<PAGE> 1
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, 1999
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
433 EAST MICHIGAN STREET
MILWAUKEE, WISCONSIN 53202
---------------------------------------- -----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 271-6755
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ----------------------------------------- ------------------------------
Common Stock, $.10 par value New York Stock Exchange, Inc.
Associated Preferred Share Purchase Rights
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
None
<PAGE> 2
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 3, 1999: 53,954,874 shares of Common Stock, $.10
par value, including 3,720,851 treasury shares.
Aggregate market value of Universal Foods Corporation Common Stock,
excluding treasury shares, held by non-affiliates as of December 3, 1999 was
$1,052,579,853. In determining who are affiliates of the Company for purposes of
this computation, it is assumed that directors, officers, and any persons filing
a Schedule 13D or Schedule 13G are "affiliates" of the Company. The
characterization of such directors, officers, and other persons as affiliates is
for purposes of this computation only and should not be construed as a
determination or admission for any other purpose that any of such persons are,
in fact, affiliates of the Company.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Universal Foods Corporation Annual Report to Shareholders
for the fiscal year ended September 30, 1999 (Parts I, II and IV of Form 10-K)
2. Portions of Universal Foods Corporation Notice of Annual Meeting and
Proxy Statement of the Company dated December 17, 1999 (Parts II and III of Form
10-K)
2
<PAGE> 3
PART I
ITEM 1. BUSINESS--FOOD AND OTHER INDUSTRIES
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.
DESCRIPTION OF BUSINESS
Universal Foods Corporation is an industrial marketer of high-performance
components that add functionality to foods, cosmetics, pharmaceuticals and other
products. The Company's principal products include:
- - flavors, flavor enhancers, and aroma chemicals for foods, beverages,
dairy/ice cream products, animal feed, personal care and household items;
- - certified synthetic and natural colors for foods, cosmetics, specialty inks
and pharmaceuticals;
- - dehydrated vegetable products sold primarily to food processors; and
- - a broad line of yeast products for commercial baking and other uses.
The Company's operations, except for the Asia Pacific Division, are managed
on a products and services basis. The Company's two reportable segments are the
Performance Products Group and the Natural Products Group.
PERFORMANCE PRODUCTS
The Company's Performance Products Group produces flavor and color products
that impart a desired taste, smell or color to a broad range of consumer
products.
FLAVOR DIVISION
The Company is a leading manufacturer and supplier of flavors, ingredient
systems and aroma chemicals to the dairy, food processing, beverage, personal
care and household products industries worldwide. The Company has a broad,
distinctive and fully integrated product offering, ranging from savory flavor
components to fully formulated flavor systems for dairy, beverage, and processed
food applications.
During 1998 the Company combined its bioproducts business (which was
formerly operated as a separate division known as Red Star BioProducts) with its
Flavor Division. The bioproducts business served the food and animal feed
processing, as well as the bionutrient industries with a broad line of natural
extracts and specialty flavors. The Company produces various specialty extracts
from yeast, vegetable proteins, meat, milk protein and other natural products
which are used primarily as savory flavor, texture modifiers and enhancers in
processed foods. The nutritional and functional properties of these extracts
also make them useful in enzyme and pharmaceutical production. The Company
believes it is the leading supplier of yeast extracts and the second leading
supplier of hydrolized vegetable proteins in the U.S. market.
Strategic acquisitions have expanded Universal Flavors' product lines and
processing 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 Flavors, through its international
subsidiary, purchased its
3
<PAGE> 4
partner's 51% interest in Azteca en Ambesco de Mexico S.A. de C.V. This purchase
brought beverages and dairy flavor product lines to the Company's existing
Mexican flavor business. In January 1998, the Company acquired Arancia
Ingredients Especiales, S.A. de C.V., a manufacturer of savory flavors and other
food ingredients, improving access to the rapidly growing Latin American savory
flavor market. In April 1998, the Company acquired an English savory and
seasonings flavor manufacturer, DC Flavours Ltd., which further expanded the
Company's technology and worldwide market presence and also gives the Company
access to the snack food market, the fastest growing segment in Europe's food
market. In May 1998, the acquisition of substantially all of the assets and
business of the beverage business of German flavor manufacturer Sundi GmbH, with
its emphasis on all-natural flavor ingredients, provided the Company with a
point of entry into Germany, Europe's largest flavor market.
The Flavor Division operates through the Company's subsidiary, Universal
Flavor Corporation and its subsidiaries, with plants in Illinois, Indiana,
Michigan, Missouri, Wisconsin, Belgium, Canada, France, Germany, Italy, Mexico,
Spain, and the United Kingdom.
COLOR DIVISION
The Company believes it is the world's leading manufacturer of certified
food colors. It makes certified synthetic and natural colors for domestic and
international producers of beverages, bakery products, processed foods,
confections, pet foods, cosmetics and pharmaceuticals. It also makes ink-jet
inks and other high-purity organic dyes. The Color Division operates through the
Company's subsidiary, Warner-Jenkinson Company Inc., which has its principal
manufacturing facility in Missouri and other subsidiaries with plants in New
Jersey, Canada, Mexico, France, Italy, the United Kingdom, and the Netherlands.
The Company became a supplier of ink-jet inks for the ink-jet printer
market with the acquisition of Tricon Colors, Inc. in 1997. It produces
pharmaceutical colors, ink-jet inks and other high-purity organic dyes in the
Tricon plant, which is located in New Jersey. In September 1997, the Company
strengthened its presence in Latin America by acquiring certain assets of the
food color business of Pyosa, S.A. de C.V., which is located in Monterrey,
Mexico. In September 1998, the Company acquired Italian natural color producer
Reggiana Antociani S.R.L., a company which specializes in the production of
anthocyanin, which is extracted from grape skins for use in fruit juices,
flavored teas, wine coolers and fruit fillings, strengthening the Company's
offerings in natural colors, the fastest growing segment of the worldwide food
colors market. In February 1999, the Company expanded its cosmetics business
through the purchase of Les Colorants Wackherr, a Paris-based producer of colors
for major cosmetics houses throughout Europe, Asia and North America. Also in
February 1999, the Company further developed its natural colors offerings by
acquiring certain assets of Quimica Universal, a Peruvian producer of carminic
acid and annatto, natural colors used in food and other applications. The
Company acquired Pointing Holdings Limited, a manufacturer of food colors,
flavors and specialty chemicals located in the United Kingdom in April 1999. The
Pointing international color business significantly strengthened the Company's
worldwide color capabilities. In August 1999, the Company acquired certain
assets of Nino Fornaciari fu Riccardo SNC, an Italian producer of natural colors
for the food and beverage industries.
NATURAL PRODUCTS GROUP
The Natural Products Group produces dehydrated vegetable and yeast products
which are used as ingredients in the manufacture of various food products.
DEHYDRATED PRODUCTS DIVISION
The Company believes it is the third largest producer of dehydrated onion
and garlic products in the United States. The Company is also one of the largest
producers and distributors of chili powder, paprika, chili pepper and dehydrated
vegetables such as parsley, celery and spinach. Domestically, the Company sells
dehydrated products 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. The Dehydrated Products Division operates in the United States
through the Company's subsidiary, Rogers Foods Inc., which has its processing
facilities in California.
4
<PAGE> 5
The Company believes it is one of the leading dehydrators of specialty
vegetables in Europe. During 1994 and 1995, the Company acquired three European
dehydrated vegetable processors. The acquisitions gave the Company a base from
which to expand its dehydrated products business internationally, as the
acquisitions included processing facilities in the Netherlands, France and
Ireland. These acquisitions also expanded the Company's dehydrated technology
base to include puffed drying, freeze drying and vacuum drying. Vegetables
processed using these technologies rehydrate faster and absorb water more
effectively than vegetables processed using straight heat drying methods. This
is a benefit with today's convenience foods such as soups, snacks and other dry
foods.
RED STAR YEAST & PRODUCTS DIVISION
The Company believes it is the largest North American supplier of yeast to
the commercial bakery market. It also exports yeast and related products
throughout the world. The Company specializes in the production of baker's yeast
in cream (liquid), compressed (semi-solid), and active dry form, as well as
nutritional yeast and yeast used in the wine-making process, which are all sold
under the RED STAR trademark. The Company sells active dry yeast to food
processors for inclusion in bread, pizza and similar mixes.
The Company also manufactures compressed, active dry and fast-acting dry
yeast products in ready-to-use packages which are sold on grocery store shelves
and in convenient packages for food service use. The Company believes it is the
second largest supplier of yeast to the domestic retail market. In 1994, the
Company purchased a 20% interest in and entered into an agreement with Minn-Dak
Yeast Company, located in North Dakota, for contract manufacturing under the Red
Star label and to supply molasses, a major raw material in yeast production.
Red Star Yeast & Product's yeast plants are located in Wisconsin, Maryland
and California.
-----------------------------------------
ASIA PACIFIC DIVISION
In 1997, the Company established the Asia Pacific Division as a separate
operating Division to focus on marketing its diverse product line in the Pacific
Rim under one unified name. Through the Asia Pacific Division, the Company
offers a full range of products from its other four divisions as well as
products developed by regional technical teams to appeal to local preferences.
Sales, marketing and technical functions previously directed by U.S. based
divisions are managed through the Asia Pacific Division's headquarters in
Singapore. Manufacturing operations are located in Australia, Hong Kong, New
Zealand, and the Philippines.
RESEARCH AND DEVELOPMENT/QUALITY ASSURANCE
The development of specialized products and services is a complex,
technical process calling upon the combined knowledge and talents of the
Company's research, development and quality assurance personnel. The Company
believes that its competitive advantage lies in its ability to work with its
customers to develop and deliver high-performance products which address the
broad, but unique and distinct, needs of those customers.
The Company's research, development and quality assurance personnel make
significant contributions toward improving existing products and developing new
products tailored to its customer's needs, while providing on-going technical
support and know-how to the Company's manufacturing activities. The Company
employs approximately 220 people in research, development and quality assurance.
Expenditures for research, development and quality assurance in 1999 were $29.5
million compared with $29.4 million in 1998 and $31.5 million in 1997. Of the
foregoing amounts, approximately $20.5 million in 1999, $18.7 million in 1998
and $19.7 million in 1997 were research and development expenses.
5
<PAGE> 6
As part of its commitment to quality as a competitive advantage, the
Company has undertaken efforts to achieve certification to the requirements
established by the International Organization for Standardization in Geneva,
Switzerland, through its ISO 9000 series of quality standards. Facilities
currently certified include Universal Flavors facilities in the United States,
Spain, Italy, Mexico, Belgium, Germany, the United Kingdom and Canada;
Warner-Jenkinson facilities in the United States, the Netherlands and United
Kingdom; Dehydrated Products facilities in the United States, France and the
Netherlands; and Asia Pacific facilities in the Philippines.
COMPETITION
All Company products are sold in highly competitive markets. While no
single factor is determinative, the Company's competitive position is based
principally on process and applications expertise, quality, technological
advances resulting from its research and development, and customer service and
support. Because of its highly differentiated products, the Company competes
with only a few companies across multiple ingredient lines, and is more likely
to encounter competition specific to an individual product.
- Flavor. Competition to supply the flavor industry has taken on an
increasingly global nature. Most of the Company's customers do not buy
all their flavor products from a single supplier. As a result, the
Company does not compete with a single company in all product
categories. Competition for the supply of flavors is based on the
development of customized ingredients for new and reformulated
customer products, as well as on quality, customer service and price.
- Color. Although statistics are not available, the Company believes
that it is one of the world's largest producers of synthetic and
natural colors. 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. Strategic acquisitions
continue to enhance product and process technology synergies, as well
as a growing international presence.
- Dehydrated. Competition for dehydrated onion, garlic, capsicums,
carrots and parsley products, the main products of the Dehydrated
Products Division, is limited to three main competitors. Competition
for other dehydrated business is limited to single, as opposed to
multiple, product lines. State-of-the-art dehydration technology,
extensive plant breeding and seed development programs, and
comprehensive crop management techniques produce consistent,
top-quality dehydrated products which helps the Company maintain its
competitive position. Competition for dehydrated business is on the
basis of quality, customer service and price.
- Yeast. The Company believes that it is the largest supplier of
commercial baker's yeast and the second largest supplier of retail
yeast in North America. In both the commercial and retail yeast areas,
the Company competes with several yeast producers. Competition for the
supply of yeast is on the basis of quality, customer service and
price.
- Asia Pacific. Because of the broad array of products available to
customers of the Asia Pacific Division, the Company is able to offer a
wider product base than many of its competitors. Competition is based
upon reliability in product quality, service and price as well as
technical support available to customers.
PRODUCTS AND APPLICATION ACTIVITIES
With the Company's strategic focus on high-performance ingredients and
ingredient systems, the Company's emphasis is in application activities and
processing improvements in the support of its
6
<PAGE> 7
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.
Lower calorie ingredients and non-nutritive sweeteners for dairy, food and
beverage applications are a focus of development activity for Universal Flavors.
Formulations for functional and textured beverages and flavors for snack and
main meal items offer opportunities as well. Development of savory flavors has
accelerated with the integration of the Company's BioProducts Division in 1998.
The development of natural food colors remains a growth opportunity for the
Color Division. With the 1997 acquisition of Tricon Colors, Inc., the Color
Division expanded its purification technology, with the primary opportunity in
colors for ink-jet printers.
European acquisitions in 1994 and 1995 expanded the Dehydrated Products
product line to include peas, carrots, beans, potatoes and other specialty
vegetables.
The Red Star Yeast & Products Division has been producing baker's yeast for
over 115 years, serving the commercial and consumer markets. The move to cream
yeast and the development of cream yeast delivery systems has revolutionized the
commercial baking industry, improving efficiencies and increasing productivity.
The development of yeast derivatives and other specialty ingredients provide
growth opportunities in bionutrients and biotechnology markets such as
pharmaceuticals, vitamins, vaccines and bioremediation.
In addition, the discussion of operational activities in the "Business
Profile" on Pages 4 and 5 of the 1999 Annual Report to Shareholders is
incorporated by reference.
RAW MATERIALS
In producing its products, the Company uses a wide range of raw materials.
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 turmeric, 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 soybean. The acquisition of the Biolux Group in 1994
provides long-term supply arrangements for brewer's yeast to be used for
European production needs. Chili peppers, onion, garlic and other vegetables are
acquired under annual contracts with numerous growers in the western United
States and Europe.
The principal raw material used in the production of yeast products is
molasses, which is purchased through brokers and producers, usually 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 into a
supply agreement with Minn-Dak Yeast Company, a major North American molasses
supplier, to provide additional assurances of adequate supplies of molasses.
The Company believes that alternate sources of materials are available to
enable it to maintain its competitive position in the event of an interruption
in the supply of raw materials from a single supplier.
FOREIGN OPERATIONS
Note 12 of the Consolidated Financial Statements of the Company contained
in the Universal Foods Corporation 1999 Annual Report is incorporated herein by
reference.
7
<PAGE> 8
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, 1999, the Company employed 4,252 persons in the U.S.
and worldwide. A total of 652 U.S. employees are represented by one of the three
unions with which the Company has collective bargaining relationships pursuant
to eleven collective bargaining agreements.
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. Compliance is not expected to have a
material adverse effect in the succeeding two years as well. As is true with the
food industry in general, the production, packaging, labeling and distribution
of the products of the Company are subject to the regulations of various
federal, state and local governmental agencies, in particular the U.S. Food &
Drug Administration.
