- --------
-------- --------- --------
</TABLE>
(table continued on next page)
F-52
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
JUNE 27, JUNE 28, JUNE 29,
1998 1997 1996
-------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Acquisition of DelAgra:
Accounts receivable............................................. $ 403 $ 0 $ 0
Inventories..................................................... 3,212 0 0
Prepaid expenses and other current assets....................... 81 0 0
Property, plant, and equipment.................................. 1,842 0 0
Goodwill........................................................ 1,508 0 0
Other accrued expenses.......................................... (433) 0 0
-------- --------- --------
$ 6,613 $ 0 $ 0
-------- --------- --------
-------- --------- --------
Acquisition of C&O Distributing Company:
Property, plant, and equipment.................................. $ 54 $ 0 $ 0
Goodwill........................................................ 756 0 0
-------- --------- --------
$ 810 $ 0 $ 0
-------- --------- --------
-------- --------- --------
Investment in Great Lakes Kraut Company:
Inventories..................................................... $ 2,175 $ 0 $ 0
Prepaid expenses and other current assets....................... 409 0 0
Property, plant and equipment................................... 6,966 0 0
Other accrued expenses.......................................... (62) 0 0
-------- --------- --------
$ 9,488 $ 0 $ 0
-------- --------- --------
-------- --------- --------
Acquisition of Packer Foods and Matthews Candy Co.:
Accounts receivable............................................. $ 0 $ 0 $ 1,282
Inventories..................................................... 0 0 3,902
Prepaid expenses and other current assets....................... 0 0 270
Property, plant and equipment................................... 0 0 6,044
Goodwill........................................................ 0 0 493
Deferred tax asset.............................................. 0 0 264
Accounts payable................................................ 0 0 (4,954)
Other accrued expenses.......................................... 0 0 (418)
Other non-current liabilities................................... 0 0 (1,098)
-------- --------- --------
Cash paid for acquisition....................................... $ 0 $ 0 $ 5,785
-------- --------- --------
-------- --------- --------
Supplemental schedule of non-cash investing and financing activities:
Conversion of retains to preferred stock.................................. $ 6,967 $ 3,275 $ 2,379
-------- --------- --------
-------- --------- --------
Net proceeds allocated to members but retained by the Cooperative......... $ 4,605 $ 2,650 $ 0
-------- --------- --------
-------- --------- --------
Capital lease obligations incurred........................................ $ 0 $ 206 $ 113
-------- --------- --------
-------- --------- --------
Notes from Nalley Canada Ltd. forgiven in acquisition..................... $ 0 $ 4,986 $ 0
-------- --------- --------
-------- --------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
AND MEMBERS' CAPITALIZATION AND REDEEMABLE STOCK
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
JUNE 27, JUNE 28, JUNE 29,
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Retained earnings allocated to members:
Qualified retains:
Balance at beginning of period.......................................... $ 31,920 $ 32,318 $ 34,250
Net proceeds allocated to members....................................... 4,605 2,650 0
Converted to preferred stock............................................ (6,751) (3,048) (1,926)
Cash paid in lieu of fractional shares.................................. (9) 0 (6)
-------- -------- --------
Balance at end of period................................................ 29,765 31,920 32,318
-------- -------- --------
Non-qualified retains:
Balance at beginning of period.......................................... 2,960 3,275 3,851
Distribution of 1992, 1991, and 1990 non-qualified retains:
Cash paid.......................................................... (84) (88) (122)
Converted to preferred stock....................................... (216) (227) (454)
-------- -------- --------
Balance at end of period................................................ 2,660 2,960 3,275
-------- -------- --------
Total retains allocated to members at end of period.......................... 32,425 34,880 35,593
-------- -------- --------
Non-cumulative preferred stock:
Balance at beginning of period.......................................... 1,345 2,645 76,083
Conversion to cumulative preferred stock................................ (220) (1,300) (73,438)
-------- -------- --------
Balance at end of period................................................ 1,125 1,345 2,645
-------- -------- --------
Cumulative preferred stock:
Balance at beginning of period.......................................... 80,393 75,818 0
Converted from non-cumulative preferred stock........................... 220 1,300 73,438
Converted from non-qualified retains.................................... 216 227 454
Converted from qualified retains........................................ 6,751 3,048 1,926
-------- -------- --------
Balance at end of period................................................ 87,580 80,393 75,818
-------- -------- --------
Earned surplus (unallocated and apportioned):
Balance at beginning of period.......................................... 6,786 3,125 21,649
Allocation to/(from) earned surplus..................................... 4,662 3,661 (18,524)
Minimum pension liability adjustment.................................... (608) 0 0
-------- -------- --------
Balance at end of period................................................ 10,840 6,786 3,125
-------- -------- --------
Total shareholders' and members' capitalization.............................. $131,970 $123,404 $117,181
-------- -------- --------
-------- -------- --------
Redeemable stock:
Class B cumulative preferred stock:
Balance at beginning of period.......................................... $ 315 $ 334 $ 0
Issued/(repurchased), net............................................... (45) (19) 334
-------- -------- --------
Balance at end of period................................................ $ 270 $ 315 $ 334
-------- -------- --------
-------- -------- --------
Common stock:
Balance at beginning of period.......................................... $ 8,944 $ 9,185 $ 9,395
(Repurchased)/issued, net............................................... 185 (241) (210)
-------- -------- --------
Balance at end of period................................................ $ 9,129 $ 8,944 $ 9,185
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
Pro-Fac Cooperative, Inc. ('Pro-Fac' or the 'Cooperative') is an
agricultural cooperative which processes and markets crops grown by its members
through its wholly-owned subsidiary Agrilink Foods, Inc. ('Agrilink' or the
'Company').
Agrilink 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. The vegetable and fruit product lines account
for approximately 49 percent of sales. The Company's products are primarily
distributed in the United States.
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.
FISCAL YEAR
The fiscal year of Pro-Fac ends on the last Saturday in June. Fiscal 1998
and 1997 each comprised 52 weeks and fiscal 1996 comprised 53 weeks.
CONSOLIDATION
The consolidated financial statements include the Cooperative and its
wholly-owned subsidiary, Agrilink, after elimination of intercompany
transactions and balances. Investments in affiliates, owned more than 20 percent
but not in excess of 50 percent, are recorded under the Equity Method of
accounting.
CHANGE IN ACCOUNTING PRINCIPLE
Effective June 30, 1996, accounting procedures were changed to include in
prepaid expenses and other current assets, manufacturing spare parts previously
charged directly to expense. Management believes this change is preferable
because it provides a better matching of costs with related revenues when
evaluating interim financial statements. The favorable cumulative effect of the
change (net of income taxes of $1.1 million) was $4.6 million. Pro forma amounts
for the cumulative effect of the accounting change on prior periods are not
determinable due to the lack of physical inventory counts required to establish
quantities at the respective dates. Management does not believe that the
difference in accounting methodologies for spare parts had any material impact
on the Cooperative's historical financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term investments with maturities of
three months or less. There were no such short-term investments at June 27, 1998
or June 28, 1997.
INVENTORIES
Inventories are stated at the lower of cost or market on the first-in,
first-out ('FIFO') method. Reserves recorded at June 27, 1998 and June 28, 1997
were $391,000 and $362,000, respectively.
F-55
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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).
Earnings on the Cooperative's investment in the Bank in fiscal years 1998,
1997, and 1996 amounted to $1,023,000, $1,633,000, and $2,188,000, respectively.
MANUFACTURING OVERHEAD
Allocation of manufacturing overhead to finished goods produced is on the
basis of a production period; thus at the end of each period, manufacturing
costs incurred by seasonal plants, subsequent to the end of previous pack
operations, are deferred and included in the accompanying balance sheet under
the caption ' Prepaid manufacturing expense.' Such costs are applied to finished
goods during the next production period and recognized as an element of costs of
goods sold.
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.
OTHER ASSETS
Other assets are primarily comprised of debt issuance costs. The debt
issuance costs are amortized over the term of the debt. Amortization expense
incurred in fiscal 1998, 1997, and 1996 was $800,000.
INCOME TAXES
Income taxes are provided on non-patronage income for financial reporting
purposes. Deferred income taxes resulting from temporary differences between
financial reporting and tax reporting as well as from the issuance of
non-qualified retains 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
F-56
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 primarily self-insured 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. The accrual for casualty insurance at June 27, 1998
and June 28, 1997 was $3.3 million and $2.9 million, respectively.
EARNINGS PER SHARE DATA OMITTED
Earnings per share amounts are not presented as earnings are not
distributed to members in proportion to their common stock holdings. Earnings
(representing those earnings derived from patronage-sourced business) are
distributed to members in proportion to the dollar value of deliveries under
Pro-Fac contracts rather than based on the number of shares of common stock
held.
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 cost of other advertising promotion and marketing
programs are charged in the year incurred. Advertising expense incurred in
fiscal 1998, 1997, and 1996 amounted to $9,878,000, $8,736,000, and $9,831,000,
respectively.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Cooperative in
estimating the fair value disclosures for financial instruments:
Cash, Accounts Receivable, Accounts Payable, and Other Accrued Expenses
The carrying amount approximates fair value because of the short maturity
of these instruments.
Long-Term Investments
The carrying value of the investment in the Bank was $24.4 million at June
27, 1998. As there is no market price for this investment, a reasonable estimate
of fair value is not possible.
F-57
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Term Debt
The fair value of the long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered for
debt of the same remaining maturities.
NOTE 2. AGREEMENTS WITH AGRILINK
Effective November 3, 1994, Pro-Fac acquired Agrilink.
In connection with the acquisition, Pro-Fac sold $160.0 million of 12.25
percent Senior Subordinated Notes (the 'Notes') due 2005 and entered into a
credit agreement (the '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 under the Notes and the Credit
Agreement have been guaranteed by Pro-Fac.
The contractual relationship between Pro-Fac and the Company is defined in
the Pro-Fac Marketing and Facilitation Agreement (the 'Agreement'). Under the
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
Agrilink, it may be more or less than the price Agrilink would pay in the open
market in the absence of the Agreement.
Under the Agreement, Agrilink is required to have on its Board of Directors
some persons who are neither members of nor affiliated with Pro-Fac
('Disinterested Directors'), the number of Disinterested Directors must at least
equal the number of Directors who are members of Pro-Fac. The volume and type of
crops to be purchased by Agrilink under the Agreement are determined pursuant to
its annual profit plan, which requires the approval of a majority of the
Disinterested Directors of Agrilink. 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
Agrilink, including the provision of a long-term, stable crop supply, favorable
payment terms for crops and the sharing of risks in losses of certain operations
of the business. For fiscal years ended 1998, 1997, and 1996, such additional
patronage income/(loss) amounted to $12.5 million, $10.3 million, and $(9.0)
million, respectively. Under the Indentures related to the Notes, Pro-Fac is
required to reinvest at least 70 percent of the additional patronage income in
Agrilink.
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 $29.9 million
in the Company (including reinvested Additional Patronage Income).
NOTE 3. ACQUISITIONS, DISPOSALS, AND RESTRUCTURING
FISCAL 1998
Nutrition Medical
Effective May 1, 1998, the Company acquired the private label adult
nutrition formula business from Nutrition Medical, Inc. Nutrition Medical will
be paid royalty payments for two years.
F-58
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Michigan Distribution Center
Effective March 31, 1998, the Company entered into a multiyear logistics
agreement under which GATX Logistics will provide freight management, packaging
and labeling services, and distribution support to and from production
facilities owned by the Company in and around Coloma, Michigan. The agreement
included the sale of the Company's labeling equipment and distribution center.
The Company received proceeds of $12.6 million for the equipment and facility
which were applied to outstanding bank loans. No significant gain or loss
occurred as a result of this transaction.
DelAgra Corp.
Effective March 30, 1998, the Company acquired the majority of assets and
the business of DelAgra Corp. of Bridgeville, Delaware. DelAgra Corp. is a
producer of private label frozen vegetables. The acquisition was accounted for
as a purchase. The purchase price was approximately $6.9 million. Goodwill of
approximately $0.6 million and $0.9 million for a covenant not to compete were
received in conjunction with this transaction. These amounts are being amortized
over 30 and 5 years, respectively.
C&O Distributing Company
Effective March 9, 1998, the Company acquired the majority of assets and
the business of C&O Distributing Company of Canton, Ohio. C&O distributes snack
products for Snyder of Berlin, one of the Company's businesses included within
its snack foods unit. The acquisition was accounted for as a purchase. The
purchase price was approximately $0.8 million. Intangibles of approximately $0.8
million were recorded in conjunction with this transaction and are being
amortized over 30 years.
Formation of New Sauerkraut Company
Effective July 1, 1997, the Company and Flanagan Brothers, Inc. of Bear
Creek, Wisconsin contributed all their assets involved in sauerkraut production
to form a new sauerkraut company. This new company, Great Lakes Kraut Company,
operates as a New York limited liability company with ownership and earnings
divided equally between the two companies. The joint venture is accounted for
using the Equity Method of accounting. Summarized financial information of Great
Lakes Kraut Company is as follows:
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Net sales.............................................. $ 27,620
Gross profit........................................... $ 7,439
Operating income....................................... $ 4,411
Net income............................................. $ 3,786
</TABLE>
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Current assets......................................... $ 10,648
Noncurrent assets...................................... $ 18,884
Current liabilities.................................... $ 6,463
Noncurrent liabilities................................. $ 6,261
</TABLE>
F-59
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL 1997
Georgia Frozen Distribution Center
On June 27, 1997, Americold acquired the Company's frozen foods
distribution center in Montezuma, Georgia. In addition, the two companies
entered into a long-term logistics agreement under which Americold will manage
its facility and all frozen food transportation operations of Agrilink in
Georgia and New York. The Company received proceeds of approximately $9.1
million which were applied to outstanding Bank loans. No significant gain or
loss occurred as a result of this transaction.
Information Services Reorganization
On June 19, 1997, Systems & Computer Technology Corporation ('SCT') and the
Company announced they signed a major outsourcing services and software
agreement effective June 30, 1997. The ten-year agreement, valued at
approximately $50 million, is for SCT's OnSite outsourcing services and ADAGE
ERP software and implementation services.
Sale of New York Canned Vegetable Businesses
On May 6, 1997, Seneca Foods Corporation ('Seneca') acquired the Agrilink
Leicester, New York production facility and the LeRoy, New York distribution
center, as well as the Blue Boy brand.
Seneca and the Company have also forged a long-term strategic alliance to
combine their agricultural departments into one organization to be managed by
Agrilink. The objective is to maximize sourcing efficiencies of New York State
vegetable requirements for both companies. This agreement initially has a
minimum ten-year term.
The Company received proceeds of approximately $29.4 million which were
applied to outstanding Bank loans. No significant gain or loss occurred as a
result of this transaction.
Brooks Foods
On April 30, 1997, Hoopeston Foods acquired certain assets from the Brooks
Foods operating facility. The purchase price of approximately $2.1 million was
paid with $400,000 in cash and a $1.7 million ten-year note. The proceeds were
applied to outstanding Bank loans. No significant gain or loss occurred as a
result of this transaction. In addition, the two companies entered into a copack
and warehouse agreement under which Hoopeston will produce, package, and
warehouse certain products.
Nalley Canada Ltd.
On June 26, 1995, Agrilink sold Nalley Canada Ltd., located in Vancouver,
British Columbia, to a management group. The operations were sold for
approximately $8.0 million. Approximately, $4.0 million was received in cash.
The remainder of the proceeds were received through a series of long-term notes
with maturities between 1998 and 2005. The notes beared interest at a rate of
12 1/4 percent.
In April 1997, the Company acquired certain businesses from Nalley Canada
Ltd. The acquired operations include a $12.0 million consumer products business,
which markets throughout the western Provinces of Canada. The purchase price of
approximately $5.0 million was paid through the forgiveness of various long-term
receivables (including interest earned) issued to the Company in connection with
its sale of the stock of Nalley Canada Ltd. in 1995.
Finger Lakes Packaging
On October 9, 1996, the Company completed the sale of Finger Lakes
Packaging, Inc. ('Finger Lakes Packaging'), a subsidiary of the Company to
Silgan Containers Corporation, an indirect, wholly-owned subsidiary of Silgan
Holdings, Inc., headquartered in Stamford, Connecticut. A gain of approximately
$3.6 million was recognized on this transaction. The Company received proceeds
of approximately $30.0 million. Proceeds from this sale were applied to
outstanding Bank loans. The transaction also included a long-term supply
agreement between Silgan and Agrilink.
F-60
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL 1996
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
the year ended December 31, 1994, Packer had net sales of $13.0 million,
operating income of $300,000, and income before extraordinary items of $100,000.
Packer Foods has been merged into the Company's CBF 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.
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
were to reduce expenses, improve productivity, and streamline operations.
Efforts focused on the consolidation of operations and the elimination of
approximately 900 positions. The total fiscal 1996 restructuring charge amounted
to $5.9 million. This amount included 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 incurred throughout the
year. Reductions in personnel included both operational and administrative
positions.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS
The following is a summary of property, plant and equipment and related
obligations at June 27, 1998 and June 28, 1997:
<TABLE>
<CAPTION>
JUNE 27, 1998 JUNE 28, 1997
------------------------------ ------------------------------
OWNED LEASED OWNED LEASED
ASSETS ASSETS TOTAL ASSETS ASSETS TOTAL
-------- ------ -------- -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Land............................................ $ 5,772 $ 0 $ 5,772 $ 5,755 $ 0 $ 5,755
Land improvements............................... 3,949 0 3,949 2,117 0 2,117
Buildings....................................... 71,342 395 71,737 80,739 645 81,384
Machinery and equipment......................... 163,177 990 164,167 167,155 2,397 169,552
Construction in progress........................ 14,421 0 14,421 13,053 0 13,053
-------- ------ -------- -------- ------ --------
258,661 1,385 260,046 268,819 3,042 271,861
Less accumulated depreciation................... (64,678) (753 ) (65,431) (52,194) (1,744) (53,938)
-------- ------ -------- -------- ------ --------
Net............................................. $193,983 $ 632 $194,615 $216,625 $1,298 $217,923
-------- ------ -------- -------- ------ --------
-------- ------ -------- -------- ------ --------
Obligations under capital leases(1)............. $ 759 $1,375
Less current portion............................ (256 ) (558)
------ ------
Long-term portion............................... $ 503 $ 817
------ ------
------ ------
</TABLE>
- ------------
(1) Represents the present value of net minimum lease payments calculated at the
Company's incremental borrowing rate at the inception of the leases, which
ranged from 6.3 to 9.8 percent.
Interest capitalized in conjunction with construction amounted to
approximately $248,000 and $342,000 in fiscal 1998 and 1997, respectively.
F-61
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 27, 1998.
<TABLE>
<CAPTION>
TOTAL
FISCAL YEAR ENDING LAST CAPITAL OPERATING FUTURE
SATURDAY IN JUNE LEASES LEASES COMMITMENT
- ------------------------------------------------------------------------------ ------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1999.................................................................. $ 356 $ 5,418 $ 5,774
2000.................................................................. 224 3,582 3,806
2001.................................................................. 145 1,977 2,122
2002.................................................................. 78 1,012 1,090
2003.................................................................. 56 204 260
Later years................................................................... 144 40 184
------- --------- ----------
Net minimum lease payments.................................................... 1,003 $12,233 $ 13,236
--------- ----------
--------- ----------
Less amount representing interest............................................. (244)
-------
Present value of minimum lease payments....................................... $ 759
-------
-------
</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 $12,250,000, $11,204,000, and $10,927,000 for fiscal years 1998,
1997, and 1996, respectively.
NOTE 5. DEBT
BANK FACILITY
The Bank Facility includes Term Loan, Seasonal, and Letter of Credit
facilities. The outstanding borrowings under the Term Loan were $72.4 million at
June 27, 1998. The Seasonal Facility provides seasonal financing of up to $82.0
million. The Letter of Credit Facility provides $18.0 million.
Terms
The Bank has extended to a portion of the Term Loan 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 Term Loan was 7.4 percent per annum for fiscal
1998.
Borrowings under the Seasonal Facility are payable at the expiration of
that portion of the facility, which is December 1998; except that for 15
consecutive calendar days during each year, the borrowings under the Seasonal
Facility must be zero.
Guarantees and Security
All obligations under the Bank Facility are guaranteed by Pro-Fac and
certain subsidiaries of Agrilink (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.
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
all covenants, restrictions and requirements under the terms of the borrowing
agreement.
F-62
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Commitment Fees
The Bank assesses commitment fees of 0.35 percent on the seasonal line and
0.25 percent on the unused portion of the Term Loan.
Seasonal and Letter of Credit Facilities
Short-term borrowings for the three years ended June 27, 1998 were as
follows:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at end of period............................................... $ 0 $ 0 $ 0
Rate at fiscal year end................................................ 0.0% 0.0% 0.0%
Maximum outstanding during the period.................................. $66,000 $65,000 $94,000
Average amount outstanding during the period........................... $51,300 $34,300 $53,700
Weighted average interest rate during the period....................... 7.0% 7.3% 7.4%
</TABLE>
The Letter of Credit Facility provides for the issuance of letters of
credit through December 1998. Management anticipates timely renewals of both the
Seasonal and the Letter of Credit facilities.
Fair Value
Based on an estimated borrowing rate at fiscal year-end 1998 of 7.2 percent
for long-term debt with similar terms and maturities, the fair value of the
Company's long-term debt outstanding under the Bank Facility was approximately
$72.5 million at June 27, 1998.
Based on an estimated borrowing rate at fiscal year end 1997 of 8.7 percent
for long-term debt with similar terms and maturities, the fair value of the
Company's long-term debt outstanding under the Bank Facility was approximately
$71.8 million at June 28, 1997.
THE SENIOR SUBORDINATED NOTES ('NOTES')
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.
Guarantees and Security
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 Credit Agreement).
Certain Covenants
The Notes also limit the amount and timing of dividends and other payments
('Restricted Payments') from the Company to Pro-Fac or to holders of other
Agrilink 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 Agrilink's Fixed
Charge Coverage Ratio (as defined in the Indenture, a ratio of cash flow to
interest) for the preceding four quarters 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.
F-63
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Value
Based on an estimated borrowing rate at 1998 fiscal year-end of 11.2
percent for borrowings with similar terms and maturities, the fair value of the
Notes was $171.4 million at June 27, 1998.
Based on an estimated borrowing rate at 1997 fiscal year end of 11.1
percent for borrowings with similar terms and maturities, the fair value of the
Notes was $174.7 million at June 28, 1997.
OTHER DEBT
Other debt of $5.6 million carries rates up to 10.0 percent at June 27,
1998.
MATURITIES
Total long-term debt maturities during each of the next five fiscal years
are as follows: 1999, $8.1 million; 2000, $10.6 million; 2001, $18.6 million;
2002, $13.1 million; and 2003, $13.1 million. Provisions of the Term Loan
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 of June 27, 1998, the Company had satisfied its
obligation under this provision. Provisions of the Term Loan also require that
cash proceeds from the sale of businesses be applied to the Term Loan.
NOTE 6. TAXES ON INCOME
Taxes on income before cumulative effect of an accounting change include
the following:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal --
Current............................................ $ 6,214 $ 658 $ (4,884)
Deferred........................................... 1,201 4,409 (7,349)
----------- ----------- -----------
7,415 5,067 (12,233)
State and foreign --
Current............................................ 874 314 25
Deferred........................................... (449) 148 (863)
----------- ----------- -----------
425 462 (838)
----------- ----------- -----------
$ 7,840 $ 5,529 $ (13,071)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-64
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the consolidated effective tax rate to the amount
computed by applying the federal income tax rate to income before taxes and
cumulative effect of an accounting change, is as follows:
<TABLE>
<CAPTION>
JUNE 27, JUNE 28, JUNE 29,
1998 1997 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income tax provision/(benefit) at 35% in 1998,
34% in 1997 and 1996................................................. $8,740 $4,631 $ (7,697)
State income taxes, net of federal income tax effect................... 571 484 (834)
Allocation to members.................................................. (2,149) (230) 0
Goodwill amortization.................................................. 961 1,041 784
Dividend received deduction............................................ (305) (472) (521)
Other (net)............................................................ 22 75 (95)
-------- -------- --------
Subtotal............................................................... 7,840 5,529 (8,363)
Tax benefits resulting from prior years' exempt status................. 0 0 (4,708)
-------- -------- --------
Total............................................................. $7,840 $5,529 $(13,071)
-------- -------- --------
-------- -------- --------
Effective Tax Rate..................................................... 31.4% 40.6% (57.7)%
</TABLE>
The consolidated deferred tax (liabilities)/assets consist of the following
at June 27, 1998 and June 28, 1997:
<TABLE>
<CAPTION>
FISCAL FISCAL
1998 1997
-------- --------
<S> <C> <C>
Liabilities:
Depreciation..................................................... $(44,611) $(49,357)
Non-compete agreements........................................... (333) (462)
Other receivables................................................ (4) (538)
Prepaid manufacturing............................................ (3,270) (3,215)
Accounts receivable.............................................. (197) 0
Other............................................................ 0 (215)
-------- --------
(48,415) (53,787)
-------- --------
Assets:
Non-qualified retains............................................ 904 1,006
Inventory........................................................ 2,089 2,322
Accounts receivable.............................................. 0 377
Capital and operating loss carryforwards......................... 6,573 10,159
Accrued employee benefits........................................ 3,594 3,431
Insurance accruals............................................... 1,987 2,058
Pension/OPEB accruals............................................ 6,928 7,128
Restructuring reserves........................................... 321 1,332
Promotional Reserves............................................. 1,648 1,592
Other............................................................ 2,313 3,315
-------- --------
26,357 32,720
-------- --------
Net deferred liabilities......................................... (22,058) (21,067)
Valuation allowance.............................................. (5,550) (6,212)
-------- --------
$(27,608) $(27,279)
-------- --------
-------- --------
</TABLE>
During fiscal year 1998, the Company utilized $9.2 million of net operating
loss carryforwards ($3.2 million of tax). Additionally, approximately $11.0
million of net operating loss carryforwards
F-65
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($3.9 million of tax) were transferred from Pro-Fac. The benefits for these net
operating losses had been recorded in previous years.
During fiscal year 1997, however, the Company disposed of its Finger Lakes
Packaging subsidiary, its New York canned vegetable operation, and a
distribution center in Georgia. During fiscal year 1998, a distribution center
in Michigan was also disposed of. As a result of these disposals, the Company
utilized $26.8 million of its capital loss carryforward. As the related
valuation allowance was established in conjunction with the acquisition of the
Company by Pro-Fac, the recognition of this capital loss carryforward reduced
goodwill. 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. This sale and other sales
resulted in a capital loss of $40.4 million ($15.7 million of tax). As of the
date of sale, a full valuation allowance had been recorded against the capital
loss carryforward as it was more likely than not that a tax benefit would not be
realized. As of June 27, 1998, the Company has $13.6 million of a capital loss
carryforward available. The capital loss carryforward expires in 2001, and any
future recognition of this capital loss carryforward will also reduce goodwill.
In January 1995, the Boards of Directors of Agrilink and Pro-Fac approved
appropriate amendments to the Bylaws of the Agrilink to allow the Company to
qualify as a cooperative under Subchapter T of the Internal Revenue Code. In
August 1995, Agrilink and Pro-Fac received a favorable ruling from the Internal
Revenue Service approving the change in tax treatment effective for fiscal 1996.
This ruling also confirmed that the change in Agrilink tax status would have no
affect on Pro-Fac's ongoing treatment as a cooperative under Subchapter T of the
Internal Revenue Code of 1986.
In August of 1993, the Internal Revenue Service issued a determination
letter which concluded that the Cooperative was exempt from federal income tax
to the extent provided by Section 521 of the Internal Revenue Code, 'Exemption
of Farmers' Cooperative from Tax.' Unlike a nonexempt cooperative, a tax-exempt
cooperative is entitled to deduct cash dividends it pays on its capital stock in
computing its taxable income. The exempt status was retroactive to fiscal year
1986. In conjunction with this ruling, the Cooperative had filed for tax refunds
for fiscal years 1986 to 1992 in the amount of approximately $8.8 million and
interest payments of approximately $5.2 million. Accordingly, a refund amount of
$10.1 million for tax and interest have been reflected in the financial
statements of the Cooperative as of June 24, 1995. In addition, refund amounts
of $3.9 million for tax and interest have been reflected in the financial
statement of the Cooperative as of June 29, 1996. These refunds and interest for
the fiscal years 1986 to 1991 were received in March of 1996. The refund and
interest for fiscal year 1992 was received in June of 1997.
As a result of the acquisition of Agrilink Foods, the Cooperative's tax
exempt status has ceased.
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.
F-66
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pension cost for fiscal years ended 1998, 1997, and 1996 includes the
following components:
<TABLE>
<CAPTION>
PENSION BENEFITS
-----------------------------------------
FISCAL FISCAL FISCAL
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period.............................. $ 86,775 $ 87,674 $ 80,752
Service cost........................................................... 2,796 2,915 3,162
Interest cost.......................................................... 6,776 6,637 6,703
Plan participants' contributions....................................... 168 279 213
Amendments............................................................. 74 0 (265)
Actuarial loss/(gain).................................................. 14,193 (2,171) 2,786
Benefits paid.......................................................... (8,295) (8,559) (5,677)
----------- ----------- -----------
Benefit obligation at end of period............................... 102,487 86,775 87,674
----------- ----------- -----------
Change in plan assets:
Fair value of assets at beginning of period............................ 88,979 89,716 74,897
Actual return on Plan assets........................................... 25,129 4,884 19,430
Employer contribution.................................................. 257 2,659 853
Plan participants' contributions....................................... 168 279 213
Benefits paid.......................................................... (8,295) (8,559) (5,677)
----------- ----------- -----------
Fair value of assets at end of period............................. 106,238 88,979 89,716
----------- ----------- -----------
Plan funded status.......................................................... 3,751 2,204 2,042
Unrecognized prior service cost........................................ (147) (243) (265)
Unrecognized net transition asset or obligation........................ 0 0 0
Unrecognized actuarial gain............................................ (17,057) (15,421) (18,115)
Union plans............................................................ (106) (122) (293)
----------- ----------- -----------
(Accrued benefit liability) prior to additional minimum
liability....................................................... (13,559) (13,582) (16,631)
Amounts recognized in the statement of financial position
consist of:
Prepaid benefit cost (accrued benefit liability)....................... (14,167) (13,997) (16,835)
Accumulated other comprehensive income................................. 608 415 204
----------- ----------- -----------
Net amount recognized............................................. $ (13,559) $ (13,582) $ (16,631)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average assumptions:
Discount rate.......................................................... 7.0% 8.0% 7.75%
Expected return on plan assets......................................... 10.0% 10.0% 10.0%
Rate of compensation increase.......................................... 4.5% 4.5% 4.5%
Components of net periodic benefit cost:
Service cost........................................................... $ 2,796 $ 2,915 $ 3,162
Interest cost.......................................................... 6,776 6,637 6,703
Expected return on plan assets......................................... (8,708) (8,947) (7,307)
Amortization of prior service cost..................................... (22) (22) 0
Amortization of (gain)/loss............................................ (593) (802) (64)
Union costs............................................................ 88 70 205
----------- ----------- -----------
Net periodic benefit cost.............................................. $ 337 $ (149) $ 2,699
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-67
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the two non-qualified retirement plans with accumulated
benefit obligations in excess of plan assets were:
<TABLE>
<CAPTION>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN EXCESS BENEFIT RETIREMENT PLAN
--------------------------------------- ---------------------------------------
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Projected benefit obligation............... $ 1,939 $ 1,843 $ 1,913 $ 850 $ 652 $ 453
Accumulated benefit obligation............. 1,939 1,843 1,913 651 575 315
Plan assets................................ 0 0 0 0 0 0
</TABLE>
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>
<CAPTION>
OTHER BENEFITS
-----------------------------------------
FISCAL FISCAL FISCAL
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period.............................. $ 2,604 $ 2,695 $ 2,743
Service cost........................................................... 6 8 23
Interest cost.......................................................... 198 199 222
Actuarial loss/(gain).................................................. 322 49 (168)
Benefits paid.......................................................... (372) (347) (125)
----------- ----------- -----------
Benefit obligation at end of period............................... 2,758 2,604 2,695
----------- ----------- -----------
Change in plan assets:
Fair value of assets at beginning of period............................ 0 0 0
Employer contribution.................................................. 372 347 125
Benefits paid.......................................................... (372) (347) (125)
----------- ----------- -----------
Fair value of assets at end of period............................. 0 0 0
----------- ----------- -----------
Plan funded status.......................................................... (2,758) (2,604) (2,695)
Unrecognized actuarial gain............................................ (46) (378) (443)
----------- ----------- -----------
Accrued benefit liability prior to additional minimum liability... (2,804) (2,982) (3,138)
Amounts recognized in the statement of financial position
consist of:
Accrued benefit liability.............................................. (2,804) (2,982) (3,138)
----------- ----------- -----------
Net amount recognized............................................. $(2,804) $(2,982) $(3,138)
----------- ----------- -----------
----------- ----------- -----------
Weighted-average assumptions:
Discount rate.......................................................... 7.0% 8.0% 7.75%
Expected return on plan assets......................................... N/A N/A N/A
Rate of compensation increase.......................................... N/A N/A N/A
</TABLE>
F-68
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OTHER BENEFITS
-----------------------------------------
FISCAL FISCAL FISCAL
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost........................................................... $ 6 $ 8 $ 23
Interest cost.......................................................... 198 199 222
Amortization of (gain)/loss............................................ (10) (15) 0
----------- ----------- -----------
Net periodic benefit cost.............................................. $ 194 $ 192 $ 245
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
For measurement purposes, a 9.5 percent rate of increase in the per capita
cost covered health care benefits was assumed for fiscal 1998. The rate was
assumed to decrease gradually to 5.0 percent for 2007 and remain at that level
thereafter.
The Company sponsors benefit plans that provide postretirement medical and
life insurance benefits for certain current and former employees. For the most
part, current employees are not eligible for the postretirement medical
coverage. As such, the assumed health care trend rates have an insignificant
effect on the amounts reported for the postretirement benefits plan.
One-percentage point change in the assumed health care trend rates would have
the following effect:
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost
components........................................ $ 7,361 $ (7,435)
Effect on postretirement benefit obligation......... $113,206 $ (108,742)
</TABLE>
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 5.0 percent of the combined long-term
debt and equity (as defined) of Pro-Fac and the Company.
Under the Retirement Savings and Incentive Plan ('RSIP' or the 'Plan'), the
Company makes an incentive contribution to the Plan if certain pre-established
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 1998, 1997 and
1996 the Company allocated $475,000, $500,000 and $400,000, respectively, in the
form of matching contributions and $400,000, $400,000 and $211,000,
respectively, in the form of incentive contributions for the benefit of its
employees.
LONG-TERM INCENTIVE PLAN
On June 24, 1996, the Company introduced a long-term incentive program, the
Agrilink 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 on the fourth anniversary of grant. One-third of the
appreciated value of units in excess of the initial grant price is paid as cash
compensation over the subsequent three years. The final value of the performance
units is determined on the fourth anniversary of grant. The total units granted
were 278,357 at $21.88 per unit in June 1998, 176,278 at $25.04 per unit, and
7,996 at $13.38 per unit in June 1997, and 248,511 at $13.38 per unit in June
1996. Units forfeited during the year included 27,251 at $13.38 and 19,978 at
$25.04. During fiscal 1997, approximately $1.5 million was allocated to this
plan.
F-69
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The value of the grants from the Agrilink Foods Equity Value Plan will be
based on the Company's future earnings and debt repayment.
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 price of such shares is par
value, $10 per share. During fiscal 1998, 1997, and 1996, 27,043, 31,435 and
33,364 shares, respectively, were held by employees, and 580 shares were
subscribed to as of June 27, 1998.
NOTE 8. COMMON STOCK AND CAPITALIZATION
COMMON STOCK
The common stock purchased by members is related to the crop delivery of
each member. Regardless of the number of shares held, each member has one vote.
As of June 27, 1998, there were 634 holders of the common stock. Common stock
may be transferred to another grower only with approval of the Pro-Fac Board of
Directors. If a member ceases to be a producer of agricultural products which he
markets through the Cooperative, then he must sell his common stock to another
grower acceptable to the Cooperative. If no such grower is available to purchase
the stock, then the member must provide one year's advance written notice of his
intent to withdraw, after which the Cooperative must purchase his common stock
at par value. There is no established public trading market for the common stock
of the Cooperative.
In fiscal 1998 and fiscal 1996, dividends on common stock were paid at a
rate of 5.0 percent. No dividends on common stock were paid in fiscal 1997.
At June 27, 1998 and June 28, 1997, there were outstanding subscriptions,
at par value, for 160,629 and 54,557 shares of common stock, respectively. These
shares are issued as subscription payments are received.
PREFERRED STOCK
Except for the Class B Cumulative Preferred Stock all preferred stock
originated from the conversion at par value of retains. This stock is
non-voting, except that the holders of preferred and common stock would be
entitled to vote as separate classes on certain matters which would affect or
subordinate the rights of the class.
At the Cooperative's annual meeting in January 1995, shareholders approved
an amendment to the certificate of incorporation to authorize the creation of
five additional classes of preferred stock.
On August 23, 1995, the Cooperative commenced an offer to exchange one
share of its Class A Cumulative Preferred Stock (liquidation preference $25 per
share) for each of its existing Non-cumulative Preferred Stock (liquidation
preference $25 per share). Pro-Fac's Class A Cumulative Preferred Stock is
listed under the symbol PFACP on the National Market System of the National
Association of Securities Dealers Automated Quotation System ('Nasdaq'). As of
June 27, 1998, the number of Class A Cumulative Preferred Stock record holders
was 1,841.
Subsequent to June 27, 1998, the Cooperative declared a cash dividend of
$1.50 per share on the Non-cumulative Preferred Stock and $.43 per share on the
cumulative preferred stock. These dividends amounted to $1.6 million.
In June 1995, the Board approved, pursuant to its authority under the
Charter Amendment the creation of a new series of preferred stock, to be
designated the 'Class B, Series 1, 10 percent
F-70
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cumulative preferred stock' (the 'Class B Stock'). These shares will be issued
to employees of Agrilink pursuant to an Employee Stock Purchase Plan. At least
once a year Pro-Fac plans to offer to repurchase at least 5 percent of the
outstanding shares of Class B Stock.
The dividend rates for the preferred stock are as follows:
<TABLE>
<S> <C>
Non-cumulative preferred...................... $1.50 per share paid annually at the
discretion of the Board.
Class A Cumulative Preferred.................. $1.72 per share annually, paid in four
quarterly installments of $.43 per share.
Class B Cumulative Preferred.................. $1.00 per share paid annually.
</TABLE>
Because dividends on the Non-cumulative Preferred Stock are payable
annually and dividends on the Cumulative Preferred Stock are paid quarterly, the
exchange of Non-cumulative Preferred Stock for Cumulative Preferred Stock on
October 10, 1995 resulted in the payment of 1 3/4 years of dividends to the
holders of exchanged shares in fiscal 1996.
RETAINED EARNINGS ALLOCATED TO MEMBERS ('RETAINS')
Retains arise from patronage income and are allocated to the accounts of
members within 8.5 months of the end of each fiscal year.
Qualified Retains
Qualified retains are freely transferable and normally mature into
preferred stock in December of the fifth year after allocation. Qualified
retains are taxable income to the member in the year the allocation is made.
Non-Qualified Retains
Non-qualified retains may not be sold or purchased. The present intention
of the Board of Directors is that the non-qualified retains allocation be
redeemed in five years through partial payment in cash and issuance of preferred
stock. The non-qualified retains will not be taxable to the member until the
year of redemption. Non-qualified retains may be subject to later adjustment if
such is deemed necessary by the Board of Directors because of events which may
occur after the retains were allocated.
Beginning with the retains issued in 1995, the maturity of all future
retains will result in the issuance of Class A Cumulative Preferred Stock.
EARNED SURPLUS (UNALLOCATED AND APPORTIONED)
Earned surplus consists of accumulated income after distribution of
earnings allocated to members, dividends and after state and federal income
taxes. Earned surplus is reinvested in the business in the same fashion as
retains.
NOTE 9. SUBSEQUENT EVENTS AND OTHER MATTERS
DEAN FOODS VEGETABLE COMPANY
On July 27, 1998, the Company announced that it had reached a definitive
agreement with Dean Foods Company ('Dean') of Franklin Park, Illinois, to
acquire Dean's vegetable operations which include the nationally known Birds Eye
brand and Dean's Freshlike and VegAll brands. The Dean Foods Vegetable Company
('DFVC') reported net sales of $620.2 million (on a basis consistent with
F-71
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
that report by Agrilink) and operating earnings of $38.7 million. DFVC employs
approximately 2,000 full-time employees in 13 plants, located in California,
Minnesota, New York, Texas, and Wisconsin. The acquisition is expected to close
in September 1998 and will be accounted for as a purchase.
SEYFERT FOODS, INC.
On May 6, 1998, the Company and Heath Investment Capital, Inc., announced
that they were unable to reach a definitive agreement regarding the Company's
effort to acquire the assets of Seyfert Foods, Inc. of Ft. Wayne, Indiana.
J.A. HOPAY DISTRIBUTING CO., INC.
Effective July 21, 1998, the Company acquired J.A. Hopay Distributing Co.,
Inc. of Pittsburgh, Pennsylvania. Hopay distributes snack products for Snyder of
Berlin. The acquisition was accounted for as a purchase. The purchase price was
approximately $3.1 million.
LEGAL MATTERS
The Company is party to various litigation and claims arising in the
ordinary course of business. Management and legal counsel for the Company are of
the opinion that none of these legal actions will have a material effect on the
financial position of the Company.
COMMITMENTS
The Company's Curtice Burns Foods business unit has guaranteed an
approximate $1.4 million loan for the City of Montezuma to renovate a sewage
treatment plant operated in Montezuma on behalf of the City.
F-72
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS AND NET PROCEEDS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales.......................................................................... $ 182,579 $ 176,397
Cost of sales...................................................................... (135,882) (130,748)
------------- -------------
Gross profit....................................................................... 46,697 45,649
Selling, administrative and general expense........................................ (34,883) (32,922)
Income from Great Lakes Kraut Company.............................................. 636 164
Gain on sale of aseptic operations................................................. 64,202 0
------------- -------------
Operating income................................................................... 76,652 12,891
Interest expense................................................................... (8,336) (7,770)
------------- -------------
Income before taxes, dividends, allocation of net proceeds, and extraordinary
item............................................................................. 68,316 5,121
Tax provision...................................................................... (25,007) (1,822)
------------- -------------
Income before dividends, allocation of net proceeds, and extraordinary item........ 43,309 3,299
Extraordinary item relating to the early extinguishment of debt (net of income
taxes)........................................................................... (18,024) 0
------------- -------------
Net income......................................................................... $ 25,285 $ 3,299
------------- -------------
------------- -------------
Allocation of net proceeds:
Net income.................................................................... $ 25,285 $ 3,299
Dividends on common and preferred stock....................................... (1,978) (1,850)
------------- -------------
Net proceeds.................................................................. 23,307 1,449
Allocation to earned surplus.................................................. (21,302) (788)
------------- -------------
Net proceeds available to members............................................. $ 2,005 $ 661
------------- -------------
------------- -------------
Net proceeds available to members:
Estimated cash payment........................................................ $ 501 $ 165
Qualified retains............................................................. 1,504 496
------------- -------------
Net proceeds available to members............................................. $ 2,005 $ 661
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-73
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 26, JUNE 27, SEPTEMBER 27,
1998 1998 1997
------------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 9,083 $ 5,049 $ 3,997
Accounts receivable trade, net............................................... 98,911 55,046 65,053
Accounts receivable, other................................................... 11,053 3,575 3,845
Current deferred tax assets.................................................. 13,336 4,849 12,312
Inventories --
Finished goods.......................................................... 349,451 111,153 140,056
Raw materials and supplies.............................................. 45,829 30,433 25,413
------------- ---------- -------------
Total inventories.................................................. 395,280 141,586 165,469
------------- ---------- -------------
Current investment in CoBank................................................. 1,330 1,994 631
Prepaid manufacturing expense................................................ 98 8,404 84
Prepaid expenses and other current assets.................................... 17,288 12,989 8,464
------------- ---------- -------------
Total current assets............................................... 546,379 233,492 259,855
Investment in CoBank.............................................................. 22,377 22,377 24,320
Investment in Great Lakes Kraut Company........................................... 7,223 6,584 6,585
Property, plant and equipment, net................................................ 317,025 194,615 209,216
Assets held for sale at net realizable value...................................... 2,711 2,662 3,259
Goodwill and other intangible assets, net......................................... 327,650 94,744 95,503
Other assets...................................................................... 24,477 12,234 7,525
------------- ---------- -------------
Total assets....................................................... $ 1,247,842 $ 566,708 $ 606,263
------------- ---------- -------------
------------- ---------- -------------
LIABILITIES AND SHAREHOLDERS' AND MEMBERS' CAPITALIZATION
Current liabilities:
Notes payable................................................................ $ 94,000 $ 0 $ 64,000
Current portion of obligations under capital leases.......................... 256 256 558
Current portion of long-term debt............................................ 1,023 8,071 8,073
Accounts payable............................................................. 84,945 70,158 39,175
Income taxes payable......................................................... 13,212 4,046 5,386
Accrued interest............................................................. 690 8,559 3,960
Accrued employee compensation................................................ 14,329 8,598 7,981
Other accrued expenses....................................................... 89,746 19,013 21,681
Dividends payable............................................................ 0 52 0
Amount due members........................................................... 29,946 20,636 27,808
------------- ---------- -------------
Total current liabilities.......................................... 328,147 139,389 178,622
Obligations under capital leases.................................................. 503 503 817
Long-term debt.................................................................... 463,700 69,937 70,528
Senior subordinated notes......................................................... 15 160,000 160,000
Subordinated bridge facility...................................................... 200,000 0 0
Subordinated promissory note...................................................... 30,000 0 0
Deferred income tax liabilities................................................... 34,644 32,457 39,591
Other non-current liabilities..................................................... 26,623 23,053 22,962
------------- ---------- -------------
Total liabilities.................................................. 1,083,632 425,339 472,520
------------- ---------- -------------
(table continued on next page)
</TABLE>
F-74
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
SEPTEMBER 26, JUNE 27, SEPTEMBER 27,
1998 1998 1997
------------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Commitments and contingencies
Class B cumulative redeemable preferred stock; liquidation preference $10 per
share, authorized -- 500,000 shares; issued and outstanding 27,043, 27,043, and
31,435 shares, respectively..................................................... 270 270 314
<CAPTION>
SEPTEMBER 26, JUNE 27, SEPTEMBER 27,
1998 1998 1997
------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common stock, par value $5,
authorized -- 5,000,000 shares
Shares issued...................... 1,834,805 1,825,863 1,749,580
Shares subscribed.................. 737,935 160,629 44,808
------------- ---------- -------------
Total subscribed and
issued............ 2,572,740 1,986,492 1,794,388
Less subscriptions receivable in
installments..................... (737,935) (160,629) (44,808)
------------- ---------- -------------
Total issued and
outstanding....... 1,834,805 1,825,863 1,749,580 9,174 9,129 8,748
------------- ---------- -------------
------------- ---------- -------------
Shareholders' and members' capitalization:
Retained earnings allocated to members....................................... 31,264 29,765 32,409
Non-qualified allocation to members.......................................... 2,660 2,660 2,960
Accumulated other comprehensive income:
Minimum pension liability adjustment.................................... (608) (608) 0
Cumulative foreign currency adjustment.................................. (5) 0 0
Non-cumulative preferred stock, par value $25; authorized -- 5,000,000
shares; issued and outstanding -- 45,001, 45,001, and 53,797,
respectively............................................................... 1,125 1,125 1,345
Class A cumulative preferred stock, liquidation preference $25 per share;
authorized -- 49,500,000 shares; issued and outstanding 3,503,199,
3,503,199, and 3,215,709 shares, respectively.............................. 87,580 87,580 80,393
Earned surplus............................................................... 32,750 11,448 7,574
------------- ---------- -------------
Total shareholders' and members' capitalization.................... 154,766 131,970 124,681
------------- ---------- -------------
Total liabilities and capitalization............................... $ 1,247,842 $ 566,708 $ 606,263
------------- ---------- -------------
------------- ---------- -------------
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-75
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................... $ 25,285 $ 3,299
Amounts payable to members.................................................... (501) (165)
Adjustments to reconcile net income to net cash used in operating activities:
Gain on the sale of the aseptic operations............................... (64,202) 0
Extraordinary item relating to the early extinguishment of debt.......... 18,024 0
Amortization of goodwill and other intangibles........................... 926 990
Amortization of debt issue costs......................................... 200 199
Depreciation............................................................. 4,385 4,597
Equity in undistributed earnings of Great Lakes Kraut Company............ (636) (164)
Change in assets and liabilities:
Accounts receivable................................................. (22,222) (17,442)
Inventories......................................................... (72,038) (52,739)
Accounts payable and other accrued expenses......................... (22,938) (9,959)
Amounts due to members.............................................. 9,310 12,017
Income taxes payable................................................ 19,629 (286)
Other assets and liabilities........................................ (34) (2,299)
------------- -------------
Net cash used in operating activities.......................... (104,812) (61,952)
------------- -------------
Cash flows from investing activities:
Purchase of property, plant and equipment..................................... (4,094) (3,231)
Proceeds from disposals....................................................... 83,000 375
Proceeds from investment in CoBank............................................ 664 316
Cash paid for acquisitions.................................................... (445,918) 0
------------- -------------
Net cash used in investing activities.......................... (366,348) (2,540)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of short-term debt..................................... 177,000 64,000
Payments on short-term debt................................................... (83,000) 0
Proceeds from issuance of long-term debt...................................... 677,100 2,000
Proceeds from Great Lakes Kraut Company....................................... 0 3,000
Payments on long-term debt.................................................... (276,450) (1,303)
Cash paid for debt issuance costs............................................. (17,523) 0
Issuances/(repurchases) of common stock....................................... 45 (196)
Cash dividends paid........................................................... (1,978) (1,850)
------------- -------------
Net cash provided by financing activities...................... 475,194 65,651
------------- -------------
Net change in cash and cash equivalents............................................ 4,034 1,159
Cash and cash equivalents at beginning of period................................... 5,049 2,838
Cash and cash equivalents at end of period......................................... $ 9,083 $ 3,997
------------- -------------
------------- -------------
</TABLE>
(table continued on next page)
F-76
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS -- (CONTINUED)
(table continued from previous page)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Supplemental disclosure of cash flow information:
Acquisition of Dean Foods Vegetable Company
Accounts receivable...................................................... $ 28,701
Inventories.............................................................. 191,619
Prepaid expenses and other current assets................................ 2,871
Current deferred tax asset............................................... 6,300
Property, plant and equipment............................................ 131,648
Goodwill and other intangible assets..................................... 230,609
Accounts payable......................................................... (37,802)
Accrued employee compensation............................................ (8,437)
Other accrued expenses................................................... (66,748)
Long-term debt........................................................... (2,752)
Subordinated promissory note............................................. (30,000)
Other assets and liabilities, net........................................ (2,404)
-------------
$ 443,605
-------------
-------------
Acquisition of J.A. Hopay Distributing Co., Inc.:
Accounts receivable...................................................... $ 420
Inventories.............................................................. 153
Property, plant and equipment............................................ 51
Goodwill and other intangible assets..................................... 3,303
Other accrued expenses................................................... (251)
Obligation for covenant not to compete................................... (1,363)
-------------
$ 2,313
-------------
-------------
Investment in Great Lakes Kraut Company:
Inventories.............................................................. $ 2,175
Prepaid expenses and other current assets................................ 409
Property, plant and equipment............................................ 6,966
Other accrued expenses................................................... (62)
-------------
$ 9,488
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
F-77
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for these periods. The following summarizes the significant
accounting policies applied in the preparation of the accompanying financial
statements. These financial statements should be read in conjunction with the
financial statements and accompanying notes contained in the Pro-Fac
Cooperative, Inc. ('Pro-Fac' or the 'Cooperative') audited financial statements
beginning on page F-49.
CONSOLIDATION
The consolidated financial statements include the Cooperative and its
wholly-owned subsidiary, Agrilink Foods, Inc. ('Agrilink' or 'the Company')
after elimination of intercompany transactions and balances. Investments in
affiliates, owned more than 20 percent but not in excess of 50 percent, are
recorded under the equity method of accounting.
RECLASSIFICATION
Certain items for fiscal 1998 have been reclassified to conform with the
current presentation.
ADOPTION OF SFAS NO. 130
Effective June 28, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, 'Reporting Comprehensive Income.'
Comprehensive income is defined as the change in equity of a business during a
period from transactions and other events and circumstances from non-owner
sources. Under SFAS No. 130, the term 'comprehensive income' is used to describe
the total of net earnings plus other comprehensive income which for the Company
includes foreign currency translation adjustments and minimum pension liability
adjustments. The adoption of SFAS No. 130 did not have a material effect on the
Company's results of operations or financial position.
ADOPTION OF SFAS NO. 131
Effective June 28, 1998 the Company adopted SFAS No. 131, 'Disclosures
about Segments of an Enterprise and Related Information.' SFAS No. 131
supersedes SFAS No. 14, 'Financial Reporting for Segments of a Business
Enterprise,' replacing the 'industry segment' approach with the 'management'
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS No. 131 did not affect the Company's results of operations
or financial position.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not engage in interest rate speculation. Derivative
financial instruments are utilized to hedge interest rate risks and are not held
for trading purposes.
The Company enters into interest rate swap agreements to limit exposure to
interest rate movements. Net payments or receipts are accrued into prepaid
expenses and other current assets and/or other accrued expenses and are recorded
as adjustments to interest expense. Interest rate instruments are entered into
for periods no greater than the life of the underlying transaction being hedged.
Management anticipates that all interest rate derivatives will be held to
maturity. Any gains or losses on
F-78
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
prematurely terminated interest rate derivatives will be recognized over the
remaining life, if any, of the underlying transaction as an adjustment to
interest expense.
NOTE 2. ACQUISITION OF DEAN FOODS VEGETABLE COMPANY
On September 24, 1998, Agrilink acquired the Dean Foods Vegetable Company
('DFVC'), the frozen and canned vegetable business of Dean Foods Company ('Dean
Foods'), by acquiring all the outstanding capital stock of Dean Foods Vegetable
Company and Birds Eye de Mexico SA de CV (the 'Acquisition'). In connection with
the Acquisition, Agrilink sold its aseptic business to Dean Foods. Agrilink paid
$360.0 million in cash, net of the sale of the Aseptic Business, and issued to
Dean Foods a $30.0 million unsecured subordinated promissory note due November
22, 2008 (the 'Subordinated Promissory Note'), as consideration for the
Acquisition. The Company has the right, exercisable until July 15, 1999, to
require Dean Foods, jointly with the Company, to treat the Acquisition as an
asset sale for tax purposes under Section 338(h)(10) of the Internal Revenue
Code. In order to exercise that election, the Company will pay $13.2 million to
Dean Foods. The Company intends to exercise that election.
After the Acquisition, DFVC was merged into the Company, and Dean Foods
Vegetable Company became a business unit of the Company known as Agrilink Foods
Vegetable Company ('AFVC'). DFVC has been one of the leading processors of
vegetables in the United States, selling its products under well-known brand
names, such as Birds Eye, Freshlike and Veg-All, and private labels. The Company
believes that the Acquisition strengthens its competitive position by: (i)
enhancing its brand recognition and market position, (ii) providing
opportunities for cost savings and operating efficiencies and (iii) increasing
its product and geographic diversification.
The Acquisition was accounted for under the purchase method of accounting.
Under purchase accounting, tangible and identifiable intangible assets acquired
and liabilities assumed will be recorded at their respective fair values. The
valuations and other studies which will provide the basis for such an allocation
have not progressed to a stage where there is sufficient information to make a
final allocation in the accompanying financial statements. Accordingly, the
purchase accounting adjustments made in the accompanying financial statements
are preliminary. Once an allocation is determined, in accordance with generally
accepted accounting principles, any remaining excess of purchase cost over net
assets acquired will be adjusted through goodwill.
Due to insignificance, the results of operations of AFVC for the period
September 24 through 26, 1998 have not been included in the Company's
Consolidated Statement of Operations for the three months ended September 26,
1998.
Concurrently with the Acquisition, Agrilink refinanced its existing
indebtedness (the 'Refinancing'), including its 12.25 percent Senior
Subordinated Notes due 2005 (the 'Old Notes') and its then existing bank debt.
On August 24, 1998, Agrilink commenced a tender offer (the 'Tender Offer') for
all the Old Notes and consent solicitation to certain amendments under the
indenture governing the Old Notes to eliminate substantially all the restrictive
covenants and certain events of default therein. Substantially all of the $160
million aggregate principal amount of the Old Notes were tendered and purchased
by Agrilink for aggregate consideration of approximately $184 million, including
accrued interest of $2.9 million. Agrilink also terminated its existing bank
facility (including seasonal borrowings) and repaid the $176.5 million,
excluding interest owed and breakage fees outstanding thereunder.
In order to consummate the Acquisition and the Refinancing and to pay the
related fees and expenses, Agrilink: (i) entered into a new credit facility (the
'New Credit Facility') providing for $455.0 million of term loan borrowings (the
'Term Loan Facility') and up to $200.0 million of revolving credit borrowings
(the 'Revolving Credit Facility'), (ii) entered into a $200.0 million bridge
loan facility (the 'Bridge Facility') and (iii) issued a $30.0 million
Subordinated Promissory Note to Dean Foods. The
F-79
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Bridge Facility will be repaid principally with the proceeds from a new
long-term take-out financing. The Bridge Facility was provided by Warburg Dillon
Read LLC, as Arranger and Syndication Agent; and UBS AG, Stamford Branch, as
Administrative Agent; and the Bank of Montreal and Harris Trust and Savings Bank
as additional lenders.
NOTE 3. AGREEMENTS WITH AGRILINK
The contractual relationship between Agrilink and Pro-Fac is defined in the
Pro-Fac Marketing and Facilitation Agreement ('Agreement'). Under the 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 Agrilink, it
may be more or less than the price Agrilink would pay in the open market in the
absence of the Agreement.
Under the Agreement, the Company is required to have on its board of
directors some persons who are neither members of nor affiliated with Pro-Fac
('Disinterested Directors'). The number of Disinterested Directors must at least
equal the number of directors who are members of Pro-Fac. The volume and type of
crops to be purchased by Agrilink under the Agreement are determined pursuant to
its annual profit plan, which requires the approval of a majority of the
Disinterested Directors. In addition, under the Agreement, 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, as additional
patronage income, 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 Agrilink, including the provision of a long term, stable
crop supply, favorable payment terms for crops and the sharing of risks of
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. Under the Agreement, Pro-Fac is required to reinvest at least 70 percent
of the additional Patronage income in Agrilink.
