SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1995
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number 1-7626
UNIVERSAL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0561070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
433 East Michigan Street
Milwaukee, Wisconsin 53202
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(414) 271-6755
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Name of each exchange
Title of each class on which registered
Common Stock, $.10 par value New York Stock Exchange, Inc.
Associated Common Share
Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for at least the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock as of December 1, 1995: 26,977,437
shares of Common Stock, $.10 par value, including 863,500 treasury shares.
Aggregate market value of Universal Foods Corporation Common
Stock, excluding treasury shares, held by non-affiliates as of December 1,
1995 was $873,323,603.
Documents Incorporated By Reference
1. Portions of Universal Foods Corporation 1995 Annual Report
to Shareholders (Parts I, II and IV of Form 10-K)
2. Portions of Universal Foods Corporation Notice of Annual
Meeting and Proxy Statement dated December 15, 1995 (Parts II and III of
Form 10-K)
<PAGE>
PART I
ITEM 1. BUSINESS - Food
Universal Foods Corporation (the "Company") was incorporated in 1882
in Wisconsin. Its principal executive offices are located at 433 East
Michigan Street, Milwaukee, Wisconsin 53202, telephone (414) 271-6755.
The Company engages in the international development, manufacture and
distribution of high-performance ingredients and ingredient systems to
food products and other items. Principal products of the Company include
food, beverage and dairy flavors; certified and natural colors for foods,
cosmetics and pharmaceuticals; dehydrated vegetable products; a diverse
line of yeast products; and flavor enhancers, secondary flavorings and
other bioproducts. The Company exited the frozen potato business during
Fiscal 1994.
The following material from the Universal Foods Corporation 1995
Annual Report to Shareholders is incorporated by reference:
"Management's Analysis of Operations and Financial Condition" on
Pages 18 through 21 (but not any photographs or applicable
information included therein).
Note A - "Summary of Significant Accounting Policies" on Page
27.
Note K - "Foreign Operations" on Page 32.
Description
Flavor
The Company conducts its food flavor business through its wholly-
owned subsidiary Universal Flavor Corporation ("Universal Flavor").
Universal Flavor manufactures and supplies flavors, ingredient systems and
fragrances to the dairy, food processor, beverage and personal care and
household products industries worldwide and is a recognized leader in the
North American dairy and beverage flavor markets. It operates plants
located in Kearny, New Jersey; Amboy, Illinois; Indianapolis, Indiana; and
Fenton, Missouri. Universal Flavor has eleven additional plants in
Canada, Mexico, Belgium, Great Britain, Italy, Spain, Australia, New
Zealand, Hong Kong and the Philippines. Products are sold primarily
through employee sales representatives with some assistance from food
brokers.
Strategic acquisitions have expanded Universal Flavor's product lines
and processing capabilities. In April 1990, the Company acquired the
international flavor business of Felton Worldwide, a subsidiary of
Harrisons and Crosfield, PLC, of Great Britain. This acquisition
strengthened Universal Flavor's position as a major flavor producer in
Great Britain and gave Universal Flavor a larger presence on the European
continent and in the Pacific Rim. In September 1991, the Company acquired
Fantasy Flavors, Inc. Combining Fantasy's product lines with the
Company's existing BlankeBaer operation positioned Universal Flavor as the
premier dairy ingredient systems supplier in North America. The January
1992 acquisition of Curt Georgi Imes, S.P.A. brought particular strength
in the Italian bakery and dairy flavor markets, as well as experienced
research and development and sophisticated analytical capabilities. The
January 1994 acquisition of Destillaciones Garcia de la Fuente, S.A.
(DGF), based in Granada, Spain, provided a depth of expertise for
expanding into aroma chemicals which are used to create flavors as well as
fragrances. In July 1994, Universal Flavor, through its international
subsidiary, purchased its partner's 51% interest in Azteca en Ambesco de
Mexico. This purchase brought beverages and dairy flavor technology to
the Company's other existing Mexican flavor business.
Color
The Company, through its subsidiary Warner-Jenkinson Company ("W-J"),
is the world's leading manufacturer of certified food colors. It also has
a growing share of the international natural color market. Its products,
sold under such trademarks as RED SEAL and SPECTRACOAT, are used by
producers of beverages, bakery products, processed foods, confections, pet
foods, cosmetics and pharmaceuticals. W-J is headquartered in St. Louis,
Missouri, the site of its major manufacturing facilities. Cosmetic and
pharmaceutical colors are produced in New Jersey. Latin American
customers are served by W-J de Mexico, S.A. de C.V., a manufacturing and
sales subsidiary located just outside of Mexico City. W-J Canada
(formerly Dyeco Ltd.) operates out of Kingston, Ontario. Other
manufacturing facilities are located in King's Lynn, England; Amersfoort,
The Netherlands; and Tullamarine, Victoria, Australia. Domestically, the
W-J product line is sold principally by the Company's own sales force.
International sales are made through distributors and directly by the
Company.
Recent acquisitions have strengthened the business internationally
which operates under the W-J name. In August 1991, the Company acquired
the international food and cosmetic color operations of Morton
International, Inc. which provided additional technology in cosmetic
colors and a worldwide distribution network. In June 1992, the Company
acquired Butterfield Food Ingredients, Ltd., a British food color
manufacturer with particular expertise in natural colors, pharmaceutical
applications and international distribution, particularly in the Far East.
During 1993, the Company acquired Spectrum S.A., a Mexican food color
distributor with approximately 20% market share in that country.
Dehydrated Products
The Company's subsidiary, Rogers Foods, Inc. ("Rogers"), produces
dehydrated onion and garlic and is believed to be the third largest
producer of these products in the United States. These items are marketed
under the trademark ROGERS FOODS and private labels. Rogers also produces
and distributes chili powder, chili pepper, paprika, dehydrated vegetables
such as parsley, celery and spinach, and oleoresin (a liquid chili pepper
used as a highly concentrated coloring agent) under the brand name CHILI
PRODUCTS. Rogers believes it is one of the largest producers of these
products.
Rogers sells dehydrated products directly and through brokers to food
manufacturers for use as ingredients and also for repackaging under
private labels for sale to the retail market and to the food service
industry. Rogers' processing facilities are located in Turlock,
Livingston and Greenfield, California.
During 1994 and 1995, the Company acquired three European dehydrated
vegetable processors. The acquisitions give the Company a base from which
to expand its dehydrated products business internationally. These
acquisitions also expand the Company's dehydrated technology base to
include freeze drying, puffed drying and vacuum drying. Vegetables
processed using these technologies are premium products because they have
a short reconstitution time, a benefit in today's convenience foods such
as soups, snacks and other dry foods.
The European businesses operate as UNIVERSAL DEHYDRATES. The
acquired companies formerly operated as Mallow Foods in Midleton, County
Cork, Ireland; Silva Laon, located near Laon, France; and Top Foods in
Elburg, the Netherlands. The Company believes it is the leading
dehydrator of specialty vegetables in Europe.
Yeast
The Company specializes in the production of compressed, cream,
active dry and nutritional yeast products for sale to industrial,
institutional and retail accounts under the RED STAR trademark. The
largest market for yeast is the domestic baking industry. In addition,
active dry yeast is sold to food processors for inclusion in bread, pizza
and similar mixes. The compressed, active dry and fast-acting dry yeast
products of the Company bearing the RED STAR and RED STAR QUICK RISE
trademarks are sold in ready-to-use packages to retail stores and in two
pound packages for food service use. The Company believes it is the
largest North American supplier of yeast to the commercial bakery market
and the second largest supplier to the retail market.
The business also exports yeast and allied products throughout the
world and manages investments in companies operating yeast and allied
product facilities in 12 offshore locations, two of which are wholly-owned
subsidiaries. The Company receives revenues in the form of dividends and
technical assistance fees from these foreign affiliates.
Company owned yeast plants are located in Milwaukee, Wisconsin;
Baltimore, Maryland; Dallas, Texas; and Oakland, California. The Company
distributes its fermentation products largely through its own sales force.
In 1994, the Company purchased a 20% stock interest in and entered an
agreement with Minn-Dak Yeast Company, Inc. in Wahpeton, North Dakota for
contract manufacturing under the RED STAR trademark and to supply
molasses, a major raw material in yeast production, to the Company.
BioProducts
During 1994, the Company created the Red Star BioProducts Division
from its existing Red Star Specialty Products Division and two
acquisitions. Red Star Specialty Products had been established as a
small, stand-alone profit center in 1989 out of the Company's yeast group.
With internally developed expertise, the group focused on highly technical
product development using extracts from brewer's and baker's yeast.
During 1993, Universal BioVentures, the Company's biotechnology group, was
integrated into Red Star Specialty Products to develop new products
utilizing the Company's expertise in fermentation and molecular biology.
The BioVentures product line was discontinued in 1995 because of the
continuing development costs and funding required for expansion.
The 1994 acquisitions of Champlain Industries Limited and the Biolux
Group expanded the division's product lines and international presence,
making the division a more significant part of the Company. Champlain
Industries Limited produces savory flavorings and flavor enhancers from
vegetable proteins, yeast, meats and milk protein. It is a leading
producer of hydrolyzed vegetable proteins (HVP) in North America. The
Company has operations in Canada, the U.S., and the United Kingdom.
The Biolux Group is the leading European producer of food,
nutritional and feed ingredients derived from brewer's yeast. The
acquisition makes the Company the world leader in brewer's yeast extract
technology, production and sales. The Biolux Group consists of New Biolux
in Belgium and Vitalevor in France. Its products include flavor
enhancers, health foods, feed ingredients and nutrients for pharmaceutical
and biotechnology processes. The Biolux Group is a major purchaser and
processor of brewer's yeast in the European market.
The expanded Red Star BioProducts Division serves the food and feed
processing and bionutrient industries with the broadest line of natural
extracts and specialty cultures. It supplies various natural extracts
from brewer's yeast, baker's yeast, vegetable proteins, meat, casein and
other naturally occurring materials. These specialty extracts function
primarily as flavor and texture modifiers and enhancers, and secondary
flavorings in the food processing industries. The nutritional and
functional properties of Red Star BioProducts extracts are the basis for
their use in enzyme and pharmaceutical production.
The Company believes Red Star BioProducts is the leading supplier of
yeast extracts and second in the supply of HVPs in the U.S. market. The
products are marketed under a number of RED STAR and CHAMPLAIN trademarks.
The expanded division operates production facilities in Juneau,
Wisconsin; Harbor Beach, Michigan; Clifton, New Jersey; and in Canada, the
United Kingdom, Belgium and France. More than half of the Division's
products are now produced outside of the United States. Its products are
marketed through technically trained sales personnel directly to the
customer and through distributors in some international markets.
Frozen Foods
On August 1, 1994, the Company completed the sale of Universal Frozen
Foods Company, a wholly owned subsidiary of the Company ("Frozen Foods"),
to ConAgra, Inc. The sale was a major step in Universal Foods' strategic
transition to a focus on high-performance ingredients and ingredient
systems for foods and other products.
Frozen Foods produced frozen potato products for U.S. and international
markets, selling most of its product to the food service industry. It had
a share of the retail market with branded and private labeled products.
It operated processing facilities in Twin Falls, Idaho; Hermiston, Oregon;
and Pasco, Washington.
Research and Development/Quality Assurance
The Company believes that its competitive advantage and ability to
develop and deliver high-performance products is based on its technical
expertise in the processing and application of its technology for foods
and other products. Therefore, the Company provides an above-industry
average investment in research, development and quality assurance, and is
committed to the training and development of its people.
The Company employs approximately 400 people in research and quality
assurance. Over the past five years, expenditures as a percentage of
revenue have increased from 3.0% in 1991 to 3.6% in 1995. Expenditures in
fiscal 1995 decreased 11.4% from fiscal 1994 to $28.6 million from $32.2
million. This decrease is a direct result of the sale of Frozen Foods.
Frozen Foods accounted for $4.1 million in expenditures during fiscal
1994. Expenditures in fiscal 1994 increased 13% to $32.2 million from
$28.5 million in fiscal 1993. The Company's commitment to research and
product development continues at a level significantly higher than the
food industry average. Of the aforesaid amounts, approximately $17.9
million in fiscal 1993, $20.4 million in fiscal 1994 and $19.3 million in
fiscal 1995, were research and development expenses as defined by the
Financial Accounting Standards Board.
In 1992, the Company completed a new research center for seed genetics
and tissue culture at Livingston, California, for Dehydrated Products, and
the Company enlarged food flavor research laboratories in Kearny, New
Jersey. During 1993, beverage flavor laboratories in Indianapolis were
enlarged, new modern laboratories for research on color products at W-J's
production site in St. Louis, Missouri were completed, and a new facility
for quality assurance and technical customer services was added to the
Turlock, California complex. All of these facilities are designed to
meet the specialized, strategic needs of the Company's operating units.
The Company continued its comprehensive training program designed to
introduce all personnel to team problem solving using statistical process
control, teamwork and communication procedures under a program named "The
Universal Way." This program promotes the Company's commitment to
continuous quality improvement of its products and services as a primary
Company objective.
As part of its commitment to quality as a competitive advantage, the
Company has undertaken efforts to achieve certification to quality
standards established by the International Organization for
Standardization in Geneva, Switzerland, through its ISO 9000 series. Red
Star BioProducts believes it was the first North American ingredients
supplier to receive ISO 9002 certification. To date, Universal Flavor
facilities in Indiana and New Jersey in the United States and facilities
in The Netherlands and United Kingdom have also been certified.
Dehydrated Product facilities in California, in the United States, and in
Ireland, France and the Netherlands have also been certified.
Competition
All Company products are sold in highly competitive markets. Since the
Company and its competitors utilize similar methods of production,
marketing and delivery, the Company competes primarily on process and
applications expertise, quality and service. Universal Foods competes
with only a few companies across multiple ingredient lines and is more
likely to encounter competition specific to individual businesses.
With the evolution of food processing as a global business, competition
to supply the industry has taken on an increasingly global nature. In the
worldwide flavor market, the Company's principal competition comes from
other U.S. and European producers. Building an international presence is
a key goal for Universal Flavor as witnessed by acquisitions and the
completion of a plant in Belgium in order to meet increasing international
flavor demands.
W-J is the leading producer of certified colors in North America and
Western Europe. State of the art equipment, the latest process
technology, a Color Service Laboratory unequaled in the industry, and the
most complete range of synthetic and natural colors constitute the basis
for its market leadership position. Acquisitions have resulted in product
and process technology synergies, particularly in the cosmetic color
market, as well as a growing international presence.
For Dehydrated Products, acquisitions in Europe provide international
expansion and strengthen export opportunities for U.S. based operations.
The Company believes it is now the leading dehydrator of specialty
vegetables in Europe and the third largest producer of onion and garlic in
North America. Competition in Red Star BioProducts comes primarily from
domestic and European producers. Red Star BioProducts is the leading
producer of flavor enhancers in North America; competition in the European
market is fragmented. Red Star yeast and Products competes primarily in
the North American market and has two major competitors.
Products and Application Activities
With the Company's strategic focus on high-performance ingredients and
ingredient systems, the Company's emphasis has shifted from the
development of major new products to application activities and processing
improvements in the support of its customers' numerous new and
reformulated products. The Company maintains many of its proprietary
processes and formulae as trade secrets and under secrecy agreements with
customers.
Development activities include a line of stable aqueous dispersion of
colors for foods and pharmaceutical products. Patents have been granted
on the products marketed under the SPECTRASPRAY label and applied for on
the SPECTRABLEND label. The development of natural food colors continues
to expand and is a growth opportunity for W-J.
A variety of activities at Universal Flavor focus on the development of
natural flavors and flavor solutions for low-fat and no-fat applications.
The group has developed a reaction flavor for imparting animal fat flavor
to nutritionally preferred vegetable oils. Using new reaction and
extraction processes, a line of natural roasted onion, garlic and pepper
flavors has been created. A new technology was installed for production
of aseptically processed fruits. Emphasis has been placed on the
development of low-fat dairy and bakery flavor and ingredients systems.
New flavored fruit and spice pieces have also been developed to provide
new textures, flavors and unique performance properties in bakery items.
In 1993 Red Star BioProducts introduced the Flavor Mate 950 series, the
most potent flavor enhancer on the market, and the Savory Mate series,
which are flavor enhancers designed for specific areas such as beef,
poultry, pork, etc. Acquisitions in 1994 expanded the divisions product
line particularly in hydrolyzed vegetable proteins. The transfer of
technology to European acquisitions begun in 1995 will allow the
production of food and pharmaceutical grade extracts from brewing yeast.
European acquisitions in 1994 and 1995 expanded the Dehydrated Products
product line to include peas, carrots, beans, celery root and other
specialty vegetables.
In addition, the discussion of operational activities on Page 16 of the
1995 Annual Report to Shareholders is incorporated by reference.
Raw Materials
The principal raw material used in the production of yeast products is
molasses, which is purchased through brokers and producers under yearly
fixed-price contracts. Processes have been developed to permit partial
replacement of molasses with alternate, readily available substrates for
use if molasses supplies should become limited. In 1994, the Company
entered a supply agreement with Minn-Dak Yeast Company, Inc., a major
North American molasses supplier, to provide additional assurances of
adequate supplies.
Chili peppers, onion, garlic and other vegetables are acquired under
annual contracts with numerous growers in the western United States and
Europe. Chemicals and petrochemicals used to produce certified colors are
obtained from several domestic and foreign suppliers. Raw materials for
natural colors, such as carmine, beta carotene, annatto and tumeric, are
purchased from overseas and U.S. sources. In the production of flavors,
the principal raw materials include essential oils, aroma chemicals,
botanicals, fruits and juices and are obtained from local vendors. Flavor
enhancers and secondary flavors are produced from brewer's yeast, baker's
yeast from the Company's own operations, and vegetable materials such as
corn and soybeans. The acquisition of the Biolux Group in 1994 provides
long-term contracts on supplies of brewer's yeast for European production
needs.
The Company believes that its required raw materials are generally in
adequate supply and available from numerous competitively priced sources.