ITEM 2. PROPERTIES
Domestically, the Company operated 16 manufacturing and processing plants
in eight states as of September 30, 1999. Three plants produced yeast, two
facilities produced flavor enhancers and other bioproducts, three produced
dehydrated products, five plants produced colors and related products, and three
plants produced flavors. None of these properties are held subject to any
material encumbrances. At September 30, 1999, the Company operated 32 foreign
manufacturing facilities located in 14 foreign countries. Of these facilities,
five produced flavor enhancers and other bioproducts, three manufactured
dehydrated and frozen vegetables, eight produced colors, 15 produced or
distributed flavors and aroma chemicals, and one produced both flavors and
colors. In addition, the Company has minority interests in seven companies
located in the U.S. and five foreign countries.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings related to its
business. The Company believes that adverse decisions in these proceedings would
not, in the aggregate, 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 1999.
8
<PAGE> 9
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the registrant and their ages as of December 1,
1999 are as follows:
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Name Age Position
- ----------------------- --- --------------------------------
<S> <C> <C>
Kenneth P. Manning 57 Chairman, President and Chief Executive Officer
Patrick R. Bartling 43 Vice President and Group Executive - Natural Products
Richard Carney 49 Vice President - Human Resources
Steven O. Cordier 43 Vice President and Treasurer
Michael DuBois 53 President - Flavor
Michael Fung 49 Vice President and Chief Financial Officer
John L. Hammond 53 Vice President, Secretary and General Counsel
Michael L. Hennen 46 Vice President and Controller
Richard F. Hobbs 52 Vice President - Administration
R. Steven Martin 43 Vice President and Group Executive -
Performance Products
James F. Palo 59 President - Dehydrated Products
Jorge Slater 52 President - Asia Pacific
K.T. Thomas Tchang 48 President - Red Star Yeast & Products
William Tesch 49 Vice President; Vice President - Operations, Red Star
Yeast & Products
Michael A. Wick 56 President - Color
Dr. Ho-Seung Yang 51 Vice President - Technologies
</TABLE>
Messrs. Bartling, Cordier, DuBois, Fung, Hammond, Hennen, Martin, Slater,
Tchang, Tesch and Yang have been employed by the Company in an executive
capacity for less than five years. All of the other individuals named above have
been employed by the Company for at least five years.
Mr. Bartling joined the Company in January 1999 as Vice President and Group
Executive. From 1995 to 1999, he served as General Manager of the Automotive
Division of Modine Manufacturing Company, a leading manufacturer of automotive
parts. Prior to that Mr. Bartling served as Vice President - Operations of
MagneTek, a manufacturer of drive systems.
Mr. Cordier joined the Company in October 1995 as Treasurer. In September
1999, Mr. Cordier was elected a Vice President of the Company. From 1990 until
joining the Company he was Director of Financial Planning at International
Flavors and Fragrances, Inc.
Mr. DuBois joined the Company in May 1998 as President of the Flavor
Division. From 1994 until joining Universal Foods, Mr. DuBois was employed by
Bush Boake Allen, Inc., a food technology company, first as Vice President Sales
and Marketing, Flavors North America, and, beginning in 1996 as Vice President
and General Manager, Seasonings Division. From 1992 to 1994 he served as Vice
President - Sales and Marketing, Flavor and Fruit Division for Sanofi
Bio-Industries, a flavor company. Prior to joining Sanofi Bio-Industries, Mr.
DuBois held several positions with Firmenich, Incorporated, a fragrance and
flavor company.
Mr. Fung joined the Company in June 1995 as Vice President and Chief
Financial Officer. From 1992 to 1995 he served as Senior Vice President and
Chief Financial Officer for Vanstar Corporation, a leading provider of products
and services to design, build and manage computer network infrastructures for
large enterprises. From 1988 to 1992, Mr. Fung was Vice President and Chief
Financial Officer of
9
<PAGE> 10
Bass Pro Shops and Tracker Marine Corporation, privately held companies operated
under common ownership involved in the manufacture and marketing of outdoor
sporting goods. From 1977 to 1988, Mr. Fung was employed by the Beatrice Company
in various positions, ultimately as Vice President and Controller.
Mr. Hammond joined the Company in January 1998, as Vice President,
Secretary and General Counsel. From 1992 to 1997, Mr. Hammond was employed by
The Providence Journal Company, a newspaper, cable and broadcast television
company, initially as Vice President - Legal, and subsequently as Vice
President, General Counsel and Chief Administrative Officer. From 1989 to 1992,
Mr. Hammond was Vice President, General Counsel and Secretary of Landstar
System, Inc., a trucking company. Prior to that, Mr. Hammond was employed by The
Singer Company for ten years and was Deputy General Counsel at the time of his
departure.
Mr. Hennen joined the Company in January 1995 as Controller. In September
1999, Mr. Hennen was elected a Vice President of the Company. 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. Martin was elected Vice President and Group Executive in June 1997. He
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, now operating as Solutia, a chemical company, since
1978 in various management positions.
Mr. Slater was elected President - Asia Pacific Division in April 1998. Mr.
Slater was hired by the Company in August of 1996 and served as Vice President
and Managing Director of the Asia Pacific Division prior to being elected its
President. From 1994 to 1996, Mr. Slater worked at McCormick & Company, Inc., a
spice and seasonings company, as Vice President and Managing Director Asia
Pacific. Prior to joining McCormick & Company, Inc., Mr. Slater worked for Dole
Packaged Foods Company and, prior to that, for International Flavors and
Fragrances, Inc.
Mr. Tchang was elected President - Red Star Yeast & Products Division in
September 1997. He joined the Company in 1995 as Vice President, Sales and
Marketing for the Company's BioProducts Division. Prior to joining the Company,
he was Marketing Director of Huntsman Specialty Chemicals Corp., a chemical
company, which purchased the Maleic Anhydride business of the specialty
chemicals division of the Monsanto Company. Prior to such purchase, Mr. Tchang
was employed by the Monsanto Company for 20 years in various manufacturing, and
later sales and marketing positions.
Mr. Tesch joined the Company in 1971, becoming Plant Manager of the Red
Star BioProducts Division in 1989. From 1993 to 1994, he was Director, Training
and Development of The Universal Way. From 1994 to 1996, he served as Vice
President, Manufacturing Operations of the Red Star BioProducts Division, and in
April 1996, Mr. Tesch was elected President of the Red Star BioProducts
Division, a position he held until the completion of the consolidation of the
Flavor and BioProducts Divisions in January 1998. From January 1998 until July
1998, Mr. Tesch was the Vice President of Corporate Engineering. Mr. Tesch is
currently a corporate Vice President, and the Vice President of Operations for
Red Star Yeast & Products.
Dr. Yang was elected Vice President - Technologies in January 1998. From
1990 to 1998, Dr. Yang was employed by Sunkyong Industries in Seoul, Korea,
where he held the positions of managing director of corporate planning and
development, managing director, group chairman's office and director, life
science and development.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The only 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 1999 appearing under
"Common Stock prices and dividends" on Page 34 of the 1999 Annual Report to
Shareholders are incorporated by reference. In fiscal 1999, 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 Amended and 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, 1999, $18,740,000 is available for the payment of dividends on the
common stock of the Company under the most restrictive loan covenants.
On January 27, 1994 the Board of Directors established a share repurchase
program which authorizes the Company to repurchase up to 5 million shares. As of
September 30, 1999, 4,145,096 shares had been repurchased under that program.
On June 25, 1998, the Board of Directors of the Company adopted a preferred
stock shareholder rights plan which is described at Note 7 of Notes to
Consolidated Financial Statements - "Shareholders' Equity" on Pages 25 and 26 of
the 1999 Annual Report to Shareholders and which is incorporated by reference.
The number of shareholders of record on December 3, 1999 was 5,121.
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 on Page 33 of the
1999 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information required by this item is set forth under "Management's
Analysis of Operations and Financial Condition" on Pages 13 through 17 of the
1999 Annual Report to Shareholders and is incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is set forth under "Market Risk
Factors" on Page 15 of the 1999 Annual Report to Shareholders and is
incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are
set forth on Pages 18 through 32 and Page 34 of the 1999 Annual Report to
Shareholders and are incorporated by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
11
<PAGE> 12
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 6 and Page 28, respectively, of the Notice of Annual
Meeting and Proxy Statement of the Company dated December 17, 1999, 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,"
"Compensation and Development Committee Report" and "Executive Compensation" on
Pages 7 and 8 and Pages 9 through 16 of the Notice of Annual Meeting and Proxy
Statement of the Company dated December 17, 1999.
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 and 9 of the
Notice of Annual Meeting and Proxy Statement of the Company dated December 17,
1999, 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, 1998 through September
30, 1999, 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.
12
<PAGE> 13
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 following this report.)
(Other than Exhibit 10.1(a), 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:
No reports on Form 8-K were required to be filed during the quarter ended
September 30, 1999.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE REFERENCE IN
1999 ANNUAL REPORT
1. FINANCIAL STATEMENTS TO SHAREHOLDERS
----------------------------
<S> <C>
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, 1999.
Independent Auditors' Report 32
Consolidated Balance Sheets - September 30, 1999 and 1998 19
Consolidated Statements of Earnings - Years ended September 30, 1999, 18
1998 and 1997
Consolidated Statements of Shareholders' Equity - Years ended September
30, 1999, 1998 and 1997 20
Consolidated Statements of Cash Flows - Years ended September 30, 1999, 1998
and 1997 21
Notes to Consolidated Financial Statements 22 - 31
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
PAGE REFERENCE IN
2. FINANCIAL STATEMENT SCHEDULES FORM 10-K
---------------------
<S> <C>
Independent Auditors' Report 14
Schedule II - Valuation and Qualifying Accounts and Reserves 15
</TABLE>
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.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Universal Foods Corporation:
We have audited the consolidated financial statements of Universal Foods
Corporation and subsidiaries as of September 30, 1999 and 1998, and for each of
the three years in the period ended September 30, 1999, and have issued our
report thereon dated November 11, 1999. Such consolidated financial statements
and report are included in your 1999 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.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 11, 1999
14
<PAGE> 15
SCHEDULE II
UNIVERSAL FOODS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(IN THOUSANDS)
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
VALUATION ACCOUNTS DEDUCTED IN THE BALANCE AT ADDITIONS CHARGED BALANCE
BALANCE SHEET FROM THE ASSETS TO BEGINNING OF TO COSTS AND AT END OF
WHICH THEY APPLY PERIOD EXPENSES DEDUCTIONS(A) PERIOD
- ---------------------------------- ------------ ----------------- ------------- ----------
<S> <C> <C> <C> <C>
1997
Allowance for losses: $ 3,509 $ 572 $ 47 $ 4,034
Trade accounts receivable ======= ======= ====== =======
1998
Allowance for losses: $ 4,034 $ 1,245 $ 731 $ 4,548
Trade accounts receivable ======= ======= ====== =======
1999
Allowance for losses: $ 4,548 $ 431 $ 900 $ 4,079
Trade accounts receivable ======= ====== ====== =======
</TABLE>
(A) Accounts written off, less recoveries.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIVERSAL FOODS CORPORATION
By: /s/ John L. Hammond
---------------------------
John L. Hammond, Vice President
Secretary & General Counsel
Dated: December 28, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of December 28, 1999, by the following persons
on behalf of the Registrant and in the capacities indicated.
/s/ Kenneth P. Manning Chairman of the Board, President and
- --------------------------- Chief Executive Officer
Kenneth P. Manning
/s/ Michael Fung Vice President and Chief Financial
- --------------------------- Officer
Michael Fung
/s/ Michael L. Hennen Vice President and Controller
- ------------------------------
Michael L. Hennen
/s/ Richard A. Abdoo Director
- ------------------------------
Richard A. Abdoo
/s/ Michael E. Batten Director
- ------------------------------
Michael E. Batten
/s/ John F. Bergstrom Director
- ------------------------------
John F. Bergstrom
/s/ Dr. Fergus M. Clydesdale Director
- ------------------------------
Dr. Fergus M. Clydesdale
/s/ James A.D. Croft Director
- ------------------------------
James A.D. Croft
/s/ Alberto Fernandez Director
- ------------------------------
Alberto Fernandez
/s/ James L. Forbes Director
- ------------------------------
James L. Forbes
/s/ Dr. Carol I. Waslien Ghazaii Director
- --------------------------------
Dr. Carol I. Waslien Ghazaii
/s/ William V. Hickey Director
- ------------------------------
William V. Hickey
/s/ Essie Whitelaw Director
- ------------------------------
Essie Whitelaw
S-1
<PAGE> 17
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
The Company will furnish a copy of any exhibit described below upon request
and upon reimbursement to the Company of its reasonable expenses of furnishing
such exhibit, which shall be limited to a photocopying charge of $0.25 per page
and, if mailed to the requesting party, the cost of first-class postage.
<TABLE>
<CAPTION>
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- --------------------------------------- ------------------------------------ ---------
<S> <C> <C> <C>
3.1 Universal Foods Corporation Amended Exhibit 3.1 to Annual Report on
and Restated Articles of Incorporation, Form 10-K for the fiscal year ended
adopted November 12, 1998 September 30, 1998 (Commission
File No. 1-7626)
3.2 Universal Foods Corporation Amended X
and Restated Bylaws, adopted
November 11, 1999
4.1 Rights Agreement, dated as of August Exhibit 1.1 to Registration
6, 1998, between Registrant and Statement on Form 8-A dated
Firstar Trust Company July 20, 1998 (Commission File
No. 1-7626)
10.1 Material Contracts
10.1(a) Indenture between Registrant and The Exhibit 4.1 to Registration
First National Bank of Chicago, as Statement on Form S-3 dated
Trustee November 9, 1998 (Commission
File 333-67015)
10.2 Management Contracts or
Compensatory Plans
10.2(a) Executive Employment Contract X
between Registrant and
Kenneth P. Manning dated
November 11, 1999
10.2(b) Amended and Restated Change of X
Control Employment and Severance
Agreement between Registrant and
Kenneth P. Manning dated
November 11, 1999
10.2(c) 1985 Stock Plan for Executive Exhibit 10.2(c) to Annual Report on
Employees Form 10-K for the fiscal year ended
September 30, 1998 (Commission
File No. 1-7626)
</TABLE>
Exhibit Index -- 1
<PAGE> 18
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- --------------------------------------- ------------------------------------ ---------
<S> <C> <C> <C>
10.2(d) Universal Foods Corporation 1990 Exhibit 10.2(d) to Annual Report on
Employee Stock Plan, as amended Form 10-K for the fiscal year ended
September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(e) Universal Foods Corporation 1994 Exhibit 10.2(f) Annual Report on
Employee Stock Plan, as amended Form 10-K for the fiscal year ended
September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(f) Universal Foods Corporation 1998 Exhibit 10.2(h) to Annual Report on
Stock Option Plan, as amended Form 10-K for the fiscal year ended
September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(g) 1999 Non-Employee Director Stock Appendix A to Registrant's
Option Plan definitive Proxy Statement for its
Annual Meeting of Shareholders to
be held on January 27, 2000 filed
with the Commission on Schedule 14A
on December 17, 1999.
10.2(h) Amended and Restated Directors Appendix B to Registrant's
Deferred Compensation Plan definitive Proxy Statement for its
Annual Meeting of Shareholders to
be held on January 27, 2000 filed
with the Commission on Schedule 14A
on December 17, 1999.