NOTE 4. DEBT
NEW CREDIT FACILITY
In connection with the Acquisition, the Company has entered into the New
Credit Facility with Harris Bank as Administrative Agent and Bank of Montreal as
Syndication Agent, and the lenders thereunder. The Credit Facility consists of
the $200.0 million Revolving Credit Facility and the $455.0 million Term Loan
Facility. The Term Loan Facility is comprised of the Term A Facility, which has
a maturity of five years, the Term B Facility, which has a maturity of six
years, and the Term C Facility, which has a maturity of seven years. The
Revolving Credit Facility has a maturity of five years.
The New Credit Facility bears interest, at the Company's option, at the
Administrative Agent's alternate base rate or the London Interbank Offered Rate
('LIBOR') plus, in each case, applicable margins of: (i) in the case of
alternate base rate loans, (x) 1.00 percent for loans under the Revolving Credit
Facility and the Term A Facility, (y) 2.75 percent for loans under the Term B
Facility and (z) 3.00 percent for loans under the Term C Facility and (ii) in
the case of LIBOR loans, (x) 2.75 percent for loans under the Revolving Credit
Facility and the Term A Facility, (y) 3.75 percent for loans under the Term B
Facility and (z) 4.00 percent for loans under the Term C Facility. The
Administrative Agent's 'alternate base rate' is defined as the greater of: (i)
the prime commercial rate as announced by the
F-80
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Administrative Agent or (ii) the Federal Funds rate plus 0.50 percent. In
addition, the Company will pay a commitment fee calculated at a rate of 0.50
percent per annum on the daily average unused commitment under the Revolving
Credit Facility.
Beginning with the reporting period ending March 31, 1999, the applicable
margins for the New Credit Facility will be subject to possible reductions based
on the ratio of consolidated debt to earnings before interest, taxes,
depreciation and amortization ('EBITDA') (each as defined in the New Credit
Facility).
Upon consummation of the Acquisition, the Company drew $455.0 million under
the Term Loan Facility, consisting of $100.0 million, $175.0 million and $180.0
million of loans under the Term A Facility, Term B Facility and Term C Facility,
respectively. Additionally, the Company drew $93.0 million under the Revolving
Credit Facility for seasonal working capital needs and $14.3 million under the
Revolving Credit Facility was issued for letters of credit. During December
1998, the Company's primary lender exercised its right under the New Credit
Facility to transfer $50.0 million from the Term A Facility to the Term B and
Term C Facilities in increments of $25.0 million.
The Term Loan Facility will be subject to the following amortization
schedule.
<TABLE>
<CAPTION>
FISCAL YEAR TERM LOAN A TERM LOAN B TERM LOAN C TOTAL
- -------------------------------------- ----------- ----------- ----------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
1999................................ $ 0.0 $ 0.2 $ 0.2 $ 0.4
2000................................ 7.5 0.4 0.4 8.3
2001................................ 10.0 0.4 0.4 10.8
2002................................ 10.0 0.4 0.4 10.8
2003................................ 10.0 0.4 0.4 10.8
2004................................ 12.5 0.4 0.4 13.3
2005................................ 0.0 197.8 0.4 198.2
2006................................ 0.0 0.0 202.4 202.4
----------- ----------- ----------- ------
$50.0 $ 200.0 $ 205.0 $455.0
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
The Term Loan Facility is subject to mandatory prepayment under various
scenarios as defined in the New Credit Facility.
The Company's obligations under the New Credit Facility are secured by a
first-priority lien on: (i) substantially all existing or after-acquired assets,
tangible or intangible, (ii) the capital stock of certain of Pro-Fac's current
and future subsidiaries, and (iii) all of the Company's rights (principally
indemnification rights) under the agreement to acquire DFVC and the Pro-Fac
Marketing and Facilitation Agreement. The Company's obligations under the New
Credit Facility are guaranteed by Pro-Fac and certain of the Company's current
and future subsidiaries, if any.
The New Credit Facility contains customary covenants and restrictions on
the Company's ability to engage in certain activities, including, but not
limited to: (i) limitations on the incurrence of indebtedness and liens, (ii)
limitations on sale-leaseback transactions, consolidations, mergers, sale of
assets, transactions with affiliates and investments and (iii) limitations on
dividend and other distributions. The New Credit Facility also contains
financial covenants requiring Pro-Fac to maintain a minimum level of EBITDA, a
minimum interest coverage ratio, a minimum fixed charge coverage ratio, a
maximum leverage ratio and a minimum level of net worth. The Company is in
compliance with all covenants, restrictions and requirements under the terms of
the New Credit Facility.
INTEREST RATE PROTECTION AGREEMENTS
The Company has entered into a three-year interest rate swap agreement with
the Bank of Montreal in the notional amount of $150 million. The swap agreement
provides for an interest rate of
F-81
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4.96 percent over the term of the swap payable by the Company in exchange for
payments at the published three-month LIBOR. In addition, the Company entered
into a separate interest rate swap agreement with the Bank of Montreal in the
notional amount of $100 million for an initial period of three years, which may
be extended, at the Company's option, for an additional two-year period. This
swap agreement provides for an interest rate of 5.32 percent over the term of
the swap, including the two-year extension period if the Company elects to
extend, payable by the Company in exchange for payments at the published
three-month LIBOR. The Company entered into these agreements in order to manage
its interest rate risk by exchanging its floating rate interest payments for
fixed rate interest payments.
SUBORDINATED BRIDGE FACILITY
To complete the Acquisition, the Company also entered into a Subordinated
Bridge Facility (the 'Bridge Facility'). The Bridge Facility was provided by
Warburg Dillon Read LLC, as Arranger and Syndication Agent; and UBS AG, Stamford
Branch, as Administrative Agent; and the Bank of Montreal and Harris Trust and
Savings Bank as additional lenders. The interest rate under the Bridge Facility
resets monthly on the basis of LIBOR plus a spread of 5 percent for the first 90
days, which spread increases by an additional 1 percent each subsequent 90-day
period. In no event will the interest rate exceed 16 percent per annum. The
Company anticipates that the Bridge Facility will be repaid principally with the
proceeds of a new long-term take-out financing. Should the Company be unable to
complete its long-term take-out financing, the Bridge Facility, if not repaid
within one year, may thereafter be converted to permanent financing with
consistent interest rates and a maturity of September, 2006.
SUBORDINATED PROMISSORY NOTE
As partial consideration for the Acquisition, the Company issued to Dean
Foods a Subordinated Promissory Note for $30 million aggregate principal amount
due November 22, 2008. Interest on the Subordinated Promissory Note is payable
quarterly in arrears commencing December 31, 1998, at a rate per annum of 5
percent until November 22, 2003, and at a rate of 10 percent thereafter.
Interest accruing through November 22, 2003 is required to be paid in kind
through the issuance by the Company of additional subordinated promissory notes
identical to the Subordinated Promissory Note. Interest accruing after November
22, 2003 is payable in cash. The Subordinated Promissory Note may be prepaid at
the Company's option without premium or penalty.
The Subordinated Promissory Note is expressly subordinate to the
Subordinated Bridge Facility, any long-term take-out financing, and the New
Credit Facility and contains no financial covenants. The Subordinated Promissory
Note is guaranteed by Pro-Fac.
12 1/4 PERCENT SENIOR SUBORDINATED NOTES (DUE 2005)
In conjunction with the Acquisition, the Company repurchased $159,985,000
principal amount of its Old Notes, of which $160 million aggregate principal
amount was previously outstanding. The Company paid a total of approximately
$184 million to repurchase the Old Notes, including interest accrued thereon of
$2.9 million. Holders who tendered consented to certain amendments to the
indenture relating to the Old Notes, which eliminated or amended substantially
all the restrictive covenants and certain events of default contained in such
indenture. The Company may repurchase the remaining Old Notes in the future in
open market transactions, privately negotiated purchases or otherwise.
F-82
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. OTHER MATTERS
J.A. HOPAY DISTRIBUTING CO., INC.
Effective July 21, 1998, the Company acquired J.A. Hopay Distributing Co.,
Inc. ('Hopay') of Pittsburgh, Pennsylvania. Hopay distributes snack products for
Snyder of Berlin, one of the Company's business units within its Snack Foods
Group. The acquisition was accounted for as a purchase. The purchase price (net
of liabilities assumed) was approximately $2.3 million. Intangibles of
approximately $3.3 million were recorded in conjunction with this transaction
and are being amortized over 30 years.
FORMATION OF NEW SAUERKRAUT COMPANY
Effective July 1, 1997, the Company and Flanagan Brothers, Inc. of Bear
Creek, Wisconsin, contributed all their sauerkraut production related assets to
form a new sauerkraut company. This new company, Great Lakes Kraut Company,
operates as a New York limited liability company, with ownership split equally
between the two companies. The joint venture is accounted for using the equity
method of accounting.
DIVIDENDS
Subsequent to quarter end, the Cooperative declared a cash dividend of $.43
per share on the Class A Cumulative Preferred Stock. These dividends approximate
$1.5 million and will be paid on October 30, 1998.
F-83
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The purpose of this discussion is to outline the significant reasons for
changes in the Consolidated Statement of Operations and Net Proceeds from fiscal
1996 through fiscal 1998. This discussion is taken from the Annual Report on
Form 10-K/A-1 for the year ended June 27, 1998 and the Quarterly Report on Form
10-Q for the quarter ended September 26, 1998 of Pro-Fac Cooperative, Inc.
('Pro-Fac' or the 'Cooperative') and, to the extent the information in the main
part of the Prospectus is more recent than information in this discussion, the
information in this discussion is superseded by such more recent information.
Pro-Fac processes and markets crops grown by its members through its
wholly-owned subsidiary, Agrilink Foods, Inc. ('Agrilink' or the 'Company').
Prior to the Acquisition, Agrilink had three primary business units:
Curtice Burns Foods ('CBF'), Nalley Fine Foods ('Nalley'), and its Snack Foods
Group. Each business unit offers different products. The majority of each
business unit's net sales are within the United States. In addition, all of the
operating facilities of those business units are within the United States. A
fourth business unit, AFVC, which has a processing facility located in Mexico,
was added in connection with the Acquisition.
The CBF business unit produces products in several food categories,
including fruit fillings and toppings; aseptically-produced products (prior to
Agrilink's sale of the Aseptic Business to Dean Foods in connection with the
Acquisition); canned and frozen fruits and vegetables and popcorn. The Nalley
business unit produces canned meat products (such as chilies and stews),
pickles, salad dressings, peanut butter, salsa and syrup. The Company's snack
foods business unit consists of the Snyder of Berlin, Husman Snack Foods and
Tim's Cascade Potato Chip businesses. This business unit produces and markets
potato chips and other salty-snack items. As part of the Acquisition, Agrilink
sold the Aseptic Business to Dean Foods. On December 10, 1998, the Company
announced that it had reached an agreement in principle to sell its peanut
butter business; the sale of the peanut butter business will not constitute a
significant transaction.
The following tables illustrate the Cooperative's results of operations by
business unit for the fiscal years ended June 29, 1996, June 28, 1997 and June
27, 1998 and the fiscal quarters ended September 27, 1997 and September 26,
1998, and the Cooperative's total assets by business at June 28, 1997, June 27,
1998, September 27, 1997 and September 26, 1998. In fiscal 1996, Agrilink sold
its Nalley Canada Ltd. subsidiary and Nalley's United States Chips and Snacks
business. In fiscal 1997, Agrilink sold its Finger Lakes Packaging Company, Inc.
('Finger Lakes Packaging') subsidiary and a portion of its canned vegetable
business.
NET SALES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------
JUNE 29, 1996 JUNE 28, 1997 JUNE 27, 1998
-------------- -------------- --------------
% OF % OF % OF
$ TOTAL $ TOTAL $ TOTAL
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CBF............................... 431.2 58.4 440.2 60.2 469.0 65.2
Nalley Fine Foods................. 189.2 25.6 182.4 25.0 182.1 25.3
Snack Foods Group................. 63.7 8.6 67.3 9.2 68.6 9.5
----- ----- ----- ----- ----- -----
Subtotal ongoing operations... 684.1 92.6 689.9 94.4 719.7 100.0
Businesses sold(1)................ 55.0 7.4 40.9 5.6 0.0 0.0
----- ----- ----- ----- ----- -----
Total......................... 739.1 100.0 730.8 100.0 719.7 100.0
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
<CAPTION>
FISCAL QUARTER ENDED
---------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
---------------------------------------
% OF % OF
$ TOTAL $ TOTAL
----- ----- ------ -----
<S> <C> <C> <C> <C>
CBF............................... 87.7 49.7 96.7 53.0
Nalley Fine Foods................. 46.9 26.6 42.8 23.4
Snack Foods Group................. 17.3 9.8 18.2 10.0
----- ----- ----- -----
Subtotal ongoing operations... 151.9 86.1 157.7 86.4
Businesses sold(1)................ 24.5 13.9 24.9 13.6
----- ----- ----- -----
Total......................... 176.4 100.0 182.6 100.0
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- ------------
(1) Includes the sales of Finger Lakes Packaging, the portion of the canned
vegetable business sold, Nalley Canada Ltd. and Nalley's United States Chips
and Snacks business. See Note 3 to the 'Notes to Consolidated Financial
Statements' of Pro-Fac included elsewhere herein. Includes the net sales of
the Aseptic Business for the fiscal quarters ended September 27, 1997 and
September 26, 1998. See Note 2 to the 'Unaudited Consolidated Financial
Statements' of Pro-Fac included elsewhere herein.
F-84
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
OPERATING INCOME(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
-------------------------------- ------------------------------
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998(2)
-------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBF................................................ $ 26.5 $ 40.5 $ 47.1 $ 6.1 $ 6.1
Nalley Fine Foods.................................. (2.9) 10.8 10.4 3.7 2.2
Snack Foods Group.................................. 4.1 5.9 6.9 2.1 2.3
Corporate overhead................................. (1.6) (10.3) (8.7) (1.9) (1.3)
-------- -------- -------- ------ ------
Subtotal ongoing operations................... 26.1 46.9 55.7 10.0 9.3
Businesses sold and other non-recurring(3)......... (6.7) 3.2 0.0 2.9 3.2
-------- -------- -------- ------ ------
Total(4)...................................... $ 19.4 $ 50.1 $ 55.7 $12.9 $12.5
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
- ------------
(1) Excludes cumulative effect of an accounting change in fiscal 1997. See Note
1 to the 'Notes to Consolidated Financial Statements' of Pro-Fac included
elsewhere herein.
(2) Excludes the gain on the sale of the Aseptic Business.
(3) In fiscal 1996, such amount includes restructuring initiatives and operating
activities of both Finger Lakes Packaging and the portion of the canned
vegetable business sold. In fiscal 1997, such amount includes the operating
earnings and gain on the sale of Finger Lakes Packaging, operating
activities of the portion of the canned vegetable business sold, final
settlement of an insurance claim and a loss on the disposal of property held
for sale. See Note 3 to the 'Notes to Consolidated Financial Statements' of
Pro-Fac included elsewhere herein. For the fiscal quarters ended September
27, 1997 and September 26, 1998, such amount represents the operating
earnings of the Aseptic Business.
(4) Operating income less interest expense of $7.6 million and $8.3 million for
the fiscal quarters ended September 27, 1997 and September 26, 1998,
respectively, results in pretax income before dividing with Pro-Fac and
before extraordinary item. Interest expense allocated to business units is
not considered a critical component by management when evaluating success.
EBITDA(1)(2)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
-------------------------------- ------------------------------
JUNE 29, JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1996 1997 1998 1997 1998(3)
-------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBF................................................ $ 44.4 $ 57.1 $ 61.0 $ 9.5 $ 8.9
Nalley Fine Foods.................................. 2.3 16.2 16.0 5.1 3.6
Snack Foods Group.................................. 6.0 7.6 8.8 2.6 2.8
Corporate.......................................... (1.7) (9.9) (8.5) (1.9) (1.3)
-------- -------- -------- ------ ------
Subtotal ongoing operations................... 51.0 71.0 77.3 15.3 14.0
Businesses sold and other non-recurring(4)......... (2.1) 5.9 0.0 3.2 3.8
-------- -------- -------- ------ ------
Total......................................... $ 48.9 $ 76.9 $ 77.3 $18.5 $17.8
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
- ------------
(1) EBITDA is defined as the sum of pretax income (loss) of Pro-Fac (before the
cumulative effect of an accounting change and extraordinary item, dividends
and allocation of net proceeds), and interest expense, depreciation and
amortization of goodwill and other intangibles. EBITDA should not be
considered as an alternative to net income or cash flows from operations or
any other generally accepted accounting principles measure of performance or
as a measure of liquidity. EBITDA is included herein because the Cooperative
believes EBITDA is a financial indicator of a company's ability to service
debt. EBITDA as calculated by the Cooperative may not be comparable to
calculations as presented by other companies.
(2) Excludes cumulative effect of an accounting change in fiscal 1997. See Note
1 to the 'Notes to Consolidated Financial Statements' of Pro-Fac included
elsewhere herein.
(3) Excludes the gain on the sale of the Aseptic Business.
(4) In fiscal 1996, such amount includes restructuring initiatives and operating
activities of both Finger Lakes Packaging and the portion of the canned
vegetable business sold. In fiscal 1997, such amount includes the operating
earnings and gain on the sale of Finger Lakes Packaging, operating
activities of the portion of the canned vegetable business sold, final
settlement of an insurance claim and a loss on the disposal of property held
for sale. See Note 3 to the 'Notes to Consolidated Financial Statements' of
Pro-Fac included elsewhere herein. For the fiscal quarters ended September
27, 1997 and September 26, 1998, such amount represents the operating
earnings of the Aseptic Business.
F-85
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
TOTAL ASSETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
-------------------------------- ----------------------------------
JUNE 28, JUNE 27, SEPTEMBER 27, SEPTEMBER 26,
1997 1998 1997 1998
-------------- -------------- -------------- ----------------
% OF % OF % OF % OF
$ TOTAL $ TOTAL $ TOTAL $ TOTAL
----- ----- ----- ----- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBF......................................... 329.0 60.2 362.2 63.9 346.7 57.1 405.0 32.5
AFVC........................................ -- -- -- -- -- -- 592.0 47.4
Nalley Fine Foods........................... 144.4 26.4 137.4 24.3 155.8 25.7 154.9 12.4
Snack Foods Group........................... 26.7 4.9 28.0 4.9 26.5 4.4 32.1 2.6
Corporate................................... 46.6 8.5 39.1 6.9 49.6 8.2 63.8 5.1
----- ----- ----- ----- ----- ----- ------- -----
Subtotal ongoing operations............ 546.7 100.0 566.7 100.0 578.6 95.4 1,247.8 100.0
Businesses sold(1).......................... -- -- -- -- 27.7 4.6 -- --
----- ----- ----- ----- ----- ----- ------- -----
Total.................................. 546.7 100.0 566.7 100.0 606.3 100.0 1,247.8 100.0
----- ----- ----- ----- ----- ----- ------- -----
----- ----- ----- ----- ----- ----- ------- -----
</TABLE>
- ------------
(1) Includes the assets of the Aseptic Business. See Note 2 to the 'Unaudited
Consolidated Financial Statements' of Agrilink included elsewhere herein.
CHANGES FROM FIRST QUARTER FISCAL 1999 TO FIRST QUARTER FISCAL 1998
Net income for the first quarter of fiscal 1999 of $25.3 million
represented a $22.0 million increase over the first quarter of fiscal 1998 net
income of $3.3 million. Total EBITDA for the first quarter of fiscal 1999 before
the extraordinary charge relating to the early extinguishment of debt was $82.0
million as compared to $18.5 million in the first fiscal quarter of fiscal 1998.
Excluding the operating results and gain from businesses sold, EBITDA for the
continuing business decreased $1.3 million, or 8.5%, to $14.0 million in the
first quarter of the current fiscal year from $15.3 million in the first quarter
of the prior fiscal year. This decline was impacted by a decrease at CBF of $0.6
million due to changes in product mix within the fruit category (approximately
$1.1 million); and an increase in advertising associated with the launch of
Breakfast Toppers (approximately $0.5 million). These decreases were offset by
an increase within the vegetable category of $1.0 million attributable to
improvements in volume. The decline at Nalley of $1.5 million was due primarily
to the recognition of a favorably settled outstanding tax claim with the state
of Washington for $1.4 million in the first quarter of the prior fiscal year.
The EBITDA within the Snack Foods Group increased $0.2 million due to increases
in net sales.
Net Sales
Total net sales for the quarter increased $6.2 million, or 3.5%, to $182.6
million in the first fiscal quarter of fiscal 1999 from $176.4 million in the
first quarter of fiscal 1998. Excluding businesses sold, net sales increased by
$5.8 million, or 3.8%, to $157.7 million in the first quarter of fiscal 1999
from $151.9 million in the first quarter of fiscal 1998.
The increase in net sales for ongoing operations came primarily from the
CBF business unit which reported an increase in net sales of $9.0 million. This
increase was attributable to improvements in volume primarily within frozen
vegetables. Net sales for the remaining categories at CBF were relatively
consistent with that of the first quarter of the prior fiscal year.
Net sales for Nalley decreased $4.1 million in the first quarter of fiscal
1999 as compared with the first quarter of the prior fiscal year as gains in the
pickle category were offset by reductions in the dressings and canned product
lines. Within the pickle category, net sales for the first quarter of fiscal
1999 increased $0.6 million as a result of increased volume in the food service
channel. Competitive
F-86
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
pressures on volume and price resulted in a $2.6 million decrease in net sales
for dressings and a $2.0 million decrease in the canned category. Net sales for
the peanut butter category were flat with that of the first quarter of the prior
fiscal year. On December 10, 1998, the Company announced that it had reached an
agreement in principle to sell its peanut butter business.
Net sales for the Snack Foods Group increased by $0.9 million, or 5.2%, to
$18.2 million in the first quarter of fiscal 1999 as a result of new business in
the Northwest and product line extensions, including Snyder of Berlin's kettle
chips.
Gross Profit
Gross profit of $46.7 million in the quarter ended September 26, 1998
represented an increase of approximately $1.1 million, or 2.4%, from $45.6
million in the quarter ended September 27, 1997. Excluding the impact of
businesses sold, gross profit increased $0.7 million or 1.8%.
The increase in gross profit at the CBF business unit (excluding the
Aseptic Business) was $1.0 million. The vegetable category showed improvements
of $2.1 million resulting from increases in volume, while the fruit category
showed a decline of $0.7 million attributable to product mix and decreases
within other categories of $0.4 million due to changes in volume.
Overall, gross profit at Nalley decreased $0.8 million due primarily to the
reductions in net sales outlined above. The Nalley gross margin percentage has,
however, improved over the prior year to 35.9% from 34.4% in the first quarter
of fiscal 1998.
Increases in net sales within the Snack Foods Group resulted in margin
improvements of $0.5 million.
Selling, Administrative and General Expenses
Selling, administrative and general expenses have increased $1.9 million in
the first quarter of fiscal 1999 as compared with the first quarter of the prior
fiscal year. As a percentage of net sales, selling, administrative and general
expenses increased to 19.1% in the first quarter of fiscal 1999 from 18.7% in
the first quarter of fiscal 1998. This increase is primarily due to the impact
of a favorably settled outstanding tax claim with the state of Washington for
$1.4 million recognized in the first quarter of fiscal 1998. All remaining
expenses were relatively flat with that of the prior year.
Income from Great Lakes Kraut Company
This amount represents earnings received from the investment in Great Lakes
Kraut Company, a joint venture formed between Agrilink and Flanagan Brothers,
Inc. See Note 5, 'Other Matters -- Formation of New Sauerkraut Company,' to the
'Unaudited Consolidated Financial Statements' of Pro-Fac included elsewhere
herein.
Gain on Sale of Aseptic Operations
In conjunction with the Acquisition, the Company sold its Aseptic Business
to Dean Foods. A gain of approximately $64.2 million was recognized on this
disposal reflecting a value for this business of approximately $83.0 million
(based upon an appraised value given to the Company by an independent
appraiser).
F-87
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
Interest Expense
Interest expense increased $0.5 million, or 6.4%, to $8.3 million in the
first quarter of fiscal 1999 from $7.8 million in the first quarter of fiscal
1998. The increase is impacted by higher levels of seasonal borrowings in the
first quarter of fiscal 1999 due to the earlier intake of crops in the current
year and therefore the resultant increase in inventory levels.
Provision for Taxes
The provision for taxes increased $23.2 million to $25.0 million in the
first quarter of fiscal 1999 from $1.8 million in the first quarter of fiscal
1998. Of this increase, $25.0 million is attributable to the provision
associated with the gain on the sale of the Aseptic Business. The remaining
variance is impacted by the change in earnings. The Cooperative's effective tax
rate is impacted by the net proceeds distributed to members and the
non-deductibility of certain amounts of goodwill.
Extraordinary Item Relating to the Early Extinguishment of Debt
Concurrently with the Acquisition, the Company refinanced its existing
indebtedness, including the Old Notes and its then existing bank debt. Premiums
and breakage fees associated with early redemptions and other fees incurred
amounted to $18.0 million (net of applicable income taxes of $10.4 million).
CHANGES FROM FISCAL 1997 TO FISCAL 1998
Net income for fiscal 1998 of $17.1 million represented a $4.4 million, or
34.6%, increase over the prior year's net income of $12.7 million. Total EBITDA
before cumulative effect of an accounting change was $77.3 million as compared
to $76.9 million in the prior year. Excluding the impact of businesses sold and
other non-recurring activities, EBITDA increased $6.3 million, or 8.9%, to
$77.3 million, while operating income increased $8.8 million, or 18.8%, to
$55.7 million from the prior year's $46.9 million. These improvements reflected
the benefits from numerous initiatives including: (i) increase in volume and new
customers in many of Agrilink's product lines; (ii) the continuing benefits from
structural changes made within the organization including the consolidation of
operations and facilities; and (iii) a decrease in interest expense due to
initiatives undertaken in the prior year to reduce debt and focus on strategic
product lines.
Net Sales
Total net sales for the year decreased $11.1 million, or 1.5%, to $719.7
million in fiscal year 1998 from $730.8 million in the prior year. Excluding the
net sales of businesses sold by the Company, net sales increased by $29.8
million, or 4.3%, to $719.7 million in fiscal year 1998 from $689.9 million in
the prior year.
The increase in net sales for ongoing operations came primarily from the
CBF business unit, which accounted for an increase of $28.8 million. Prior year
net sales include $13.8 million in sauerkraut sales, which are now accounted for
by the joint venture between Agrilink and Flanagan Brothers, Inc. created in
fiscal 1998. See Note 3, 'Acquisitions, Disposals and Restructuring -- Formation
of New Sauerkraut Company' to the financial statements of Pro-Fac included
elsewhere herein. Excluding the impact of sauerkraut sales from the prior year,
net sales from the CBF business unit increased $42.6 million, or 10.0%, from the
prior year. Such increases resulted from changes in volume, product mix, new
customers and improvements in pricing. The increase was attributable to
increases in net sales from: (i) the vegetable category of $20.2 million, (ii)
the fruit category of $3.0 million and (iii) the Aseptic
F-88
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
Business of $24.4 million. In connection with the Acquisition the Company sold
its Aseptic Business to Dean Foods.
Net sales for Nalley remained relatively flat with the prior year as gains
in the pickle and canned categories were offset by reductions in dressings and
peanut butter (on December 10, 1998, the Company announced it had reached an
agreement in principle to sell its peanut butter business). Within the pickle
category, net sales for fiscal 1998 increased $3.0 million as a result of
increased volume in the food service channel. Competitive pressures on volume
and price resulted in a $3.0 million decrease in net sales for dressings. In
addition, peanut butter experienced a $0.6 million decrease in net sales.
Net sales for the Snack Foods Group increased by $1.3 million, or 1.9%, to
$68.6 million in fiscal 1998 as a result of new business in the Northwest and
product line extensions, including kettle chips within Snyder of Berlin.
Gross Profit
Gross profit of $195.6 million in fiscal 1998 increased $3.9 million, or
2.0%, from $191.7 million in fiscal 1997. Excluding the impact of businesses
sold in fiscal 1997, gross profit increased $8.1 million. As a percentage of
sales, gross profit increased from 26.2% to 27.2%. This increase is attributable
to improved margins in many of Agrilink's product lines.
The increase in gross profit at the CBF business unit was $5.0 million. The
fruit category showed improvements of $5.5 million resulting from changes in
pricing and product mix. The vegetable category showed a decline of $0.9
million. However, excluding the impact of the canned vegetable business sold in
1997, the gross profit within the vegetable category improved $1.5 million. This
increase is lower than the increase in net sales described above primarily due
to weakened pricing within the industry. As highlighted under ' -- Liquidity and
Capital Resources -- Short- and Long-Term Trends,' the vegetable portion of
Agrilink's business can be impacted by the national market. During the third and
fourth quarters of fiscal 1998, pricing was negatively impacted by an oversupply
situation.
Overall, gross profit at Nalley decreased $0.5 million. While production
and purchasing efficiencies yielded benefits, such amounts were offset by volume
declines within the dressing category due to competitive pressures.
Increases in net sales within the Snack Foods Group resulted in margin
improvements of $0.7 million.
Selling, Administrative and General Expenses
Selling, administrative and general expenses decreased $3.5 million as
compared with the prior year. As a percentage of net sales, selling,
administrative and general expenses declined from 19.9% to 19.7%. This decrease
is primarily due to: (i) reductions in selling expenses of $1.4 million; (ii)
reductions in incentive costs of $1.2 million; and (iii) the impact of a
favorably settled outstanding tax claim with the state of Washington for $1.4
million.
Income from Great Lakes Kraut Company
This amount represents earnings received from the investment in Great Lakes
Kraut Company, a joint venture formed between Agrilink and Flanagan Brothers,
Inc. See Note 3 'Other Matters -- Formation of New Sauerkraut Company' to the
consolidated financial statements of Pro-Fac included elsewhere herein.
F-89
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
Interest Expense
Interest expense decreased $5.7 million, or 15.6%, to $30.8 million in
fiscal 1998 from $36.5 million in fiscal 1997. This improvement is primarily the
result of management's focus on debt reduction during fiscal year 1997. Specific
actions taken by management included the sale of Finger Lakes Packaging, the
sale of the canned vegetable business and the sale of the Georgia distribution
center. The reduction in debt accounted for $4.2 million of the reduction in
interest expense while changes in rate accounted for the remaining $1.5 million
reduction.
Provision for Taxes
The provision for taxes increased $2.3 million, or 41.8%, to $7.8 million
in fiscal 1998 from $5.5 million in fiscal 1997. This increase was a result of
an $11.4 million increase in earnings before tax. The Pro-Fac effective tax rate
in fiscal 1998 was 31.4% which is impacted by the net proceeds distributed to
members and the non-deductibility of goodwill. A further discussion of tax
matters is included at Note 6 to the 'Notes to Consolidated Financial
Statements' of Pro-Fac included elsewhere herein.
CHANGES FROM FISCAL 1996 TO FISCAL 1997
Net income for fiscal 1997 of $12.7 million represented a $22.2 million
increase over the prior year's loss of $9.5 million. Total EBITDA before
cumulative effect of an accounting change was $76.9 million for the year ended
June 28, 1997 as compared to $48.9 million in the prior year. EBITDA for ongoing
business reached $71.0 million as compared to the prior year's $51.0 million.
This significant improvement reflected the benefits from numerous initiatives
including: (i) a reduction in debt by $97.9 million which included the sales of
Finger Lakes Packaging, the portion of the canned vegetable business sold, the
Georgia Distribution facility and idle manufacturing facilities, and efforts to
improve cash flow through better management of working capital requirements (see
Notes 3 and 5 to the 'Notes to Consolidated Financial Statements' of Pro-Fac
included elsewhere herein); (ii) the implementation of structural changes within
the organization, including the consolidation of the operations of Brooks Foods
and Southern Frozen Foods into CBF; and (iii) the consolidation of support
services such as human resources and agricultural services. The reduction in
interest expense as a result of the debt reduction initiatives improved net
income by $5.5 million and consolidation efforts accounted for approximately
$2.0 million of the $6.5 million reduction in selling, administrative, and
general expenses.
Structural changes within the business units included a review of the
Nalley operations and the consolidation of several other operations. EBITDA for
the Nalley business unit was $16.2 million for the year ended June 28, 1997 as
compared to $2.3 million in the prior year. These results were driven by
organizational changes and the absence of the significant start-up costs for the
new salad dressing line which were incurred throughout fiscal 1996.
Net Sales
Total net sales decreased by $8.3 million, or 1.1%, to $730.8 million in
fiscal 1997 from $739.1 million in fiscal 1996. Excluding businesses sold, net
sales increased $5.8 million, or 0.8%, to $689.9 million in fiscal 1997 from
$684.1 million in fiscal 1996.
Net sales from ongoing operations at CBF increased $9.0 million, or 2.1%,
to $440.2 million in fiscal 1997 from $431.2 million in fiscal 1996. This
increase was due to improvements in pricing and increased sales from new
customers.
Net sales from ongoing operations at Nalley decreased by $6.8 million, or
3.6%, to $182.4 million in fiscal 1997 from $189.2 million in fiscal 1996. While
the canned category showed increases of $1.5
F-90
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
million, such gains were offset by reductions in all other categories of $8.3
million. Such reductions resulted from competitive pressures on volume and
price.
Net sales at the Snack Foods Group increased $3.6 million, or 5.7%, to
$67.3 million in fiscal 1997 from $63.7 million in fiscal 1996. Of this
increase, $0.9 million was attributable to the acquisition of Matthews Candy
Company during the fourth quarter of fiscal 1996. The $2.7 million increase from
the existing remaining business was due to the addition of new customers and
product line extensions. Management believes the acquisition of Matthews
broadened its line of products and, therefore, enhanced its earnings capability.
However, due to the competitive nature of the snack food industry, management is
unable to assess whether such increases within the Snack Foods Group will
continue to be realized.
Gross Profit
Gross profit of $191.7 million in fiscal 1997 increased $15.5 million, or
8.8%, from $176.2 million in fiscal 1996. As a percentage of sales, gross profit
increased from 23.8% to 26.2%. This increase was attributable to improved
margins in all of the business units.
The increase in gross profit was benefited by improved/increased pricing at
the CBF business unit. As highlighted under ' -- Liquidity and Capital
Resources -- Short- and Long-Term Trends,' the vegetable and fruit portions of
Agrilink's business can be positively or negatively impacted by the national
crop yields. The status of the national supply situation controls pricing.
During fiscal 1997, crop yields of commodities in markets in which Agrilink
operates were below that of the prior year and, therefore, pricing levels within
the commodities markets in which Agrilink competes were increased. The increase
in pricing favorably impacted gross profit by $9.5 million.
Gross profit increased at Nalley by $4.0 million in 1997. This improvement
was primarily attributable to operating improvements, primarily the elimination
of start-up costs on the new salad dressing line introduced in 1996, reductions
in manufacturing variances and reductions in promotional expenses.
Increased sales from the Snack Foods Group also improved profitability. The
increase in sales within the Snack Foods Group contributed an increase to gross
profit of $1.5 million.
Selling, Administrative and General Expenses
Selling, administrative and general expenses decreased $6.5 million as
compared with the prior year. As a percentage sales, selling, administrative,
and general expenses decreased from 20.5% to 19.9%. This decrease is net of the
inclusion of expenses (approximately $5.6 million) relating to Agrilink's
incentive program. Payments under the incentive programs in fiscal 1997 are
attributable to the significantly improved earnings. The net decrease is
attributable to a $5.8 million decrease in selling ($1.7 million), advertising
($1.0 million), and trade promotions expenses ($3.1 million) resulting from
decreased spending at Nalley. Reductions in other administrative expenses
accounted for $10.5 million and were primarily attributable to benefits from the
restructuring initiative that began late in fiscal 1996. These initiatives
included the consolidation of the administrative functions at CBF and the sale
of Finger Lakes Packaging. In addition, in fiscal 1996, selling, administrative,
and general expenses were offset by a $4.4 million income adjustment related to
a reduction in the amount of CMV paid to the Cooperative members.
Gain on Sale of Finger Lakes Packaging
On October 9, 1996, Agrilink completed the sale of Finger Lakes Packaging
to Silgan Containers Corporation, an indirect, wholly-owned subsidiary of Silgan
Holdings, Inc., headquartered in Stamford, Connecticut. A gain of approximately
$3.6 million was recognized on this disposal. Agrilink received
F-91
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
proceeds of approximately $30.0 million which were applied to reduce bank debt.
The transaction also included a long-term supply agreement.
Interest Expense
Interest expense decreased $5.5 million, or 13.1%, to $36.5 million in
fiscal 1997 from $42.0 million in fiscal 1996. This improvement resulted from
both the inventory reduction and cash-flow-management programs initiated in
fiscal 1996. In addition, debt was reduced by the proceeds from the sale of
Finger Lakes Packaging, the canned vegetable business, and idle facilities.
Provision for Taxes
The provision for taxes increased $18.6 million to $5.5 million in fiscal
1997 from a $13.1 million benefit in fiscal 1996. The Cooperative's effective
tax rate in fiscal 1997 was 40.6% which was impacted by the net proceeds
distributed to members and the non-deductibility of goodwill. The Cooperative's
tax benefit in fiscal 1996 was favorably impacted by tax benefits resulting from
the prior year's exempt status. A further discussion of tax matters is included
at Note 6 to the 'Notes to the Consolidated Financial Statements' of Pro-Fac
included elsewhere herein.
Cumulative Effect of a Change in Accounting
Effective June 30, 1996, accounting procedures were changed to include in
prepaid expenses and other current assets, manufacturing spare parts previously
charged directly to expense. Management believes this change is preferable
because it provides a better matching of costs with related revenues when
evaluating interim financial statements. The favorable cumulative effect of the
change (net of income taxes of $1.1 million) was $4.6 million. Pro forma amounts
for the cumulative effect of the accounting change on prior periods are not
determinable due to the lack of physical inventory counts required to establish
quantities at the respective dates. Management does not believe that the
difference in accounting methodologies for spare parts had any material impact
on the Company's historic financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion highlights the major variances in the 'Unaudited
Consolidated Statement of Changes in Cash Flows' included elsewhere herein, for
Pro-Fac's first quarter of fiscal 1999 compared to its first quarter of fiscal
1998 and in the 'Consolidated Statement of Changes in Cash Flows' included in
the consolidated financial statements of Pro-Fac, included elsewhere herein, for
fiscal 1998 compared to fiscal 1997.
Net cash used in operating activities in the first quarter of fiscal 1999
increased $42.9 million over the first quarter of the prior fiscal year. This
increase is primarily due to variances within inventory including: (i) an
increase of $1.5 million in inventory to support additional business regarding
the Sam's national club stores; (ii) an increase of $2.5 million associated with
the acquisition of DelAgra; and (iii) changes in growing areas, early harvesting
of crops, the size of the crop intake, and other changes in inventory necessary
to support operations (approximately $15.3 million).
In addition, cash used in operating activities in the first quarter of
fiscal 1999 increased over the first quarter of the prior fiscal year due to the
timing of liquidation of outstanding accounts payable and accrued expenses.
Net cash used in investing activities increased significantly in the first
quarter of fiscal 1999 as compared with the first quarter of fiscal 1998 due to
the acquisition of DFVC offset by the sale of the
F-92
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
Aseptic Business. The purchase of property, plant and equipment increased $0.9
million to $4.1 million for the quarter ended September 26, 1998 from $3.2
million for the quarter ended September 27, 1997 and was for general operating
purposes.
Net cash provided by financing activities also increased significantly in
the first quarter of fiscal 1999 as compared with the first quarter of fiscal
1998 due to the acquisition of DFVC and the activities completed concurrent with
the Acquisition to refinance existing indebtedness. See Note 4, 'Debt,' to the
'Unaudited Consolidated Financial Statements' of Pro-Fac included elsewhere
herein.
Net cash provided by operating activities decreased in fiscal 1998
primarily due to an increase in inventory of approximately $25.7 million. This
increase is primarily due to: (i) an increase of $8.0 million in inventory to
support additional business regarding the Sam's national club stores as
described below; (ii) an increase of $4.0 million of inventory associated with
the acquisition of DelAgra; and (iii) change in growing areas/timing of crop
intake and early harvesting of crops resulting from the 1998 growing season
(approximately $11.0 million).
During October of 1997, Agrilink became the sole supplier of frozen
vegetables for the Sam's national club stores. The executed contract extends for
a two-year period and required an $11.0 million prepayment for volume discounts.
Due to the time frame required for the incumbent supplier to exit these
operations and for the Company to implement full distribution, this contract did
not significantly impact fiscal 1998 earnings. However, the Company anticipates
this arrangement will have a favorable impact on fiscal 1999 earnings, although
there can be no assurance it will do so.
An offsetting increase in cash provided by operating activities resulted
from the changes in accounts payable and accrued expenses due to the timing of
liquidation.
Net cash provided by investing activities decreased significantly in fiscal
1998, primarily due to the sales in fiscal 1997 of Finger Lakes Packaging, a
portion of the canned vegetable business, the Georgia distribution center, and
several idle facilities. In fiscal 1998 the only significant disposal consisted
of the sale of the distribution center in Coloma, Michigan. All proceeds from
asset sales were applied to repay bank debt in accordance with the terms of the
Old Credit Facility. In addition, in fiscal 1998, acquisitions accounted for the
use of $7.4 million of investing cash flow. These proceeds were utilized to
purchase DelAgra Corporation of Bridgeville, Delaware and C&O Distributing
Company of Canton, Ohio. The purchase of property, plant, and equipment
increased by $0.4 million, or 2.9%, to $14.1 million in fiscal 1998 from $13.7
million in fiscal 1997 and was for general operating purposes.
Financing activities used $3.8 million of cash in fiscal 1998 compared to
using $104.2 million in cash for fiscal 1997. Cash used in fiscal 1997 included
$97.9 million of debt repayment which resulted from the cash provided by the
sale of certain assets during the year.
Borrowings
See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- New Credit Facility'
in the main part of this Prospectus.
Capital Expenditures
The Company anticipates that capital expenditures for fiscal years 1999 and
2000, including capital expenditures relating to DFVC, will be approximately
$25.0 million per annum.
As a result of the Acquisition and the Merger, the Company may in the
current fiscal year be required to repay prior to maturity industrial revenue
bonds under which the Company, as successor to DFVC, is obligated, in the
principal amount of approximately $2.5 million, plus accrued and unpaid
interest.
F-93
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
Based on the current level of operations, the Company believes that it will
be able to meet the debt service requirements on its indebtedness (including the
Notes) and meet its working capital needs and fund its capital expenditures and
other operating expenses out of cash flow from operations and available
borrowings under the Revolving Credit Facility. However, there can be no
assurance that the Company's business will generate cash flow at levels
sufficient to meet these requirements. In addition under the New Credit
Facility, the Company has scheduled principal amortization payments of the Term
Loans of $198.2 million in fiscal 2005 and $202.4 million in fiscal 2006. See
'Description of Certain Indebtedness -- New Credit Facility.' The Company may be
unable to repay such principal amounts under the New Credit Facility due in
fiscal 2005 and fiscal 2006 unless it is able to refinance such indebtedness.
See 'Risk Factors -- Our Substantial Leverage and Debt Service Requirements May
Have Adverse Consequences' in the main part of this Prospectus.
Short- and Long-Term Trends
Throughout fiscal 1998 and 1997 Agrilink has focused on Agrilink's core
businesses and growth opportunities. A complete description of the acquisition
and disposal activities completed is outlined at Note 3 to the 'Notes to
Consolidated Financial Statements' of Pro-Fac included elsewhere herein.
As a result of the financings entered into in connection with the
Acquisition, the Company is highly leveraged. The Company will therefore be
heavily focused on managing its operations with a view toward making timely
payments of scheduled debt repayments. Such leverage and demands on the Company
could have significant adverse effects. See 'Risk Factors -- Our Substantial
Leverage and Debt Service Requirements May Have Adverse Consequences' in the
main part of this Prospectus.
The vegetable and fruit portions of the business, which includes CBF and
AFVC, 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. The
crop and yields resulting from the 1997 growing season has resulted in an
increased supply throughout the industry. Accordingly, pricing and sales volume
have been negatively impacted in the third and fourth quarters of fiscal 1998.
In the first quarter of fiscal 1998, the Company reclassified a $9.4
million demand receivable due from Pro-Fac reflecting the conversion of such
receivable to a non-interest bearing long-term obligation due from Pro-Fac
having a 10-year maturity.
Additional Payment to Dean Foods
The Company expects to pay an additional $13.2 million to Dean Foods in
connection with the anticipated election by Agrilink to treat the Acquisition as
an asset sale for tax purposes under Section 338(h)(10) of the Code and to fund
such payment by borrowing that amount under the Revolving Credit Facility. The
Company anticipates that such election would allow the Company to reduce its
future tax liability through increased depreciation and amortization deductions
resulting from the stepped up basis for the assets acquired from Dean Foods and
deductibility of goodwill.
DFVC
See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- DFVC' in the main
part of this Prospectus.
F-94
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- (CONTINUED)
New Credit Facility
See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- New Credit Facility'
in the main part of this Prospectus.
Interest Rate Protection Agreements
See 'Management's Discussion and Analysis of Financial Condition and
Results Operations -- Interest Rate Protection Agreements' in the main part of
this Prospectus.
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.
OTHER MATTERS
See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Other Matters' in the main part of this Prospectus.
Favorable Tax Ruling and Developments
In August of 1993, the Internal Revenue Service issued a determination
letter which concluded that the Cooperative was exempt from federal income tax
to the extent provided by Section 521 of the Internal Revenue Code, 'Exemption
of Farmers' Cooperative from Tax.' Unlike a nonexempt cooperative, a tax-exempt
cooperative is entitled to deduct cash dividends it pays on its capital stock in
computing its taxable income. The exempt status was retroactive to fiscal year
1986. In conjunction with this ruling, the Cooperative filed for tax refunds for
fiscal years 1986 to 1992 in the amount of approximately $8.8 million and
interest payments of approximately $5.2 million. A refund amount of $10.1
million for tax and interest was reflected in the financial statements of the
Cooperative as of June 24, 1995. In addition, a refund amount of $3.9 million
for tax and interest have been reflected in the financial statements of the
Cooperative as of June 29, 1996. The refund and interest for the fiscal years
1986 to 1991 was received in March of 1996. The refund and interest for fiscal
year 1992 was received in June of 1997.
As a result of the acquisition of Agrilink in 1994, the Cooperative's
exempt status has ceased.
F-95
<PAGE>
<PAGE>
SELECTED HISTORICAL AND UNAUDITED
PRO FORMA FINANCIAL DATA
The following selected historical consolidated financial data and selected
unaudited pro forma financial data with respect to Pro-Fac should be read in
conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' for Pro-Fac, the historical consolidated financial
statements of Pro-Fac and DFVC and the related notes and the Unaudited Pro Forma
Financial Data of Pro-Fac and the related notes, each as included elsewhere
herein. The selected historical consolidated financial data for each of the
years ended June 25, 1994, June 24, 1995, June 29, 1996, June 28, 1997 and June
27, 1998 and as of the end of each such periods have been derived from Pro-Fac's
audited consolidated financial statements and reflect the operations and
financial position of Pro-Fac at the dates and for the periods indicated. The
selected historical consolidated financial data for the fiscal quarters ended
September 27, 1997 and September 26, 1998 and as of the end of each of such
periods have been derived from Pro-Fac's financial statements included elsewhere
herein which are unaudited but which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations and financial position of Pro-Fac
at the dates and for the periods indicated. The selected unaudited pro forma
financial data have been derived from Pro-Fac's audited consolidated financial
statements for the year ended and as of June 27, 1998, Pro-Fac's unaudited
consolidated financial statements for the quarter ended and as of September 26,
1998, DFVC's audited consolidated financial statements for the year ended and as
of May 31, 1998 and DFVC's unaudited consolidated financial statements for the
quarter ended and as of August 30, 1998. No adjustment was made to the unaudited
pro forma financial data to conform DFVC's last Sunday of May fiscal year end to
Pro-Fac's last Saturday of June fiscal year end or their disparate respective
fiscal quarter ends. The summary selected unaudited pro forma financial data
give effect to the Transactions and the Offering and the application of the net
proceeds therefrom as described under 'The Acquisition' and 'Use of Proceeds,'
as if they had occurred at the dates referenced under 'Unaudited Pro Forma
Financial Data of Pro-Fac and Consolidated Subsidiary.' The pro forma financial
data reflect the assumption that Agrilink will elect to treat the Acquisition as
an asset sale for tax purposes under Section 338(h)(10) of the Code. The summary
selected unaudited pro forma financial data do not purport to represent what
Pro-Fac's results of operations or financial position actually would have been
if the transactions referred to therein had been consummated on the date or for
the periods indicated or what such results will be for any future date or any
future period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, -------------------
1994(1) 1995(2) 1996 1997 ACTUAL PRO FORMA
-------- -------- -------- -------- ------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 58.2 $ 522.4 $ 739.1 $ 730.8 $ 719.7 $1,242.0
Cost of sales................... (58.2) (384.8) (562.9) (539.1) (524.1) (865.4)
-------- -------- -------- -------- ------- ---------
Gross profit.................. 0.0 137.6 176.2 191.7 195.6 376.6
Selling, administrative and
general....................... 1.1 (99.3) (151.7) (145.2) (141.8) (288.4)
Income from Great Lakes Kraut
Company....................... -- -- -- -- 1.9 1.9
Gain on sale of Finger Lakes
Packaging..................... -- -- -- 3.6 -- --
Gain on sale of the Aseptic
Business...................... -- -- -- -- -- --
Restructuring(3)................ -- -- (5.9 ) -- -- --
Additional costs incurred as a
result of fire................ -- (2.3 ) -- -- -- --
Interest income................. -- 4.4 0.8 -- -- --
Income from Agrilink prior to
acquisition................... 34.2 11.2 -- -- -- --
Amortization of unallocated
excess of purchase cost over
net assets acquired........... -- -- -- -- -- (10.4)
-------- -------- -------- -------- ------- ---------
Operating income.............. $ 35.3 $ 51.6 $ 19.4 $ 50.1 $ 55.7 $ 79.7
Total interest expense.......... (11.6) (29.1) (42.0) (36.5) (30.8) (73.0)
-------- -------- -------- -------- ------- ---------
<CAPTION>
FISCAL QUARTER ENDED
----------------------------------------
SEPTEMBER 26, 1998
SEPTEMBER 27, -----------------------
1997 ACTUAL PRO FORMA
---- ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 176.4 $ 182.6 $ 279.6
Cost of sales................... (130.8) (135.9) (201.8)
------- -------- --------
Gross profit.................. 45.6 46.7 77.8
Selling, administrative and
general....................... (32.9) (34.9) (67.7)
Income from Great Lakes Kraut
Company....................... 0.2 0.6 0.6
Gain on sale of Finger Lakes
Packaging..................... -- -- --
Gain on sale of the Aseptic
Business...................... -- 64.2 --
Restructuring(3)................
Additional costs incurred as a
result of fire................ -- -- --
Interest income................. -- -- --
Income from Agrilink prior to
acquisition................... -- -- --
Amortization of unallocated
excess of purchase cost over
net assets acquired........... -- -- (2.4)
------- -------- --------
Operating income.............. $ 12.9 $ 76.6 $ 8.3
Total interest expense.......... (7.8) (8.3) (19.2)
------- -------- --------
</TABLE>
(table continued on next page)
F-96
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, -------------------
1994(1) 1995(2) 1996 1997 ACTUAL PRO FORMA
-------- -------- -------- -------- ------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) before
dividends, allocation of net
proceeds, and cumulative
effect of an accounting
change and extraordinary
item........................ $ 23.7 $ 22.5 $ (22.6) $ 13.6 $ 24.9 $ 6.7
Tax (provision) benefit......... 0.8 7.1 13.1 (5.5) (7.8) (4.1)
-------- -------- -------- -------- ------- ---------
Income (loss) before cumulative
effect of an accounting change
and extraordinary item........ 24.5 29.6 (9.5 ) 8.1 17.1 2.6
Extraordinary item relating to
the early extinguishment of
debt (net of income taxes).... -- -- -- -- -- --
Cumulative effect of an
accounting change(4).......... -- -- -- 4.6 -- --
-------- -------- -------- -------- ------- ---------
Net income (loss)......... $ 24.5 $ 29.6 $ (9.5 ) $ 12.7 $ 17.1 $ 2.6
-------- -------- -------- -------- ------- ---------
-------- -------- -------- -------- ------- ---------
SELECTED FINANCIAL DATA:
EBITDA(5)....................... $ 37.0 $ 68.1 $ 48.9 $ 76.9 $ 77.3 $ 131.0
EBITDA margin(6)................ 63.6% 13.0% 6.6% 10.5% 10.7% 10.5%
Depreciation and amortization... $ 1.7 $ 16.5 $ 29.5 $ 26.8 $ 21.6 $ 51.3
Capital expenditures............ $ 10.0 $ 28.7 $ 19.5 $ 13.7 $ 14.1 $ 25.3
Ratio of earnings to fixed
charges and preferred
dividends (coverage
deficiency)(7)................ 2.20x 1.49x $ (37.0) 1.09x 1.37x $ (3.0)
BALANCE SHEET DATA:
Working capital................. $ 2.1 $ 138.9 $ 103.4 $ 76.0 $ 94.1
Total assets.................... $296.1 $ 689.7 $ 637.3 $ 546.7 $ 566.7
Total debt...................... $152.6 $ 357.6 $ 337.4 $ 239.3 $ 238.8
Total shareholders' and members'
capitalization(8)............. $123.8 $ 145.2 $ 126.7 $ 132.7 $ 141.4
<CAPTION>
FISCAL QUARTER ENDED
----------------------------------------
SEPTEMBER 26, 1998
SEPTEMBER 27, -----------------------
1997 ACTUAL PRO FORMA
---- ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pre-tax income (loss) before
dividends, allocation of net
proceeds, and cumulative
effect of an accounting
change and extraordinary
item........................ $ 5.1 $ 68.3 $ (10.9)
Tax (provision) benefit......... (1.8) (25.0) 1.7
------- -------- --------
Income (loss) before cumulative
effect of an accounting change
and extraordinary item........ 3.3 43.3 (9.2)
Extraordinary item relating to
the early extinguishment of
debt (net of income taxes).... -- (18.0) --
Cumulative effect of an
accounting change(4).......... -- -- --
------- -------- --------
Net income (loss)......... $ 3.3 $ 25.3 $ (9.2)
------- -------- --------
------- -------- --------
SELECTED FINANCIAL DATA:
EBITDA(5)....................... $ 18.5 $ 17.8 $ 21.1
EBITDA margin(6)................ 10.5% 9.7% 7.5%
Depreciation and amortization... $ 5.6 $ 5.3 $ 12.8
Capital expenditures............ $ 3.2 $ 4.1 $ 7.3
Ratio of earnings to fixed
charges and preferred
dividends (coverage
deficiency)(7)................ 1.27x 1.14x $ (13.4)
BALANCE SHEET DATA:
Working capital................. $ 81.2 $ 218.2
Total assets.................... $ 606.3 $1,247.8
Total debt...................... $ 304.0 $ 789.5
Total shareholders' and members'
capitalization(8)............. $ 133.7 $ 164.2
</TABLE>
- ------------
(1) Represents financial information prior to the acquisition of Agrilink Foods,
Inc. Depreciation and amortization and capital expenditures were recognized
by Pro-Fac through the provisions of the earnings split.
(2) Includes the results of Agrilink subsequent to the acquisition in November
1994.
(3) During fiscal 1996, the Company initiated a company-wide restructuring
program. The restructuring charge amounted to $5.9 million (before taxes).
This amount consisted of employee termination benefits of $4.0 million and
$1.9 million for strategic consulting expenses.
(4) Represents cumulative effect of an accounting change to include in prepaid
expenses and other current assets manufacturing spare parts previously
charged directly to expense.
(5) EBITDA is defined as the sum of pre-tax income (loss) of Pro-Fac (before the
cumulative effect of an accounting change, dividends and allocation of net
proceeds), and interest expense, depreciation and amortization of goodwill
and other intangibles. EBITDA should not be considered as an alternative to
net income or cash flows from operations or any other generally accepted
accounting principles measure of performance or as a measure of liquidity.
EBITDA is included herein because Pro-Fac believes EBITDA is a financial
indicator of a company's ability to service debt. EBITDA as calculated by
Pro-Fac may not be comparable to calculations as presented by other
companies. EBITDA (actual and pro forma) at September 26, 1998 excludes the
$64.2 million gain on the sale of the Aseptic Business. Had the gain on the
sale of the Aseptic Business been included, EBITDA (actual) at September 26,
1998 would have been $81.9 million.
(6) EBITDA margin is defined as EBITDA divided by net sales.
(7) For purposes of calculating ratio of earnings to fixed charges and preferred
dividends, earnings are determined by adding fixed charges to income (loss)
before taxes and before cumulative effect of an accounting change. Fixed
charges consist of interest expense and the interest component of rental
expense. For fiscal 1996, and for fiscal 1998 and the first quarter of
fiscal 1999 on a pro forma basis, earnings before fixed charges were
insufficient to cover fixed charges and pre-tax basis preferred dividends,
and the dollar amount of coverage deficiency, instead of the ratio, is
disclosed.
(8) For purposes of this calculation, equity includes common stock and
redeemable preferred stock.
F-97
<PAGE>
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA OF PRO-FAC AND
CONSOLIDATED SUBSIDIARY
The following unaudited pro forma condensed consolidated financial data
(the 'Pro-Fac Pro Forma Financial Data') of Pro-Fac and its consolidated
subsidiary is derived from the historical consolidated financial statements of
Pro-Fac and DFVC included elsewhere herein, adjusted to give effect on a
preliminary basis to the Transactions and the Offering and the application of
the net proceeds therefrom. The Pro-Fac Pro Forma Financial Data reflect the
assumption that Agrilink will elect to treat the Acquisition as an asset sale
for tax purposes under Section 338(h)(10) of the Code. The Unaudited Pro Forma
Consolidated Statements of Operations of Pro-Fac give effect to the Transactions
and the Offering and the application of the net proceeds therefrom as if they
had occurred as of June 29, 1997. No adjustment was made to the Pro-Fac Pro
Forma Financial Data to conform DFVC's last Sunday of May fiscal year end to
Pro-Fac's last Saturday of June fiscal year end or their disparate quarter ends.