Patents, Formulae and Trademarks
The Company owns or controls many patents, formulae and trademarks
related to its businesses. The businesses are not materially dependent
upon patent or trademark protection; however, trademarks, patents and
formulae are important for the continued consistent growth of the Company.
Employees
As of September 30, 1995, the Company employed about 4,100 persons
worldwide (which includes approximately 200 seasonal employees).
Approximately 430 employees are represented by one of 12 union contracts
with whom the Company has collective bargaining relationships. The
Company considers its employee relations to be good.
Regulation
Compliance with government provisions regulating the discharge of
material into the environment, or otherwise relating to the protection of
the environment, did not have a material adverse effect on the Company's
operations for the year covered by this report nor is such compliance
expected to have a material effect in the succeeding two years. As is
true with the food industry in general, the production, packaging,
labeling and distribution of the Company's products are subject to the
regulations of various federal, state and local governmental agencies, in
particular the Food & Drug Administration.
ITEM 2. PROPERTIES
Domestically, the Company operates eighteen manufacturing and processing
plants in ten states as of September 30, 1995. Four plants produced
bakers yeast, four facilities provided flavor enhancers and bioproducts,
three produced dehydrated products, two plants produced colors and four
plants produced flavors. None of these properties are held subject to any
material encumbrances. The Company also has investments in fifteen
companies operating yeast and allied product facilities located in twelve
offshore locations. The Company operates five color plants, eleven flavor
plants, five bioproducts facilities and three dehydrated vegetable plants
in thirteen foreign countries.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings of a character
regarded as normal to its business and in which, the Company believes,
adverse decisions, in the aggregate, would not subject the Company to
damages of a material amount.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
last quarter of fiscal 1995.
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant and their ages as of December
1, 1995 are as follows:
EXECUTIVE OFFICERS
Name Age Position
Guy A. Osborn 59 Chairman, Chief Executive
Officer and Director
Kenneth P. Manning 53 President, Chief Operating
Officer and Director
Richard Carney 45 Vice President - Human
Resources
Steven O. Cordier 39 Treasurer
Thomas J. Degnan 47 President, Red Star
BioProducts Division
Michael Fung 45 Vice President - Chief
Financial Officer
Michael L. Hennen 42 Controller
Richard F. Hobbs 48 Vice President -
Administration
R. Steven Martin 39 President, Red Star Yeast &
Products Division
Terrence M. O'Reilly 50 Vice President, Secretary and
General Counsel
James F. Palo 55 President, Dehydrated
Products
Division
Dr. Gary W. Sanderson 60 Vice President, Technologies
Kenneth G. Scheffel 59 Vice President, Chemical
Technologies
Charles G. Tuchel 40 President, Flavor Division
Michael A. Wick 52 President, Color Division
All of these individuals have been employed by the Company in an
executive capacity for more than five years, except Richard Carney, Steven
O. Cordier, Michael L. Hennen, R. Steven Martin, Charles G. Tuchel and
Michael Fung.
Mr. Carney was elected Vice President - Human Resources in April
1993. He joined the Company in 1981 as Treasury Manager and held various
positions in the Treasurer's Department until 1986 when he assumed the
Director of Benefits responsibilities which he performed until being
elected a Vice President.
Mr. Tuchel joined the Company in May 1992 as the Managing Director -
Europe for the Color Division. In October 1994, he was promoted to Vice
President and General Manager of Universal Flavors International, and in
June 1995 elected President - Flavors Division. Prior to joining the
Company, Mr. Tuchel was Business Manager at ICI Petrochemicals from 1990
through 1992.
Mr. Martin joined the Company as Vice President - Marketing of its
Red Star Yeast & Products Division in 1993. In June 1995, Mr. Martin was
elected President - Red Star Yeast & Products Division. Prior to joining
the Company, Mr. Martin was with the Monsanto Company since 1978 in
various general management positions.
Mr. Hennen joined the Company in January 1995 as Controller. From
1985 until joining the Company he was a Senior Manager at Deloitte &
Touche LLP, a public accounting firm providing audit and tax services to
the Company as its outside auditor.
Mr. Cordier joined the Company in October 1995 as Treasurer. From
1990 until joining the Company he was Director of Financial Planning at
International Flavors and Fragrances, a $1.3 billion New York Stock
Exchange company.
Mr. Fung joined the Company in June 1995 as Vice President - Chief
Financial Officer. From 1992 to 1995 he served as Senior Vice President
and Chief Financial Officer for Vanstar Corporation, the world's largest
manufacturer and integrator of multi-vendor personal computer systems and
services. From 1988 to 1992, Mr. Fung was Vice President and Chief
Financial Officer of Bass Pro Shops & Tracker Marine, privately-held
companies operated under common ownership involved in the manufacture and
marketing of outdoor sporting goods.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The principal market in which the common stock of the Company is
traded is the New York Stock Exchange. The range of the high and low
sales prices as quoted in the New York Stock Exchange - Composite
Transaction tape for the common stock of the Company and the amount of
dividends declared for fiscal 1995 appearing under "Quarterly Financial
Data" on Page 22 of the 1995 Annual Report of the Company are incorporated
by reference. Common stock dividends were paid on a quarterly basis, and
it is expected that quarterly dividends will continue to be paid in the
future. In addition to the restrictions contained in its Restated
Articles of Incorporation, the Company is subject to restrictions on the
amount of dividends which may be paid on its common stock under the
provisions of various credit agreements. On the basis of the consolidated
financial statements of the Company as of September 30, 1995, $29,737,000
is available for the payment of dividends on the common stock of the
Company under the most restrictive loan covenants.
The Company had a stock repurchase program, initially announced June
7, 1984, under which the authorization terminated in fiscal 1994.
Consequently, on January 27, 1994 the Board of Directors established a new
share repurchase program which authorizes the Company to repurchase up to
2.5 million shares. As of September 30, 1995, 65,000 had been repurchased
under the new authorization.
On September 8, 1988 the Board of Directors of the Company adopted a
common stock shareholder rights plan which is described at Note F of Notes
to Consolidated Financial Statements - Shareholders' Equity on Pages 29,
30 and 31 of the 1995 Annual Report to Shareholders and which is
incorporated by reference.
The number of shareholders of record on December 1, 1995 was 6,065.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data required by this item is incorporated by
reference from the "Five-Year Review" and the notes thereto of the 1995
Annual Report to Shareholders on Page 34.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Management's Analysis of Operations and Financial Condition is
incorporated by reference from Pages 18 through 21 of the 1995 Annual
Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item
are set forth on Pages 22 through 33 of the 1995 Annual Report to
Shareholders and are incorporated by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and officers appearing under
"Election of Directors" (ending before "Committees of the Board of
Directors") and "Other Matters" on Pages 2 through Page 6 and Page 15,
respectively, of the Notice of Annual Meeting and Proxy Statement of the
Company dated December 15, 1995, is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to compensation of directors and officers is
incorporated by reference from "Director Compensation and Benefits," and
"Compensation and Development Committee Report" and "Executive
Compensation" on Pages 7 through 14 of the Notice of Annual Meeting and
Proxy Statement of the Company dated December 15, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The discussion of securities ownership of certain beneficial owners
and management appearing under "Principal Shareholders" on Pages 8 through
9 of the Notice of Annual Meeting and Proxy Statement of the Company dated
December 15, 1995, is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no family relationships between any of the directors,
nominees for director and officers of the Company nor any arrangement or
understanding between any director or officer or any other person pursuant
to which any of the nominees has been nominated. No director, nominee for
director or officer had any material interest, direct or indirect, in any
business transaction of the Company or any subsidiary during the period
October 1, 1994 through September 30, 1995, or in any such proposed
transaction. In the ordinary course of business, the Company engages in
business transactions with companies whose officers or directors are also
directors of the Company. These transactions are routine in nature and are
conducted on an arm's-length basis. The terms of any such transactions
are comparable at all times to those obtainable in business transactions
with unrelated persons.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed:
1. and 2. Financial Statements and Financial Statement
Schedule. (See following "List of Financial Statements and
Financial Statement Schedules.")
3. Exhibits. (See Exhibit Index on the last page of this
report.) (No instruments defining the rights of holders of long-term
debt of the Company and its consolidated subsidiaries are filed
herewith because no long-term debt instrument authorizes securities
exceeding 10% of the total consolidated assets of the Company. The
Company agrees to furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.)
(b) Reports on Form 8-K: None
List Of Financial Statements and Financial Statement Schedules
Page Reference
in 1995 Annual
Report to
1. FINANCIAL STATEMENTS Shareholders
The following consolidated financial
statements of Universal Foods Corporation and
Subsidiaries are incorporated by reference
from the Annual Report to Shareholders for the
year ended September 30, 1995.
Independent Auditors' Report 33
Consolidated Balance Sheets - September 30, 1995
and 1994 24
Consolidated Earnings - Years ended September 30,
1995, 1994 and 1993 23
Consolidated Shareholders' Equity - Years ended
September 30, 1995, 1994 and 1993 25
Consolidated Cash Flows - Years ended
September 30, 1995, 1994 and 1993 26
Notes to Consolidated Financial Statements 27 - 32
Page Reference
2. FINANCIAL STATEMENT SCHEDULES in Form 10-K
Independent Auditors' Report 15
Schedule II - Valuation and Qualifying Accounts
and Reserves 16
All other schedules are omitted because they are inapplicable, not
required by the instructions or the information is included in the
consolidated financial statements or notes thereto.
<PAGE>
Deloitte & Touche 411 East Wisconsin Avenue
LLP Milwaukee, WI 53202-4496
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors
of Universal Foods Corporation
We have audited the consolidated financial statements of Universal Foods
Corporation as of September 30, 1995 and 1994 and for each of the three
years in the period ended September 30, 1995, and have issued our report
thereon dated November 9, 1995, which report expresses an unqualified
opinion and includes an explanatory paragraph relating to the change in
methods of accounting for postretirement benefits other than pensions and
postemployment benefits to conform with Statements of Financial Accounting
Standards No. 106 and No. 112, respectively; such consolidated financial
statements and report are included in your 1995 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also
included the consolidated financial statement schedule of Universal Foods
Corporation, listed in Item 14. This consolidated financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our
opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
November 9, 1995
<PAGE>
SCHEDULE II
<TABLE>
UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(In Thousands)
Years ended September 30, 1995, 1994, and 1993
<CAPTION>
Valuation accounts
deducted in the Additions
balance sheet from Balance at Charged to Balance at
the assets to which beginning costs and Net end of
they apply of period expenses acquired Deductions period
<S> <C> <C> <C> <C> <C>
1993
Allowance for losses:
Trade accounts
receivable $3,357 $ 988 $ --- $1,039 (A) $3,306
1994
Allowance for losses:
Trade accounts
receivable $3,306 $ 971 $ 637 $1,387 (A) $3,527
1995
Allowance for losses:
Trade accounts
receivable $3,527 $1,356 $ --- $1,115 (A) $3,768
(A) Divestiture and accounts written off, less recoveries.
</TABLE>
<PAGE>
SIGNATURES
PURSUANT to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, duly authorized.
UNIVERSAL FOODS CORPORATION
/s/ T. M. O'Reilly
T. M. O'Reilly, Vice President
Secretary & General Counsel
Dated: December 22, 1995
PURSUANT to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 22, 1995, by the following
persons on behalf of the Registrant and in the capacities indicated.
/s/ Guy A. Osborn Chairman, Chief Executive Officer and
Director
/s/ Kenneth P. Manning President, Chief Operating Officer and
Director
/s/ Michael Fung Vice President - Chief Financial
Officer
/s/ Michael L. Hennen Corporate Controller
/s/ Michael E. Batten Director
/s/ John F. Bergstrom Director
/s/ James L. Forbes Director
/s/ Dr. Olan D. Forker Director
/s/ Dr. Carol I. Waslien Ghazaii Director
/s/ Leon T. Kendall Director
/s/ James H. Keyes Director
/s/ Charles S. McNeer Director
/s/ John L. Murray Director
/s/ William U. Parfet Director
/s/ Essie Whitelaw Director
<PAGE>
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1994 ANNUAL REPORT ON FORM 10-K
Incorporated
Exhibit Herein by Filed
Number Description Reference Herewith
3.1 Restated Articles of (Previously filed at
Incorporation Exhibit 3.1 to the
1993 Annual Report on
Form 10-K)
3.2 Restated Bylaws X
4 Shareholders Rights Plan (Previously filed on
Form 8-A dated
September 15, 1988 as
amended by Exhibit 3
to Form 8 dated
December 22, 1988 and
by Exhibits 4 and 5
to Form 8 dated
September 14, 1990)
10 Material Contracts
*(a) Executive (Previously filed at
Employment Exhibit 10(a) to the
Contract 1985 Annual Report on
Form 10-K)
*(b) 1981 Incentive (Previously filed
Stock Option Plan with the Notice of
Annual Meeting &
Proxy Statement dated
December 5, 1981)
*(c) 1985 Stock Plan (Previously filed
for Executive with the Notice of
Employees Annual Meeting &
Proxy Statement dated
December 12, 1985)
*(d) 1990 Employee (Previously filed
Stock Plan with the Notice of
Annual Meeting &
Proxy Statement dated
December 18, 1989)
*(e) Director Stock (Previously filed as
Grant Plan, as Exhibit 10(e) to the
amended 1991 Annual Report on
Form 10-K)
*(f) Management Income (Previously filed as
Deferral Plan Exhibit 10(f) to the
1991 Annual Report on
Form 10-K)
*(g) Executive Income (Previously filed as
Deferral Plan Exhibit 10(g) to the
1991 Annual Report on
Form 10-K)
*(h) Change of Control X
Employment and
Severance
Agreement
(i) Trust Agreement (Previously filed as
dated January 18, Exhibit 18 to
1988 between the Amendment No. 1 of
Company and the Company's
Marshall & Ilsley Schedule 14D-9 filed
Trust Company December 9, 1988)
(j) Trust Agreement (Previously filed as
dated January 18, Exhibit 19 to
1988 between the Amendment No. 1 of
Company and the Company's
Marshall & Ilsley Schedule 14D-9 filed
Trust Company December 9, 1988)
(k) Trust Agreement (Previously filed as
dated September Exhibit 20 to
18, 1988 between Amendment No. 1 of
the Company and the Company's
Marshall & Ilsley Schedule 14D-9 filed
Trust Company December 9, 1988)
*(l) Management (Previously filed as
Incentive Plan for Exhibit 10(i) to the
Major Corporate 1991 Annual Report on
Executives Form 10-K)
*(m) 1994 Employees (Previously filed on
Stock Option Plan Form S-8 dated
September 12, 1994)
13 Portions of Annual Report
to Shareholders for the
year ended September 30, X
1995 that are
incorporated by reference
21 Significant Subsidiaries
of Universal Foods
Corporation X
23 Consent of Deloitte &
Touche LLP X
27 Financial Data Schedule X
99 Notice of Annual Meeting (Previously filed via
and Proxy Statement, the EDGAR System on
dated December 15, 1995 December 14, 1995 as
the Company's
Schedule 14A)
Except to the extent
incorporated by
reference, the Proxy
Statement shall not
be deemed to be filed
with the Securities
and Exchange
Commission as part of
this annual Report on
Form 10-K.
* Indicates management contracts or compensatory plans.
Exhibit 3.2
UNIVERSAL FOODS CORPORATION
BYLAWS
(As Amended Through November 9, 1995)
1. OFFICES
1.1 Business Offices. The principal office of the corporation
in the State of Wisconsin shall be located in the City of Milwaukee,
County of Milwaukee. The corporation may have such other offices, either
within or without the State of Wisconsin, as the Board of Directors may
designate or as the business of the corporation may require from time to
time.
1.2 Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors.
2. SHAREHOLDERS
2.1 Annual Meeting. The date of the annual meeting of
shareholders shall be set by the Board of Directors each year for the
third Thursday after the first Friday of January, or on such other day as
may be designated by the Board of Directors, for the purpose of electing
directors and transacting such other business as may come before the
meeting; provided, however, that any such other date shall be not later
than March 1. In fixing a meeting date for any annual meeting of
shareholders, the Board of Directors may consider such factors as it deems
relevant within the good faith exercise of its business judgment. If the
election of directors shall not be held at the annual meeting of
shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of shareholders as soon
thereafter as convenient.
2.1A Purposes of Annual Meeting. At an annual meeting of
shareholders (an "Annual Meeting"), only business properly brought before
the meeting as provided in this Section may be transacted. To be properly
brought before an Annual Meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (ii) brought before the meeting by or
at the direction of the Board of Directors or (iii) otherwise properly
brought before the meeting by a shareholder of record where the
shareholder has complied with the requirements of this Section. To bring
business before an Annual Meeting, a shareholder must have given written
notice thereof, either by personal delivery or by United States certified
mail, postage prepaid, to the Secretary of the corporation, that is
received by the Secretary not more than ninety (90) days and not less than
fifty (50) days in advance of the third Thursday after the first Friday in
the month of January next following the last Annual Meeting held; provided
that if the Annual Meeting of shareholders is held earlier than the third
Thursday after the first Friday in the month of January, such notice must
be given on or before the later of (x) the date fifty (50) days prior to
the earlier date of the Annual Meeting and (y) the date ten (10) business
days after the first public disclosure, which may include any public
filing with the Securities and Exchange Commission or a press release to
Dow Jones & Company or any similar service, of the earlier date of the
Annual Meeting. Any such notice shall set forth the following as to each
matter the shareholder proposes to bring before the Annual Meeting: (A) a
brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting and, if such
business includes a proposal to amend the By-laws of the corporation, the
language of the proposed amendment; (B) the name and address, as they
appear on the corporation's books, of the shareholder proposing such
business and the beneficial owner or owners, if any, on whose behalf the
business is proposed; (C) the class and number of shares of the
corporation which are beneficially owned by such shareholder and
beneficial owner or owners; (D) a representation that the shareholder is a
holder of record of stock of the corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to
propose such business; and (E) any material interest of the shareholder
and beneficial owner or owners in such business and such persons' reasons
for conducting such business at the meeting. Notwithstanding anything in
the By-laws to the contrary, no business shall be conducted at an Annual
Meeting except in accordance with the procedures set forth in this
Section. If the chairman of the shareholders meeting shall determine that
business was not properly brought before the meeting and in accordance
with the provisions of the By-laws, he shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Section, a
shareholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section.