10.2(i) Director Stock Grant Plan, as Exhibit 10.2(j) to Annual Report on
amended November 14, 1991 Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(j) Management Income Deferral Plan, Exhibit 10.2(k) to Annual Report on
including Amendment No. 1 thereto Form 10-K for the fiscal year ended
dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(k) Executive Income Deferral Plan, Exhibit 10.2(l) to Annual Report on
including Amendment No. 1 thereto Form 10-K for the fiscal year ended
dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(l) Form of Amended and Restated Exhibit 10.2(n) to Annual Report on
Change of Control Employment and Form 10-K for the fiscal year ended
Severance Agreement for Executive September 30, 1998 (Commission File
Officers. No. 1-7626)
10.2(m) Amended and Restated Trust Exhibit 10.2(o) to Annual Report on
Agreement dated September 10, 1998 Form 10-K for the fiscal year ended
between the Registrant and Firstar September 30, 1998 (Commission
Bank, Milwaukee, N.A. File No. 1-7626)
("Rabbi Trust A")
</TABLE>
Exhibit Index -- 2
<PAGE> 19
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- ------------------------------------------- ------------------------------------ ---------
<S> <C> <C> <C>
10.2(n) Trust Agreement, including Changes Exhibit 10.2(p) to Annual Report on
upon Appointment of Successor Form 10-K for the fiscal year ended
Trustee dated as of February 1, 1998 September 30, 1998 (Commission
between the Registrant and Firstar File No. 1-7626)
Bank, Milwaukee, N.A.
("Rabbi Trust B")
10.2(o) Trust Agreement, including Changes Exhibit 10.2(q) to Annual Report on
upon Appointment of Successor Form 10-K for the fiscal year ended
Trustee dated as of February 1, 1998 September 30, 1998 (Commission
between the Registrant and Firstar File No. 1-7626)
Bank, Milwaukee, N.A.
("Rabbi Trust C")
10.2(p) Incentive Compensation Plan for Elected Appendix C to Registrant's
Corporate Officers definitive Proxy Statement for its
Annual Meeting of Shareholders to
be held on January 27, 2000 filed
with the Commission on Schedule 14A
on December 17, 1999.
10.2(q) Form of Management Incentive Plan for Division Exhibit 10.2(s) to Annual Report on
Presidents Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(r) Form of Management Incentive Plan for Corporate Exhibit 10.2(t) to Annual Report on
Management Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(s) Form of Management Incentive Plan for Division Exhibit 10.2(u) to Annual Report on
Management Form 10-K for the fiscal year ended
September 30, 1998 (Commission File
No. 1-7626)
10.2(t) Form of Agreement for Executive Exhibit 10.2(v) to Annual Report on
Officers (Supplemental Executive Form 10-K for the fiscal year ended
Retirement Plan A), including September 30, 1998 (Commission File
Amendment No.1 thereto dated No. 1-7626)
September 10, 1998
10.2(u) Universal Foods Corporation Supplemental Exhibit 10.2(w) to Annual Report on
Benefit Plan, including Amendment No. 1 Form 10-K for the fiscal year ended
thereto dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
10.2(v) Universal Foods Corporation Transition Exhibit 10.2(x) to Annual Report on
Retirement Plan, including Amendment No. 1 Form 10-K for the fiscal year ended
thereto dated September 10, 1998 September 30, 1998 (Commission File
No. 1-7626)
</TABLE>
Exhibit index -- 3
<PAGE> 20
UNIVERSAL FOODS CORPORATION
EXHIBIT INDEX
1999 ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Exhibit Incorporated by Filed
Number Description Reference From Herewith
--------- --------------------------------------- ------------------------------------ ---------
<S> <C> <C> <C>
13.1 Portions of Annual Report to Shareholders X
for the year ending September 30, 1999
that are incorporated by reference
21 Subsidiaries of the Registrant X
23 Consent of Deloitte & Touche LLP X
27 Financial Data Schedule X
99 Notice of Annual Meeting and Proxy Previously filed on Schedule 14A
Statement dated December 17, 1999 dated December 17, 1999
(Commission File No. 1-7626)
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
</TABLE>
Exhibit Index -- 4
<PAGE> 1
EXHIBIT 3.2
UNIVERSAL FOODS CORPORATION
AMENDED AND RESTATED BY-LAWS
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, upon the recommendation of the Nominating Committee, 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.
2.2 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) brought before the meeting by or at the
direction of the Board of Directors, or (ii) 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 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
<PAGE> 2
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 Amended and Restated Articles of Incorporation
or 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.
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 or she 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.
2.3 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 written
demand, in accordance with this Section 2.3, 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 2.5 of these By-laws.
(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 ten (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
2
<PAGE> 3
Meeting shall, by written notice to the Secretary of the corporation, request
the Board of Directors to fix a Demand Record Date. The Board of Directors shall
promptly, but in all events within ten (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
ten (10) days after the date on which such request is received by the Secretary,
the Demand Record Date shall be the tenth (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 2.2 and 3.9 of these By-laws.
(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 ten percent (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 2.3), 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), shall set forth the
name and address, as they appear in the corporation's books, of each shareholder
signing such demand and the class or series 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 seventy
(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 2.3, the Secretary receives a written agreement
signed by each Soliciting Shareholder (as defined herein), 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
3
<PAGE> 4
required to pay such costs. For purposes of this paragraph (d) the following
terms shall have the meanings set forth below:
(i) "Affiliate" shall have the meaning assigned
to such term in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(ii) "Participant" shall have the meaning
assigned to such term in Rule 14a-11
promulgated under 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 2.3 is ten (10) 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 2.3 is more than ten (10),
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 2.3, 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,
4
<PAGE> 5
reasonably and in good faith, that
such Affiliate should be required to
sign the written notice described in
paragraph (c) of this Section 2.3
and/or the written agreement
described in this paragraph (d) in
order to prevent the purposes of
this Section 2.3 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 seventy (70)
days after the Meeting Record Date (as defined in Section 2.6); 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 ten (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 ten percent (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 one hundredth (100th) day
after the Delivery Date, or if such one hundredth (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 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 (5)
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 ten percent (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 (5) Business Day period, or to take any other action
5
<PAGE> 6
(including, without limitation, the commencement, prosecution or defense of any
litigation with respect thereto).
(g) For purposes of these By-laws, "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.
2.4 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.
2.5 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 ten (10) days nor more than sixty (60) 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 Amended and Restated Articles of Incorporation. In the event of any
Demand Special Meeting, such notice of meeting shall be sent not more than
thirty (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 Amended and 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 2.3 of these By-laws and (ii) shall contain all of the information
required in the notice received by the corporation in accordance with Section
2.3(b) of these By-laws. 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.
6
<PAGE> 7
2.6 Fixing of Certain Record Dates.
(a) The Board of Directors may fix a future date not less than
ten (10) days and not more than sixty (60) 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 thirtieth (30th) day after the Delivery Date
and (ii) if the Board of Directors fails to fix the Meeting Record Date within
thirty (30) days after the Delivery Date, then the close of business on such
thirtieth (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 one hundred twenty (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 of
Directors, 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.
2.7 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.
2.8 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 2.8. Except as otherwise provided in the
7
<PAGE> 8
Amended and 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 Amended and Restated Articles of
Incorporation or the Wisconsin Business Corporation Law requires a greater
number of affirmative votes. Unless otherwise provided in the Amended and
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.
2.9 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.
2.10 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 Amended and
Restated Articles of Incorporation of the corporation or by the Wisconsin
Business Corporation Law.
2.11 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.
2.12 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:
8
<PAGE> 9
(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.
2.13 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 Vice President in the order provided
under Section 4.7 of these By-laws, 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 any meeting of the shareholders, but in
the absence of the Secretary, the Chairman of the Meeting may appoint any other
person to act as secretary of the meeting.
2.14 Postponement; Adjournment.
(a) Any Annual Meeting or any Special Meeting called by the
Chairman of the Board, the Chief Executive Officer (other than a Demand Special
Meeting) or the Board of Directors may be postponed at any time or from time to
time after written notice of the meeting
9
<PAGE> 10
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 are 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 corporation. 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
10
<PAGE> 11
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 By-laws of the corporation,
each director shall hold office for the term for which he or she is elected and
until his or 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 or 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 or
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 or her successor shall have been duly elected or until his or 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,
meeting attendance fees and reasonable expenses incurred as a director as
established and approved annually by the Board of Directors upon the
recommendation of the Nominating Committee. 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 or
her services as a director of the corporation. A Chief Executive Officer, who
retires from the corporation prior to attaining age seventy (70) while serving
as a director, immediately becomes eligible
11
<PAGE> 12
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 By-law immediately after, and at the same
place as, the Annual Meeting of shareholders, and each adjourned session
thereof. The Board of Directors may, by resolution, provide 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 of Meetings. Except as otherwise provided in the Amended and
Restated Articles of Incorporation or the Wisconsin Business Corporation Law,
notice of the date, time and place of any special meeting of the Board of
Directors and of any special meeting of a committee of the Board of Directors
shall be given orally or in writing to each director or committee member at
least forty-eight (48) hours prior to the meeting, except that notice by mail
shall be given at least seventy-two (72) hours prior to the meeting. The notice
need not describe the purpose of the meeting.
3.6 Quorum; Votes. One-third (1/3) 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 Amended and Restated Articles of Incorporation or by these By-laws.
3.7 Removal and Resignation. A director may be removed from office by
the affirmative vote of the holders of two-thirds (2/3) 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 or her 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
12
<PAGE> 13
office constitute fewer than a quorum of the Board of Directors, 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.
3.9 Nominations. Nominations for the election of directors may be made
only 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 to the Secretary of the corporation and 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 fiftieth (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
13
<PAGE> 14
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 or she shall so
declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 3.9, 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.
3.10 Compensation. The Board of Directors, irrespective of any personal
interest of any of its members, upon the recommendation of the Nominating
Committee, may establish compensation of all directors for services to the
corporation as directors, or may delegate such authority to an appropriate
committee.
3.11 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 or 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; (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; or (iv) the director dissents or abstains from
action taken, minutes of the meeting are prepared that fail to show the
director's dissent or abstention from the action taken and the director delivers
to the corporation a written notice of that failure that complies with Section
180.0141 of the Wisconsin Business Corporation Law promptly after receiving the
minutes. Such right to dissent or abstain shall not apply to a director who
voted in favor of such action.
3.12 Committees of the Board of Directors.
(a) Subject to the provisions of the Wisconsin Business
Corporation Law, there shall be those committees of the Board of Directors set
forth in Sections 3.13-3.18 of these By-laws, and the Board of Directors may
from time to time establish other committees including standing or special
committees, which shall have such duties and powers as are authorized by these
By-laws or by the Board of Directors; provided, however, that no
14
<PAGE> 15
committee shall do any of the following: (i) authorize distributions; (ii)
approve or propose to shareholders action that the Wisconsin Business
Corporation Law requires be approved by shareholders; (iii) 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; (iv)
amend the corporation's Amended and Restated Articles of Incorporation; (v)
adopt, amend or repeal the corporation's By-laws; (vi) approve a plan of merger
not requiring shareholder approval; (vii) authorize or approve reacquisition of
shares, except according to a formula or method prescribed by the Board of
Directors; and (viii) 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 or the Chief Executive Officer of the
corporation to do so within limits prescribed by the Board of Directors. In
addition to the powers expressly enumerated in these By-laws, the Board of
Directors may, by resolution, at any time desirable, adopt new powers and
authority of any committee.
(b) Committee members and the chairman of each committee,
including any alternates, shall be appointed by the Board of Directors as
provided in the Wisconsin Business Corporation Law. The Chief Executive Officer
of the corporation shall make recommendations to the Board of Directors for its
action concerning members to be appointed to the several committees of the Board
of Directors. Any member of any committee may be removed at any time with or
without cause by the Board of Directors. Vacancies which occur in any committee
may be filled by a resolution of the Board of Directors. If any vacancy shall
occur in any committee by reason of death, resignation, disqualification,
removal or otherwise, the remaining members of such committee, so long as the
committee has at least two (2) members and a quorum is present, may continue to
act until such vacancy is filled. The Board of Directors may, by resolution, at
any time deemed desirable, discontinue any standing or special committee,
subject to the requirements of the By-laws of the corporation. Members of
standing committees, and their chairmen, shall be appointed yearly at the
organizational meeting of the Board of Directors which is held immediately
following the Annual Meeting of shareholders. Members of committees may receive
such compensation for their services as the Board of Directors, upon the
recommendation of the Nominating Committee, may determine.
3.13 Executive Committee. There shall be an Executive Committee of the
Board of Directors. The Executive Committee shall consist of the Chief Executive
Officer of the corporation and not less than three (3) other directors. Subject
to the Wisconsin Business Corporation Law and Section 3.12 of these By-laws, the
Executive Committee shall have all of the powers of the Board of Directors in
the management and conduct of the business and affairs of the corporation in the
intervals between meetings of the Board of Directors, and shall report its
actions to the Board of Directors at its regular meetings.
15
<PAGE> 16
3.14 Audit Committee. There shall be an Audit Committee of the Board of
Directors. The Committee shall have the following membership and powers:
(a) The Committee shall have at least three (3) members. All
members of the Committee shall be non employee directors.
(b) The Committee shall recommend to the Board of Directors for
its action the appointment or discharge of the corporation's independent
auditors, based upon the Committee's evaluation of the quality of their audit
work and the appropriateness of the fees charged both for audit and non-audit
services.
(c) The Committee shall review and approve the fees of the
corporation's independent auditors and the scope and plan of the audit and shall
meet with the independent auditors at appropriate times to review, among other
things, the results of the audit, any certification, report or opinion which the
auditors propose to render in connection with the corporation's financial
statements, and the corporation's internal control structure.
(d) The Committee shall review the adequacy and appropriateness of
internal controls governing performance of the corporation's activities, as well
as recommendations for improvements in such internal controls, including: (a)
the corporation's Code of Conduct and other policies, and procedures to monitor
compliance therewith; (b) management's assessment of internal controls; and (c)
the internal audit function.
(e) The Committee shall review with the independent auditors the
adequacy of the financial reporting process, including the selection of
accounting policies.
(f) The Committee shall have such other duties as may be lawfully
delegated to it from time to time by the Board of Directors.
(g) Notwithstanding the foregoing, the composition of the Audit
Committee, the qualification of its members, and its functions and
responsibilities, shall at all times comply with the listing requirements of the
New York Stock Exchange or other exchange on which the corporation's stock is
listed as such listing requirements may be amended from time to time.
3.15 Compensation and Development Committee. There shall be a
Compensation and Development Committee of the Board of Directors. The Committee
shall have the following membership and powers:
(a) The Committee shall be composed of at least three (3) members.
Each member of the Committee shall be both a "nonemployee director" (within the
meaning of
16
<PAGE> 17
Rule 16b-3 of the Securities and Exchange Act) and an "outside director" (within
the meaning of Section 162(m)(4)(C) of the Internal Revenue Code).
(b) The Committee shall review and approve all compensation plans
and programs (philosophy and guidelines) for the senior management of the
corporation including salary structure, base salary, short and long-term
incentive compensation plans, including stock options and nonqualified benefit
plans and programs, including fringe benefit plans and programs.
(c) The Committee shall prepare such reports as are required to be
included in the corporation's proxy statement.
(d) The Committee shall review and approve annual changes in the
compensation of each officer appointed by the Board of Directors including base
salary and short- and long-term incentive awards.
(e) The Committee shall review and approve all awards under the
corporation's Stock Option Plans.
(f) The Committee shall consider and make recommendations to the
Board of Directors regarding the selection and retention of all elected officers
of the corporation (as defined in Section 4.1) and shall annually recommend to
the Board of Directors the appointment of such officers of the corporation at
the time of the Annual Meeting of shareholders.
(g) The Committee shall approve all executive employment
contracts.
(h) The Committee shall oversee the selection of outside
consultants to review the compensation programs of the corporation and shall
meet with such consultants with or without management as appropriate.
(i) The Committee shall annually review the performance of the
Chief Executive Officer.
(j) The Committee shall annually review and approve the Chief
Executive Officer's management development and succession plans for the
corporation.
(k) The Committee shall have such other duties as may be lawfully
delegated to it from time to time by the Board of Directors.