The Pro-Fac Pro Forma Financial Data do not purport to represent what Pro-Fac's
results of operations would actually have been had the Transactions and the
Offering in fact occurred on such dates or what Pro-Fac's results of operations
will be for any future period. The Pro-Fac Pro Forma Financial Data do not give
effect to any transactions other than the Transactions and the Offering and the
application of the net proceeds therefrom as discussed in the notes to the
Pro-Fac Pro Forma Financial Data set forth below.
The Acquisition will be accounted for using the purchase method of
accounting. Under purchase accounting, tangible and identifiable intangible
assets acquired and liabilities assumed will be recorded at their respective
fair values. Information regarding the fair values of assets being acquired is
not currently available. Accordingly, no allocation of the excess of purchase
cost over net assets acquired has been made for purposes of this pro forma
presentation. The valuations and other studies which will provide the basis for
such an allocation have not progressed to a stage where there is sufficient
information to make a final allocation in the accompanying Pro-Fac Pro Forma
Financial Data. Accordingly, the purchase accounting adjustments made in
connection with the Pro-Fac Pro Forma Financial Data are preliminary and have
been made solely for purposes of developing the Pro-Fac Pro Forma Financial
Data. Once an allocation is determined, in accordance with generally accepted
accounting principles, any remaining excess of purchase cost over net assets
acquired will be recorded as goodwill. Pro-Fac expects that significant goodwill
will be recorded as a result of the Acquisition.
Likewise, the value recorded for the Aseptic Business disposal, and the
resulting gain and other effects on the Pro-Fac Pro Forma Financial Data, are
based on the appraisal given to Agrilink by the independent appraiser retained
by Agrilink. If the value ascribed to the Aseptic Business is determined to be
different than that recorded in the Pro-Fac Pro Forma Financial Data due to a
variance from the appraisal or for any other reason, the change in such value
would have a corresponding effect on the Pro-Fac Pro Forma Financial Data.
The pro forma adjustments are based on available information and upon
certain assumptions that management of Pro-Fac believes are reasonable under the
circumstances. The Pro-Fac Pro Forma Financial Data and accompanying notes
should be read in conjunction with 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' relating to Pro-Fac, the
historical consolidated financial statements of Pro-Fac and DFVC, including the
notes thereto, and other financial information pertaining to Pro-Fac and
Agrilink incorporated by reference herein.
F-98
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 27, 1998
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------
ASEPTIC TRANSACTIONS
BUSINESS AND
PRO-FAC DFVC DISPOSAL OFFERING
(HISTORICAL) (HISTORICAL) ADJUSTMENTS(A) ADJUSTMENTS TOTAL
------------ ------------ -------------- ----------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales............................................. $719.7 $541.2 ($97.9) $79.0 (b) $1,242.0
Cost of sales......................................... (524.1) (397.6) 81.3 (25.0)(c) (865.4)
------------ ------------ ------ ----------- --------
Gross profit..................................... 195.6 143.6 (16.6) 54.0 376.6
Selling, administrative and general................... (141.9) (104.9) 0.1 (41.7)(d) (288.4)
Income from Great Lakes Kraut Company................. 1.9 1.9
Amortization of unallocated excess of purchase cost
over -- net assets acquired......................... -- -- -- (10.4)(e) (10.4)
------------ ------------ ------ ----------- --------
Operating income before extraordinary items...... 55.6 38.7 (16.5) 1.9 79.7
Interest expense...................................... (30.7) (9.2) 1.4 (34.5)(f) (73.0)
------------ ------------ ------ ----------- --------
Pretax income before extraordinary items and
dividends and allocation of net proceeds....... 24.9 29.5 (15.1) (32.6) 6.7
(Provision) benefit for taxes......................... (7.8) (11.8) 3.4 12.1 (g) (4.1)
------------ ------------ ------ ----------- --------
Income (loss) before extraordinary items......... $ 17.1 $ 17.7 ($11.7) ($20.5) $ 2.6
------------ ------------ ------ ----------- --------
------------ ------------ ------ ----------- --------
</TABLE>
See accompanying notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements.
F-99
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 27, 1998
(a) To reflect the sale of the Aseptic Business to Dean Foods. In
conjunction with this transaction, it is anticipated Agrilink will recognize a
gain. Such gain has not been reflected in the unaudited Pro Forma Condensed
Consolidated Statement of Operations as the gain is considered nonrecurring.
(b) Represents a reclassification of promotional expenses of DFVC to
conform presentation to that of Agrilink. Such amount is equal to the adjustment
of selling, administrative and general expenses in pro forma adjustment (d)
below.
(c) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Cost savings anticipated under existing contracts with the suppliers of product
packaging......................................................................... $ 2.5
Reclassification of warehousing expenses of DFVC to conform presentation to that of
Agrilink. Such amount is equal to the adjustment of selling, administrative and
general expenses in pro forma adjustment (d) below................................ (27.5)
------
$(25.0)
------
------
</TABLE>
(d) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Reclassification of promotional expenses of DFVC to conform presentation to that of
Agrilink. Such amount is equal to the adjustment to the net sales in pro forma
adjustment (b) above.............................................................. $(79.0)
Reclassification of warehousing expenses to conform presentation to that of Agrilink.
Such amount is equal to the adjustment to the net sales in pro forma adjustment (c)
above............................................................................. 27.5
To reflect the anticipated cost reductions under the plan formulated by management to
eliminate duplicate administrative costs, including primarily sales and marketing
functions, finance functions and logistics functions. Because both the Agrilink and
DFVC personnel currently contact the same customers, it is anticipated that no
material negative impact to sales will occur. The plan outlined is to be executed
within one year from the consummation date of the Acquisition..................... 9.8
------
$(41.7)
------
------
</TABLE>
(e) To reflect $10.4 million of additional goodwill amortization relating
to the Acquisition assuming an amortization period of 20 years. Depreciation and
amortization recorded by the Company subsequent to the Acquisition will be
determined based upon the fair values of acquired assets and their related lives
as ultimately recorded under purchase accounting.
(f) To reflect the net adjustment to interest expense as follows (dollars
in millions):
<TABLE>
<S> <C>
Notes at an interest rate of 11.875%................................................. $ 23.8
Borrowings under the New Credit Facility (at the rates applicable upon syndication
thereof)............................................................................. 40.1
Subordinated Promissory Note at an interest rate of 5.0% (noncash)................ 1.5
Amortization of debt issuance costs.................................................. 3.2
Less historical interest expense net adjustment...................................... (33.3)
Less amortization of debt issuance costs related to debt repaid...................... (0.8)
------
$ 34.5
------
------
</TABLE>
F-100
<PAGE>
<PAGE>
The elimination of debt issuance costs and premiums to be paid to
extinguish existing debt will be recognized as an extraordinary item ($18.0
million net of a $10.5 million tax benefit) in Pro-Fac's statement of operations
for the first fiscal quarter of 1999. Such charge has not been reflected in the
unaudited Pro Forma Condensed Consolidated Statement of Operations.
Fees associated with obtaining commitments for the Bridge Facility have not
been reflected in the unaudited Pro Forma Consolidated Statement of Operations
as they are considered nonrecurring. Such fees, which will be reflected in
Pro-Fac's 1999 second fiscal quarter, are estimated to be approximately $5.6
million before taxes.
(g) To reflect the income tax effect of the pro forma adjustments based on
an assumed statutory income tax rate of 39.0%.
F-101
<PAGE>
<PAGE>
PRO-FAC COOPERATIVE, INC. AND
CONSOLIDATED SUBSIDIARY -- AGRILINK FOODS, INC.
UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 26, 1998
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------
ASEPTIC TRANSACTIONS
BUSINESS AND
PRO-FAC DFVC DISPOSAL OFFERING
(HISTORICAL) (HISTORICAL) ADJUSTMENTS(A) ADJUSTMENTS TOTAL
------------ ------------ -------------- ----------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.............................................. $ 182.6 $106.4 $(24.9) $ 15.5 (b) $ 279.6
Cost of sales.......................................... (135.9) (81.2) 20.8 (5.5)(c) (201.8)
------------ ------------ ------- ----------- -------
Gross profit...................................... 46.7 25.2 (4.1) 10.0 77.8
Selling, administrative and general.................... (34.9) (25.9) -- (6.9)(d) (67.7)
Income from Great Lakes Kraut Company.................. 0.6 -- -- -- 0.6
Gain on the sale of the Aseptic Business............... 64.2 -- -- (64.2)(e) --
Amortization of unallocated excess of purchase cost
over net assets acquired............................. -- -- -- (2.4)(f) (2.4)
------------ ------------ ------- ----------- -------
Operating income before extra-ordinary items...... 76.6 (0.7) (4.1) (63.5) 8.3
Interest expense....................................... (8.3) (2.0) 0.4 (9.3)(g) (19.2)
------------ ------------ ------- ----------- -------
Pre-tax income before extraordinary items and
dividends and allocation of net proceeds........ 68.3 (2.7) (3.7) (72.8) (10.9)
(Provision) benefit for taxes.......................... (25.0) 1.1 0.8 24.8(e)(h) 1.7
------------ ------------ ------- ----------- -------
Income (loss) before extraordinary items.......... $ 43.3 $ (1.6) $ (2.9) $ (48.0) $ (9.2)
------------ ------------ ------- ----------- -------
------------ ------------ ------- ----------- -------
</TABLE>
- ------------
(a) To reflect the sale of the Aseptic Business to Dean Foods which was
completed in conjunction with the transaction.
(b) Represents a reclassification of promotional expenses of DFVC to
conform presentation to that of Agrilink. Such amount is equal to the adjustment
of selling, administrative and general expenses in pro forma adjustment (d)
below.
(c) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Cost savings anticipated under existing contracts with the suppliers of product
packaging........................................................................... $ 0.6
Reclassification of warehousing expenses of DFVC to conform presentation to that of
Agrilink. Such amount is equal to the adjustment of selling, administrative and general
expenses in pro forma adjustment (d) below.......................................... (6.1)
-----
$(5.5)
-----
-----
</TABLE>
F-102
<PAGE>
<PAGE>
(d) To reflect the net of (dollars in millions):
<TABLE>
<S> <C>
Reclassification of promotional expenses of DFVC to conform presentation to that of
Agrilink. Such amount is equal to the adjustment to the net sales in pro forma
adjustment (b) above............................................................... $(15.5)
Reclassification of warehousing expenses to conform presentation to that of Agrilink.
Such amount is equal to the adjustment to the net sales in pro forma adjustment (c)
above.............................................................................. 6.1
To reflect the anticipated cost reductions achievable under the plan formulated by
management to eliminate duplicate administrative costs, including primarily sales and
marketing functions, finance functions and logistics functions. Because both the
Agrilink and DFVC personnel currently contact the same customers, it is anticipated
that no material negative impact to sales will occur. The plan outlined is to be
executed within one year from the consummation date of the Acquisition............. 2.5
------
$ (6.9)
------
------
</TABLE>
(e) To eliminate the gain recognized on the sale of the Aseptic Business to
Dean Foods (net of income taxes of $25.0 million). Such income has not been
reflected in the unaudited Pro Forma Condensed Consolidated Statement of
Operations, as the gain is considered nonrecurring.
(f) To reflect $2.4 million of additional goodwill amortization relating to
the Acquisition assuming an amortization period of 20 years. Depreciation and
amortization recorded by the Company subsequent to the Acquisition will be
determined based upon the fair values of acquired assets and their related lives
as ultimately recorded under purchase accounting.
(g) To reflect the net adjustment to interest expense as follows (dollars
in millions):
<TABLE>
<S> <C>
Notes at an interest rate of 11.875%................................................... $ 5.9
Borrowings under the New Credit Facility (at the rates applicable upon syndication
thereof)............................................................................... 10.3
Subordinated Promissory Note at an interest rate of 5.0% (non-cash).................... 0.4
Amortization of debt issuance costs.................................................... 0.8
Less historical interest expense net adjustment........................................ (7.9)
Less amortization of debt issuance costs related to debt repaid........................ (0.2)
-----
$ 9.3
-----
-----
</TABLE>
The elimination of debt issuance costs and premiums to be paid to
extinguish existing debt have been recognized as an extraordinary item in the
Statement of Operations for the quarter ended September 26, 1998. See 'Unaudited
Consolidated Statement of Operations' of Pro-Fac included elsewhere herein. Such
charge has not been reflected in the unaudited Pro Forma Condensed Consolidated
Statement of Operations.
Fees associated with obtaining commitments for the Bridge Facility have not
been reflected in the unaudited Pro Forma Consolidated Statement of Operations
as they are considered nonrecurring. Such fees, which will be reflectd in
Pro-Fac's 1999 second fiscal quarter, are estimated to be approximately $5.6
million before taxes.
(h) To reflect the income tax effect of the pro forma adjustments based on
an assumed statutory income tax rate of 39.0%.
F-103
<PAGE>
<PAGE>
================================== ==================================
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER INDIVIDUAL TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER OR THE GUARANTORS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUER OR THE GUARANTORS SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information........................................................................ 2
Forward-Looking Information................................................................................ 3
Market and Industry Data................................................................................... 4
Prospectus Summary......................................................................................... 5
Risk Factors............................................................................................... 12
The Company and Pro-Fac.................................................................................... 21
The Transactions........................................................................................... 21
Use of Proceeds............................................................................................ 23
Capitalization............................................................................................. 23
The Exchange Offer......................................................................................... 24
Unaudited Pro Forma Financial Data of the Company.......................................................... 33
Selected Historical and Unaudited Pro Forma Consolidated Financial Data of Agrilink and DFVC............... 38
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 42
Business................................................................................................... 57
Description of Certain Indebtedness........................................................................ 59
Description of Notes....................................................................................... 62
Certain U.S. Federal Income Tax Considerations............................................................. 91
Plan of Distribution....................................................................................... 91
Legal Matters.............................................................................................. 92
Experts.................................................................................................... 93
Index to Consolidated Financial Statements and Other Information........................................... F-1
</TABLE>
------------------------
UNTIL , 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THE
EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS,
INCLUDING SELLING EXCHANGE NOTES RECEIVED IN EXCHANGE FOR INITIAL NOTES HELD FOR
THEIR OWN ACCOUNT (SEE 'PLAN OF DISTRIBUTION') AND WITH RESPECT TO ANY UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$200,000,000
AGRILINK FOODS, INC.
-------------------------
PROSPECTUS
-------------------------
OFFER TO EXCHANGE ITS
11 7/8% SENIOR SUBORDINATED NOTES
DUE 2008
================================== ==================================
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Agrilink Foods, Inc.
Agrilink Foods, Inc. is a New York corporation. Pursuant to Section 722 of
the New York Business Corporation Law (the 'New York Corporation Law'), Article
V of the By-laws of the Company provides that the Company shall indemnify any
person made, or threatened to be made, a party to any action or proceeding,
whether civil or criminal, by reason of the fact that he, his testator or
intestate is or was a director, officer or employee of the Company or serves or
served any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity at the request of the Company
against judgments, fines, amounts paid in settlement and reasonable expenses,
including attorneys' fees actually and necessarily incurred as a result of such
action or proceeding or any appeal thereon to the full extent permitted by the
New York Corporation Law. Expenses incurred in defending a civil or criminal
action or proceeding shall be paid by the registrant in advance of the final
disposition of such action or proceeding to the extent, if any, authorized by
the Board in accordance with the provisions of the New York Corporation Law,
upon receipt of an undertaking by or on behalf of the director, officer or
employee to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Company as authorized in the by-laws or to
repay such amount to the extent the expenses so advanced by the Company or
allowed by a court exceed the indemnification to which he is entitled. The
Company shall provide such other indemnification to the directors and officers
of the Company as may, from time to time, be provided pursuant to resolutions
duly adopted by the Board of Directors of the Company.
Section 726 of the New York Corporation Law allows the Company to purchase
and maintain insurance to indemnify (i) the Company for any obligation which it
incurs as a result of the indemnification of directors and officers, (ii)
directors and officers in instances in which they may be indemnified by the
Company, and (iii) directors and officers in instances in which they may not
otherwise be indemnified by the Company provided the contract of insurance
covering such directors and officers provides, in a manner acceptable to the
superintendent of insurance of the State of New York, for a retention amount and
for co-insurance. Notwithstanding the foregoing, no such insurance may provide
for any payment, other than cost of defense, to or on behalf of any director or
officer (i) if a judgment or other final adjudication adverse to the insured
director or officer establishes that his acts of active and deliberate
dishonesty were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled or (ii) in relation to any risk the insurance of which is
prohibited under the insurance law of the State of New York.
Pursuant to Section 402(b) of the New York Corporation Law, paragraph 10 of
the Certificate of Incorporation of the Company provides that no director of the
Company shall be personally liable to the Company or its shareholders for
damages for any breach of duty in such capacity except where a judgment or other
final adjudication adverse to said director establishes: (i) that the director's
acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law; or (ii) that the director personally gained in fact a
financial profit or other advantage to which the director was not legally
entitled; or (iii) that the director's acts violated Section 719 of the New York
Corporation Law.
The foregoing statements are subject to the detailed provisions of Sections
721 through 726 of the New York Business Corporation Law, Agrilink's By-laws and
its Certificate of Incorporation, as applicable.
Pro-Fac Cooperative
Pro-Fac is a New York cooperative corporation. Sections 721 through 726 of
the New York Business Corporation Law permit the registrant to indemnify its
officers and directors against liabilities. Under Section 722 of the New York
Business Corporation Law, the registrant may indemnify any person made, or
threatened to be made, a party to any action or proceeding, whether civil or
criminal, by reason of the fact that he, his testator or intestate is or was a
director, officer or employee of the
II-1
<PAGE>
<PAGE>
registrant or serves or served any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise in any capacity at the
request of the registrant against judgments, fines, amounts paid in settlement
and reasonable expenses, including attorneys' fees actually and necessarily
incurred as a result of such action or proceeding or any appeal thereon, if such
director or officer acted in good faith for a purpose which he reasonably
believed to be in, or, under certain circumstances, not opposed to, the best
interests of the registrant.
Section 726 of the New York Business Corporation Law allows the registrant
to purchase and maintain insurance to indemnify (i) the registrant for any
obligation which it incurs as a result of the indemnification of directors and
officers, (ii) directors and officers in instances in which they may be
indemnified by the registrant, and (iii) directors and officers in instances in
which they may not otherwise be indemnified by the registrant provided the
contract of insurance covering such directors and officers provides, in a manner
acceptable to the superintendent of insurance of the State of New York, for a
retention amount and for co-insurance. Notwithstanding the foregoing, no such
insurance may provide for any payment, other than cost of defense, to or on
behalf of any director or officer (i) if a judgment or other final adjudication
adverse to the insured director or officer establishes that his acts of active
and deliberate dishonesty were material to the cause of action so adjudicated,
or that he personally gained in fact a financial profit or other advantage to
which he was not legally entitled or (ii) in relation to any risk the insurance
of which is prohibited under the insurance law of the State of New York.
The foregoing statements are subject to the detailed provisions of Sections
721 through 726 of the New York Business Corporation Law, Pro-Fac's By-laws and
its Certificate of Incorporation, as applicable.
Kennedy Endeavors, Incorporated
Kennedy Endeavors is a Washington corporation. Section 23B.08.510 of the
Washington Business Corporation Act permits a Washington corporation to
indemnify an individual made a party to a proceeding because the individual is
or was a director against liability incurred in the proceeding if (i) the
individual acted in good faith; and (ii) the individual reasonably believed, in
the case of conduct in the individual's official capacity with the corporation,
that the individual's conduct was in its best interests, and in all other cases,
that the individual's conduct was at least not opposed to its best interests;
and (iii) in the case of any criminal proceeding, the individual had no
reasonable cause to believe the individual's conduct was unlawful. A corporation
may not indemnify a director under this section (i) in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation; or (ii) in connection with any other
proceeding charging improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which the director was
adjudged liable on the basis that personal benefit was improperly received by
the director.
Kennedy Endeavors' By-laws permit indemnification to the full extent
permitted by the Washington Business Corporation Act of any person who is or was
a director or officer of Kennedy Endeavors who is or was involved or threatened
to be made so involved in any action, suit or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that such person
is or was serving as a director, officer or employee of Kennedy Endeavors or was
serving at the request of Kennedy Endeavors as a director, officer or employee
of any other corporation.
Section 23B.08.580 of the Washington Business Corporation Act permits a
Washington corporation to purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation, or who, while a director officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by the individual in
that capacity or arising from the individual's status as a director, officer,
employee, or agent, whether or not the corporation would have power to indemnify
the individual against the same liability under Section 23B.08.510 or 23B.08.520
of the Washington Business Corporation Act.
II-2
<PAGE>
<PAGE>
The foregoing statements are subject to the detailed provisions of Sections
23B.08.500 through 23B.08.590 of the Washington Business Corporation Act,
Kennedy Endeavors' By-laws and its Certificate of Incorporation, as applicable.
Linden Oaks Corporation
Linden Oaks is a Delaware corporation. Section 145 of the Delaware General
Corporation law (the 'DGCL') provides that a corporation may indemnify directors
and officers as well as other employees and individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation -- a 'derivative action'), if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceedings, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) actually
and reasonably incurred in connection with the defense or settlement of such
action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, by-laws,
disinterested director vote, stockholder vote, agreement or otherwise.
Linden Oaks Corporation's By-laws permit indemnification to the fullest
extent permitted under Delaware law of any person who is or was a director or
officer of Linden Oaks Corporation who is or was involved or threatened to be
made so involved in any action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person is or
was serving as a director, officer or employee of Linden Oaks Corporation or was
serving at the request of Linden Oaks Corporation as a director, officer or
employee of any other enterprise.
Section 102(b)(7) of the DGCL permits a provision in the certificate of
incorporation of each corporation organized thereunder, such as Linden Oaks
Corporation, eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Section FIFTH of Linden Oaks
Corporation's Certificate of Incorporation provides that no director shall be
personally liable to the corporation or its stockholders for monetary damages
for breach of a fiduciary duty as a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the DGCL (relating to
unlawful dividends, stock purchases and redemptions); or (iv) for any
transaction from which the director derived an improper personal benefit.
Section SIXTH provides that each director, officer, employee and agent of the
corporation shall be indemnified and held harmless by the corporation to the
fullest extent authorized by the DGCL.
The foregoing statements are subject to the detailed provisions of Sections
145 and 102(b)(7) of the DGCL, Linden Oaks Corporation's By-laws and its
Certificate of Incorporation, as applicable.
Liability Insurance
Pro-Fac maintains a directors and officers liability insurance and
corporation reimbursement policy, in such amount as it deems reasonable, against
certain liabilities that may be asserted against, or incurred by, the directors
and officers of each registrant in their capacities as directors or officers of
such registrant, including liabilities under Federal and state securities laws.
Such policy is due for renewal on October 15, 1999.
ITEM 21. EXHIBITS.
(a) Exhibits:
<TABLE>
<C> <S>
4.1 -- Indenture, dated as of November 18, 1998, between Agrilink Foods, Inc., the Guarantors named therein and
IBJ Schroder Bank & Trust Company, Inc., as trustee.
4.2 -- Form of 11 7/8% Senior Subordinated Notes due 2008 (included as Exhibit B to Exhibit 4.1).
4.3 -- Registration Rights Agreement, dated as of November 18, 1998, among Agrilink Foods, Inc., Pro-Fac
Cooperative, Inc., Warburg Dillon Read LLC and Nesbitt Burns Securities Inc.
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<S> <C>
5.1 -- Opinion of Howard, Smith & Levin LLP.
12.1 -- Statement regarding the computation of the ratio of earnings to fixed charges and preferred dividends of
Pro-Fac Cooperative, Inc.
12.2 -- Statement regarding the computation of the ratio of earnings to fixed charges of Agrilink Foods, Inc.
23.1 -- Consent of PricewaterhouseCoopers LLP regarding Agrilink Foods, Inc.
23.2 -- Consent of PricewaterhouseCoopers LLP regarding Pro-Fac Cooperative, Inc.
23.3 -- Consent of PricewaterhouseCoopers LLP regarding Dean Foods Vegetable Company.
23.4 -- Consent of counsel (included in Exhibit 5.1).
24.1 -- Powers of Attorney of Agrilink Foods, Inc., Pro-Fac Cooperative, Inc., Kennedy Endeavors, Incorporated and
Linden Oaks Corporation (included in the signature pages hereto).
25.1 -- Statement of Eligibility and Qualification on Form T-1 of IBJ Schroder Bank & Trust Company.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 -- Form of Letter to Clients.
99.5 -- Form of Exchange Agency Agreement.
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rochester, State of New
York, on January 5, 1999.
AGRILINK FOODS, INC.
By: /S/ DENNIS M. MULLEN
.................................
NAME: DENNIS M. MULLEN
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Dennis M. Mullen and Earl L. Powers and
each of them, with full power to act alone, as 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 (including post-effective amendments)
to this Registration Statement and any subsequent registration statement filed
by the Registrant pursuant to Rule 462(b) of the Securities Act, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the SEC, 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 and necessary to be done in connection therewith, 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
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ DENNIS M. MULLEN President and Chief Executive Officer January 5, 1999
.........................................
(DENNIS M. MULLEN)
/s/ EARL L. POWERS Vice President, Finance and January 5, 1999
......................................... Chief Financial Officer (Principal
(EARL L. POWERS) Financial Officer and Principal Accounting
Officer)
/s/ ROBERT V. CALL, JR. Director and Chairman of the Board January 5, 1999
.........................................
(ROBERT V. CALL, JR.)
/s/ BRUCE R. FOX Director January 5, 1999
.........................................
(BRUCE R. FOX)
/s/ CORNELIUS D. HARRINGTON, JR. Director January 5, 1999
.........................................
(CORNELIUS D. HARRINGTON, JR.)
/s/ STEVEN D. KOINZAN Director January 5, 1999
.........................................
(STEVEN D. KOINZAN)
/s/ WALTER F. PAYNE Director January 5, 1999
.........................................
(WALTER F. PAYNE)
/s/ FRANK M. STOTZ Director January 5, 1999
.........................................
(FRANK M. STOTZ)
</TABLE>
II-5
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rochester, State of New
York, on January 5, 1999.
PRO-FAC COOPERATIVE, INC.
By: /s/ BRUCE R. FOX
.................................
NAME: BRUCE R. FOX
TITLE: PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Dennis M. Mullen and Earl L. Powers and
each of them, with full power to act alone, as 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 (including post-effective amendments)
to this Registration Statement and any subsequent registration statement filed
by the Registrant pursuant to Rule 462(b) of the Securities Act, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the SEC, 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 and necessary to be done in connection therewith, 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
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ BRUCE R. FOX President and Director January 5, 1999
.......................................
(BRUCE R. FOX)
/s/ STEVEN D. KOINZAN Treasurer and Director January 5, 1999
.........................................
(STEVEN D. KOINZAN)
/s/ EARL L. POWERS Vice President, Finance and January 5, 1999
......................................... Assistant Treasurer
(EARL L. POWERS)
/s/ DALE W. BURMEISTER Director January 5, 1999
.........................................
(DALE W. BURMEISTER)
/s/ ROBERT V. CALL, JR. Director January 5, 1999
.........................................
(ROBERT V. CALL, JR.)
/s/ GLEN LEE CHASE Director January 5, 1999
.........................................
(GLEN LEE CHASE)
Secretary and Director
.........................................
(TOM R. CRONER)
Director
.........................................
(KENNETH M. DAHLSTEDT)
</TABLE>
II-6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ ROBERT A. DEBADTS Director January 5, 1999
.........................................
(ROBERT A. DEBADTS)
/s/ KENNETH A. MATTINGLY Director January 5, 1999
.........................................
(KENNETH A. MATTINGLY)
Director
.........................................
(ALLAN W. OVERHISER)
/s/ PAUL E. ROE Director January 5, 1999
.........................................
(PAUL E. ROE)
/s/ DARELL SARFF Director January 5, 1999
.........................................
(DARELL SARFF)
</TABLE>
II-7
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rochester, State of New
York, on January 5, 1999.
KENNEDY ENDEAVORS, INCORPORATED
By: /S/ TIM KENNEDY
.................................
NAME: TIM KENNEDY
TITLE: PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Dennis M. Mullen and Earl L. Powers and
each of them, with full power to act alone, as 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 (including post-effective amendments)
to this Registration Statement and any subsequent registration statement filed
by the Registrant pursuant to Rule 462(b) of the Securities Act, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the SEC, 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 and necessary to be done in connection therewith, 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
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ TIM KENNEDY President January 5, 1999
.........................................
(TIM KENNEDY)
/s/ EARL L. POWERS Director, Vice President, Finance and January 5, 1999
......................................... Secretary
(EARL L. POWERS)
/s/ ROBERT V. CALL, JR. Director January 5, 1999
.........................................
(ROBERT V. CALL, JR.)
/s/ DENNIS M. MULLEN Director January 5, 1999
.........................................
(DENNIS M. MULLEN)
</TABLE>
II-8
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rochester, State of New
York, on January 5, 1999.
LINDEN OAKS CORPORATION
By: /S/ TIMOTHY J. BENJAMIN
.................................
NAME: TIMOTHY J. BENJAMIN
TITLE: PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Dennis M. Mullen and Earl L. Powers and
each of them, with full power to act alone, as 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 (including post-effective amendments)
to this Registration Statement and any subsequent registration statement filed
by the Registrant pursuant to Rule 462(b) of the Securities Act, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the SEC, 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 and necessary to be done in connection therewith, 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
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ TIMOTHY J. BENJAMIN President and Director January 5, 1999
.........................................
(TIMOTHY J. BENJAMIN)
/s/ LINDA K. NELSON Treasurer January 5, 1999
.........................................
(LINDA K. NELSON)
/s/ ROBERT CAMPBELL Director January 5, 1999
.........................................
(ROBERT CAMPBELL)
/s/ EARL L. POWERS Director January 5, 1999
.........................................
(EARL L. POWERS)
</TABLE>
II-9
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
4.1 -- Indenture, dated as of November 18, 1998, between Agrilink Foods, Inc., the Guarantors named therein
and IBJ Schroder Bank & Trust Company, Inc., as trustee.
4.2 -- Form of 11 7/8% Senior Subordinated Notes due 2008 (included as Exhibit B to Exhibit 4.1).
4.3 -- Registration Rights Agreement, dated as of November 18, 1998, among Agrilink Foods, Inc., Pro-Fac
Cooperative, Inc., Warburg Dillon Read LLC and Nesbitt Burns Securities Inc.
5.1 -- Opinion of Howard, Smith & Levin LLP.
12.1 -- Statement regarding the computation of the ratio of earnings to fixed charges and preferred dividends
of Pro-Fac Cooperative, Inc.
12.2 -- Statement regarding the computation of the ratio of earnings to fixed charges of Agrilink Foods, Inc.
23.1 -- Consent of PricewaterhouseCoopers LLP regarding Agrilink Foods, Inc.
23.2 -- Consent of PricewaterhouseCoopers LLP regarding Pro-Fac Cooperative, Inc.
23.3 -- Consent of PricewaterhouseCoopers LLP regarding Dean Foods Vegetable Company.
23.4 -- Consent of counsel (included in Exhibit 5.1).
24.1 -- Powers of Attorney of Agrilink Foods, Inc., Pro-Fac Cooperative, Inc., Kennedy Endeavors, Incorporated
and Linden Oaks Corporation (included in the signature pages hereto).
25.1 -- Statement of Eligibility and Qualification on Form T-1 of IBJ Schroder Bank & Trust Company.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 -- Form of Letter to Clients.
99.5 -- Form of Exchange Agency Agreement.
</TABLE>
<PAGE>
<PAGE>
===============================================================================
----------------
AGRILINK FOODS, INC.,
AS ISSUER
THE GUARANTORS NAMED HEREIN
AND
IBJ SCHRODER BANK & TRUST COMPANY
AS TRUSTEE
$200,000,000
11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
---------------
INDENTURE
Dated as of November 18, 1998
---------------
===============================================================================
<PAGE>
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ----------
<S> <C> <C>
310 (a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(a)(5)................................................... 7.10
(b)...................................................... 7.08; 7.10; 12.02
(b)(1)................................................... 7.10
(c)...................................................... N.A.
311 (a)...................................................... 7.11
(b)...................................................... 7.11
(c)...................................................... N.A.
312 (a)...................................................... 2.05
(b)...................................................... 12.03
(c)...................................................... 12.03
313 (a)...................................................... 7.06
(b)(1)................................................... N.A.
(b)(2)................................................... 7.06
(c)...................................................... 7.06; 12.02
(d)...................................................... 7.06
314 (a)...................................................... 4.02; 4.03; 12.02
(b)...................................................... N.A.
(c)(1)................................................... 12.04
(c)(2)................................................... 12.04
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 12.05
(f)...................................................... N.A.
315 (a)...................................................... 7.01(b)
(b)...................................................... 7.05; 12.02
(c)...................................................... 7.01(a)
(d)...................................................... 7.01(c)
(e)...................................................... 6.11
316 (a) (last sentence)...................................... 2.12
(a)(1)(A)................................................ 6.05
(a)(1)(B)................................................ 6.04
(a)(2)................................................... N.A.
(b)...................................................... 6.07
(c)...................................................... 9.04(b)
317 (a)(1)................................................... 6.08
(a)(2)................................................... 6.09
(b)...................................................... 2.04
318 (a)...................................................... 12.01
</TABLE>
- ---------------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions..........................................................1
SECTION 1.02. Other Definitions...................................................24
SECTION 1.03. Incorporation by Reference of TIA...................................25
SECTION 1.04. Rules of Construction...............................................25
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating.....................................................26
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount............27
SECTION 2.03. Registrar and Paying Agent..........................................28
SECTION 2.04. Paying Agent to Hold Money in Trust.................................28
SECTION 2.05. Holder Lists........................................................29
SECTION 2.06. Transfer and Exchange...............................................29
SECTION 2.07. Restrictive Legends.................................................30
SECTION 2.08. Book-Entry Provisions for Global Notes..............................32
SECTION 2.09. Special Transfer Provisions.........................................34
SECTION 2.10. Replacement Notes...................................................37
SECTION 2.11. Outstanding Notes...................................................38
SECTION 2.12. Treasury Notes......................................................38
SECTION 2.13. Temporary Notes.....................................................38
SECTION 2.14. Cancellation........................................................39
SECTION 2.15. Defaulted Interest..................................................39
SECTION 2.16. Record Date.........................................................39
SECTION 2.17. CUSIP and CINS Numbers..............................................39
ARTICLE 3
REDEMPTIONS AND OFFERS TO PURCHASE
SECTION 3.01. Notices to Trustee..................................................40
SECTION 3.02. Selection of Notes to Be Redeemed or Purchased......................40
</TABLE>
-i-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.03. Notice of Redemption................................................41
SECTION 3.04. Effect of Notice of Redemption......................................42
SECTION 3.05. Deposit of Redemption Price.........................................42
SECTION 3.06. Notes Redeemed in Part..............................................42
SECTION 3.07. Redemption Provisions...............................................42
SECTION 3.08. Mandatory Offers....................................................43
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes....................................................45
SECTION 4.02. Reports.............................................................46
SECTION 4.03. Compliance Certificate..............................................46
SECTION 4.04. Stay, Extension and Usury Laws......................................47
SECTION 4.05. Limitation on Restricted Payments...................................47
SECTION 4.06. Corporate Existence.................................................49
SECTION 4.07. Limitations on Additional Indebtedness..............................50
SECTION 4.08. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries..........................................50
SECTION 4.09. Limitations on Layering Debt........................................50
SECTION 4.10. Limitations on Transactions with Affiliates.........................51
SECTION 4.11. Limitations on Liens................................................52
SECTION 4.12. Taxes...............................................................52
SECTION 4.13. Limitations on Restrictions on Distributions from
Restricted Subsidiaries..........................................52
SECTION 4.14. Maintenance of Offices or Agencies..................................53
SECTION 4.15. Change of Control...................................................53
SECTION 4.16. Limitations on Asset Sales..........................................54
SECTION 4.17. Additional Note Guarantees..........................................57
SECTION 4.18. Payments Pursuant to the Pro-Fac Marketing Agreement;
Reinvestments by Pro-Fac; Borrowings by Pro-Fac..................57
SECTION 4.19. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law..............................................58
ARTICLE 5
SUCCESSORS
SECTION 5.01. Limitations on Mergers and Certain Other Transactions...............59
SECTION 5.02. Successor Corporation Substituted...................................60
</TABLE>
-ii-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 6
DEFAULTS AND REMEDIES
<S> <C> <C>
SECTION 6.01. Events of Default...................................................61
SECTION 6.02. Acceleration........................................................62
SECTION 6.03. Other Remedies......................................................63
SECTION 6.04. Waiver of Past Defaults.............................................63
SECTION 6.05. Control by Majority of Holders......................................63
SECTION 6.06. Limitations on Suits by Holders.....................................63
SECTION 6.07. Rights of Holders to Receive Payment................................64
SECTION 6.08. Collection Suit by Trustee..........................................64
SECTION 6.09. Trustee May File Proofs of Claim....................................64
SECTION 6.10. Priorities..........................................................64
SECTION 6.11. Undertaking for Costs...............................................65
SECTION 6.12. Willful Default.....................................................65
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee...................................................66
SECTION 7.02. Rights of Trustee...................................................67
SECTION 7.03. Individual Rights of Trustee........................................67
SECTION 7.04. Trustee's Disclaimer................................................67
SECTION 7.05. Notice to Holders of Defaults and Events of Default.................68
SECTION 7.06. Reports by Trustee to Holders.......................................68
SECTION 7.07. Compensation and Indemnity..........................................68
SECTION 7.08. Replacement of Trustee..............................................69
SECTION 7.09. Successor Trustee by Merger, Etc....................................70
SECTION 7.10. Eligibility; Disqualification.......................................70
SECTION 7.11. Preferential Collection of Claims Against Company...................70
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Discharge of Liability on Notes; Defeasance.........................71
SECTION 8.02. Conditions to Defeasance............................................71
SECTION 8.03. Application of Trust Money..........................................73
SECTION 8.04. Repayment to Company................................................73
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SECTION 8.05. Indemnity for Government Securities.................................74
SECTION 8.06. Reinstatement.......................................................74
ARTICLE 9
AMENDMENTS
SECTION 9.01. Amendments and Supplements Permitted without Consent of
Holders..........................................................74
SECTION 9.02. Amendments and Supplements Requiring Consent of Holders.............75
SECTION 9.03. Compliance with TIA.................................................76
SECTION 9.04. Revocation and Effect of Consents...................................76
SECTION 9.05. Notation or Exchange of Notes.......................................77
SECTION 9.06. Trustee Protected...................................................77
ARTICLE 10
SUBORDINATION
SECTION 10.01. Agreement to Subordinate............................................77
SECTION 10.02. Liquidation; Dissolution; Bankruptcy................................77
SECTION 10.03. No Payment on Notes in Certain Circumstances........................78
SECTION 10.04. Acceleration of Notes...............................................79
SECTION 10.05. When Distributions Must Be Paid Over................................79
SECTION 10.06. Notice..............................................................80
SECTION 10.07. Subrogation.........................................................80
SECTION 10.08. Relative Rights.....................................................81
SECTION 10.09. The Company, Guarantors and Holders May Not Impair
Subordination....................................................81
SECTION 10.10. Distribution or Notice to Representative............................82
SECTION 10.11. Rights of Trustee and Paying Agent..................................83
SECTION 10.12. Trust Moneys Not Subordinated; Permitted Junior
Securities.......................................................83
SECTION 10.13. Authorization to Effect Subordination...............................83
ARTICLE 11
GUARANTEE
SECTION 11.01. Guarantee...........................................................84
SECTION 11.02. Trustee to Include Paying Agent.....................................85
SECTION 11.03. Subordination of Guarantee..........................................85
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SECTION 11.04. Limits of Guarantee.................................................85
SECTION 11.05. Severability........................................................85
SECTION 11.06. Subrogation.........................................................85
SECTION 11.07. Execution of Guarantee...........................................85
SECTION 11.08. Release of Guarantor................................................86
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls........................................86
SECTION 12.02. Notices.............................................................87
SECTION 12.03. Communication by Holders with Other Holders.........................87
SECTION 12.04. Certificate and Opinion As to Conditions Precedent..................88
SECTION 12.05. Statements Required in Certificate or Opinion.......................88
SECTION 12.06. Rules by Trustee and Agents.........................................88
SECTION 12.07. Legal Holidays......................................................88
SECTION 12.08. No Recourse Against Others..........................................88
SECTION 12.09. Counterparts........................................................88
SECTION 12.10. Initial Appointments, Compliance Certificates.......................89
SECTION 12.11. Governing Law.......................................................89
SECTION 12.12. No Adverse Interpretation of Other Agreements.......................89
SECTION 12.13. Successors..........................................................89
SECTION 12.14. Severability........................................................89
SECTION 12.15. Third Party Beneficiaries...........................................89
SECTION 12.16. Table of Contents, Headings, Etc....................................89
EXHIBITS
Exhibit A. Form of Initial Note...............................................A-1
Exhibit B. Form of Exchange Note..............................................B-1
Exhibit C. Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors.......................C-1
Exhibit D. Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S..............................D-1
Exhibit E. Form of Note Guarantee.............................................E-1
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INDENTURE, dated as of November 18, 1998, is by and among
Agrilink Foods, Inc., a New York corporation, as issuer (as further defined
below, the "COMPANY"), the Guarantors (as defined below) and IBJ Schroder Bank &
Trust Company, a New York banking corporation, as trustee (the "TRUSTEE").
The Company, the Guarantors and the Trustee agree as follows for
the benefit of each other and for the equal and ratable benefit of the holders
of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person that
becomes a Restricted Subsidiary after the date of this Indenture, Indebtedness
of such Person and its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary that was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary and (b) with
respect to the Company or any of its Restricted Subsidiaries, any Indebtedness
of a Person (other than the Company or a Restricted Subsidiary) existing at the
time such Person is merged with or into the Company or a Restricted Subsidiary,
or Indebtedness assumed by the Company or any of its Restricted Subsidiaries in
connection with the acquisition of an asset or assets from another Person, which
Indebtedness was not, in any case, incurred by such other Person in connection
with, or in contemplation of, such merger or acquisition. For purposes of the
Pro-Fac Merger only, Indebtedness of Pro-Fac existing at the time the Company is
merged with and into Pro-Fac, but not incurred in connection with, or in
contemplation of, the Pro-Fac Merger, shall be deemed incurred for purposes of
this Indenture at the time of the consummation of the Pro-Fac Merger, but the
incurrence thereof shall not require compliance with Section 4.07(a).
"ACQUISITION" means the acquisition by the Company of Dean Foods
Vegetable Company and the transfer by the Company of its aseptic business, in
each case on September 23, 1998 pursuant to and in accordance with terms of the
Stock Purchase Agreement dated as of July 24, 1998 by and between Dean Foods
Company and the Company and the Asset Transfer Agreement dated as of July 24,
1998 by and between Dean Foods Company and the Company.
"ADDITIONAL INTEREST" has the meaning set forth in the
Registration Rights Agreement.
"AFFILIATE" of any specified Person means (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and (ii) with respect to Pro-Fac and
the Company, any member of Pro-Fac that is
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a director of Pro-Fac or that has beneficial ownership of more than 1% of the
outstanding voting securities of Pro-Fac. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and under "common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"AGENT" means any Registrar, Paying Agent, or co-registrar
appointed pursuant to Section 2.03.
"ASSET SALE" means any sale, issuance, conveyance, transfer,
lease, assignment or other disposition to any Person other than the Company or
any of its Restricted Subsidiaries (including, without limitation, by means of a
Sale and Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (a) any Capital Stock of any
Restricted Subsidiary or (b) any other properties or assets of the Company or
any of its Restricted Subsidiaries other than transfers of cash, Cash
Equivalents, accounts receivable, inventory or other properties or assets in the
ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any of the following: (i) any transfer of
properties or assets (including Capital Stock) that is governed by, and made in
accordance with, the provisions of Article 5; (ii) any transfer of properties or
assets to an Unrestricted Subsidiary, if permitted under Section 4.05; (iii)
sales of damaged, worn-out or obsolete equipment or assets that, in the
Company's reasonable judgment, are either no longer used or useful in the
business of the Company or its Subsidiaries, provided that the proceeds thereof
are used to purchase replacement or similar assets for use in the business of
the Company and its Subsidiaries; and (iv) any transfer that, but for this
clause (iv), would be an Asset Sale, if after giving effect to such transfer,
the aggregate Fair Market Value of the properties or assets transferred in such
transaction or any such series of related transactions does not exceed $500,000.
"ATTRIBUTABLE INDEBTEDNESS," when used with respect to any Sale
and Leaseback Transaction, means, as at the time of determination, the present
value (discounted at a rate equivalent to the Company's then-current weighted
average cost of funds for borrowed money as at the time of determination,
compounded on a semi-annual basis) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in any such Sale
and Leaseback Transaction.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended.
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"BANKRUPTCY LAW" means the Bankruptcy Code or any similar federal
or state law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the Board
of Directors of such Person, or any authorized committee of the Board of
Directors of such Person.
"BOARD RESOLUTION" means a duly adopted resolution of the Board
of Directors of the Company or any Guarantor.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which banking institutions in the City of New York are authorized by law,
regulation or executive order to remain closed.
"CAPITAL STOCK" of any Person means (i) any and all shares or
other equity interests (including without limitation common stock, preferred
stock and partnership interests) in such Person and (ii) all rights to purchase,
warrants or options (whether or not currently exercisable), participations or
other equivalents of or interests in (however designated) such shares or other
interests in such Person.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the
obligations of such Person to pay rent or other amounts under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable obligations with a
maturity of 360 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) U.S. dollar denominated time deposits and
certificates of deposit of any financial institution (a) that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than $500 million or (b) whose short-term commercial paper rating or
that of its parent company is at least A-1 or the equivalent thereof from S&P or
P-1 or the equivalent thereof from Moody's (any such bank, an "APPROVED BANK"),
in each case with a maturity of 360 days or less from the date of acquisition;
(iii) commercial paper issued by any Approved Bank or by the parent company of
any Approved Bank and commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating of at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's, or guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing no more than
360 days from the date of acquisition; (iv) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clause (i) above entered into with any commercial bank meeting the
specifications of clause (ii)(a)
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above; and (v) investments in money market or other mutual funds substantially
all of whose assets comprise securities of the types described in clauses (i)
through (iv) above.
"CEDEL" means Cedel Bank, Societe anonyme.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related transactions, of
all or substantially all of Pro-Fac's or the Company's assets to any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act); provided,
however, that the Pro-Fac Merger shall not constitute a Change of Control under
this clause (i); (ii) the consummation of any transaction the result of which is
that any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act) (other than Pro-Fac in the case of clause (y)) owns, directly or
indirectly, (A) more than 50% of the voting power of the voting stock of either
(x) Pro-Fac or (y) the Company or (B) more than 30% of the voting power of the
voting stock of the Company if Pro-Fac owns, directly or indirectly, a lesser
percentage than such Person or group of the voting power of the voting stock of
the Company; (iii) the first date on which any Person or group (as defined
above) shall have elected, or caused to be elected, a sufficient number of its
or their nominees to the Board of Directors of Pro-Fac or the Company such that
the nominees so elected (regardless of when elected) shall collectively
constitute a majority of the Board of Directors of Pro-Fac or the Company, as
the case may be; or (iv) (A) prior to consummation of the Pro-Fac Merger, for a
period of 120 consecutive days, the number of Disinterested Directors on the
Board of Directors of the Company being less than the greater of (x) two and (y)
the number of directors of the Company who are Pro-Fac Directors and (B) on and
after consummation of the Pro-Fac Merger, for a period of 120 consecutive days,
the number of Disinterested Directors on the Board of Directors of Pro-Fac, as
successor corporation to the Company, being less than two. For purposes of this
definition, any transfer of an equity interest of an entity that was formed for
the purpose of acquiring voting stock of Pro-Fac or the Company shall be deemed
to be a transfer of such portion of the voting stock owned by such entity as
corresponds to the portion of the equity of such entity that has been so
transferred.
"COMMERCIAL MARKET VALUE" means Commercial Market Value
determined in accordance with the Pro-Fac Marketing Agreement (as in effect on
the Issue Date and whether or not in effect at the time of determination).
"COMPANY" means Agrilink Foods, Inc., a New York corporation,
unless and until a subsequent successor replaces it in accordance with Article 5
and thereafter means such successor.
"CONSOLIDATED AMORTIZATION EXPENSE" for any period means the
amortization expense of the Company and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net Income),
determined on a consolidated basis in accordance with GAAP.
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"CONSOLIDATED DEPRECIATION EXPENSE" for any period means the
depreciation expense of the Company and its Restricted Subsidiaries for such
period (to the extent included in the computation of Consolidated Net Income),
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" for any period means the
provision for taxes based on income and profits of the Company and its
Restricted Subsidiaries to the extent such income or profits were included in
computing Consolidated Net Income for such period.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to any
determination date, the ratio of (a) EBITDA for the four full fiscal quarters
immediately preceding the determination date (for any determination, the
"REFERENCE PERIOD"), to (b) Consolidated Interest Expense for such Reference
Period. In making such computations, (i) EBITDA and Consolidated Interest
Expense shall be calculated on a pro forma basis assuming that (A) the
Indebtedness to be incurred or the Disqualified Capital Stock to be issued (and
all other Indebtedness incurred or Disqualified Capital Stock issued after the
first day of such Reference Period referred to in Section 4.07, through and
including the date of determination), and (if applicable) the application of the
net proceeds therefrom (and from any other such Indebtedness or Disqualified
Capital Stock), including the refinancing of other Indebtedness, had been
incurred on the first day of such Reference Period and, in the case of Acquired
Indebtedness, on the assumption that the related transaction (whether by means
of purchase, merger or otherwise) also had occurred on such date with EBIDTA
(including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) attributable to the
assets which are the subject of such acquisition being included in such pro
forma calculation and (B) any acquisition or disposition by the Company or any
Restricted Subsidiary of any properties or assets outside the ordinary course of
business or any repayment of any principal amount of any Indebtedness of the
Company or any Restricted Subsidiary prior to the stated maturity thereof, in
either case since the first day of such Reference Period through and including
the date of determination, had been consummated on such first day of such
Reference Period; (ii) the Consolidated Interest Expense attributable to
interest on any Indebtedness required to be computed on a pro forma basis in
accordance with Section 4.07 and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of the Company, either the fixed or floating rate;
(iii) the Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility required to be computed on a pro
forma basis in accordance with Section 4.07 shall be computed based upon the
average daily balance of such Indebtedness during the applicable period,
provided that such average daily balance shall be reduced by the amount of any
repayment of Indebtedness under a revolving credit facility during the
applicable period, which repayment permanently
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reduced the commitments or amounts available to be reborrowed under such
facility; (iv) notwithstanding the foregoing clauses (ii) and (iii), interest on
Indebtedness determined on a floating rate basis, to the extent such interest is
covered by agreements relating to Hedging Obligations, shall be deemed to have
accrued at the rate per annum resulting after giving effect to the operation of
such agreements; and (v) if after the first day of the applicable Reference
Period and before the date of determination, the Company has permanently retired
any Indebtedness out of the net proceeds of the issuance and sale of shares of
Capital Stock (other than Disqualified Capital Stock) of the Company within 60
days of such issuance and sale, Consolidated Interest Expense shall be
calculated on a pro forma basis as if such Indebtedness had been retired on the
first day of such period.
"CONSOLIDATED INTEREST EXPENSE" for any period means the sum,
without duplication, of the total interest expense of the Company and its
consolidated Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP and including, without limitation (i)
imputed interest on Capitalized Lease Obligations and Attributable Indebtedness;
(ii) commissions, discounts and other fees and charges owed with respect to
letters of credit securing financial obligations and bankers' acceptance
financing; (iii) the net costs associated with Hedging Obligations; (iv)
amortization of other financing fees and expenses; (v) the interest portion of
any deferred payment obligations; (vi) amortization of debt discount or premium,
if any; (vii) all other non-cash interest expense; (viii) capitalized interest;
(ix) all cash dividend payments (and non-cash dividend payments in the case of a
Restricted Subsidiary) on any series of preferred stock of the Company or any
Restricted Subsidiary; (x) all interest payable with respect to discontinued
operations; and (xi) all interest on any Indebtedness of any other Person
guaranteed by the Company or any Restricted Subsidiary to the extent paid by the
Company or such Restricted Subsidiary.
"CONSOLIDATED NET INCOME" for any period means the net income (or
loss) of the Company and its consolidated Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; provided that
there shall be excluded from such net income (to the extent otherwise included
therein), without duplication (i) the net income (or loss) of any Person (other
than a Restricted Subsidiary) in which any Person other than the Company and its
Restricted Subsidiaries has an ownership interest, except to the extent that any
such income has actually been received by the Company and its Restricted
Subsidiaries (unless and to the extent such Restricted Subsidiary is subject to
clause (iii) below) in the form of cash dividends or distributions during such
period; (ii) except to the extent includable in the consolidated net income of
the Company pursuant to the foregoing clause (i), the net income (or loss) of
any Person that accrued prior to the date that (a) such Person becomes a
Restricted Subsidiary or is merged into or consolidated with the Company or any
Restricted Subsidiary or (b) the assets of such Person are acquired by the
Company or any Restricted Subsidiary; (iii) the net income of any Restricted
Subsidiary during such period to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary
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of that income (a) is not permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary during such period or (b)
would be subject to any taxes payable on such dividend or distribution; (iv) any
gain (or, only in the case of a determination of Consolidated Net Income as used
in EBITDA, any loss), together with any related provisions for taxes on any such
gain (or, if applicable, the tax effects of such loss), realized during such
period by the Company or any Restricted Subsidiary upon (a) the acquisition of
any securities, or the extinguishment of any Indebtedness, of the Company or any
Restricted Subsidiary or (b) any Asset Sale by the Company or any of its
Restricted Subsidiaries; provided, however, that there shall be excluded from
Consolidated Net Income for all purposes any loss realized by the Company or any
Restricted Subsidiary upon the acquisition of any securities, or the
extinguishment of any Indebtedness, of the Company or any Restricted Subsidiary,
or the write-off of deferred financing costs, in connection with the Acquisition
and all refinancings of Indebtedness consummated in connection therewith; (v)
any extraordinary gain (or, only in the case of a determination of Consolidated
Net Income as used in EBITDA, any extraordinary loss), together with any related
provision for taxes on any such extraordinary gain (or, if applicable, the tax
effects of such extraordinary loss), realized by the Company or any Restricted
Subsidiary during such period; (vi) any restructuring charges recognized during
such period in an amount not to exceed $7.0 million in the aggregate after the
Issue Date so long as such restructuring charges are recognized within 24 months
after the Issue Date; and (vii) in the case of a successor to the Company by
consolidation, merger or transfer of its assets, any earnings of the successor
prior to such merger, consolidation or transfer of assets; and provided,
further, that any gain in excess of return of capital referred to in clauses
(iv) and (v) above that relates to a Restricted Investment and which is received
in cash by the Company or a Restricted Subsidiary during such period shall be
included in the Consolidated Net Income of the Company.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of
any date, the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as determined in accordance with GAAP as of such
date, less all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business made
within twelve months after the acquisition of such business) subsequent to the
Issue Date in the book value of any asset owned by such Person or a Subsidiary
of such Person.
"CORPORATE TRUST OFFICE" shall be at the address of the Trustee
specified in Section 12.02 or such other address as the Trustee may give notice
to the Company.
"COVERAGE RATIO INCURRENCE CONDITION" would be met at any
specified time only if the Company (or its Successor, as the case may be) would
be able to incur $1.00 of additional Indebtedness at such specified time
pursuant to the Consolidated Interest Coverage Ratio test set forth in Section
4.07.
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"CUSTODIAN" means any custodian, receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after
notice or the passage of time or both would be, an Event of Default.
"DEPOSITORY" means, with respect to the Notes issuable or issued
in whole or in part in global form, The Depository Trust Company, until a
successor shall have been appointed and becomes such Depository, and,
thereafter, "Depository" shall mean or include such successor.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness under the
New Credit Facility (whether incurred pursuant to the definition of Permitted
Indebtedness or pursuant to the provisions of Section 4.07) and (ii) any other
Indebtedness constituting Senior Indebtedness that at the date of determination
has an aggregate principal amount outstanding of at least $25.0 million and that
is specifically designated by the Company, in the instrument creating or
evidencing such Senior Indebtedness or in an Officers' Certificate delivered to
the Trustee, as "Designated Senior Indebtedness."
"DISINTERESTED DIRECTORS" means (i) prior to the consummation of
the Pro-Fac Merger, directors of the Company who are not employees, shareholders
(at the time of becoming directors) or otherwise Affiliates (other than by
reason of being a director of the Company) of either Pro-Fac or the Company and
(ii) on and after consummation of the Pro-Fac Merger, directors of Pro-Fac, as
the successor corporation to the Company, who are not employees, shareholders
(at the time of becoming directors) or otherwise Affiliates (other than by
reason of being a director of Pro-Fac) of Pro-Fac.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of a Person
or any of its Subsidiaries that, by its terms, by the terms of any agreement
related thereto or by the terms of any security into which it is convertible,
puttable or exchangeable, is, or upon the happening of any event or the passage
of time would be, required to be redeemed or repurchased by such Person or any
of its Subsidiaries, whether or not at the option of the holder thereof, or
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, in whole or in part, on or prior to the final maturity date of the
Notes; provided, however, that in the case of Pro-Fac only, Disqualified Capital
Stock shall not include (x) retained earnings allocated to members of Pro-Fac,
(y) common stock of Pro-Fac issued to members of Pro-Fac and (z) Class B
Preferred Stock (having substantially the same terms as in effect on the Issue
Date) of Pro-Fac issued to officers, directors or employees of Pro-Fac.
"DOLLARS" and "$" means lawful money of the United States of
America.
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"EBITDA" for any period means without duplication, the sum of the
amounts for such period of (i) Consolidated Net Income plus (ii) in each case to
the extent deducted in determining Consolidated Net Income for such period (and
without duplication), (A) Consolidated Income Tax Expense, (B) Consolidated
Amortization Expense (but only to the extent not included in Consolidated
Interest Expense), (C) Consolidated Depreciation Expense, (D) Consolidated
Interest Expense, (E) all other non-cash items reducing the Consolidated Net
Income (excluding any such non-cash charge that results in an accrual of a
reserve for cash charges in any future period) for such period, in each case
determined on a consolidated basis in accordance with GAAP, plus (iii) in the
case of the Company, for any period that includes a fiscal quarter beginning on
or prior to consummation of the Pro-Fac Merger, the Pro-Fac share of earnings
(loss) as determined in accordance with the Pro-Fac Marketing Agreement for such
period through the date of consummation of the Pro-Fac Merger, minus (iv) the
aggregate amount of all non-cash items, determined on a consolidated basis, to
the extent such items increased Consolidated Net Income for such period.