2.2 Special Meetings. (a) A special meeting of the
shareholders of the corporation (a "Special Meeting") may be called only
by (i) the Chairman of the Board, (ii) the Chief Executive Officer or
(iii) the Board of Directors and shall be called by the Chairman of the
Board or the Chief Executive Officer upon the demand, in accordance with
this Section 2.2, of the holders of record of shares representing at least
10% of all the votes entitled to be cast on any issue proposed to be
considered at the Special Meeting. Only such business shall be conducted
at a Special Meeting as shall have been described in the notice of meeting
sent to shareholders pursuant to Section 2.4 of these Bylaws.
(b) To enable the corporation to determine the shareholders
entitled to demand a Special Meeting, the Board of Directors may fix a
record date to determine the shareholders entitled to make such a demand
(the "Demand Record Date"). The Demand Record Date shall not precede the
date upon which the resolution fixing the Demand Record Date is adopted by
the Board of Directors and shall not be more than 10 days after the date
upon which the resolution fixing the Demand Record Date is adopted by the
Board of Directors. Any shareholder of record seeking to have
shareholders demand a Special Meeting shall, by sending written notice to
the Secretary of the corporation by hand or by certified or registered
mail, return receipt requested, request the Board of Directors to fix a
Demand Record Date. The Board of Directors shall promptly, but in all
events within 10 days after the date on which a valid request to fix a
Demand Record Date is received, adopt a resolution fixing the Demand
Record Date and shall make a public announcement of such Demand Record
Date. If no Demand Record Date has been fixed by the Board of Directors
within 10 days after the date on which such request is received by the
Secretary, the Demand Record Date shall be the 10th day after the first
date on which a valid written request to set a Demand Record Date is
received by the Secretary. To be valid, such written request shall set
forth the purpose or purposes for which the Special Meeting is to be held,
shall be signed by one or more shareholders of record (or their duly
authorized proxies or other representatives), shall bear the date of
signature of each such shareholder (or proxy or other representative) and
shall set forth all information about each such shareholder and about the
beneficial owner or owners, if any, on whose behalf the request is made
that would be required to be set forth in a shareholder's notice described
in Sections 2.1A and 3.8A of these Bylaws.
(c) For a shareholder or shareholders to demand a Special
Meeting, a written demand or demands for a Special Meeting by the holders
of record as of the Demand Record Date of shares representing at least 10%
of all the votes entitled to be cast on each issue proposed to be
considered at the Special Meeting must be delivered to the corporation.
To be valid, each written demand by a shareholder for a Special Meeting
shall set forth the specific purpose or purposes for which the Special
Meeting is to be held (which purpose or purposes shall be limited to the
purpose or purposes set forth in the written request to set a Demand
Record Date received by the corporation pursuant to paragraph (b) of this
Section 2.2), shall be signed by one or more persons who as of the Demand
Record Date are shareholders of record (or their duly authorized proxies
or other representatives), shall bear the date of signature of each such
shareholder (or proxy or other representative), and shall set forth the
name and address, as they appear in the corporation's books, of each
shareholder signing such demand and the class and number of shares of the
corporation which are owned of record and beneficially by each such
shareholder, shall be sent to the Secretary by hand or by certified or
registered mail, return receipt requested, and shall be received by the
Secretary within 70 days after the Demand Record Date.
(d) The corporation shall not be required to call a Special
Meeting upon shareholder demand unless, in addition to the documents
required by paragraph (c) of this Section 2.2, the Secretary receives a
written agreement signed by each Soliciting Shareholder, pursuant to which
each Soliciting Shareholder, jointly and severally, agrees to pay the
corporation's costs of holding the Special Meeting, including the costs of
preparing and mailing proxy materials for the corporation's own
solicitation, provided that if each of the resolutions introduced by any
Soliciting Shareholder at such meeting is adopted, and each of the
individuals nominated by or on behalf of any Soliciting Shareholder for
election as director at such meeting is elected, then the Soliciting
Shareholders shall not be required to pay such costs. For purposes of
this paragraph (d), the following terms shall have the meanings set forth
below:
(i) "Affiliate" of any Person shall mean any Person
controlling, controlled by or under common control with such first Person.
(ii) "Participant" shall have the meaning assigned to such term
in Rule 14a-11 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(iii) "Person" shall mean any individual, firm, corporation,
partnership, joint venture association, trust, unincorporated organization
or other entity.
(iv) "Proxy" shall have the meaning assigned to such term in
Rule 14a-1 promulgated under the Exchange Act.
(v) "Solicitation" shall have the meaning assigned to such term
in Rule 14a-11 promulgated under the Exchange Act.
(vi) "Soliciting Shareholder" shall mean, with respect to any
Special Meeting demanded by a shareholder or shareholders, any of the
following Persons:
(A) if the number of shareholders signing the demand or
demands of meeting delivered to the corporation pursuant to paragraph (c)
of this Section 2.2 is ten or fewer, each shareholder signing any such
demand;
(B) if the number of shareholders signing the demand or
demands of meeting delivered to the corporation pursuant to paragraph (c)
of this Section 2.2 is more than ten, each Person who either (I) was a
Participant in any Solicitation of such demand or demands or (II) at the
time of the delivery to the corporation of the documents described in
paragraph (c) of this Section 2.2, had engaged or intended to engage in
any Solicitation of Proxies for use at such Special Meeting (other than a
Solicitation of Proxies on behalf of the corporation); or
(C) any Affiliate of a Soliciting Shareholder, if a
majority of the directors of the corporation then in office determine,
reasonably and in good faith, that such Affiliate should be required to
sign the written notice described in paragraph (c) of this Section 2.2
and/or the written agreement described in this paragraph (d) in order to
prevent the purposes of this Section 2.2 from being evaded.
(e) Except as provided in the following sentence, any Special
Meeting shall be held at such hour and day as may be designated by
whichever of the Chairman of the Board, the Chief Executive Officer or the
Board of Directors shall have called such meeting. In the case of any
Special Meeting called by the Chairman of the Board or the Chief Executive
Officer upon the demand of shareholders (a "Demand Special Meeting"), such
meeting shall be held at such hour and day as may be designated by the
Board of Directors; provided, however, that the date of any Demand Special
Meeting shall be not more than 70 days after the Meeting Record Date (as
defined in Section 2.5); and provided further that in the event that the
directors then in office fail to designate an hour and date for a Demand
Special Meeting within 10 days after the date that valid written demands
for such meeting by the holders of record as of the Demand Record Date of
shares representing at least 10% of all the votes entitled to be cast on
each issue proposed to be considered at the special meeting are delivered
to the corporation (the "Delivery Date"), then such meeting shall be held
at 2:00 P.M. local time on the 100th day after the Delivery Date or, if
such 100th day is not a Business Day (as defined below), on the first
preceding Business Day. In fixing a meeting date for any Special Meeting,
the Chairman of the Board, the Chief Executive Officer or the Board of
Directors may consider such factors as he or it deems relevant within the
good faith exercise of his or its business judgment, including, without
limitation, the nature of the action proposed to be taken, the facts and
circumstances surrounding any demand for such meeting, and any plan of the
Board of Directors to call an Annual Meeting or a Special Meeting for the
conduct of related business.
(f) The corporation may engage nationally recognized
independent inspectors of elections to act as an agent of the corporation
for the purpose of promptly performing a ministerial review of the
validity of any purported written demand or demands for a Special Meeting
received by the Secretary. For the purpose of permitting the inspectors
to perform such review, no purported demand shall be deemed to have been
delivered to the corporation until the earlier of (i) five Business Days
following receipt by the Secretary of such purported demand and (ii) such
date as the independent inspectors certify to the corporation that the
valid demands received by the Secretary represent at least 10% of all the
votes entitled to be cast on each issue proposed to be considered at the
Special Meeting. Nothing contained in this paragraph shall in any way be
construed to suggest or imply that the Board of Directors or any
shareholder shall not be entitled to contest the validity of any demand,
whether during or after such five Business Day period, or to take any
other action (including, without limitation, the commencement, prosecution
or defense of any litigation with respect thereto).
(g) For purposes of these Bylaws, "Business Day" shall mean any
day other than a Saturday, a Sunday or a day on which banking institutions
in the State of Wisconsin are authorized or obligated by law or executive
order to close.
2.3 Place of Meeting. The Board of Directors, the Chairman of
the Board or the Chief Executive Officer may designate any place, either
within or without the State of Wisconsin, as the place of meeting for the
Annual Meeting, any Special Meeting or any postponement thereof. If the
Board of Directors, the Chairman of the Board or the Chief Executive
Officer shall fail or neglect to make such designation, the Secretary
shall designate the place of such meeting. If no designation is made, the
place of meeting shall be the registered office of the corporation in the
State of Wisconsin. Any adjourned meeting may be reconvened at any place
designated by vote of the Board of Directors or by the Chairman of the
Board or the Chief Executive Officer.
2.4 Notice of Meeting. The corporation shall send written or
printed notice stating the place, day and hour of any Annual Meeting or
Special Meeting not less than 10 days nor more than 70 days before the
date of such meeting either personally or by mail to each shareholder of
record entitled to vote at such meeting and to other shareholders as may
be required by law or by the Restated Articles of Incorporation. In the
event of any Demand Special Meeting, such notice of meeting shall be sent
not more than 30 days after the Delivery Date. If mailed, such notice of
meeting shall be addressed to the shareholder at the shareholder's address
as it appears on the corporation's record of shareholders. Unless
otherwise required by law or the Restated Articles of Incorporation, a
notice of an Annual Meeting need not include a description of the purpose
for which the meeting is called. In the case of any Special Meeting, (a)
the notice of meeting shall describe any business that the Board of
Directors shall have theretofore determined to bring before the meeting
and (b) in the case of a Demand Special Meeting, the notice of meeting (i)
shall describe any business set forth in the statement of purpose of the
demands received by the corporation in accordance with Section 2.2 of
these Bylaws and (ii) shall contain all of the information required in the
notice received by the corporation in accordance with Section 2.2(b) of
these Bylaws. A shareholder's attendance at a meeting, in person or by
proxy, waives objection to the following: (A) lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the
meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (B) consideration of a particular
matter at the meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to considering the matter
when it is presented.
2.5 Fixing of Certain Record Dates. (a) The Board of
Directors may fix a future date not less than 10 days and not more than 70
days prior to the date of any Annual Meeting or Special Meeting as the
record date for the determination of shareholders entitled to notice of,
or to vote at, such meeting (the "Meeting Record Date"). In the case of
any Demand Special Meeting, (i) the Meeting Record Date shall be not later
than the 30th day after the Deliver Date and (ii) if the Board of
Directors fails to fix the Meeting Record Date within 30 days after the
Delivery Date, then the close of business on such 30th day shall be the
Meeting Record Date. The shareholders of record on the Meeting Record
Date shall be the shareholders entitled to notice of and to vote at the
meeting. Except as may be otherwise provided by law, a determination of
shareholders entitled to notice of or to vote at a meeting of shareholders
is effective for any adjournment of such meeting unless the Board of
Directors fixes a new Meeting Record Date, which it shall do if the
meeting is postponed or adjourned to a date more than 120 days after the
date fixed for the original meeting.
(b) The Board of Directors may fix a future date as the record
date for the determination of shareholders entitled to receive payment of
any share dividend or distribution. If no record date is so fixed by the
board, the record date for determining shareholders entitled to a
distribution (other than a distribution involving a purchase, redemption
or other acquisition of the corporation's shares) or a share dividend is
the date on which the Board of Directors authorized the distribution or
share dividend, as the case may be.
2.6 Voting Lists. After a record date for a Special Meeting or
Annual Meeting has been fixed, the corporation shall prepare a list of the
names of all of the shareholders entitled to notice of the meeting. The
list shall be arranged by class or series of shares, if any, and show the
address of and number of shares held by each shareholder. Such list shall
be available for inspection by any shareholder, beginning two business
days after notice of the meeting is given for which the list was prepared
and continuing to the date of the meeting, at the corporation's principal
office or at a place identified in the meeting notice in the city where
the meeting will be held. The corporation shall make the shareholders'
list available at the meeting, and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any
adjournment thereof. Refusal or failure to prepare or make available the
shareholders' list shall not affect the validity of any action taken at a
meeting of shareholders.
2.7 Quorum: Votes. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of
those shares exists with respect to that matter. If the corporation has
only one class of stock outstanding, such class shall constitute a
separate voting group for purposes of this Section 2.7. Except as
otherwise provided in the Restated Articles of Incorporation or the
Wisconsin Business Corporation Law, a majority of the votes entitled to be
cast on the matter shall constitute a quorum of the voting group for
action on that matter. Once a share is represented for any purpose at a
meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes
of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or
must be set for the adjourned meeting. If a quorum exists, except in the
case of the election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action exceed the
votes cast opposing the action, unless the articles of incorporation or
the Wisconsin Business Corporation Law requires a greater number of
affirmative votes. Unless otherwise provided in the Restated Articles of
Incorporation, each director shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election of directors at a
meeting at which a quorum is present.
2.8 Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote his or her shares in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the
shareholder by signing an appointment form, either personally or by his or
her attorney-in-fact. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the corporation
authorized to tabulate votes. An appointment is valid for eleven months
from the date of its signing unless a different period is expressly
provided in the appointment form.
2.9 Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote upon each matter submitted to a vote
at a meeting of shareholders, except to the extent that the voting rights
of the shares of any class or classes are enlarged, limited, or denied by
the Restated Articles of Incorporation of the corporation or by the
Wisconsin Business Corporation Law.
2.10 Subsidiary Shares. Shares held by another corporation, if
a sufficient number of shares entitled to elect a majority of the
directors of such other corporation is held directly or indirectly by the
corporation, shall not be entitled to vote at any meeting, but shares held
in a fiduciary capacity may be voted.
2.11 Acceptance of Instruments Showing Shareholder Action. If
the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and
give it effect as the act of a shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of a
shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver or proxy appointment and give it effect as the act
of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity.
(b) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the
shareholder and, if the corporation requests, evidence of fiduciary status
acceptable to the corporation is presented with respect to the vote,
consent, waiver or proxy appointment.
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation is presented with
respect to the vote, consent, waiver or proxy appointment.
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder is presented with
respect to the vote, consent, waiver or proxy appointment.
(e) Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners.
The corporation may reject a vote, consent, waiver or proxy appointment if
the Secretary or other officer or agent of the corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
2.12 Conduct of Meeting. The Chairman of the Board, and in his
or her absence, any officer or director designated by the Chairman of the
Board, and in his or her absence, the Chief Executive Officer, and in his
or her absence, the President, and in his or her absence, a Corporate Vice
President in the order provided under Section 4.7 of these Bylaws, and in
their absence, any person chosen by the shareholders present shall call
any Annual Meeting or Special Meeting to order and shall act as Chairman
of the Meeting, and the Secretary of the corporation shall act as
secretary of all meetings of the shareholders, but in the absence of the
Secretary, the chairman may appoint any other person to act as secretary
of the meeting.
2.13 Postponement; Adjournment.
(a) Any Annual Meeting or any Special Meeting called by the
Chairman of the Board, the Chief Executive Officer (other than a meeting
called pursuant to the demand of shareholders entitled to demand such a
meeting) or the Board of Directors may be postponed at any time or from
time to time after written notice of the meeting has been delivered to
shareholders as follows: (i) in the case of the Annual Meeting or a
Special Meeting called by the Board of Directors, by action of the Board
of Directors or a duly authorized committee thereof and (ii) in the case
of a Special Meeting called by the Chairman of the Board or the Chief
Executive Officer, at the request of the person calling the meeting and
with the consent of the Board of Directors or a duly authorized committee
thereof. Any such postponement or postponements shall be disclosed in any
public filing with the Securities and Exchange Commission or by means of a
press release to Dow Jones & Company or any similar service promptly
following such postponement, and promptly thereafter written notice of
such postponement stating the place, day and hour to which the meeting was
postponed shall be delivered to each shareholder of record entitled to
vote at such meeting.
(b) A meeting of shareholders may be adjourned to a different
date, time or place from time to time, whether or not there is a quorum,
(i) at any time, upon a resolution of shareholders if the number of votes
cast in favor of such resolution exceed the number of votes cast against
such resolution or (ii) by order of the chairman of the meeting, but only
where such order is delivered before any business is transacted at such
meeting and such adjournment is for a period of thirty (30) days or less.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting originally noticed. Any such adjournment or
adjournments pursuant to clause (i), if the new date, time and place of
the meeting is not announced at the meeting prior to adjournment or if a
new record date is or must be fixed for the meeting, or pursuant to clause
(ii) shall be disclosed in any public filing with the Securities and
Exchange Commission or by means of a press release to Dow Jones & Company
or any similar service promptly following such adjournment, and promptly
thereafter written notice of such adjournment stating the date, time and
place to which the meeting was adjourned shall be delivered to each
shareholder of record entitled to vote at such meeting, except that
(except as may be otherwise required by law) no such disclosure in
filings, press releases or notices to shareholders shall be required if an
adjournment is for a period of forty-eight (48) hours or less.
3. BOARD OF DIRECTORS
3.1 General Powers. All corporate powers of the corporation
shall be exercised by or under the authority of, and the business and
affairs of the corporation managed under the direction of, its Board of
Directors.