3.16 Finance Committee. There shall be a Finance Committee of the Board
of Directors. The Committee shall have the following membership and powers:
17
<PAGE> 18
(a) The Committee shall have at least three (3) members. At least
fifty percent (50%) of the members of the Committee shall be non employee
directors.
(b) The Committee shall review and approve the corporation's
annual capital budget, long-term financing plans, existing credit facilities,
investments and commercial and investment banking relationships.
(c) The Committee shall review and approve the corporation's
existing insurance coverages, foreign currency management and Stock Repurchase
Program.
(d) The Committee shall review and approve the financial
management and administrative operation of the corporation's qualified and
non qualified employee benefit plans.
(e) The Committee shall have such other duties as lawfully may be
delegated to it from time to time by the Board of Directors.
3.17 Nominating Committee. There shall be a Nominating Committee of the
Board of Directors. The Committee shall have the following membership and
powers:
(a) The Committee shall have at least three (3) members. All
members of the Committee shall be non employee directors.
(b) The Committee shall review candidates to serve as director and
shall recommend candidates to the Board of Directors for nomination to stand for
election at each Annual Meeting of shareholders or other meetings where
directors are to be elected and shall recommend persons to serve as proxies to
vote proxies solicited by the Board of Directors in connection with such
meetings.
(c) The Committee shall cause the names of all director candidates
that are approved by the Board of Directors to be listed in the corporation's
proxy materials and shall support the election of all candidates so nominated by
the Board of Directors to the extent permitted by law.
(d) The Committee shall review and make recommendations to the
Board of Directors concerning the composition and size of the Board of Directors
and potential candidates to serve in the future on the Board of Directors.
(e) The Committee shall review candidates for election as
directors submitted by shareholders for compliance with these By-laws.
18
<PAGE> 19
(f) The Committee shall review and recommend to the Board of
Directors the overall compensation programs for directors, including annual
retainer, meeting fees, deferred compensation, stock or option plans or other
incentive plans, and retirement plans.
(g) The Committee shall recommend to the Board of Directors the
date, time and place of the Annual Meeting of the shareholders.
(h) The Committee shall have such other duties as lawfully may be
delegated to it from time to time by the Board of Directors.
3.18 Scientific Advisory Committee. There shall be a Scientific
Advisory Committee of the Board of Directors. The Committee shall have the
following membership and powers:
(a) The Committee shall have at least three (3) members. At least
fifty percent (50%) of the members of the Committee shall be non employee
directors.
(b) The Committee shall review and evaluate the research and
development programs of the corporation with respect to quality and scope.
(c) The Committee shall advise the Board of Directors on
maintaining product leadership through technological innovation.
(d) The Committee shall review and make recommendations to the
Board of Directors regarding the technological aspects of the corporation's
business, including new business opportunities.
(e) The Committee shall report to the Board of Directors on new
technological and regulatory trends that will have a significant impact on the
business of the corporation.
(f) The Committee shall have such other duties as lawfully may be
delegated to it from time to time by the Board of Directors.
3.19 Meetings of Committees. Each committee of the Board of Directors
shall fix its own rules of procedure which shall include and be consistent with
the provisions of the Wisconsin Business Corporation Law, these By-laws and any
resolutions of the Board of Directors governing such committee, and shall make
such reports to the Board of Directors of its activities as the Board of
Directors may request. Each committee shall meet as provided by such rules and
shall also meet at the call of its chairman or any two (2) members of such
committee. Unless otherwise provided by such rules, the provisions of these
By-laws under Section 3. entitled "Board of Directors" relating to the place of
holding meetings and
19
<PAGE> 20
the notice required for meetings of the Board of Directors shall govern the
place of meetings and notice of meetings for committees of the Board of
Directors. A majority of the members of each committee shall constitute a quorum
thereof, except that when a committee consists of two (2) members, then the two
(2) members shall constitute a quorum. In the absence of a quorum, a majority of
the members present at the time and place of any meeting may adjourn the meeting
from time to time until a quorum shall be present and the meeting may be held as
adjourned without further notice or waiver. Except in cases where it is
otherwise provided by the rules of such committee, the vote of a majority of the
members present at a duly constituted meeting at which a quorum is present shall
be sufficient to pass any measure by the committee.
3.20 Informal Action Without Meeting. Any action required or permitted
by the Amended and Restated Articles of Incorporation or By-laws 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 of Directors 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.
3.21 Telephonic Meetings. Notwithstanding any place set forth in the
notice of the meeting or these By-laws, 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 either: (a) all directors participating may
simultaneously hear each other, such as by conference telephone, or (b) all
communication during the meeting is immediately transmitted to each
participating director, and each participating director is able to immediately
send messages to all other participating directors; provided, however, that the
Chairman of the Board or the chairman of the respective Committee of the Board
of Directors 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. The
identity of each director participating in such a meeting must be verified in
such manner as the chairman of the meeting deems reasonable under the
circumstances before a vote may be taken.
20
<PAGE> 21
4. OFFICERS
4.1 Number.
(a) The principal executive officers of the corporation shall be a
Chairman, a Chief Executive Officer, a President, one or more Vice Presidents,
one or more of whom may be designated Executive Vice President, one or more of
whom may be designated Senior Vice President, and one or more of whom may be
designated Vice President and Group Executive, a Secretary, a Treasurer, a
Controller, a Chief Financial Officer and divisional presidents, each of whom
shall be appointed by the Board of Directors (the officers thus appointed by the
Board of Directors are sometimes referred to herein as the "elected"officers).
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 Board of Directors or the Chief Executive
Officer. Such officers, agents and employees appointed by the Chief Executive
Officer shall hold office at the discretion of the Chief Executive Officer. Any
two or more offices may be held by the same person.
(b) The duties of the elected 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 appoint from time to time
and for such periods or without limitation as to time as the Board of Directors
shall order.
(c) The duties and powers of all officers appointed by the Chief
Executive Officer shall be those specifically prescribed for the position(s) by
the Chief Executive Officer at the time of appointment.
4.2 Appointment and Term of Office.
(a) The elected officers of the corporation shall be appointed
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 appointment
of officers shall not be held at such meeting, such appointment shall be held as
soon thereafter as convenient. Each such officer shall hold office until his or
her successor shall have been duly appointed or until his or her death or until
he or she shall resign or shall have been removed in the manner hereinafter
provided.
(b) A vacancy in any office appointed by the Board of Directors,
because of death, resignation, removal, disqualification or otherwise may be
filled by the Board of Directors for the unexpired portion of the term.
21
<PAGE> 22
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. 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 shareholders and
directors. He or she shall have authority, subject to such rules as may be
prescribed by the Board of Directors, to appoint and remove 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. 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. In the absence of the Chief Executive Officer 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 Chief Executive Officer to act
personally, the President shall perform the duties of the Chief Executive
Officer and when so acting shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer. The President 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.
22
<PAGE> 23
4.7 Vice Presidents. At the time of appointment, one or more of the
elected Vice Presidents may be designated Executive Vice President and one or
more of them may be designated 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 Presidents in the order of their tenure in such
position, or in the absence of any such designation, or in the event of his or
her inability to act, any Senior Vice President in the order of their tenure in
such position, or in the absence of any such designation, or in the event of his
or her inability to act, then the other Vice Presidents in order of their tenure
in such position, 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 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,
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 By-laws 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; and
(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 By-laws; 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.
23
<PAGE> 24
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 Compensation.
(a) The compensation of the elected officers shall be fixed from
time to time by the Compensation and Development Committee of the Board of
Directors and no such officer shall be prevented from receiving such
compensation by reason of the fact that he or she is also a Director of the
corporation.
(b) The compensation of all officers appointed by the Chief
Executive Officer shall be set by the Chief Executive Officer, from time to
time.
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 indebtedness for borrowed money 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, including by means of facsimile signatures,
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.
24
<PAGE> 25
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 Chief Financial Officer 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 Signature by Former Officer, Transfer Agent or Registrar. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate for shares has ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may be issued by the corporation with the same effect as if that
person were still an officer, transfer agent or registrar at the date of its
issue.
6.3 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.
6.4 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.
6.5 Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction upon the transfer of such shares imposed by the corporation.
6.6 Lost, Destroyed or Stolen Certificates. Where the owner claims that
his or her certificate for shares has been lost, destroyed or wrongfully taken,
a new certificate shall be issued in place thereof if the owner (a) so requests
before the corporation has notice that such
25
<PAGE> 26
shares have been acquired by a bona fide purchaser, and (b) if required by the
corporation, files with the corporation a sufficient indemnity bond, and (c)
satisfies such other reasonable requirements as may be prescribed by or under
the authority of the Board of Directors.
6.7 Consideration for Shares. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time and determined
to be adequate by the Board of Directors, provided that any shares having a par
value shall not be issued for a consideration less than the par value thereof.
The consideration may consist of any tangible or intangible property or benefit
to the corporation, including cash, promissory notes, services performed,
contracts for services to be performed, or other securities of the corporation.
When the corporation receives the consideration for which the Board of Directors
authorized the issuance of shares, such shares shall be deemed to be fully paid
and nonassessable by the corporation.
6.8 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. WAIVER OF NOTICE
7.1 Shareholder Written Waiver. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the Amended and Restated
Articles of Incorporation or these By-laws before or after the date and time
stated in the notice. The waiver shall be in writing and signed by the
shareholder entitled to the notice, shall contain the same information that
would have been required in the notice under the Wisconsin Business Corporation
Law except that the time and place of meeting need not be stated, and shall be
delivered to the corporation for inclusion in the corporate records.
7.2 Shareholder Waiver by Attendance. A shareholder's attendance at a
meeting, in person or by proxy, waives objection to both of 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.
(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.
26
<PAGE> 27
7.3 Director Written Waiver. A director may waive any notice required
by the Wisconsin Business Corporation Law, the Amended and Restated Articles of
Incorporation or these By-laws before or after the date and time stated in the
notice. The waiver shall be in writing, signed by the director entitled to the
notice and retained by the corporation.
7.4 Director Waiver by Attendance. A director's attendance at or
participation in a meeting of the Board of Directors or any committee thereof
waives any required notice to him or her of the 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.
8. LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
8.1 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; or
(d) willful misconduct.
8.2 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
27
<PAGE> 28
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:
(i) 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;
(ii) 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;
(iii) a transaction from which the director or
officer derived an improper personal profit;
or
(iv) willful misconduct.
(c) Determination of whether indemnification is required under this
Section shall be made under Section 180.0855 of the Wisconsin Business
Corporation Law.
(d) 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 Section.
(e) A director or officer who seeks indemnification under this
Section shall make a written request to the corporation.
(f) 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.
8.3 Reliance by Directors and Officers. 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:
(a) 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; or
28
<PAGE> 29
(b) 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.
(c) 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.
8.4 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 any of the following:
(a) the effects of the action on employees, suppliers and customers
of the corporation;
(b) the effects of the action on communities in which the
corporation operates; or
(c) any other factors the director or officer considers pertinent.
8.5 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 Sections 180.0851, 180.0853,
180.0856 and 180.0858 of the Wisconsin Business Corporation Law.
8.6 General.
(a) Except as limited by law, the indemnification and allowance of
expenses provided by Sections 8.1 through 8.5 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 of Directors or resolution
adopted by the corporation's shareholders.
(b) For purposes of this article, the definitions contained in
Section 180.0850 of the Wisconsin Business Corporation Law 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
29
<PAGE> 30
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 8.2, or with any limitations, any employee or former employee of the
corporation with respect to any action taken or not taken in his or 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.
9. GENERAL
9.1 Fiscal Year. The fiscal year of the corporation shall end on
September 30 of each year, commencing September 30, 1961.
9.2 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".
9.3 Notices. Except as otherwise required by law or these By-laws, any
notice required to be given by these By-laws may be given orally or in writing
and notice may be communicated in person, by mail or private carrier, by
telephone, telegraph, teletype, facsimile or other form of wire or wireless
communication, and, if these forms of personal notice are impracticable, notice
may be communicated by a newspaper of general circulation in the area where
published, or by radio, television or other form of public broadcast
communication. Oral notice is effective when communicated. Written notice is
effective as follows: (a) if delivered in person, when received; (b) if given by
mail, when deposited, postage prepaid, in the United States mail addressed to
the director at his or her business or home address (or such other address as
the director may have designated in writing filed with the Secretary); (c) if
given by private carrier, when delivered to the carrier; (d) if given by
telegraph, when delivered to the telegraph company; and (e) if given by
facsimile, e-mail or other form of wireless communication, at the time
transmitted to a facsimile number or e-mail address at any address designated in
(b) above.
9.4 No Nominee Procedures. The corporation has not established, and
nothing contained in these By-laws 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 Business Corporation Law.
30
<PAGE> 31
10. AMENDMENTS
10.1 Power to Amend and Repeal. Except as may be limited pursuant to
Section 10.2, these By-laws may be amended or repealed, and new By-laws 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 of Directors; except that Sections 2.3, 2.8,
3.2, 3.7, 3.8, 10.1, and 10.2 of the By-laws may be amended only by the
affirmative vote of the holders of two-thirds (2/3) 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 10.2, the Board of
Directors shall have the power to amend or repeal any By-law adopted by the
shareholders, and any By-law adopted by the Board of Directors shall be subject
to amendment or repeal by the shareholders as well as by the directors.
10.2 Restrictions on Amendment and Repeal.
(a) The Board of Directors shall have no power to amend or repeal
any By-law or amendment adopted by the shareholders which contains a specific
provision to the effect that such By-law or amendment shall not be subject to
amendment or repeal by the Board of Directors.
(b) The Board of Directors shall have no power to amend or repeal
any By-law adopted or amended by the shareholders that fixes a greater or lower
quorum requirement or a greater voting requirement for the Board of Directors
than otherwise is provided in the Wisconsin Business Corporation Law unless the
By-law expressly provides that it may be amended or repealed by a specified vote
of the Board of Directors. Action by the Board of Directors to adopt or amend a
By-law that changes the quorum or voting requirement for the Board of Directors
must meet the same quorum requirement and be adopted by the same vote required
to take action under the quorum and voting requirement then in effect, unless a
different voting requirement is specified as provided by the preceding sentence.
A By-law that fixes a greater or lower quorum requirement or a greater voting
requirement for shareholders or voting groups of shareholders than otherwise is
provided in the Wisconsin Business Corporation Law may not be adopted, amended
or repealed by the Board of Directors.
(c) No amendment or repeal of these By-laws 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.
31
<PAGE> 1
EXHIBIT 10.2(a)
EXECUTIVE EMPLOYMENT CONTRACT
THIS AGREEMENT, made and entered into as of the 11th day of
November, 1999 by and between Universal Foods Corporation, a Wisconsin
corporation (hereinafter referred to as the "Company"), and Kenneth P.
Manning (hereinafter referred to as "Executive");
W I T N E S S E T H :
WHEREAS, the Executive is presently employed by the Company as
its President, Chief Executive Officer and Chairman of the Board of Directors of
the Company (the "Board");
WHEREAS, the Board recognizes that the Executive's
contribution to the growth and success of the Company has been substantial;
WHEREAS, the Board desires to provide for the continued
employment of the Executive and to encourage the continued attention and
dedication to the Company of the Executive as a member of the Company's
management;
WHEREAS, the Executive and the Company intend that this
Agreement shall supersede and replace the Executive Employment Contract made and
entered into as of November 5, 1987, and amended as of May 10, 1988, by and
between the Company and the Executive (the "Prior Agreement");
WHEREAS, the Executive and the Company intend that in the
event of a Change of Control (as defined in the Amended and Restated Change of
Control Severance and Employment Agreement, made and entered into as of November
11, 1999, by and between the Executive and the Company (the "Change of Control
Agreement")), this Agreement shall be superseded and replaced by the Change of
Control Agreement; and
<PAGE> 2
WHEREAS, the Executive is willing to commit himself to
continue to serve the Company, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
1. Employment. The Company hereby agrees to continue to
employ the Executive, and the Executive hereby agrees to continue to serve the
Company, on the terms and conditions set forth herein.