"EQUITY OFFERING" means an underwritten primary offering of
Capital Stock (other than Disqualified Capital Stock) of Pro-Fac (to the extent
that the net cash proceeds thereof are contributed to the equity capital of the
Company (other than as Disqualified Capital Stock)) or the Company pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act or pursuant to a private placement pursuant to an available
exemption from registration under the Securities Act to the extent, in the case
of such private placement, such Capital Stock is not sold to Pro-Fac, the
Company, any Subsidiary or any Affiliate (without giving effect to clause (ii)
in the definition thereof) thereof.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" means the 11-7/8% Senior Subordinated Notes due
2008 of the Company to be offered to Holders in exchange for Notes pursuant to
the Exchange Offer or otherwise pursuant to a Registration of Notes (the terms
of which are identical to the Initial Notes except that the Exchange Notes shall
be registered under the Securities Act and shall not contain the Private
Placement Legend or provide for the payment of Additional Interest) and
unconditionally guaranteed on a joint and several basis by the Guarantors.
"EXCHANGE OFFER" means the offer that may be made by the Company
and the Guarantors pursuant to the Registration Rights Agreement to exchange
Exchange Notes for the Notes.
"EXISTING INDEBTEDNESS" means all of the Indebtedness of the
Company and its Restricted Subsidiaries that is outstanding on the Issue Date
and any additional promissory
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notes issued in accordance with the terms of the Subordinated Promissory Note as
in effect on the Issue Date.
"FAIR MARKET VALUE" of any asset or item means the fair market
value of such asset or item as determined in good faith by the Board of
Directors and evidenced by a Board Resolution.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Company that is
not incorporated or organized in the United States or in any State thereof or
the District of Columbia.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect on the Issue Date.
"GOVERNMENT SECURITIES" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"GUARANTORS" means each of the Subsidiary Guarantors and Pro-Fac,
and "GUARANTOR" means any one of the foregoing.
"HEDGING OBLIGATIONS" of any Person means the obligations of such
Person pursuant to (i) any interest rate swap agreement, interest rate collar
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in interest rates, (ii) agreements or arrangements
designed to protect such Person against fluctuations in foreign currency
exchange rates in the conduct of its operations, or (iii) any forward contract,
commodity swap agreement, commodity option agreement or other similar agreement
or arrangement designed to protect such Person against fluctuations in commodity
prices, in each case, entered into in the ordinary course of business for bona
fide hedging purposes and not for the purpose of speculation.
"HOLDER" means a Person in whose name a Note is registered on the
Registrar's books.
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"IAI GLOBAL NOTE" means a permanent global Note in registered
form representing the aggregate principal amount of Notes transferred to
Institutional Accredited Investors.
"IMMATERIAL SUBSIDIARY" means any Restricted Subsidiary of the
Company that has, together with all other Immaterial Subsidiaries in the
aggregate, assets, revenues and net income comprising less than 2.00% of the
assets, revenues and net income of the Company and its Subsidiaries taken as a
whole.
"INCUR" means, with respect to any Indebtedness or Obligation,
incur, create, issue, assume, Guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to such Indebtedness
or Obligation; provided that (i) the Indebtedness of a Person existing at the
time such Person became a Restricted Subsidiary shall be deemed to have been
incurred by such Restricted Subsidiary and (ii) neither the accrual of interest
nor the accretion of accreted value shall be deemed to be an incurrence of
Indebtedness.
"INITIAL NOTES" means the 11-7/8% Senior Subordinated Notes due
2008 of the Company issued on the Issue Date and authenticated and delivered
under this Indenture pursuant to Section 2.02 of this Indenture.
"INDEBTEDNESS" of any Person at any date means, without
duplication: (i) all liabilities, contingent or otherwise, of such Person for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof); (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (or reimbursement obligations with respect thereto); (iv)
all obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred by
such Person in the ordinary course of business in connection with obtaining
goods, materials or services, which payable is not overdue by more than 60 days
according to the original terms of sale unless such payable is being contested
in good faith; (v) the maximum fixed redemption or repurchase price of all
Disqualified Capital Stock of such Person; (vi) all Capitalized Lease
Obligations of such Person; (vii) all Indebtedness of others secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by such
Person; (viii) all Indebtedness of others guaranteed by such Person to the
extent of such Guarantee; provided that Indebtedness of the Company or its
Restricted Subsidiaries that is guaranteed by the Company or the Company's
Restricted Subsidiaries shall only be counted once in the calculation of the
amount of Indebtedness of the Company and its Restricted Subsidiaries on a
consolidated basis; (ix) all Attributable Indebtedness; and (x) to the extent
not otherwise included in this definition, Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above, the
maximum liability of such Person for any such contingent obligations at such
date and, in the case of clause (vii), the
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lesser of (A) the Fair Market Value of any asset subject to a Lien securing the
Indebtedness of others on the date that the Lien attaches and (B) the amount of
the Indebtedness secured. For purposes of the preceding sentence, the "maximum
fixed redemption or repurchase price" of any Disqualified Capital Stock that
does not have a fixed redemption or repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased or redeemed on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock (or any equity security for which it may be exchanged
or converted), such fair market value shall be determined in good faith by the
Board of Directors of such Person, which determination shall be evidenced by a
Board Resolution.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with its terms.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Company's Board of Directors, qualified to perform
the task for which it has been engaged and disinterested and independent with
respect to the Company and its Affiliates.
"INITIAL PURCHASERS" means each of Warburg Dillon Read LLC and
Nesbitt Burns Securities Inc.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"INTEREST PAYMENT DATE" shall have the meaning set forth in the
Notes.
"INVESTMENTS" of any Person means (i) all investments by such
Person in any other Person in the form of loans, advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business) or similar credit extensions
constituting Indebtedness of such Person, and any Guarantee of Indebtedness of
any other Person, (ii) all purchases (or other acquisitions for consideration)
by such Person of Indebtedness, Capital Stock or other securities of any other
Person and (iii) all other items that would be classified as investments
(including without limitation purchases of assets outside the ordinary course of
business) on a balance sheet of such Person prepared in accordance with GAAP.
"ISSUE DATE" means November 18, 1998, the date the Initial Notes
are originally issued.
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"LIEN" means, with respect to any asset or property, any
mortgage, deed of trust, lien (statutory or other), pledge, lease, easement,
restriction, covenant, charge, security interest or other encumbrance of any
kind or nature in respect of such asset or property, whether or not filed,
recorded or otherwise perfected under applicable law, including without
limitation any conditional sale or other title retention agreement, and any
lease in the nature thereof, any option or other agreement to sell, and any
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction (other than
cautionary filings in respect of operating leases).
"MATURITY DATE" means November 1, 2008.
"MOODY'S" means Moody's Investors Service, Inc., and its
successors.
"NET AVAILABLE PROCEEDS" means, with respect to any Asset Sale,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, accountants and investment banks) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be paid to any Person (other than the
Company or any Restricted Subsidiary) owning a beneficial interest in the
properties or assets subject to the Asset Sale or having a Lien therein and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pensions and other postemployment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee; provided, however, that any
amounts remaining after adjustments, revaluations or liquidations of such
reserves shall constitute Net Available Proceeds.
"NEW CREDIT FACILITY" means the Credit Agreement dated as of
September 23, 1998 by and among the Company, Pro-Fac, the other guarantors party
thereto, Harris Trust and Savings Bank, individually and as Administrative
Agent, Bank of Montreal, Chicago Branch, individually and as a Syndication
Agent, and the other lenders party thereto, together with any guarantees,
security agreements or other collateral documents and any other related
documents, as any of the foregoing may be subsequently amended, restated,
refinanced, or replaced from time to time, and shall include agreements in
respect of Hedging Obligations designed to protect against fluctuations in
interest rates and entered into with respect to loans thereunder.
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"NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness of
the Company or any of its Restricted Subsidiaries incurred (a) to finance the
purchase of any assets of the Company or any of its Restricted Subsidiaries
within 90 days of such purchase, (b) to the extent the amount of Indebtedness
thereunder does not exceed 100% of the purchase cost of such assets, (c) to the
extent the purchase cost of such assets is or should be included in "additions
to property, plant and equipment" in accordance with GAAP, and (d) to the extent
that such Indebtedness is non-recourse to the Company or any of its Restricted
Subsidiaries or any of their respective assets other than the assets so
purchased.
"NON-U.S. PERSON" means a person that is not a U.S. person, as
defined in Regulation S.
"NOTES" means the Initial Notes and the Exchange Notes treated as
a single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"OBLIGATION" means any principal, interest (including, in the
case of Senior Indebtedness, interest accruing subsequent to the filing of a
petition in bankruptcy or insolvency at the rate specified in the document
relating to such Senior Indebtedness, whether or not such interest is an allowed
claim permitted to be enforced against the obligor under applicable law),
penalties, fees, indemnification, reimbursements, costs, expenses, damages and
other liabilities payable under the documentation governing any Indebtedness.
"OFFER" means a Change of Control Offer or a Net Proceeds Offer,
as the context requires.
"OFFER PERIOD" means the Change of Control Offer Period or the
Net Proceeds Offer Period, as the context requires.
"OFFICER" means any of the following of any Person: the Chairman
of the Board, the Chief Executive Officer, the Chief Financial Officer, the
President, any Vice President, the Treasurer or the Secretary.
"OFFICERS' CERTIFICATE" means a certificate signed by any two
Officers.
"OLD NOTES" means the Company's 12-1/4% Senior Subordinated Notes
due 2005.
"144A GLOBAL NOTE" means a permanent global Note in registered
form representing the aggregate principal amount of Notes sold in reliance on
Rule 144A under the Securities Act.
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"OPINION OF COUNSEL" means a written opinion from legal counsel
(such counsel may be an employee of or counsel to the Company or the Trustee)
that complies with the requirements of this Indenture.
"PAYMENT RESTRICTION" with respect to a Subsidiary of any Person,
means any encumbrance, restriction of limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such Subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other Subsidiary of such Person, (b) make loans or advances to
such Person or any other Subsidiary or such Person, (c) Guarantee any
Indebtedness of such Person or any other Subsidiary of such Person or (d)
transfer any of its properties or assets to such Person or any other Subsidiary
of such Person (other than customary restrictions on transfers of property
subject to a Lien permitted under the Indenture) or (ii) such Person or any
other Subsidiary of such Person to receive or retain any such dividends,
distributions or payments, loans or advances, guarantee, or transfer of
properties or assets.
"PERMITTED INDEBTEDNESS" means any of the following:
(i) Indebtedness of the Company and the related guarantees of the
Subsidiary Guarantors under the New Credit Facility in an aggregate
principal amount at any time outstanding not to exceed (a) under the
Term Loan Facilities, $455.0 million, less any required permanent
repayments actually made thereunder (excluding any such repayment to the
extent refinanced and replaced at the time of payment), and (b) under
the Revolving Loan Facility, the greater of (x) $200.0 million, and (y)
the sum of (A) 80% of the book amount of all accounts receivable owned
by the Company and its Restricted Subsidiaries and (B) 50% of the book
value of all inventory owned by the Company and its Restricted
Subsidiaries, in each case computed in accordance with GAAP as of the
end of the last fiscal month of the Company, reduced by any required
permanent repayments actually made (which are accompanied by a
corresponding permanent commitment reduction) in respect of the
Revolving Loan Facility (excluding any such repayment and commitment
reductions to the extent refinanced and replaced at the time of
payment);
(ii) Indebtedness under the Notes, the Note Guarantees and this
Indenture;
(iii) Existing Indebtedness;
(iv) Indebtedness under Hedging Obligations, provided that (1)
such Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by Section 4.07, and
(2) the notional principal
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amount of such Hedging Obligations at the time incurred does not exceed
the principal amount of such Indebtedness to which such Hedging
Obligations relate;
(v) Indebtedness of the Company to a Subsidiary Guarantor and
Indebtedness of any Subsidiary Guarantor to the Company or any other
Subsidiary Guarantor; provided, however, that upon either (1) the
subsequent issuance (other than directors' qualifying shares), sale,
transfer or other disposition of any Capital Stock or any other event
which results in any such Subsidiary Guarantor ceasing to be a
Subsidiary Guarantor or (2) the transfer or other disposition of any
such Indebtedness (except to the Company or a Subsidiary Guarantor), the
provisions of this clause (v) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed, in each case, to be
incurred and shall be treated as an incurrence for purposes of Section
4.07 at the time the Subsidiary Guarantor in question ceased to be a
Subsidiary Guarantor or the time such transfer or other disposition
occurred;
(vi) Indebtedness in respect of bid, performance or surety bonds
or insurance of self-reinsurance obligations (including to secure
worker's compensation and other similar insurance coverage) issued for
the account of the Company in the ordinary course of business consistent
with past practice, including guarantees or obligations of the Company
with respect to letters of credit supporting such bid, performance or
surety obligations or such insurance or self-insurance obligations (in
each case other than for an obligation for money borrowed);
(vii) Indebtedness in respect of Non-Recourse Purchase Money
Indebtedness incurred by the Company or any Restricted Subsidiary;
(viii) Refinancing Indebtedness;
(ix) Indebtedness in respect of the Guarantee by the Company of
revolving credit indebtedness incurred by Great Lakes Kraut Company in
an aggregate principal amount at any time outstanding not to exceed
$10.0 million; and
(x) Indebtedness incurred by the Company or any Subsidiary
Guarantor, in addition to Indebtedness incurred pursuant to the
foregoing clauses of this definition, with an aggregate principal face
or stated amount (as applicable) at any time outstanding for all such
Indebtedness incurred pursuant to this clause not in excess of $25.0
million.
"PERMITTED JUNIOR SECURITIES" means any securities of the Company
provided for by a plan of reorganization or readjustment that are subordinated
in right of payment to all Senior Indebtedness that may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Notes are subordinated to Senior Indebtedness.
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"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"PLAN OF LIQUIDATION" with respect to any Person, means a plan
that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise): (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety; and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"PRO-FAC" means Pro-Fac Cooperative, Inc., a New York cooperative
corporation, unless and until a successor replaces it in accordance with Article
5 and thereafter means such successor. For avoidance of doubt, on and after the
Pro-Fac Merger, references herein to "Pro-Fac" shall be deemed to be references
to Pro-Fac, as successor corporation to the Company.
"PRO-FAC DIRECTOR" means any Person who, as a director, officer
or other designee of Pro-Fac, serves as a director of the Company.
"PRO-FAC MARKETING AGREEMENT" means the Marketing and
Facilitation Agreement between Pro-Fac and the Company in the form existing as
of the Issue Date, as such agreement may be amended, restated, renewed, extended
or replaced in accordance with this Indenture.
"PRO-FAC MERGER" means the merger of the Company with and into
Pro-Fac with Pro-Fac as the surviving corporation.
"PURCHASE DATE" means the Change of Control Purchase Date or the
Net Proceeds Purchase Date, as the context requires.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"RECORD DATE" has the meaning set forth in the Notes.
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company or a
Restricted Subsidiary issued in exchange for, or the proceeds from the issuance
and sale or disbursement of which are used substantially concurrently to repay,
redeem, refund, refinance, discharge or otherwise retire for value, in whole or
in part (collectively, "REPAY"), or constituting an amendment, modification or
supplement to or a deferral or renewal of (collectively, an "AMENDMENT"), any
Indebtedness of the Company or any Restricted Subsidiary (the
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"REFINANCED INDEBTEDNESS") in a principal amount not in excess of the principal
amount of the Refinanced Indebtedness (or, if such Refinancing Indebtedness
refinances Indebtedness under a revolving credit facility or other agreement
providing a commitment for subsequent borrowings, with a maximum commitment not
to exceed the maximum commitment under such revolving credit facility or other
agreement), plus the amount of accrued but unpaid interest thereon and the
amount of any reasonably determined prepayment premium necessary to accomplish
such refinancing and such reasonable fees and expenses incurred in connection
therewith; provided that: (i) the Refinancing Indebtedness is the obligation of
the same Person as that of the Refinanced Indebtedness; (ii) if the Refinanced
Indebtedness was subordinated to or pari passu with the Note Indebtedness, then
such Refinancing Indebtedness, by its terms, is expressly pari passu with (in
the case of Refinanced Indebtedness that was pari passu with) the Note
Indebtedness, or subordinate in right of payment to (in the case of Refinanced
Indebtedness that was subordinated to) the Note Indebtedness at least to the
same extent as the Refinanced Indebtedness; (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness
being repaid that is scheduled to mature on or prior to the maturity date of the
Notes; and (iv) the Refinancing Indebtedness is secured only to the extent, if
at all, and by the assets (which may include after-acquired assets), that the
Refinanced Indebtedness is secured.
"REGISTRATION" means a registered exchange offer for the Notes by
the Company or other registration of the Notes under the Securities Act pursuant
to and in accordance with the terms of the Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company, Pro-Fac and the
Initial Purchasers, as such agreement may be amended, modified or supplemented
from time to time.
"REGISTRATION STATEMENT" means the Registration Statement
pursuant to and as defined in the Registration Rights Agreement.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S GLOBAL NOTE" means a permanent global Note in
registered form representing the aggregate principal amount of Notes sold in
reliance on Regulation S under the Securities Act.
"RELATED BUSINESS" means any business in which the Company and
its Subsidiaries operate on the Issue Date, or that is closely related to or
complements the business of the Company and its Subsidiaries, as such business
exists on the Issue Date.
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"RELATED BUSINESS INVESTMENT" means any Investment directly by
the Company or its Restricted Subsidiaries in any Related Business.
"REPRESENTATIVE" means, with respect to any Senior Indebtedness,
the indenture trustee or other trustee, agent or other representative(s), if
any, of holders of such Senior Indebtedness.
"RESTRICTED DEBT PAYMENT" means any purchase, redemption,
defeasance (including without limitation covenant or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Restricted Subsidiary, prior to the scheduled maturity or prior to any scheduled
repayment of principal or sinking fund payment, as the case may be, in respect
of Subordinated Indebtedness.
"RESTRICTED INVESTMENT" means any Investment by the Company or
any Restricted Subsidiary (other than investments in Cash Equivalents) in any
Person that is not the Company or a Restricted Subsidiary, including in any
Unrestricted Subsidiary, but shall not include (i) Investments by the Company or
any Restricted Subsidiary in a Person, if as a result of such Investment (a)
such Person becomes a Restricted Subsidiary of the Company that is engaged in a
Related Business or (b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that is
engaged in a Related Business; (ii) loans by the Company or any of its
Restricted Subsidiaries to employees of the Company or any of its Restricted
Subsidiaries the proceeds of which are applied to purchase Capital Stock of
Pro-Fac in amount not to exceed $2.0 million at any time outstanding; or (iii)
the Guarantee by the Company of revolving credit indebtedness incurred by Great
Lakes Kraut Company in an aggregate principal amount at any time outstanding not
to exceed $10.0 million; or (iv) demand loans for working capital purposes from
the Company to Pro-Fac made prior to the consummation of the Pro-Fac Merger, not
exceeding $40.0 million at any time outstanding, which will be reduced to zero
for a period of not less than 15 consecutive days in each fiscal year.
"RESTRICTED PAYMENT" means with respect to any Person: (i) the
declaration or payment of any dividend (other than a dividend declared and paid
(x) by a Wholly-Owned Restricted Subsidiary to holders of its Capital Stock, or
(y) by a Subsidiary (other than a Wholly-Owned Restricted Subsidiary) to its
shareholders on a pro rata basis, but only to the extent of the dividends
actually received by the Company or a Restricted Subsidiary) or the making of
any other payment or distribution of cash, securities or other property or
assets in respect of such Person's Capital Stock (except that a dividend payable
solely in Capital Stock (other than Disqualified Capital Stock) of such Person
shall not constitute a Restricted Payment) (it being understood that the
allocation of retains to Pro-Fac's members on and after consummation of the
Pro-Fac Merger shall not be deemed a Restricted Payment); (ii) any payment on
account of the purchase, redemption, retirement or other acquisition for value
of
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(A) the Capital Stock of the Company or (B) the Capital Stock of any
Restricted Subsidiary, or any other payment or distribution made in respect
thereof, either directly or indirectly (other than a payment solely in Capital
Stock that is not Disqualified Capital Stock, and excluding any such payment to
the extent actually received by the Company or a Restricted Subsidiary); (iii)
any Restricted Investment; or (iv) any Restricted Debt Payment.
"RESTRICTED SECURITY" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"REVOLVING LOAN FACILITY" means the revolving loan facility
provided under the New Credit Facility.
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTIONS" means with respect to any
Person an arrangement with any bank, insurance company or other lender or
investor or to which such lender or investor is a party, providing for the
leasing by such Person of any property or asset of such Person which has been or
is being sold or transferred by such Person to such lender or investor or to any
Person to whom funds have been or are to be advanced by such lender or investor
on the security of such property or asset.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended.
"SENIOR INDEBTEDNESS" means, with respect to the Company or any
Guarantor, all Indebtedness and other Obligations specified below payable
directly or indirectly by the Company or such Guarantor, as the case may be,
whether outstanding on the Issue Date or thereafter created, incurred or assumed
by the Company or such Guarantor: (i) the principal of and interest on and all
other Indebtedness and Obligations related to the New Credit Facility
(including, without limitation, all loans, letters of credit and unpaid drawings
with respect thereto and other extensions of credit under the New Credit
Facility, and all expenses, fees, reimbursements, indemnities and other amounts
owing pursuant to the New Credit Facility), (ii) amounts payable in respect of
any Hedging Obligations, (iii) in addition to the amounts described in (i) and
(ii), all Indebtedness not prohibited by Section 4.07 that is not expressly pari
passu with, or subordinated to, the Notes or the Note Guarantees, as the case
may be, (iv)
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all Capital Lease Obligations outstanding on the Issue Date, and (v) all
Refinancing Indebtedness permitted under this Indenture of Indebtedness
specified in clauses (i) through (iv). Notwithstanding anything to the contrary,
Senior Indebtedness will not include (a) any Indebtedness which by the express
terms of the agreement or instrument creating, evidencing or governing the same
is junior or subordinate in right of payment to any item of Senior Indebtedness,
(b) any trade payable arising from the purchase of goods or materials or for
services obtained in the ordinary course of business, (c) Indebtedness incurred
(but only to the extent incurred) in violation of this Indenture as in effect at
the time of the respective incurrence, (d) any Indebtedness of the Company that,
when incurred, was without recourse to the Company, (e) any Indebtedness to any
employee of the Company or any of its respective Subsidiaries, (f) any liability
for taxes owned or owing by the Company, (g) any Indebtedness represented by the
Company's Old Notes and any Guarantee thereof by Pro-Fac or any Subsidiary
Guarantor, or (h) any Subordinated Indebtedness. Indebtedness represented by the
Old Notes and any Guarantee thereof by Pro-Fac or any Subsidiary Guarantor shall
be pari passu with the Notes and the Note Guarantees, respectively.
"SENIOR SUBORDINATED INDEBTEDNESS" of the Company means the Notes
and any other Indebtedness of the Company (including the Old Notes) that
specifically provides that such Indebtedness is to rank pari passu with the
Notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness. "Senior Subordinated Indebtedness" of any Guarantor has a
correlative meaning.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company that
would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the Issue Date, except all references to "10 percent" in such
definition shall be changed to "2 percent".
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or
any Restricted Subsidiary that is subordinated in right of payment to the Notes
or the Note Guarantee of such Restricted Subsidiary, respectively, including,
without limitation, the Subordinated Promissory Note and any additional
promissory notes issued in accordance with the terms thereof as in effect on the
Issue Date.
"SUBORDINATED PROMISSORY NOTE" means the Subordinated Promissory
Note dated as of September 23, 1998 made by the Company to Deans Food Company in
principal amount of $30.0 million issued in connection with the consummation of
the Acquisition.
"SUBSIDIARY" of any Person means (i) any corporation of which at
least a majority of the aggregate voting power of all classes of the Voting
Stock is owned by such Person directly or through one or more other Subsidiaries
of such Person and (ii) any entity other than a corporation in which such
Person, directly or indirectly, owns at least a majority of the
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Voting Stock of such entity entitling the holder thereof to vote or otherwise
participate in the selection of the governing body, partners, managers or others
that control the management and policies of such entity. Unless otherwise
specified, "Subsidiary" means a Subsidiary of the Company.
"SUBSIDIARY GUARANTOR" means (i) each of Linden Oaks Corporation,
a Delaware corporation, and Kennedy Endeavors, Incorporated, a Washington
corporation and (ii) each other person who is required to become (or whom the
Company otherwise causes to become) a Subsidiary Guarantor by the terms of this
Indenture.
"TERM LOAN FACILITIES" means the Term Loan Facilities provided
under the New Credit Facility.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) aS in effect on the Issue Date (except as provided in Section 9.03
herein).
"TRUSTEE" means IBJ Schroder Bank & Trust Company until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means such successor.
"TRUST OFFICER" when used with respect to the Trustee means the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"UNRESTRICTED NOTES" means one or more Notes that do not and are
not required to bear the Private Placement Legend, in the form set forth in
EXHIBIT B.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of the Company in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, and
any such designation shall be deemed to be a Restricted Investment at the time
of and immediately upon such designation by the Company and its Restricted
Subsidiaries in the amount of the Consolidated Net Worth of such designated
Subsidiary and its consolidated Subsidiaries at such time, provided that such
designation shall be permitted only if (A) the Company and its Restricted
Subsidiaries would be able to make the Restricted Investment
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deemed made pursuant to such designation at such time, (B) no portion of the
Indebtedness or any other obligation (contingent or otherwise) of such
Subsidiary (x) is Guaranteed by the Company or any Restricted Subsidiary, (y) is
recourse to the Company or any Restricted Subsidiary or (z) subjects any
property or asset of the Company or any Restricted Subsidiary, directly or
indirectly, contingently or otherwise, to the satisfaction thereof and (C) no
default or event of default with respect to any Indebtedness of such Subsidiary
would permit any holder of any Indebtedness of the Company or any Restricted
Subsidiary to declare such Indebtedness of the Company or any Restricted
Subsidiary due and payable prior to its maturity. The Board of Directors of the
Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary,
and any such designation shall be deemed to be an incurrence by the Company and
its Restricted Subsidiaries of the Indebtedness (if any) of such Subsidiary so
designated for purposes of Section 4.07 as of the date of such designation,
provided that such designation shall be permitted only if immediately after
giving effect to such designation and the incurrence of any such additional
Indebtedness deemed to have been incurred thereby (x) the Company would meet the
Coverage Ratio Incurrence Condition and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
described in the two preceding sentences shall be evidenced to the Trustee by
the filing with the Trustee of a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and setting forth the
underlying calculations of such certificate.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"U.S. PERSON" has the meaning ascribed to it in Regulation S.
"VOTING STOCK" with respect to any Person, means securities of
any class of Capital Stock of such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock or other relevant
equity interest has voting power by reason of any contingency) to vote in the
election of members of the board of directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY", when applied to any
Indebtedness at any date, means the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment by (ii) the then outstanding
principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means a Restricted
Subsidiary of which 100% of the Capital Stock (except for directors' qualifying
shares or certain minority
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interests owned by other Persons solely due to local law requirements that there
be more than one stockholder, but which interest is not in excess of what is
required for such purpose) is owned directly by the Company or through one or
more Wholly-Owned Restricted Subsidiaries.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
<S> <C>
"AFFILIATE TRANSACTION".................................. 4.10
"AGENT MEMBERS".......................................... 2.08(a)
"AUTHENTICATING AGENT"................................... 2.02
"CHANGE OF CONTROL OFFER"................................ 4.15(b)
"CHANGE OF CONTROL OFFER PERIOD"......................... 4.15(c)
"CHANGE OF CONTROL PURCHASE DATE"........................ 4.15(c)
"CHANGE OF CONTROL PURCHASE PRICE"....................... 4.15(a)
"CINS"................................................... 2.17
"COMMISSION"............................................. 4.02
"COVENANT DEFEASANCE".................................... 8.01(b)
"CUSIP".................................................. 2.17
"EVENT OF DEFAULT"....................................... 6.01(a)
"EXCESS PROCEEDS"........................................ 4.16(b)
"GLOBAL NOTES"........................................... 2.01
"GLOBAL NOTE HOLDER"..................................... 2.08(a)
"INSOLVENCY OR LIQUIDATION PROCEEDING"................... 10.02
"LEGAL DEFEASANCE"....................................... 8.01(b)
"NET PROCEEDS DEFICIENCY"................................ 4.16(c)
"NET PROCEEDS OFFER"..................................... 4.16(c)
"NET PROCEEDS OFFER PERIOD".............................. 4.16(c)
"NET PROCEEDS PURCHASE DATE"............................. 4.16(c)
"NON-PAYMENT DEFAULT".................................... 10.03(b)
"NOTE AMOUNT"............................................ 4.16(d)
"NOTE GUARANTEE"......................................... 11.01
"NOTE INDEBTEDNESS"...................................... 10.01
"NOTE PORTION OF EXCESS PROCEEDS"........................ 4.16(d)
"NOTICE OF DEFAULT"...................................... 6.01(b)
"OFFERED PRICE".......................................... 4.16(c)
"OTHER INDEBTEDNESS"..................................... 4.16(d)
"PAYING AGENT"........................................... 2.03
"PAYMENT AMOUNT"......................................... 4.16(c)
"PAYMENT BLOCKAGE NOTICE"................................ 10.03(b)
</TABLE>
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<TABLE>
<S> <C>
"PAYMENT BLOCKAGE PERIOD"................................ 10.03(b)
"PAYMENT DEFAULT"........................................ 10.03(a)
"PHYSICAL NOTES"......................................... 2.01
"PRIVATE PLACEMENT LEGEND"............................... 2.07
"REGISTRAR".............................................. 2.03
"RESTRICTED PERIOD"...................................... 2.09(b)
"SUCCESSOR".............................................. 5.01(a)
"TRUSTEE EXPENSES"....................................... 6.08
</TABLE>
SECTION 1.03. Incorporation by Reference of TIA. Whenever this
Indenture refers to a provision of the TIA, the portion of the provision
required to be incorporated herein in order for this Indenture to be qualified
under the TIA is incorporated by reference in, and made a part of, this
Indenture. Any terms incorporated by reference in this Indenture that are
defined by the TIA, defined by the TIA by reference to another statute or
defined by the Commission in a rule under the TIA have the meanings so assigned
to them therein.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) "or" is not exclusive;
(3) words in the singular include the plural, and in the plural
include the singular;
(4) words used herein implying any gender shall apply to both
genders;
(5) "herein" "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subsection;
(6) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP, applied on a basis
consistent with the most recent audited consolidated financial
statements of the Company;
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(7) "$," "U.S. Dollars" and "United States Dollars" each refer to
United States dollars, or such other money of the United States that at
the time of payment is legal tender for payment of public and private
debts;
(8) whenever in this Indenture there is mentioned, in any
context, principal, interest or any other amount payable under or with
respect to any Note, such mention shall be deemed to include mention of
the payment of Additional Interest to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof;
(9) provisions apply to successive events and transactions; and
(10) any reference to a Section or Article refers to such Section
or Article of this Indenture.
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating. The Initial Notes and the
Trustee's certificate of authentication relating thereto shall be substantially
in the form of EXHIBIT A. The Exchange Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of EXHIBIT B.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule or depository rule or usage. The Company and the Trustee shall
approve the form of the Notes and any notation, legend or endorsement on them.
Each Note shall be dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the Notes, annexed hereto
as EXHIBITS A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Company, the Guarantors and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A or in offshore
transactions in reliance on Regulation S shall be issued initially in the form
of one or more permanent global Notes in registered form, substantially in the
form set forth in EXHIBIT A (the "GLOBAL NOTES"), deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided and shall bear the legends set forth in
Section 2.07. The aggregate principal amount of the Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
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Notes issued in exchange for interests in the Global Notes
pursuant to Section 2.08 may be issued in the form of permanent certificated
Notes in registered form (the "PHYSICAL NOTES") and shall bear the first legend
set forth in Section 2.07.
All Notes offered and sold in reliance on Regulation S shall
remain in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement.
SECTION 2.02. Execution and Authentication; Aggregate Principal
Amount. Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue on the Issue Date in aggregate principal amount not to exceed $200,000,000
and (ii) Unrestricted Notes from time to time for issue only in exchange for a
like principal amount of Initial Notes, in each case upon written orders of the
Company in the form of an Officers' Certificate. In each case, the Officers'
Certificate shall specify the amount of Notes to be authenticated, the date on
which the Notes are to be authenticated, the aggregate principal amount of Notes
outstanding on the date of authentication and whether the Notes are to be
Initial Notes or Unrestricted Notes and shall further specify the amount of such
Notes to be issued as a Global Note or Physical Notes. The aggregate principal
amount of Notes outstanding at any time may not exceed $200,000,000, except as
provided in Section 2.10.
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series of Notes will have
the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the
"AUTHENTICATING Agent") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes
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authentication by such Authenticating Agent. An Authenticating Agent has the
same rights as an Agent to deal with the Company, the Guarantors or with any of
their respective Affiliates.
The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency (which shall be located in the Borough of Manhattan
in the City of New York) (i) where Notes may be presented for registration of
transfer or for exchange (subject to Sections 2.06, 2.08 and 2.09) (the
"REGISTRAR"), (ii) where Notes may be presented for payment (the "PAYING AGENT")
and (iii) where notices to or upon the Company and the Guarantors in respect of
the Notes or this Indenture may be served. The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change the Paying
Agent, Registrar or co-registrar with prior written notice to the Trustee. The
Company shall notify the Trustee and the Trustee shall notify the Holders of the
name and address of any Agent not a party to this Indenture. The Company shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture, and such agreement shall incorporate the provisions of the TIA and
implement the provisions of this Indenture that relate to such Agent.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
The Company, the Guarantors or any of their respective Affiliates may act as
Paying Agent, Registrar or co-registrar; provided, however, that neither the
Company, any Guarantor nor any of their respective Affiliates may act as Paying
Agent after the occurrence and continuance of an Event of Default. If the
Company fails to appoint or maintain a Registrar and/or Paying Agent, the
Trustee shall act as such, and shall be entitled to appropriate compensation in
accordance with Section 7.07.
SECTION 2.04. Paying Agent to Hold Money in Trust. By at least
12:00 noon (Eastern Standard Time) on the date on which any principal of or
interest on any Note is due and payable, the Company shall deposit with the
Paying Agent U.S. Legal Tender in immediately available funds sufficient to pay
such principal or interest when due. The Company shall require each Paying Agent
other than the Trustee to agree in writing that the Paying Agent will hold in
trust for the Holders' benefit or the Trustee all money the Paying Agent holds
for the redemption or purchase of the Notes or for the payment of principal of,
or premium, if any, or interest (including Additional Interest, if any) on the
Notes, and will notify the Trustee of any default by the Company in providing
the Paying Agent with sufficient funds to redeem or purchase Notes or make any
payment on the Notes as and to the extent required to be redeemed, purchased or
paid under the terms of this Indenture. While any such default continues, the
Trustee may require the Paying Agent to pay all money it holds to the
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Trustee and account for any funds disbursed. The Company at any time may require
the Paying Agent to pay all money it holds to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or any of its
Affiliates) shall have no further liability for the money it delivered to the
Trustee. If the Company, any Guarantor or any of their respective Affiliates
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the Holders' benefit all money it holds as Paying Agent.
SECTION 2.05. Holder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders and shall otherwise comply with Section
312(a) of the TIA. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee, at least seven (7) Business Days before each Record Date
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require that sets forth
the names and addresses of, and the aggregate principal amount of Notes held by,
each Holder, and the Company shall otherwise comply with Section 312(a) of the
TIA.
SECTION 2.06. Transfer and Exchange. (a) The Company appoints the
Trustee as transfer and exchange agent for the purpose of any transfer or
exchange of the Notes.
(b) Neither the Trustee nor the Registrar shall be required (i)
to register the transfer of or exchange any Note selected for redemption, (ii)
to register the transfer of or exchange any Note for a period of 15 days before
the mailing of a notice of redemption and ending on the date of such mailing or
(iii) to register the transfer or exchange of a Note between a Record Date and
the next succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Registrar may require a Holder to furnish appropriate endorsements and transfer
documents and payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.13, 3.06, 3.08 or 9.05, which the Company shall pay).
(d) Prior to due presentment for registration of transfer of any
Note to the Trustee, the Trustee, any Agent and the Company shall deem and treat
the Person in whose name any Note is registered as the absolute owner of such
Note (whether or not such Note shall be overdue and notwithstanding any notation
of ownership or other writing on such Note made by anyone other than the
Company, the Registrar, or any co-registrar) for the purpose of receiving
payment of principal of, premium, if any, interest (including Additional
Interest, if any) on such Note and for all other purposes, and notice to the
contrary shall not affect the Trustee, any Agent or the Company.
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(e) A Holder may transfer a Note only by written application to
the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar. Prior to the
registration of any transfer by a Holder as provided herein, the Company, the
Trustee, and any Agent shall treat the person in whose name the Note is
registered as the absolute owner thereof for all purposes whether or not the
Note shall be overdue, and neither the Company, the Trustee, nor any such Agent
shall be affected by notice to the contrary. Furthermore, any Holder of a Global
Note shall, by acceptance of such Global Note, agree that transfers of
beneficial interests in such Global Note may be effected through a book entry
system maintained by the Holder of such Global Note (or its agent) and that
ownership of a beneficial interest in the Note shall be required to be reflected
in a book entry. When Notes are presented to the Registrar or a co-registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Notes of other authorized denominations (including an
exchange of Initial Notes for Exchange Notes), the Registrar or co-registrar, as
relevant, shall register the transfer or make the exchange as requested if the
requirements for such transactions set forth herein are met; provided that no
exchanges of Initial Notes for Exchange Notes shall occur until a Registration
Statement shall have been declared effective by the Commission and provided
further that any Initial Notes that are exchanged for Exchange Notes shall be
canceled by the Trustee. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at the
Registrar's request.
All Notes issued upon any transfer or exchange of Notes shall be
valid obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Notes surrendered upon such transfer
or exchange.
SECTION 2.07. Restrictive Legends. (a) Each Global Note and
Physical Note that constitutes a Restricted Security or is sold in compliance
with Regulation S shall bear the following legend (the "PRIVATE PLACEMENT
LEGEND") on the face thereof until after the second anniversary of the later of
the Issue Date and the last date on which the Company or any Affiliate of the
Company was the owner of such Note (or any predecessor security) (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) (or such longer period of time as may be
required under the Securities Act or applicable state securities laws in the
opinion of counsel for the Company, unless otherwise agreed by the Company and
the Holder thereof):
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
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APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY (1) BY ITS ACQUISITION HEREOF REPRESENTS THAT (A) IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT AND (2) IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR
ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT PRIOR TO THE
DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE
OF THIS NOTE AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF
THE COMPANY WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION
TERMINATION DATE") (X) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY: (i) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A
U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
IF THE COMPANY SO REQUESTS), (ii) TO THE COMPANY OR (iii) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (X)
ABOVE. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO
THE RESALE RESTRICTION TERMINATION DATE.
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(b) Each Global Note shall also bear the following legend on the
face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR
BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE
OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTIONS 2.06, 2.08 AND 2.09 OF THE
INDENTURE GOVERNING THIS NOTE.
SECTION 2.08. Book-Entry Provisions for Global Notes. (a) The
Global Notes initially shall (i) be registered in the name of the Depository or
the nominee of such Depository (the "GLOBAL NOTE HOLDER"), (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Section 2.07.
Members of, or participants in, the Depository ("AGENT MEMBERS")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the absolute owner of the Global
Notes for all purposes whatsoever. Notwithstanding the foregoing,
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nothing herein shall prevent the Company, the Trustee or any Agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Note.
(b) Transfers of the Global Notes shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or, subject to Section 2.01, exchanged for Physical Notes in accordance with the
rules and procedures of the Depository and the provisions of Section 2.09. In
addition, Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Notes if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Notes and a successor depositary is not appointed by
the Company within 90 days of such notice or (ii) an Event of Default of which
the Trustee has actual notice has occurred and is continuing and the Registrar
has received a written request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of
the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Note in an amount equal to the principal amount
of the beneficial interest in such Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph
(b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and
(d) of Section 2.09, bear the Private Placement Legend.
(f) The Holder of the Global Notes may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
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SECTION 2.09. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the transferee is not an Affiliate of
the Company and the requested transfer is after the second anniversary
of the later of (a) the Issue Date and (b) the last date on which the
Company or an Affiliate of the Company was the owner of such Note (or
any predecessor security) or such shorter period of time as permitted by
Rule 144(k) under the Securities Act or any successor provision
thereunder or (y) the proposed transferee has delivered to the Registrar
a certificate substantially in the form of EXHIBIT C and such other
information or legal opinions that the Trustee or the Company may
reasonably require in order to confirm that such transfer is being made
pursuant to an exemption from or in a transaction not subject to the
registration requirements of the Securities Act;
(ii) if the proposed transferee is an Agent Member and the Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in the IAI Global Note, upon receipt by the
Registrar of (x) written instructions given in accordance with the
Depository's and the Registrar's procedures and (y) the appropriate
certificate, if any, required by clause (y) of paragraph (i) above,
together with any required legal opinions and certifications, the
Registrar shall register the transfer and reflect on its books and
records the date and an increase in the principal amount of the IAI
Global Note in an amount equal to the principal amount of Physical Notes
to be transferred, and the Trustee shall cancel the Physical Notes so
transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any
required legal opinions and certifications, the Registrar shall register
the transfer and reflect on its books and records the date and (A) a
decrease in the principal amount of the Global Note from which such
interests are to be transferred in an amount equal to the principal
amount of the Notes to be transferred and (B) an increase in the
principal amount of the IAI Global Note in an amount equal to the
principal amount of the Global Note to be transferred.
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(b) Transfers to Non-U.S. Persons. The following additional
provisions shall apply with respect to the registration of any proposed transfer
of an Initial Note to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the transferee is not an Affiliate of
the Company and the requested transfer is after the second anniversary
of the later of (a) the Issue Date and (b) the last date on which the
Company or an Affiliate of the Company was the owner of such Note (or
any predecessor security) or such shorter period of time as permitted by
Rule 144(k) under the Securities Act or any successor provision
thereunder or (y) the proposed transferor has delivered to the Registrar
a certificate substantially in the form of EXHIBIT D and such other
information or legal opinions that the Trustee or the Company may
reasonably require in order to confirm that such transfer is being made
pursuant to an exemption from or in a transaction not subject to the
registration requirements of the Securities Act;
(ii) if the proposed transferee is an Agent Member and the Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in the Regulation S Global Note, upon
receipt by the Registrar of (x) written instructions given in accordance
with the Depository's and the Registrar's procedures and (y) the
appropriate certificate, if any, required by clause (y) of paragraph (i)
above, together with any required legal opinions and certifications, the
Registrar shall register the transfer and reflect on its books and
records the date and an increase in the principal amount of the
Regulation S Global Note in an amount equal to the principal amount of
Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred;
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any
required legal opinions and certifications, the Registrar shall register
the transfer and reflect on its books and records the date and (A) a
decrease in the principal amount of the Global Note from which such
interests are to be transferred in an amount equal to the principal
amount of the Notes to be transferred and (B) an increase in the
principal amount of the Regulation S Global Note in an amount equal to
the principal amount of the Global Note to be transferred; and
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(iv) until the 41st day after the Issue Date (the "RESTRICTED
PERIOD"), an owner of a beneficial interest in the Regulation S Global
Note may not transfer such interest to a transferee that is a U.S.
person or for the account or benefit of a U.S. Person within the meaning
of Rule 902(o) of the Securities Act. During the Restricted Period, all
beneficial interests in the Regulation S Global Note shall be
transferred only through Cedel or Euroclear, either directly if the
transferor and transferee are participants in such systems, or
indirectly through organizations that are participants therein.
(c) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing
the Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is
a QIB within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) if the proposed transferee is an Agent Member, and the Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in the 144A Global Note, upon receipt by the
Registrar of instructions given in accordance with the Depository's and
the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the 144A
Global Note in an amount equal to the principal amount of the Physical
Notes to be transferred, and the Trustee shall cancel the Physical Notes
so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall register the transfer and
reflect on its books and records the date and (A) a decrease in the
principal amount of the Global Note
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from which interests are to be transferred in an amount equal to the
principal amount of the Notes to be transferred and (B) an increase in
the principal amount of the 144A Global Note in an amount equal to the
principal amount of the Global Note to be transferred.
(d) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section
2.09 exist, (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (iii)
such Note has been sold pursuant to an effective registration statement under
the Securities Act.
(e) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.08 or this Section
2.09. The Company shall have the right to inspect and make copies at its own
expense of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
The Trustee shall have no obligation or duty to monitor,
determine or inquire as to the compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or among
Depository participants, members or beneficial owners in any Global Note) other
than to require delivery of such certificates and other documentation or
evidence or to perform such other acts and make such determinations and
inquiries as are required by, and to do so if and when required by, the terms of
this Indenture, and to examine the same to determine compliance as to form with
the requirements hereof.
SECTION 2.10. Replacement Notes. Holders shall surrender
mutilated Notes to the Trustee. If any mutilated Note is surrendered to the
Trustee, or if the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note, the Company shall
issue and the Trustee shall authenticate, a replacement Note if the
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Trustee's requirements are met, and each such replacement Note shall be an
additional obligation of the Company. If the Trustee or the Company requires,
the Holder must supply an indemnity bond that is sufficient, in the reasonable
judgment of the Trustee and the Company, to protect the Company, the Trustee,
any Agent or any Authenticating Agent from any loss that any of them may suffer
if a Note is replaced. The Company and the Trustee may charge for its reasonable
expenses in replacing a Note.
SECTION 2.11. Outstanding Notes. The Notes outstanding at any
time are all the Notes the Trustee has authenticated except for those it has
canceled, those delivered to it for cancellation, and those described in this
Section 2.11 as not outstanding. If a Note is replaced pursuant to Section 2.10,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that a bona fide purchaser holds the replaced Note. If the entire principal of,
premium, if any, and accrued interest (including Additional Interest, if any) on
any Note is considered paid under Section 4.01, it ceases to be outstanding and
interest on it ceases to accrue. Subject to Section 2.12, a Note does not cease
to be outstanding because the Company, any Guarantor or any of their respective
Affiliates holds such Note.
SECTION 2.12. Treasury Notes. In determining whether the Holders
of the required principal amount of Notes have concurred in any direction,
waiver or consent, Notes owned by the Company, any Guarantor or any of their
respective Affiliates shall be considered as though they are not outstanding;
provided, however, that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes for which the Trustee receives an Officers' Certificate stating that such
Notes are so owned shall be so disregarded. The Company shall notify the
Trustee, in writing in the form of an Officers' Certificate, when it, any
Guarantor or any of their respective Affiliates repurchases or otherwise
acquires Notes and of the aggregate principal amount of such Notes so
repurchased or otherwise acquired. Notwithstanding the foregoing, Notes that the
Company or any Affiliate of the Company offers to purchase or acquires pursuant
to an exchange offer, tender offer or otherwise shall not be deemed to be owned
by the Company or any Affiliate of the Company until legal title to such Notes
passes to the Company or such Affiliate, as the case may be.
SECTION 2.13. Temporary Notes. Until definitive Notes are ready
for delivery, the Company may prepare and the Trustee on its behalf shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of definitive Notes but may have variations that the Company considers
appropriate for temporary Notes. Without unreasonable delay, the Company shall
prepare and the Trustee on its behalf, upon receipt of a written order of the
Company pursuant to Section 2.02, shall authenticate definitive Notes in
exchange for temporary Notes. Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.
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SECTION 2.14. Cancellation. The Company at any time may deliver
Notes to the Trustee for cancellation. The Registrar, any co-registrar, the
Paying Agent, the Company and its Subsidiaries shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange, replacement,
payment (including all Notes called for redemption and all Notes accepted for
payment pursuant to an Offer) or cancellation, and the Trustee shall cancel all
such Notes and shall return all canceled Notes to the Company. Subject to
Section 2.10, the Company may not issue new Notes to replace any Notes that have
been canceled by the Trustee or that have been delivered to the Trustee for
cancellation. If the Company or any Affiliate of the Company acquires any Notes
(other than by redemption pursuant to Section 3.07 or an Offer pursuant to
Section 4.15 or 4.16), such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes unless and until such
Notes are delivered to the Trustee for cancellation.
SECTION 2.15. Defaulted Interest. If the Company defaults in a
payment of interest on the Notes, it shall pay the defaulted interest in any
lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to Holders on a subsequent special record date, in each case at the
rate provided in the Notes and Section 4.01. The Company shall, with the
Trustee's consent, fix or cause to be fixed each such special record date and
payment date. At least 15 days before the special record date, the Company (or,
at the request of the Company, the Trustee in the name of, and at the expense
of, the Company) shall mail a notice that states the special record date, the
related payment date and the amount of interest to be paid.
SECTION 2.16. Record Date. The record date for purposes of
determining the identity of holders of Notes entitled to vote or consent to any
action by vote or consent authorized or permitted under this Indenture shall be
determined as provided for in Section 316(c) of the TIA.
SECTION 2.17. CUSIP and CINS Numbers. A "CUSIP" or "CINS" number
will be printed on the Notes and the Trustee shall use CUSIP or CINS numbers, as
the case may be, in notices of redemption, purchase or exchange as a convenience
to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness or accuracy of such numbers printed
in the notice or on the Notes and that reliance may be placed only on the other
identification numbers printed on the Notes. The Company will promptly notify
the Trustee of any change in the CUSIP or CINS number, as the case may be.
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ARTICLE 3
Redemptions and Offers to Purchase
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Notes pursuant to Section 3.07, it shall furnish to the Trustee, at least 15 but
not more than 30 days before notice of any redemption is to be mailed to Holders
(or such shorter time as may be satisfactory to the Trustee), (x) an Officers'
Certificate stating (i) that the Company has elected to redeem Notes pursuant to
Section 3.07(a) or (b), as the case may be, (ii) the date notice of redemption
is to be mailed to Holders, (iii) the redemption date, (iv) the aggregate
principal amount of Notes to be redeemed, (v) the redemption price for such
Notes and (vi) the amount, if any, of accrued and unpaid interest (including
Additional Interest, if any) on such Notes as of the redemption date and (y) an
Opinion of Counsel that the Company is entitled to redeem the Notes pursuant to
Section 3.07. If the Trustee is not the Registrar, the Company shall,
concurrently with delivery of its notice to the Trustee of a redemption, cause
the Registrar to deliver to the Trustee a certificate (upon which the Trustee
may rely) setting forth the name of, and the aggregate principal amount of the
Notes held by, each Holder.
If the Company is required to offer to purchase Notes pursuant to
Section 4.15 or 4.16, it shall furnish to the Trustee, at least two Business
Days before notice of the Offer is to be mailed to Holders, an Officers'
Certificate setting forth (i) that the Offer is being made pursuant to Section
4.15 or 4.16, as the case may be, (ii) the Purchase Date, (iii) the maximum
principal amount of Notes the Company is offering to purchase pursuant to the
Offer, (iv) the purchase price for such Notes and (v) the amount, if any, of
accrued and unpaid interest (including Additional Interest, if any) on such
Notes as of the Purchase Date.
The Company will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or Offer.
SECTION 3.02. Selection of Notes to Be Redeemed or Purchased. If
less than all outstanding Notes are to be redeemed or if less than all Notes
tendered pursuant to an Offer are to be accepted for payment, the Trustee shall
select the outstanding Notes to be redeemed or accepted for payment on a pro
rata basis, by lot or by any other method that the Trustee deems fair and
appropriate. If the Company elects to mail notice of a redemption to Holders,
the Trustee shall (i) select the Notes to be redeemed from Notes outstanding not
previously called for redemption in the manner specified by the Trustee and (ii)
notify the Company of the names of each Holder of Notes selected for redemption,
the principal amount of Notes held by each such Holder and the principal amount
of such Holder's Notes that are to be redeemed. If less than all Notes tendered
pursuant to an Offer are to be accepted for payment, the Trustee shall select on
or prior to the Purchase Date for such Offer the Notes to be accepted for
payment. The Trustee shall select for redemption or purchase Notes or portions
of Notes in principal amounts at maturity of $1,000 or integral multiples
thereof; except that if
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all of the Notes of a Holder are selected for redemption or purchase, the
aggregate principal amount of the Notes held by such Holder, even if not an
integral multiple of $1,000, may be redeemed or purchased. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Notes called
for redemption or tendered pursuant to an Offer also apply to portions of Notes
called for redemption or tendered pursuant to an Offer. The Trustee shall notify
the Company promptly of the Notes or portions of Notes to be called for
redemption or selected for purchase.
SECTION 3.03. Notice of Redemption. (a) With respect to any
redemption of Notes, a notice of redemption shall identify the Notes or portions
thereof to be redeemed, including CUSIP or CINS numbers, and shall state: (1)
the redemption date; (2) the redemption price for the Notes and the amount, if
any, of unpaid and accrued interest on such Notes as of the date of redemption
and the premium, if any, and Additional Interest, if any, on the Notes as of the
date of redemption; (3) the section of this Indenture pursuant to which the
Notes called for redemption are being redeemed; (4) if any Note is being
redeemed in part, the portion of the principal amount of such Note to be
redeemed and that, after the redemption date, upon surrender of such Note, a new
Note or Notes in principal amount equal to the unredeemed portion will be
issued; (5) the name and address of the Paying Agent; (6) that Notes called for
redemption must be surrendered to the Paying Agent to collect the redemption
price for, and any accrued and unpaid interest (including Additional Interest,
if any) on such Notes as of the date of redemption; (7) that, unless the Company
defaults in making such redemption payment, interest on Notes called for
redemption ceases to accrue on and after the redemption date; and (8) that no
representation is made as to the correctness or accuracy of the CUSIP or CINS
number (as applicable) listed in such notice and printed on the Notes.
(b) The Trustee shall (at the Company's expense and in the
Company's name) give the notice of any redemption setting forth the information
required by paragraph (a) to Holders at least 30 days but not more than 60 days
before the redemption date; provided, however, that the Company shall deliver to
the Trustee, at least 45 days prior to the date of redemption and at least 15
days prior to the date that notice of the redemption is to be mailed to Holders,
an Officers' Certificate that (i) requests the Trustee to give notice of the
redemption to Holders, (ii) sets forth the information to be provided to Holders
in the notice of redemption, as set forth in the preceding paragraph, and (iii)
sets forth the aggregate principal amount of Notes to be redeemed and the
amount, if any, of accrued and unpaid interest (including Additional Interest,
if any) thereon as of the date of redemption. If the Trustee is not the
Registrar, the Company shall, concurrently with any such request, cause the
Registrar to deliver to the Trustee a certificate (upon which the Trustee may
rely) setting forth the name of, the address of, and the aggregate principal
amount of Notes held by, each Holder; provided further that any such Officers'
Certificate may be delivered to the Trustee on a date later than permitted under
this Section 3.03(b) if such later date is acceptable to the Trustee.
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SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
redemption date at the price set forth in the Note.
SECTION 3.05. Deposit of Redemption Price. (a) Prior to 12:00
noon (Eastern Standard Time) on any redemption date, the Company shall deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the redemption price
of, and the amount, if any, of accrued interest and unpaid interest (including
Additional Interest, if any) on all Notes to be redeemed in immediately
available funds as of the date of redemption. After any redemption date, the
Paying Agent shall promptly return to the Company any money that the Company
deposited with the Paying Agent in excess of the amounts necessary to pay the
redemption price of, and any accrued interest (including Additional Interest, if
any) on all Notes to be redeemed.
(b) If the Company complies with the preceding paragraph,
interest on the Notes to be redeemed will cease to accrue on such Notes on the
applicable redemption date, whether or not such Notes are presented for payment.
If a Note is redeemed on an Interest Payment Date, then any accrued and unpaid
interest shall be paid to the Person in whose name such Note was registered at
the close of business on the related Record Date, and in all other
circumstances, such interest shall be paid to the Holder of such Note. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest will be paid on the unpaid principal, premium, if any, and unpaid
interest (including Additional Interest, if any) which has accrued to the
redemption date and from the redemption date until such amounts are paid, at the
rate of interest provided in the Notes and Section 4.01.
SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note
that is redeemed in part, the Company shall issue and the Trustee shall
authenticate for the Holder at the Company's expense a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. Redemption Provisions. (a) The Notes will not be
redeemed prior to November 1, 2003, but will be redeemable at the option of the
Company, in whole or in part, at time on or after November 1, 2003, at the
following redemption prices (expressed as percentages of principal amount),
together with accrued and unpaid interest, if any, thereon, to the redemption
date, if redeemed during the twelve-month period beginning November 1:
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<TABLE>
<CAPTION>
OPTIONAL
REDEMPTION
YEAR PRICE
<S> <C>
2003.............................. 105.938%
2004.............................. 103.958%
2005.............................. 101.979%
2006 and thereafter............... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 1,
2001, the Company may redeem at its option up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Equity Offerings at a redemption price equal to 111.875% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any, to
the redemption date; provided that (a) at least $130.0 million in aggregate
principal amount of the Notes remains outstanding immediately after the
occurrence of any such redemption and (b) such redemption occurs within 60 days
of the date of the closing of any such Equity Offering.
SECTION 3.08. Mandatory Offers. (a) If required by Section 4.15
or 4.16, the Company will mail to the Trustee (who shall mail to each Holder at
the Company's expense) a notice stating: (1) that an Offer is being made
pursuant to Section 4.15 or 4.16, as the case may be, and describing the
transaction or transactions that constitute the Change of Control or Asset Sale,
as the case may be, and the length of time the Offer shall remain open and the
maximum aggregate principal amount of Notes that the Company is offering to
purchase pursuant to such Offer; (2) the purchase price for the Notes (as set
forth in Section 4.15 or 4.16, as the case may be), the amount of accrued and
unpaid interest and Additional Interest, if any, on such Notes as of the
Purchase Date, and the Purchase Date; (3) that any Note not accepted for payment
will continue to accrue interest; (4) that, unless the Company defaults in
making such payment, any Note accepted for payment pursuant to the Offer will
cease to accrue interest after the relevant Purchase Date; (5) that Holders may
tender all or any portion of the Notes registered in the name of such Holder and
that any portion of a Note tendered must be tendered in a principal amount of
$1,000 or an integral multiple thereof; (6) that Holders electing to tender any
Note or portion thereof will be required to surrender their Note, with the form
therein entitled "Option of Holder to Elect Purchase" completed, or transfer by
book-entry transfer, to the Company, a Depository, if appointed by the Company,
or a Paying Agent at the address specified in the notice at least three days
prior to the Purchase Date; (7) that Holders will be entitled to withdraw their
election to tender Notes if the Company, the Depository or the Paying Agent, as
the case may be, receives, not later than the close of business on the last day
of the relevant Offer Period, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have such Note
purchased; and (8) that Holders
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whose Notes are accepted for payment in part will be issued new Notes equal in
principal amount to the unpurchased portion of Notes surrendered, provided that
only Notes in a principal amount of $1,000 or integral multiples thereof will be
accepted for payment in part.