3.2 Number, Tenure and Qualifications.
(a) The number of directors of the corporation shall be eleven
(11). No more than two (2) officers or employees of the corporation or any
of its subsidiaries shall simultaneously serve as directors of the corpora-
tion. The directors shall be divided into three (3) classes with the first
class to consist of three (3) directors and the second and third classes to
consist of four (4) directors each. The term of office of those of the
first class shall expire at the annual meeting to be held in January,
1984, and of the second class one year thereafter and of the third class,
two years thereafter, and in all cases, until their respective successors
shall have been elected and qualified. At the annual meetings following
the initial election of directors by classes, the successors to the class
of directors whose term expires in that year shall be elected for a term
of three (3) years to succeed those whose terms expire, so that the term
of office of one class of directors shall expire in each year, but,
subject to the provisions of the Bylaws of the corporation, each director
shall hold office for the term for which he/she is elected and until
his/her successor is elected and, if necessary, qualified or until there
is a decrease in the number of directors that takes effect upon or after
the expiration of the term for which he/she is elected.
(b) Directors need not be residents of the State of Wisconsin
or shareholders of the corporation. A director having attained age
Seventy (70) shall automatically cease to be a director of the corporation
effective as of the Annual Meeting immediately following such director's
Seventieth (70th) birthday. All directors who are also officers of the
corporation shall automatically cease to be directors of the corporation,
effective as of his/her date of termination of employment from the
corporation, with the exception of any corporate officer holding, or who
has held the position of Chief Executive Officer.
(c) A Chairman of the Board shall be elected by the Board of
Directors from among its members to preside at all meetings of the
shareholders and the Board of Directors. The Director, who need not be an
employee of the corporation, elected Chairman of the Board shall serve in
such position for the term of office as elected by the shareholders or the
Board of Directors and until his/her successor shall have been duly
elected or until his/her death or until resignation or removal in the
manner hereinafter provided. The Chairman of the Board, if an employee of
the Corporation, may be elected Chief Executive Officer of the Corporation
by the Board of Directors. The Chairman of the Board shall perform all
duties incident to the office and such other duties as may be prescribed
by the Board of Directors from time to time.
(d) All directors of the corporation, who are not
simultaneously employed as officers by the corporation, shall be properly
compensated and reimbursed for their services as a director on the basis
of an annual retainer, Board of Director and Committees of the Board
meeting attendance fees and reasonable expenses incurred as a director as
established, reviewed and approved annually by the Nominating Committee of
the Board of Directors. Any employee of the corporation, who is elected a
director of the corporation, shall not receive any compensation, expense
reimbursement or participation in director benefit programs for his/her
services as a director of the corporation. A Chief Executive Officer, who
retires from the corporation prior to attaining age 70 while serving as a
director, immediately becomes eligible for compensation, expense
reimbursement and director benefit program participation as a non-employee
director effective as of the individual's retirement date from the
corporation.
3.3 Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of shareholders, and
each adjourned session thereof. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of
Wisconsin, for the holding of additional regular meetings without other
notice than such resolution.
3.4 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
Chief Executive Officer or a majority of the number of directors fixed by
Section 3.2. The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the
State of Wisconsin, as the place for holding any special meeting of the
Board of Directors called by them.
3.5 Notice. Notice of any special meeting shall be given at
least five (5) days previously thereto by written notice mailed to each
director at his or her business address, or by written or oral notice
given by other means at least 48 hours previously thereto. Whenever any
notice whatever is required to be given to any director of the corporation
under the provisions of these Bylaws or under the provisions of the
Restated Articles of Incorporation or under the provisions of any statute,
a waiver thereof in writing, signed at any time, whether before or after
the time of meeting, by the director entitled to such notice and retained
by the corporation, shall be deemed equivalent to timely notice. The
attendance of a director at or participation in a meeting shall constitute
a waiver of notice of such meeting, unless the director at the beginning
of the meeting or promptly upon his or her arrival objects to holding the
meeting or transacting business at the meeting and does not thereafter
vote for or assent to action taken at the meeting. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of
the Board of Directors need be specified in the notice or waiver of notice
of such meeting.
3.6 Quorum: Votes. One-third of the number of directors fixed
by Section 3.2 shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors, but though less than such quorum
is present at a meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice. If a quorum is
present when a vote is taken, the affirmative vote of a majority of
directors present shall be the act of the Board of Directors, unless the
act of a greater number is required by law, by the Restated Articles of
Incorporation or these Bylaws.
3.7 Removal and Resignation. A director may be removed from
office by the affirmative vote of the holders of two-thirds of the
outstanding shares entitled to vote taken at a meeting called for that
purpose. A director may resign at any time by delivering his written
resignation to the Secretary of the corporation or to the Chairman of the
Board. A resignation is effective when the notice is received unless the
notice specifies a later effective date.
3.8 Vacancies. Any vacancy occurring in the Board of
Directors, including a vacancy created by an increase in the number of
directors, may be filled by any of the following: (i) the shareholders,
(ii) the Board of Directors or (iii) if the directors remaining in office
constitute fewer than a quorum of the Board, the directors, by the
affirmative vote of a majority of all directors remaining in office;
provided, however, that if the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of
that voting group may vote to fill the vacancy if it is filled by the
shareholders, and only the remaining directors elected by that voting
group may vote to fill the vacancy if it is filled by the directors. The
Directors so elected shall hold office until the next succeeding election
of the class for which such director shall have been elected.
3.8A Nominations. Nominations for the election of directors may
only be made by the Board of Directors, by the Nominating Committee of the
Board of Directors (or, if none, any other committee serving a similar
function) or by any shareholder entitled to vote generally in elections of
directors where the shareholder complies with the requirements of this
Section. Any shareholder of record entitled to vote generally in
elections of directors may nominate one or more persons for election as
directors at a meeting of shareholders only if written notice of such
shareholder's intent to make such nomination or nominations has been
given, either by personal delivery or by United States certified mail,
postage prepaid, to the Secretary of the corporation that is received by
the Secretary (i) with respect to an election to be held at an Annual
Meeting, not more than ninety (90) days nor less than fifty (50) days in
advance of the third Thursday after the first Friday of the month of
January next following the last Annual Meeting held; provided, that if the
Annual Meeting is held earlier than the third Thursday after the first
Friday of the month of January, such notice must be given on or before the
later of (x) the date fifty (50) days prior to the earlier date of the
Annual Meeting and (y) the date ten (10) business days after the first
public disclosure, which may include any public filing with the Securities
and Exchange Commission or a press release to Dow Jones & Company or any
similar service, of the earlier date of the Annual Meeting, and (ii) with
respect to an election to be held at a Special Meeting as to which notice
of such meeting states that it is to be held for the election of
directors, not earlier than ninety (90) days prior to such Special Meeting
and not later than the close of business on the later of (x) the tenth
(10th) business day following the date on which notice of such meeting is
first given to shareholders and (y) the 50th day prior to such Special
Meeting. Each such notice of a shareholder's intent to nominate a
director or directors at an Annual Meeting or Special Meeting shall set
forth the following: (A) the name and address, as they appear on the
corporation's books, of the shareholder who intends to make the nomination
and of the beneficial owner or owners, if any, on whose behalf the
nomination is to be made and the name and residence address of the person
or persons to be nominated; (B) the class and number of shares of the
corporation which are beneficially owned by the shareholder and beneficial
owner or owners; (C) a representation that the shareholder is a holder of
record of stock of the corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (D) a description of all
arrangements or understandings between the shareholder and/or beneficial
owner or owners and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to be made by the shareholders; (E) such other information regarding
each nominee proposed by such shareholder as would be required to be
disclosed in solicitations of proxies for election of directors, or would
be otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, including any information
that would be required to be included in a proxy statement filed pursuant
to Regulation 14A had the nominee been nominated by the Board of
Directors; and (F) the written consent of each nominee to be named in a
proxy statement and to serve as a director of the corporation if so
elected. No person shall be eligible to serve as a director of the
corporation unless nominated in accordance with the procedures set forth
in this By-law. If the chairman of the shareholders meeting shall
determine that a nomination was not made in accordance with the procedures
prescribed by the By-laws, he shall so declare to the meeting and the
defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 3.8A, a shareholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the
matters set forth in this Section.
3.9 Compensation. The Board of Directors, irrespective of any
personal interest of any of its members, may establish compensation of all
directors for services to the corporation as directors, officers or
otherwise, or may delegate such authority to an appropriate committee.
3.10 Presumption of Assent. A director of the corporation who
is present and is announced as present at a meeting of the Board of
Directors or a committee thereof of which he/she is a member at which
action on any corporate matter is taken assents to the action taken,
unless any of the following occurs: (i) the director objects at the
beginning of the meeting or promptly upon his or her arrival to the
holding of the meeting or transacting business at the meeting; (ii) the
director's dissent or abstention from the action taken is entered in the
minutes of the meeting; or (iii) the director delivers written notice of
his or her dissent or abstention to the presiding officer of the meeting
before its adjournment or to the corporation immediately after adjournment
of the meeting. Such right to dissent or abstain shall not apply to a
director who voted in favor of such action.
3.11 Committees. The Board of Directors by resolution approved
by a majority of all directors then in office may designate one or more
committees, each committee to consist of two or more directors appointed
by the Board of Directors, which to the extent provided in said
resolution, as initially adopted, and as thereafter supplemented or
amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the authority of
the Board of Directors in the management of the business and affairs of
the corporation, except that a committee may not do any of the following:
(a) authorize distributions; (b) approve or propose to shareholders action
that the Wisconsin Business Corporation Law requires shareholders to
approve; (c) fill vacancies on the Board of Directors or, unless the Board
of Directors provides by resolution that any vacancies on a committee
shall be filled by the affirmative vote of a majority of the remaining
committee members, on any of its committees; (d) amend the corporation's
Restated Articles of Incorporation; (e) adopt, amend or repeal bylaws; (f)
approve a plan of merger not requiring shareholder approval; (g) authorize
or approve reacquisition of shares, except according to a formula or
method prescribed by the Board of Directors; and (h) authorize or approve
the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
All members of the Board of Directors not appointed to serve as members of
a committee designated by the Board of Directors shall be deemed
designated to serve as alternates for such committee, any one of whom may
take the place of any absent member or members at any meeting of such
committee, upon request of the Chairman of the Board. Subject to any
provision of law and these Bylaws, each such committee shall fix its own
rules governing the conduct of its activities and shall make such reports
to the Board of Directors of its activities as the Board of Directors may
request. Unless otherwise provided by the Board of Directors in creating
the committee, a committee may employ counsel, accountants and other
consultants to assist it in the exercise of its authority.
3.12 Informal Action Without Meeting. Any action required or
permitted by the Restated Articles of Incorporation or Bylaws or any
provision of law to be taken by the Board of Directors or a committee at a
meeting may be taken without a meeting if the action is taken by all
members of the Board or of the committee. The action shall be evidenced
by one or more written consents describing the action taken, signed by
each director or committee member and retained by the corporation. Such
action shall be effective when the last director or committee member signs
the consent, unless the consent specifies a different effective date.
3.13 Telephonic Meetings. Notwithstanding any place set forth
in the notice of the meeting or these Bylaws, members of the Board of
Directors may participate in regular or special meetings of the Board of
Directors and all Committees of the Board of Directors by or through the
use of any means of communication by which all directors participating may
simultaneously hear each other, such as by conference telephone; provided,
however, that the Chairman of the Board or the chairman of the respective
Committee of the Board or other person or persons calling a meeting may
determine that the directors cannot participate by such means, in which
case the notice of the meeting, or other notice to directors given prior
to the meeting, shall state that each director's physical presence shall
be required. If a meeting is conducted through the use of such means,
then at the commencement of such meeting all participating directors shall
be informed that a meeting is taking place at which official business may
be transacted. A director participating in a meeting by such means shall
be deemed present in person at such meeting. If action is to be taken at
any such Board of Directors or Committee meeting on any of the following
matters, then the identity of each director participating in such a
meeting must be verified by the disclosure of each director's social
security number to the secretary of the meeting or in such other manner as
the chairman of the meeting deems reasonable under the circumstances
before a vote may be taken on any of such matters: (i) a plan of merger
or share exchange; (ii) a sale, lease, exchange or other disposition of
substantial property or assets of the corporation; (iii) a voluntary
dissolution or the revocation of voluntary dissolution proceedings; or
(iv) a filing for bankruptcy. For purposes of the preceding clause (ii),
the phrase "sale, lease, exchange or other disposition of substantial
property or assets" shall mean any sale, lease, exchange or other
disposition of property or assets of the corporation having a net book
value equal to 10% or more of the net book value of the total assets of
the corporation as of the close of the fiscal year last ended prior to the
date of such meeting and as to which financial statements of the
corporation have been prepared.
4. OFFICERS
4.1 Number.
(a) The principal executive officers of the corporation shall
be a Chief Executive Officer, a President, one or more Corporate Vice
Presidents, one or more of whom may be designated Executive Vice President
and/or Senior Vice President, a Secretary, a Treasurer, a Controller and
divisional presidents, each of whom shall be elected by the Board of
Directors or, to the extent authorized by the Board of Directors, by the
Chief Executive Officer. All other officers, other designated divisional
or staff officers, and all assistant officers (including one or more
Assistant Secretaries and/or Assistant Treasurers) shall be appointed by
the Chief Executive Officer as he or she deems necessary. Any two or more
offices may be held by the same person.
(b) The duties of the executive officers shall be those
enumerated herein and any further duties designated by the Board of
Directors. The duties herein specified for particular officers may be
transferred to and vested in such other officers as the Board of Directors
shall elect from time to time and for such periods or without limitation
as to time as the Board shall order.
(c) The duties and powers of all appointed officers shall be
those specifically prescribed for the position(s) by the Chief Executive
Officer at the time of appointment.
4.2 Election and Term of Office.
(a) The officers of the corporation to be elected by the Board
of Directors shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting of
the shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as convenient.
Each officer shall hold office until his/her successor shall have been
duly elected or until his/her death or until he/she shall resign or shall
have been removed in the manner hereinafter provided.
(b) A vacancy in any elected office because of death,
resignation, removal, disqualification or otherwise may be filled by the
Board of Directors for the unexpired portion of the term.
(c) The Chief Executive Officer shall have authority to appoint
and to terminate the appointment of all divisional staff and assistant
officers from time to time and for such periods of time as serve the best
interests of the corporation.
4.3 Removal. The Board of Directors may remove any officer or
agent at any time, with or without cause and notwithstanding the contract
rights, if any, of the officer or agent removed. Election or appointment
shall not of itself create contract rights.
4.4 Resignation. An officer may resign at any time by
delivering written notice to the Secretary of the corporation. The
resignation is effective when the notice is delivered, unless the notice
specifies a later effective date and the corporation accepts the later
effective date.
4.5 The Chief Executive Officer. The Chief Executive Officer,
subject to the control of the Board of Directors, shall supervise and
control all of the business and affairs of the corporation. He or she
shall, in the absence of the Chairman of the Board, preside at all
meetings of the stockholders and directors. He or she shall have
authority, subject to such rules as may be prescribed by the Board of
Directors, to appoint certain officers and such agents and employees of
the corporation as he or she shall deem necessary, to prescribe their
powers, duties and compensation, and to delegate authority to them. Such
appointed officers, agents and employees shall hold office at the
discretion of the Chief Executive Officer. He or she shall have authority
to sign, execute and acknowledge, on behalf of the corporation, all deeds,
mortgages, bonds contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by the Board
of Directors; and except as otherwise provided by law or the Board of
Directors, he or she may authorize any other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments
in his or her place and stead. In general, he or she shall perform all
duties incident to the office of Chief Executive Officer and such other
duties as may be prescribed by the Board of Directors from time to time.
4.6 The President. The President shall be the chief operating
officer of the corporation. He or she shall have the authority to sign
all stock certificates, contracts, and other instruments of the
corporation necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by the Board
of Directors, and shall perform all duties as are incident to his or her
office or are properly required of him or her by the Board of Directors,
the Chairman of the Board or the Chief Executive Officer. He or she shall
have the authority, subject to such rules, directions, or orders as may be
prescribed by the Chairman of the Board, the Board of Directors or the
Chief Executive Officer, to appoint and terminate the appointment of such
agents and employees of the corporation as he or she shall deem necessary,
to prescribe their power, duties and compensation and to delegate
authority to them.
4.7 Corporate Vice Presidents. At the time of election, one or
more of the Corporate Vice Presidents may be designated Executive Vice
President and/or Senior Vice President. In the absence of the President
or in the event of his or her death, inability or refusal to act, or in
the event for any reason it shall be impracticable for the President to
act personally, the Executive Vice President, or in the event of his or
her inability to act, the Senior Vice Presidents in the order designated
at the time of their election, or in the absence of any such designation,
then in the order of their election, or in the event of their inability to
act, then the other Corporate Vice Presidents in the order designated at
the time of their election, or in the absence of any such designation,
then in the order of their election, shall perform the duties of the
President and when so acting shall have all the powers of and be subject
to all the restrictions upon the President. Any Corporate Vice President
may sign, with the Secretary or Assistant Secretary, certificates for
shares of the corporation and shall perform such other duties as from time
to time may be assigned to him or her by the Chairman of the Board, the
Chief Executive Officer or the Board of Directors.
4.8 The Secretary. The Secretary shall: (a) keep as permanent
records any of the following that has been prepared: the minutes of the
shareholders' and of the Board of Directors' meetings; records of actions
taken by the Board of Directors without a meeting; and records of actions
taken by a Committee of the Board of Directors in place of the Board of
Directors and on behalf of the corporation; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or as
required by law; (c) be custodian of the corporate records and of the seal
of the corporation and see that the seal of the corporation is affixed to
all documents the execution of which on behalf of the corporation under
its seal is duly authorized; (d) maintain or cause an authorized agent to
maintain a record of the corporation's shareholders, in a form that
permits preparation of a list of the names and addresses of all
shareholders, by class or series of shares and showing the number and
class or series of shares held by each shareholder; (e) in general perform
all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him or her by the Chief Executive
Officer or by the Board of Directors.
4.9 The Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her
duties in such sum and with such surety or sureties as the Board of
Directors shall determine. He or she shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation,
receive and give receipts for moneys due and payable to the corporation
from any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Section 5 of these
Bylaws; and (b) in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be
assigned to him or her by the Chief Executive Officer or by the Board of
Directors.