2. Term. The employment of the Executive by the Company
as provided in Section 1 of this Agreement will commence on the date hereof and
end on November 11, 2002, unless further extended or sooner terminated as
hereinafter provided (the "Employment Period"). On November 11, 2000, and on
November 11 of each year thereafter, the term of the Executive's employment
shall be automatically extended for one additional year unless at least ninety
days prior to such renewal date either party hereto shall give notice to the
other that the Employment Period shall not be so extended; provided, however,
that in no event shall the term of the Executive's employment extend beyond the
end of the calendar month in which the Executive's 65th birthday occurs and
provided further that no automatic extension of the term of the Executive's
employment shall occur if the Executive is disabled, as determined pursuant to
Section 8 of this Agreement, at the time such extension would otherwise
automatically become effective.
3. Position and Duties.
(a) During the Employment Period, the Executive shall
serve as President and Chief Executive Officer of the Company and the Chairman
of the Board and shall have such responsibilities and authority as may from time
to time be assigned to the Executive by the Company's Board of Directors
consistent with his position as President and Chief Executive Officer of the
Company.
(b) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive shall devote substantially all his
-2-
<PAGE> 3
working time and efforts 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 under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing 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 or otherwise violate the provisions of Section 14.
4. Place of Performance. In connection with the
Executive's employment by the Company, the Executive shall be based in
Milwaukee, Wisconsin (at the principal executive offices of the Company) except
for required travel on the Company's business to an extent substantially
consistent with his present business travel obligations.
5. Compensation and Related Matters.
(a) Base Salary. During the Employment Period, the
Company shall pay to the Executive a salary at a rate of not less than $621,000
per annum pursuant to the Company's normal payroll practices (the "Base
Salary"). The Base Salary shall be reviewed on or before October 1 of each year
following the date of this Agreement, while this Agreement remains in force, to
ascertain whether in the judgment of the Board or such Committee to whom the
Board may have delegated authority, such Base Salary should be increased. If so
increased, the Base Salary shall not thereafter during the term of this
Agreement be decreased and the term Base Salary as utilized in this Agreement
shall refer to the Base Salary as so increased. Compensation of the Executive by
salary payments shall not be deemed exclusive and shall not prevent the
Executive from participating in any other compensation or benefit plan of the
Company. The base salary payments (including any increased salary payments)
hereunder shall not in any way limit or reduce any other obligation of the
Company hereunder, and no other compensation, benefit or payment hereunder shall
in any way limit or reduce the obligation of the Company to pay the Executive's
base salary hereunder.
-3-
<PAGE> 4
(b) Annual Bonus. In addition to the Annual Base Salary,
the Executive shall be eligible to be awarded, for each fiscal year or portion
of a fiscal year ending during the Employment Period, an annual bonus (the
"Annual Bonus") pursuant to the terms of the Company's Incentive Compensation
Plan for Elected Corporate Officers, or any successor or replacement plan.
(c) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in performing services hereunder, including all
expenses of travel and living expenses while away from home on business or at
the request of and in the service of the Company, provided that such expenses
are incurred and accounted for in accordance with the policies and procedures
established by the Company.
(d) Other Benefits. During the Employment Period: (i) the
Executive shall be entitled to participate in incentive, savings and retirement
plans, practices, policies and programs of the Company to an extent no less
favorable than the participation provided generally to other senior executives
of the Company; and (ii) the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in, and shall receive benefits
under, welfare benefit plans, practices, policies and programs provided by the
Company (including, without limitation, medical, prescription, dental,
disability, employee life insurance, group life insurance, accidental death and
travel accident insurance plans and programs) to an extent no less favorable
than the participation and benefits provided to other senior executives of the
Company (and/or their families).
(e) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation that is no less favorable than the paid
vacation provided generally to other senior executives of the Company and to all
paid holidays given by the Company to its other senior executives.
(f) Office and Support Staff. During the Employment
Period, the Company shall furnish the Executive with office space, secretarial
assistance and such other facilities and services as shall be suitable to the
Executive's position and adequate for the performance of his duties as set forth
in Section 3.
-4-
<PAGE> 5
(g) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits and perquisites, which shall be
no less favorable than the fringe benefits and perquisites provided generally to
other senior executives of the Company.
6. Offices. The Executive agrees to serve without
additional compensation, if elected or appointed thereto, as a director of the
Company and any of its subsidiaries and in one or more executive offices of any
of the Company's subsidiaries, provided that the Executive is indemnified for
serving in any such capacities on a basis no less favorable than is currently
provided by the Company's By-laws.
7. Death. If the Executive shall die during the
Employment Period but prior to the delivery of a Notice of Termination (as
hereinafter defined) by the Company or by the Executive for Good Reason (as
hereinafter defined), the Company shall pay the Executive's estate or legal
representative, within thirty days following the Executive's Date of Termination
(as hereinafter defined), a lump sum payment equal to the sum of: (1) the
Executive's Annual Base Salary through the Date of Termination, (2) the value of
the Executive's accrued, but unused, vacation days (based on the Executive's
Annual Base Salary) and (3) the product of (x) the average annual bonus earned
by the Executive for the three years immediately prior to the year in which the
Date of Termination occurs and (y) a fraction, the numerator of which is the
number of full and partial months in the fiscal year in which the Date of
Termination occurs through the Date of Termination, and the denominator of which
is twelve, in each case to the extent not theretofore paid (the "Bonus Amount"),
and the Company shall have no further obligations to pay other benefits under
this Agreement. The amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations".
8. Disability.
(a) If during the Employment Period, the Company or the
Executive terminates the Executive's employment due to the Executive's
Disability, the Company shall pay the Executive (1) within thirty days following
the Executive's Date of Termination, a lump sum payment of the Accrued
Obligations and (2) commencing on the Date of Termination until he reaches age
65 or the termination of his Disability, whichever is first to occur, such
amounts which an individual in his earnings category would be normally entitled
to receive as full Long
-5-
<PAGE> 6
Term Disability ("LTD") coverage under the Company LTD plan then in effect, but
not less than 60% of his Base Salary as determined under Section 5(a) at the
time of the Date of Termination. During the term of his Disability, the
Executive also shall receive the employee benefits (or service credits therefor,
as the case may be) he would have been entitled to receive, as provided in
Section 5(d) (other than under incentive plans). The obligation to provide the
foregoing disability benefits shall survive the termination of this Agreement
provided the Disability was incurred before termination, and the Company shall
have no further obligations to pay compensation or benefits under this
Agreement.
(b) For purposes of this Agreement, "Disability" means
that (i) the Executive has been unable, for a period of 180 consecutive business
days, to perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (ii) a physician selected by the
Company or its insurers, and acceptable to the Executive or the Executive's
legal representative, has determined that the Executive's incapacity is total
and permanent. A termination of the Executive's employment by the Company for
Disability shall be communicated to the Executive by written notice, and shall
be effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability Effective Date.
9. Termination by the Company.
(a) Termination for Cause. The Executive's employment may
be terminated by the Board at any time for Cause which shall be defined to mean
(I) conviction of the Executive of any act of fraud, theft or embezzlement or
(II) the commission of any of the following acts by the Executive which is
substantially injurious to the Company: dishonesty, gross misconduct, willful
disclosure of trade secrets, gross dereliction of duty or other grave misconduct
on the part of the Executive.
The Executive shall not be deemed to have been terminated for
Cause without (i) reasonable notice to the Executive setting forth the reasons
for the Company's intention to terminate for Cause, (ii) an opportunity for the
Executive, together with his counsel, to be heard
-6-
<PAGE> 7
before the Board and (iii) delivery to the Executive of a Notice of Termination
from the Board finding that in the good faith opinion of the Board the Executive
was guilty of conduct set forth above in this Section 9(a), and specifying the
particulars thereof in detail. In the event the Executive's employment is
terminated for Cause, the Executive shall be entitled to his accrued and unpaid
Base Salary through the date of termination and shall forfeit his right to any
and all compensation and benefits he would otherwise have been entitled to
receive under this Agreement.
(b) Termination without Cause. The Company has the right
to terminate the employment of the Executive without Cause, upon at least thirty
days' prior written notice, if such termination is approved by a majority vote
of the Board taken at a meeting duly called to consider such matter. In the
event of termination of the Executive's employment pursuant to this Section
9(b), the Company shall provide the Executive with the following "Termination
Benefits," and the Company shall have no further obligations to pay compensation
or benefits under this Agreement:
(i) a lump sum cash payment, within thirty days
following the Date of Termination, equal to the sum of: (A) the Accrued
Obligations, and (B) the product of (1) three and (2) the sum of the Base
Salary, plus the higher of Executive's most recent annual bonus or Executive's
target bonus for the year in which the Date of Termination occurs (if no target
bonus has been set for such year, the Executive's target bonus for the prior
year shall be used).
(ii) the Executive shall be credited with three
additional years of service for purposes of calculating his retirement benefit
under any supplemental or excess retirement plan of the Company in which he was
a participant as of the Date of Termination;
(iii) from the Date of Termination until 36 months
following the end of the month in which the Date of Termination occurs, 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 5(d)(ii)
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 senior executives
-7-
<PAGE> 8
of the Company (and their families), (in addition, if the Executive is eligible
for "COBRA" continuation health coverage under Section 4980B of the Internal
Revenue Code of 1986, as amended (or any successor provision), such coverage
shall commence upon the end of the coverage for the Severance Period); 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; and
(iv) the Executive shall be credited with three
additional years of service and age for purposes of eligibility for retiree
health benefits under the retiree health plan maintained by the Company.
10. Termination by the Executive.
(a) Without Good Reason. The Executive has the right to
terminate his employment at any time without Good Reason upon no less than
thirty days' prior written notice delivered to the Company. If the Executive
terminates his employment during the Employment Period for any reason other than
Disability or Good Reason, the Company shall pay a lump sum payment to the
Executive of the Accrued Obligations (other than the Bonus Amount), and the
Company shall have no further obligations to pay compensation or benefits under
this Agreement.
(b) For Good Reason. The Executive has the right to
terminate his employment for Good Reason upon thirty days' prior written notice
delivered to the Company within 120 days of the occurrence of one of the events
set forth below. For purposes of this Agreement, "Good Reason" shall mean,
without the Executive's written consent:
(i) any reduction in the Executive's Base
Salary;
(ii) the assignment to the Executive of any
duties inconsistent with, or the reduction of powers or functions associated
with, his positions, duties, responsibilities and status with the Company set
forth in Section 3;
-8-
<PAGE> 9
(iii) the Company's mandatory transfer of the
Executive to another geographic location other than a location within 35 miles
of Milwaukee, Wisconsin or to a location other than the Company's principal
executive offices, except for required travel on the Company's business to an
extent substantially consistent with the Executive's business travel obligations
as of the date hereof; or
(iv) any other material breach of this Agreement
by the Company.
An isolated, insubstantial and inadvertent action not taken in bad faith, and
which is remedied by the Company within ten days after notice from the
Executive, shall not be treated as Good Reason under this Agreement. In the
event of a termination of employment by the Executive for Good Reason during the
Employment Period, the Executive shall be provided with the Termination Benefits
set forth in Section 9(b) hereof.
In the event that the Executive shall in good faith give a Notice of Termination
(as hereinafter defined) for Good Reason and it shall thereafter be determined
that Good Reason did not exist, the employment of the Executive hereunder shall,
at the Executive's option, continue after such determination; provided, that the
Executive continued his employment during the dispute concerning his alleged
Good Reason pursuant to his option to do so as provided in Section 11 and
provided further, that in no event shall such employment extend beyond the
Employment Period. If the Executive does not choose to continue his employment
hereunder after such determination, the employment of the Executive shall be
deemed to have terminated at the date of giving such purported Notice of
Termination by mutual consent of the Company and the Executive; provided,
however, that if the Executive exercises his option to continue his employment
during the period of dispute concerning his alleged Good Reason as provided in
Section 11, the Executive shall be entitled to compensation and benefits during
such continued employment in accordance with Section 5 of this Agreement.
11. Notice of Termination; Date of Termination. (a) Any
termination of the Executive's employment by the Company under Section 9 or by
the Executive under Section 10 shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and the date of the
Executive's
-9-
<PAGE> 10
termination and shall set 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. In the event that one party notifies the other that
a dispute exists concerning the termination of the Executive's employment, the
Executive's employment under this Agreement shall, at the Executive's option,
not be terminated until such dispute is finally resolved either by mutual
written agreement of the parties or in accordance with Section 16, as the case
may be; provided, however, that in no event shall such employment extend beyond
the Employment Period.
(b) Date of Termination. The Executive's "Date of Termination"
shall mean: (i) in the event of his death, the date of death; (ii) in the event
of his Disability, the Disability Effective Date; and (iii) in the event of any
other termination of employment, the date specified in the Notice of
Termination.
12. Non-exclusivity 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 for which the
Executive may qualify, nor, subject to Section 24, shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Company. Accrued benefits and other amounts
that the Executive is otherwise entitled to receive under any plan, policy,
practice or program of, or any contract or agreement with, the Company on or
after the Date of Termination shall be payable in accordance with such plan,
policy, practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
13. Interest and Costs. In the event that any payments
due to the Executive hereunder shall fail to be paid when due, such unpaid
amounts shall bear interest at the rate of 12% per annum and if such unpaid
amounts are collected by law or through an attorney-at-law, the Executive shall
also be entitled to collect reasonable attorneys' fees and all costs of
collection. Within ten (10) days after the Executive's written request therefor,
the Company shall pay to the Executive, or such other person or entity as the
Executive may designate in writing to the Company, such reasonable attorneys'
fees and costs of collection in advance of the final disposition or conclusion
of any dispute, legal or arbitration proceeding with respect to such collection.
-10-
<PAGE> 11
14. Noncompetition; Nonsolicitation and Confidential
Information. (a) During the Employment Period and for a period of one year after
the Executive's Date of Termination (the "Noncompetition Period"), the Executive
shall not, within the United States, except as permitted by the Company's prior
written consent, engage in, be employed by, or in any way advise or act for, or
have any financial interest in any business which is a competitor of the
Company. Notwithstanding the foregoing, this Section 14(a) shall not apply
during the Noncompetition Period if the Executive's employment is terminated
without Cause or the Executive terminates his employment for Good Reason. The
ownership of less than five percent of any class of securities of any
corporation listed on a national securities exchange or regularly traded over
the counter even though such corporation may be a competitor of the Company as
specified above, shall not be deemed as constituting a financial interest in
such competitor.
(b) During the Noncompetition Period, other than on
behalf of the Company, the Executive shall not induce or solicit any employee of
the Company to terminate his or her employment.
(c) 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 and its respective businesses that the Executive
obtains during the Executive's employment by the Company and that is not public
knowledge (other than as a result of the Executive's violation of this Section
14(c) ("Confidential Information")). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written consent
of the Company or as otherwise required by law or legal process.
(d) All computer software, business cards, telephone
lists, customer lists, price lists, contract forms, catalogs, the Company books,
records, files and know-how acquired while the Executive is an employee of the
Company are acknowledged to be the property of the Company and shall not be
duplicated, removed from the Company's possession or premises or made use of
other than in pursuit of the Company's business or as may otherwise required by
law or any legal process, or as is necessary in connection with any adversarial
proceeding against the Company and, upon termination of employment for any
reason, the Executive shall deliver to
-11-
<PAGE> 12
the Company, without further demands, all copies thereof which are then in his
possession or under his control.