(b) On the Purchase Date for any Offer, the Company will (i) to
the extent lawful, (x) in the case of an Offer resulting from a Change of
Control, accept for payment all Notes or portions thereof properly tendered
pursuant to such Offer and (y) in the case of an Offer resulting from one or
more Asset Sales, accept for payment, on a pro rata basis to the extent
necessary, the Payment Amount of Notes or portions thereof pursuant to the Net
Proceeds Offer, or if less than the Payment Amount has been tendered, all Notes
tendered, and will deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of Sections 3.08 and 4.16, (ii) deposit with the
Paying Agent by 12:00 noon (Eastern Standard Time) on the Purchase Date U.S.
Legal Tender in immediately available funds sufficient to pay the aggregate
purchase price of all Notes or portions thereof accepted for payment and any
accrued and unpaid interest (including Additional Interest, if any) on such
Notes as of the Purchase Date, and (iii) deliver, or cause to be delivered, to
the Trustee all Notes or portions thereof so accepted together with an Officers'
Certificate setting forth the name of each Holder that tendered Notes and the
principal amount of the Notes, as the case may be, or portions thereof tendered
by each such Holder.
(c) With respect to any Offer, (i) if less than all of the Notes
tendered pursuant to an Offer are to be accepted for payment by the Company for
any reason, the Trustee shall select on or prior to the Purchase Date the Notes
or portions thereof to be accepted for payment pursuant to Section 3.02, and
(ii) if the Company deposits with the Paying Agent on the Purchase Date an
amount of U.S. Legal Tender sufficient to purchase all Notes accepted for
payment, interest shall cease to accrue on such Notes on the Purchase Date;
provided, however, that if the Company fails to deposit an amount of U.S. Legal
Tender sufficient to purchase all Notes accepted for payment, the deposited
funds shall be used to purchase on a pro rata basis all Notes accepted for
payment and interest shall continue to accrue, as the case may be, on all Notes
not purchased.
(d) Promptly after consummation of an Offer, (i) the Paying Agent
shall mail to each Holder of Notes or portions thereof accepted for payment an
amount equal to the Change of Control Purchase Price or Offered Price, as the
case may be, (ii) with respect to any tendered Note not accepted for payment in
whole or in part, the Trustee shall return such Note to the Holder thereof, and
(iii) with respect to any Note accepted for payment in part, the Company shall
issue and the Trustee shall authenticate and mail to each such Holder a new Note
equal in principal amount to the unpurchased portion of the tendered Note.
(e) The Company will (i) publicly announce the results of the
Offer to Holders on or as soon as practicable after the Purchase Date, and (ii)
comply with the applicable
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tender offer rules, including the requirements of Rule 14e-1 under the Exchange
Act and any other applicable laws and regulations in connection with the
purchase of Notes pursuant to any Offer.
(f) If any of this Section 3.08, Section 4.15 or Section 4.16
conflict with duties imposed upon the Company or the Guarantors by virtue of any
applicable laws or regulations, the Company or such Guarantor, as the case may
be, shall comply with such applicable laws or regulations and will not be deemed
to have breached its obligations under this Indenture.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes. Subject to the provisions of
Article 10, the Company shall pay the principal of, and premium, if any, and
interest (including Additional Interest, if any) on the Notes on the dates and
in the manner provided in the Notes. Holders must surrender their Notes to the
Paying Agent to collect principal payments. The Notes will be payable as to
principal, premium, if any, and interest (including Additional Interest), if
any, at the office or agency of the Company maintained for such purpose within
the City and State of New York or, at the option of the Company, by wire
transfer of immediately available funds or, in the case of Physical Notes only,
by mailing a check to the registered address of the Holder.
So long as the Global Note Holder is the registered owner of any
Notes, the Global Note Holder will be considered the sole holder of outstanding
Notes represented by such Global Notes under this Indenture. Payments in respect
of the principal of, premium, if any, and interest (including Additional
Interest), if any, on any Notes registered in the name of the Global Note Holder
on the applicable Record Date will be payable by the Trustee to or at the
direction of such Global Note Holder in its capacity as the registered holder
under this Indenture. None of the Company, the Guarantors or the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of Notes by the Depository, or for maintaining,
supervising or reviewing any records of the Depository relating to such Notes.
Principal, premium or interest (including Additional Interest, if
any) shall be considered paid on the date due if, by 12:00 noon (Eastern
Standard Time) on the Business Day immediately preceding such date, the Company
has deposited with the Paying Agent U.S. Legal Tender in immediately available
funds designated for and sufficient to pay such principal, premium or interest
(including Additional Interest, if any); provided, however, that principal,
premium or interest (including Additional Interest, if any) shall not be
considered
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paid within the meaning of this Section 4.01 if U.S. Legal Tender intended to
pay such principal, premium or interest (including Additional Interest, if any)
is held by the Paying Agent for the benefit of holders of Senior Indebtedness of
the Company pursuant to the provisions of Article 10. The Paying Agent shall
return to the Company, no later than five days following the date of payment,
any money that exceeds the amount then due and payable on the Notes.
SECTION 4.02. Reports. Whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "COMMISSION"), so
long as any Notes are outstanding, each of the Company and Pro-Fac will file
with the Commission, to the extent such filings are accepted by the Commission,
and will furnish (within 15 days after such filing) to the Trustee and the
Holders of Notes all quarterly and annual reports and other information,
documents and reports that would be required to be filed with the Commission
pursuant to Section 13 of the Exchange Act if the Company or Pro-Fac, as the
case may be, were required to file under such section. In addition, each of the
Company and Pro-Fac will make such information available to prospective
purchasers of the Notes, securities analysts and broker-dealers who request it
in writing. Each of the Company and Pro-Fac has agreed that, for so long as any
Notes remain outstanding, it will furnish to the Holders and beneficial holders
of Notes and to prospective purchasers of Notes designated by the holders of
Transfer Restricted Securities (as defined in the Registration Rights Agreement)
and to broker dealers, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. On and after
consummation of the Pro-Fac Merger, only Pro-Fac, as successor corporation to
the Company, shall be required to comply with this Section 4.02.
SECTION 4.03. Compliance Certificate. The Company shall deliver
to the Trustee, within 90 days after the end of each fiscal year of the Company,
an Officers' Certificate stating that (i) a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year without regard to
any grace period has been made to determine whether the Company has kept,
observed, performed and fulfilled all of its obligations under this Indenture
and the Notes, (ii) such review was supervised by the Officers of the Company
signing such certificate, and (iii) that to the best knowledge of each Officer
signing such certificate, (a) the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (or, if a Default or Event of Default occurred,
describing all such Defaults or Events of Default of which each such Officer may
have knowledge and what action the Company has taken or proposes to take with
respect thereto), and (b) no event has occurred and remains in existence by
reason of which payments on account of the principal of, or premium, if any, or
interest (including Additional Interest, if any) on the Notes are prohibited or
if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to
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Section 4.02 shall be accompanied by a written statement of the Company's
independent public accountants (which shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements nothing has come to their attention that would lead them to
believe that the Company has violated any provisions of Sections 4.01, 4.05,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 or Article 5
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
The Company will, so long as any of the Notes are outstanding,
deliver to the Trustee, promptly after any Officer of the Company becomes aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.04. Stay, Extension and Usury Laws. Each of the Company
and the Guarantors covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the covenants
or the performance of their obligations under this Indenture and the Notes and
Note Guarantees; and each of the Company and the Guarantors (to the extent they
may lawfully do so) hereby expressly waive all benefit or advantage of any such
law, and covenant that they will not, by resort to any such law, hinder, delay
or impede the execution of any power granted to the Trustee pursuant to this
Indenture, but will suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.05. Limitation on Restricted Payments. The Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any Restricted Payment (except as permitted below) if at the
time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof;
(ii) the Company would be unable to meet the Coverage Ratio
Incurrence Condition; or
(iii) the amount of such Restricted Payment, when added to the
aggregate amount of all other Restricted Payments (except as expressly
provided in the second following paragraph) made on or after the first
day of the last completed fiscal quarter of the Company ending
immediately prior to the Issue Date, exceeds the sum of (A) 50% of the
Company's Consolidated Net Income (taken as one accounting period) from
the first day of the last completed fiscal quarter of the Company ending
immediately prior to the Issue Date to the end of the Company's most
recently ended fiscal
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quarter for which financial statements are available at the time of such
Restricted Payment (or, if such aggregate Consolidated Net Income shall
be a deficit, minus 100% of such aggregate deficit) plus (B) the net
cash proceeds from the issuance and sale (other than to a Subsidiary of
the Company or Pro-Fac) after the Issue Date of (1) the Company's
Capital Stock that is not Disqualified Capital Stock (excluding amounts
contributed to the Company pursuant to clause (E) of this paragraph and
excluding Capital Stock purchased with the proceeds of loans from the
Company or any of its Subsidiaries) or (2) debt securities of the
Company that have been converted into the Company's Capital Stock that
is not Disqualified Capital Stock and that is not held by a Subsidiary
of the Company, plus (C) to the extent that any Restricted Investment
that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (x) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (y) the initial amount of such Restricted
Investment plus (D) the amount of Restricted Investment outstanding in
an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company in accordance with the
definition of "Unrestricted Subsidiary," plus (E) 40% of the aggregate
contributions by Pro-Fac to the Company pursuant to Section 4.18(a)
subsequent to the Issue Date but prior to the consummation of the
Pro-Fac Merger, plus (F) $7.5 million.
The foregoing provisions of clauses (ii) and (iii) of the
immediately preceding paragraph will not prohibit (1) the payment of any
dividend by the Company or any Restricted Subsidiary within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture; (2) the redemption,
repurchase, retirement or other acquisition of any Capital Stock of the Company
in exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company or Pro-Fac) of other Capital Stock of
the Company (other than any Disqualified Capital Stock); (3) the defeasance,
redemption, repurchase or other retirement of Subordinated Indebtedness in
exchange for, or out of the proceeds of, the substantially concurrent issue and
sale of Capital Stock of the Company (other than (x) Disqualified Capital Stock,
(y) Capital Stock sold to a Subsidiary of the Company or Pro-Fac and (z) Capital
Stock purchased with the proceeds of loans from the Company or any of its
Subsidiaries); (4) the payment of amounts prior to consummation of the Pro-Fac
Merger required to fund Pro-Fac's reasonable operating expenses, not in excess
of $250,000, as adjusted to reflect changes in the Consumer Price Index between
the Issue Date and the date of any such payment, in any fiscal year; (5) (x) the
payments of dividends or distributions to Pro-Fac solely in amounts and at the
times necessary to permit Pro-Fac, or (y) any payments to members of Pro-Fac or
and after the consummation of the Pro-Fac Merger solely in amounts and at the
times necessary, in each case to purchase, redeem, acquire, cancel or otherwise
retire for value Capital Stock of Pro-Fac (i) held by officers, directors or
employees or former officers, directors or employees (or their transferees,
estates or beneficiaries under their estates), or a trust established for the
benefit of
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any of the foregoing, of Pro-Fac, the Company or its Subsidiaries,
upon death, disability, retirement, severance or termination of employment or
service or pursuant to any agreement under which such Capital Stock or related
rights were issued or (ii) held by members or former members of Pro-Fac, upon
the departure of such Persons as members of Pro-Fac or upon the discontinuance
by any such Person of one or more crops; provided that the amount of such
payments under this clause (5) does not exceed in the aggregate $2.0 million in
any fiscal year; or (6) Restricted Investments the amount of which, together
with the amount of all other Restricted Investments made pursuant to this clause
(6) after the Issue Date, does not exceed $15.0 million.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payments referred to in clauses (2) and (3)
thereof, and, to the extent deducted in determining Consolidated Net Income in
any period, the Restricted Payments referred to in clause (5) thereof) shall be
included once in calculating whether the conditions of clause (iii) of the
second preceding paragraph have been met with respect to any subsequent
Restricted Payments. For purposes of determining compliance with this Section
4.05, in the event that a transaction meets the criteria of more than one of the
types of Restricted Payments described in the clauses of the immediately
preceding paragraph or of the exceptions in of the definition of "Restricted
Payment," the Company, in its sole discretion, shall classify such transaction
and only be required to include the amount and type of such transaction in one
of such clauses. If an issuance of Capital Stock of the Company is applied to
make a Restricted Payment pursuant to clause (2) or (3) above, then, in
calculating whether the conditions of clause (iii) of the second preceding
paragraph have been met with respect to any subsequent Restricted Payments, the
proceeds of any such issuance shall be included under such clause (iii) only to
the extent such proceeds are not applied as so described in this sentence.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.05 were computed, which calculations
shall be based upon the Company's latest available financial statements.
SECTION 4.06. Corporate Existence. Subject to Section 4.16 and
Article 5, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate, partnership or other existence of each of its Subsidiaries in
accordance with the respective organizational documents of each of its
Subsidiaries and the rights (charter and statutory), licenses and franchises of
the Company and each of its Subsidiaries; provided, however, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any Subsidiary, if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries
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taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders.
SECTION 4.07. Limitations on Additional Indebtedness. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, incur any Indebtedness (including without limitation
Acquired Indebtedness); provided that (i) the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness and (ii) if no Default or Event of
Default shall have occurred and be continuing at the time of or as a consequence
of the incurrence of any such Indebtedness, the Company may incur additional
Indebtedness if, after giving effect thereto, the Company's Consolidated
Interest Coverage Ratio on the date thereof would be at least 2.0 to 1.0,
determined on a pro forma basis as if the incurrence of such additional
Indebtedness, and the application of the net proceeds therefrom, had occurred at
the beginning of the four-quarter period used to calculate the Company's
Consolidated Interest Coverage Ratio.
(b) The Company may make demand loans to Pro-Fac for working
capital purposes in amounts not exceeding $40.0 million at any time outstanding,
each such loan to bear interest at a rate equal to the rate in effect on the
date of such loan under the Revolving Loan Facility. The loan balance must be
reduced to zero for a period of not less than 15 consecutive days in each fiscal
year. Except for the foregoing provision and except for (x) Pro-Fac's Note
Guarantee and (y) Pro-Fac's Guarantee of the Obligations under the New Credit
Facility, as long as Pro-Fac has the right to borrow under the Pro-Fac Marketing
Agreement Pro-Fac shall not incur any other Indebtedness. This paragraph (b)
shall not apply on and after the consummation of the Pro-Fac Merger.
SECTION 4.08. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell any shares of its Capital Stock
(including options, warrants or other rights to purchase shares of such Capital
Stock) except (i) to the Company or a Wholly-Owned Restricted Subsidiary, (ii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary or (iii) to the
extent such shares represent directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Wholly-Owned
Restricted Subsidiary. The proceeds of any sale of Capital Stock permitted
hereunder and referred to in clauses (ii) and (iii) above will be treated as Net
Available Proceeds and must be applied in a manner consistent with Section 4.16.
SECTION 4.09. Limitations on Layering Debt. Neither the Company
nor any Guarantor will incur any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness of the Company or such Guarantor, as
the case may be, unless such Indebtedness by its terms is pari passu with, or
subordinated to, the Notes or the Note Guarantee of such Guarantor, as the case
may be.
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SECTION 4.10. Limitations on Transactions with Affiliates. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, in one transaction or a series of related transactions,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction (or series of related
transactions) involving Pro-Fac (including, without limitation, any amendment to
or waiver under the Pro-Fac Marketing Agreement and any agreement for the
purchase of crops entered into pursuant to the Pro-Fac Marketing Agreement)
prior to consummation of the Pro-Fac Merger or involving aggregate payments in
excess of $1.0 million, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and which sets forth and
authenticates a resolution that has been adopted by a vote of a majority of the
Disinterested Directors approving such Affiliate Transaction and (b) with
respect to any Affiliate Transaction (or series of related transactions)
involving aggregate payments in excess of $5.0 million (other than any Affiliate
Transaction (for series of related transactions) occurring prior to consummation
of the Pro-Fac Merger and relating to the Pro-Fac Marketing Agreement or any
agreement for the purchase of crops entered into pursuant to the Pro-Fac
Marketing Agreement), the Officers' Certificate described in the preceding
clause (a) and an opinion as to the fairness to the Company or such Subsidiary
from a financial point of view of such Affiliate Transaction (or series of
related transactions) issued by an Independent Financial Advisor; provided,
however, that the following shall not be deemed to be Affiliate Transactions:
(i) transactions exclusively between or among (1) the Company and one or more
Restricted Subsidiaries or (2) Restricted Subsidiaries, provided, in each case,
that no Affiliate of the Company (other than another Restricted Subsidiary) owns
Capital Stock of any such Restricted Subsidiary; (ii) transactions between the
Company or any Restricted Subsidiary and any qualified employee stock ownership
plan established for the benefit of the Company's employees, or the
establishment or maintenance of any such plan; (iii) reasonable director,
officer and employee compensation and other benefit and indemnification
arrangements entered into in the ordinary course of business and consistent with
past practice; (iv) transactions permitted by Section 4.05 or excluded from the
definition of "Restricted Payments;" (v) the pledge of Capital Stock of
Unrestricted Subsidiaries to support the Indebtedness thereof; (vi) transactions
between the Company or any Restricted Subsidiary and any Affiliate of the
Company or such Restricted Subsidiary that is a joint venture, provided that no
direct or indirect holder of an equity interest in such joint venture (other
than the Company or a Restricted Subsidiary) is an Affiliate of the Company or
such Restricted Subsidiary; and (vii) except as set forth in clause (a) above,
the Pro-Fac Marketing Agreement and any transaction effected pursuant thereto.
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SECTION 4.11. Limitations on Liens. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, incur or
permit to exist any Lien of any nature whatsoever on any property of the Company
or any Restricted Subsidiary (including Capital Stock of a Restricted
Subsidiary), or any proceeds, income or profit therefrom, whether owned at the
Issue Date or thereafter acquired, which secures Indebtedness that is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or if such Lien secures Indebtedness
that is subordinated to the Notes, prior to) such Indebtedness for so long as
such Indebtedness is secured by a Lien.
The foregoing restrictions shall not apply to (i) Liens existing
on the Issue Date securing Indebtedness outstanding on the Issue Date; (ii)
Liens in favor of the Company; (iii) Liens to secure Non-Recourse Purchase Money
Indebtedness; (iv) Liens securing Acquired Indebtedness permitted to be incurred
under this Indenture, provided that the Liens do not extend to property or
assets not subject to such Lien at the time of acquisition (other than
improvements thereon); (v) Liens on property of a Person existing at the time
such Person is acquired or merged with or into or consolidated with the Company
or any such Restricted Subsidiary (and not created in anticipation or
contemplation thereof); or (vi) Liens to secure Refinancing Indebtedness of
Indebtedness secured by Liens referred to in the foregoing clauses (iv) and (v),
provided that in each case such Liens do not extend to any additional property
or assets (other than improvements thereon).
SECTION 4.12. Taxes. The Company shall, and shall cause each of
its Subsidiaries to, pay prior to delinquency all taxes, assessments and
governmental levies the failure of which to pay could reasonably be expected to
result in a material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company and its Subsidiaries taken as a
whole, except for those taxes contested in good faith by appropriate proceedings
properly initiated and diligently conducted and for which adequate reserves, to
the extent required under GAAP, have been taken.
SECTION 4.13. Limitations on Restrictions on Distributions from
Restricted Subsidiaries. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any Payment Restriction with respect to any of its Restricted
Subsidiaries, except for (a) any such Payment Restriction in effect on the Issue
Date under the New Credit Facility or any similar Payment Restriction under any
similar credit facility, or any amendment, restatement, renewal, replacement or
refinancing of any of the foregoing, provided that such similar Payment
Restrictions are not, taken as a whole, materially more restrictive than the
Payment Restrictions in effect on the Issue Date under the New Credit Facility;
(b) any such Payment Restriction under any agreement evidencing any Acquired
Indebtedness that was permitted to be incurred pursuant to the Indenture in
effect at the time of such incurrence and not created in contemplation of such
event, provided that such Payment Restriction is not extended to apply to any
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of the assets of the entities not previously subject thereto; (c) any such
Payment Restriction arising in connection with Refinancing Indebtedness;
provided that any such Payment Restrictions that arise under such Refinancing
Indebtedness are not, taken as a whole, materially more restrictive than those
under the agreement creating or evidencing the Indebtedness being refunded or
refinanced; (d) any such restriction by reason of customary provisions
restricting assignments, subletting or other transfers contained in leases,
licenses and similar agreements entered into in the ordinary course of business;
and (e) Payment Restrictions arising under applicable law.
SECTION 4.14. Maintenance of Offices or Agencies. The Company
will maintain an office or an agency in the Borough of Manhattan in the City of
New York (which may be an office of any Agent) where Notes may be surrendered
for registration of transfer or exchange or for presentation for payment and
where notices and demands to or upon the Company and the Guarantors in respect
of the Notes and this Indenture may be served. The Company will give prompt
written notice to the Trustee of any change in the location of such office or
agency. If at any time the Company shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.15. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder of the Notes will have the right to require that
the Company repurchase such Holder's Notes, in whole or in part in integral
multiples of $1,000 in principal amount, for a cash purchase price (the "CHANGE
OF CONTROL PURCHASE PRICE") equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Additional Interest, if any, to the date of
repurchase, all in accordance with paragraph (b) below.
(b) Within 30 days following any Change of Control, the Company
will mail to the Trustee (who shall mail to each holder at the Company's
expense) a notice (i) describing the transaction or transactions that constitute
the Change of Control, (ii) offering to repurchase, pursuant to the procedures
required by Section 3.08 and described in such notice (a "CHANGE OF CONTROL
OFFER"), on a date specified in such notice (which shall be a business day not
earlier than 30 days or later than 60 days from the date such notice is mailed)
and for the Change of Control Purchase Price, all Notes properly tendered by
such Holder pursuant to
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such offer to purchase for the Change of Control Purchase Price and (iii)
describing the procedures that holders must follow to accept the Change of
Control Offer.
(c) The Change of Control Offer will remain open for a period of
at least 20 Business Days (or for such longer period as is required by law)
following its commencement (the "CHANGE OF CONTROL OFFER PERIOD"). No later than
five Business Days after the termination of the change of Control Offer Period
(the "CHANGE OF CONTROL PURCHASE DATE"), the Company will purchase all Notes
tendered in response to the Change of Control Offer. Payment for any Notes so
purchased will be made in the same manner as interest payments are made.
(d) Notwithstanding the foregoing, the Company's obligation to
make a Change of Control Offer will be satisfied if a third party makes the
Change of Control Offer in the manner and at the times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made by
the Company in this Indenture and purchases all Notes properly tendered and not
withdrawn under such Change of Control Offer.
(e) The Company will comply with the applicable tender offer
rules, including the requirements of Rule 14e-1 under the Exchange Act and any
other applicable laws and regulations in connection with the purchase of Notes
pursuant to a Change of Control Offer.
SECTION 4.16. Limitations on Asset Sales. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, consummate any
Asset Sale unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets included in such Asset Sale (evidenced by the delivery by
the Company to the Trustee of an Officers' Certificate certifying that such
Asset Sale complies with this clause (i)), (ii) immediately after giving effect
to such Asset Sale, no Default or Event of Default shall have occurred and be
continuing, and (iii) at least 80% of the consideration received by the Company
or such Restricted Subsidiary therefor is in the form of cash paid at the
closing thereof. The amount (without duplication) of any (x) Indebtedness (other
than Subordinated Indebtedness) of the Company or such Restricted Subsidiary
that is expressly assumed by the transferee in such Asset Sale and with respect
to which the Company or such Restricted Subsidiary, as the case may be, is
unconditionally released by the holder of such Indebtedness, and (y) any Cash
Equivalents, or other notes, securities or items of property received from such
transferee that are promptly (but in any event within 15 days) converted by the
Company or such Restricted Subsidiary to cash (to the extent of the cash
actually so received), shall be deemed to be cash for purposes of clause (iii)
of the preceding sentence and, in the case of clause (x) above, shall also be
deemed to constitute a repayment of, and a permanent reduction in, the amount of
such Indebtedness for purposes of the following paragraph (b). If at any time
any non-cash consideration received by the Company or any Restricted Subsidiary
of the Company, as the case may be, in connection with any Asset
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Sale is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any such non-cash consideration), then the
date of such conversion or disposition shall be deemed to constitute the date of
an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied
in accordance with this Section 4.16. A transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a
Restricted Subsidiary will not be deemed to be an Asset Sale, and a transfer of
assets that is excluded from the definition of "Restricted Payment" or that
constitutes a Restricted Investment and that is permitted under Section 4.05
will not be deemed to be an Asset Sale.
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale, the Company or any Restricted Subsidiary shall, no later than 270
days after such Asset Sale (i) apply all or any of the Net Available Proceeds
therefrom to repay amounts outstanding under the New Credit Facility or any
other Senior Indebtedness; provided, in each case, that the related loan
commitment (if any) of any Indebtedness constituting revolving credit debt is
thereby permanently reduced by the amount of any such revolving credit debt so
repaid; and/or (ii) invest all or any part of the Net Available Proceeds thereof
in the purchase of fixed assets to be used by the Company and its Restricted
Subsidiaries in a Related Business (together with any short-term assets
incidental thereto), or the making of a Related Business Investment. The amount
of such Net Available Proceeds not applied or invested as provided in this
paragraph will constitute "EXCESS PROCEEDS."
(c) When the aggregate amount of Excess Proceeds equals or
exceeds $10.0 million, the Company will be required to make an offer to
purchase, from all holders of the Notes, an aggregate principal amount of Notes
equal to the amount of such Excess Proceeds as follows:
(i) The Company will make an offer to purchase (a "NET PROCEEDS
OFFER") from all holders of the Notes in accordance with the procedures
set forth in Section 3.08 the maximum principal amount (expressed as a
multiple of $1,000) of Notes that may be purchased out of the amount
(the "PAYMENT AMOUNT") of such Excess Proceeds.
(ii) The offer price for the Notes will be payable in cash in an
amount equal to 100% of the principal amount of the Notes tendered
pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and
Additional Interest, if any, to the date such Net Proceeds Offer is
consummated (the "OFFERED PRICE"), in accordance with the procedures set
forth in Section 3.08. To the extent that the aggregate Offered Price of
Notes tendered pursuant to a Net Proceeds Offer is less than the Payment
Amount relating thereto (such shortfall constituting a "NET PROCEEDS
DEFICIENCY"), the Company may use such Net Proceeds Deficiency, or a
portion thereof, for general corporate purposes, subject to the
limitations of Section 4.05.
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(iii) If the aggregate Offered Price of Notes validly tendered and
not withdrawn by holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis (with such adjustments as
may be appropriate so that only Notes in denominations of $1,000, or
integral multiples thereof, will be purchased).
(iv) The Net Proceeds Offer shall remain open for a period of at
least 20 Business Days (or for such longer period as is required by law)
following its commencement (the "NET PROCEEDS OFFER PERIOD"). No later
than five Business Days after the termination of the Offer Period (the
"NET PROCEEDS PURCHASE DATE"), the Company will purchase the principal
amount of Notes required to be purchased pursuant to this Section 4.16.
Payment for any Notes so purchased will be made in the same manner as
interest payments are made.
(v) Upon completion of such Net Proceeds Offer in accordance with
the foregoing provisions, the amount of Excess Proceeds in respect of
such Net Proceeds Offer shall be deemed to be zero.
(d) Notwithstanding the foregoing, in the event that any other
Indebtedness of the Company which ranks pari passu with the Notes (the "OTHER
Indebtedness") requires an offer to purchase to be made to repurchase such Other
Indebtedness upon the consummation of an Asset Sale, the Company may apply the
Excess Proceeds otherwise required to be applied to a Net Proceeds Offer to
offer to purchase such Other Indebtedness and to a Net Proceeds Offer so long as
the amount of such Excess Proceeds applied to purchase the Notes is not less
than the Note Portion of Excess Proceeds. With respect to any Excess Proceeds,
the Company shall make the Net Proceeds Offer in respect thereof at the same
time as the analogous offer to purchase is made pursuant to any Other
Indebtedness and the purchase date in respect of the Net Proceeds Offer shall be
the same as the purchase date in respect of the offer to purchase pursuant to
such Other Indebtedness.
For purposes of this Section 4.16, "NOTE PORTION OF EXCESS
PROCEEDS," in respect of a Net Proceeds Offer, means (1) if no Other
Indebtedness is concurrently being offered to be purchased, the amount of the
Excess Proceeds in respect of such Net Proceeds Offer and (2) if Other
Indebtedness is concurrently being offered to be purchased, an amount equal to
the product of (x) the Excess Proceeds in respect of such Net Proceeds Offer and
(y) a fraction the numerator of which is the principal amount of all Notes
tendered pursuant to such Net Proceeds Offer (the "NOTE AMOUNT") and the
denominator of which is the sum of the Note Amount and the lesser of the
aggregate principal face amount or accreted value as of the relevant purchase
date of all Other Indebtedness tendered pursuant to a concurrent offer to
purchase such Other Indebtedness made at the time of such Net Proceeds Offer.
(e) The Company will not permit any Subsidiary to enter into or
suffer to exist any agreement that would place any restriction of any kind
(other than pursuant to law or
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regulation) on the ability of the Company to make a Net Proceeds Offer following
any Asset Sale.
(f) The Company will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and any other applicable
laws and regulations in connection with the purchase of Notes pursuant to a Net
Proceeds Offer.
SECTION 4.17. Additional Note Guarantees. (a) If the Company or
any of its Subsidiaries shall acquire or create another Subsidiary (other than
(x) any Foreign Subsidiary so long as such Foreign Subsidiary is not a guarantor
of any Senior Indebtedness of the Company or (y) a Subsidiary that has been
designated as an Unrestricted Subsidiary or (z) an Immaterial Subsidiary), then
within 10 days after acquiring or creating such Subsidiary, the Company shall
comply with paragraph (b) of this Section 4.17.
(b) Any Person required by paragraph (a) of this Section 4.17 to
become, or that is at the option of the Company becoming, a Guarantor shall
execute and deliver to the Trustee a supplemental indenture in form and
substance satisfactory to the Trustee, which subjects such Person to the
provisions of this Indenture as a Guarantor pursuant to the terms of Article 11,
and provide an Opinion of Counsel to the effect that such supplemental indenture
has been duly authorized and executed by such Person and constitutes the legal,
valid and binding obligation of such Person (subject to customary assumptions
and exceptions).
SECTION 4.18. Payments Pursuant to the Pro-Fac Marketing
Agreement; Reinvestments by Pro-Fac; Borrowings by Pro-Fac. (a) As promptly as
practicable, and in any event within ten Business Days, after receipt from the
Company of any payment made in excess of the Commercial Market Value for crops
and other services pursuant to the Pro-Fac Marketing Agreement, Pro-Fac will
invest in cash as common equity interests (other than Disqualified Capital
Stock) in the Company an amount equal to 70% of such excess. Without the consent
of the Holders of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), the Company will not: (a) amend the calculation of amounts
payable to Pro-Fac under the Pro-Fac Marketing Agreement in a manner which would
increase the payments made to Pro-Fac, (b) amend the Pro-Fac Marketing Agreement
to require that Affiliate Transactions involving Pro-Fac be approved by less
than a majority of the Disinterested Directors or (c) amend this Section 4.18(a)
or the definition of "Commercial Market Value" in this Indenture.
(b) Notwithstanding the foregoing, the preceding paragraph (a)
shall not apply on and after the consummation of the Pro-Fac Merger. On and
after the consummation of the Pro-Fac Merger, any payment to any member of
Pro-Fac in cash or property (other than Capital Stock) for crops in excess of
Commercial Market Value shall be deemed to be a Restricted Payment under Section
4.05. In addition, Pro-Fac will cause its certificate of incorporation and/or
by-laws to be amended no later than the consummation of the Pro-Fac Merger to
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require (i) that there shall be at least two Disinterested Directors on the
Board of Directors of Pro-Fac at all times, (ii) the formation and maintenance
of a committee of the Board of Directors of Pro-Fac to recommend Commercial
Market Value, which committee shall include at least two Disinterested Directors
at all times, (iii) approval by a majority of the Disinterested Directors of the
annual profit plan of Pro-Fac (including the raw product section of the profit
plan) and the final determination of Commercial Market Value, and (iv)
precluding the further amendment of the certificate of incorporation and by-laws
of Pro-Fac concerning (i), (ii), and (iii) above without the consent of the
Holders of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes). Without the consent of the Holders of at least 75% in principal
amount of the Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for the Notes), the Company and Pro-Fac
will not amend this Section 4.18(b) or the definition of "Commercial Market
Value" in this Indenture.
SECTION 4.19. Maintenance of Properties; Insurance; Books and
Records; Compliance with Law. (a) The Company shall, and shall cause each of its
Subsidiaries to, at all times cause all properties used in the conduct of its
business to be maintained and kept in good condition, repair and working order
(reasonably wear and tear excepted) and supplied with all necessary equipment,
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereto, in each case, in a manner customary for
companies similarly situated.
(b) The Company shall and shall cause each of its Subsidiaries to
maintain insurance with insurance companies or association with a rating of "A-"
or better, as established by Best's Rating Guide (or an equivalent rating with
such other publication of a similar nature as shall be in current use) in such
amounts and covering such risks as are usually and customarily carried with
respect to companies similarly situated and similar facilities according to
their respective locations.
(c) The Company shall and shall cause each of its Subsidiaries to
keep proper books of record and account, in which full and correct entries shall
be made of all financial transactions and the assets and business of the Company
and each Subsidiary of the Company, in accordance with GAAP consistently applied
to the Company and its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject, non-compliance with which would materially adversely
affect the business, condition (financial or otherwise), results of operations
or properties of the Company and its Subsidiaries taken as a whole.
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(e) The Company and each Guarantor shall deliver to the Trustee
any information reasonably requested by the Trustee in connection with
compliance by the Trustee or the Company with any of their respective duties or
obligations hereunder or under the TIA.
(f) Upon the request of the Trustee, the Company and each
Guarantor shall execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out effectively the
purposes of this Indenture.
(g) The Company shall not and shall not permit any of its
Subsidiaries to enter into any agreement or instrument that by its terms
expressly prohibits the Company from making any payments on or in respect of the
Notes in accordance with the terms thereof and of this Indenture.
ARTICLE 5
SUCCESSORS
SECTION 5.01. Limitations on Mergers and Certain Other
Transactions. (a) The Company will not, in a single transaction or a series of
related transactions, (i) consolidate or merge with or into (other than a merger
with a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Company's jurisdiction of incorporation to another State of the United States;
provided that clauses (a) and (d) below are complied with), or sell, lease,
transfer, convey or otherwise dispose of or assign all or substantially all of
the assets of the Company or the Company and its Subsidiaries (taken as a
whole), or permit any of its Restricted Subsidiaries to do so if such
transaction would result in the transfer of all or substantially all of the
assets of the Company and its Subsidiaries (taken as a whole), or assign any of
its obligations under the Notes and this Indenture, to any Person or (ii) adopt
a Plan of Liquidation unless, in either case: (a) the Person formed by or
surviving such consolidation or merger (if other than the Company) or to which
such sale, lease, conveyance or other disposition or assignment shall be made
(or, in the case of a Plan of Liquidation, any Person to which assets are
transferred) (collectively, the "SUCCESSOR"), is a corporation or a cooperative
corporation organized and existing under the laws of any State of the United
States of America or the District of Columbia, and the Successor assumes by
supplemental indenture in a form satisfactory to the Trustee all of the
obligations of the Company under the Notes and this Indenture; (b) immediately
prior to and immediately after giving effect to such transaction and the
assumption of the obligations as set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, no
Default or Event of
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Default shall have occurred and be continuing; provided, however, that in the
case of the Pro-Fac Merger, the foregoing clause (b) shall be deemed to be
satisfied if immediately after giving effect to the Pro-Fac Merger and the
assumption of the obligations set forth in clause (a) above and the incurrence
of any Indebtedness to be incurred in connection therewith, no Default or Event
of Default shall have occurred and be continuing; and (c) immediately after and
giving effect to such transaction and the assumption of the obligations set
forth in clause (a) above and the incurrence of any Indebtedness to be incurred
in connection therewith, and the use of any net proceeds therefrom on a pro
forma basis, (x) in the case of the Pro-Fac Merger only, the Consolidated
Coverage Ratio shall be at least equal to or greater than the Consolidated
Coverage Ratio immediately prior to the consummation of the Pro-Fac Merger and
the assumption of the obligations set forth in clause (a) above and the
incurrence of any Indebtedness to be incurred in connection therewith, and (y)
in the case of any other such transaction, the Company or the Successor, as the
case may be, could meet the Coverage Ratio Incurrence Condition; and (d) each
Guarantor, unless it is the other party to the transactions described above,
shall have by amendment to its Note Guarantee confirmed that its Note Guarantee
shall apply to the obligations of the Company or the Successor under the Notes
and this Indenture. For purposes of this Section 5.01, any Indebtedness of the
Successor which was not Indebtedness of the Company immediately prior to the
transaction shall be deemed to have been incurred in connection with such
transaction.
(b) No Guarantor (other than a Subsidiary Guarantor whose Note
Guarantee is to be released in accordance with Section 11.08) may consolidate
with or merge with or into (whether or not such Guarantor is the surviving
Person), another Person or entity whether or not affiliated with such Guarantor
unless:
(i) the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the obligations of
such Guarantor under the Note Guarantee of such Guarantor and this
Indenture pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee under the Notes and this
Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; and
(iii) immediately after giving effect to any such transaction
involving a Subsidiary Guarantor, the Coverage Ratio Incurrence
Condition would be met;
provided, however, that the foregoing paragraph (b) of this Section 5.01 shall
not apply to the Pro-Fac Merger (the Pro-Fac Merger being governed by Section
5.01(a)).
SECTION 5.02. Successor Corporation Substituted. In the event of
any transaction described in and complying with the conditions listed in Section
5.01 in which the Company or a Guarantor, as the case may be, is not the
surviving Person, such surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of, the Company or such Guarantor,
as the case may be, and the Company shall be discharged from
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its Obligations under this Indenture and the Notes or such Guarantor shall be
discharged from its Obligations under this Indenture and its Note Guarantee, as
the case may be.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. (a) Each of the following
constitutes an event of default (an "EVENT OF DEFAULT"):
(i) failure by the Company to pay interest or Additional Interest
on any of the Notes when it becomes due and payable and the continuance
of any such failure for 30 days (whether or not such payment shall be
prohibited by Article 10);
(ii) failure by the Company to pay the principal or premium, if
any, on any of the Notes when it becomes due and payable, whether at
stated maturity, upon redemption (including, without limitation, the
failure to make a payment to purchase Notes tendered pursuant to a
Change of Control Offer or Net Proceeds Offer), upon acceleration or
otherwise (whether or not such payment shall be prohibited by Article
10);
(iii) failure by the Company to comply with any of its agreements
or covenants described above under Article 5 or in respect of its
obligations to make a Change of Control Offer or a Net Proceeds Offer
described in Sections 4.15 and 4.16, respectively, or failure by Pro-Fac
to comply with the provisions of Section 4.07(b) or 4.18;
(iv) failure by the Company or any Guarantor to comply with any
other covenant in this Indenture and continuance of such failure for 60
days after notice of such failure has been given to the Company by the
Trustee or by the holders of at least 25% of the aggregate principal
amount of the Notes then outstanding;
(v) failure by either the Company or any of its Restricted
Subsidiaries to make any principal payment at final maturity after the
expiration of any applicable grace period in respect of any Indebtedness
of the Company or any of such Restricted Subsidiaries, or the
acceleration of the maturity of such Indebtedness by the holders thereof
because of a default, with an aggregate outstanding principal amount for
all such Indebtedness under this clause (v) of $7.5 million or more;
(vi) one or more final, non-appealable judgments or orders that
exceed $7.5 million in the aggregate for the payment of money have been
entered by a court or courts of competent jurisdiction against the
Company or any Restricted Subsidiary of
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the Company and such judgment or judgments have not been satisfied,
stayed, annulled or rescinded within 60 days of being entered;
(vii) if under any Bankruptcy Law, (A) the Company, Pro-Fac or any
Significant Subsidiary commences a voluntary case, consents to the entry
of an order for relief against it in an involuntary case, consents to
the appointment of a Custodian of it or for all or substantially all of
its property, or makes a general assignment for the benefit of its
creditors, or (B) a court of competent jurisdiction enters an order or
decree, and such order or decree remains unstated and in effect for 60
days, that is for relief against the Company, Pro-Fac or any Significant
Subsidiary in an involuntary case, appoints a Custodian of the Company,
Pro-Fac or any Significant Subsidiary or for all or substantially all of
the property of the Company, Pro-Fac or any Significant Subsidiary, or
orders the liquidation of the Company, Pro-Fac or any Significant
Subsidiary; and
(viii) except as permitted by Section 11.08 any Note Guarantee
ceases to be in full force and effect or any Note Guarantee is declared
to be null and void and unenforceable or is found to be invalid or any
Guarantor repudiates its obligations under any Note Guarantee.
(b) Any notice of default delivered to the Company by the Trustee
or by Holders of Notes with a copy to the Trustee must specify the Default,
demand that it be remedied and state that the notice is a "NOTICE OF DEFAULT".
SECTION 6.02. Acceleration. (a) If an Event of Default (other
than an Event of Default under Section 6.01(a)(vii) with respect to the Company)
occurs and is continuing under this Indenture, the Trustee, by written notice to
the Company, or the holders of at least 25% in aggregate principal amount of the
Notes then outstanding by written notice to the Company and the Trustee, may
declare all amounts owing under the Notes to be due and payable immediately.
Upon such declaration of acceleration, the aggregate principal of, premium, if
any, and interest (including Additional Interest, if any) on the outstanding
Notes shall immediately become due and payable.
(b) Notwithstanding anything to the contrary in this Indenture,
if an Event of Default arises under Section 6.01(a)(vii) with respect to the
Company, the principal amount of and premium on, if any, and any accrued and
unpaid interest (including Additional Interest, if any) on all outstanding Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders.
(c) The Holders of a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may rescind any declaration
of acceleration of such Notes and its consequences if the rescission would not
conflict with any judgment or decree
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and if all existing Defaults and Events of Default (other than the nonpayment of
principal of, or premium, if any, or interest on, the Notes which shall have
become due by such declaration) shall have been cured or waived.
SECTION 6.03. Other Remedies. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of, or premium, if any, or interest (including Additional
Interest, if any) on, the Notes or to enforce the performance of any provision
of the Notes or this Indenture. The Trustee may maintain a proceeding even if it
does not possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults. Subject to Section 9.02,
the Holders of a majority in aggregate principal amount of the then outstanding
Notes by notice to the Trustee may on behalf of all Holders waive any existing
Default or Event of Default and its consequences under this Indenture, except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest (including Additional Interest, if any) on, any
Note (which may only be waived with the consent of each Holder affected). Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; provided that no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
SECTION 6.05. Control by Majority of Holders. Subject to Section
7.01(e), the Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it by this Indenture. However, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of other Holders, or would
involve the Trustee in personal liability. The Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with such direction.
SECTION 6.06. Limitations on Suits by Holders. A Holder may
pursue a remedy with respect to this Indenture or the Notes only if: (1) the
Holder gives to the Trustee written notice of a continuing Event of Default; (2)
the Holders of at least 25% in principal amount of the then outstanding Notes
make a written request to the Trustee to pursue the remedy; (3) such Holder or
Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense; (4) the Trustee does not comply with the
request within 60 days after receipt of the request and the offer of indemnity;
and (5) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding
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Notes do not give the Trustee a direction inconsistent with the request. A
Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder. Holders of the Notes may
not enforce this Indenture or the Notes, except as provided herein.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, but subject to Article
10, the right of any Holder to receive payment of principal of, and premium, if
any, and interest (including Additional Interest, if any) on, a Note, on or
after a respective due date expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective date, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(a)(i) or (a)(ii) occurs and is continuing, the Trustee
is authorized to recover judgment in its own name and as trustee of an express
trust against the Company (or any Guarantor or other obligor under the Notes)
for (i) principal, premium, if any, interest, if any, and Additional Interest,
if any, remaining unpaid on the Notes, (ii) interest on overdue principal and
premium, if any, and, to the extent lawful, interest, and (iii) such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel ("TRUSTEE EXPENSES").
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may
file such proofs of claim and other papers or documents as may be necessary or
advisable to have the claims of the Trustee (including any claim for Trustee
Expenses and for amounts due under Section 7.07) and the Holders allowed in any
Insolvency or Liquidation Proceeding or other judicial proceeding relative to
the Company (or any Guarantor or other obligor upon the Notes), its creditors or
its property and shall be entitled and empowered to collect, receive and
distribute to Holders any money or other property payable or deliverable on any
such claims and each Holder authorizes any Custodian in any such Insolvency or
Liquidation Proceeding or other judicial proceeding to make such payments to the
Trustee, and if the Trustee shall consent to the making of such payments
directly to the Holders any such Custodian is hereby authorized to make such
payments directly to the Holders, and to pay to the Trustee any amount due to it
hereunder for Trustee Expenses, and any other amounts due the Trustee or any
predecessor Trustee under Section 7.07; provided, however, that the Trustee
shall not be authorized to (i) consent to, accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder or (ii) vote in respect of the
claim of any Holder in any such Insolvency or Liquidation Proceeding or other
judicial proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article 6, it shall pay out the money in the following order:
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First: to the Trustee for all Trustee Expenses and for all amounts
due under Section 7.07;
Second: to the holders of Senior Indebtedness to the extent required
by Article 10;
Third: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, interest, Additional Interest, if
any, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for
principal, premium, if any, interest and Additional Interest,
if any, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.06, or a suit
by Holders of more than 10% in principal amount of the then outstanding Notes.
SECTION 6.12. Willful Default. In the case of an Event of Default
occurring by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding payment of the
premium that the Company would have had to pay if the Company then had elected
to redeem the Notes under the provisions of Article 3 and under the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, upon the acceleration of the Notes. If an Event of
Default occurs prior to November 1, 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to November 1,
2003, then, upon acceleration of the Notes, an additional premium shall also
become and be immediately due and payable, to the extent permitted by law, in an
amount equal to 10.0%.
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ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
occurs (and has not been cured) the Trustee shall (i) exercise the rights and
powers vested in it by this Indenture, and (ii) use the same degree of care and
skill in exercising such rights and powers as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee's duties shall be determined solely by the express provisions of this
Indenture and the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and (ii) in
the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions required to be delivered under this Indenture to
determine whether they conform to this Indenture's requirements.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this Section 7.01(c) does not limit the effect of
Section 7.01(b); (ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not
be liable with respect to any action it takes or omits to take in good faith in
accordance with a direction it receives pursuant to Section 6.05. Unless
otherwise specifically provided in this Indenture, any demand, request,
direction or notice from the Company shall be sufficient if signed by an Officer
of the Company.
(d) Every provision of this Indenture that in any way relates to
the Trustee shall be subject to paragraphs (a), (b) and (c) of this Section
7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers or to perform any duty
under this Indenture at the request of any Holders unless such Holders shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as it may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
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SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document it reasonably believes to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in any such document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it under this Indenture in good faith and in
reliance on such advice or opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) Subject to Section 7.01, the Trustee shall not be liable for
any action it takes or omits to take in good faith that it believes to be
authorized or within its rights or powers.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or any of its Affiliates with the same
rights it would have if it were not Trustee. The Trustee shall at all times
comply with section 310(b) of the TIA as in effect from time to time. Each Agent
shall have the same rights as the Trustee under this Section 7.03.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes; it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not be responsible for any
statement or recital in this Indenture or any statement in the Notes or any
other document executed in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
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SECTION 7.05. Notice to Holders of Defaults and Events of
Default. If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to the Holders a notice of the
Default or Event of Default within 30 days after the occurrence thereof. Except
in the case of a Default or Event of Default in payment of principal or interest
or Additional Interest, if any, on any Note (including any failure to redeem
Notes called for redemption or any failure to purchase Notes that are tendered
pursuant to an Offer and that are required to be purchased by the terms of this
Indenture), the Trustee may withhold the notice if and so long as a committee of
its Trust Officers determines in good faith that withholding such notice is in
the Holders' interests.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after
each May 15 beginning with May 15, 1999, the Trustee shall mail to the Holders a
brief report dated as of such reporting date that complies with section 313(a)
of the TIA (but if no event described in section 313(a) of the TIA has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with section 313(b)(2) of the TIA.
The Trustee shall also transmit by mail all reports as required by section
313(c) of the TIA.
Commencing at the time this Indenture is qualified under the TIA,
a copy of each report at the time of its mailing to Holders shall be filed with
the Commission and each stock exchange on which the Notes are listed. The
Company shall notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. Compensation and Indemnity. The Company shall pay
to the Trustee from time to time such compensation for its services hereunder as
the parties shall agree in writing from time to time. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, advances and expenses it incurs or makes in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements, advances, collection costs and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, from and against any
and all losses, liabilities or expenses (including reasonable attorney's fees
and expenses) the Trustee incurs arising out of or in connection with the
acceptance or administration of its duties under this Indenture (including any
expenses incurred in connection with the performance of its duties under Section
6.08), except as set forth below. The Trustee shall notify the Company promptly
of any claim for which it may seek indemnity; provided, however, that failure by
the Trustee to provide the Company with any such notice shall not relieve the
Company of any of its obligations under this Section 7.07 except to the extent
that the Company has been prejudiced by such failure. The Company shall defend
the claim and the Trustee shall cooperate in the defense of any such claim. If,
in the reasonable judgment of the Trustee's counsel, the
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Trustee has an interest adverse to the Company or a potential conflict of
interest exists between the Trustee and the Company, the Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The Company's obligations under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture. The Company need not reimburse
any expense or indemnify against any loss or liability the Trustee incurs
through the Trustee's negligence or bad faith.
To secure payment of the Company's obligations under this Section
7.07, the Trustee shall have a Lien prior to the Notes on all money or property
the Trustee holds or collects, except that held in trust to pay principal of,
and premium, if any, interest and Additional Interest, if any, on, particular
Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.
The Trustee's right to receive payments due under this Section 7.07 shall not be
subordinate to any other liability or indebtedness of the Company.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(a)(vii) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute administrative expenses under any Bankruptcy
Law without any need to demonstrate substantial contribution under Bankruptcy
Law.
SECTION 7.08. Replacement of Trustee. A resignation or removal of
the Trustee and appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign and be discharged from the trust hereby
created by so notifying the Company in writing. The Holders of a majority in
aggregate principal amount of the then outstanding Notes may remove the Trustee
by so notifying the Trustee and the Company in writing. The Company may remove
the Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the
Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered
with respect to the Trustee under any Bankruptcy Law; (iii) a Custodian or
public officer takes charge of the Trustee or its property; or (iv) the Trustee
becomes incapable of performing the services of the Trustee hereunder.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee; provided that within one year after such appointment the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may appoint a successor Trustee to replace any successor Trustee appointed
by the Company.
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If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
appointment to Holders. The retiring Trustee shall promptly transfer all
property it holds as Trustee to the successor Trustee, subject to its rights
under Section 7.07 and provided that all sums owing to the retiring Trustee
hereunder have been paid. Notwithstanding replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the retiring Trustee's benefit with respect to expenses and liabilities
relating to the retiring Trustee's activities prior to being replaced.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, subject to Section 7.10,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times (i) be a corporation organized and doing business under the laws of
the United States of America, of any state thereof, or the District of Columbia
authorized under such laws to exercise corporate trustee power, (ii) be subject
to supervision or examination by federal or state authority, (iii) have a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition, and (iv) satisfy the requirements
of sections 310(a) and 310(b) of the TIA.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to section 311(a) of the TIA, excluding any creditor
relationship listed in section 311(b) of the TIA. A Trustee who has resigned or
been removed shall be subject to section 311(a) of the TIA to the extent
indicated therein.
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Discharge of Liability on Notes; Defeasance. (a)
Subject to Sections 8.01(c) and 8.06, this Indenture shall cease to be of any
further effect after (i) either the Company has delivered to the Trustee all
outstanding Notes (other than Notes replaced pursuant to Section 2.10) for
cancellation or all outstanding Notes have become due and payable and the
Company has irrevocably deposited with the Trustee or a Paying Agent U.S. Legal
Tender and/or Government Securities in an amount sufficient (without
reinvestment thereof) to pay when due all principal of, premium, if any, and
interest and Additional Interest, if any, on, all outstanding Notes (other than
Notes replaced pursuant to Section 2.09), and (ii) the Company pays all other
sums payable under this Indenture.
(b) Subject to Sections 8.01(c), 8.02, and 8.06, the Company at
any time may terminate (i) all of its and the Guarantors' obligations under this
Indenture and the Notes ("LEGAL DEFEASANCE"), or (ii) its obligations under
Sections 4.02, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17,
4.18, 4.19(a), (b), (c) and (d) and 5.01 ("COVENANT DEFEASANCE"). The Company
may exercise Legal Defeasance notwithstanding its prior exercise of Covenant
Defeasance.
If the Company exercises Legal Defeasance, payment of the Notes
may not be accelerated because of an Event of Default. If the Company exercises
Covenant Defeasance, payment of the Notes may not be accelerated because of an
Event of Default specified in 6.01 (a)(iii), (iv), (v) or (vi).
Upon satisfaction of the conditions set forth in Section 8.02 and
upon the Company's request (and at the Company's expense), the Trustee shall
acknowledge in writing the discharge of those obligations that the Company has
terminated.
(c) Notwithstanding Sections 8.01(a) and (b), the Company's
obligations under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.10, 2.11, 2.12,
4.01, 4.04, 4.06, 4.14, 7.07, 7.08, 8.04, 8.05, and 8.06, and the obligations of
the Trustee and the Paying Agent under Section 8.04 shall survive until the
Notes have been paid in full. Thereafter, the Company's obligations under
Sections 7.07 and 8.05 and the obligations of the Company, Trustee and Paying
Agent under Section 8.04 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise
either Legal Defeasance or Covenant Defeasance only if:
(i) the Company irrevocably deposits with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. Legal Tender
or Government Securities,
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or a combination thereof, in such amounts as will be sufficient, (x) in
the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Additional Interest, if any, on the outstanding Notes on the stated
maturity or the date such payments are due in accordance with the terms
of the Notes or on the applicable, redemption date, as the case may be,
and (y) in the opinion of the Company as stated in an Officers'
Certificate, to pay the Trustee Expenses. The Company shall specify
whether the Notes are being defeased to maturity or to a particular
redemption date;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee (1) an Opinion of Counsel reasonably acceptable
to the Trustee confirming that (x) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(y) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel will confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred and (2) an Opinion of Counsel to the effect
that (x) the deposit of the trust funds does not violate the Investment
Company Act of 1940 and (y) after the period ending on the 123rd day
after the date of deposit, the trust funds will not be subject to the
effect of Section 547 of the Bankruptcy Code or Section 15 of the New
York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee (1) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner at
the same times as would have been the case if such Covenant Defeasance
had not occurred and (2) an Opinion of Counsel to the effect that (x)
the deposit of the trust funds does not violate the Investment Company
Act of 1940 and (y) after the period ending on the 123rd day after the
date of deposit, the trust funds will not be subject to the effect of
Section 547 of the United States Bankruptcy Code or Section 15 of the
New York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from
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bankruptcy or insolvency events are concerned, at any time in the period
ending on the 123rd day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a Default under any material
agreement or instrument (other than this Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors
of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.
SECTION 8.03. Application of Trust Money. The Trustee or Paying
Agent shall hold in trust U.S. Legal Tender and/or Government Securities
deposited with it pursuant to this Article 8. The Trustee or Paying Agent shall
apply the deposited money and the money from Government Securities in accordance
with this Indenture to the payment of principal of, and premium, if any,
interest or Additional Interest, if any, on, the Notes. Money deposited with the
Trustee or a Paying Agent pursuant to this Article 8 shall not be subject to the
provisions of Article 10.
SECTION 8.04. Repayment to Company. After the Notes have been
paid in full, the Trustee and the Paying Agent shall promptly turn over to the
Company any excess money or Notes held by them.
Any money deposited with the Trustee or a Paying Agent pursuant
to this Article 8 for the payment of the principal of, premium, if any, interest
or Additional Interest, if any, on, any Note that remains unclaimed for two
years after becoming due and payable shall be paid to the Company on its
request; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such money shall cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in The New York Times and The Wall Street Journal (National Edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
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SECTION 8.05. Indemnity for Government Securities. The Company
shall pay and shall indemnify the Trustee and any Paying Agent against any tax,
fee or other charge imposed on or assessed against U.S. Legal Tender and/or
Government Securities deposited with it pursuant to this Article 8 or the
principal and interest received on such U.S. Legal Tender and/or Government
Securities.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any U.S. Legal Tender or Government Securities in accordance
with this Article 8 by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's Obligations under this
Indenture and the Notes and the Guarantors' Obligations under the Note
Guarantees shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or Government Securities in
accordance with this Article 8; provided, however, that if the Company or any
Guarantor has made any payment of principal of, or premium, if any, interest, or
Additional Interest, if any, on, any Notes because of the reinstatement of its
Obligations under this Indenture and the Notes or the Note Guarantees, the
Company or such Guarantor, as the case may be, shall be subrogated to the
Holders' rights to receive such payment from the money or Government Securities
held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Amendments and Supplements Permitted without
Consent of Holders. (a) The Company, the Guarantors and the Trustee may amend or
supplement this Indenture or the Notes without the consent of any Holder to: (i)
cure any ambiguity, defect or inconsistency; (ii) provide for uncertificated
Notes in addition to or in place of certificated Notes; (iii) provide for the
assumption of the obligations to the Holders of the Company or a Guarantor, as
the case may be, in the event of a merger or consolidation that is permitted by
Article 5; (iv) make any change that (1) would provide any additional rights or
benefits to the Holders or (2) does not adversely affect the legal rights under
this Indenture of any Holder; or (v) comply with the requirements of the
Securities and Exchange Commission in order to effect or maintain the
qualification of this Indenture under the TIA.