4.10 The Controller. The Controller shall be the chief
accounting officer of the corporation. He or she shall: (a) maintain
appropriate accounting records for the corporation; (b) cause regular
audits of these accounting records to be made; and (c) in general perform
all of the duties incident to the office of Controller and such other
duties as from time to time may be assigned to him or her by the Chief
Executive Officer or by the Board of Directors.
4.11 Salaries.
(a) The salaries of the elected officers shall be fixed from
time to time by the Board of Directors or by an appropriate committee of
the Board of Directors and no such officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a
Director of the corporation.
(b) The salaries of all divisional staff and assistant
officers, appointed by the Chief Executive Officer, shall be set by the
Chief Executive Officer from time to time, in the best interests of the
corporation.
5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
corporation, and such authorization may be general or confined to specific
instances.
5.2 Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by or under the authority of a resolution of the Board
of Directors. Such authorization may be general or confined to specific
instances.
5.3 Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by or under the authority of resolution of
the Board of Directors.
5.4 Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as may be
selected by or under the authority of the Board of Directors.
6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares. Certificates representing shares
of the corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the Chairman,
Chief Executive Officer, President or Vice President-Finance and by the
Secretary or an Assistant Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the
number of shares and the date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be entered on the stock transfer books of
the corporation. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificates shall be issued until
the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the Board of Directors may prescribe.
6.2 Uncertificated Shares. The Board of Directors may
authorize the issuance of any shares of any of the corporation's classes
or series without certificates. The authorization does not affect shares
already represented by certificates until the certificates are surrendered
to the corporation.
6.3 Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the
holder of record thereof or by his or her legal representative, who shall
furnish proper evidence of authority to transfer, or by his or her
attorney thereunto authorized by power of attorney duly executed and filed
with the Secretary of the corporation, and on surrender for cancellation
of the certificate for such shares. The person in whose name shares stand
on the books of the corporation shall be deemed by the corporation to be
the owner thereof for all purposes.
6.4 Stock Regulations. The Board of Directors shall have the
power and authority to make all such rules and regulations not
inconsistent with the statutes of the State of Wisconsin as they may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the corporation, including the appointment or
designation of one or more stock transfer agents and one or more stock
registrars.
7. GENERAL
7.1 Limited Liability of Directors to Corporation and
Shareholders. A director is not liable to the corporation, its
shareholders, or any person asserting rights on behalf of the corporation
or its shareholders, for damages, settlements, fees, fines, penalties or
other monetary liabilities arising from a breach of, or failure to
perform, any duty resulting solely from his or her status as a director,
unless the person asserting liability proves that the breach or failure to
perform constitutes any of the following:
(a) A willful failure to deal fairly with the corporation or
its shareholders in connection with a matter in which the director has a
material conflict of interest.
(b) A violation of criminal law, unless the director had
reasonable cause to believe his or her conduct was lawful, or no
reasonable cause to believe his or her conduct was unlawful.
(c) A transaction from which the director derived an improper
personal profit.
(d) Willful misconduct.
7.2 Indemnification.
(a) A corporation shall indemnify a director or officer, to the
extent he or she has been successful on the merits or otherwise in the
defense of a proceeding, for all reasonable expenses incurred in the
proceeding if the director or officer was a party because he or she is a
director or officer of the corporation.
(b) In cases not included under the foregoing paragraph, a
corporation shall indemnify a director or officer against liability
incurred by the director or officer in a proceeding to which the director
or officer was a party because he or she is a director or officer of the
corporation, unless liability was incurred because the director or officer
breached or failed to perform a duty he or she owes to the corporation and
the breach or failure to perform constitutes any of the following:
1. A willful failure to deal fairly with the corporation or
its shareholders in connection with a matter in which the director or
officer has a material conflict of interest.
2. A violation of criminal law, unless the director or officer
had reasonable cause to believe his or her conduct was lawful or no
reasonable cause to believe his or her conduct was unlawful.
3. A transaction from which the director or officer derived an
improper personal profit.
4. Willful misconduct.
(b) Determination of whether indemnification is required under
this subsection shall be made under Wis. Stats. 180.0855.
(c) The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an equivalent
plea, does not, by itself, create a presumption that indemnification of
the director or officer is not required under this subsection.
(d) A director or officer who seeks indemnification under this
section shall make a written request to the corporation.
(e) Indemnification under this section is not required if the
director or officer has previously received indemnification or allowance
of expenses from any person, including the corporation, in connection with
the same proceeding.
7.3 Reliance by Directors and Officers.
(a) Unless a director or officer has knowledge that makes
reliance unwarranted, a director or officer, in discharging his or her
duties to the corporation, may rely on information, opinions, reports or
statements, any of which may be written or oral, formal or informal,
including financial statements and other financial data, if prepared or
presented by any of the following:
1. An officer or employee of the corporation whom the director
or officer believes in good faith to be reliable and competent in the
matters presented.
2. Legal counsel, public accountants or other persons as to
matters the director or officer believes in good faith are within the
person's professional or expert competence.
3. In the case of reliance by a director, a committee of the
board of directors of which the director is not a member if the director
believes in good faith that the committee merits confidence.
7.4 Consideration of Interests in Addition to Shareholders'
Interests. In discharging his or her duties to the corporation and in
determining what he or she believes to be in the best interests of the
corporation, a director or officer may, in addition to considering the
effects of any action on shareholders, consider the following:
(a) The effects of the action on employees, suppliers and
customers of the corporation.
(b) The effects on the action on communities in which the
corporation operates.
(c) Any other factors the director or officer considers
pertinent.
7.5 Insurance. The corporation may purchase and maintain
insurance on behalf of an individual who is an employee, agent, director
or officer of the corporation against liability asserted against or
incurred by the individual in his or her capacity as an employee, agent,
director or officer or arising from his or her status as an employee,
agent, director or officer, regardless of whether the corporation is
required or authorized to indemnify or allow expenses to the individual
against the same liability under Wis. Stats. 180.0851, 180.0853, 180.0856
and 180.0858.
7.6 General.
(a) Except as limited by law, the indemnification and allowance
of expenses provided by Sections 7.1 through 7.5 of this Article do not
preclude any additional right to indemnification or allowance of expenses
that a director, officer or employee may have under any written agreement
between such person and the corporation, resolution of the Board or
resolution adopted by the corporation's shareholders.
(b) For purposes of this article, the definitions contained in
Wis. Stat. 180.0850 are incorporated herein by this reference. The term
"employee" shall mean a natural person who is or was an employee of the
corporation or who, while an employee of the corporation, is or was
serving at the corporation's request as a director, officer, partner,
committee, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, and, unless the context requires
otherwise, the estate or personal representative of the employee.
(c) The corporation, by its Board of Directors, may indemnify
under Section 7.2, or with any limitations, any employee or former
employee of the corporation with respect to any action taken or not taken
in his/her capacity as or while an employee. Notwithstanding the
foregoing, the corporation shall indemnify an employee who is not a
director or officer of the corporation, to the extent that he or she has
been successful on the merits or otherwise in defense of a proceeding, for
all expenses incurred in the proceeding if the employee was a party
because he or she was an employee of the corporation.
7.7 Fiscal Year. The fiscal year of the corporation shall end
on September 30 of each year, commencing September 30, 1961.
7.8 Seal. The Board of Directors shall provide a corporate
seal which shall be circular in form and shall have inscribed thereon the
name of the corporation and the words "Corporate Seal, Wisconsin".
7.9 Notices. Except as otherwise required by law or these
Bylaws, any notice required to be given by these Bylaws may be given
orally or in writing and notice may be communicated in person, by
telephone, telegraph, teletype, facsimile or other form of wire or
wireless communication, or by mail or private carrier. Except where these
Bylaws require a notice to be delivered to or received by the recipient of
the notice, written notice required to be given by these Bylaws is
effective, if communicated (a) by mail, when deposited in the United
States mail, if mailed postpaid and correctly addressed, (b) by private
carrier, when delivered to the carrier and (c) by telegram, when the
telegram is delivered to the telegraph company.
7.10 No Nominee Procedures. The corporation has not
established, and nothing contained in these Bylaws shall be deemed to
establish, any procedure by which a beneficial owner of the corporation's
shares that are registered in the name of a nominee is recognized by the
corporation as the shareholder under Section 180.0723 of the Wisconsin
Statutes.
8. AMENDMENTS
8.1 Power to Amend and Repeal. Except as may be limited
pursuant to Section 8.2, these Bylaws may be amended or repealed, and new
Bylaws may be adopted, either by the shareholders at any meeting, or by
vote of a majority of the shares present or represented thereat, or by the
Board of Directors by a vote of a majority of the Board; except that
Sections 2.2, 2.7, 3.2, 3.7, 3.8, 8.1, and 8.2 of the Bylaws may be
amended only by the affirmative vote of the holders of two-thirds of the
outstanding shares entitled to vote thereon or by the affirmative vote of
a majority of the directors. Except as may be limited pursuant to Section
8.2, the Board of Directors shall have the power to amend or repeal any
Bylaw adopted by the shareholders, and any Bylaw adopted by the Board of
Directors shall be subject to amendment or repeal by the shareholders as
well as by the directors.
8.2 Restrictions on Amendment and Repeal.
(a) The Board of Directors shall have no power to amend or
repeal any Bylaw or amendment adopted by the shareholders which contains a
specific provision to the effect that such Bylaw or amendment shall not be
subject to amendment or repeal by the Board of Directors.
(b) No amendment or repeal of these Bylaws by the shareholders
at any meeting shall be effective unless the notice of such meeting shall
have set forth the general nature of the proposed amendment or repeal.
Exhibit 10(h)
CHANGE OF CONTROL
EMPLOYMENT AND SEVERANCE AGREEMENT
AGREEMENT by and between Universal Foods Corporation, a Wisconsin
corporation (the "Company"), and ____________________________
____________________ (the "Executive"), dated as of the first day of
October 1995.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication
of the Executive, notwithstanding the possibility, threat or occurrence of
a Change of Control (as defined below) of the Company. The Board believes
it is imperative to diminish the inevitable distraction of the Executive
by virtue of the personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control which
ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean
the first date during the Change of Control Period (as defined in Section
1(b)) on which a Change of Control (as defined in Section 2) occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change of
Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if
it is reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or anticipation of a Change of Control, then for
all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the
date hereof; provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date (such date
and each annual anniversary thereof shall be hereinafter referred to as
the "Renewal Date"), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three years from
such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control
Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (1) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company, or (2) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination, or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to its terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on
the third anniversary of such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During
the Employment Period, (A) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects
with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Effective Date
and (B) the Executive's services shall be performed at the location where
the Executive was employed immediately preceding the Effective Date or any
or office location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the Executive to
(A) serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at educational
institutions, and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by the Company
and its affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs.
During the Employment Period, the Annual Base Salary shall be reviewed and
increased a minimum of 3% no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the Executive under
this Agreement and shall be commensurate with increases given to peer
executives. Annual Base Salary shall not be reduced after any such
increase and the term "Annual Base Salary" as utilized in this Agreement
shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company..
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least
equal to the Executive's highest bonus under the Company's [Management
Incentive Plan], or any comparable bonus under any predecessor or
successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was not
employed by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year
for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
qualified and non-qualified incentive (cash and stock related), savings
and retirement plans, and/or comparable practices, policies and programs
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities,
in each case, less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect
at any time during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided generally at
any time after the Effective Date to other peer executives of the Company
and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time
after the Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax
and financial planning services, use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated
companies at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its affiliated
companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good
faith that the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment with
the Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes
of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for performance is
delivered to the Executive by the Chief Executive Officer of the Company
which specifically identifies the manner in which the Chief Executive
Officer believes that the Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board or upon the instructions of the
Chief Executive Officer or a senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board,
the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail. Any
termination of the Executive's employment by the Company during the
Employment Period (other than a termination under Section 5(a)) shall be
deemed to be a termination other than for Cause unless it meets all
requirements of this Section 5(b).
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any
other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(iii) the Company's requiring the Executive to be based
at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required immediately prior
to the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive
for any reason where the Date of Termination (as defined below) is during
the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The failure by
the Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be, (ii)
if the Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good
Reason, Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, (2)
the product of (x) the higher of (I) the Recent Annual Bonus and (II) the
Annual Bonus paid or payable, including any bonus or portion thereof which
has been earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which the Executive
was employed for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any (such higher
amount being referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in the current
fiscal year of the Company through the Date of Termination, and the
denominator of which is 365 and (3) any compensation previously deferred
by the Executive (together with any accrued interest or earnings thereon)
and any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2)
the sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
C. an amount equal to all vested and nonforfitable
amounts, as defined under the Company's savings and retirement plans and
programs (qualified and non-qualified) described in Section 4(b)(iii) and
(ii) for three years after the Executive's Date of Termination,
the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided
to them in accordance with the plans, programs, practices and policies
described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits) of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until three years after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and provider of
which shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the
Date of Termination. With respect to the provision of Other Benefits, the
term Other Benefits as utilized in this Section 6(b) shall include,
without limitation, and the Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to
death benefits, if any, as in effect with respect to other peer executives
and their beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive's
death with respect to other peer executives of the Company and its
affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term "Other Benefits"
as utilized in this Section 6(c) shall include, and the Executive shall be
entitled after the Disability Effective Date to receive, disability and
other benefits at least equal to the most favorable of those generally
provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive and/or the Executive's family, as
in effect at any time thereafter generally with respect to other peer
executives of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) his Annual
Base Salary through the Date of Termination, (y) the amount of any
compensation previously deferred by the Executive, and (z) Other Benefits,
in each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding
a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all
Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject
to Section 12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligations to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement. Each and every payment made hereunder by
the Company shall be final, and the Company will not seek to recover all
or any part of such payment from the Executive for any reason. The
Company agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company,
the Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the Company. (a) Anything
in this Agreement to the contrary notwithstanding and except as set forth
below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive
of all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Deloitte & Touche LLP or such certified
public accounting firm as may be designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the
receipt of notice from the Executive and that there has been a Payment, or
such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within ten days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 9(c) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business days
after the Executive is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which said claim
is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or Income Tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the Company
shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority
in respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or to contest the
claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs
the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or Income Tax (including interest or penalties
with respect thereto) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of Section
9(c) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto).
If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that the
Executive shall not be entitled to any refund with respect to such claim
and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any
of its affiliated companies, and their respective businesses, which shall
have been obtained by the Executive during the Executive's employment by
the Company or any of its affiliated companies and which shall not be or
become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not
be assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. As used in this agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when actually received by the Executive
or actually received by the Company's secretary. If mailed, such notices
shall be mailed by United States registered or certified mail, return
receipt requested, addressee only, postage prepaid, if to the Company, to
Attention: Secretary (or President, if the Executive is then Secretary),
or if to the Executive, at the address set forth below the Executive's
signature to this Agreement, or to such other address as the party to be
notified shall have theretofore given to the other party in writing.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof, prior to the Effective
Date, the Executive's employment and/or this Agreement may be terminated
by either the Executive or the Company at any time prior to the Effective
Date, in which case the Executive shall have no further rights under this
Agreement. From and after the Effective Date this Agreement shall
supersede any other agreement between the parties with respect to the
subject matter hereof.
13. Governing Law; Resolution of Disputes. This Agreement and
the rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Wisconsin. Any dispute arising
out of this Agreement shall, at the Executive's election, be determined by
arbitration under the rules of the American Arbitration Association then
in effect (in which case both parties shall be bound by the arbitration
award) or by litigation. Whether the dispute is to be settled by
arbitration or litigation, the venue for the arbitration or litigation
shall be in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing
in the United States, the election of the Executive with respect to such
venue shall be Wisconsin. The parties consent to personal jurisdiction in
each trial court in the selected venue having subject matter jurisdiction,
and each party irrevocably consents to service of process in the manner
provided hereunder for the giving of notices.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed in its
name and on its behalf, all as of the day and year first above written.
UNIVERSAL FOODS CORPORATION
By________________________________
Guy A. Osborn
Chairman and CEO
CORPORATE SEAL
Attest_____________________________
Secretary
________________________________
Signature
________________________________
Name (please print)
Address___________________________
___________________________
___________________________
Exhibit 13
[Start Page 16]
Operations Review
Flavor
Continued strong performance internationally and growth in our U.S. food
and beverage flavors offset softness in the U.S. dairy flavors market.
Operating margins increased while revenue for the year was up 4%.
U.S. food flavor and ingredients revenue was up as a result of increasing
penetration of the segment. Formulations for juices, teas, and sports
beverages boosted beverage flavor revenues in the U.S. Dairy flavor
revenue declined due to weaknesses with major customer brands and further
industry consolidation.
U.S. operations were reorganized in the fourth quarter by food, beverage
and dairy industries to capitalize on technical expertise in those markets
and to improve responsiveness to target customers. European operations
were restructured geographically and product lines consolidated.
Strong results in the Pacific Rim and Canada offset a decline in Mexico
due to economic conditions in that country. Development of new fragrance
components for household and personal care items boosted results from our
European aroma chemical business.
We significantly strengthened our research, development and applications
expertise and enhanced processing technology for natural flavors. An
integrated information system was launched which will improve
responsiveness.
Color
Continued improvement in product mix and good international demand drove
profit growth for the year. Revenue was up 5% despite the impact of
economic conditions in Mexico which represents 11% of division sales.
Domestic food and beverage color revenue was up. Sales of value-added
color dispersions rose as we created specialized solutions to meet
customer needs. Fruit and other new-age beverages propelled a significant
increase in revenue from natural colors.
Presence in the U.S. cosmetic and pharmaceutical markets was strengthened
through a restructuring of sales and marketing efforts and the addition of
other ingredients to the product line. Semi-permanent hair dyes boosted
cosmetic color sales in Europe.
The ongoing transformation of the St. Louis, Missouri, manufacturing
complex into the most modern color production facility in the world
continued. A state-of-the-art facility to produce water-insoluble pigments
went into full production and construction of a new warehouse began.
Process technology improvements resulted in more efficient manufacturing,
production of additional raw and intermediate materials as well as fine
chemicals, and more sophisticated extraction of natural colors.