(e) The provisions of Sections 14(a), (b), (c) and (d)
shall remain in full force and effect until the expiration of the period
specified herein notwithstanding the earlier termination of the Executive's
employment hereunder. In the event of a breach of the Executive's covenants
under this Section 14, it is understood and agreed that the Company shall be
entitled to injunctive relief, as well as any other legal remedies. For purposes
of this Section 14, the "Company" shall include all entities controlling,
controlled by or under common control with the Company.
15. Resolution of Disputes. Any dispute arising out of
this Agreement shall, at the Executive's option, be determined by arbitration
under the rules of the American Arbitration Association then in effect, other
than any requests for injunctive relief under Section 14(e), or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be Milwaukee, Wisconsin or, if the Executive
is no longer residing or working in Milwaukee, Wisconsin, such venue shall, at
the Executive's election, be the city in which the Executive resides. More
specifically, if litigation is the method for settling any such dispute, venue
for the litigation shall be in the Circuit Court of Milwaukee County or, if the
Executive is no longer residing or working in Milwaukee, Wisconsin, such venue
shall, at the Executive's election, be the county court for the county in which
the Executive resides. The parties consent to jurisdiction in the selected venue
notwithstanding their residence or situs.
16. Payment Obligations Absolute. The Company's
obligation during and after the term of the Executive's employment hereunder to
pay the Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company may have against him or
anyone else, except as provided in Section 9(b)(iii). All amounts payable by the
Company hereunder shall be paid without notice (except as provided in Section
12) or demand. The Company will not seek to recover all or any part of any such
payment from the Executive or from whomsoever may be entitled thereto, for any
reason whatsoever, except as provided in Section 9(b)(iii).
-12-
<PAGE> 13
17. Strict Compliance. The Executive's or the Company's
failure to insist upon strict compliance with any provision of, or to assert any
right under, this Agreement (including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section 4(c)(i))
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
18. Successors; Binding Agreement.
(a) 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, by agreement in
form and substance satisfactory to the Executive, to expressly assume 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.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement. 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 executes and delivers
the agreement provided for in this Section 18 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
19. Notice. All notices, requests, demands and other
communications required or permitted to be given by either party to the other
party by this Agreement (including, without limitation, any Notice of
Termination of employment) shall be in writing and shall be deemed to have been
duly given when delivered personally or received by certified or registered
mail, return receipt requested, postage prepaid, at the address of the other
party, as follows:
-13-
<PAGE> 14
If to the Company, to:
Universal Foods Corporation
433 East Michigan Street
Milwaukee, Wisconsin 53202
Attention: Secretary
If to Executive, to:
At the last address for the Executive in the
Company's records.
Either party hereto may change its address for purposes of this Section 19 by
giving fifteen (15) days prior notice to the other party hereto.
20. Severability. If any term or provision of this
Agreement or the application hereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
21. Headings. The headings in this Agreement are inserted
for convenience of reference only and shall not be a part of or control or
affect the meaning of this Agreement.
22. Governing Law. This Agreement has been executed and
delivered in the State of Wisconsin and shall in all respects be governed by,
and construed and enforced in accordance with, the laws of the State of
Wisconsin.
23. Payroll and Withholding Taxes. All payments to be
made or benefits to be provided hereunder by the Company shall be subject to
reduction for any applicable payroll-related or withholding taxes.
-14-
<PAGE> 15
24. Entire Agreement. This Agreement supersedes any and
all other oral or written agreements heretofore made relating to the subject
matter hereof (including, without limitation, the Prior Agreement) other than
the Change of Control Agreement, and constitutes the entire agreement of the
parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
UNIVERSAL FOODS CORPORATION ("Company")
By: /s/ Richard F. Hobbs
-------------------------------------
Richard F. Hobbs
Vice President - Administration
[CORPORATE SEAL] Attest /s/ John L. Hammond
-------------------------------------
EXECUTIVE
/s/ Kenneth P. Manning
--------------------------------------------
Kenneth P. Manning
-15-
<PAGE> 1
EXHIBIT 10.2(b)
AMENDED AND RESTATED
CHANGE OF CONTROL
EMPLOYMENT AND SEVERANCE AGREEMENT
AGREEMENT by and between Universal Foods Corporation, a
Wisconsin corporation (the "Company"), and Kenneth P. Manning (the "Executive"),
dated as of the 11th day of November, 1999.
WHEREAS, 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;
WHEREAS, the Company and the Executive intend that, upon a
Change of Control, this Agreement shall supersede and replace the Executive
Employment Contract made and entered into as of November 11, 1999, by and
between the Company and the Executive (the "Prior 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.
<PAGE> 2
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: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (D)
any acquisition 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 September 10, 1998, 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 September 10, 1998, 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 by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another entity (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 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
2
<PAGE> 3
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 the 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 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
3
<PAGE> 4
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
4
<PAGE> 5
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
5
<PAGE> 6
performance is delivered to the Executive by the non-employee member of the
Board of Directors of the Company who has served longest (the "Senior Director")
which specifically identifies the manner in which the Senior Director 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 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;
6
<PAGE> 7
(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
7
<PAGE> 8
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. the sum of (i) all vested and nonforfeitable amounts under
the Company's savings and retirement plans (qualified and non-qualified)
described in Section 4(b)(iii), (ii) the amount equal to the product of (x)
three and (y) the highest aggregate annual amount contributed by the Company (as
a Company contribution, and not a salary reduction) on behalf of the Executive,
during the last three full fiscal years prior to the Effective Date, to the
Company's Savings Plan, and Supplemental Benefits Plan, or any successor or
replacement defined contribution plans, and (iii) the amount equal to the
product of (x) the greater of (1) three and (2) the number of full years from
the Date of Termination until the Executive would attain age 65 and (y) the
highest aggregate annual amount contributed by the Company (as a Company
contribution, and not a salary reduction) on behalf of the Executive, during the
last three fiscal years prior to the Effective Date, to the Company's Transition
Retirement Plan and Retirement Employee Stock Ownership Plan, or any successor
or replacement defined contribution plans.
(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) for purposes of calculating the Executive's benefits
under the Company's Supplemental Executive Retirement Plan, the Executive will
be deemed to have received three additional years of base salary in amounts
equal to the Executive's Annual Base Salary as of the Date of Termination, as
increased for purposes of this subparagraph in each of such three years,
8
<PAGE> 9
by the percentage increase in the Executive's Annual Base Salary from the year
prior to the year which the Date of Termination occurs to the year in which the
Date of Termination occurs;
(iv) 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
(v) 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 (the "Disability Benefit") 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; provided that the Executive shall receive an
annual Disability Benefit commencing upon his Disability Effective Date at least
equal to 60% of the Executive's Annual Base Salary, which shall be paid on a
monthly basis until the earlier of (i) the date on which the Executive reaches
age 65 or (ii) the termination of the Executive's Disability. During the period
of the
9
<PAGE> 10
Disability, the Executive shall also receive the employee benefits (or service
credits therefor, as the case may be) under any employee benefit plan or
arrangement as in effect on the Date of Termination (including, without
limitation, each pension and retirement plan and arrangement, supplemental
pension and retirement plan and arrangement, deferred compensation plan, profit
sharing plan, stock option plan, health and split-dollar life insurance,
disability plan, dental program, executive car program and vacation plan) or
made available in the future to other peer executives of the Company, subject to
and on a basis consistent with the terms, conditions and overall administration
of such plans and arrangements.
(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 (provided that the Executive
hereby waives any right to participate in any severance plan, program or policy
of the Company during the Employment Period), 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
10
<PAGE> 11
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 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
11
<PAGE> 12
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 to
effectively 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 is limited 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
12
<PAGE> 13
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,
13
<PAGE> 14
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, including the Prior
Agreement and any predecessor agreement thereto. Prior to the Effective Date,
the Prior Agreement shall remain in effect pursuant to its terms.
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.
14
<PAGE> 15
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 /s/ Richard F. Hobbs
-----------------------------------
Richard F. Hobbs
Vice President-Administration
/s/ Kenneth P. Manning
-----------------------------------
Kenneth P. Manning
Address: 5240 North Lake Drive
Whitefish Bay, WI 53217
15
<PAGE> 1
Exhibit 13.1
BUSINESS PROFILE
Universal Foods Corporation is a global leader in the manufacture and supply of
high-performance flavors, colors, yeast and dehydrated products. The Company's
Performance Products segment produces flavor and color products for food,
beverages, cosmetics, pharmaceuticals, specialty inks and a variety of other
applications. The Natural Products segment produces dehydrated ingredients and a
broad range of yeast products for commercial and retail markets.
PERFORMANCE PRODUCTS
Flavor
REVENUE (in millions)
[BAR CHART]
95 371
96 359
97 321
98 347
99 374
OPERATES AS: UNIVERSAL FLAVORS
We offer one of the most complete ranges of flavors, flavor enhancers and flavor
systems for the food, beverage and dairy industries. Our flavor chemists and
application specialists work closely with customers in the development of custom
taste products with a focus on sensory superiority, ease-of-use and value.
PRODUCTS
Savory, dairy, sweet goods and beverage flavors and flavor systems. Extracts
from yeast, vegetable proteins, meat, milk protein and other natural products
for use primarily as flavor enhancers. Aroma chemicals and fragrances for
personal care and household products.
1999 AND BEYOND
Revenue was up for the year due to strong double-digit gains in sales to the
dairy, beverage and food ingredients categories and the positive contribution of
our first full year following the integration of the bioproducts savory flavor
business. Our year-old creative centers in Indianapolis and Fenton, Missouri,
along with a new flavor creative center in Canada, are providing enhanced
customer support in new product development. Acquisitions completed during the
past two years continue to provide new access to key customers around the globe.
Strategies have been developed for further penetration of the growing markets
for
<PAGE> 2
nutraceuticals, frozen novelties, cultured dairy products and snack foods.
CUSTOMERS % OF REVENUE
[PIE CHART]
Food Processors 44%
Dairy Product Companies 28%
Beverage Companies 19%
Other 9%
ESTIMATED GLOBAL MARKET $15 billion
Color
REVENUE (in millions)
[BAR CHART]
95 149
96 159
97 192
98 195
99 232
OPERATES AS: WARNER-JENKINSON COMPANY
We are the world's leading supplier of synthetic food colors, with a rapidly
growing share of the global market for natural and cosmetic colors. Our skilled
chemists and color technicians provide outstanding technical support in the
development of high-performance colors and color systems that meet specific
application requirements and performance characteristics.
PRODUCTS
Natural and synthetic colors for food, beverages, confections, cosmetics,
pharmaceuticals, personal care items, inks for ink-jet printers, and a variety
of other products. In addition to our broad range of standard products, we
provide specially tailored products that simplify and enhance the use of color.
1999 AND BEYOND
Revenue for our Color division grew significantly as a result of increased sales
volumes of synthetic, natural and cosmetic colors. New acquisitions added to the
results and further strengthened our Color division during fiscal 1999. Les
Colorants Wackherr, Paris, France, expanded our offerings in colors for
cosmetics and added a new range of
<PAGE> 3
cosmetic ingredient products. The acquisition of certain assets of Quimica
Universal, Lima, Peru, enhanced our capabilities in the production of annatto
and carminic acid-based products. The acquisition of Pointing Holdings Ltd. in
the U.K. has provided greater access to international markets. The natural color
business of Nino Fornaciari fu Riccardo S.N.C. strengthened our position as the
number one supplier of anthocyanin, a natural color, sold worldwide. Our Color
division continues to grow as we focus on areas with the greatest opportunities
for growth, including natural colors, cosmetic colors, new dyes and specialty
chemical synthesis and purification.
CUSTOMERS % OF REVENUE
[PIE CHART]
Food Processors 75%
Cosmetics Mfrs/Pharmaceutical Companies/Ink-jet Printer Mfrs 25%
ESTIMATED GLOBAL MARKET $2.9 billion
NATURAL PRODUCTS
Yeast
REVENUE (in millions)
[BAR CHART]
95 155
96 156
97 159
98 164
99 164
OPERATES AS: RED STAR YEAST & PRODUCTS
We are the largest North American supplier of yeast to the commercial bakery
market. Our Red Star name denotes quality and reliability in the production and
delivery of yeast products for commercial and retail markets.
PRODUCTS
A diversified line of yeast products including compressed, cream and active dry
yeast for commercial and retail applications, including bakery goods, pizza,
frozen dough, prepared bread machine mixes, and wine making. Nutritional yeast
for health conscious consumers, and bionutrients for use in pharmaceuticals,
biotechnology, and starter cultures for the dairy industry.
<PAGE> 4
1999 AND BEYOND
Revenue was comparable to last year due to competitive pressures in the yeast
industry. Favorable raw material costs helped to offset the impact of lower
prices. Red Star Yeast continues to excel in this challenging competitive
environment. Our focus remains on programs to reduce costs and improve
productivity. In addition, we continue to explore opportunities for growth
outside the traditional commercial baking industry. Greater emphasis is being
placed on the production and marketing of higher-margin yeast derivatives,
including bionutrients and nutraceuticals.
CUSTOMERS % OF REVENUE
[PIE CHART]
Commercial Baking Companies 72%
Retail 16%
Bionutrients/Nutraceuticals 12%
ESTIMATED GLOBAL MARKET $2.3 billion
DEHYDRATED PRODUCTS
REVENUE (in millions)
[BAR CHART]
95 117
96 132
97 135
98 147
99 147
OPERATES AS: ROGERS FOODS (U.S.)
UNIVERSAL DEHYDRATES (EUROPE)
We are a market leader in the U.S. production of dehydrated onion, garlic and
chili products and the number one supplier of dehydrated vegetables in Europe.
Our modern dehydration technology, extensive plant breeding and seed development
programs, and comprehensive crop management techniques produce consistent,
top-quality dehydrated products.
PRODUCTS
Dehydrated onion, garlic, chili pepper, paprika, parsley, celery, spinach and
other vegetables for use as ingredients by food processors and sale under
private labels to the retail market and food service industry.
<PAGE> 5
1999 AND BEYOND
Revenue for our Dehydrated Products division was flat primarily due to lower
volumes of garlic as a result of a U.S. crop shortage. Onion and chili volumes
were on plan for the year. We closed our unprofitable frozen vegetable
processing operations in Ireland during the latter part of the fiscal year. The
remaining Dehydrated Products operations in Europe continue to turn in a
stronger performance each quarter. Plant breeding and seed development programs
and new crop management techniques provide opportunities for further
improvements in productivity and product quality.
CUSTOMERS % OF REVENUE
[PIE CHART]
Food Processors 55%
Spice Blenders 20%
Repackers/Distributors/Retail 25%
ESTIMATED GLOBAL MARKET $1.2 billion
MANAGEMENT'S ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
[ Years ended September 30, 1999, 1998 and 1997 ]
The following financial review provides information which management believes is
relevant to an assessment and understanding of the Company's consolidated
results of operations and financial condition. The financial review should be
read in conjunction with the consolidated financial statements and notes
thereto.
RESULTS OF OPERATIONS
In 1999, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 131 "Disclosures about Segments of an Enterprise and Related Information"
which establishes new standards for reporting and disclosure relating to
segments and geographic data. The Company's reportable segments are as follows:
Performance Products
This segment includes the Flavor and Color divisions, which produce flavor and
color products that impart a desired taste, smell or color to a broad range of
consumer products.
Natural Products
This segment produces yeast and dehydrated products which are used by
manufacturers of various food products.