(b) Upon the Company's request, after receipt by the Trustee of a
resolution of the Board of Directors of the Company authorizing the execution of
any amended or supplemental indenture and the documents described in Section
9.06, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture, but the Trustee shall not be obligated to
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enter into an amended or supplemental indenture that adversely affects its own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. Amendments and Supplements Requiring Consent of
Holders. (a) Except as otherwise provided in Section 9.01(a), this Indenture and
the Notes may be amended or supplemented with the written consent of the Holders
of at least a majority in aggregate principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes), and any existing Default or Event of Default or
compliance with any provision of this Indenture or the Notes may be waived
(other than any continuing Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes (except as set forth in
(C)(iv) below)) with the consent of Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes); provided that:
(A) no such modification or amendment may, without the consent of
the Holders of at least 75% in aggregate principal amount of Notes then
outstanding, amend or modify the obligations of the Company under
Section 4.15 (or the definitions related thereto) that could adversely
affect the rights of any Holder of the Notes;
(B) no such modification or amendment may, without the consent of
Holders of at least 75% in aggregate principal amount of the Notes then
outstanding, amend or modify the obligations of the Company and Pro-Fac
under Section 4.18 (or the definitions related thereto); and
(C) without the consent of each Holder affected, the Company and
the Trustee may not: (i) reduce the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver; (ii) reduce
the principal of or change the fixed maturity of any Note or alter the
provisions with respect to the redemption of the Notes; (iii) reduce the
rate of or change the time for payment of interest on any Note; (iv)
waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration); (v) make any Note payable
in money other than that stated in the Notes; (vi) make any change in
the provisions of this Indenture relating to waivers of past Defaults or
of the right of Holders of Notes to receive payments of principal of or
premium, if any, or interest on the Notes; (vii) waive a redemption
payment with respect to any Note; (viii) take any action that would
subordinate the Notes or the Note Guarantees to any other Indebtedness
of the Company or any of Guarantors, respectively (except
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as provided in Article 10), or otherwise affect the ranking of the Notes
or the Note Guarantees; or (ix) release any Guarantor from any of its
payment obligations under its Note Guarantee or this Indenture otherwise
in accordance with this Indenture.
(b) It shall not be necessary for the consent of the Holders
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to each Holder affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental indenture
or waiver.
SECTION 9.03. Compliance with TIA. Every amendment or supplement
to this Indenture or the Notes shall be set forth in an amended supplemental
indenture that complies with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents. (a) Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
of a Note is a continuing consent by the Holder and every subsequent Holder of a
Note or portion of a Note that evidences the same Indebtedness as the consenting
Holder's Note, even if notation of the consent is not made on such Note.
However, any such Holder or subsequent Holder may revoke the consent as to its
Note or portion of a Note if the Trustee receives the notice of revocation
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Notes have
consented to the amendment, supplement or waiver.
(b) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Notes entitled to consent to
any amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders of Notes at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such amendment or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders of Notes after such record date. No consent shall be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Notes required hereunder for such amendment
or waiver to be effective shall have also been given and not revoked within such
90-day period.
(c) After an amendment or waiver becomes effective, it shall bind
every Holder, unless it is of the type described in clause (C) of Section
9.02(a), in which case the amendment or waiver shall only bind each Holder that
consented to it and every subsequent Holder of a Note that evidences the same
debt as the consenting Holder's Note.
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SECTION 9.05. Notation or Exchange of Notes. The Trustee may
place an appropriate notation about an amendment, supplement or waiver on any
Note thereafter authenticated. The Company in exchange for all Notes may issue
and the Trustee shall authenticate new Notes that reflect the amendment,
supplement or waiver. Failure to make the appropriate notation or issue a new
Note shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. Trustee Protected. The Trustee shall sign any
amendment or supplemental indenture authorized pursuant to this Article 9 if the
amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign it.
In signing such amendment or supplemental indenture, the Trustee shall be
entitled to receive and, subject to Section 7.01, shall be fully protected in
relying upon, an Officers' Certificate and Opinion of Counsel pursuant to
Sections 12.04 and 12.05 as conclusive evidence that such amendment or
supplemental indenture is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon the
Company and the Guarantors in accordance with its terms. Neither the Company nor
any Guarantor may sign an amendment or supplemental indenture until the Board of
Directors of the Company approves it.
ARTICLE 10
SUBORDINATION
SECTION 10.01. Agreement to Subordinate. The Company and each
Guarantor agrees, and each Holder by accepting a Note agrees, that the payment
by the Company of principal of, and premium, if any, and interest and Additional
Interest, if any, on, the Notes, and by each Guarantor of such amounts under its
Note Guarantee (collectively, the "NOTE INDEBTEDNESS"), are subordinated to the
prior payment in full in cash when due of the principal of, and premium, if any,
and accrued and unpaid interest on and all other amounts owing in respect of all
existing and future Senior Indebtedness of the Company and of such Guarantor, as
the case may be.
SECTION 10.02. Liquidation; Dissolution; Bankruptcy. Upon any
payment or distribution to creditors of the Company or any Guarantor of the
assets of the Company or such Guarantor, as the case may be, of any kind or
character in a total or partial liquidation or dissolution of the Company or
such Guarantor, as the case may be, or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or such
Guarantor, as the case may be, whether voluntary or involuntary (including any
assignment for the benefit of creditors and proceedings for marshaling of assets
and liabilities of the Company or such Guarantor, as the case may be) (an
"INSOLVENCY OR LIQUIDATION PROCEEDING"), the holders of all Senior Indebtedness
of the Company or such Guarantor, as the case
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may be, then outstanding will be entitled to payment in full in cash (including
interest accruing subsequent to the filing of petition of bankruptcy or
insolvency at the rate specified in the document relating to the applicable
Senior Indebtedness, whether or not such interest is an allowed claim
enforceable against the Company or such Guarantor, as the case may be, under
applicable law) before the Holders of Notes are entitled to receive any payment
on or with respect to the Note Indebtedness from the Company or such Guarantor,
as the case may be, and until all Senior Indebtedness of the Company or such
Guarantor, as the case may be, receives payment in full in cash, any
distribution to which the Holders of Notes would be entitled will be made to
holders of Senior Indebtedness of the Company or such Guarantor, as the case may
be.
SECTION 10.03. No Payment on Notes in Certain Circumstances. (a)
Upon the occurrence of any default in the payment of any principal of or
interest on or other amounts due on any Designated Senior Indebtedness of the
Company or any Guarantor (a "PAYMENT DEFAULT"), no payment of any kind or
character shall be made by the Company or such Guarantor, as the case may be,
(or by any other Person on its or their behalf) with respect to the Note
Indebtedness unless and until (i) such Payment Default shall have been cured or
waived in accordance with the instruments governing such Designated Senior
Indebtedness or shall have ceased to exist, (ii) such Designated Senior
Indebtedness has been discharged or paid in full in cash in accordance with the
instruments governing such Designated Senior Indebtedness, or (iii) the benefits
of this sentence have been waived by the holders of such Designated Senior
Indebtedness or their Representative immediately after which the Company or such
Guarantor, as the case may be, must resume making any and all required payments,
including missed payments, in respect of its obligations under the Notes.
(b) Upon (i) the occurrence and continuance of an event of
default (other than a Payment Default) relating to Designated Senior
Indebtedness of the Company or any Guarantor, as such event of default is
defined therein or in the instrument or agreement under which such Designated
Senior Indebtedness is outstanding, which event of default, pursuant to the
instruments governing such Designated Senior Indebtedness, entitles the holders
(or a specified portion of the holders) of such Designated Senior Indebtedness
or their designated representative to immediately accelerate without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace period the maturity of such Designated
Senior Indebtedness (whether or not such acceleration has actually occurred) (a
"NON-PAYMENT DEFAULT") and (ii) the receipt by the Trustee and the Company or
such Guarantor, as the case may be, from the trustee or other Representative of
holders of such Designated Senior Indebtedness of written notice (a "PAYMENT
BLOCKAGE NOTICE") of such occurrence, no payment is permitted to be made by the
Company or such Guarantor, as the case may be, (or by any other Person on its or
their behalf) in respect of the Note Indebtedness for a period (a "PAYMENT
BLOCKAGE PERIOD") commencing on the date of receipt by the Trustee of such
Payment Blockage Notice and ending on the earliest to occur of the following
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events (subject to any blockage of payments that may then be in effect due to a
Payment Default on Designated Senior Indebtedness): (w) such Non-payment Default
has been cured or waived or has ceased to exist; (x) a 179-consecutive-day
period commencing on the date such Payment Blockage Notice is received by the
Trustee has elapsed; (y) such Payment Blockage Period has been terminated by
written notice to the Trustee from the trustee or other representative of
holders of such Designated Senior Indebtedness, whether or not such Non-payment
Default has been cured or waived or has ceased to exist; and (z) such Designated
Senior Indebtedness has been discharged or paid in full in cash, immediately
after which, in the case of clause (w), (x), (y) or (z), the Company or such
Guarantor, as the case may be, must resume making any and all required payments,
including missed payments, in respect of its obligations under the Notes.
Notwithstanding the foregoing, (A) not more than one Payment Blockage Period may
be commenced in any period of 360 consecutive days and (B) no default or event
of default with respect to the Designated Senior Indebtedness of the Company or
such Guarantor, as the case may be, that was the subject of a Payment Blockage
Notice which existed or was continuing on the date of the giving of any Payment
Blockage Notice shall be or serve as the basis for the giving of a subsequent
Payment Blockage Notice whether or not within a period of 360 consecutive days
unless such default or event of default shall have been cured or waived for a
period of at least 90 consecutive days after such date. Notwithstanding anything
in this Indenture to the contrary, in no event may the total number of days
during which any Payment Blockage Period or Periods are in effect exceed 179
days in the aggregate during any 360 day consecutive period.
SECTION 10.04. Acceleration of Notes. If payment of the Notes is
accelerated because of an Event of Default, the Company shall promptly notify
each holder of the Senior Indebtedness of the Company or any Guarantor of the
acceleration.
SECTION 10.05. When Distributions Must Be Paid Over. In the event
that any payment or distribution of assets of the Company or any Guarantor,
whether in cash, property or securities, shall be received by the Trustee or the
Holders of Notes at a time when such payment or distribution is prohibited by
this Article 10, such payment or distribution shall be segregated from other
funds or assets and held in trust for the benefit of the holders of Senior
Indebtedness of the Company or such Guarantor, as the case may be, and shall be
paid or delivered by the Trustee or such Holders, as the case may be, to the
holders of the Senior Indebtedness of the Company or such Guarantor, as the case
may be, remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
or such Guarantor, as the case may be, may have been issued, ratably according
to the aggregate amounts remaining unpaid on account of the Senior Indebtedness
of the Company or such Guarantor, as the case may be, held or represented by
each, for application to the payment of all Senior Indebtedness of the Company
or such Guarantor, as the case may be, remaining unpaid, to the extent necessary
to pay or to provide for the payment in full in
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cash of all such Senior Indebtedness after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
With respect to the holders of Senior Indebtedness of the Company
or any Guarantor, the Trustee undertakes to perform only such obligations on its
part as are specifically set forth in this Article 10, and no implied covenants
or obligations with respect to any holders of the Senior Indebtedness of the
Company or any Guarantor shall be read into this Indenture against the Trustee.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of the
Senior Indebtedness of the Company or any Guarantor and shall not be liable to
any holders of such Senior Indebtedness if the Trustee shall pay over or
distribute to, or on behalf of, Holders or the Company or any other Person,
money or assets to which any holders of such Senior Indebtedness are entitled
pursuant to this Article 10, except if such payment is made at a time when a
Trust Officer has knowledge that the terms of this Article 10 prohibit such
payment.
SECTION 10.06. Notice. Neither the Trustee nor the Paying Agent
shall at any time be charged with the knowledge of the existence of any facts
that would prohibit the making of any payment to or by the Trustee or Paying
Agent under this Article 10, unless and until the Trustee or Paying Agent shall
have received written notice thereof from the Company or such Guarantor or one
or more holders of the Senior Indebtedness of the Company or such Guarantor, as
the case may be, or a Representative of any holders of such Senior Indebtedness;
and, prior to the receipt of any such written notice, the Trustee or Paying
Agent shall be entitled to assume conclusively that no such facts exist. The
Trustee shall be entitled to rely on the delivery to it of written notice by a
Person representing itself to be a holder of the Senior Indebtedness of the
Company or a Guarantor (or a Representative thereof) to establish that such
notice has been given.
The Company shall promptly notify the Trustee and the Paying
Agent in writing of any facts it knows that would cause a payment of principal
of, or premium, if any, or interest (including Additional Interest, if any) on,
the Notes or any other Obligation in respect of the Notes to violate this
Article 10, but failure to give such notice shall not affect the subordination
of the Notes to the Senior Indebtedness of the Company or any Guarantor provided
in this Article 10 or the rights of holders of such Senior Indebtedness under
this Article 10.
SECTION 10.07. Subrogation. After all Senior Indebtedness of the
Company or any Guarantor has been paid in full in cash and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of such Senior
Indebtedness to receive distributions applicable to such Senior Indebtedness to
the extent that distributions otherwise payable to Holders have been applied to
the payment of such Senior Indebtedness. A distribution made under this Article
10 to holders of the Senior Indebtedness of the Company or any Guarantor that
otherwise would have been made to Holders is not, as between the Company or such
Guarantor, as the
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case may be, and Holders, a payment by the Company or such Guarantor, as the
case may be, on its Senior Indebtedness.
SECTION 10.08. Relative Rights. This Article 10 defines the
relative rights of Holders and holders of the Senior Indebtedness of the Company
or any Guarantor. Nothing in this Indenture shall: (1) impair, as between the
Company or a Guarantor, as the case may be, and Holders, the Obligations of the
Company or any Guarantor, which are absolute and unconditional, to pay principal
of, and premium, if any, and interest (including Additional Interest, if any) on
the Notes in accordance with their terms; (2) affect the relative rights of
Holders and the creditors of the Company or any Guarantor other than their
rights in relation to holders of the Senior Indebtedness of the Company or any
Guarantor; or (3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders of the Senior Indebtedness of the Company or any Guarantor to receive
distributions and payments otherwise payable to Holders.
Nothing contained in this Article 10 or elsewhere in this
Indenture or in any Note is intended to or shall impair, as between the Company,
any Guarantor and the Holders, the Obligations of the Company and the
Guarantors, which are absolute and unconditional, to pay to the Holders the
principal of, and premium, if any, and interest (including Additional Interest,
if any) on the Notes as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company and the Guarantors other than
the holders of the Senior Indebtedness of the Company or any Guarantor, nor
shall anything herein or therein prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon Default under
this Indenture, subject to the rights, if any, under this Article 10 of the
holders of such Senior Indebtedness.
The failure to make a payment on account of principal of, or
interest on the Notes by reason of any provision of this Article 10 shall not be
construed as preventing the occurrence of an Event of Default under Section
6.01.
SECTION 10.09. The Company, Guarantors and Holders May Not Impair
Subordination. (a) No right of any holder of the Senior Indebtedness of the
Company or any Guarantor to enforce the subordination as provided in this
Article 10 shall at any time or in any way be prejudiced or impaired by any act
or failure to act by the Company or any Guarantor or by any noncompliance by the
Company or any Guarantor with the terms, provisions and covenants of this
Indenture or the Notes or any other agreement regardless of any knowledge
thereof with which any such holder may have or be otherwise charged.
(b) Without in any way limiting Section 10.09(a), the holders of
any Senior Indebtedness of the Company or any Guarantor may, at any time and
from time to time to the extent not otherwise prohibited by this Indenture,
without the consent of or notice to any
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Holders, without incurring any liabilities to any Holder and without impairing
or releasing the subordination and other benefits provided in this Indenture or
the Holders' obligations to the holders of such Senior Indebtedness, even if any
Holder's right of reimbursement or subrogation or other right or remedy is
affected, impaired or extinguished thereby, do any one or more of the following:
(i) amend, renew, exchange, extend, modify, increase or supplement (to the
extent permitted under this Indenture) in any manner such Senior Indebtedness or
any instrument evidencing or guaranteeing or securing such Senior Indebtedness
or any agreement under which such Senior Indebtedness is outstanding (including,
but not limited to, changing the manner, place or terms of payment or changing
or extending the time of payment of, or renewing, exchanging, amending,
increasing or altering (to the extent permitted under this Indenture), (x) the
terms of such Senior Indebtedness, (y) any security for, or any Guarantee of,
such Senior Indebtedness, (z) any liability of any obligor on such Senior
Indebtedness (including any guarantor) or any liability incurred in respect of
such Senior Indebtedness); (ii) sell, exchange, release, surrender, realize
upon, enforce or otherwise deal with in any manner and in any order any property
pledged, mortgaged or otherwise securing such Senior Indebtedness or any
liability of any obligor thereon, to such holder, or any liability incurred in
respect thereof; (iii) settle or compromise any such Senior Indebtedness or any
other liability of any obligor of such Senior Indebtedness to such holder or any
security therefor or any liability incurred in respect thereof and apply any
sums by whomsoever paid and however realized to any liability (including,
without limitation, payment of any of the Senior Indebtedness) in any manner or
order; and (iv) fail to take or to record or otherwise perfect, for any reason
or for no reason, any lien or security interest securing such Senior
Indebtedness by whomsoever granted, exercise or delay in or refrain from
exercising any right or remedy against any obligor or any guarantor or any other
Person, elect any remedy and otherwise deal freely with any obligor and any
security for such Senior Indebtedness or any liability of any obligor to the
holders of such Senior Indebtedness or any liability incurred in respect of such
Senior Indebtedness.
SECTION 10.10. Distribution or Notice to Representative. Whenever
a distribution is to be made, or a notice given, to holders of Senior
Indebtedness of the Company or any Guarantor, the distribution may be made and
the notice given to their Representative, if any. If any payment or distribution
of the Company's assets is required to be made to holders of any of the Senior
Indebtedness of the Company or any Guarantor pursuant to this Article 10, the
Trustee and the Holders shall be entitled to rely upon any order or decree of
any court of competent jurisdiction, or upon any certificate of a Representative
of such Senior Indebtedness or a Custodian, in ascertaining the holders of such
Senior Indebtedness entitled to participate in any such payment or distribution,
the amount to be paid or distributed to holders of such Senior Indebtedness and
all other facts pertinent to such payment or distribution or to this Article 10.
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SECTION 10.11. Rights of Trustee and Paying Agent. The Trustee or
Paying Agent may continue to make payments on the Notes unless prior to any
payment date it has received written notice of facts that would cause a payment
of principal of, or premium, if any, or interest (including Additional Interest,
if any) on the Notes to violate this Article 10. Only the Company, a Guarantor,
a Representative of Senior Indebtedness, or a holder of Senior Indebtedness that
has no Representative may give such notice.
To the extent permitted by the TIA, the Trustee in its individual
or any other capacity may hold Indebtedness of the Company or any Guarantor
(including Senior Indebtedness) with the same rights it would have if it were
not Trustee. Any Agent may do the same with like rights.
SECTION 10.12. Trust Moneys Not Subordinated; Permitted Junior
Securities. Notwithstanding anything contained herein to the contrary, (x)
payments of U.S. Legal Tender or the proceeds of Government Securities held in
trust under Article 8 by the Trustee for the payment of principal of and
interest on the Notes shall not be subordinated to the prior payment of any
Senior Indebtedness or subject to the restrictions set forth in this Article 10
and (y) Holders of Notes may receive and retain Permitted Junior Securities, and
no such receipt or retention will be contractually subordinated in right of
payment to any Senior Indebtedness or subject to the restrictions described in
this Article 10, and none of the Holders shall be obligated to pay over any such
amount to the Company or any Guarantor, any holder of Senior Indebtedness of the
Company or any Guarantor or any other creditor of the Company or any Guarantor.
SECTION 10.13. Authorization to Effect Subordination. Each Holder
of a Note by its acceptance thereof authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article 10, and appoints the Trustee as such
Holder's attorney-in-fact for any and all such purposes (including, without
limitation, the timely filing of a claim for the unpaid balance of the Note that
such Holder holds in the form required in any Insolvency or Liquidation
Proceeding and causing such claim to be approved).
If a proper claim or proof of debt in the form required in such
proceeding is not filed by or on behalf of all Holders prior to 30 days before
the expiration of the time to file such claims or proofs, then the holders or a
Representative of any Senior Indebtedness of the Company or any Guarantor are
hereby authorized, and shall have the right (without any duty), to file an
appropriate claim for and on behalf of the Holders.
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ARTICLE 11
GUARANTEE
SECTION 11.01. Guarantee. Each Guarantor hereby unconditionally,
jointly and severally, guarantees (each a "NOTE GUARANTEE") to each Holder of a
Note authenticated and delivered by the Trustee that: (i) the principal of,
premium and interest (including Additional Interest, if any) on the Notes will
be promptly paid in full when due, whether at maturity, by acceleration,
redemption, upon an Offer or otherwise, and interest on the overdue principal of
and interest (including Additional Interest, if any), and premium, if any, on
the Notes, if any, to the extent lawful, and all other Obligations of the
Company to the Holders or the Trustee under this Indenture and the Notes will be
promptly paid in full, all in accordance with the terms of this Indenture and
the Notes; and (ii) in case of any extension of time of payment or renewal of
any Notes or any of such other Obligations, that the Notes will be promptly paid
in full when due in accordance with the terms of such extension or renewal,
whether at stated maturity, by acceleration or otherwise.
Each Guarantor hereby further agrees that its Obligations under
this Indenture and the Notes shall, subject to Section 11.05, be unconditional,
regardless of the validity, legality or enforceability of this Indenture or the
Notes, the absence of any action to enforce this Indenture or the Notes, any
waiver or consent by any Holder with respect to any provisions this Indenture or
the Notes, any modification or amendment of, or supplement of, this Indenture or
the Notes, the recovery of any judgment against the Company or any action to
enforce any such judgment, or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of such Guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenants that its Note Guarantee will not be discharged
except by complete performance by the Company of such Obligations. If any Holder
or the Trustee is required by any court or otherwise to return to the Company,
such Guarantor or a Custodian of the Company or such Guarantor any amount paid
by the Company or such Guarantor to the Trustee or such Holder, its Note
Guarantee shall, to the extent previously discharged as a result of any such
payment, be immediately reinstated and be in full force and effect. Each
Guarantor hereby acknowledges and agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Company's Obligations under this Indenture and the Notes may be accelerated as
provided in Article 6 for purposes of its Note Guarantee notwithstanding any
stay, injunction or other prohibition preventing such acceleration, and (y) in
the event of any declaration of acceleration of the Company's Obligations under
this Indenture and the Notes as provided in Article 6, such Obligations (whether
or not due and payable) shall forthwith become due and payable by such Guarantor
for the purpose of its Note Guarantee.
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SECTION 11.02. Trustee to Include Paying Agent. In case at any
time any Paying Agent other than the Trustee shall have been appointed by the
Company, the term "Trustee" as used in this Article 11 shall (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 11 in place of the Trustee.
SECTION 11.03. Subordination of Guarantee. Each Guarantor's
Obligations under its Note Guarantee shall be junior and subordinated in right
of payment to any Senior Indebtedness of such Guarantor in the same manner and
to the same extent as the Notes are subordinated to Senior Indebtedness of the
Company pursuant to Article 10.
SECTION 11.04. Limits of Guarantee. Notwithstanding anything to
the contrary in this Article 11, the aggregate amount of the Obligations
guaranteed under this Indenture by each Guarantor shall be limited in amount to
the maximum amount that would not render such Guarantor's obligations subject to
avoidance under applicable fraudulent conveyance provisions of the Bankruptcy
Code or any comparable provision of any applicable state law.
SECTION 11.05. Severability. In case any provision of this
Note Guarantee shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 11.06. Subrogation. Upon making any payment with respect
to the Company hereunder, each Guarantor shall be subrogated to the rights of
the payee against the Company with respect to such payment; provided that no
Guarantor shall enforce any payment by way of subrogation or contribution until
all Obligations of the Company under this Indenture have been paid in full. If
any amount shall be paid to any Guarantor in violation of the preceding sentence
and the Notes shall not have been paid in full, such amount shall have been
deemed to have been paid to such Guarantor for the benefit of, and held in trust
for the benefit of, the Holders of the Notes, and shall, subject to the
provisions of Section 11.03, forthwith be paid to the Trustee for the benefit of
such Holders to be credited and applied upon the Notes, whether matured or
unmatured, in accordance with terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 11.06 is knowingly made in contemplation of such benefits.
SECTION 11.07. Execution of Guarantee. To evidence their Note
Guarantee to the Noteholders specified in Section 11.01, the Guarantors hereby
agree to execute the Note Guarantee in substantially the form of EXHIBIT E,
which shall be endorsed on each Note ordered to be authenticated and delivered
by the Trustee. Each Guarantor hereby agrees that its Note Guarantee set forth
in Section 11.01 shall remain in full force and effect notwithstanding
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any failure to endorse on each Note a notation of such Note Guarantee. Each such
Note Guarantee shall be signed on behalf of each Guarantor by two Officers, or
an Officer and an Assistant Secretary or one Officer shall sign and one Officer
or an Assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) shall attest to such Note
Guarantee prior to the authentication of the Note on which it is endorsed, and
the delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such Note Guarantee on behalf of
such Guarantor. Such signatures upon the Note Guarantee may be by manual or
facsimile signature of such officers and may be imprinted or otherwise
reproduced on the Note Guarantee, and in case any such officer who shall have
signed the Note Guarantee shall cease to be such officer before the Note on
which such Note Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Note nevertheless
may be authenticated and delivered or disposed of as though the person who
signed the Note Guarantee had not ceased to be such officer of the Guarantor.
SECTION 11.08. Release of Guarantor. A Subsidiary Guarantor shall
be released from all of its obligations under its Guarantee if:
(i) all of the assets or Capital Stock of such Subsidiary
Guarantor have been sold or otherwise disposed of in a transaction in
compliance with the terms of this Indenture (including, without
limitation, Section 4.16); or
(ii) the Subsidiary Guarantor is designated an Unrestricted
Subsidiary in compliance with the terms of this Indenture (including
Section 4.05);
and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with and that such release is authorized and permitted hereunder.
The Trustee shall execute any documents reasonably requested by
the Company or a Guarantor in order to evidence the release of such Guarantor
from its obligations under its Guarantee endorsed on the Notes and under this
Article 11.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies, or conflicts with the duties imposed by
operation of Section 318(c) of the TIA, the imposed duties shall control.
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<PAGE>
<PAGE>
SECTION 12.02. Notices. Any notice or communication by the
Company, any Guarantor or the Trustee to the other is duly given if in writing
and delivered in person, mailed by registered or certified mail, postage
prepaid, return receipt requested or delivered by telecopier or overnight air
courier guaranteeing next day delivery to the other's address:
If to the Company or the Guarantors:
Agrilink Foods, Inc.
90 Linden Oaks
Rochester, New York 14602
Telecopier: (716) 383-1606
Attention: President
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Telecopier: (212) 858-2952
Attention: Corporate Finance Trust Services
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: (i) at the time delivered by hand, if
personally delivered; (ii) the date receipt is acknowledged, if mailed by
registered or certified mail; (iii) when answered back, if telecopied and (iv)
the next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first-class mail to his or her address shown on the register maintained by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it. If the
Company mails a notice or communication to Holders, it shall mail a copy to the
Trustee and each Agent at the same time.
SECTION 12.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to section 312(b) of the TIA with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other Person shall have the protection of section
312(c) of the TIA.
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<PAGE>
SECTION 12.04. Certificate and Opinion As to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee, at
the Trustee's request: (a) an Officers' Certificate (which shall include the
statements set forth in Section 12.05) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with and (b) an
Opinion of Counsel (which shall include the statements set forth in Section
12.05) stating that, in the opinion of such counsel, all such conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with.
SECTION 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to section 314(a)(4) of the TIA) shall include: (1) a statement that
the Person making such certificate or opinion has read such covenant or
condition; (2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; (3) a statement that, in the opinion of such
Person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with, and (4) a statement as to whether, in such
Person's opinion, such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or at a meeting of Holders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
SECTION 12.07. Legal Holidays. If a payment date is a not a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
SECTION 12.08. No Recourse Against Others. No director, officer,
employee, incorporator or direct or indirect stockholder or Affiliate of the
Company or any Guarantor (other than the Company and any Guarantor), as such,
shall have any liability for any obligation of the Company or such Guarantor
under this Indenture, the Note Guarantees or the Notes or for any claim based
on, in respect of, or by reason of, any such obligation or the creation of any
such obligation. Each Holder by accepting a Note waives and releases such
Persons from all such liability and such waiver and release is part of the
consideration for the issuance of the Notes.
SECTION 12.09. Counterparts. This Indenture may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
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<PAGE>
SECTION 12.10. Initial Appointments, Compliance Certificates. The
Company initially appoints the Trustee as Paying Agent, Registrar (subject to
Section 2.03 and 2.06) and authenticating agent. The first compliance
certificate to be delivered by the Company to the Trustee pursuant to Section
4.03 shall be for the fiscal year ending on June 26, 1999.
SECTION 12.11. Governing Law. The laws of the State of New York
shall govern this Indenture and the Notes, without regard to conflict of laws
provisions thereof.
SECTION 12.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries, and no other indenture,
loan or debt agreement may be used to interpret this Indenture.
SECTION 12.13. Successors. All agreements of the Company and the
Guarantors in this Indenture and the Notes shall bind any successors of the
Company and such Guarantors, respectively. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 12.14. Severability. If any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 12.15. Third Party Beneficiaries. Holders of Senior
Indebtedness are third party beneficiaries of this Indenture, and any of them
(or their Representative) shall have the right to enforce the provisions of this
Indenture that benefit such holders.
SECTION 12.16. Table of Contents, Headings, Etc. The Table of
Contents and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part of
this Indenture, and shall in no way modify or restrict any of the terms or
provisions of this Indenture.
[Signature Pages Follow]
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<PAGE>
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date and year first written above.
AGRILINK FOODS, INC.
By: /s/ DENNIS M. MULLEN
-----------------------------
Name:
Title:
PRO-FAC COOPERATIVE, INC.
By: /s/ EARL L. POWERS
-----------------------------
Name:
Title:
LINDEN OAKS CORPORATION
By: /s/ TIMOTHY BENJAMIN
-----------------------------
Name:
Title:
KENNEDY ENDEAVORS, INCORPORATED
By: /s/ EARL L. POWERS
-----------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
By:
-----------------------------
Name:
Title:
<PAGE>
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date and year first written above.
AGRILINK FOODS, INC.
By:
-----------------------------
Name:
Title:
PRO-FAC COOPERATIVE, INC.
By:
-----------------------------
Name:
Title:
LINDEN OAKS CORPORATION
By:
-----------------------------
Name:
Title:
KENNEDY ENDEAVORS, INCORPORATED
By:
-----------------------------
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
By: /s/ TERENCE RAWLINS
-----------------------------
Name: TERENCE RAWLINS
Title: ASSISTANT VICE PRESIDENT
<PAGE>
<PAGE>
EXHIBIT A
[FORM OF INITIAL NOTE]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (1)
BY ITS ACQUISITION HEREOF REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED
HEREBY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT AND (2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION
UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE ISSUER THAT PRIOR TO THE DATE WHICH IS TWO
YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND
THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION TERMINATION DATE") (X)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY: (i)
(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON
(AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), (ii) TO THE COMPANY OR (iii) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES
A-1
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<PAGE>
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (Y) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (X) ABOVE. THE FOREGOING
RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE
RESTRICTION TERMINATION DATE.
AGRILINK FOODS, INC.
11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
No. ____________ $__________
[CUSIP][CINS] NO.
Agrilink Foods, Inc., a corporation duly organized and existing
under the laws of the State of New York (herein called the "COMPANY", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ______________________, or registered
assigns, the principal sum of ___________________ Dollars on November 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing
May 1, 1999
Record Dates:. April 15 and October 15
Pursuant to the Indenture, the payment of principal of and
premium, if any, and interest and, if applicable, Additional Interest on this
Note is unconditionally guaranteed by Pro-Fac Cooperative, Inc., a cooperative
corporation duly organized and existing under the laws of the State of New York,
and its successors ("PRO-FAC") and by the Subsidiary Guarantors (as defined in
the Indenture) (together with Pro-Fac, the "GUARANTORS"), and such other Persons
as may from time to time execute and deliver to the Trustee a counterpart of the
Indenture as a Subsidiary Guarantor.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof and as more fully specified in the Indenture,
which further provisions shall for all purposes have the same effect as if set
forth at this place.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
AGRILINK FOODS, INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
Dated: [ ]
This is one of the Notes referred to in the within-mentioned
Indenture.
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
Dated: [ ] By:
-----------------------------
Authorized Signatory
A-3
<PAGE>
<PAGE>
FORM OF REVERSE OF NOTE
1. INTEREST. Agrilink Foods, Inc. (the "COMPANY") promises to pay
interest on the principal amount of this Note at the rate and in the manner
specified below. Cash interest will accrue at 11-7/8% per annum until maturity
and will be payable semi-annually in arrears in cash on May 1 and November 1 of
each year commencing May 1, 1999, or if any such day is not a Business Day on
the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on
this Note will accrue from the most recent date on which interest has been paid
or, if no interest has been paid, from the original date of issue. To the extent
lawful, the Company shall pay interest on overdue principal, premium, if any,
interest and Additional Interest, if any, from time to time on demand at the
rate borne by this Note, compounded semi-annually. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
In the event that one or more Registration Defaults (as defined
in the Registration Rights Agreements) shall have occurred and be continuing
under the Registration Rights Agreement, then Additional Interest (as defined
therein) (in addition to the interest otherwise due hereon) will accrue on the
principal amount of the Transfer Restricted Securities (as defined therein) from
and including the date on which the first such Registration Default shall have
occurred to but excluding the date on which all such Registration Defaults have
been cured. All accrued Additional Interest, if any, will be paid by the Company
or the Guarantors, in arrears, on each Interest Payment Date.
2. METHOD OF PAYMENT. The Company will pay interest on this Note
to the Person who is the registered Holder of this Note at the close of business
on the record date for the next Interest Payment Date, which record date shall
be April 15 and October 15 of each year (each a "RECORD DATE"); notwithstanding
the foregoing, the first Record Date shall be April 15, 1999. Holders must
surrender Notes to a Paying Agent, as defined below, to collect principal
payments on such Notes. Principal of, premium, if any, interest and Additional
Interest, if any, on, the Notes will be payable at the office or agency of the
Company maintained for such purpose within the Borough of Manhattan in the City
and State of New York or, at the option of the Company by wire transfer of
immediately available funds or, in the case of certificated securities only, by
mailing a check to the registered address of the Holder. Until otherwise
designated by the Company, the Company's office or agency will be the office of
the Trustee maintained for such purpose. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. LEGAL TENDER").
3. PAYING AGENT AND REGISTRAR. (a) IBJ Schroder Bank & Trust
Company (the "TRUSTEE") will initially act as the Paying Agent and Registrar.
The Company may appoint additional paying agents or co-registrars, and change
the Paying Agent, any additional
A-4
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<PAGE>
paying agent, the Registrar or any co-registrar without prior notice to any
Holder. The Company, any Guarantor or any of their respective Affiliates may act
in any such capacity unless an Event of Default shall have occurred and be
continuing.
(b) Pursuant to the Indenture, the Company has appointed the
Trustee as transfer and exchange agent for the purpose of any transfer or
exchange of the Notes.
(c) Holders shall present Notes to the Trustee, as transfer and
exchange agent, for transfer and exchange.
4. INDENTURE. The Company has issued the Notes under an
Indenture, dated as of November 18, 1998 (the "INDENTURE"), among the Company,
as issuer of the Notes, the Guarantors party thereto and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the original issuance of the Notes
(the "TRUST INDENTURE ACT"). Capitalized terms used herein are used as defined
in the Indenture unless defined herein. The Notes are subject to, and qualified
by, all such terms, certain of which are summarized herein, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of such
terms (all capitalized terms not defined herein shall have the meanings assigned
to them in the Indenture). The Notes are unsecured general obligations of the
Company limited to $200,000,000 in aggregate principal amount.
5. REDEMPTION PROVISIONS. (a) The Notes are not subject to any
mandatory sinking fund redemption prior to maturity.
(b) The Notes may not be redeemed prior to November 1, 2003, but
will be redeemable at the option of the Company, in whole or in part, at any
time on or after November 1, 2003, at the following redemption prices (expressed
as percentages of principal amount), together with accrued and unpaid interest
thereon to the redemption date, if redeemed during the twelve-month period
beginning November 1:
<TABLE>
<CAPTION>
OPTIONAL
REDEMPTION
YEAR PRICE
<S> <C>
2003................................. 105.938%
2004................................. 103.958%
2005................................. 101.979%
2006 and thereafter.................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 1,
2001, the Company may redeem at its option up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Equity Offerings at a redemption price equal to 111.875% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any, to
the redemption date; provided that (a) at least $130 million in
A-5
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<PAGE>
aggregate principal amount of the Notes originally issued remains outstanding
immediately after the occurrence of any such redemption and (b) such redemption
occurs within 60 days of the date of the closing of any such Equity Offering.
(c) If less than all of the Notes are to be redeemed at any time,
selection of the Notes to be redeemed will be made by the Trustee from among the
outstanding Notes on a pro rata basis, by lot or by any other method permitted
in the Indenture. Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each holder whose Notes are to
be redeemed at the registered address of such holder. On and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption.
6. MANDATORY OFFERS. (a) Upon the occurrence of a Change of
Control, each Holder of Notes will have the right to require that the Company
repurchase such Holder's Notes, in whole or in part in integral multiples of
$1,000 in principal amount, for a cash purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest (including Additional
Interest, if any), if any, to the date of repurchase, as provided in, and
subject to the terms of, the Indenture.
(b) The Company is, subject to certain conditions, obligated to
make an offer to purchase Notes at 100% of their principal amount, plus accrued
and unpaid interest (including Additional Interest, if any), if any, thereon to
the date of repurchase with certain of the Net Available Proceeds of Asset Sales
in accordance with the Indenture.
7. NOTES TO BE REDEEMED OR PURCHASED. The Notes may be redeemed
or purchased in part, but only in multiples of $1,000 principal amount unless
all Notes held by a Holder are to be redeemed or purchased. On or after any date
on which Notes are redeemed or purchased, interest ceases to accrue on the Notes
or portions thereof called for redemption or accepted for purchase on such date.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 principal amount of maturity
and integral multiples thereof. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. Holders seeking to transfer
or exchange their Notes may be required, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption or tendered pursuant to an Offer. Neither the Trustee nor the
Registrar shall be required (i) to register the transfer of or exchange any Note
selected for redemption, (ii) to register the transfer of or exchange any Note
for a period of 15 days before the mailing of a notice of redemption ending on
the date of such mailing, (iii) to register the transfer or exchange of a Note
between a Record Date and the next succeeding Interest Payment Date.
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9. PERSONS DEEMED OWNERS. The registered Holder of a Note shall
be treated as the owner of the Note for all purposes.
10. AMENDMENTS AND WAIVERS. (a) Subject to certain exceptions,
the Indenture and the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes), and any existing Default or Event
of Default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for the Notes).
(b) Notwithstanding section 10(a) above, the Company, the
Guarantors and the Trustee may amend or supplement the Indenture or the Notes,
without the consent of any Holder, to: cure any ambiguity, defect or
inconsistency; provide for uncertificated Notes in addition to or in place of
certificated Notes; provide for the assumption of the obligations to the Holders
of the Company, or the Guarantors, as the case may be, in the event of any
merger or reorganization involving the Company, or a Guarantor, as the case may
be, that is permitted under Article 5 of the Indenture; make any change that
would provide any additional rights or benefits to Holders or does not adversely
affect the legal rights under the Indenture of any Holder; or comply with the
requirements of the Securities and Exchange Commission ("SEC") in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
11. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture, the Notes or the Note Guarantees except
as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Notes or the Note Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of certain continuing
Defaults or Events of Default if it determines that withholding notice is in
their interest.
12. SUBORDINATION. All Obligations owed under and in respect of
the Notes are subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, to the prior payment in full in cash of
all Obligations owed under and in respect of all existing and future Senior
Indebtedness of the Company and of each Guarantor, and the subordination of the
Notes is for the benefit of all holders of all Senior Indebtedness, whether
outstanding on the Issue Date or incurred thereafter. The Company and each
Guarantor agree, and each Holder by accepting a Note agrees, to the
subordination.
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<PAGE>
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee in its individual
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Company or any of its Affiliates with the same rights it would
have if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or direct or indirect stockholder of the Company or any Guarantor
(other than the Company and any Guarantor), as such, shall have any liability
for any obligation of the Company or such Guarantor under the Indenture or the
Notes or Note Guarantees or for any claim based on, in respect of, or by reason
of, any such obligation or the creation of any such obligation. Each Holder by
accepting a Note waives and releases such Persons from all such liability, and
such waiver and release is part of the consideration for the issuance of the
Notes.
15. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. The Company and
the Guarantors may be discharged from their obligations under the Indenture, the
Notes and the Note Guarantees except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture, the Notes and the Note Guarantees, in each case upon satisfaction of
certain conditions specified in the Indenture.
16. RESTRICTIVE COVENANTS. The Indenture contains certain
covenants that, among other things, limit the ability of the Company and its
Restricted Subsidiaries to make restricted payments, to incur indebtedness, to
create liens, to sell assets, to permit restrictions on dividends and other
payments by Restricted Subsidiaries of the Company to the Company, to
consolidate, merge or sell all or substantially all of its assets or to engage
in transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to the
Trustee on compliance with such limitations.
17. GOVERNING LAW. This Note shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflict of laws provisions thereof.
18. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
19. CUSIP/CINS NUMBERS. Pursuant to a recommendation promulgated
by the Committee on Uniform Note Identification Procedures, the Company has
caused CUSIP and CINS numbers, as applicable, to be printed on the Notes and has
directed the Trustee to use CUSIP and CINS numbers, as applicable, in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers printed on the Notes.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to: Agrilink Foods,
Inc., 90 Linden
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<PAGE>
Oaks, P.O. Box 20670, Rochester, New York 14602, Attention: Vice
President--Communications, or by telephone at 716-383-1850.
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<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES*
The following exchanges of a part of this Global Note for
Physical Notes have been made:
<TABLE>
<CAPTION>
Amount of Amount of increase Principal Amount of Signature of
decrease in in this Global Note authorized officer
Date of Exchange Principal Amount Principal Amount of following such of Trustee or
of this Global this Global Note decrease (or increase) Notes Custodian
Note
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ------------------------
* This schedule should only be added if the Note is issued in global form.
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<PAGE>
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- ------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: _________________ Signed: _______________________________________
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee: ______________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantee
program reasonably acceptable to the Trustee)
In connection with any transfer of this Note occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "SECURITIES ACT") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) by end of the period referred to in Rule 144(k) under the
Securities Act, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that
this Note is being transferred:
A-11
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
[Check One]
<S> <C>
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) that has furnished
to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the Securities
Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act; or
(6) __ pursuant to an effective registration statement under the Securities Act;
or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act;
</TABLE>
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided that if box (3), (4),
(5) or (7) is checked, the Company or the Trustee may require, prior to
registering any such transfer of the Notes, in its sole discretion, such legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act.
A-12
<PAGE>
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.09 of the Indenture shall have been satisfied.
Dated: __________________ Signed: _______________________________
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee: _________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantee
program reasonably acceptable to the Trustee)
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ ________________________________
NOTICE: To be executed by
an executive officer
A-13
<PAGE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Note purchased by the Company pursuant
to Section 4.15 of the Indenture, check the box: [ ]
If you elect to have this Note purchased by the Company pursuant
to Section 4.16 of the Indenture, check the box: [ ]
If you elect to have only part of the principal amount of this
Note purchased by the Company pursuant to Section 4.15 or 4.16 of the Indenture,
state the portion of such amount (multiples of $1,000 principal amount only):
$____________________________.
Dated: ______________________ Your signature: _______________________________
(Sign exactly as name appears on
the other side of this Note)
Signature Guarantee:____________________________________
(Signature must be guaranteed by a financial institution that is
a member of the Securities Transfer Agent Medallion Program ("STAMP"), in
accordance with the Securities Exchange Act of 1934, as amended.)
A-14
<PAGE>
<PAGE>
EXHIBIT B
[FORM OF EXCHANGE NOTE]
AGRILINK FOODS, INC.
11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
No. ____________ $__________
[CUSIP][CINS] NO.
Agrilink Foods, Inc., a corporation duly organized and existing
under the laws of the State of New York (herein called the "COMPANY", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ______________________, or registered
assigns, the principal sum of ___________________ Dollars on November 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing
May 1, 1999
Record Dates: April 15 and October 15
Pursuant to the Indenture, the payment of principal of and
premium, if any, and interest and, if applicable, Additional Interest on this
Note is unconditionally guaranteed by Pro-Fac Cooperative, Inc., a cooperative
corporation duly organized and existing under the laws of the State of New York,
and its successors ("PRO-FAC") and by the Subsidiary Guarantors (as defined in
the Indenture) (together with Pro-Fac, the "GUARANTORS"), and such other Persons
as may from time to time execute and deliver to the Trustee a counterpart of the
Indenture as a Subsidiary Guarantor.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof and as more fully specified in the Indenture,
which further provisions shall for all purposes have the same effect as if set
forth at this place.
B-1
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
AGRILINK FOODS, INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
Dated: [ ]
This is one of the Notes referred to in the within-mentioned
Indenture.
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
Dated: [ ] By:
--------------------------------
Authorized Signatory
B-2
<PAGE>
<PAGE>
FORM OF REVERSE OF NOTE
1. INTEREST. Agrilink Foods, Inc. (the "COMPANY") promises to pay
interest on the principal amount of this Note at the rate and in the manner
specified below. Cash interest will accrue at 11-7/8% per annum until maturity
and will be payable semi-annually in arrears in cash on May 1 and November 1 of
each year commencing May 1, 1999, or if any such day is not a Business Day on
the next succeeding Business Day (each an "INTEREST PAYMENT DATE"). Interest on
this Note will accrue from the most recent date on which interest has been paid
or, if no interest has been paid, from the original date of issue. To the extent
lawful, the Company shall pay interest on overdue principal, premium, if any,
interest and Additional Interest, if any, from time to time on demand at the
rate borne by this Note, compounded semi-annually. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
There shall also be payable in respect of this Note all
Additional Interest that may have accrued on the Note for which this Note was
exchanged (as defined in such Note) pursuant to the Exchange Offer or otherwise
pursuant to a Registration of such Note, such Additional Interest to be payable
in accordance with the terms of such Note.
2. METHOD OF PAYMENT. The Company will pay interest on this Note
to the Person who is the registered Holder of this Note at the close of business
on the record date for the next Interest Payment Date, which record date shall
be April 15 and October 15 of each year (each a "RECORD DATE"); notwithstanding
the foregoing, the first Record Date shall be April 15, 1999. Holders must
surrender Notes to a Paying Agent, as defined below, to collect principal
payments on such Notes. Principal of, premium, if any, interest and Additional
Interest, if any, on, the Notes will be payable at the office or agency of the
Company maintained for such purpose within the Borough of Manhattan in the City
and State of New York or, at the option of the Company by wire transfer of
immediately available funds or, in the case of certificated securities only, by
mailing a check to the registered address of the Holder. Until otherwise
designated by the Company, the Company's office or agency will be the office of
the Trustee maintained for such purpose. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. LEGAL TENDER").
3. PAYING AGENT AND REGISTRAR. (a) IBJ Schroder Bank & Trust
Company (the "TRUSTEE") will initially act as the Paying Agent and Registrar.
The Company may appoint additional paying agents or co-registrars, and change
the Paying Agent, any additional paying agent, the Registrar or any co-registrar
without prior notice to any Holder. The Company, any Guarantor or any of their
respective Affiliates may act in any such capacity unless an Event of Default
shall have occurred and be continuing.
(b) Pursuant to the Indenture, the Company has appointed the
Trustee as transfer and exchange agent for the purpose of any transfer or
exchange of the Notes.
B-3
<PAGE>
<PAGE>
(c) Holders shall present Notes to the Trustee, as transfer and
exchange agent, for transfer and exchange.
4. INDENTURE. The Company has issued the Notes under an
Indenture, dated as of November 18, 1998 (the "INDENTURE"), among the Company,
as issuer of the Notes, the Guarantors party thereto and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the original issuance of the Notes
(the "TRUST INDENTURE ACT"). The Notes are subject to, and qualified by, all
such terms, certain of which are summarized herein, and Holders are referred to
the Indenture and the Trust Indenture Act for a statement of such terms (all
capitalized terms not defined herein shall have the meanings assigned to them in
the Indenture). The Notes are unsecured general obligations of the Company
limited to $200,000,000 in aggregate principal amount.
5. REDEMPTION PROVISIONS. (a) The Notes are not subject to any
mandatory sinking fund redemption prior to maturity.
(b) The Notes may not be redeemed prior to November 1, 2003, but
will be redeemable at the option of the Company, in whole or in part, at any
time on or after November 1, 2003, at the following redemption prices (expressed
as percentages of principal amount), together with accrued and unpaid interest
if any, thereon to the redemption date, if redeemed during the twelve-month
period beginning November 1:
<TABLE>
<CAPTION>
OPTIONAL
REDEMPTION
YEAR PRICE
<S> <C>
2003................................. 105.938%
2004................................. 103.958%
2005................................. 101.979%
2006 and thereafter.................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 1,
2001, the Company may redeem at its option up to 35% of the aggregate principal
amount of the Notes originally issued with the net cash proceeds of one or more
Equity Offerings at a redemption price equal to 111.875% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any, to
the redemption date; provided that (a) at least $130 million in aggregate
principal amount of the Notes remains outstanding immediately after the
occurrence of any such redemption and (b) such redemption occurs within 60 days
of the date of the closing of any such Equity Offering.
(c) If less than all of the Notes are to be redeemed at any time,
selection of the Notes to be redeemed will be made by the Trustee from among the
outstanding Notes on a pro rata basis, by lot or by any other method permitted
in the Indenture. Notice of redemption will
B-4
<PAGE>
<PAGE>
be mailed at least 30 days but not more than 60 days before the redemption date
to each holder whose Notes are to be redeemed at the registered address of such
holder. On and after the redemption date, interest will cease to accrue on the
Notes or portions thereof called for redemption.
6. MANDATORY OFFERS. (a) Upon the occurrence of a Change of
Control, each Holder of Notes will have the right to require that the Company
repurchase such Holder's Notes, in whole or in part in integral multiples of
$1,000 in principal amount, for a cash purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest (including Additional
Interest, if any), if any, to the date of repurchase, as provided in, and
subject to the terms of, the Indenture.
(b) The Company is, subject to certain conditions, obligated to
make an offer to purchase Notes at 100% of their principal amount, plus accrued
and unpaid interest (including Additional Interest, if any), thereon to the date
of repurchase with certain of the Net Available Proceeds of Asset Sales in
accordance with the Indenture.
7. NOTES TO BE REDEEMED OR PURCHASED. The Notes may be redeemed
or purchased in part, but only in multiples of $1,000 principal amount unless
all Notes held by a Holder are to be redeemed or purchased. On or after any date
on which Notes are redeemed or purchased, interest ceases to accrue on the Notes
or portions thereof called for redemption or accepted for purchase on such date.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form, without coupons, in denominations of $1,000 principal amount of maturity
and integral multiples thereof. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. Holders seeking to transfer
or exchange their Notes may be required, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Note or portion of a Note selected for
redemption or tendered pursuant to an Offer. Neither the Trustee nor the
Registrar shall be required (i) to register the transfer of or exchange any Note
selected for redemption, (ii) to register the transfer of or exchange any Note
for a period of 15 days before the mailing of a notice of redemption ending on
the date of such mailing, (iii) to register the transfer or exchange of a Note
between a Record Date and the next succeeding Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Note shall
be treated as the owner of the Note for all purposes.
10. AMENDMENTS AND WAIVERS. (a) Subject to certain exceptions,
the Indenture and the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes), and any existing Default
B-5
<PAGE>
<PAGE>
or Event of Default or compliance with any provision of the Indenture or the
Notes may be waived with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes).
(b) Notwithstanding section 10(a) above, the Company, the
Guarantors and the Trustee may amend or supplement the Indenture or the Notes,
without the consent of any Holder, to: cure any ambiguity, defect or
inconsistency; provide for uncertificated Notes in addition to or in place of
certificated Notes; provide for the assumption of the obligations to the Holders
of the Company, or the Guarantors, as the case may be, in the event of any
merger or reorganization involving the Company, or a Guarantor, as the case may
be, that is permitted under Article 5 of the Indenture; make any change that
would provide any additional rights or benefits to Holders or does not adversely
affect the legal rights under the Indenture of any Holder; or comply with the
requirements of the Securities and Exchange Commission ("SEC") in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
11. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture, the Notes or the Note Guarantees except
as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Notes or the Note Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of certain continuing
Defaults or Events of Default if it determines that withholding notice is in
their interest.
12. SUBORDINATION. All Obligations owed under and in respect of
the Notes are subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, to the prior payment in full in cash of
all Obligations owed under and in respect of all existing and future Senior
Indebtedness of the Company and of each Guarantor, and the subordination of the
Notes is for the benefit of all holders of all Senior Indebtedness, whether
outstanding on the Issue Date or incurred thereafter. The Company and each
Guarantor agree, and each Holder by accepting a Note agrees, to the
subordination.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee in its individual
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Company or any of its Affiliates with the same rights it would
have if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or direct or indirect stockholder of the Company or any Guarantor
(other than the Company and any Guarantor), as such, shall have any liability
for any obligation of the Company or such Guarantor under the Indenture or the
Notes or Note Guarantees or for any claim based on, in respect
B-6
<PAGE>
<PAGE>
of, or by reason of, any such obligation or the creation of any such obligation.
Each Holder by accepting a Note waives and releases such Persons from all such
liability, and such waiver and release is part of the consideration for the
issuance of the Notes.
15. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. The Company and
the Guarantors may be discharged from their obligations under the Indenture, the
Notes and the Guarantees except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture, the Notes and the Note Guarantees, in each case upon satisfaction of
certain conditions specified in the Indenture.
16. RESTRICTIVE COVENANTS. The Indenture contains certain
covenants that, among other things, limit the ability of the Company and its
Restricted Subsidiaries to make restricted payments, to incur indebtedness, to
create liens, to sell assets, to permit restrictions on dividends and other
payments by Restricted Subsidiaries of the Company to the Company, to
consolidate, merge or sell all or substantially all of its assets or to engage
in transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to the
Trustee on compliance with such limitations.
17. GOVERNING LAW. This Note shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflict of laws provisions thereof.
18. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
19. CUSIP/CINS NUMBERS. Pursuant to a recommendation promulgated
by the Committee on Uniform Note Identification Procedures, the Company has
caused CUSIP and CINS numbers, as applicable, to be printed on the Notes and has
directed the Trustee to use CUSIP and CINS numbers, as applicable, in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other identification
numbers printed on the Notes.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to: Agrilink Foods,
Inc., 90 Linden Oaks, P.O. Box 20670, Rochester, New York 14602, Attention: Vice
President--Communications, or by telephone at 716-383-1850.
B-7
<PAGE>
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES*
The following exchanges of a part of this Global Note for
Physical Notes have been made:
<TABLE>
<CAPTION>
Amount of Amount of increase Principal Amount of Signature of
decrease in in this Global Note authorized officer
Date of Exchange Principal Amount Principal Amount of following such of Trustee or
of this Global this Global Note decrease (or increase) Notes Custodian
Note
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------
* This schedule should only be added if the Note is issued in global form.
B-8
<PAGE>
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: _________________ Signed: _______________________________________
(Sign exactly as name appears on the other
side of this Note)
Signature Guarantee: ______________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantee
program reasonably acceptable to the Trustee)
B-9
<PAGE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Note purchased by the Company pursuant
to Section 4.15 of the Indenture, check the box: [ ]
If you elect to have this Note purchased by the Company pursuant
to Section 4.16 of the Indenture, check the box: [ ]
If you elect to have only part of the principal amount of this
Note purchased by the Company pursuant to Section 4.15 or 4.16 of the Indenture,
state the portion of such amount (multiples of $1,000 principal amount only):
$______________________________.
Dated: ______________________ Your signature: ________________________________
(Sign exactly as name appears on
the other side of this Note)
Signature Guarantee:________________________________
(Signature must be guaranteed by a financial institution that is
a member of the Securities Transfer Agent Medallion Program ("STAMP"), in
accordance with the Securities Exchange Act of 1934, as amended.)
B-10
<PAGE>
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
[ ], [ ]
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Administration
Re: Agrilink Foods, Inc. (the "COMPANY")
11-7/8% Senior Subordinated Notes
due 2008 (the "NOTES")
------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of Notes of the Company,
we confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), or an entity in which all of the equity owners
are accredited investors within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act (the "INSTITUTIONAL ACCREDITED
INVESTOR");
(ii) any purchase of Notes by us will be for our own account or
for the account of one or more other Institutional Accredited Investors;
(iii) in the event that we purchase any Notes, we will acquire
Notes having a minimum purchase price of at least $100,000 for our own
account and for each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks
of purchasing Notes;
C-1
<PAGE>
<PAGE>
(v) we are not acquiring Notes with a view to any distribution
thereof in a transaction that would violate the Securities Act or the
securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property
and the property of any accounts for which we are acting as fiduciary
shall remain at all times within our control; and
(vi) we acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto,
as we deem necessary in connection with our decision to purchase Notes.
We understand that the Notes are being offered in a transaction
not involving any public offering within the meaning of the Securities Act and
that the Notes have not been registered under the Securities Act, and we agree,
on our own behalf and on behalf of each account for which are acquired any
Notes, that any such Notes may be offered, resold, pledged or otherwise
transferred only: (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in a
transaction meeting the requirements of Rule 144A, outside the United States in
a transaction meeting the requirements of Rule 904 under the Securities Act, or
in accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (ii) to the Company or (iii) pursuant to an effective registration
statement, and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction. We
understand that the registrar will not be required to accept for registration of
transfer any Notes, except upon presentation of evidence satisfactory to the
Company that the foregoing restrictions on transfer have been complied with. We
further understand that the Notes purchased by us will bear a legend reflecting
the substance of this paragraph. We acknowledge that you and others will rely
upon our confirmations, acknowledgments and agreements set forth herein, and we
agree to notify you promptly in writing if any of our representations or
warranties herein ceases to be accurate and complete.