Dehydrated Products
Revenue was up 38% bolstered by European acquisitions; operating profit
improved. Revenue from the existing business was up 11% reflecting strong
U.S. onion and garlic volumes.
Acquisitions in France and The Netherlands, combined with a 1994 purchase
in Ireland, gave us market leadership in the European dehydrated vegetable
business with a broad line of specialty products and opportunities to
enhance exports.
Our product line now includes carrots, peas, beans, celeriac and a variety
of other vegetables in addition to our onion, garlic and chili products.
We also expanded our dehydration technology to include freeze and vacuum
drying to produce premium products with short reconstitution times.
Integration of the European acquisitions began. Sales and marketing have
been centralized. U.S. processing technology and agricultural growing
expertise is being transferred to the region. Vegetables will be grown and
dehydrated in those locations best suited for each product.
Certification to international quality standards (ISO 9002) was achieved
by the U.S. production facility in Turlock, California; laboratories in
Livingston and Greenfield, California; and by our acquired facility in
France. Other European facilities were certified previously.
Red Star Bioproducts
Acquisitions made in the fourth quarter of 1994 significantly boosted 1995
revenue and operating profit in the division. Over half of revenue was
derived from outside of the United States.
The acquisition of Champlain Industries and the Biolux Group significantly
expanded our product lines and international reach. We integrated and
strengthened sales and marketing efforts of the combined group.
With a broadened product line for food processors that includes flavor
enhancers derived from yeast and vegetable proteins, we strengthened our
market position in North America and built upon our new presence in
Europe.
To produce food- and pharmaceutical-grade extracts from spent brewer's
yeast in Europe, we undertook the transfer of proprietary U.S. technology
to our acquired operations. Investment in additional equipment and
capacity is slated to begin in 1996 to meet anticipated demand.
Marketing of yeast extracts as bionutrients was strengthened.
High-performance extracts serve as a source of nutrition for the
production of enzymes, natural flavors and pharmaceuticals, as well as in
biotechnology and environmental clean-up.
Red Star yeast & Products
With solid improvements in operating profit, we widened our advantage as
the leading, low-cost yeast supplier in North America. The boost in
operating margin was the result of recovering prices and successful cost
reduction efforts.
We captured the benefits of restructuring our sales and marketing group
and developed partnerships with distributors to provide reliable service
at lower costs. Capital investments continued to improve the efficiency of
operations.
Significant changes also occurred in the infrastructure of the industry in
1995, with the exit of two yeast producers from the North American market
and a subsequent reduction in capacity.
We are capitalizing on the trend towards automated handling of ingredients
in the wholesale baking industry by taking a leadership position in the
conversion of key customers to bulk yeast delivery systems.
Retail yeast sales continued to get a boost from the bread machine boom.
Promotional activities included joint marketing and couponing with bread
machine and packaged bread mix makers, and the introduction of a line of
Red Star bread machines.
[End Page 16]
[Start Text of Pages 18-21]
Management's Analysis of Operations and Financial Condition
Years ended September 30, 1995, 1994 and 1993
Results of Operations
During 1995, Universal Foods Corporation focused on strengthening its
existing businesses to position the Company for future growth. The
businesses were strengthened through acquisitions, international expansion
and a continued emphasis on its strategy to use process and applications
expertise to move into more advanced and sophisticated product categories.
With the sale of the Frozen Foods business in the 1994 fourth quarter,
1995 was the Company's first full year of operations as a developer and
marketer of high-performance ingredients for foods and other uses. Revenue
from the Company's continuing businesses was $793 million in 1995 compared
to $691 million in 1994.
Net earnings in 1995 were $66.1 million or $2.54 per share compared with
$50.9 million or $1.95 per share in 1994. The 1995 earnings include a net
pretax gain from unusual items of $26.8 million or $.36 per share. The
1994 results include a pretax restructuring charge of $12.1 million or
$.29 per share.
Unusual items in 1995 include a pretax gain from the sale of the Frozen
Foods business of $49.6 million offset by the cost of discontinuing a
product line of $14.1 million and other items totaling $8.7 million.
Approximately 70% of the unusual charges relate to the write-down of
assets to net realizable value.
In the fourth quarter of 1994, the Company recorded a pretax restructuring
charge of $12.1 million. The restructuring includes product line
consolidation in the Company's Flavor Division and the reorganization of
sales, marketing and distribution functions in the Red Star Yeast &
Products Division. The charge included $6 million of severance and
termination benefits and $6.1 million of asset write-offs and other items.
Approximately 50% of the charge was non-cash. Operating cash flows were
used to fund severance and other cash items. The restructuring program was
substantially completed in 1995 and will reduce operating costs in 1996.
Revenue in 1995 was $793 million compared with $930 million in 1994 and
$892 million in 1993. The decrease in revenue in 1995 was caused by the
sale of the Frozen Foods business. In 1995 the Company's ongoing
operations increased revenue by $102 million compared with an increase of
$67 million in 1994. Of the 1995 revenue growth from ongoing operations,
60% was generated by the BioProducts Division due to volume gains from
acquisitions and growth from their existing business. The Dehydrated
Products Division contributed 32% of the gains through growth in the onion
and garlic business bolstered by the European acquisitions. The Flavor and
Color Divisions showed modest revenue increases while Red Star Yeast &
Products was down slightly.
In 1994, the Company was able to continue growth in revenue through
acquisitions, volume increases and market share growth, both domestically
and internationally. Of the 1994 sales growth from ongoing operations, 33%
was generated from the Flavor Division by volume gains through
acquisitions, growth in U.S. food and beverage flavors and strong sales in
the Pacific Rim. The Color Division generated 29% of the revenue growth
through volume gains and a concentration of sales in higher dollar-value
products. The BioProducts Division contributed 22% of the gains through
growth in higher-value products and the benefit of two acquisitions in the
fourth quarter. Modest revenue gains were also achieved by the Dehydrated
Products and Red Star Yeast & Products Divisions.
Sales generated outside the United States is a significant portion of the
Company's revenue. In 1995 foreign sales revenue was $313 million, or
approximately 40% of total revenue. This compares with $232 million or 25%
of total revenue in 1994. In 1993 revenue generated outside the United
States was $184 million, or 21% of total Company revenue. Approximately
58% of the 1995 international sales were in Europe. The Company also
generates revenue in Canada, Mexico and the Pacific Rim. Historically,
changes in foreign currency rates have not been material to revenue and
expenses and management currently expects no significant impact from
foreign currency rate changes in 1996.
The cost of products sold represented 65.3% of revenue in 1995, 66.3% in
1994 and 66.1% in 1993. The 1% decrease in 1995 resulted from improved
product mix and operating efficiencies. In 1994, the cost of products sold
as a percentage of revenue did not change significantly from 1993 as
higher raw material costs in the Frozen Foods Division were offset by
volume efficiencies in the Flavor and BioProducts Divisions.
Despite a decrease in 1995 revenue, selling and administrative expenses
decreased to 21.7% of revenue as compared to 22.0% in 1994 and 1993. The
Company's continued focus on cost reduction resulted in a decrease in
total expenses in 1995.
Operating income, excluding unusual items, decreased $6.3 million in 1995
compared with an increase of $3.4 million in 1994. The 1995 decrease is
primarily attributable to the sale of the Frozen Foods business reduced by
increases in operating income for all other divisions.
The 1994 increase in operating income is attributable to increases in the
Flavor, Color and BioProducts Divisions which offset weak operating
earnings in the Frozen Foods Division due to increased selling costs and
production costs associated with raw material quality.
The effective income tax rate was 42.3% in 1995 compared with 37.3% in
1994 and 37.5% in 1993. The effective tax rate in 1995 was increased by a
higher than normal tax rate on the gain on the sale of the Frozen Foods
business offset by increased tax credits.
The Company uses financial instruments in its management of foreign
currency and interest rate exposures. The Company has procedures in place
to monitor and control financial instruments, and they are not held or
issued for trading purposes. The Company's credit risk related to
financial instruments is considered low.
During 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions," SFAS No. 112 "Employer's Accounting for
Postemployment Benefits," and SFAS No. 109 "Accounting for Income Taxes."
Standards 106 and 112 require the accrual of certain benefit costs during
the years an employee provides service rather than when they are paid. The
combined impact of these accounting changes resulted in a cumulative,
non-cash charge to net earnings in 1993 of $23.6 million or $0.90 per
share.
Liquidity and Financial Position
Cash provided by operating activities was $23.1 million in 1995 and $61.6
million in 1994. The decrease in 1995 versus 1994 was primarily the result
of higher taxes paid resulting from the sale of the Frozen Foods business.
The decrease in cash provided by operating activities of $21.1 million in
1994 versus 1993 was the result of higher working capital requirements
principally related to increased international sales levels.
Cash used for investing activities was $16.3 million in 1995 versus $36
million provided by investing activities in 1994. The 1995 and 1994
amounts include $39 million and $163 million, respectively, of cash
received from the sale of the Frozen Foods business.
Acquisitions of $12.4 million in 1995 included two European dehydrated
vegetable businesses. During 1994, the Company used $65.9 of cash to
acquire four businesses. The acquisitions included Destillaciones Garcia
de la Fuente, S.A., a Spanish flavor and fragrance business; Mallow Foods,
a dehydrator of vegetable products based in Ireland; Champlain Industries
Limited, a Canadian producer of flavor enhancers and savory flavorings;
and the Biolux Group, a European producer of ingredients from brewer's
yeast. In 1994, the Company also entered an agreement with Minn-Dak Yeast
Company, Inc. for contract manufacturing under the Red Star label and to
supply molasses, a major raw material in yeast production. In keeping with
the Company's overall business strategy, these acquisitions are expected
to enhance current manufacturing and distribution capabilities, as well as
expand its abilities in new product development.
Capital expenditures totaled $42.6 million in 1995, compared to $55.1
million in 1994. Both years reflect expenditures for productivity
improvements and plant expansions, principally in the Flavor and Color
Divisions. In 1996, capital expenditures are estimated to be between $50
and $60 million; depreciation should approximate $32 million.
Financing activities used $41.6 million in 1995 compared to $65.6 million
in 1994. In 1995 and 1994, the Company used proceeds from the sale of the
Frozen Foods business to pay down debt and fund acquisitions. In 1995, the
Company refinanced its $55 million revolving loan agreement with a $70
million multicurrency revolving loan agreement. The revolving loan
agreement supports the Company's commercial paper program. The Company has
an agreement in place to issue $40 million of 6.99% senior notes on
December 28, 1995. Proceeds will be used to refinance $20 million of
senior notes coming due in December 1995 and for general corporate
purposes.
The Company has paid uninterrupted quarterly dividends since commencing
public trading in its stock over twenty years ago. In 1995, dividends paid
per share were $0.96 up 4% over $.92 in 1994, which was an increase of 5%
over 1993. As evidence of the Company's continued effort to provide
shareholders with immediate and tangible participation in current
earnings, the dividends paid in 1995 represented 44% of net earnings
before unusual items, exceeding the Company's goal of paying annual cash
dividends between 35% and 40% of earnings. Subsequent to year-end, the
dividend on common shares was increased to an annualized rate of $1.00 per
share, a 4% increase.
The impact of inflation on both the Company's financial position and
results of operations has been minimal and is not expected to adversely
affect 1996 results.
The Company's financial position continues to remain strong, enabling it
to meet cash requirements for operations, capital expansion programs and
dividends to shareholders.
Outlook
Universal Foods Corporation's primary market is the food industry. Despite
a slow-growth environment in the industry, the Company expects to increase
revenue and profits by targeting faster growing niches and successful
customers within each of its businesses, leveraging its process and
applications expertise to move into more advanced and sophisticated
product categories, and capitalizing on geographic expansion.
The Company views consolidations within the food industry as an
opportunity to be among the select number of companies participating in
long-term supplier relationships with its customers. The Company also
expects to continue to increase total revenue provided by exports and
manufacturing operations outside the United States to enhance its position
as a supplier to international customers.
Certain of the Company's businesses and products provide slower, stable
growth while others can be expected to achieve higher levels of
performance. As a supplier of value-added ingredients, the Company can
benefit from new trends in the food and beverage industry. It has the
technology and flexibility to meet changing customer needs as well as to
supply both brand name and private label manufacturers.
Additional opportunities exist in leveraging its expertise into non-food
areas. Currently, about 10% of revenue comes from non-food applications.
These include such diverse, but technically related applications as
cosmetics, personal care, pharmaceuticals and specialty chemicals.
Universal Foods expects to achieve further synergies from its recent
acquisitions in the Red Star BioProducts and Dehydrated Products Divisions
as manufacturing operations and sourcing of materials are rationalized and
enhanced. The transfer of U.S. technology to acquired European operations
will provide for improved processing efficiencies and upgraded product
quality, both of which should improve operating margins in those
operations. In addition, the Company expects to continue to benefit from
the integration of acquired Flavor and Color operations which have been
restructured over the past few years.
To further penetrate the growing market for flavors, flavor enhancers and
colors in Asia/Pacific Rim, the Company will strengthen its regional
presence. Resources and personnel will be devoted to building an
infrastructure for expanded technical and marketing support from a central
location. These activities are considered an investment in long-term
growth and should significantly boost the company's share of revenue from
the region, now 4%.
Other Issues
Environmental Issues: Universal Foods has a proactive environmental
program, taking the initiative rather than waiting for legal mandates to
prod action. The Company provides employee training and encourages active
employee involvement with respect to environmental concerns.
The Company has strengthened its environmental policy, placing emphasis on
process changes to reduce or eliminate environmental discharges, rather
than relying on costly emission control investments to treat waste after
it is produced. For example, the Red Star Yeast & Product Division has
re-engineered its manufacturing process to be more efficient and control
emissions through the same state-of-the-art system. The system, installed
in two facilities, is the culmination of six years of cooperative efforts
with federal and state regulatory agencies.
Equal Opportunity Policy: Universal Foods is an Equal Opportunity
Employer. The Company strives to create a working environment free of
discrimination and harassment with respect to race, sex, color, national
origin, religion, age, disability or being a veteran of the Vietnam era,
as well as to make reasonable accommodations in the employment of
qualified individuals with disabilities.
Corporate Governance: Universal Foods believes it is managed in a way that
is fair to all its shareholders and which allows its shareholders to
maximize the value of their investment by participating in the present and
future growth of the Company.
Independent Board of Directors: The Company's Board of Directors is
composed primarily of independent members. Nominees for board members are
selected to provide a diversity of expertise, experience and achievements
in general business and food-related fields which allow the Board to most
effectively represent the interests of all the Company's shareholders.
Independent Committees: The audit, nominating and compensation and
development committees of the Board are composed of directors who are not
employees of the Company. These committees, as well as the entire Board,
consult with and are advised by outside consultants and experts in
connection with their deliberations as needed.
Executive Compensation: A significant portion of executive compensation is
tied to the Company's success in meeting specific performance goals. The
overall objectives of this policy are to attract and retain the best
possible executive talent, to motivate these executives to achieve the
Company's business strategy goals, to link executive and shareholder
interests through equity-based plans and to provide a program that
recognizes individual contributions.
Scientific Advisory Committee: As an advisory committee to the Board, this
group reviews research and development programs with respect to the
quality and scope of work undertaken, advises the Company on maintaining
product leadership through technological innovation, reports on new
technological trends and suggests new emphasis for research.
Confidential Voting: The Company provides for confidential shareholder
voting by employing an independent tabulation service. Proxy cards which
identify the particular vote of a shareholder are not seen by the Company
unless it is necessary to meet legal requirements or in the event a
shareholder has made a written comment on the card.
Corporate Responsibility: The Company is committed to the health and
well-being of the communities in which it does business. Universal Foods
supports an initiative to return 2% of pretax domestic earnings to its
communities through contributions and in-kind donations of products and
services. The Universal Foods Foundation is a not-for-profit organization
formed by the Company to manage its charitable contributions. Areas that
receive support are education, health and human services, culture and the
arts, and civic and community projects.
[End Pages 18-21]
[Start Page 22]
Consolidated Financial Data
(Dollars in thousands
except per share amounts)
Earnings
Revenue Gross Profit Earnings Per Share
1995
First Quarter $187,724 $65,353 $35,582 $1.37
Second Quarter 191,824 67,171 13,648 .52
Third Quarter 207,542 68,546 14,557 .56
Fourth Quarter 205,881 73,707 2,316 .09
1994
First Quarter $220,791 $76,632 $14,460 $ .55
Second Quarter 237,082 79,437 14,574 .56
Third Quarter 249,467 81,199 15,310 .59
Fourth Quarter 222,523 75,843 6,567 .25
Fourth quarter of 1995 includes unusual charges of $22,713,000.
First quarter of 1995 includes a gain on the sale of the Frozen Foods
business of $49,560,000.
Fourth quarter of 1994 includes a restructuring charge of $12,125,000.