<PAGE> 6
NET EARNINGS (in millions)
(excluding unusual items)
[BAR CHART]
95 $56.9
96 $60.9
97 $64.7
98 $72.6
99 $80.1
1999 VS. 1998
Revenue for 1999 increased $63.4 million, or 7.4%, to $920.2 million from $856.8
million in 1998. The overall increase in revenue was attributable to increases
in the Performance Products segment resulting from volume increases and
acquisitions of natural and cosmetic color businesses. U.S. Flavor volume was
particularly strong in the dairy, beverage and food ingredient product
categories. The Color division recorded gains in all product categories. Revenue
in the Natural Products segment was $311 million in both 1999 and 1998. The U.S.
dehydrated products business recorded revenue increases for onion products
offset by lower garlic volumes. In Europe, revenue was flat as the closure of
the frozen vegetable business in Ireland offset increases in dehydrated
products. Revenue in Yeast was flat as volumes and average selling prices were
comparable to 1998. The strengthening of the U.S. dollar relative to foreign
currencies during the year had the effect of reducing reported revenue by
approximately 1.0%.
Cost of products sold as a percent of revenue was 65.2% in 1999 compared to
64.9% in 1998. In the Performance Products segment, cost of products sold as a
percent of revenue increased to 67.4% in 1999 from 66.8% in 1998. This increase
is primarily attributable to changes in product mix at the Color division caused
by additional sales of lower margin synthetic dyes and higher cost of products
sold related to the Pointing business acquired in 1999. In addition, the Flavor
division had increased sales of dairy products in 1999 at lower margins than
other product categories. In the Natural Products segment, cost of products sold
as a percent of revenue decreased to 64.2% in 1999 from 64.9% in 1998 as raw
material costs decreased for most product categories except garlic.
Selling and administrative expenses increased $3.4 million to $175.3 million
from $171.9 million but decreased as a percent of revenue to 19.0% from 20.1%.
Selling and administrative expenses as a percent of revenue were lower in both
the Performance Products and Natural Products segments. Corporate expenses were
lower as increases in intangible amortization expense were offset by a $1.9
million favorable settlement of a previously accrued litigation claim. During
1999, the Company
<PAGE> 7
closed the frozen vegetable business in Ireland at a cost of approximately $2.7
million.
Operating income in 1999 increased $16.2 million, or 12.6%, to $145.1 million.
Operating income increased $9.6 million, or 10.3%, in the Performance Products
segment as the flavor business in the U.S. continues to improve and the segment
benefited from recent acquisitions. Operating income in the Natural Products
segment was $60.5 million in 1999 compared to $56.6 million in 1998, an increase
of 7.0%. The increase is the result of lower product costs and reduced selling
and administrative expenses.
Interest expense increased $4.8 million to $26.0 million in 1999. The increase
was caused by additional outstanding borrowings which were used primarily to
fund acquisitions (see Note 5 to the Consolidated Financial Statements).
The effective income tax rate for 1999 was 32.7% compared to 32.5% last year.
Both years include the benefits from settlements of prior years' issues that
reduced the effective rate 1.2% in 1999 and 1.4% in 1998.
Net earnings were $80.1 million in 1999 compared to $72.6 million in 1998, an
increase of 10.3%. In 1999, diluted earnings per share increased to $1.57 from
$1.40, an increase of 12.1%.
1998 VS. 1997
Revenue for 1998 increased $31.1 million, or 3.8%, to $856.8 million from $825.7
million in 1997. Revenue in the Performance Products segment increased $28.4
million, or 5.5%, primarily due to volume gains in the international Flavor
business which benefited from 1998 acquisitions. Revenue in the Natural Products
segment was $311.1 million in 1998 compared to $294.3 million in 1997 as volumes
increased in the U.S. dehydrated products business. The overall strengthening of
the U.S. dollar relative to foreign currencies during the year had the effect of
reducing reported revenue by approximately 2.1%.
Cost of products sold as a percent of revenue was 64.9% in 1998 compared to
66.7% in 1997. In the Performance Products segment, cost of products sold as a
percent of revenue decreased to 66.8% in 1998 from 68.5% in 1997. In the Natural
Products segment, cost of products sold as a percent of revenue decreased to
64.9% in 1998 from 65.4% in 1997. The decreases are attributable to increased
productivity and lower raw material costs in the Color and Yeast divisions.
Selling and administrative expenses increased $4.5 million to $171.9 million
from $167.4 million, or 2.7%. As a percent of revenue, selling and
administrative expenses decreased to 20.1% from 20.3%. Included in 1997 selling
and administrative expenses are $7.5 million of integration expenses for the
cost of combining the Company's bioproducts business with the Flavor division.
<PAGE> 8
Operating income increased $21.6 million in 1998, or 20.2%, to $128.9 million.
Operating income increased $24.1 million, or 35.2%, in the Performance Products
segment as the Flavor division was favorably impacted by acquisitions and cost
savings from the integration of the bioproducts business. Operating income in
the Natural Products segment was $56.6 million in 1998 compared to $51.1 million
in 1997, an increase of 10.7%. The increase primarily resulted from higher
volumes in the U.S. dehydrated products business.
Interest expense increased $4.4 million to $21.2 million in 1998. The increase
was primarily attributable to additional outstanding borrowings which were used
to fund fiscal 1998 acquisitions.
The effective tax rate for 1998 was 32.5% compared to 28.5% for 1997. Both years
include the benefits from settlements of prior years' issues that reduced the
effective rate 1.4% in 1998 and 5.3% in 1997. Excluding the effects of these
items the effective tax rate would have been approximately 34.0%.
Net earnings were $72.6 million in 1998 compared to $64.7 million in 1997, an
increase of 12.3%. In 1998, diluted earnings per share increased to $1.40 from
$1.26, an increase of 11.1%.
FOREIGN REVENUE (in millions)
[BAR CHART]
95 $313
96 $325
97 $324
98 $343
99 $402
LIQUIDITY AND FINANCIAL POSITION
Cash provided by operating activities was $102.5 million in 1999, $95.4 million
in 1998 and $93.7 million in 1997. The 1999 and 1998 amounts include increases
in net earnings and depreciation and amortization expense, offset by normal
increases in net operating assets.
Cash used for investing activities was $121.2 million in 1999, $133.9 million in
1998 and $129.3 million in 1997. Cash used for acquisitions was $58.4 million in
1999 and $68.7 million in 1998. The net assets of the Performance Products
segment grew significantly in 1999 and 1998 as all of the recent acquisitions
were in the Color and Flavor divisions. Capital expenditures totaled $62.6
million in 1999 and $66.1 million in 1998.
<PAGE> 9
Financing activities provided cash of $21.8 million in 1999, $39.6 million in
1998 and $35.6 million in 1997. Net additional borrowings were $69.2 million in
1999 and $75.0 million in 1998. In November 1998, the Company filed a shelf
registration statement with the Securities and Exchange Commission pursuant to
which the Company may from time to time issue debt securities of up to $300
million in the aggregate. The first transaction under the shelf registration
statement was the sale of $150 million of unsecured notes due in April 2009. The
net proceeds from the sale of the notes were used to repay existing short term
indebtedness, which was used to acquire other companies and to meet the
Company's working capital needs. The Company maintains debt levels considered
prudent based on its cash flows, interest coverage and percentage of total debt
to total capital. During 1999 and 1998, the Company repurchased 1,084,000 and
964,396 shares of treasury stock at a cost of $24.3 million and $21.8 million,
respectively.
The Company has paid uninterrupted quarterly cash dividends since commencing
public trading in its stock over thirty-six years ago. In 1999 and 1998,
dividends paid per share were $0.53.
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 2000
results.
The Company's financial position remains strong, enabling it to meet cash
requirements for operations, capital expansion programs and dividends to
shareholders.
OPERATING MARGINS
(excluding unusual items)
[BAR CHART]
95 13.0%
96 13.5%
97 13.0%
98 15.0%
99 15.8%
MARKET RISK FACTORS
The Company is exposed to market risk, including changes in interest rates,
currency exchange rates and commodity prices. To manage the volatility relating
to these exposures on a consolidated basis, the Company nets the exposures to
take advantage of natural offsets and enters into various derivative
transactions for some of the remaining exposures pursuant to the Company's
policies covering hedging practices. The financial impacts of these hedging
instruments are offset by corresponding changes in the underlying exposures
being hedged. The
<PAGE> 10
Company does not hold or issue derivative financial instruments for trading
purposes. Note 1 to the consolidated financial statements includes a discussion
of the Company's accounting policies for financial instruments.
The Company manufactures and sells its products in a number of countries
throughout the world and, as a result, is exposed to movements in foreign
currency exchange rates. The major foreign currency exposures involve the
markets in Western Europe, Mexico and Canada. The primary purpose of the
Company's foreign currency hedging activities is to protect against the
volatility associated with foreign currency sales, purchases of materials and
other assets and liabilities created in the normal course of business. The
Company utilizes forward exchange contracts with durations of generally less
than 12 months. In addition, the Company enters into forward exchange contracts
to hedge intercompany financing transactions and foreign source income. At
September 30, 1999 and 1998, unrealized gains and losses on outstanding forward
exchange contracts are not material. At September 30, 1999 and 1998, the
potential gain or loss in the fair value of the Company's outstanding forward
exchange contracts, assuming a hypothetical 10% fluctuation in the currencies of
such contracts, would be approximately $5.7 million and $5.9 million,
respectively. However, it should be noted that any change in the value of the
contracts, real or hypothetical, would be significantly offset by an inverse
change in the value of the underlying hedged items. In addition, this
hypothetical calculation assumes that each exchange rate would change in the
same direction relative to the U.S. dollar.
The Company manages its debt structure and interest rate risk through the use of
fixed-rate and floating-rate debt and through the use of derivatives. The
Company uses interest-rate swaps to hedge its exposure to interest rate changes
and also to lower its financing costs. Certain foreign currency interest rate
swaps are designated as hedges to the Company's related net foreign investments.
The Company's primary exposure is to U.S. interest rates. At September 30, 1999
and 1998, unrealized gains and losses related to interest rate swap agreements
were not material. As of September 30, 1999 and 1998, the potential gain or loss
in the fair value of the Company's outstanding interest rate swap agreements
assuming a hypothetical 10% fluctuation in the currencies and interest rates of
such contracts would be approximately $10.1 million and $2.5 million,
respectively. However, any change in the value of the contracts, real or
hypothetical, would be significantly offset by an inverse change in the value of
the underlying hedged items.
The Company is the purchaser of certain commodities such as corn, soybean meal,
molasses and fruits. The Company generally purchases these commodities based
upon market prices that are established with the vendor as part of the purchase
process. In general, the Company does not use commodity financial instruments to
hedge commodity prices due to a high correlation between the commodity cost and
the ultimate selling price of the product. On occasion, the Company may enter
into non-
<PAGE> 11
cancelable contracts, as deemed appropriate, to reduce the effect of price
fluctuations on some future manufacturing requirements.
YEAR 2000
With the new millennium approaching, organizations are examining their installed
computer systems, network elements, software applications and other business
systems to ensure that they are Year 2000 compliant. This issue occurs because
many computers and computer applications define the year using only the last two
digits. The assumption is that the first two digits are always 19. Therefore,
the year 2000 would be stored as "00" and could be mistakenly identified as 1900
by the computer. This mistake could lead to errors in calculations, comparisons,
and the sorting of data.
The Company has developed a comprehensive Project Plan ("the Plan") for
addressing the Year 2000 issue. The Plan includes the following components:
1 Vendor and system surveys, including an assessment of Company systems,
applications and business-critical third-party systems;
2 Development of action plans to remedy business critical, non-compliant
systems;
3 Implementation of those action plans;
4 System testing using multiple critical dates;
5 Creation of Year 2000 rollover and contingency plans;
6 Implementation of the Year 2000 rollover and contingency plans; and
7 Post Year 2000 strategies.
TOTAL DEBT TO TOTAL CAPITAL
[BAR CHART]
95 34.3%
96 36.9%
97 41.1%
98 45.7%
99 50.8%
The Company is implementing the Plan primarily using internal personnel. The
Company has engaged certain outside consultants with recognized expertise in
assessing and dealing with Year 2000 needs to assist in the management of the
Plan. Management of each division is responsible for identifying and fixing the
problems within its operations. Plan coordination is being overseen by the
Corporate executive staff and the Board of Directors. To date, key financial,
operational, and informational systems, including equipment with embedded
microprocessors, have been inventoried and assessed. Detailed plans have been
developed and a majority of these plans have been implemented.
<PAGE> 12
System implementation at the Company has included upgrading system code and/or
replacing hardware and upgrading or replacing current systems. The Plan also
includes an evaluation of the Company's communication systems, security systems
and other non-information technology systems for purposes of determining whether
Year 2000 issues exist. Since most of the business critical systems of the
Company have been purchased from third-party vendors, the majority of remedies
have been through upgrades. When available, written certifications of Year 2000
compliance for these systems have been obtained.
Because of the nature of implementation plans for business critical systems,
system testing activities have overlapped implementation activities. As of
September 30, 1999, systems testing has been completed. Once a system has been
tested, no upgrades or modifications will be made to that system until after
March 2000.
A critical part of the Plan involves the investigation and assessment of the
Year 2000 preparedness of important suppliers, vendors, customers, utilities and
other third parties. The Company's initial round of assessments has been
completed. Generally, these third parties have indicated that they are
progressing on schedule with their Year 2000 issues. The Company is continuing
to monitor critical suppliers and vendors and these efforts will continue
throughout the balance of 1999 in order to minimize the risk that any
significant adverse consequences will result due to the failure of these third
parties to be Year 2000 ready.
While the Company has no reason to believe that its exposure to the risks of its
failure or that of third parties to be Year 2000 ready is any greater than the
exposure to such risks that affect its competitors, generally, there can be no
assurance that the consequences of such failures would not have a material
adverse impact on the Company's operations. Although the Company does not
anticipate any major noncompliance issues, the Company believes the most likely
worst case scenario would be the temporary disruption of its business in certain
locations in the event of noncompliance by the Company or such third parties,
which could include temporary plant closings, delays in the delivery and receipt
of products and supplies, invoice and collection errors and inventory
obsolescence. The Company believes that its diverse operations and its
contingency planning should significantly reduce the adverse effect any such
disruptions may have.
The Company has developed and is implementing contingency plans to allow the
Company to continue critical operations in the event either the Company or major
key suppliers or customers fail to resolve their respective Year 2000 issues in
a timely manner. Contingency plans include stockpiling raw and packaging
materials, increasing finished goods inventory levels, developing emergency
backup and recovery procedures, securing alternate suppliers, replacing
electronic applications with manual processes or other appropriate measures.
Standardized progress reporting has been implemented for all divisions
<PAGE> 13
to report their contingency planning and remediation status to the Corporate
executive staff. The Company's Year 2000 readiness plan, including the further
development and refinement of contingency plans, is an ongoing process and will
continue to evolve and change as new information becomes available.
The cost of outside consultants to assist with software redemption and project
management has not been and is not expected to be material. During 1999, the
Company incurred capital expenditures of approximately $10.0 million as a result
of accelerating the rollout of computer operating systems and the replacement of
non-compliant process control systems in various plants. In addition, the
Company estimates that during 1999, approximately 30% of its information
technology (IT) personnel were dedicated to implementation of the Company's
Plan. The foregoing allocation of resources had no significant impact on other
IT projects as many of the planned and in process projects are normal business
system migrations that upgrade and improve the Company's current systems in
addition to resolving Year 2000 issues.
DEPRECIATION/CAPITAL EXPENDITURES (in millions)
[BAR CHART]
95 $28.2/$42.6
96 $29.2/$59.0
97 $32.4/$73.5
98 $38.0/$66.1
99 $41.3/$62.6
EURO CONVERSION
A single currency, the Euro, was introduced in Europe on January 1, 1999. Of the
fifteen member countries of the European Union, eleven adopted the Euro as their
legal currency on that date. Fixed conversion rates between the national
currencies of these eleven countries and the Euro were established on that date.