C-2
<PAGE>
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
--------------------------------
(Name of Purchaser)
By:
-------------------------------
Name:
Title:
Address:
------
--------------------------
--------------------------
C-3
<PAGE>
<PAGE>
EXHIBIT D
Form of Certificate to be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
---------, ----
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Administration
Re: Agrilink Foods, Inc. (the "COMPANY")
11-7/8% Senior Subordinated Notes due 2008 (the "NOTES")
--------------------------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$200,000,000
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act of 1933.
D-1
<PAGE>
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------------
Authorized Signatory
D-2
<PAGE>
<PAGE>
EXHIBIT E
NOTE GUARANTEE
--------------
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest (and Additional Interest, if any) on this Note in the amounts
and at the times when due and interest on the overdue principal, premium, if
any, and interest (and Additional Interest, if any), if any, of this Note, if
lawful, and the payment or performance of all other obligations of the Company
under the Indenture (as defined below) or the Notes, to the Holder of this Note
and the Trustee, all in accordance with and subject to the terms and limitations
of this Note, Articles 10 and 11 of the Indenture and this Note Guarantee. This
Note Guarantee will become effective in accordance with Article 11 of the
Indenture and its terms shall be evidenced therein. The validity and
enforceability of any Note Guarantee shall not be affected by the fact that it
is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of November 18, 1998, among
Agrilink Foods, Inc., a New York corporation, as issuer (the "COMPANY"), the
Guarantors named therein and IBJ Schroder Bank & Trust Company, as trustee (the
"TRUSTEE"), as amended or supplemented (the "INDENTURE").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Note Guarantee and the Indenture are expressly set
forth in Article 11 of the Indenture, and are expressly subordinated in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture) of the Guarantors to the extent set forth in Article 10 of the
Indenture, and reference is hereby made to the Indenture for the precise terms
of the Note Guarantee and all of the other provisions of the Indenture to which
this Note Guarantee relates.
THIS NOTE GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
This Note Guarantee is subject to release upon the terms set
forth in the Indenture.
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IN WITNESS WHEREOF, each Guarantor has caused its Note Guarantee
to be duly executed.
Date: [ ]
PRO-FAC COOPERATIVE, INC.
By:
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Name:
Title:
LINDEN OAKS CORPORATION
By:
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Name:
Title:
KENNEDY ENDEAVORS, INCORPORATED
By:
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Name:
Title:
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made
and entered into as of November 18, 1998 by and among AGRILINK FOODS, INC., a
New York corporation (the "COMPANY"), PRO-FAC COOPERATIVE INC., a New York
cooperative corporation (the "PARENT"), and WARBURG DILLON READ LLC and NESBITT
BURNS SECURITIES INC. (the "INITIAL PURCHASERS").
The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers to purchase $200,000,000 aggregate
principal amount of the Company's Old Notes (as defined herein) under the Notes
Purchase Agreement, dated November 13, 1998 (the "PURCHASE AGREEMENT"), by and
among the Company, Parent and the Initial Purchasers. The Old Notes will be
guaranteed on an unsecured senior subordinated basis by the Guarantors (as
defined herein) and will be issued pursuant to the Notes Indenture (as defined
herein).
The parties hereto hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"ACTION" has the meaning set forth in Section 8(c) of this
Agreement.
"AGREEMENT" has the meaning set forth in the introductory
paragraph to this Agreement.
"BROKER-DEALER" means any broker or dealer registered under
the Exchange Act.
"COMMISSION" means the Securities and Exchange Commission.
"CONSUMMATION" of an Exchange Offer means the occurrence of
(i) the filing and effectiveness under the Act of the Exchange Offer
Registration Statement relating to the Exchange Notes to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement continuously
effective, and the keeping of the Exchange Offer open, for not less than the
minimum period required pursuant to Section 3(b) of this Agreement and (iii) the
delivery by the Company to the registrar under the Notes Indenture of Exchange
Notes in the same aggregate principal amount as the aggregate principal amount
of Old Notes tendered by the Holders thereof pursuant to the Exchange Offer and
not withdrawn. "CONSUMMATE" has a correlative meaning.
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"EFFECTIVENESS TARGET DATE" has the meaning set forth in
Section 5 of this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"EXCHANGE NOTES" means the Company's 11-7/8% Senior
Subordinated Notes due 2008 to be issued pursuant to the Notes Indenture or an
indenture substantially identical to the Notes Indenture (i) in connection with
the Exchange Offer or (ii) upon the request of any Holder of Old Notes covered
by the Shelf Registration Statement, in exchange for such Old Notes and
evidencing the same debt as the Old Notes and guaranteed on an unsecured senior
subordinated basis by the Guarantors. Exchange Notes, as used herein, includes
the guarantees by the Guarantors.
"EXCHANGE OFFER" means the registration under the Act by the
Issuers of the Exchange Notes pursuant to a Registration Statement pursuant to
which the Issuers offer the Holders of outstanding Old Notes that are Transfer
Restricted Securities the opportunity to exchange such outstanding Old Notes
that are Transfer Restricted Securities held by such Holders for Exchange Notes
in an aggregate principal amount equal to the aggregate principal amount of the
Old Notes that are Transfer Restricted Securities tendered in such exchange
offer by such Holders.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the Registration
Statement relating to the Exchange Offer, including the related Prospectus.
"GUARANTORS" means Parent and the Subsidiary Guarantors.
"HOLDER" has the meaning set forth in Section 2(b) of this
Agreement.
"INDEMNIFIED PERSON" has meaning set forth in Section 8(a) of
this Agreement.
"INITIAL PURCHASERS" has the meaning set forth in the
introductory paragraph to this Agreement.
"INTEREST PAYMENT DATE" has the meaning set forth in the Notes
Indenture and the Notes.
"ISSUE DATE" means the date that the Old Notes are purchased
by the Initial Purchasers pursuant to the Purchase Agreement.
"ISSUERS" means the Company together with the Guarantors;
individually, each an "ISSUER".
"LOSSES" has the meaning set forth in Section 8(a) of this
Agreement.
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"NASD" means the National Association of Securities Dealers,
Inc.
"NOTES" means the Old Notes and the Exchange Notes.
"NOTES INDENTURE" means the Notes Indenture, dated as of
November 18, 1998, by and among the Issuers and IBJ Schroder Bank & Trust
Company, as trustee (the "TRUSTEE"), pursuant to which the Notes are to be
issued, as such Notes Indenture is amended or supplemented from time to time in
accordance with its terms.
"OLD NOTES" means the Company's 11-7/8% Senior Subordinated
Notes due 2008 to be issued pursuant to the Notes Indenture on the Issue Date,
including the guarantees by the Guarantors.
"PARENT" has the meaning set forth in the introductory
paragraph to this Agreement.
"PARTICIPATING BROKER-DEALER" has the meaning set forth in
Section 6(a) of this Agreement.
"PERSON" means an individual, corporation, limited liability
company, partnership, joint venture, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government (including
any agency or political subdivision thereof) or other entity of any kind.
"PROSPECTUS" means the prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other amendments
and supplements thereto, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such Prospectus.
"REGISTRATION DEFAULT" has the meaning set forth in Section 5
of this Agreement.
"REGISTRATION STATEMENT" means any registration statement of
the Issuers relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement that is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including pre- and
post-effective amendments) and all exhibits and material incorporated by
reference or deemed to be incorporated by reference, if any, therein.
"SHELF FILING DEADLINE" has the meaning set forth in Section
4(a) of this Agreement.
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"SHELF REGISTRATION STATEMENT" has the meaning set forth in
Section 4(a) of this Agreement.
"SUBSIDIARY" means, with respect to any Person, any other
Person of which a majority of the equity ownership or the voting securities is
at the time owned, directly or indirectly, by such Person or by one or more
other subsidiaries of such Person or a combination thereof.
"SUBSIDIARY GUARANTORS" means each of Linden Oaks Corporation,
a Delaware corporation, and Kennedy Endeavors, Incorporated, a Washington
corporation.
"TIA" means the Trust Indenture Act of 1939, as amended, and
the rules and regulations promulgated pursuant thereto, all as in effect on the
date of the Notes Indenture.
"TRANSFER RESTRICTED SECURITIES" means each Note until the
earliest to occur of (i) the date on which each such Old Note has been exchanged
by a person other than a Broker-Dealer for an Exchange Note in the Exchange
Offer, (ii) following the exchange by a Broker-Dealer in the Exchange Offer of
an Old Note for an Exchange Note, the date on which such Exchange Note is sold
to a purchaser who receives from such Broker-Dealer on or prior to the date of
such sale a copy of the Prospectus (as supplemented or amended) contained in the
Exchange Offer Registration Statement, (iii) the date on which such Note has
been effectively registered under the Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Note could be resold
pursuant to Rule 144(k) under the Act.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a
registration in which securities of the Company are sold to an underwriter(s)
for reoffering to the public pursuant to an effective Registration Statement.
SECTION 2. Securities Subject To This Agreement. (a) Transfer
Restricted Securities. The securities entitled to the benefits of this Agreement
are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER")
whenever such Person beneficially owns Transfer Restricted Securities.
SECTION 3. Exchange Offer. (a) Unless the Exchange Offer is
not permitted by applicable law or Commission policy, the Company and Parent
shall, and shall cause each of the Subsidiary Guarantors to, (i) cause to be
filed with the Commission on or prior to 60 days after the Issue Date, an
Exchange Offer Registration Statement under the Act relating to the Exchange
Notes and the Exchange Offer and (ii) use their respective best efforts to cause
such Exchange Offer Registration Statement to be declared effective by the
Commission on or prior to 120 days after the Issue Date. In connection with the
foregoing, the Company and
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Parent shall, and shall cause each of the Subsidiary Guarantors to, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary to cause such Exchange Offer Registration Statement to become
effective, (B) if applicable, file a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act, (C) cause all
necessary filings in connection with the registration and qualification of the
Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer; provided, however, that
no Issuer shall be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to take any action which would
subject it to general service of process or taxation in any jurisdiction where
it is not so subject; and (D) upon the effectiveness of such Registration
Statement, commence the Exchange Offer and use their respective best efforts to
issue on or prior to 45 days after the date on which such Exchange Offer
Registration Statement is declared effective by the Commission, Exchange Notes
in exchange for all Old Notes tendered prior thereto in the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting registration of the
Exchange Notes to be offered in exchange for the Old Notes that are Transfer
Restricted Securities and, as required hereby, permitting resales of Exchange
Notes held by Broker-Dealers as contemplated by Section 3(c) below. If, after
such Exchange Offer Registration Statement initially is declared effective by
the Commission, the Exchange Offer or the issuance of Exchange Notes under the
Exchange Offer or the resale of Exchange Notes received by Broker-Dealers in the
Exchange Offer as contemplated by Section 3(c) below is interfered with by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or court, such Exchange Offer Registration Statement
shall be deemed not to have become effective for purposes of this Agreement
during the period that such stop order, injunction or other similar order or
requirement shall remain in effect.
(b) The Company and Parent shall, and shall cause each of the
Subsidiary Guarantors to, cause the Exchange Offer Registration Statement to be
effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company and Parent
shall, and shall cause each of the Subsidiary Guarantors to, cause the Exchange
Offer to comply with all applicable federal and state securities laws. The
Company and Parent shall, and shall cause each of the Subsidiary Guarantors to,
only offer to exchange Exchange Notes for Old Notes in the Exchange Offer. The
Company and Parent shall, and shall cause each of the Subsidiary Guarantors to,
use their respective best efforts to cause the Exchange Offer to be Consummated
on the earliest practicable date after the Exchange Offer Registration Statement
has become effective, but not less than 20 business days after such effective
date and in no event later than 45 days after such effective date.
(c) The Company and Parent shall, and shall cause each of the
Subsidiary Guarantors to, indicate in a "Plan of Distribution" section contained
in the Prospectus included in the Exchange Offer Registration Statement that any
Broker-Dealer that holds Old
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Notes that are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Transfer Restricted Securities acquired directly from the Company or
any affiliate of the Company), may exchange such Old Notes pursuant to the
Exchange Offer; provided, however, that such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with any resales of
the Exchange Notes received by such Broker-Dealer in the Exchange Offer. Such
"Plan of Distribution" section shall allow the use of such Prospectus by all
Persons subject to the prospectus delivery requirements of the Act, including
Participating Broker-Dealers, and shall also contain all other information with
respect to such resales by Broker-Dealers that the Commission may require to
permit such resales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company and Parent shall, and shall cause each of the
Subsidiary Guarantors to, use their respective best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Notes acquired by Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of 180 days from the date on which the
Exchange Offer Registration Statement is declared effective. The Company and
Parent shall, and shall cause each of the Subsidiary Guarantors to, provide
sufficient copies of the latest version of such Prospectus to Broker-Dealers
promptly upon request at any time during such 180-day period in order to
facilitate such resales.
SECTION 4. Shelf Registration.
(a) Shelf Registration. If (i) the Issuers are not required to
file an Exchange Offer Registration Statement or to Consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities shall
notify the Company within 20 days after the commencement of the Exchange Offer
that such Holder (A) is prohibited by law or Commission policy from
participating in the Exchange Offer, or (B) may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus, and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
is a Broker-Dealer and holds Old Notes (including the Initial Purchasers that
hold Old Notes as part of an unsold allotment from the original offering of the
Notes) acquired directly from the Company or one of its affiliates, then the
Company and Parent shall, and shall cause each of the Subsidiary Guarantors to,
(x) cause to be filed a shelf registration statement pursuant to Rule 415 under
the Act, which may be an amendment to the Exchange
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Offer Registration Statement (in either event, the "SHELF REGISTRATION
STATEMENT"), on or prior to the earliest to occur of (1) the 60th day after the
date on which the Company determines that the Issuers are not required to file
the Exchange Offer Registration Statement or (2) the 60th day after the date on
which the Company receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above (such earliest date being the
"SHELF FILING DEADLINE"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(c) of this Agreement,
and (y) use their respective best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the 60th day
after the Shelf Filing Deadline. The Company and Parent shall, and shall cause
each of the Subsidiary Guarantors to, use their respective best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Sections 6(b) and 6(c) of this
Agreement to the extent necessary to ensure that it is available for resales of
Notes by the Holders of Transfer Restricted Securities entitled to the benefit
of this Section 4(a) and to ensure that it conforms to the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a continuous period of two years following the
date on which such Shelf Registration becomes effective under the Act or such
shorter period that will terminate when all the Notes covered by the Shelf
Registration Statement have been sold pursuant to such Shelf Registration
Statement or are no longer Transfer Restricted Securities.
(b) Postponement or Suspension of Shelf Registration Statement
under Certain Circumstances. If, notwithstanding their respective best efforts
to cause an Exchange Offer Registration Statement to be declared effective and
to consummate the Exchange Offer pursuant to Section 3(a) of this Agreement, the
Issuers are required to file a Shelf Registration Statement pursuant to Section
4(a) hereof, the Company and Parent may postpone or suspend the filing or
effectiveness of such Shelf Registration Statement (or any amendments or
supplements thereto) (i) if such action is required by applicable law or (ii)
for up to an aggregate of 30 days during any consecutive 365-day period, if such
action is approved by the Boards of Directors of the Company and Parent and is
taken by the Company and Parent in good faith and for valid business reasons
(not including the avoidance of the Company's and Parent's obligations
hereunder), including the premature disclosure of material nonpublic information
which, if disclosed at such time, would be materially harmful to the interests
of the Issuers and their respective shareholders, so long as the Company and
Parent promptly thereafter comply with the requirements of Section 4(a) hereof.
This Section 4(b) shall not affect the Company's obligations to pay Additional
Interest pursuant to Section 5 of this Agreement.
(c) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 15 days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
prospectus included
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in such Shelf Registration Statement. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed to make the information
previously furnished to the Company by such Holder not materially misleading.
SECTION 5. Additional Interest. If (i) the Exchange Offer
Registration Statement or the Shelf Registration Statement is not filed with the
Commission on or prior to the date specified for such filing in Section 3(a) or
Section 4(a), respectively, of this Agreement, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in Section 3(a) or Section 4(a), respectively, of this Agreement
(the "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer has not been
Consummated within 45 days after the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement or (iv) any Registration Statement
required by this Agreement is filed and declared effective but shall thereafter
cease to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods required by this Agreement (each such
event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), the
Company hereby agrees to pay to each Holder of Transfer Restricted Securities
additional interest ("ADDITIONAL INTEREST") on the principal amount of the Notes
(in addition to the stated interest on the Notes) from and including the date on
which any such Registration Defaults have occurred to but excluding the date on
which all such Registration Defaults have been cured. Additional Interest will
accrue during the first 90-day period immediately following the occurrence of
any Registration Default in an amount equal to $.05 per week (or any part
thereof) per $1,000 principal amount of Notes constituting Transfer Restricted
Securities, and shall increase by an additional $.05 per week (or any part
thereof) per $1,000 principal amount of Notes constituting Transfer Restricted
Securities for each subsequent 90-day period, but in no event shall such amount
exceed $.30 per week (or any part thereof) per $1,000 principal amount of Notes
constituting Transfer Restricted Securities. The Company shall have no
obligation to pay additional Additional Interest in respect of any subsequent
Registration Default relating to any particular Transfer Restricted Securities
so long as the Company continues to accrue Additional Interest with respect to
an earlier Registration Default relating to such particular Transfer Restricted
Securities. All accrued Additional Interest shall be paid by the Company on each
Interest Payment Date in accordance with the provisions applicable to the
payment of interest set forth in the Notes Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of Additional Interest with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such Transfer
Restricted Security shall have been satisfied in full.
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SECTION 6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with
the Exchange Offer, the Company and Parent shall, and shall cause each of the
Subsidiary Guarantors to, comply with all of the provisions of Section 6(c)
below, use their respective best efforts to effect such exchange to permit the
sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and comply with all of the
following provisions:
(i) If, in the reasonable opinion of counsel to the Company,
there is a question as to whether the Exchange Offer is permitted by
applicable federal law or Commission policy, the Company and Parent
hereby agree to, and hereby agree to cause each of the Subsidiary
Guarantors to, seek a no-action letter or other favorable decision from
the Commission allowing the Issuers to Consummate an Exchange Offer for
such Old Notes. The Company and Parent hereby agree to, and hereby
agree to cause each of the Subsidiary Guarantors to, pursue the
issuance of such a no-action letter or favorable decision to the
Commission staff level. In connection with the foregoing, the Company
and Parent hereby agree to, and hereby agree to cause each of the
Subsidiary Guarantors to, take all such other reasonable actions as are
requested by the Commission or otherwise required in connection with
the issuance of such no-action letter or decision, including without
limitation (A) participating in telephonic conferences with the
Commission staff, (B) delivering to the Commission staff an analysis
prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which
need not be favorable) by the Commission staff of such submission. The
Initial Purchasers shall be given prior notice of any action taken by
the Issuers under this clause (i).
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an affiliate of the Company within the
meaning of the Act, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any Person to
participate in, a distribution of the Exchange Notes to be issued in
the Exchange Offer and (C) it is acquiring the Exchange Notes in its
ordinary course of business. Holders of Transfer Restricted Securities
shall use their best efforts to cooperate in the Issuers' preparations
for the Exchange Offer.
(iii) The Company, Parent and the Initial Purchasers acknowledge
that the staff of the Commission has taken the position that any
Broker-Dealer that owns Exchange Notes that were received by such
Broker-Dealer for its own account in the Exchange
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Offer (a "PARTICIPATING BROKER-DEALER") may be deemed to be an
"underwriter" within the meaning of the Act and must deliver a
prospectus meeting the requirements of the Act in connection with any
resale of such Exchange Notes. Further, the Company, Parent and the
Initial Purchasers acknowledge that the Initial Purchasers may not
exchange in the Exchange Offer Old Notes representing unsold
allotments resulting from the original offering of the Old Notes.
The Company, Parent and the Initial Purchasers also
acknowledge that it is the Commission staff's current position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Notes, without naming
the Participating Broker-Dealers or specifying the amount of Exchange Notes
owned by them, such Prospectus may be delivered by Participating Broker-Dealers
to satisfy their prospectus delivery obligations under the Act in connection
with resales of Exchange Notes for their own accounts (other than a resale of an
unsold allotment resulting from the original offering of the Notes), so long as
the Prospectus otherwise meets the requirements of the Act.
(b) Shelf Registration Statement. In the event that a Shelf
Registration Statement is required by this Agreement, the Company and Parent
shall, and shall cause each of the Subsidiary Guarantors to, comply with all the
provisions of Section 6(c) of this Agreement and use their respective best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution of such Transfer Restricted Securities and, in
connection therewith, the Company and Parent shall, and shall cause each of the
Subsidiary Guarantors to, as expeditiously as possible, prepare and file with
the Commission a Shelf Registration Statement relating to the registration on
any appropriate form under the Act, which form shall be available for the sale
of the Transfer Restricted Securities in accordance with the intended method or
methods of distribution of such Transfer Restricted Securities within the time
periods and otherwise in accordance with the provisions of this Agreement.
(c) General Provisions. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus, to the extent that the same
are required to be available to permit resales of Notes by Broker-Dealers), the
Company and Parent shall, and shall cause each of the Subsidiary Guarantors to:
(i) use their respective best efforts to keep such
Registration Statement continuously effective for the applicable time
period required hereunder and provide all requisite financial
statements (including financial statements of the Parent and, if
required by the Act or any regulation thereunder, financial statements
of the Subsidiary Guarantors) for the period specified in Section 3 or
4 of this Agreement, as applicable;
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upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company shall promptly notify
the Holders to suspend use of the Prospectus, and the Holders shall
suspend use of the Prospectus and the Holders shall not communicate
non-public information to any third party in violation of the
securities laws until the Issuers have made an appropriate amendment
to such Registration Statement (or caused the Prospectus to be
supplemented by a Prospectus Supplement), in the case of clause (A),
correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), the Company and Parent shall, and shall
cause each of the Subsidiary Guarantors to, use their respective best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) subject to clause (iv) of this Section 6(c), prepare and
file with the Commission such pre-effective and post-effective
amendments to such Registration Statement as may be necessary to keep
the Registration Statement effective for the applicable period set
forth in Section 3 or 4 of this Agreement, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; subject to clause (iv) of this
Section 6(c), cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act during the applicable time period required
hereunder and to comply fully with the applicable provisions of Rules
424 and 430A under the Act in a timely manner; and comply with the
provisions of the Act and the Exchange Act applicable to the Issuers
with respect to the disposition of all Transfer Restricted Securities
covered by such Registration Statement during such period in accordance
with the intended method or methods of distribution by the sellers of
such securities set forth in such Registration Statement as so amended
or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus;
(iii) advise the underwriter(s), if any, the Initial Purchasers,
in the case of a Shelf Registration Statement, each of the selling
Holders, and, in the case of the Exchange Offer Registration Statement,
each of the Participating Broker-Dealers who have notified the Company
that it will be utilizing the Prospectus in the Exchange Offer
Registration Statement as provided in Section 3(c) hereof, promptly
and, if requested by such Persons, confirm such advice in writing, (A)
when the Prospectus or any prospectus supplement or post-effective
amendment has been filed and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has
become effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to the
Prospectus or for additional information relating to such Registration
Statement or Prospectus, (C) of the
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issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or preventing
the use of any Prospectus or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement to such Registration Statement or Prospectus,
as the case may be, or any document incorporated by reference in such
Registration Statement or Prospectus untrue, or that requires the
making of any additions to or changes in the Registration Statement or
the Prospectus in order to make the statements in such Registration
Statement or Prospectus not misleading and that, in the case of the
Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any
time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement or preventing the use of
the Prospectus, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company and Parent shall,
and shall cause each of the Subsidiary Guarantors to, use their
respective best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) furnish to each of the underwriter(s), if any, the Initial
Purchasers and, in the case of a Shelf Registration Statement, each of
the selling Holders, before filing with the Commission, copies of any
Registration Statement or any Prospectus included in such Registration
Statement or Prospectus or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such underwriter(s), if any, the Initial Purchasers and such Holders
for a period of at least five business days, and the Company and Parent
will not, and will cause each of the Subsidiary Guarantors not to, file
any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus, as the
case may be (including all such documents incorporated by reference),
to which any underwriter, Initial Purchaser or selling Holder shall
reasonably object within five business days after the receipt of such
Registration Statement or Prospectus;
(v) in connection with any Shelf Registration Statement and,
in the case of Participating Broker-Dealers, any Exchange Offer
Registration Statement, promptly prior to the filing of any document
that is to be incorporated by reference into a Registration Statement
or Prospectus, (A) provide copies of such document to the selling
Holders (including Participating Broker-Dealers, if any) and to the
underwriter(s), if any, (B) make the Company's representatives
reasonably available for discussion of
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such document and other customary due diligence matters; provided that
such discussion and due diligence shall be coordinated on behalf of the
selling Holders (including Participating Broker-Dealers, if any) by one
counsel designated by and on behalf of such selling Holders and (C)
include such information in such document prior to the filing of such
document as such selling Holders or underwriter(s), if any, may
reasonably request;
(vi) make available at reasonable times for inspection by the
selling Holders (including Participating Broker-Dealers, if any), any
underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), if any, at the offices
where normally kept, during reasonable business hours, all relevant
financial and other records, pertinent corporate documents and
properties of the Company and the Guarantors and cause the Company's
and the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement
subsequent to the filing thereof and prior to its effectiveness;
provided, however, that any information that is reasonably and in good
faith designated by the Company in writing as confidential at the time
of delivery of such information shall be kept confidential by such
persons, unless and to the extent that (i) disclosure of such
information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any
disclosure requirements pursuant to federal securities laws in
connection with the filing of any Registration Statement or the use of
any Prospectus), (iii) such information becomes generally available to
the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information
becomes available to such Person from a source other than the Company
or the Guarantors and such source is not bound by a confidentiality
agreement; provided that each such Person agrees that it will, prior to
the disclosure of such information, give notice to the Company and
allow it at its own expense to undertake appropriate action to prevent
disclosure of information deemed confidential;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment, if necessary,
such information as such selling Holders and underwriter(s), if any,
may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the
principal amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid for Transfer Restricted
Securities and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or
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post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment; provided, however, that the Issuers shall not
be required to take any action pursuant to this Section 6(c)(vii) that
would, in the opinion of counsel for the Company, violate applicable
law;
(viii) furnish to each underwriter, if any, the Initial
Purchasers and selling Holders, without charge, at least one conformed
copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including all exhibits filed therewith
and all documents, including exhibits, incorporated therein by
reference that are expressly requested by such persons;
(ix) deliver to each selling Holder, each of the
underwriter(s), if any, and the Initial Purchasers, without charge, as
many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons may reasonably
request; the Company and Parent hereby consent to the use of the
Prospectus and any amendment or supplement to the Prospectus by each of
the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities in accordance with the terms thereof and with U.S. federal
securities laws and Blue Sky laws covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings of securities of this type) and take all such other
reasonable actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all as may be reasonably requested by any Holder of Transfer Restricted
Securities or the underwriter(s), if any, in connection with any sale
or resale of Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement; and whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company and Parent
shall, and shall cause each of the Subsidiary Guarantors to:
(A) make such representations and warranties to the
Holders of such Transfer Restricted Securities and the
underwriters, if any, with respect to the business of Parent
and the Company and their Subsidiaries (including with respect
to businesses or assets acquired or to be acquired by any of
them), and the Shelf Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when
customarily requested;
(B) obtain opinions of counsel to the Company and
Parent and updates thereof (which counsel and opinions (in
form, scope and substance) shall
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be reasonably satisfactory to the underwriters, if any, and
special counsel to the Holders of the Transfer Restricted
Securities being sold), addressed to each selling Holder of
Transfer Restricted Securities and each of the underwriters,
if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as
may be reasonably requested by such underwriters, if any, and
special counsel to Holders of Transfer Restricted Securities;
(C) obtain customary "cold comfort" letters and
updates thereof from the independent certified public
accountants of the Company and the Parent (and, if necessary,
any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the
Company or any such subsidiary for which financial statements
and financial data is, or is required to be, included in the
Registration Statement), addressed to each selling Holder of
Transfer Restricted Securities and each of the underwriters,
if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings;
(D) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters,
if any, than those set forth in Section 8 hereof (or such
other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Transfer Restricted
Securities covered by such Shelf Registration Statement and
the underwriters, if any); and
(E) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being
sold and the underwriters, if any, to evidence the continued
validity of the representations and warranties made pursuant
to clause (A) above and to evidence compliance with any
customary conditions contained in the underwriting agreement
or other agreement entered into by the Company and Parent.
If at any time the representations and warranties of the
Company and Parent contemplated in clause (x)(A) above cease to be true
and correct, the Company shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if
requested by any of them, shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification (or exemption from such registration or
qualification) of the Transfer Restricted Securities for offer and sale
under the securities
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or Blue Sky laws of such jurisdictions as the selling Holders and
underwriter(s), if any, may reasonably request and do any and all other
reasonable acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Registration Statement; provided, however, that no
Issuer shall be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process or to taxation, other than
as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xii) if a Shelf Registration is filed pursuant to Section 4,
cooperate with the selling Holders and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or
Holders may reasonably request;
(xiii) in connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with the selling
Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xiv) use their respective best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers of such
Transfer Restricted Securities or the underwriter(s), if any, to
Consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xi) above;
(xv) if any fact or event contemplated by Section 6(c)(iii)(D)
of this Agreement shall exist or have occurred, subject to clause (iv)
of this Section 6(c), prepare a supplement or post-effective amendment
to the Registration Statement or related Prospectus or any document
incorporated in such Registration Statement or Prospectus by reference
or file any other required document so that, as thereafter delivered to
the purchasers of Transfer Restricted Securities, the Registration
Statement will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein not misleading and the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be
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stated therein or necessary to make the statements contained therein,
in the light of the circumstances under which they were made, not
misleading;
(xvi) provide a CUSIP or CINS number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Notes Indenture with
certificates for the Transfer Restricted Securities that are in a form
eligible for deposit with The Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any "qualified independent underwriter" that is required to be
retained in accordance with the rules and regulations of the NASD;
(xviii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission in regards to any
Registration Statement, and make generally available to its
securityholders, as soon as practicable, a consolidated earnings
statement of the Company and its subsidiaries meeting the requirements
of Rule 158 (which need not be audited) for the twelve-month period (A)
commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm commitment or
reasonable best efforts Underwritten Offering or (B) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of
the Registration Statement; and
(xix) cause the Notes Indenture or such other indenture for the
Exchange Notes to be qualified under the TIA not later than the
effective date of the first Registration Statement required by this
Agreement, and, if applicable, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Notes
Indenture, if any, as may be required for such Notes Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause the Trustee to execute, all customary
documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Notes Indenture to be so qualified in a timely manner.
Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 6(c)(iii)(D) of this Agreement, such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv) of this Agreement, or until it is advised in writing (the "ADVICE") by
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense)
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all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities that was current
at the time of receipt of such notice. In the event that the Company shall give
any such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 of this Agreement, as
applicable, shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 6(c)(iii)(D)
of this Agreement to and including the date when each selling Holder covered by
such Registration Statement shall have received the copies of the supplemented
or amended Prospectus contemplated by Section 6(c)(xv) of this Agreement or, if
no such supplemented or amended Prospectus is required, when it shall have
received the Advice.
SECTION 7. Registration Expenses. (a) All fees and expenses
incident to the Company's and Parent's performance of or compliance with this
Agreement will be borne by the Company and Parent regardless of whether a
Registration Statement becomes effective, including, without limitation: (i) all
registration and filing fees and expenses (including required filings made by
any Initial Purchaser or Holder with the NASD (and, if applicable, the
reasonable fees and expenses of any "qualified independent underwriter" and its
counsel that may be required by the rules and regulations of the NASD)); (ii)
all fees and expenses of compliance with federal securities and state Blue Sky
or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses); (iv) all fees and disbursements of counsel for the
Company and Parent and, subject to Section 7(b) below, all reasonable fees and
disbursements of one counsel for the Holders of Transfer Restricted Securities;
(v) all fees and disbursements of independent certified public accountants of
the Company and the Parent (including the expenses of any comfort letters
required by or incident to such performance); and (vi) all fees and expenses of
the Trustee and any exchange agent and the fees and disbursements of its
counsel.
The Company and Parent will, in any event, bear their
respective internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company and Parent.
Notwithstanding the foregoing or anything in this Agreement to
the contrary, each Holder of Transfer Restricted Securities shall pay all
underwriting discounts and commissions of any underwriters with respect to any
Notes sold by or on behalf of it.
(b) In connection with any Registration Statement required by
this Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and Parent will
jointly and severally reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities being tendered in the Exchange Offer and/or
resold pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as
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applicable, for the reasonable fees and disbursements of not more than one
counsel, who shall be Cahill Gordon & Reindel or such other counsel as may be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. Indemnification. (a) Each of the Company and Parent
agrees, jointly and severally, to indemnify and hold harmless (i) the Initial
Purchasers (in their capacity as such), each Holder of Transfer Restricted
Securities and each Participating Broker-Dealer, (ii) each person, if any, who
controls any of the foregoing within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person") and (iii) the
respective agents, employees, officers and directors of the Initial Purchasers
(in their capacity as such) and the agents, employees, officers and directors of
any Holder or any controlling person (any person referred to in clause (i), (ii)
or (iii) may hereinafter be referred to as an "INDEMNIFIED PERSON") from and
against any and all losses, liabilities, claims, damages and expenses whatsoever
(including, but not limited to, reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all reasonable amounts paid in settlement of any claim or litigation)
(collectively, "LOSSES") to which they or any of them may become subject under
the Act, the Exchange Act or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
preliminary prospectus or Prospectus, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company and Parent will not be
liable in any such case to the extent, but only to the extent, that any such
Loss arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company or Parent by or on
behalf of any Indemnified Person relating to such Indemnified Person expressly
for use therein; and, provided further, however, that the indemnity agreement
contained in this subsection (a) with respect to any preliminary prospectus
shall not inure to the benefit of the Indemnified Persons or their agents,
employees, officers and directors for any Loss (i) if and to the extent the
Prospectus corrected any such alleged untrue statement or omission and (ii) if
such Indemnified Persons failed to send or give a copy of the Prospectus at or
prior to the written confirmation of a sale of the Notes to the person alleging
such Loss, unless such failure to deliver the Prospectus was a result of
non-compliance by the Company and Parent with Section 6(c)(ix) hereof. This
indemnity agreement will be in addition to any liability that each of the
Company and Parent may otherwise have, including, but not limited to, liability
under this Agreement.
(b) In connection with any Registration Statement pursuant to
which a Holder of Transfer Restricted Securities offers or sells Transfer
Restricted Securities, such
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Holder agrees, severally and not jointly, to indemnify and hold harmless the
Company and Parent, their respective agents, employees, officers and directors
and each person controlling either the Company or Parent within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, and the agents,
employees, officers and directors of such controlling person to the same extent
as the foregoing indemnity from the Company and Parent to each Indemnified
Person but only with respect to, and to the extent that, information relating to
such Holder furnished in writing to the Company or Parent by or on behalf of
such Holder expressly for use in such Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or proceeding
(collectively, an "ACTION"), such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify each party against whom indemnification is to be sought in writing of the
commencement of such Action (but the failure so to notify an indemnifying party
shall not relieve such indemnifying party from any other liability or
obligations to the indemnified party that it may have under this Section 8
except to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may otherwise have). In case any such
Action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement of such Action, the indemnifying party will be
entitled to participate in such Action, and to the extent it may elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense of such
Action with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such Action, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
Action, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to the indemnified party to take charge of the defense of such
Action within a reasonable time after notice of commencement of the Action, or
(iii) the named parties to such Action (including any impleaded parties) include
such indemnified party and the indemnifying parties (or such indemnifying
parties shall have assumed the defense of such action), and such indemnified
party or parties shall have reasonably concluded that there may be defenses
available to it or them that are different from or additional to those available
to one or all of the indemnifying parties (in which case the indemnifying
parties shall not have the right to direct the defense of such Action on behalf
of the indemnified party or parties), in any of which events such fees and
expenses of counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying party be liable for the fees and expenses of more than
one counsel (together with appropriate local counsel) at any time for all
indemnified parties in connection with any one Action or separate but
substantially similar or related Actions arising out of the same general
allegations or circumstances. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or Action effected without its written consent; provided, however,
that such consent was not unreasonably withheld. No indemnifying party shall,
without prior
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written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party, or indemnity could have been sought hereunder by such indemnified
party, unless such settlement (A) includes an unconditional written release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of any such indemnified
party.
(d) In order to provide for contribution in circumstances in
which the indemnification provided for in paragraphs (a) and (b) of this Section
8 is for any reason held to be unavailable from the indemnifying party, or is
insufficient to hold harmless a party indemnified under this Section 8, the
Company and Parent (jointly and severally) and the Indemnified Persons
(severally but not jointly), as applicable, shall contribute to the aggregate
Losses of the nature contemplated by such indemnification provision (but after
deducting in the case of Losses suffered by the indemnifying party, any
contribution received by the indemnifying party from persons other than the
Indemnified Person who may also be liable for contribution, including persons
who control the Indemnified Person within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act) to which the Company and Parent and the
Indemnified Persons may be subject, in such proportion as is appropriate to
reflect the relative benefits received by the Company and Parent, on the one
hand, and the Indemnified Persons, on the other hand, from the offering of the
Notes or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in paragraph (c) of this Section 8 and having
been prejudiced in any material respect by the absence of such notice, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company and Parent, on the one hand,
and the Indemnified Persons, on the other hand, in connection with the
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and Parent, on the one hand, and the Indemnified Persons, on the other hand,
shall be deemed to be in the same proportion as (x) the total proceeds from the
offering of Old Notes (net of discounts but before deducting expenses) received
by the Company as set forth in the table on the cover page of the final offering
memorandum related thereto, and (y) the total proceeds received by such
Indemnified Person from the sale of Notes. The relative fault of the Company and
Parent, on the one hand, and the Indemnified Persons, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and Parent or the
Indemnified Persons and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission.
(e) The Company and Parent and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to paragraph
(d) of this Section 8 were determined by pro rata allocation or by any other
method of allocation that does not take into
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account the equitable considerations referred to above. Notwithstanding the
provisions of paragraph (d) of this Section 8, (i) in no case shall an
Indemnified Person be required to contribute any amount in excess of the amount
by which the total received by such Indemnified Person with respect to its sale
of its Transfer Restricted Securities or Exchange Notes, as the case may be,
exceeds the amount of any damages that such Indemnified Person has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of paragraphs (d) and (e) of this Section 8,
each person, if any, who controls an Indemnified Person within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same
rights to contribution as such Indemnified Person, and each person, if any, who
controls the Company and Parent within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
the Company and Parent, subject in each case to clauses (i) and (ii) of this
Section 8(e). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any Action against such party in respect of which a
claim for contribution may be made against another party or parties under
paragraph 8(d) or (e) of this Section 8, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under paragraph (d) or (e) of this Section 8
or otherwise, except to the extent that it has been prejudiced in any material
respect by such failure; provided, however, that no additional notice shall be
required with respect to any Action for which notice has been given under
Section 8(c) for purposes of indemnification. Anything in this section to the
contrary notwithstanding, no party shall be liable for contribution with respect
to any Action or claim settled without its written consent; provided, however,
that such written consent was not unreasonably withheld.
SECTION 9. Rule 144A. The Company and Parent agree with each
Holder, for so long as any Transfer Restricted Securities remain outstanding, to
make available to any Holder or beneficial owner of Transfer Restricted
Securities and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner and to Broker-Dealers, upon their
request, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. Participation in Underwritten Registrations. No
Holder may participate in any Underwritten Registration under this Agreement
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements approved
by the Persons entitled under this Agreement to approve such arrangements and
(b) completes and executes all reasonable questionnaires, powers of attorneys,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
-22-
<PAGE>
<PAGE>
SECTION 11. Selection of Underwriters. The Holders of Transfer
Restricted Securities covered by the Shelf Registration Statement who desire to
do so may sell such Transfer Restricted Securities in an Underwritten Offering.
In any such Underwritten Offering, the investment banker or investment bankers
and manager or managers that will administer the offering will be selected by
the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities included in such offering; provided that such investment
bankers and managers must be reasonably satisfactory to the Company.
SECTION 12. Miscellaneous.
(a) Remedies. Each Holder, in addition to being entitled to
exercise all rights provided in this Agreement, in the Notes Indenture, the
Purchase Agreement or granted by law, including recovery of liquidated or other
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and Parent agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by them of the
provisions of this Agreement and hereby agree to waive the defense in any Action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company and Parent will
not, and will cause each of the Subsidiary Guarantors not to, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions of this Agreement. No Issuer has
previously entered into any agreement currently in effect granting any
registration rights with respect to its respective securities to any Person,
except as disclosed in the Offering Memorandum dated November 13, 1998 relating
to the Old Notes. The rights granted to the Holders under this Agreement do not
in any way conflict with and are not inconsistent with the rights granted to the
holders of any of the Issuers' securities under any agreement in effect on the
date of this Agreement.
(c) Adjustments Affecting the Notes. Without the written
consent of the Holders of a majority in aggregate principal amount of
outstanding Transfer Restricted Securities, the Company and Parent will not, and
will cause each of the Subsidiary Guarantors not to, take any action, or permit
any change to occur, with respect to the Notes that would materially and
adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions of this Agreement may not be given unless (i) in
the case of Section 5 hereof and this Section 12(d)(i), the Company has obtained
the written consent of each affected Holder of outstanding Transfer Restricted
Securities and (ii) in the case of all other provisions hereof, the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions of this
Agreement that relates exclusively to the
-23-
<PAGE>
<PAGE>
rights of Holders whose securities are being sold or tendered pursuant to the
Exchange Offer and that does not affect directly or indirectly the rights of
other Holders whose securities are not being sold or tendered pursuant to such
Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities subject to such Exchange
Offer.
Whenever the consent or approval of Holders of a specified
percentage of Transfer Restricted Securities is required hereunder, (i) such
consents may be obtained in connection with a tender offer or exchange offer for
the Notes and (ii) Transfer Restricted Securities held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(e) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivering,
first-class mail (registered or certified, return receipt requested), telex,
telecopier or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Notes Indenture, with a copy to the Registrar
under the Notes Indenture; and
(ii) if to the Company or Parent, at:
Agrilink Foods, Inc.
90 Linden Place
P.O. Box 681
Rochester, New York 14603
Facsimile: (716) 383-1606
Attention: Earl L. Powers
with a copy to:
Howard Smith & Levin LLP
1330 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 841-1010
Attention: Scott F. Smith, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) at the time delivered by hand, if personally delivered;
(ii) five business days after being deposited in the mail, postage prepaid, if
mailed; (iii) when answered back, if telexed; (iv) when receipt acknowledged by
telecopier machine, if telecopied; and (v) on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
-24-
<PAGE>
<PAGE>
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Notes Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties to this Agreement in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of this Agreement.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CONFLICT OF LAWS RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained in this Agreement, or the application of any such provision
in any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained in this Agreement shall not be affected or
impaired thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties to
this Agreement in respect of the subject matter contained in this Agreement.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to in this Agreement with respect to the
registration rights granted by the Company and Parent with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
[Signature Page Follows]
-25-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AGRILINK FOODS, INC.
By: /s/ DENNIS M. MULLEN
----------------------
Name:
Title:
PRO-FAC COOPERATIVE, INC.
By: [ILLEGIBLE]
-----------------------
Name:
Title:
Accepted and agreed as of
the date first above written:
WARBURG DILLON READ LLC
NESBITT BURNS SECURITIES INC.
By: WARBURG DILLON READ LLC
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AGRILINK FOODS, INC.
By:
----------------------
Name:
Title:
PRO-FAC COOPERATIVE, INC.
By:
-----------------------
Name:
Title:
Accepted and agreed as of
the date first above written:
WARBURG DILLON READ LLC
NESBITT BURNS SECURITIES INC.
By: WARBURG DILLON READ LLC
By: /s/ James Stone
------------------------------
Name: James Stone
Title: Director
By: /s/ Matthew R. Stopnik
------------------------------
Name: Matthew R. Stopnik
Title: Associate Director
<PAGE>
<PAGE>
EXHIBIT 5.1
LETTERHEAD OF HOWARD, SMITH & LEVIN LLP
January 5, 1999
Agrilink Foods, Inc.
90 Linden Oaks
P.O. Box 20670
Rochester, NY 14602
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933, as
amended (the "Act"), pursuant to the Registration Statement on Form S-4 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission, of the offer and sale of (a) $200,000,000 aggregate principal amount
of 11-7/8% Senior Subordinated Notes due 2008 (the "Exchange Notes") of Agrilink
Foods, Inc., a New York corporation (the "Company"), and (b) Guarantees of the
Exchange Notes (together with the Exchange Notes, the "Securities") by Pro-Fac
Cooperative, Inc., a New York cooperative corporation ("Parent"), and Kennedy
Endeavors, Incorporated, a Washington corporation, and Linden Oaks Corporation,
a Delaware corporation (together, the "Subsidiary Guarantors"), in each case to
be issued pursuant to the Indenture dated as of November 18, 1998 (the
"Indenture"), among the Company, Parent, the Subsidiary Guarantors and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"), we have reviewed such
corporate records, certificates and other documents, and such questions of law,
as we have considered necessary or appropriate for the purposes of this opinion.
We have assumed that each of the Company, Parent, the Subsidiary Guarantors
and the Trustee is duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and that it has or had all
requisite power and authority to execute, deliver and perform the Indenture and,
as applicable, to issue and authenticate the Securities, and that each of
Parent, the Subsidiary Guarantors and the Trustee has duly authorized, executed
and delivered the Indenture and has duly authorized the transactions
contemplated thereby.
Upon the basis of such review and subject to the foregoing assumptions, we
advise you that, in our opinion, when the Registration Statement has become
effective under the Act, and the Securities have been duly executed and
authenticated in accordance with the Indenture and issued in exchange for a like
aggregate principal amount of the Company's outstanding 11-7/8% Senior
Subordinated Notes due 2008 and the guarantees thereof by
<PAGE>
<PAGE>
Agrilink Foods, Inc. - 2 -
Parent and the Subsidiary Guarantors, in accordance with the exchange offer
contemplated by the Registration Statement, and assuming compliance with the
Act, the Securities will constitute the valid and binding obligations of the
Company, Parent and each Subsidiary Guarantor, as the case may be, enforceable
against such parties in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights, to general
equity principles, and to the qualification that we express no opinion with
respect to waivers contained in Section 4.04 of the Indenture.
We are members of the bar of the State of New York. We do not purport to be
experts in, and we do not express any opinion on, any laws other than the law of
the State of New York, the General Corporation Law of the State of Delaware and
the Federal law of the United States of America.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus contained in the Registration Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ HOWARD, SMITH & LEVIN LLP
<PAGE>
<PAGE>
EXHIBIT 12.1
PRO-FAC COOPERATIVE, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL
FISCAL YEAR ENDED QUARTER ENDED
----------------------------------------------------------------- -------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, -------------------- SEPTEMBER 27,
1994 1995 1996 1997 ACTUAL PRO FORMA 1997
-------- -------- -------- -------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF RATIO OF
EARNINGS TO FIXED HARGES AND
PREFERRED DIVIDENDS
Pretax income (loss) before
dividends, allocation of net
proceeds, cumulative effect
of an accounting change, and
extraordinary item........... $ 23.7 $ 22.5 $(22.6) $ 13.6 $24.9 $ 6.7 $ 5.1
Deduct -- Equity in
undistributed earnings of
CoBank....................... (1.5) (1.3) (1.5) (1.1) (.7) (0.7) 0.0
-------- -------- -------- -------- ------- ---------- ------
Adjusted earnings/(loss)....... 22.2 21.2 (24.1) 12.5 24.2 6.0 5.1
-------- -------- -------- -------- ------- ---------- ------
Fixed charges:
Interest expense.......... 11.6 29.1 42.0 36.5 30.8 73.0 7.8
Rentals(A)................ 0.0 0.8 1.4 1.5 1.6 2.0 0.4
-------- -------- -------- -------- ------- ---------- ------
Total fixed
charges............ 11.6 29.9 43.4 38.0 32.4 75.0 8.2
-------- -------- -------- -------- ------- ---------- ------
Adjusted earnings/(loss) and
fixed charges................ $ 33.8 $ 51.1 $ 19.3 $ 50.5 $56.6 $ 81.0 $13.3
-------- -------- -------- -------- ------- ---------- ------
-------- -------- -------- -------- ------- ---------- ------
Preferred dividends............ $ 3.7 $ 4.3 $ 8.5 $ 5.5 $ 5.8 $ 5.8 $ 1.4
Add -- Adjustment to reflect
preferred dividends on a
pretax basis................. 0.0 0.0 4.4 2.8 3.2 3.2 0.9
-------- -------- -------- -------- ------- ---------- ------
Preferred dividends on a
pretax basis................. 3.7 4.3 12.9 8.3 9.0 9.0 2.3
Fixed charges.................. 11.6 29.9 43.4 38.0 32.4 75.0 8.2
-------- -------- -------- -------- ------- ---------- ------
Total................ $ 15.3 $ 34.2 $ 56.3 $ 46.3 $41.4 $ 84.0 $10.5
-------- -------- -------- -------- ------- ---------- ------
-------- -------- -------- -------- ------- ---------- ------
Ratio of earnings to fixed
charges and preferred
dividends.................... 2.20 1.49 (C) 1.09 1.37 (C) 1.27
-------- -------- -------- -------- ------- ---------- ------
-------- -------- -------- -------- ------- ---------- ------
<CAPTION>
SEPTEMBER 26, 1998
--------------------------------
ACTUAL PRO FORMA
------------------ ---------
<S> <C><C> <C>
COMPUTATION OF RATIO OF
EARNINGS TO FIXED HARGES AND
PREFERRED DIVIDENDS
Pretax income (loss) before
dividends, allocation of net
proceeds, cumulative effect
of an accounting change, and
extraordinary item........... $ 4.1(B) $ (10.9)
Deduct -- Equity in
undistributed earnings of
CoBank....................... 0.0 0.0
------ ---------
Adjusted earnings/(loss)....... 4.1 (10.9)
------ ---------
Fixed charges:
Interest expense.......... 8.3 19.2
Rentals(A)................ 0.5 0.5
------ ---------
Total fixed
charges............ 8.8 19.7
------ ---------
Adjusted earnings/(loss) and
fixed charges................ $ 12.9 $ 8.8
------ ---------
------ ---------
Preferred dividends............ $ 1.5 $ 1.5
Add -- Adjustment to reflect
preferred dividends on a
pretax basis................. 1.0 1.0
------ ---------
Preferred dividends on a
pretax basis................. 2.5 2.5
Fixed charges.................. 8.8 19.7
------ ---------
Total................ $ 11.3 $ 22.2
------ ---------
------ ---------
Ratio of earnings to fixed
charges and preferred
dividends.................... 1.14 (C)
------ ---------
------ ---------
</TABLE>
- ------------
(A) Rentals deemed representative of the interest factor included in rent
expense.
(B) The $64.2 million gain on the sale of the Aseptic Business has been
excluded in calculating the ratio of earnings to fixed charges for the
quarter ended September 26, 1998.
(C) For fiscal 1996, and for fiscal 1998 and the first quarter of fiscal 1999
on a pro forma basis, earnings before fixed charges were insufficient to
cover fixed charges and pre-tax basis preferred dividends by $37.0
million, $3.0 million, and $13.4 million, respectively.
<PAGE>
<PAGE>
EXHIBIT 12.2
AGRILINK FOODS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL
FISCAL YEAR ENDED QUARTER ENDED
----------------------------------------------------------------- -------------
JUNE 27, 1998
JUNE 25, JUNE 24, JUNE 29, JUNE 28, -------------------- SEPTEMBER 27,
1994 1995 1996 1997 ACTUAL PRO FORMA 1997
-------- -------- -------- -------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
Income/(loss) before taxes,
cumulative effect of an
accounting change, and
extraordinary item............. $ 18.8 $ 10.0 $(18.8) $ 7.5 $12.5 $ 3.4 $ 2.6
Fixed charges:
Interest expense............ 18.2 32.4 42.0 35.0 30.6 72.9 7.6
Rentals(B).................. 1.5 1.3 1.4 1.5 1.6 2.0 0.4
-------- -------- -------- -------- ------- ---------- ------
Total fixed charges.... 19.7 33.7 43.4 36.5 32.2 74.9 8.0
-------- -------- -------- -------- ------- ---------- ------
Adjusted earning/(loss) and
fixed charges.................. $ 38.5 $ 43.7 $ 24.6 $ 44.0 $44.7 $ 78.3 $10.6
-------- -------- -------- -------- ------- ---------- ------
-------- -------- -------- -------- ------- ---------- ------
Ratio of earnings to fixed
charges........................ 1.95 1.30 (C) 1.20 1.39 1.05 1.33
-------- -------- -------- -------- ------- ---------- ------
-------- -------- -------- -------- ------- ---------- ------
<CAPTION>
SEPTEMBER 26, 1998
--------------------------------
ACTUAL PRO FORMA
------------------ ---------
<S> <C> <C>
COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
Income/(loss) before taxes,
cumulative effect of an
accounting change, and
extraordinary item............. $ 2.1(A) $(5.5)
Fixed charges:
Interest expense............ 8.3 19.2
Rentals(B).................. 0.4 0.5
------ ---------
Total fixed charges.... 8.7 19.7
------ ---------
Adjusted earning/(loss) and
fixed charges.................. $ 10.8 $14.2
------ ---------
------ ---------
Ratio of earnings to fixed
charges........................ 1.24 (C)
------ ---------
------ ---------
</TABLE>
- ------------
(A) The $64.2 million gain on the sale of the Aseptic Business has been
excluded in calculating the ratio of earnings to fixed charges for the
quarter ended September 26, 1998.
(B) Rentals deemed representative of the interest factor included in rent
expense.
(C) For fiscal 1996 and the first quarter of fiscal 1999 on a pro forma basis,
earnings before fixed charges were insufficient to cover fixed charges by
$18.7 million and $5.5 million, respectively.
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Agrilink Foods, Inc. of our report dated
July 31, 1998 relating to the financial statements of Agrilink Foods, Inc.,
which appears in such Prospectus. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Rochester, New York
January 4, 1999
<PAGE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Agrilink Foods, Inc. of our report
dated July 31, 1998 relating to the financial statements of Pro-Fac Cooperative,
Inc., which appears in such Prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Rochester, New York
January 4, 1999
<PAGE>
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Agrilink Foods, Inc. of our report
dated August 31, 1998 relating to the financial statements of Dean Foods
Vegetable Company, which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Rochester, New York
January 4, 1999
<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
---------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification no.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
</TABLE>
Terence Rawlins, Assistant Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
AGRILINK FOODS, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C> <C>
New York 62-1412720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
and its Guarantors
Pro-Fac Cooperative, Inc. New York 16-6036816
Kennedy Endeavors, Incorporated Washington 91-1350382
Linden Oaks Corporation Delaware 52-2043917
(Exact name of obligor (State or other jurisdiction of (I.R.S. Employer
as specified in its charter) incorporation or organization) Identification No.)
90 Linden Oaks 14602
Rochester, NY (Zip code)
(Address of principal executive office)
</TABLE>
11-7/8% Senior Subordinated Notes due 2008
(Title of Indenture Securities)
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or
supervising authority to which it is
subject.
New York State Banking
Department, Two Rector
Street, New York, New York
Federal Deposit Insurance
Corporation, Washington, D.C.
Federal Reserve Bank of New
York Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee, describe
each such affiliation.
The obligors are not an affiliate of the trustee.
Item 13. Defaults by the Obligors.
(a) State whether there is or has been a default with respect
to the securities under this indenture. Explain the nature
of any such default.
None
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(b) If the trustee is a trustee under another indenture
under which any other securities, or certificates of
interest or participation in any other securities, of
the obligors are outstanding, or is trustee for more than
one outstanding series of securities under the indenture,
state whether there has been a default under any such
indenture or series, identify the indenture or series
affected, and explain the nature of any such default.
None
List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company
as amended to date. (See Exhibit 1A to Form T-1,
Securities and Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee to
Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit 4
to Form T-1, Securities and Exchange Commission
File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended
to date (See Exhibit 4 to Form T-1, Securities and
Exchange Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
</TABLE>
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore filed with the
Securities and Exchange Commission, to which there have been no
amendments or changes.
<PAGE>
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligors and its
directors or officers, the trustee has relied upon information furnished
to it by the obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1,
2 and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligors are not in default under any
indenture under which the applicant is trustee.
<PAGE>
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 22nd day
of December, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ TERENCE RAWLINS
--------------------------
Terence Rawlins
Assistant Vice President
<PAGE>
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by Agrilink Foods, Inc.,
of its 11 7/8% Senior Subordinated Notes due 2008, we hereby consent that
reports of examinations by Federal, State, Territorial, or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: TERENCE RAWLINS
-------------------------
Terence Rawlins
Assistant Vice President
Dated: December 22, 1998
<PAGE>
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of September 30, 1998
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
------------
ASSETS
------
<S> <C> <C> <C>
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin ...................................................$ 42,702
b. Interest-bearing balances................................................................................$ 13,444
2. Securities:
a. Held-to-maturity securities..............................................................................$ 191,921
b. Available-for-sale securities............................................................................$ 118,931
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and of its Edge and Agreement
subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell........................................$ 79,838
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income................................................$ 1,938,005
b. LESS: Allowance for loan and lease losses...............................................$ 63,361
c. LESS: Allocated transfer risk reserve...................................................$ -0-
d. Loans and leases, net of unearned income, allowance, and reserve.........................................$ 1,874,644
5. Trading assets held in trading accounts.......................................................................$ 462
6. Premises and fixed assets (including capitalized leases)......................................................$ 1,922
7. Other real estate owned.......................................................................................$ 819
8. Investments in unconsolidated subsidiaries and associated companies...........................................$ -0-
9. Customers' liability to this bank on acceptances outstanding..................................................$ 371
10. Intangible assets.............................................................................................$ 11,167
11. Other assets..................................................................................................$ 68,097
12. TOTAL ASSETS..................................................................................................$ 2,404,318
</TABLE>
<PAGE>
<PAGE>
LIABILITIES
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<TABLE>
<S> <C> <C> <C>
13. Deposits:
a. In domestic offices......................................................................................$ 682,904
(1) Noninterest-bearing ....................................................................$ 135,253
(2) Interest-bearing........................................................................$ 547,651
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs............................................$ 1,154,887
(1) Noninterest-bearing.....................................................................$ 17,024
(2) Interest-bearing........................................................................$ 1,137,863
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase....................................$ 91,000
15. a. Demand notes issued to the U.S. Treasury.................................................................$ 12,693
b. Trading Liabilities......................................................................................$ 239
16. Other borrowed money:
a. With a remaining maturity of one year or less............................................................$ 31,002
b. With a remaining maturity of more than one year..........................................................$ 1,375
c. With a remaining maturity of more than three years.......................................................$ 1,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding......................................................$ 371
19. Subordinated notes and debentures.............................................................................$ 100,000
20. Other liabilities.............................................................................................$ 76,658
21. TOTAL LIABILITIES.............................................................................................$ 2,152,679
22. Limited-life preferred stock and related surplus..............................................................$ N/A
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.................................................................$ -0-
24. Common stock..................................................................................................$ 29,649
25. Surplus (exclude all surplus related to preferred stock)......................................................$ 217,008
26. a. Undivided profits and capital reserves...................................................................$ 4,112
b. Net unrealized gains (losses) on available-for-sale securities...........................................$ 870
27. Cumulative foreign currency translation adjustments...........................................................$ -0-
28. TOTAL EQUITY CAPITAL..........................................................................................$ 251,639
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
Agrilink Foods, Inc.