Common Stock Prices and Dividends
Market Price Dividends
High Low Per Share
1995
First Quarter $31.13 $26.13 $.24
Second Quarter 34.25 27.25 .24
Third Quarter 34.00 31.38 .24
Fourth Quarter 34.88 31.00 .24
1994
First Quarter $35.00 $30.38 $.23
Second Quarter 34.38 30.00 .23
Third Quarter 34.25 29.50 .23
Fourth Quarter 33.38 28.88 .23
[End Page 22]
[Start Pages 23-33]
Consolidated Earnings
(In thousands except
per share amounts)
Years ended September 30, 1995 1994 1993
Earnings
Revenue $792,971 $929,863 $891,566
Operating costs and expenses:
Cost of products sold 518,194 616,752 589,735
Selling and administrative
expenses 171,914 203,965 196,102
Unusual items (26,847) 12,125 -
------- -------- --------
663,261 832,842 785,837
------- -------- --------
Operating income 129,710 97,021 105,729
Interest expense 15,107 15,888 15,172
------- -------- --------
Earnings before income taxes and
cumulative effect of accounting
changes 114,603 81,133 90,557
Income taxes 48,500 30,222 33,959
------- -------- --------
Earnings before cumulative
effect of accounting changes 66,103 50,911 56,598
Cumulative effect of accounting
changes (net of income taxes
of $14,137) - - 23,563
------- -------- --------
Net earnings $ 66,103 $ 50,911 $ 33,035
------- -------- --------
Earnings per Common Share
Earnings before cumulative effect
of accounting changes $2.54 $1.95 $2.15
Accounting changes - - (.90)
------- -------- --------
Net earnings $2.54 $1.95 $1.25
------- -------- --------
Weighted average shares 26,061 26,131 26,350
------- -------- --------
See notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
(Dollars in thousands)
September 30, 1995 1994
Assets
Current assets:
Cash and cash equivalents $ 8,717 $ 43,430
Trade accounts receivable less
allowance for losses of $3,768
and $3,527 105,847 95,336
Inventories 179,020 156,121
Prepaid expenses and other
current assets 15,230 19,145
Prepaid income taxes 17,550 13,796
-------- --------
Total current assets 326,364 327,828
Investments 18,081 13,944
Other assets 24,083 18,384
Intangibles-at cost, less accumulated
amortization of $27,165 and $26,042 148,654 147,789
Property, Plant and Equipment:
Cost:
Land 15,438 14,396
Buildings 123,739 104,142
Machinery and equipment 308,204 309,847
-------- --------
447,381 428,385
Less accumulated depreciation 187,693 172,666
-------- --------
259,688 255,719
Total assets $776,870 $763,664
-------- --------
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $ 7,108 $ 4,527
Accounts payable and accrued
expenses 121,922 127,823
Salaries, wages and withholdings
from employees 11,715 10,330
Income taxes 20,755 28,697
Current maturities on long-term
debt 21,100 20,775
-------- --------
Total current liabilities 182,600 192,152
Deferred income taxes 14,514 17,300
Other deferred liabilities 19,198 19,414
Accrued employee and retiree
benefits 38,100 35,173
Long-term debt 160,678 172,235
Shareholders' Equity:
Common stock par value $.10 a share
authorized 100,000,000 shares;
issued 26,977,437 shares 2,698 2,698
Additional paid-in capital 78,955 80,066
Earnings reinvested in the business 314,883 273,800
-------- --------
396,536 356,564
Less: Treasury stock, 877,961 and
916,615 shares, respectively, at cost 24,770 25,521
Other 9,986 3,653
-------- --------
361,780 327,390
-------- --------
Total liabilities and
shareholders' equity $776,870 $763,664
-------- --------
See notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Shareholders' Equity
<CAPTION>
Other
--------------------------------------
Earnings Unearned Foreign
Additional reinvested Treasury Stock Unallocated portion of currency
Common paid-in in the ---------------- ESOP restricted translation
(Dollars in thousands) stock capital business Shares Amount stock stock adjustments
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
September 30, 1992 $ 2,698 $ 80,511 $ 237,095 666,035 $ (16,228) $(3,700) $ (1,088) $ 3,886
Net earnings for the
year 33,035
Cash dividends paid-
$.88 a share (23,191)
Stock options exercised,
net of 11,029 shares
exchanged (883) (72,013) 1,761
Other (16) 21,916 (764)
Restricted stock issued 214 (23,200) 569 (783)
Restricted stock
cancelled 1,162 (31) 13
Amortization of
restricted stock 460
Translation adjustment
for year (9,992)
Reduction of ESOP
loan guarantee 1,500
Balances at
September 30, 1993 2,698 79,826 246,939 593,900 (14,693) (2,200) (1,398) (6,106)
Net earnings for
the year 50,911
Cash dividends paid-
$.92 a share (24,050)
Stock options exercised,
net of 8,940 shares
exchanged (524) (40,811) 1,157
ESOP contribution 690 (80,000) 1,980
Other 16 8,226 (263)
Restricted stock issued 58 (19,400) 541 (599)
Restricted stock
cancelled 4,000 (125) 56
Amortization of
restricted stock 452
Translation adjustment
for year 3,942
Purchase of treasury
stock 450,700 (14,118)
Reduction of ESOP
loan guarantee 2,200
Balances at
September 30, 1994 2,698 80,066 273,800 916,615 (25,521) - (1,489) (2,164)
Net earnings for
the year 66,103
Cash dividends paid-
$.96 a share (25,020)
Stock options exercised,
net of 81,593 shares
exchanged (1,180) (107,661) 2,744
Other 3 11,607 (412)
Restricted stock issued 66 (13,400) 376 (442)
Restricted stock
cancelled 5,800 (198) 81
Amortization of
restricted stock 515
Translation adjustment
for year (6,487)
Purchase of treasury
stock 65,000 (1,759)
Balances at
September 30, 1995 $2,698 $78,955 $314,883 877,961 $(24,770) - $(1,335) $(8,651)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Cash Flows
(Dollars in thousands)
Years ended September 30, 1995 1994 1993
Cash Flows from Operating
Activities
Net earnings $66,103 $50,911 $33,035
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Cumulative effect of
accounting changes - - 23,563
Depreciation 28,206 31,012 29,644
Amortization 6,435 5,366 5,409
Provision for losses on
accounts receivable 1,356 971 988
Gain on sale of property,
plant and equipment and
other productive assets (41,423) (185) (167)
Changes in operating assets
and liabilities (net of
effects from acquisition
and disposition of businesses):
Accounts receivable (6,543) (10,588) (4,299)
Inventories (11,109) (5,082) 1,498
Prepaid expenses, income
taxes and other assets (3,935) (3,366) (9,886)
Accounts payable and accrued
expenses (4,719) (3,312) (4,073)
Salaries, wages and
withholdings from employees 828 (3,158) 845
Income taxes (8,194) 16,488 2,285
Deferred income taxes (5,881) (4,889) 2,976
Other liabilities 2,009 (12,526) 933
------- -------- -------
Net cash provided by operating
activities 23,133 61,642 82,751
------- -------- -------
Cash Flows from Investing
Activities
Acquisition of property,
plant and equipment (42,562) (55,071) (36,363)
Acquisition of new businesses-
net of cash acquired (12,431) (65,909) (9,614)
Proceeds from disposition of
business and sale of
property, plant and equipment
and other productive assets 43,317 163,807 589
Increase in investments (4,574) (6,827) (2,225)
------- ------- -------
Net cash (used in) provided
by investing activities (16,250) 36,000 (47,613)
------- ------- -------
Cash Flows from Financing
Activities
Proceeds from additional
borrowings 11,948 42,629 27,521
Reduction in debt (27,920) (70,415) (39,240)
Purchase of treasury stock (1,759) (14,118) -
Dividends (25,020) (24,050) (23,191)
Proceeds from options exercised
and other equity transactions 1,155 386 98
------- ------- -------
Net cash used in financing
activities (41,596) (65,568) (34,812)
------- ------- -------
Net (decrease) increase in cash
and cash equivalents (34,713) 32,074 326
Cash and cash equivalents at
beginning of year 43,430 11,356 11,030
------- ------- -------
Cash and cash equivalents at end
of year $ 8,717 $43,430 $11,356
------- ------- -------
Cash paid during the year for:
Interest $15,352 $14,829 $16,234
Income taxes 53,500 33,500 29,080
See notes to consolidated financial statements.
[Start page 27]
Notes to Consolidated Financial Statements
(tabular dollars in thousands except per share amounts)
note a
Summary of Significant Accounting Policies:
Nature of Business The Company manufactures and distributes flavors,
colors, flavor enhancers and other bioproducts, dehydrated products and
yeast for foods and other applications.
Consolidated Subsidiaries and Investments in Other Companies Substantially
all of the Company's subsidiaries are wholly-owned and their accounts are
consolidated into the Company's financial statements. The Company also has
minority interests in certain foreign companies for which it reports
earnings when cash is received for technical assistance fees and
dividends.
Cash and Cash Equivalents The Company considers all highly liquid
investments with maturities of three months or less when acquired to be
cash equivalents. The effect of the Company's foreign operations on cash
flows is not material.
Inventories Inventories are stated at the lower of cost or market. Cost is
determined using primarily the first-in, first-out (FIFO) method.
Depreciation Depreciation is provided over the estimated useful lives of
plant and equipment using the straight-line method for financial
reporting. Accelerated methods are used for income tax purposes.
Intangibles The excess cost over net assets of businesses acquired and
other intangibles, principally formulae and supply contracts, are being
amortized using the straight-line method over periods ranging up to 40
years. The Company continually evaluates whether events or circumstances
have occurred which would indicate the carrying value may not be
recoverable or the useful life warrants revision. When factors indicate
that goodwill and other intangible assets should be evaluated for possible
impairment, the Company analyzes the future recoverability of the asset
using an estimate of the related undiscounted future cash flows of the
business, and recognizes any adjustment to its carrying value on a current
basis.
Financial Instruments The Company uses financial instruments in its
management of foreign currency and interest rate exposures. Financial
instruments are not held or issued for trading purposes. Non-U.S. dollar
financing transactions may be used as hedges of long-term investments or
intercompany loans in the corresponding currency. Foreign currency gains
and losses on the hedges of long-term investments are recorded as foreign
currency translation adjustments included in stockholders' equity. Gains
and losses related to hedges of intercompany loans offset the gains and
losses on intercompany loans and are recorded in net income. Interest rate
exchange agreements are effective at modifying the Company's interest rate
exposures. Net interest is accrued as either interest receivable or
payable with the offset recorded in interest expense. The Company also
uses short-term forward exchange contracts for hedging purposes. Realized
and unrealized gains and losses on these instruments are deferred and
recorded in the carrying amount of the related hedged asset, liability or
firm commitment.
Translation of Foreign Currencies Assets and liabilities of foreign
operations are translated into United States dollars at current exchange
rates. Income and expense accounts are translated into United States
dollars at average rates of exchange prevailing during the year.
Adjustments resulting from the translation of financial statements of
international units are included as foreign currency translation
adjustments in the equity section of the balance sheets. Net transaction
(gains) losses of $140,000 in 1995, ($697,000) in 1994 and $162,000 in
1993, are included in earnings before income taxes.
note b
Acquisitions, Divestiture and Unusual Items:
In 1995, the Company recorded unusual items resulting in a net pretax gain
of $26,847,000 ($9,247,000 after tax, or $.36 per share). Unusual items
include the gain on the sale of the Frozen Foods business of $49,560,000,
offset by the costs of discontinuing a product line of $14,047,000 and
other items which include the cost of a patent infringement judgment and
the write-down of intangible assets totaling $8,666,000.
In 1995, the Company finalized the sale of its Frozen Foods business and
amended the Stock Purchase Agreement ("Agreement") with ConAgra, Inc. The
business was effectively transferred to ConAgra on August 1, 1994. Under
the amended Agreement, ConAgra agreed to acquire 100% of the stock of
Universal Frozen Foods Company for $202,000,000 cash. The sale of the
Frozen Foods business resulted in a pretax gain of $49,560,000.
In 1995, the Company reviewed its options relating to the BioVentures
product line. Based on the Company's comprehensive review, during the
fourth quarter of 1995, the Company decided to sell or discontinue this
product line. Accordingly, the Company evaluated the ongoing value of the
plant and equipment and other assets associated with this product line.
Based on the evaluation, the Company recorded a charge of $14,047,000 to
adjust the assets to estimated fair value less costs of disposal.
In August 1995, the Court of Appeals for the Federal Circuit Court
affirmed a judgment against the Company for patent infringement. The
Company has accrued $4,500,000 for the judgment. The Company is in the
process of petitioning the Supreme Court to review the finding of the
Court of Appeals for the Federal Circuit Court.
In 1995, the Company acquired the common stock of two foreign dehydrated
vegetable processors for $12,798,000 cash. On an unaudited pro-forma
basis, the effects of the acquisitions were not significant to the
Company's 1995 results of operations.
In July 1994, the Company acquired all of the outstanding stock of
Champlain Industries Limited, a manufacturer of savory flavorings and
flavor enhancers, for $61,744,000 of which $37,258,000 was paid in cash
and the remaining purchase price is payable in equal installments of
$12,243,000 on June 30, 1995 and June 30, 1996. Also during 1994, the
Company purchased several other businesses for an aggregate purchase price
of $33,302,000. The excess of the total aggregate cost of all the 1994
acquisitions over the fair value of net assets acquired of approximately
$61,413,000 is being amortized by the straight-line method over 40 years.
On an unaudited pro forma basis, the effects of the acquisitions were not
significant to the Company's 1994 results of operations.
The above acquisitions have been accounted for as purchases and,
accordingly, their results of operations have been included in the
financial statements since their respective dates of acquisition.
In the fourth quarter of 1994, the Company recorded a pretax restructuring
charge of $12,125,000 ($7,600,000 after tax, or $.29 per share). The
restructuring includes product line consolidation in the Company's Flavor
Division and the reorganization of sales, marketing and distribution
functions in the Red Star Yeast & Products Division.
The charge included $6,000,000 of severance and termination benefits and
$6,125,000 of asset write-offs and other items. Approximately 50% of the
charge was non-cash. Operating cash flows were used to fund severance and
other cash items. The restructuring program was substantially completed in
1995.
note c
Inventories:
Inventories include finished and in-process products totaling $119,885,000
and $101,046,000 at September 30, 1995 and 1994, respectively, and raw
materials and supplies of $59,135,000 and $55,075,000 at September 30,
1995 and 1994, respectively.
note d
Debt:
Long-term debt consists of the following obligations:
1995 1994
Payable in U.S. Dollars:
9.06% senior notes due
through July 2004 $ 46,000 $ 50,000
8.60% senior notes due
through November 2001 12,600 14,800
7.59% senior notes due
through December 2008 30,000 30,000
6.70% senior notes due
through December 2009 20,000 20,000
6.38% senior notes due
through December 2003 20,000 20,000
6.21% senior notes due
December 1995 20,000 20,000
Commercial paper supported by
long-term loan commitments 8,215 1,031
Various mortgage notes, capital
lease obligations and other notes 6,536 2,311
Notes and credit facilities payable in
foreign currencies 18,427 34,868
------- -------
181,778 193,010
Current maturities 21,100 20,775
------- -------
Total long-term debt $160,678 $172,235
======== ========
In June 1995, the Company refinanced the $55,000,000 revolving loan
agreement, replacing the facility with a $70,000,000 multicurrency
revolving loan agreement entered into with a group of five banks. Under
the agreement, the Company has the option to elect to have interest rates
determined based upon the LIBOR rate plus margin or the certificate of
deposit rate plus margin. A commitment fee is payable on the unused amount
of credit. The facility matures in June 2000. Uncommitted lines of credit
totalling $144,000,000 are also available to the Company from several
banks, some of which participate in the revolver.
In June 1995, the Company entered into an agreement to issue on December
28, 1995, 6.99% senior notes totalling $40,000,000. The notes fully mature
in December 2007 with mandatory principal prepayments of $10,000,000 in
December 2005, $10,000,000 in December 2006 and the remaining $20,000,000
due in December 2007. Proceeds will be used for general corporate purposes
and to refinance the $20,000,000 of 6.21% senior notes due in December
1995 which have been reclassified to long-term debt.
The Company issues short-term commercial paper obligations supported by
committed lines of credit included in the Revolving Loan Agreement. The
Company intends to exercise its option to borrow under the commitment
prior to its expiration date. Consequently, at September 30, 1995 and
September 30, 1994, $8,215,000 and $1,031,000 have been reclassified to
long-term debt, respectively.
The aggregate amounts of maturities on long-term debt each year for the
five years subsequent to September 30, 1995 are as follows: 1996,
$21,100,000; 1997, $7,943,000; 1998, $7,521,000; 1999, $9,537,000 and
2000, $18,173,000.
Substantially all of the loan agreements contain restrictions concerning
working capital, borrowings, investments and dividends. Earnings
reinvested of $29,737,000 at September 30, 1995 were unrestricted.
Short-term borrowings consist of loans to foreign subsidiaries denominated
in local currencies which are borrowed under various foreign uncommitted
lines of credit.
note e
Financial Instruments and Risk Management:
Interest Rate Swaps To reduce interest rate risk and lower its cost of
borrowing, the Company has entered into interest rate swaps. As of
September 30, 1995 and 1994 the notional amount of interest rate swaps
outstanding was $20,000,000 and $40,000,000, respectively. The interest
rate swaps require the Company to pay variable and receive fixed interest
rates and the swaps outstanding at September 30, 1995 mature in 1996.
Currency Swaps To manage foreign exchange risk, the Company has entered
into currency swaps. The currency swaps of $22,358,000 and $17,055,000 at
September 30, 1995 and 1994, respectively, effectively hedge long-term
Canadian dollar-denominated investments and mature in 1997 and 1998.
Forward Exchange Contracts The Company uses forward exchange contracts to
reduce the effect of fluctuating foreign currencies on short-term foreign
currency-denominated intercompany transactions and other known foreign
currency exposures. At September 30, 1995 and 1994, the Company had
foreign exchange contracts, generally with maturities of one year or less,
of $43,175,000 and $11,607,000, respectively.
Concentrations of Credit Risk Counterparties to currency exchange and
interest rate swaps consist of large major international financial
institutions. The Company continually monitors its positions and the
credit ratings of the counterparties involved and limits the amount of
credit exposure to any one party. While the Company may be exposed to
potential losses due to the credit risk of non-performance by these
counterparties, losses are not anticipated. Concentrations of credit risk
with respect to accounts receivable are limited due to the large number of
customers, generally short payment terms, and their dispersion across
geographic areas.
Fair Values The carrying amounts of cash and equivalents, trade
receivables, investments, accounts payable, and short-term borrowings
approximated fair value as of September 30, 1995 and 1994.
The fair value of the Company's long-term debt, including
current maturities, is estimated using discounted cash flows based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements. The fair value at September 30, 1995 and 1994 was
approximately $190,000,000.
note f
Shareholders' Equity:
In 1988, the Board of Directors adopted a common stock shareholder rights
plan ("Right") which entitles each shareholder of record to receive a
dividend distribution of common stock upon the occurrence of certain
events. The Right becomes exercisable and tradeable ten days after a
person or group acquires 20% or more, or makes an offer to acquire 20% or
more, of the Company's outstanding common stock. When exercisable, each
Right entitles the holder to purchase $100 worth of Company common stock
for $50. Further, upon the occurrence of a merger or transfer of more than
50% of the Company's assets, the Right entitles the holder to purchase
common stock of the Company or common stock of an "acquiring company"
having a market value equivalent to two times the exercise price of the
Right. At no time does the Right have any voting power. The Right is
subject to redemption by the Company's Board of Directors for $.01 per
Right at any time prior to the date which a person or group acquires
beneficial ownership of 20% or more of the Company's common stock or
subsequent thereto at the option of the Board of Directors. The Rights
expire on September 8, 1998.
In January 1994, the shareholders approved the 1994 Employee Stock Plan
(the "1994 Plan") under which the Company may issue up to 1,200,000 shares
of common stock pursuant to the exercise of stock options or the grant of
restricted stock. Of the total number, up to 250,000 shares may be awarded
as restricted stock. The 1994 Plan also authorizes the grant of up to
400,000 stock appreciation rights (SARs) in connection with stock options.
The Company also has shares available under the previously approved 1991
Stock Plan for Executive employees (the "1990 Plan").
The Plans have awarded shares of restricted stock which become freely
transferable at the end of the period of restriction-five years. During
the period of restriction, the employee has voting rights and is entitled
to receive all dividends and other distributions paid with respect to the
stock.
Shares
-------------------------------------
Outstanding
Reserved Options Available
Balances at September 30, 1992
($10.591 to $36.125) 1,765,553 1,202,803 562,750
Granted ($33.75 to $34.75) - 311,600 (311,600)
Restricted stock awarded (23,200) - (23,200)
Exercised ($10.591 to $34.125) (83,042) (83,042) -
Cancelled - (16,950) 16,950
Balances at September 30, 1993
($11.833 to $36.125) 1,659,311 1,414,411 244,900
Authorized under the 1994 Plan 1,200,000 - 1,200,000
Granted ($30.875 to $32.25) - 339,900 (339,900)
Restricted stock awarded (19,400) - (19,400)
Exercised ($11.833 to $29.625) (49,751) (49,751) -
Cancelled - (104,250) 104,250
Balances at September 30, 1994
($11.833 to $36.125) 2,790,160 1,600,310 1,189,850
Granted ($28.25 to $33.00) - 372,350 (372,350)
Restricted stock awarded (13,400) - (13,400)
Exercised ($11.833 to $33.75) (189,254) (189,254) -
Cancelled - (167,516) 167,516
Balances at September 30, 1995
($11.833 to $36.125) 2,587,506 1,615,890 971,616
At September 30, 1995, 964,865 shares were exercisable at prices ranging
from $11.833 to $36.125.
The Company is authorized to issue 250,000 shares of cumulative preferred
stock.
note g
Retirement Plans:
The Company primarily provides benefits under defined contribution plans
including a savings plan and ESOP. The savings plan covers substantially
all domestic salaried and certain non-union hourly employees and provides
for matching contributions up to 4% of each employee's salary. The ESOP
covers substantially all domestic employees not covered by a defined
benefit plan and provides for contributions of 6% to 10% of each
employees' salary. Total expense for the Company's defined contribution
plans was $5,205,000, $8,112,000 and $7,364,000 in 1995, 1994 and 1993,
respectively.
note h
Postretirement and Postemployment Benefits:
The Company provides certain health insurance benefits to eligible
domestic retirees and their dependents. Effective October 1, 1992, the
Company adopted the provisions of Statement of Financial Accounting
Standards No. 106 (SFAS No. 106) "Employers' Accounting for Postretirement
Benefits Other Than Pensions," whereby the cost of postretirement benefits
is accrued during an employee's active service period. Prior to October 1,
1992, benefits were charged to operations in the period the claims were
paid. The Company elected to immediately recognize the transition
obligation for future benefits to be paid relating to past employee
services in fiscal 1993.
The postretirement benefit expense includes the following components:
1995 1994 1993
Service cost $1,139 $1,586 $1,784
Interest cost on accumulated
benefit obligation 1,733 1,977 2,118
Amortization of prior
service cost (278) (352) -
Other (15) - 160
------ ------ ------
Postretirement benefit expense $2,579 $3,211 $4,062
The Company continues to fund benefit costs on a pay-as-you-go basis, with
retirees paying a portion of the costs.
The status of the Company's postretirement benefit obligation at September
30, 1995 and 1994 was:
1995 1994
Actuarial present value of accumulated
benefit obligation:
Retirees $ 7,935 $ 8,287
Fully eligible active plan
participants 2,343 2,253
Other active plan participants 12,702 11,506
------- -------
Accumulated benefit obligation 22,980 22,046
Unrecognized prior service cost 4,999 5,277
Unrecognized gain 3,949 2,662
------- -------
Postretirement benefits accrued $31,928 $29,985
The weighted average discount rates used in determining the accumulated
postretirement benefit obligation at September 30, 1995 and 1994 were 7.0%
and 8.0%, respectively. The assumed health care cost trend rate used in
measuring the accumulated postretirement benefit obligation was 13% in
1995, 14% in 1994, gradually declining to 7% by the year 2001 and
remaining at that level thereafter. A one percentage point increase in the
assumed cost trend rate would increase the accumulated postretirement
benefit obligation as of September 30, 1995 by approximately $4,697,000
and the aggregate of the service and interest cost components of the 1995
postretirement benefit expense by $591,000.
During 1994, the Company had a curtailment of accumulated postretirement
benefits relating to employees of the Frozen Foods business which was sold
effective July 31, 1994. The gain resulting from the curtailment has been
included with the gain on the sale of Frozen Foods (see Note b).
In addition, effective October 1, 1992, the Company adopted Financial
Accounting Standards No. 112 (SFAS No. 112), "Employers' Accounting For
Postemployment Benefits." This standard requires employers to accrue the
cost of benefits to former or inactive employees after employment but
before retirement. The adoption of SFAS Nos. 106 and 112, resulted in a
non-cash pretax charge of $37,700,000 as of October 1, 1992 and has been
reflected as a cumulative effect of accounting changes.
note i
Income Taxes:
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS No. 109).
The cumulative and fiscal 1993 effect of the accounting change was not
material. SFAS No. 109 requires the Company to compute deferred income
taxes based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amount expected to be realized.
The provision for income taxes, including the income tax effect of
accounting changes, is as follows:
1995 1994 1993
Currently payable:
Federal $33,181 $36,759 $23,394
State 5,636 6,684 4,082
Foreign 8,305 5,754 3,954
Deferred (benefit):
Federal 1,021 (16,592) (10,057)
State 210 (2,862) (1,521)
Foreign 147 479 (30)
------- ------- -------
$48,500 $30,222 $19,822
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities consist of the following:
1995 1994
Deferred tax assets:
Inventory valuation $ (5,728) $ (5,690)
Employee and retiree benefits (18,345) (16,432)
Sale of assets, plant closings
and asset write-downs (3,985) (6,874)
Other (18,862) (13,910)
-------- --------
Gross deferred tax assets (46,920) (42,906)
Valuation allowance 5,587 6,112
-------- --------
Total deferred tax assets $(41,333) $(36,794)
======== ========
Deferred tax liabilities:
Property, plant and equipment $ 24,772 $ 21,234
Other 13,525 19,064
-------- --------
Total deferred tax liabilities $ 38,297 $ 40,298
-------- --------
Net deferred tax (assets) liabilities $ (3,036) $ 3,504
======== ========
The effective tax rate differs from the statutory Federal income tax rate
of 35% as described below:
1995 1994 1993
Taxes at statutory rate $40,114 $28,397 $18,500
State income taxes, net of
Federal income tax benefit 3,800 2,484 1,665
Tax credits (3,100) (1,980) (531)
Sale of business 5,900 - -
Other, net 1,786 1,321 188
------- ------- -------
Provision for income taxes $48,500 $30,222 $19,822
------- ------- -------
Effective tax rate 42.3% 37.3% 37.5%
Earnings before income taxes and cumulative effect of accounting changes
are summarized as follows:
1995 1994 1993
United States $ 92,043 $63,079 $80,483
Foreign 22,560 18,054 10,074
-------- ------- -------
$114,603 $81,133 $90,557
Domestic income taxes have not been provided on undistributed earnings of
foreign subsidiaries which are considered to be permanently invested. If
undistributed foreign earnings were to be remitted, foreign tax credits
would substantially offset any resulting domestic tax liability.
note j
Contingencies:
The Company is involved in various claims and litigation arising in the
normal course of business. In the opinion of management and Company
counsel, the ultimate resolution of these actions will not materially
affect the consolidated financial position, results of operations, or cash
flows of the Company.
note k
Foreign Operations:
Summarized information relating to the Company's domestic and foreign
operations are as follows:
1995 1994 1993
Revenue:
United States $516,683 $745,487 $752,335
Europe 174,931 104,375 74,646
Other foreign 101,357 80,001 64,585
-------- -------- --------
$792,971 $929,863 $891,566
======== ======== ========
Operating Income:
United States $ 98,816 $ 76,315 $ 91,477
Europe 14,912 8,060 4,315
Other foreign 15,982 12,646 9,937
-------- -------- --------
$129,710 $ 97,021 $105,729
======== ======== ========
Identifiable Assets:
United States $439,634 $482,934 $569,840
Europe 238,497 175,539 102,603
Other foreign 98,739 105,191 57,550
-------- -------- --------
$776,870 $763,664 $729,993
======== ======== ========
Transfers of product between geographic areas are not significant.
Operating income is total revenue less operating expenses. Identifiable
assets include all assets identified with the operations in each
geographic area, and an allocable portion of intangible assets recorded by
the parent.
Management's Responsibility for Financial Statements
The management of Universal Foods Corporation is responsible for
preparation of the financial statements and other financial information
included in this annual report. The financial statements have been
prepared in accordance with generally accepted accounting principles.
It is management's policy to maintain a control-conscious environment
through an effective system of internal accounting controls. These
controls are supported by the careful selection of competent and
knowledgeable personnel and by the communication of standard accounting
and reporting policies and procedures throughout the Company. These
controls are adequate to provide reasonable assurance that assets are
safeguarded against material loss or unauthorized use and to produce the
records necessary for the preparation of reliable financial information.
There are limits inherent in all systems of internal control based on the
recognition that the costs of such systems should be related to the
benefits to be derived. Management believes that its systems provide this
appropriate balance.
The control environment is complemented by the Company's internal audit
function, which evaluates the adequacy of the controls, policies and
procedures in place, as well as adherence to them, and recommends
improvements for implementation when applicable. In addition, the
Company's independent auditors, Deloitte & Touche LLP, have developed an
understanding of the Company's accounting and financial controls and have
conducted such tests as they considered necessary to render an opinion on
the Company's financial statements.
The Board of Directors pursues its oversight role with respect to the
Company's financial statements through the Audit Committee, which is
composed solely of outside directors. The Audit Committee recommends
selection of the Company's auditors and meets with them and the internal
auditors to review the overall scope and specific plans for their
respective audits and results from those audits. The Committee also meets
with management to review overall accounting policies relating to the
reporting of financial results. Both the independent auditors and internal
auditors have unrestricted access to the Audit Committee.
Guy A. Osborn
Chairman and
Chief Executive Officer
Michael Fung
Vice President and
Chief Financial Officer
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Directors of Universal Foods Corporation:
We have audited the accompanying consolidated balance sheets of Universal
Foods Corporation and subsidiaries as of September 30, 1995 and 1994, and
the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the three years in the period ended September 30,
1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies as of
September 30, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended September 30,
1995, in conformity with generally accepted accounting principles.
As discussed in Note h to the consolidated financial statements, effective
October 1, 1992, the companies changed their methods of accounting for
postretirement benefits other than pensions and postemployment benefits to
conform with Statements of Financial Accounting Standards No. 106 and
No. 112, respectively.
Deloitte & Touche LLP
Milwaukee, Wisconsin
November 9, 1995
[End Pages 23-33]
<PAGE>
[Start Page 34]
<TABLE>
Five Year Review
<CAPTION>
(Dollars in thousands
except per share data) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Revenue $792,971 100.0% $929,863 100.0% $891,566 100.0% $883,438 100.0% $834,329 100.0%
Operating costs and
expenses:
Cost of products sold 518,194 65.3 616,752 66.3 589,735 66.1 593,006 67.1 557,917 66.9
Selling and administra-
tive expenses 171,914 21.7 203,965 22.0 196,102 22.0 187,727 21.3 170,137 20.4
Unusual items (26,847) (3.4) 12,125 1.3 - - 19,300 2.2 - -
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
663,261 83.6 832,842 89.6 785,837 88.1 800,033 90.6 728,054 87.3
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Operating income 129,710 16.4 97,021 10.4 105,729 11.9 83,405 9.4 106,275 12.7
Interest expense 15,107 1.9 15,888 1.7 15,172 1.7 16,423 1.9 13,975 1.7
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Earnings before income taxes
and cumulative effect of
accounting changes 114,603 14.5 81,133 8.7 90,557 10.2 66,982 7.5 92,300 11.0
Income taxes 48,500 6.2 30,222 3.2 33,959 3.9 25,286 2.8 34,520 4.1
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Earnings before cumulative
effect of accounting
changes 66,103 8.3 50,911 5.5 56,598 6.3 41,696 4.7 57,780 6.9
Cumulative effect of
accounting changes net
of tax - - - - 23,563 2.6 - - - -
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Net earnings $ 66,103 8.3% $ 50,911 5.5% $ 33,035 3.7% $ 41,696 4.7% $ 57,780 6.9%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
Earnings per common share
before cumulative effect
of accounting changes 2.54 1.95 2.15 1.57 2.18
Net earnings per common
share 2.54 1.95 1.25 1.57 2.18
---- ----- ---- ---- ----
Other Related Data
Earnings per common share
excluding unusual items
and cumulative effect of
accounting changes 2.18 2.24 2.15 2.02 2.18
Dividend per common
share 0.96 0.92 0.88 0.84 0.76
Average shares
outstanding 26,061,269 26,130,783 26,350,346 26,608,350 26,537,996
Book value per common
share 13.89 12.60 11.60 11.57 10.99
Price range per common
share 26.13-34.88 28.88-35 30.25-37.25 26.75-39.88 28.63-40.38
Share price at
September 30 34.88 29.63 33.88 31.38 38.25
Research and development
expenditures 28,558 32,217 28,460 26,597 25,211
Capital expenditures 42,562 55,071 36,363 44,982 54,750
Depreciation 28,206 31,012 29,644 28,144 24,153
Amortization 6,435 5,366 5,409 4,894 5,252
Total assets 776,870 763,664 729,993 702,130 653,176
Long-term debt 160,678 172,235 171,907 167,746 152,213
Shareholders' equity 361,780 327,390 305,066 303,174 292,002
Return on average
shareholders' equity
before cumulative
effect of accounting
change 18.5% 16.1% 18.7% 13.8% 21.2%
Total debt to total capital 34.3% 37.6% 38.7% 40.4% 36.9%
Employees 4,104 4,063 5,450 5,400 5,924
</TABLE>
The 1995 results include a pretax gain of $49.6 million relating to the
sale of the Frozen Foods business and the cost of discontinuing a product
line and other unusual items totaling $22.8 million. The 1994 results
include a pretax restructuring charge of $12.1 million. The 1992 results
include a pretax restructuring charge of $19.3 million relating to the
Frozen Foods business.
[End Page 34]
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF
UNIVERSAL FOODS CORPORATION
Warner-Jenkinson Company, a New York corporation formerly known
as H. Kohnstamm & Co., Inc. through which the Company conducts its food
color business, has 5 foreign subsidiaries.
Rogers Foods Inc., a California corporation formerly the
Company's Dehydrated Division.
Universal Holdings Inc., a Nevada investment subsidiary which is
the parent company of Rogers Foods Inc. and the Warner-Jenkinson Company.
Universal Flavor Corporation, an Indiana corporation through
which the Company conducts its food flavor business, has 6 domestic and 15
foreign subsidiaries.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to
Registration Statement No.'s 33-7235, 33-34555 and 33-55437, and
Registration Statement No.'s 33-27356 and 33-35704 of Universal Foods
Corporation on Form S-8 of our reports dated November 9, 1995, which
reports express unqualified opinions and include an explanatory paragraph
relating to the change in methods of accounting for postretirement
benefits other than pensions and postemployment benefits to conform with
Statements of Financial Accounting Standards No. 106 and No. 112,
respectively, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Universal Foods Corporation for the year ended
September 30, 1995.
December 22, 1995
Milwaukee, Wisconsin
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNIVERSAL FOODS CORPORATION AS OF AND FOR
THE YEAR ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,717
<SECURITIES> 0
<RECEIVABLES> 109,615
<ALLOWANCES> 3,768
<INVENTORY> 179,020
<CURRENT-ASSETS> 326,364
<PP&E> 447,381
<DEPRECIATION> 187,693
<TOTAL-ASSETS> 776,870
<CURRENT-LIABILITIES> 182,600
<BONDS> 160,678
0
0
<COMMON> 2,698
<OTHER-SE> 359,082
<TOTAL-LIABILITY-AND-EQUITY> 776,870
<SALES> 792,971
<TOTAL-REVENUES> 792,971
<CGS> 518,194
<TOTAL-COSTS> 518,194
<OTHER-EXPENSES> (26,847)<F1>
<LOSS-PROVISION> 1,356
<INTEREST-EXPENSE> 15,107
<INCOME-PRETAX> 114,603
<INCOME-TAX> 48,500
<INCOME-CONTINUING> 66,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,103
<EPS-PRIMARY> 2.54
<EPS-DILUTED> 2.54
<FN>
<F1>Unusual Item: Includes the gain on the sale of the Frozen Foods busines offset
by the costs of discontinuing a product line and other items which include the
cost of a patent infringement judgment and the write-down of intangible assets.
</FN>
</TABLE>