OFFER TO EXCHANGE ALL OF ITS OUTSTANDING
11-7/8% Senior Subordinated Notes DUE 2008
FOR UP TO $200,000,000 AGGREGATE PRINCIPAL AMOUNT OF
ITS 11-7/8% Senior Subordinated Notes DUE 2008 PURSUANT TO THE
PROSPECTUS DATED [ ], 1999
---------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED
(THE "EXPIRATION DATE").
- ---------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST CO.
By Mail (Registered or Certified By Hand or Overnight Delivery:
Mail recommended): IBJ Schroder Bank & Trust Company
IBJ Schroder Bank & Trust Company One State Street
P.O. Box 84 New York, New York 10004
Bowling Green Station Attention: Securities
New York, New York 10274-0084 Processing Window,
Attention: Reorganization Operations Subcellar One, (SC-1)
Facsimile Transmission Number
(for Eligible Institutions only):
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL (THE "LETTER OF TRANSMITTAL") TO AN
ADDRESS, OR TRANSMISSION VIA FACSIMILE TO A NUMBER, OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID TENDER OF AGRILINK FOODS, INC. 11-7/8% Senior
Subordinated Notes DUE 2008 (THE "INITIAL NOTES").
The Instructions contained herein should be read carefully before this
Letter of Transmittal is completed and signed.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus dated [ ], 1999 (the "Prospectus") of
Agrilink Foods, Inc.
(the "Company").
This Letter of Transmittal is to be used by registered holders of Initial
Notes ("Holders") if: (i) certificates representing Initial Notes are to be
physically delivered to the Exchange Agent by such Holders; (ii) tender of
Initial Notes is to be made by book-entry transfer to the Exchange Agent's
account at The Depository Trust Company ("DTC" or the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer--Book-Entry Transfer" by any financial institution
that is a participant in DTC and whose name appears on a security position
listing as the owner of Initial Notes or (iii) delivery of Initial Notes is to
be made according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures," and, in each case, instructions are NOT being transmitted through
the DTC.
Automated Tender Program ("ATOP"). DELIVERY OF DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH
BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
<PAGE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
By execution hereof, the undersigned acknowledges receipt of the Prospectus
and this Letter of Transmittal and the instructions hereto, which together
constitute Company's offer to exchange (the "Exchange Offer") $1,000 principal
amount of its 11-7/8% Senior Subordinated Notes due 2008 (the "Exchange Notes")
of the Company, upon the terms and subject to the conditions set forth in the
Exchange Offer, for each $1,000 principal amount of its outstanding 11-7/8%
Senior Subordinated Notes due 2008 (the "Initial Notes").
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Initial Notes
indicated below. Subject to, and effective upon, the acceptance for exchange of
the Initial Notes tendered herewith, the undersigned hereby exchanges, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Initial Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent
also acts as the agent of the Company) with respect to such Initial Notes with
full power of substitution (such power-of-attorney being deemed to be an
irrevocable power coupled with an interest) to (i) present such Initial Notes
and all evidences of transfer and authenticity to, or transfer ownership of,
such Initial Notes on the account books maintained by the Book-Entry Transfer
Facility to, or upon the order of, the Company, (ii) present such Initial Notes
for transfer of ownership on the books of the Company or the trustee under the
Indenture (the "Trustee") and (iii) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Initial Notes, all in accordance with
the terms and conditions of the Exchange Offer as described in the Prospectus.
The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Initial Notes tendered
hereby and to acquire Exchange Notes issuable upon the exchange of such tendered
Initial Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Initial Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned also warrants that it will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the exchange,
assignment and transfer of the Initial Notes tendered hereby or transfer
ownership of such Initial Notes on the account books maintained by the
book-entry transfer facility.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these conditions
(which may be waived by the Company, in whole or in part, in the reasonable
discretion of the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Initial Notes tendered
hereby and, in such event, the Initial Notes not exchanged will be returned to
the undersigned at the address shown above.
THE EXCHANGE OFFER IS NOT BEING MADE TO ANY BROKER-DEALER WHO PURCHASED
INITIAL NOTES DIRECTLY FROM THE COMPANY FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT OR ANY PERSON THAT IS AN "AFFILIATE" OF THE COMPANY WITHIN
THE MEANING OF RULE 405 UNDER THE SECURITIES ACT. THE UNDERSIGNED UNDERSTANDS
AND AGREES THAT THE COMPANY RESERVES THE RIGHT
-2-
<PAGE>
<PAGE>
NOT TO ACCEPT TENDERED INITIAL NOTES FROM ANY TENDERING HOLDER IF THE COMPANY
DETERMINES, IN ITS REASONABLE DISCRETION, THAT SUCH ACCEPTANCE COULD RESULT IN A
VIOLATION OF APPLICABLE SECURITIES LAWS.
The undersigned, if the undersigned is a beneficial holder, represents (or,
if the undersigned is a broker, dealer, commercial bank, trust company or other
nominee, represents that it has received representations from the beneficial
owners of the Initial Notes (the "Beneficial Owner") stating) that, (i) the
Exchange Notes to be acquired in connection with the Exchange Offer by the
Holder and each Beneficial Owner of the Initial Notes are being acquired by the
Holder and each such Beneficial Owner in the ordinary course of their business,
(ii) the Holder and each such Beneficial Owner are not engaged in, do not intend
to engage in, and have no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes, (iii) the Holder and each
Beneficial Owner acknowledge and agree that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes cannot rely on
the interpretations of the staff of the Commission discussed in the Prospectus
under the caption "The Exchange Offer--Effect of the Exchange Offer" and may
only sell the Exchange Notes acquired by such person pursuant to a registration
statement containing the selling security holder information required by Item
507 of Regulation S-K under the Securities Act, (iv) if the Holder is a
broker-dealer that acquired Initial Notes as a result of market-making
activities or other trading activities, it will deliver a prospectus in
connection with any resale of Exchange Notes acquired in the Exchange Offer (but
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act) and (v) neither the Holder nor any such Beneficial Owner is an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company or of Parent or
is a broker-dealer who purchased Initial Notes directly from the Company for
resale pursuant to Rule 144A under the Securities Act.
EACH BROKER-DEALER WHO ACQUIRED INITIAL NOTES FOR ITS OWN ACCOUNT AS A
RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES (A "PARTICIPATING
BROKER-DEALER"), BY TENDERING SUCH INITIAL NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE
OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT
CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL
RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE
SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED
OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS
FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING
BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE EXCHANGE
NOTES MAY BE RESUMED, AS THE CASE MAY BE.
EACH PARTICIPATING BROKER-DEALER SHOULD CHECK THE BOX HEREIN UNDER THE
CAPTION "FOR PARTICIPATING BROKER-DEALERS ONLY" IN ORDER TO RECEIVE ADDITIONAL
COPIES OF THE PROSPECTUS, AND ANY AMENDMENTS AND SUPPLEMENTS THERETO, FOR USE IN
CONNECTION WITH RESALES OF THE EXCHANGE NOTES, AS WELL AS ANY NOTICES FROM THE
COMPANY TO SUSPEND AND RESUME USE OF THE
-3-
<PAGE>
<PAGE>
PROSPECTUS. BY TENDERING ITS INITIAL NOTES AND EXECUTING THIS LETTER OF
TRANSMITTAL, EACH PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST
EFFORTS TO NOTIFY THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS
EXCHANGE NOTES. IF NO PARTICIPATING BROKER-DEALERS CHECK SUCH BOX, OR IF ALL
PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED SUCH BOX SUBSEQUENTLY NOTIFY THE
COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR EXCHANGE NOTES HAVE BEEN SOLD, THE
COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER
REGISTRATION STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY
HOLDERS WITH ANY NOTICES TO SUSPEND OR RESUME USE OF THE PROSPECTUS.
The undersigned understands that tenders of the Initial Notes pursuant to
any one of the procedures described under "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer. All authority herein
conferred or agreed to be conferred by this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the heirs, legal
representatives, successors and assigns, executors, administrators and trustees
in bankruptcy of the undersigned and shall survive the death or incapacity of
the undersigned. Tendered Initial Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date in accordance with the terms of the Exchange
Offer.
The undersigned understands that by tendering Initial Notes pursuant to one
of the procedures described under "The Exchange Offer--Procedures for Tendering"
in the Prospectus and the instructions hereto, the tendering Holder will be
deemed to have waived the right to receive any payment in respect of interest on
the Initial Notes accrued up to the date of issuance of the Exchange Notes.
The undersigned also understands and acknowledges that the Company reserves
the right in its sole discretion to purchase or make offers for any Initial
Notes that remain outstanding subsequent to the Expiration Date in the open
market, in privately negotiated transactions, through subsequent exchange offers
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
The undersigned understands that the delivery and surrender of the Initial
Notes is not effective, and the risk of loss of the Initial Notes does not pass
to the Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, with any required signature guarantees, together with all accompanying
evidences of authority and any other required documents in form satisfactory to
the Company. All questions as to form of all documents and the validity
(including time of receipt) and acceptance of tenders and withdrawals of Initial
Notes will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions," the undersigned hereby requests that any Initial Notes
representing principal amounts not tendered or not accepted for exchange be
issued in the name(s) of the undersigned and that Exchange Notes be issued in
the name(s) of the undersigned (or, in the case of Initial Notes delivered by
book-entry transfer, by credit to the account at the Book-Entry Transfer
Facility). Similarly, unless otherwise indicated herein in the box entitled
"Special Delivery Instructions," the undersigned hereby requests that any
Initial Notes representing principal amounts not tendered or not accepted for
exchange and Exchange Notes be delivered to the undersigned at the address(es)
shown above. The undersigned recognizes that the
-4-
<PAGE>
<PAGE>
Company has no obligation pursuant to the "Special Issuance Instructions" box or
"Special Delivery Instructions" box to transfer any Initial Notes from the name
of the registered Holder(s) thereof if the Company does not accept for exchange
any of the principal amount of such Initial Notes so tendered.
In order to properly complete this Letter of Transmittal, a Holder must (i)
complete the box entitled "Method of Delivery" by checking one of the three
boxes therein and supplying the appropriate information, (ii) complete the box
entitled "Description of Initial Notes," (iii) if such Holder is a Participating
Broker-Dealer (as defined below) and wishes to receive additional copies of the
Prospectus for delivery in connection with resales of Exchange Notes (as defined
below), check the applicable box, (iv) sign this Letter of Transmittal by
completing the box entitled "Please Sign Here," (v) if appropriate, check and
complete the boxes relating to the "Special Issuance Instructions" and "Special
Delivery Instructions" and (vi) complete the Substitute Form W-9. Each Holder
should carefully read the detailed Instructions below prior to the completing
this Letter of Transmittal. See "The Exchange Offer--Procedures for Tendering"
in the Prospectus.
Holders of Initial Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer should transmit their acceptance to DTC, which will edit and
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of a Letter of Transmittal by
the participant identified in the Agent's Message. DTC participants may also
accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through
ATOP.
If Holders desire to tender Initial Notes pursuant to the Exchange Offer
and (i) certificates representing such Initial Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Holder's Initial Notes and all other required
documents to reach the Exchange Agent prior to the Expiration Date or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Holders may effect a tender of such Initial Notes in accordance with
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 below.
A Holder having Initial Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to accept
the Exchange Offer with respect to the Initial Notes so registered.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF INITIAL NOTES
BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION.
Your bank or broker can assist you in completing this form. The
instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent, whose address and telephone number appear on
the front cover of this Letter of Transmittal. See Instruction 11 below.
-5-
<PAGE>
<PAGE>
List below the Initial Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately signed schedule and affix the schedule to this
Letter of Transmittal.
- -------------------------------------------------------------------------------
DESCRIPTION OF INITIAL NOTES
- -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) AGGREGATE AGGREGATE
OF HOLDER(S) (PLEASE CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL
FILL IN, IF BLANK) NUMBER(S) REPRESENTED AMOUNT TENDERED
- -------------------------------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL
- -------------------------------------------------------------------------------
-6-
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
METHOD OF DELIVERY
- -------------------------------------------------------------------
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED INITIAL NOTES ARE
BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ___________________________________________
Account Number: ________Transaction Code Number: ________________________
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT
PURSUANT TO INSTRUCTION 2 BELOW AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s): ____________________________________________
Window ticket No. (if any): ______________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Name of Eligible Institution that Guaranteed Delivery: ___________________
If Delivered by Book-Entry Transfer (yes or no): _________________________
Account Number: ________Transaction Code Number: ________________________
- -------------------------------------------------------------------------------
-7-
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
FOR PARTICIPATING BROKER-DEALERS ONLY
- -------------------------------------------------------------------------------
[ ] CHECK HERE AND PROVIDE THE INFORMATION REQUESTED BELOW IF YOU ARE A
PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND, DURING THE NINE-MONTH PERIOD
FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER, 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO, AS WELL AS ANY NOTICES FROM THE COMPANY
TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY TENDERING ITS INITIAL
NOTES AND EXCUTING THIS LETTER OF TRANSMITTAL, EACH PARTICIPATING
BROKER-DEALER AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY THE
COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES.
(IF NO PARTICIPATING BROKER-DEALERS CHECK THIS BOX, OR IF ALL
PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED THIS BOX SUBSEQUENTLY NOTIFY
THE COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR EXCHANGE NOTES HAVE BEEN
SOLD, THE COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF
THE EXCHANGE OFFER REGISTRATION STATEMENT OR TO UPDATE THE PROSPECTUS AND
WILL NOT PROVIDE ANY NOTICES TO ANY HOLDERS TO SUSPEND OR RESUME USE OF
THE PROSPECTUS.)
PROVIDE THE NAME OF THE INDIVIDUAL WHO SHOULD RECEIVE, ON BEHALF OF THE
HOLDER, ADDITIONAL COPIES OF THE PROSPECTUS, AND AMENDMENTS AND SUPPLEMENTS
THERETO, AND ANY NOTICES TO SUSPEND AND RESUME USE OF THE PROSPECTUS:
Name: _______________________________________________________________________
Address: ____________________________________________________________________
Telephone No.: ______________________________________________________________
Facsimile No.: ______________________________________________________________
- -------------------------------------------------------------------------------
-8-
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL HOLDERS OF INITIAL NOTES REGARDLESS OF
WHETHER INITIAL NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Initial Notes
exactly as their name(s) appear(s) on certificate(s) for Initial Notes or, if
delivered by a participant in the Book-Entry Transfer Facility, exactly as
such participant's name appears on a security position listing as the owner of
Initial Notes, or by person(s) authorized to become Holder(s) by endorsements
and documents transmitted with this Letter of Transmittal. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below under "Capacity" and submit
evidence satisfactory to the Company of such person's authority so to act. See
Instruction 4 below.
If the signature appearing below is not of the record holder(s) of the Initial
Notes, then the record holder(s) must sign a valid bond power.
X ___________________________________________________________________________
X ___________________________________________________________________________
Signature(s) of Registered Holder(s) or Authorized Signatory
Date: _______________________________________________________________________
Name: _______________________________________________________________________
Capacity: ___________________________________________________________________
Address: ____________________________________________________________________
(include Zip Code)
Area Code and Telephone No.: ________________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER DEALER WHO ACQUIRED THE INITIAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES
AND WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
- -------------------------------------------------------------------------------
-9-
<PAGE>
<PAGE>
MEDALLION SIGNATURE GUARANTEE (SEE INSTRUCTION 4 BELOW)
(CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION)
- -------------------------------------------------------------------------------
Name of Eligible Institution Guaranteeing Signatures
- -------------------------------------------------------------------------------
Address (including Zip Code) and Telephone Number (including Area Code) of Firm
- -------------------------------------------------------------------------------
Authorized Signature
- -------------------------------------------------------------------------------
Printed Name
- -------------------------------------------------------------------------------
Title
Date: _________________________________________________________________________
- -------------------------------------------------------------------------------
-10-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
- --------------------------------- -------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5 and 7) (SEE INSTRUCTIONS 4 AND 9)
To be completed ONLY if To be completed ONLY if
Initial Notes in a principal Initial Notes in a
amount not tendered or not principal amount not
accepted for exchange are to tendered or not accepted
be issued in the name of, or for exchange or Exchange
Exchange Notes are to be Notes are to be sent to
issued in the name of, someone other than the
someone other than the persons whose person or persons
signature(s) appear(s) whose signature(s) appear(s)
within this Letter of within this letter of transmittal
Transmittal. or to an address different from
that shown in the box entitled
"Description of Initial Notes"
within this Letter of Transmittal.
Issue [ ] Initial Notes Issue [ ] Initial Notes
[ ] Exchange Notes [ ] Exchange Notes
(check as applicable) (check as applicable)
Name ______________________ Name ______________________
(Please Print) (Please Print)
Address____________________ Address____________________
_____________________________ ___________________________
(Include Zip Code) (Include Zip Code)
______________________________
(Tax Identification or
Social Security Number)
(SEE SUBSTITUTE FORM W-9 HEREIN)
Credit Initial Notes not tendered or
not exchanged by book-entry transfer to
the Book-Entry Transfer Facility account
set below:
__________________________________
(Book-Entry Transfer
Facility Account Number)
Credit Exchange Notes to the
Book-Entry Transfer Facility
account set below:
_________________________________
(Book-Entry Transfer
Facility Account Number)
- --------------------------------- -------------------------------
</TABLE>
-11-
<PAGE>
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR INITIAL
NOTES OR BOOK-ENTRY CONFIRMATION; WITHDRAWAL OF TENDERS.
To tender Initial Notes in the Exchange Offer, physical delivery of
certificates for Initial Notes or confirmation of a book-entry transfer into the
Exchange Agent's account with a Book-Entry Transfer Facility of Initial Notes
tendered electronically, as well as a properly completed and duly executed copy
or manually signed facsimile of this Letter of Transmittal, or in the case of a
book-entry transfer, an Agent's Message, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m. New York time on the Expiration
Date. Tenders of Initial Notes in the Exchange Offer may be made prior to the
Expiration Date in the manner described in the preceding sentence and otherwise
in compliance with this Letter of Transmittal. THE METHOD OF DELIVERY OF THIS
LETTER OF TRANSMITTAL, CERTIFICATES FOR INITIAL NOTES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH DTC AND ANY
ACCEPTANCE OF AN AGENT'S MESSAGE TRANSMITTED THROUGH ATOP, IS AT THE ELECTION
AND RISK OF THE HOLDER TENDERING INITIAL NOTES. IF SUCH DELIVERY IS MADE BY
MAIL, IT IS SUGGESTED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED AND THAT SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF INITIAL
NOTES WILL BE ACCEPTED. Except as otherwise provided below, the delivery will be
made when actually received by the Exchange Agent. THIS LETTER OF TRANSMITTAL,
CERTIFICATES FOR THE INITIAL NOTES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE
SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE TRUSTEE OR DTC.
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to 5:00 p.m. New York time on the Expiration Date. In order to be
valid, notice of withdrawal of tendered Initial Notes must comply with the
requirements set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
2. GUARANTEED DELIVERY PROCEDURES.
If Holders desire to tender Initial Notes pursuant to the Exchange Offer
and (i) certificates representing such Initial Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Holder's Initial Notes and all other required
documents to reach the Exchange Agent prior to the Expiration Date or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Holders may effect a tender of Initial Notes in accordance with the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
Pursuant to the guaranteed delivery procedures:
(i) such tender must be made by or through an Eligible Institution;
(ii) prior to the Expiration Date the Exchange Agent must have received
from such Eligible Institution at one of the addresses set forth on the
cover of this Letter of Transmittal a properly completed and validly
executed Notice of Guaranteed Delivery (by manually signed facsimile
transmission, mail or hand delivery) in substantially the form provided
with the Prospectus,
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<PAGE>
setting forth the name(s) and address(es) of the registered Holder(s) and
the principal amount of Initial Notes being tendered and stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange ("NYSE") trading days from the date of the Notice of
Guaranteed Delivery, the Letter of Transmittal (or a manually signed
facsimile thereof) properly completed and duly executed, or, in the case of
a book-entry transfer an Agent's Message together with certificates
representing the Initial Notes (or confirmation of book-entry transfer of
such Initial Notes into the Exchange Agent's account at a Book-Entry
Transfer Facility), and any other documents required by this Letter of
Transmittal and the instructions thereto, will be deposited by such
Eligible Institution with the Exchange Agent; and
(iii) this Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and validly executed with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
together with certificates for all Initial Notes in proper form for
transfer (or a Book-Entry Confirmation with respect to all tendered Initial
Notes), and any other required documents must be received by the Exchange
Agent within three NYSE trading days after the date of such Notice of
Guaranteed Delivery.
3. PARTIAL TENDERS.
If less than the entire principal amount of any Initial Notes evidenced by
a submitted certificate is tendered, the tendering Holder must fill in the
principal amount tendered in the last column of the box entitled "Description of
Initial Notes" herein. The entire principal amount represented by the
certificates for all Initial Notes delivered to the Exchange Agent will be
deemed to have been tendered, unless otherwise indicated. The entire principal
amount of all Initial Notes not tendered or not accepted for exchange will be
sent (or, if tendered by book-entry transfer, returned by credit to the account
at the Book-Entry Transfer Facility designated herein) to the Holder unless
otherwise provided in the "Special Issuance Instructions" or "Special Delivery
Instructions" boxes of this Letter of Transmittal.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the Holder(s) of the Initial
Notes tendered hereby the signature(s) must correspond with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
change whatsoever. If this Letter of Transmittal is signed by a participant in
one of the Book-Entry Transfer Facilities whose name is shown as the owner of
the Initial Notes tendered hereby, the signature must correspond with the name
shown on the security position listing as the owner of the Initial Notes.
If any of the Initial Notes tendered hereby are registered in the name of
two or more Holders, all such Holders must sign this Letter of Transmittal. If
any tendered Initial Notes are registered in client names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal and any necessary accompanying documents as
there are different names in which certificates are held.
If this Letter of Transmittal or any certificates for Initial Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority so to act must be submitted with this Letter of Transmittal.
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<PAGE>
<PAGE>
IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY WHO IS NOT
THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID BOND POWER
WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED MEDALLION SIGNATURE PROGRAM (A "MEDALLION SIGNATURE GUARANTOR").
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered Holder(s) of the Initial Notes tendered herewith (or by
a participant in one of the Book-Entry Transfer Facilities whose name appears on
a security position listing as the owner of Initial Notes) and certificates for
Exchange Notes or for any Initial Notes for principal amounts not tendered or
not accepted for exchange are to be issued directly to such Holder(s) or, if
tendered by a participant in one of the Book-Entry Transfer Facilities, any
Initial Notes for principal amounts not tendered or not accepted for exchange
are to be credited to such participant's account at such Book-Entry Transfer
Facility and neither the "Special Issuance Instructions" box nor the "Special
Delivery Instructions" box of this Letter of Transmittal has been completed or
(ii) such Initial Notes are tendered for the account of an Eligible Institution.
IN ALL OTHER CASES ALL SIGNATURES ON LETTERS OF TRANSMITTAL ACCOMPANYING INITIAL
NOTES MUST BE GUARANTEED BY A MEDALLION SIGNATURE GUARANTOR. In all such other
cases (including if this Letter of Transmittal is not signed by the Holder), the
Holder must either properly endorse the certificates for Initial Notes tendered
or transmit a separate, properly completed bond power with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
Holder(s) appear(s) on such Initial Notes, and, with respect to a participant in
a Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of Initial Notes, exactly as the name(s) of the participant(s)
appear(s) on such security position listing), with the signature on the
endorsement or bond power guaranteed by a Medallion Signature Guarantor, unless
such certificates or bond powers are executed by an Eligible Institution.
Endorsements on certificates for Initial Notes and signatures on bond
powers provided in accordance with this Instruction 4 by registered Holders not
executing this Letter of Transmittal must be guaranteed by a Medallion Signature
Guarantor.
5. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS.
Tendering Holders should indicate in the applicable box or boxes the name
and address to which Initial Notes for principal amounts not tendered or not
accepted for exchange or certificates for Exchange Notes, if applicable, are to
be issued or sent, if different from the name and address of the Holder signing
this Letter of Transmittal. In the case of payment to a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
6. TAXPAYER IDENTIFICATION NUMBER.
Each tendering Holder is required to provide the Exchange Agent with the
Holder's social security or Federal employer identification number, on
Substitute Form W-9 which is provided under "Important Tax Information" below,
or alternatively to establish another basis for exemption from backup
withholding. A Holder must cross out Item (2) in the Certification box in Part
III of Substitute Form W-9 if such Holder is subject to backup withholding.
Failure to provide the information on the form may subject such Holder to 31%
Federal backup withholding tax on any payment made to the Holder with respect to
the Exchange Offer. The appropriate box in Part I of Substitute Form W-9 should
be checked if the tendering or consenting Holder has not been issued a Taxpayer
Identification Number ("TIN") and has either applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part I of Substitute Form W-9
is checked, the Holder should also sign the attached Certification of
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<PAGE>
<PAGE>
Awaiting Taxpayer Identification Number. If the Exchange Agent is not provided
with a TIN within 60 days thereafter, the Exchange Agent will withhold 31% on
all such payments of the Exchange Notes until a TIN is provided to the Exchange
Agent.
7. TRANSFER TAXES.
The Company will pay all transfer taxes applicable to the exchange and
transfer of Initial Notes pursuant to the Exchange Offer, except if (i)
deliveries of certificates for Initial Notes for principal amounts not tendered
or not accepted for exchange are registered or issued in the name of any person
other than the Holder of Initial Notes tendered thereby, (ii) tendered
certificates are registered in the name of any person other than the person
signing this Letter of Transmittal or (iii) a transfer tax is imposed for any
reason other than the exchange of Initial Notes pursuant to the Exchange Offer,
in which case the amount of any transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith the amount of taxes will be billed directly to such tendering
Holder.
8. IRREGULARITIES.
All questions as to the form of all documents and the validity (including
time of receipt) and acceptance of all tenders and withdrawals of Initial Notes
will be determined by the Company, in its sole discretion which determination
shall be final and binding. ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF
INITIAL NOTES WILL NOT BE CONSIDERED VALID. The Company reserves the absolute
right to reject any and all tenders of Initial Notes that are not in proper form
or the acceptance of which, in the Company's opinion, would be unlawful. The
Company also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Initial Notes. The Company's
interpretations of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding. Any
defect or irregularity in connection with tenders of Initial Notes must be cured
within such time as the Company determines, unless waived by the Company.
Tenders of Initial Notes shall not be deemed to have been made until all defects
or irregularities have been waived by the Company or cured. A defective tender
(which defect is not waived by the Company or cured by the Holder) will not
constitute a valid tender of Initial Notes and will not entitle the Holder to
Exchange Notes. None of the Company, the Trustee, the Exchange Agent or any
other person will be under any duty to give notice of any defect or irregularity
in any tender or withdrawal of any Initial Notes, or incur any liability to
Holders for failure to give any such notice.
9. WAIVER OF CONDITIONS.
The Company reserves the right, in its reasonable discretion, to amend or
waive any of the conditions to the Exchange Offer.
10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR
INITIAL NOTES.
Any Holder whose certificates for Initial Notes have been mutilated, lost,
stolen or destroyed should write to or telephone the Trustee at the address or
telephone number set forth on the cover of this Letter of Transmittal for the
Exchange Agent.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering Initial Notes and
requests for assistance or additional copies of the Prospectus, this Letter of
Transmittal, the Notice of Guaranteed Delivery or other
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<PAGE>
<PAGE>
documents may be directed to the Exchange Agent, whose address and telephone
number appear on the cover of this Letter of Transmittal.
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a Holder who tenders Initial Notes prior to
receipt of the Exchange Notes is required to provide the Exchange Agent with
such Holder's correct TIN on the Substitute Form W-9 below or otherwise
establish a basis for exemption from backup withholding. If such Holder is an
individual, the TIN is his or her social security number. If the Exchange Agent
is not provided with the correct TIN, a $50 penalty may be imposed by the
Internal Revenue Service ("IRS") and payments, including any Exchange Notes,
made to such Holder with respect to Initial Notes exchanged pursuant to the
Exchange Offer may be subject to backup withholding.
Certain Holders (including among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on the
Substitute Form W-9. A foreign person may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed IRS Form W-8 signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions. Holders are urged to consult their own tax advisors to
determine whether they are exempt.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments, including any Exchange Notes,
made with respect to Initial Notes exchanged pursuant to the Exchange Offer, the
Holder is required to provide the Exchange Agent with (i) the Holder's correct
TIN by completing the form below, certifying that the TIN provided on the
Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that
(A) such Holder is exempt from backup withholding, (B) the Holder has not been
notified by the IRS that the Holder is subject to backup withholding as a result
of failure to report all interest or dividends or (C) the IRS has notified the
Holder that the Holder is no longer subject to backup withholding, and (ii) if
applicable, an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder. If
the Initial Notes are held in more than one name or are held not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
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<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
PAYOR'S NAME: AGRILINK FOODS, INC.
- -----------------------------------------------------------------------------------------------
Payee Information (Please print or type): Individual or
business name (if joint account list first and circle the
name of person or entity whose number you furnish in Part 1
below):
SUBSTITUTE ______________________________________________________________________________
Form W-9
Department of Check appropriate box:
the Treasury [ ] Individual/Sole Proprietor [ ] Corpporation [ ] Partnership [ ] Other
Internal Revenue
Service
------------------------------------------------------------------------------
Address
-------------------------------------------------------------------------------
City, State and Zip Code
-------------------------------------------------------------------------------
PART I Taxpayer Identification Number Social security number:
("TIN"): Enter your TIN in the box at right. For individuals
this is your social security number; for other entities it _______________________
is your employer identification number. Refer to the chart
in Item A on page 1 of the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 Employer indentification
(the "Guidelines") for further clarification. If you do number:
not have a TIN, see instructions on how to obtain a TIN in
Item C on page 2 of the Guidelines, check the appropriate
box below indicating that you have applied for a TIN and, in ----------------------
addition to the Part III Certification, sign the attached
Certification of Awaiting Taxpayer Identification Number. APPLIED FOR TIN [ ]
------------------------------------------------------------------------------------------
PART II Payees Exempt From Backup Withholding: Check box.
(See Item B on pages 1-2 of the Guidelines for further
clarification. Even if you are exempt from backup
withholding, you should still complete and sign the
certification below):
Exempt [ ]
- --------------------------------------------------------------------------------
Request For PART III Certification: You must cross out
Taxpayer item 2 below if you have been notified by the
Identification Internal Revenue Service (the "IRS") that you
Number and are currently subject to backup withholding
Certification because of underreporting interest or
dividends on your tax return (See page 2 of
the Guidelines for further clarification).
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to be
issued to me) and
2. I am not subject to backup withholding because: (a) I am
exempt from backup withholding, (b) I have not been
notified by the IRS that I am subject to backup
withholding as a result of a failure to report all
interest or dividends or (c) the IRS has notified me that
I am no longer subject to backup withholding.
Signature: _____________________ Date: ____________________
</TABLE>
- --------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL
DETAILS.
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<PAGE>
- --------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED
THE BOX "APPLIED FOR TIN" IN PART I OF SUBSTITUTE FORM W-9
CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a TIN has not been issued to me,
and either (a) I have mailed or delivered an application to receive a TIN to
the appropriate IRS Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that I must provide a TIN to the payor within 60 days of submitting
this Substitute Form W-9 and that if I do not provide a TIN to the payor
within 60 days, the payor is required to withhold 31% of all reportable
payments thereafter to me until I furnish the payor with a TIN.
Signature: ______________________ Date: _____________________________________
- --------------------------------------------------------------------
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<PAGE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
A. TIN--The Taxpayer Identification Number for most individuals is their social
security number. Refer to the following chart to determine the appropriate
number:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
GIVE THE SOCIAL SECURITY OR
EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF:
- -------------------------------------------------------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account
or, if combined funds, the first
individual on the account(1)
3. Custodian account of a minor (Uniform Gift The minor(2)
to Minors Act)
4. a. Revocable savings trust (grantor is The grantor-trustee(1)
also trustee)
b. So-called trust account that is not a The actual owner(1)
legal or valid trust under State law
5. Sole proprietorship The owner(3)
6. A valid trust, estate or pension trust Legal entity(4)
7. Corporate The corporation
8. Association, club, religious, charitable, The organization
educational or other tax exempt
organization
9. Partnership The partnership
10. A broker or registered nominee The broker or nominee
11. Account with the Department of Agriculture The public entity
- -------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's name and social security
number.
(3) Show the individual's name. You may also enter your business name or "doing
business as" name. You may use either your Social Security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
B. EXEMPT PAYEES--The following lists exempt payees. If you are exempt, you must
nonetheless complete the form and provide your TIN in order to establish that
you are exempt. Check the box in Part II of the form, sign and date the form.
For this purpose, Exempt Payees include: (1) a corporation; (2) an
organization exempt from tax under section 501(a), or an individual retirement
plan (IRA) or a custodial account under section 403(b)(7); (3) the United States
or any of its agencies or instrumentalities; (4) a state, the District of
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Columbia, a possession of the United States, or any of their political
subdivisions or instrumentalities; (5) a foreign government or any of its
political subdivisions, agencies or instrumentalities; (6) an international
organization or any of its agencies or instrumentalities; (7) a foreign central
bank of issue; (8) a dealer in securities or commodities required to register in
the U.S. or a possession of the U.S.; (9) a real estate investment trust; (10)
an entity or person registered at all times during the tax year under the
Investment Company Act of 1940; (11) a common trust fund operated by a bank
under section 584(a); and (12) a financial institution.
C. OBTAINING A NUMBER--If you do not have a taxpayer identification number or
you do not know your number, obtain Form SS-5, application for a Social Security
Number, or Form SS-4, Application for Employer Identification Number, at the
local office of the Social Security Administration or the Internal Revenue
Service and apply for a number.
D. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers who
must report the payments to the IRS. The IRS uses the numbers for identification
purposes.
Payers must be given the numbers whether or not payees are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend
and certain other payments to a payee who does not furnish a taxpayer
identification number. Certain penalties may also apply.
E. PENALTIES--
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. If you fail
to include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
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<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
OF
11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
AGRILINK FOODS, INC.
This form, or one substantially equivalent hereto, must be used to
accept the Exchange Offer of Agrilink Foods, Inc. (the "Company") made pursuant
to the Prospectus, dated [ ], 1999 (the "Prospectus"), if certificates for
Initial Notes are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Company prior to 5:00 p.m., New York City time,
on the Expiration Date. This form may be delivered or transmitted by facsimile
transmission, mail or hand delivery to IBJ Schroder Bank & Trust Company (the
"Exchange Agent") as set forth below. Capitalized terms not defined herein are
defined in the Prospectus.
DELIVERY TO: IBJ SCHRODER BANK & TRUST COMPANY, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail (Registered or Certified Mail recommended): By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing Window,
Attention: Reorganization Operations Subcellar One, (SC-1)
Facsimile Transmission Number
(for Eligible Institutions only):
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Initial Notes specified below pursuant to the
guaranteed delivery procedures set forth under the caption "The Exchange
Offer--Guaranteed Delivery Procedures" in the Prospectus. By so tendering, the
undersigned does hereby make, at and as of the date hereof, the representations
and warranties of a tendering Holder of Initial Notes set forth in the Letter of
Transmittal. The undersigned hereby tenders the Initial Notes listed below:
<TABLE>
<S> <C>
Certificate Number(s) (if available) Principal Amount Tendered
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
</TABLE>
If Initial Notes will be tendered by book-entry transfer, please provide the
following information:
<TABLE>
<S> <C>
Name of Tendering Institution: Depository Trust Company Account Number:
- ---------------------------------- ----------------------------------------
</TABLE>
<PAGE>
<PAGE>
PLEASE SIGN HERE
<TABLE>
<S> <C>
X________________________________________________ ____________________________
Signature(s) of Owner(s) or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number: ________________________________________________
Must be signed by the holder(s) of Initial Notes as their Name(s)
appear(s) on certificates for Initial Notes or on a security position listing,
or by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): ___________________________________________________________________
-------------------------------------------------------------------
-------------------------------------------------------------------
Capacity: ___________________________________________________________________
Address(es): ___________________________________________________________________
-------------------------------------------------------------------
-------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, guarantees
that the certificates representing the principal amount of Initial Notes
tendered hereby in proper form for transfer, or timely confirmation of the
book-entry transfer of such Initial Notes into the Exchange Agent's account at
The Depository Trust Company pursuant to the procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus,
together with one or more properly completed and duly executed Letters of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof), and any
required signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than three New York Stock Exchange trading days after the
Expiration Date.
<TABLE>
<S> <C>
- --------------------------------------------- --------------------------------
Name of Firm Authorized Signature
- --------------------------------------------- --------------------------------
Street Address Name (please print)
- --------------------------------------------- --------------------------------
City, State and Zip Code Title
- --------------------------------------------- --------------------------------
Area Code and Telephone Number Date
</TABLE>
DO NOT SEND CERTIFICATES FOR INITIAL NOTES WITH THIS FORM. ACTUAL
SURRENDER OR CERTIFICATES FOR INITIAL NOTES MUST BE MADE PURSUANT TO,
AND BE ACCOMPANIED BY, THE EXECUTED LETTER OF TRANSMITTAL.
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<PAGE>
<PAGE>
EXHIBIT 99.3
AGRILINK FOODS, INC.
OFFER TO EXCHANGE ITS 11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING 11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON [ ], UNLESS EXTENDED.
- --------------------------------------------------------------------------------
[ ], 1999
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Agrilink Foods, Inc., a New York corporation (the "Company"), is
offering upon the terms and conditions set forth in the Prospectus, dated [ ],
1999 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 11-7/8% Senior
Subordinated Notes due 2008 (the "Exchange Notes") for an equal principal amount
of its outstanding 11-7/8% Senior Subordinated Notes due 2008 (the "Initial
Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
as of November 18, 1998, by and among the Company and the other signatories
thereto.
We are requesting that you contact your clients for whom you hold
Initial Notes regarding the Exchange Offer. For your information and for
forwarding to your clients for whom you hold Initial Notes registered in your
name or in the name of your nominee, or who hold Initial Notes registered in
their own names, we are enclosing the following documents:
1. The Prospectus;
2. The Letter of Transmittal (including Guidelines of the Internal
Revenue Service for Certification of Taxpayer Identification Number on
Substitute Form W-9) for your use and for the information of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Initial Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to the
time the Exchange Offer expires, or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose accounts
you hold Initial Notes registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Exchange Offer; and
5. A return envelope addressed to IBJ Schroder Bank & Trust Company, the
Exchange Agent.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED. INITIAL NOTES
TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE
EXCHANGE OFFER EXPIRES.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or an Agent's Message in
lieu thereof), with any required signature guarantees and any other required
documents, should be sent to the Exchange Agent and certificates
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representing the Initial Notes should be delivered to the Exchange Agent, all in
accordance with the instructions set forth in the Letter of Transmittal and the
Prospectus.
If holders of Initial Notes wish to tender, but it is impracticable for
them to forward their certificates for Initial Notes prior to the expiration of
the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures."
The Company will not pay any fees or commissions to brokers, dealers or
other persons for soliciting exchanges of Initial Notes pursuant to the Exchange
Offer. The Company will, however, upon request, reimburse you for customary
clerical and mailing expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Company will pay or cause to be paid any stock
transfer taxes payable on the transfer of Initial Notes to it, except as
otherwise provided in Instruction 7 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer
or for additional copies of the Prospectus, Letter of Transmittal and other
enclosed materials may be directed to the Exchange Agent at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
AGRILINK FOODS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY, THE EXCHANGE AGENT, OR ANY
AFFILIATE OF EITHER OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
-2-
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EXHIBIT 99.4
AGRILINK FOODS, INC.
OFFER TO EXCHANGE ITS 11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING 11-7/8% SENIOR SUBORDINATED NOTES DUE 2008
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is a Prospectus, dated [ ], 1999 (the
"Prospectus"), a Letter of Transmittal (the "Letter of Transmittal") relating to
the offer (the "Exchange Offer") by Agrilink Foods, Inc. (the "Company") to
exchange its 11-7/8% Senior Subordinated Notes due 2008 (the "Exchange Notes")
for an equal principal amount of its outstanding 11-7/8% Senior Subordinated
Notes due 2008 (the "Initial Notes"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company contained in the Registration Rights Agreement dated as of November 18,
1998, by and among the Company and the other signatories thereto.
These materials are being forwarded to you as the beneficial owner of
Initial Notes held by us for your account or benefit but not registered in your
name. AN EXCHANGE OF ANY INITIAL NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE USED BY YOU TO EXCHANGE
NOTES HELD BY US FOR YOUR ACCOUNT OR BENEFIT.
Accordingly, we request instructions as to whether you wish us to
exchange any or all Initial Notes held by us for your account or benefit,
pursuant to the terms and conditions set forth in the Prospectus and the Letter
of Transmittal. Your instructions should be forwarded to us as promptly as
possible in order to permit us to tender the Initial Notes on your behalf in
accordance with the provisions of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount of
Exchange Notes for each $1,000 principal amount of Initial Notes, of which
$200,000,000 aggregate principal amount of Initial Notes was outstanding as of
[ ], 1999. The terms of the Exchange Notes are identical in all material
respects to the terms of the Initial Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Initial Notes for Exchange Notes.
2. The Exchange Offer is subject to certain conditions. See "The
Exchange Offer--Certain Conditions To The Exchange Offer" in the Prospectus.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on [ ], 1999, unless extended. Any Initial Notes
tendered pursuant to the Exchange Offer may be withdrawn at any time before the
Exchange Offer expires.
4. Any transfer taxes incident to the transfer of Initial Notes from
the tendering holder to the Company will be paid by the Company, except as
otherwise provided in the Prospectus and the Letter of Transmittal.
If you wish us to tender your Initial Notes, please so instruct us by
completing, executing and returning to us the instruction on the back of this
letter. An envelope to return your instructions to us is enclosed.
The Exchange Offer is not being made to, nor will exchanges be accepted
from or on behalf of, holders of Initial Notes residing in any jurisdiction in
which the making of the Exchange Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction.
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INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned hereby acknowledges receipt of your letter and the
enclosed material referred to therein relating to the Exchange Offer made by
Agrilink Foods, Inc. with respect to its Initial Notes.
This will instruct you, as to the action to be taken by you relating to
the Exchange Offer with respect to the Initial Notes held by you for the account
of the undersigned.
The aggregate face amount of the Initial Notes held by you for the account
of the undersigned is (fill in amount):
$ of the 11-7/8% Senior Subordinated Notes due 2008.
------------
With respect to the Exchange Offer, the undersigned hereby instructs you (check
appropriate box):
[ ] To TENDER the following Initial Notes held by you for the
account of the undersigned (insert principal amount of Initial
Notes to be tendered*, if any):
$ of the 11-7/8% Senior Subordinated Notes due 2008.
-----------
* The minimum permitted tender is $1,000 in principal amount of
Initial Notes. All tenders must be in integral multiples of
$1,000 of principal amount.
[ ] NOT to TENDER any Initial Notes held by you for the account of
the undersigned.
If the undersigned instructs you to tender the Initial Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal); (b) to make such
agreements, representations and warranties on behalf of the undersigned, as are
set forth in the Letter of Transmittal; and (c) to take such other action as may
be necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of such Initial Notes.
________________________________________________________________________________
SIGN HERE
Name of Beneficial Owner(s): ______________________________________________
Signature(s): _____________________________________________________________
Name(s) (please print): ___________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
Telephone Number:__________________________________________________________
Taxpayer Identification or Social Security Number: ________________________
Date: _____________________________________________________________________
________________________________________________________________________________
None of the Initial Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Initial Notes held by us
for your account.
-2-
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EXHIBIT 99.5
EXCHANGE AGENCY AGREEMENT
1. This Agreement is entered into as of [ ], 1999 between IBJ Schroder
Bank & Trust Company, a banking corporation organized under the laws of the
State of New York, as Exchange Agent (the "Agent") and Agrilink Foods, Inc., a
New York corporation (the "Company").
2. The Company proposes to make an offer to exchange (the "Exchange
Offer") $1,000 principal amounts of the Company's 11-7/8% Senior Subordinated
Notes due 2008 (the "Exchange Notes") for equal principal amounts of the
Company's outstanding 11-7/8% Senior Subordinated Notes due 2008 (the "Initial
Notes" and, together with the Exchange Notes, the "Notes"), of which
$200,000,000 aggregate principal amount is outstanding, pursuant to the
Prospectus dated [ ], 1999 and the accompanying Letter of Transmittal. The
Exchange Offer will terminate at 5:00 p.m. New York City Time on [ ], 1999,
unless extended by the Company in its sole discretion (the "Expiration Date").
The Exchange Notes are to be issued by the Company pursuant to the terms of an
Indenture dated as of November 18, 1998 (the "Indenture") between the Company,
the guarantors signatory thereto and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee").
3. Subject to the provisions hereof, the Company hereby appoints and
the Agent hereby accepts the appointment as Agent for the purposes of receiving,
accepting for delivery and otherwise acting upon tenders of the Initial Notes
(the "Certificates") in accordance with the form of Letter of Transmittal
attached hereto (the "L/T") and with the terms and conditions set forth herein
and under the caption "The Exchange Offer" in the Prospectus.
4. The Agent has received the following documents (the "Exchange Offer
Documents") in connection with its appointment and has examined such documents
to the extent necessary to perform its duties hereunder:
(a) L/T;
(b) a form of Notice of Guaranteed Delivery;
(c) the Prospectus;
(d) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees; and
(e) a form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
The Company shall furnish you with additional copies of such documents at your
request.
5. The Agent is authorized and hereby agrees to act as follows:
(a) to establish an account with respect to the Initial Notes at the
Depository Trust Company ("DTC") for purposes of the Exchange Offer within two
business days after the
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date of this Agreement, and any financial institution that is a participant in
DTC may make book-entry delivery of the Initial Notes by causing DTC to transfer
such Initial Notes into your account in accordance with DTC's procedures for
such transfer;
(b) to address, and deliver by hand or next day courier, a complete
set of the Exchange Offer Documents to each person who, prior to the Expiration
Date, becomes a registered holder of, or who appears on a security position
listing for, the Initial Notes, promptly after such person becomes such a
registered holder or appears on such security position listing, and, upon the
request of any Designated Officer, to furnish copies of such Exchange Offer
Documents or such other forms as may be approved from time to time by the
Company, to all persons requesting such documents and to accept and comply with
telephone requests for information relating to the Exchange Offer, provided that
such information shall relate only to the procedures for accepting (or
withdrawing from) the Exchange Offer;
(c) to receive all tenders of Initial Notes made pursuant to the
Exchange Offer and stamp the L/T and any Notices of Guaranteed Delivery with the
day, month and approximate time of receipt;
(d) to examine each L/T and Initial Notes (or confirmations of
book-entry transfers into the Agent's account at DTC) and any Agent's Message or
other documents delivered by or for holders of Initial Notes to determine that
all requirements necessary to constitute a valid tender have been met. The Agent
shall be entitled to rely on the electronic messages sent by DTC regarding ATOP
delivery of the Notes to the Agent's account at DTC from the DTC participants
listed on the DTC position listing provided to the Agent;
(e) to take such actions as are necessary and appropriate to correct
any irregularity or deficiency associated with any tender not in proper order;
(f) to follow instructions given by the President, Chief Executive
Officer, Chief Financial Officer, any Vice President or the Secretary of the
Company, or such other person or persons as they shall designate in writing
(each a "Designated Officer"), or any other person designated by any Designated
Officer in writing, with respect to the waiver of any irregularities or
deficiencies associated with any tender;
(g) to hold all valid tenders subject to further instructions from a
Designated Officer, or any person designated by any such Designated Officer in
writing;
(h) to render a written report, in the form of Exhibit A attached
hereto, on each business day during the Exchange Offer and promptly confirm, by
telephone, the information contained therein to the Chief Financial Officer of
the Company (facsimile number: 716-383-1606; telephone number 716-383-1850) and
to Eulalia Mack, Esq. (facsimile number: 212-841-1010; telephone number
212-841-1000);
(i) to follow and act upon any amendments, modifications or
supplements to these instructions and to the Exchange Offer (including any
extension or termination of the Exchange Offer), any of which may be given (if
orally, to be promptly confirmed in writing) to the Agent by a Designated
Officer or such other person or persons as a Designated Officer shall designate
in writing;
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(j) to return to the presenters, in accordance with the provisions of
the L/T, any Initial Notes that were not received in proper order and as to
which the irregularities or deficiencies were not cured or waived;
(k) in the event the Exchange Offer is consummated, to deliver
authenticated Exchange Notes to tendering Noteholders, in accordance with the
instructions of such Noteholder's specified in the respective L/T's, as soon as
practicable after receipt thereof;
(l) to determine that all endorsements, guarantees, signatures,
authorities, stock transfer taxes (if any) and such other requirements are
fulfilled in connection with any request for issuance of the Exchange Notes in a
name other than that of the registered owner of the Initial Notes;
(m) to deliver to, or upon the order of, the Company all Initial Notes
received under the Exchange Offer, together with any related assignment forms
and other documents;
(n) to advise the Company with respect to any Initial Notes delivered
subsequent to the Expiration Date and to accept the instructions (if given
orally, to be confirmed in writing) of a Designated Officer with respect to the
disposition of such Notes; and
(o) subject to the other terms and conditions set forth in this
Agreement, to take all other actions reasonable and necessary in the good faith
judgment of the Agent, to effect the foregoing matters.
6. The Agent shall:
(a) have no duties or obligations other than those specifically set
forth herein, in the L/T and in the Prospectus under the caption "The Exchange
Offer";
(b) not be required to refer to any documents for the performance of
its obligations hereunder other than this Agreement, the L/T and the documents
required to be submitted with the L/T, and under the caption "The Exchange
Offer" in the Prospectus; other than such documents, the Agent will not be
responsible or liable for any terms, directions or information in the Prospectus
or any other document or agreement unless the Agent specifically agrees thereto
in writing;
(c) not be required to and shall make no representations and have no
responsibilities as to the validity, accuracy, value or genuineness of (i) the
Exchange Offer, (ii) any Certificates, L/Ts or documents prepared by the Company
in connection with the Exchange Offer or (iii) any signatures or endorsements,
other than its own;
(d) not be obligated to take any legal action hereunder that
might, in its reasonable judgment, involve any expense or liability, unless it
has been furnished with reasonable indemnity by the Company;
(e) be able to rely on and shall be protected in acting in good faith
on the written or oral instructions with respect to any matter relating to its
actions as Agent specifically
3
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covered by this Agreement, of any Designated Officer of the Company authorized
to give instructions under paragraph 5(g) or 5(h) above;
(f) be able to rely on and shall be protected in acting in good faith
upon any certificate, instrument, opinion, notice, letter, telegram or any other
document or security delivered to it and believed by it reasonably and in good
faith to be genuine and to have been signed by the proper party or parties;
(g) not be responsible for or liable in any respect on account of the
identity, authority or rights of any person (other than a Designated Officer)
executing or delivering or purporting to execute or deliver any document or
property under this Agreement and shall have no responsibility with respect to
the use or application of any property delivered by it pursuant to the
provisions hereof;
(h) be able to consult with counsel satisfactory to it (including
counsel for the Company or staff counsel of the Agent) and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with advice or opinion of such counsel;
(i) not be called on at any time to advise, and shall not advise, any
person delivering an L/T pursuant to the Exchange Offer as to the wisdom of
tendering Initial Notes in the Exchange Offer or as to the market value or
decline or appreciation in market value of any Notes nor shall the Agent pay or
offer to pay any concessions, commissions or solicitation fees to any broker,
dealer, bank or other person or to engage or utilize any person to solicit
tenders;
(j) not be liable for anything which it may do or refrain from doing
in connection with this Agreement except for its own gross negligence, willful
misconduct or bad faith;
(k) not be bound by any notice or demand, or any waiver or
modification of this Agreement or any of the terms hereof, unless evidenced by a
writing delivered to the Agent signed by the proper authority or authorities
and, if the Agent's duties or rights are affected, unless the Agent shall give
its prior written consent thereto;
(l) have no duty to enforce any obligation of any person to make
delivery, or to direct or cause any delivery to be made, or to enforce any
obligation of any person to perform any other act; and
(m) have the right to assume, in the absence of written notice to the
contrary from the proper person or persons, that a fact or an event by reason of
which an action would or might be taken by the Agent does not exist or has not
occurred without incurring liability for any action taken or omitted in good
faith or in the exercise of the Agent's best judgment, or any action suffered by
the Agent to be taken or omitted, in good faith or in the exercise of the
Agent's best judgment, in reliance upon such assumption.
7. The Agent shall be entitled to compensation as set forth in Exhibit
B attached hereto.
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8. (a) The Company covenants and agrees to reimburse the Agent for,
indemnify it against, and hold it harmless from any and all reasonable costs and
expenses (including reasonable fees and expenses of counsel and allocated cost
of staff counsel) that may be paid or incurred or suffered by the Agent or to
which the Agent may become subject without gross negligence, willful misconduct
or bad faith on the Agent's part by reason of or as a result of the Agent's
compliance with the instructions set forth herein or with any additional or
supplemental written or oral instructions delivered to it pursuant hereto, or
which may arise out of or in connection with the administration and performance
of its duties under this Agreement. You shall notify the Company in writing of
the assertion of any claim against you; provided, however, that your failure so
to notify the Company shall not excuse the company from its obligations
hereunder except to the extent such failure to notify shall prejudice or cause
damage to the Company.
(b) The Company shall be entitled to participate at its own expense in
the defense of any such claim or other action, and, if the Company so elects,
shall assume the defense of any suit brought to enforce any such claim. In the
event that the Company shall assume the defense of any such suit, it shall not
be liable for the fees and expenses of any additional counsel thereafter
retained by the Agent so long as the Company shall retain counsel reasonably
satisfactory to the Agent to defend such suit. The Agent shall not compromise or
settle any such action or claim without the consent of the Company, provided
that the Company shall not be entitled to assume the defense of any action if
representation of the parties by the same legal counsel would, in the reasonable
opinion of counsel for the Agent, be inappropriate due to actual or potential
conflicting interests between the parties.
(c) Without the prior written consent of the Company (which consent
shall not be unreasonably withheld), the Agent will not settle, compromise or
consent to the entry of judgment in any pending or threatened claim, action, or
proceeding in respect of which indemnification could be sought in accordance
with the indemnification provisions of this Agreement (whether or not the Agent
or the Company or any of its controlling persons is an actual or potential party
to such claim, action or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Company and its controlling
persons from all liability arising out of such claim, action or proceeding.
9. This Agreement shall be construed and enforced in accordance with
the laws of the State of New York, without regard to conflicts of laws
provisions, and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of the parties hereto;
provided, however, that this Agreement may not be assigned by the Agent without
the prior written consent of the Company.
10. Unless otherwise expressly provided herein, all notices, requests,
demands and other communications hereunder shall be in writing, shall be
delivered by hand, facsimile, prepaid overnight courier with next business day
delivery guaranteed, or by First Class Mail, postage prepaid, shall be deemed
given when received and shall be addressed to the Agent and the Company at the
respective addresses listed below or to such other addresses as they shall
designate from time to time in writing, forwarded in like manner.
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If to the Agent, to: IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Reorganization Operations Dept.
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
with copies to: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Corporate Finance Trust Services
Telephone: (212) 858-2657
Facsimile: (212) 858-2952
If to the Company, to: Agrilink Foods, Inc.
90 Linden Oaks
P.O. Box 20670
Rochester, New York 14602
Attn: Chief Financial Officer
Telephone: (716) 383-1850
Facsimile: (716) 383-1606
with copies to: Howard, Smith & Levin LLP
1330 Avenue of the Americas
New York, New York 10019
Attn: Eulalia M. Mack, Esq.
Telephone: (212) 841-1094
Facsimile: (212) 841-1010
11. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
12. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
13. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, paragraphs 7 and 8 and any outstanding obligation of the Agent
shall survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf by their officers thereunto duly authorized, all as
of the day and year first above written.
IBJ SCHRODER BANK & TRUST COMPANY
By: __________________________________
Name:
Title:
AGRILINK FOODS, INC.
By: ___________________________________
Name:
Title:
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EXHIBIT A
SAMPLE REPORT
Date:___________________________
Report Number:__________________
As of Date:_____________________
Ladies & Gentlemen:
As Exchange Agent for the Exchange Offer dated_____________________ , 1998, we
hereby render the following report:
Principal Amount previously received: _______________________
Principal Amount received today: _______________________
Principal Amount received against Guaranteed Deliveries: _______________________
Principal Amount withdrawn today: _______________________
TOTAL PRINCIPAL AMOUNT RECEIVED TO DATE
=======================
RECAP OF PRINCIPAL AMOUNT REPRESENTED BY GUARANTEES
Guarantees previously outstanding: _______________________
Guarantees received today: _______________________
Guarantees settled today: _______________________
Guarantees withdrawn today: _______________________
Guarantees outstanding: _______________________
TOTAL PRINCIPAL AMOUNT AND GUARANTEES OUTSTANDING:
=======================
Very truly yours,
Reorganization Operations Dept.
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EXHIBIT B
COMPENSATION
For serving as the Exchange Agent pursuant to this Agreement, IBJ Schroder Bank
& Trust Company shall receive a fee of $2,500, payable upon commencement of the
Exchange Offer, and its out-of-pocket expenses incurred in connection with
completing its duties pursuant to this Agreement.
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