The national currencies are scheduled to remain legal tender as denominations of
the Euro during the transition period ending December 31, 2001. During this
transition period, parties may settle transactions using either the Euro or a
participating country's national currency. At the current time, the Company does
not believe that the conversion to the Euro will have a material impact on its
business or its financial condition.
OUTLOOK
This report contains forward-looking statements that reflect
management's current assumptions and estimates of future economic
circumstances, industry conditions, Company performance and financial
results, and Year 2000 compliance. The Private Securities Litigation
<PAGE> 14
Reform Act of 1995 provides a safe harbor for such forward-looking statements. A
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results. These factors and assumptions
include the pace and nature of new product introductions by the Company's
customers; execution of the Company's acquisition program; industry and economic
factors related to the Company's domestic and international business; and the
outcome of various productivity-improvement and cost-reduction efforts.
The Company seeks to increase revenue and profits through a number of strategic
actions. Strategies for growth include further penetration of existing markets
and entry into new product and geographic markets. In addition, the Company
continues to enhance its technologies and broaden its product base. The Company
has built strong relationships with market leaders in each of the industries
that its serves by providing superior technical support and service.
Universal Foods Corporation continues to seek opportunities to grow in both its
primary market, the food industry, and in non-food markets. Current non-food
applications include cosmetics, personal care products, pharmaceuticals, inks
for ink-jet printers and a variety of other products. The Company believes that
the technologies of the Performance Products segment provide the greatest
opportunities for growth in non-food applications.
The Company completed four acquisitions for its Color division during fiscal
1999. The acquisition of Pointing Holdings Ltd. has provided new opportunities
for geographic growth. The acquisition of Les Colorants Wackherr provides the
Company with an important strategic base and an enhanced line of colors and
ingredient systems for the cosmetic industry. The Company continues to broaden
its line of natural colors. The acquisition of certain assets of Quimica
Universal has enhanced the Company's capabilities in the production of annatto
and carminic acid- based products. The acquisition of the natural color business
of Nino Fornaciari fu Riccardo S.N.C. broadens and expands the Company's
offerings in anthocyanin.
Acquisitions remain an important part of the Company's overall plan for growth.
The Company continues to aggressively pursue attractive acquisition
opportunities and expects to add additional new businesses during fiscal 2000.
CONSOLIDATED STATEMENTS OF EARNINGS
[ In thousands except per share amounts ]
<TABLE>
<CAPTION>
Years ended September 30, 1999 1998 1997
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Revenue $920,192 $856,772 $825,714
Cost of products sold 599,797 556,048 551,090
Selling and administrative expenses 175,285 171,862 167,390
------- ------- -------
Operating income 145,110 128,862 107,234
Interest expense 26,034 21,185 16,798
------- ------- -------
Earnings before income taxes 119,076 107,677 90,436
Income taxes 38,938 35,033 25,748
- --------------------------------------------------------------------------------
Net earnings $ 80,138 $ 72,644 $ 64,688
------- ------- -------
Basic net earnings per common share $ 1.59 $ 1.42 $ 1.27
------- ------- -------
Diluted net earnings per common share $ 1.57 $ 1.40 $ 1.26
------- ------- -------
Average common shares outstanding - basic 50,528 51,155 51,026
------- ------- -------
Average common shares outstanding -
diluted 51,109 51,837 51,390
------- ------- -------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 15
CONSOLIDATED BALANCE SHEETS
[ Dollars in thousands except per share amounts ]
<TABLE>
<CAPTION>
September 30, 1999 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 4,645 $ 1,632
Trade accounts receivable less allowance for losses
of $4,079 and $4,548 143,435 121,833
Inventories 217,217 197,089
Prepaid expenses and other current assets 28,887 21,436
Deferred income taxes 10,386 15,765
--------- -------
Total current assets 404,570 357,755
Investments 38,269 32,400
Other assets 31,252 28,485
Intangibles-at cost, less accumulated amortization
of $47,776 and $40,533 278,309 217,007
Property, Plant and Equipment:
Cost:
Land 18,014 17,365
Buildings 154,642 138,320
Machinery and equipment 509,107 469,915
--------- -------
681,763 625,600
Less accumulated depreciation 291,455 270,021
--------- -------
390,308 355,579
- ---------------------------------------------------------------------------------
Total Assets $1,142,708 $ 991,226
--------- -------
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term borrowings $ 51,464 $ 42,773
Accounts payable and accrued expenses 140,119 122,297
Salaries, wages and withholdings from employees 16,777 15,744
Income taxes 23,849 22,066
Current maturities of long-term debt 9,484 6,940
--------- -------
Total current liabilities 241,693 209,820
Deferred income taxes 28,446 25,489
Other deferred liabilities 20,912 22,619
Accrued employee and retiree benefits 34,678 36,065
Long-term debt 385,397 291,588
Commitments and contingencies -- --
Shareholders' Equity:
Common stock par value $.10 a share, authorized
250,000,000 shares; issued 53,954,874 shares 5,396 5,396
Additional paid-in capital 74,524 74,663
Earnings reinvested in the business 470,253 416,949
Less: Treasury stock, 3,614,759 and 2,797,976 shares,
respectively, at cost 71,309 51,979
Accumulated other comprehensive income 45,278 37,845
Other 2,004 1,539
--------- -------
431,582 405,645
- ---------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,142,708 $ 991,226
--------- -------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 16
]
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Earnings Unearned Accumulated
Additional reinvested portion of other Total
[ Dollars in thousands Common paid-in in the Treasury stock restricted comprehensive comprehensive
except per share amounts ] stock capital business Shares Amount stock income income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1996 $5,396 $75,479 $333,290 3,114,016 $(49,892) $(953) $(12,354)
Net earnings 64,688 $64,688
Currency translation (11,393) (11,393)
-------
Total comprehensive income $53,295
-------
Cash dividends paid
$.52 a share (26,534)
Stock options exercised (1,513) (609,638) 9,768
Restricted stock 109 (20,800) 334 (23)
Other 1 3,718 (167)
Purchase of treasury stock 285,200 (5,785)
- -------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1997 5,396 74,076 371,444 2,772,496 (45,742) (976) (23,747)
Net earnings 72,644 $72,644
Currency translation (14,098) (14,098)
-------
Total comprehensive income $58,546
-------
Cash dividends paid -
$.53 a share (27,139)
Stock options exercised (393) (802,674) 13,672
Benefit plans 377 (100,000) 1,713
Restricted stock 128 (39,200) 734 (563)
Other 475 2,958 (560)
Purchase of treasury stock 964,396 (21,796)
- -------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1998 5,396 74,663 416,949 2,797,976 (51,979) (1,539) (37,845)
Net earnings 80,138 $80,138
Currency translation (7,433) (7,433)
-------
Total comprehensive income $72,705
-------
Cash dividends paid -
$.53 a share (26,834)
Stock options exercised (309) (207,282) 3,878
Benefit plans 64 (26,582) 482
Restricted stock 106 (39,000) 769 (465)
Other 5,647 (114)
Purchase of treasury stock 1,084,000 (24,345)
- -------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1999 $5,396 $74,524 $470,253 3,614,759 $(71,309) $(2,004) $(45,278)
------ ------- -------- --------- -------- ------- --------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 17
CONSOLIDATED STATEMENTS OF CASH FLOWS
[ Dollars in thousands ]
<TABLE>
<CAPTION>
Years ended September 30, 1999 1998 1997
Cash Flows from Operating Activities
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Net earnings $ 80,138 $ 72,644 $ 64,688
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation 41,264 38,011 32,399
Amortization 7,653 6,221 4,927
(Gain) loss on sale of property, plant and
equipment and other productive assets (2,446) (3,277) 16
Changes in operating assets and liabilities
(net of effects from acquisition of businesses):
Trade accounts receivable (10,786) (1,135) (13,351)
Inventories (11,266) (5,710) (13,418)
Prepaid expenses and other assets (3,714) (7,678) 198
Accounts payable and accrued
expenses (1,495) (22,425) 7,844
Salaries, wages and withholdings
from employees (1,573) 1,355 2,882
Income taxes (536) 7,537 2,044
Deferred income taxes 9,245 9,681 4,357
Other liabilities (3,982) 199 1,160
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 102,502 95,423 93,746
-------- -------- --------
Cash Flows from Investing Activities
Acquisition of property, plant and
equipment (62,555) (66,063) (73,502)
Acquisition of new businesses - net of
cash acquired (58,361) (68,670) (50,492)
Proceeds from sale of property, plant and
equipment and other productive assets 4,465 6,656 438
Increase in investments (4,794) (5,860) (5,719)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (121,245) (133,937) (129,275)
-------- -------- --------
Cash Flows from Financing Activities
Proceeds from additional borrowings 235,872 80,690 66,455
Reduction in debt (166,652) (5,720) (6,651)
Purchase of treasury stock (24,345) (21,796) (5,785)
Dividends (26,834) (27,139) (26,534)
Proceeds from options exercised and other
equity transactions 3,729 13,579 8,089
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 21,770 39,614 35,574
-------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents (14) (726) (2,182)
- ---------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 3,013 374 (2,137)
Cash and cash equivalents at beginning of
year 1,632 1,258 3,395
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 4,645 $ 1,632 $ 1,258
-------- -------- --------
Cash paid during the year for:
Interest $ 21,182 $ 21,372 $ 16,062
Income taxes 26,447 16,074 16,261
Liabilities assumed in acquisitions 34,868 -- 1,500
</TABLE>
See notes to consolidated financial statements.
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[ Tabular amounts in thousands except per share data ]
[ Years ended September 30, 1999, 1998 and 1997 ]
1 Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Universal Foods
Corporation and its subsidiaries ("the Company"). All significant intercompany
accounts and transactions are eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes operating revenues upon shipment of goods to customers.
Cash Equivalents
Highly liquid investments with maturities of three months or less when acquired
are considered cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost reduced by accumulated
depreciation. Depreciation is provided over the estimated useful life 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 are
being amortized using the straight-line method over periods ranging from 5 to 40
years.
<PAGE> 19
Software Costs
The Company capitalizes certain computer software and software development costs
incurred in connection with developing or obtaining computer software for
internal use in accordance with Statement of Position No. 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which was adopted by the Company in 1999. The adoption of SOP
98-1 had no material effect on the Company's financial position or results of
operations.
Capitalized costs are amortized on a straight-line basis over the estimated
useful life of the software.
Impairment of Long-lived Assets
The Company reviews long-lived assets for impairment whenever events or changes
in business circumstances indicate that the carrying amount of the assets may
not be fully recoverable. The Company performs undiscounted cash flow analyses
to determine if an impairment exists. If an impairment is determined to exist,
any related impairment loss is calculated based on fair value.
Financial Instruments
The Company uses derivative financial instruments for the purpose of hedging
currency and interest rate exposures which exist as part of ongoing business
operations. As a policy, the Company does not engage in speculative or leveraged
transactions, nor does the Company hold or issue financial instruments for
trading purposes.
Interest Rate Swap Agreements
The Company may utilize interest rate swap agreements to lower funding
costs, to diversify sources of funding or to alter interest rate exposure.
Amounts paid or received on interest rate swap agreements are deferred and
recognized as adjustments to interest expense. Gains and losses realized
upon the settlement of such contracts are deferred and amortized to
interest expense over the remaining term of the debt instrument or are
recognized immediately if the underlying instrument is settled.
Foreign Currency Contracts
The Company enters into forward and swap contracts to hedge transactions
denominated in foreign currencies in order to reduce the currency risk
associated with fluctuating exchange rates. Such contracts are used
primarily to hedge certain intercompany cash flows, purchases of certain
raw materials and finished goods, for payments arising from certain foreign
currency denominated obligations and to hedge net assets in foreign
subsidiaries. Realized and unrealized gains and losses from instruments
qualifying as hedges are deferred as part of the cost basis of the
underlying transaction. Realized and unrealized gains and losses from
foreign currency contracts used as economic hedges but not qualifying for
hedge accounting are recognized currently as income or expense.
<PAGE> 20
Translation of Foreign Currencies
For all significant foreign operations, the functional currency is the local
currency. 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 to U.S. dollars are
included as foreign currency translation adjustments in shareholders' equity.
Transaction gains and losses are included in earnings for the period.
Stock-Based Compensation
The Company accounts for its stock-based compensation plans using the intrinsic
value-based method in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25).
Earnings Per Share
In the first quarter of fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per Share," which
requires the disclosure of both diluted and basic earnings per share. Previously
reported earnings per share amounts have been restated, as necessary, to conform
to SFAS No. 128 requirements. The difference between basic and diluted earnings
per share is the dilutive effect of stock options and restricted stock. All
earnings per share amounts are presented on a diluted basis unless otherwise
noted.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The statement requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company is not
required to adopt the statement until fiscal 2001. The Company is currently
evaluating the effect that implementation of the new standard will have on its
results of operations, financial position and cash flows.
2 Acquisitions
During fiscal 1999, the Company acquired businesses for a total of $92,440,000.
The preliminary allocations of purchase price resulted in goodwill of
$70,626,000 which is being amortized on a straight-line- basis over 40 years.
The businesses acquired were:
In January 1999, the Company acquired for cash the stock of Les Colorants
Wackherr, a manufacturer of colors and ingredients for the cosmetic
industry.
<PAGE> 21
In January 1999, the Company acquired certain assets of Quimica Universal,
a manufacturer of annatto and carminic acid-based products, natural colors
primarily used in food.
In April 1999, the Company acquired the stock of Pointing Holdings Ltd., a
manufacturer of food colors, flavors and specialty chemicals. The purchase
price was a combination of cash, notes and the assumption of debt.
In July 1999, the Company acquired for cash the natural color business of
Nino Fornaciari fu Riccardo S.N.C., a worldwide supplier of anthocyanin.
During fiscal 1998, the Company acquired four businesses for cash of
$69,459,000. The allocations of purchase price resulted in goodwill of
$46,931,000 which is being amortized on a straight-line-basis over 40 years. The
businesses acquired were:
In January 1998, the Company acquired the stock of Arancia Ingredientes
Especiales, S.A. de C.V., a manufacturer of savory flavors and other food
ingredients.
In April 1998, the Company acquired the stock of DC Flavours Ltd., a
manufacturer of savory flavors and seasonings.
In May 1998, the Company acquired substantially all of the assets and
business of the beverage business of Sundi GmbH, a German flavor
manufacturer.
In September 1998, the Company acquired the stock of Reggiana Antociani
S.R.L., a manufacturer of natural colors for the food and beverage
industries.
During the second quarter of 1997, the Company acquired Tricon Colors, Inc., an
ink and dye producer, for cash of $44,492,000. The allocation of the purchase
price resulted in goodwill of $37,923,000 which is being amortized on a
straight-line-basis over 40 years.
In September 1997, the Company acquired certain assets of the food color
business of Pyosa S.A., for cash and notes aggregating $7,500,000.
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. On an unaudited pro-forma basis, the
effects of the acquisitions were not significant to the Company's results of
operations.
3 Integration Charge
In 1997, the Company recorded an integration charge of $7,500,000
($4,600,000 after tax, or $.09 per share) for the cost of combining its
<PAGE> 22
BioProducts and Flavor divisions. This charge, which is classified in selling
and administrative expenses, relates primarily to severance costs substantially
all of which were paid in 1998.
4 Inventories
Inventories include finished and in-process products totaling $159,117,000 and
$145,135,000 at September 30, 1999 and 1998, respectively, and raw materials and
supplies of $58,100,000 and $51,954,000 at September 30, 1999 and 1998,
respectively.
5 Debt
Long-term debt consists of the following obligations at September 30:
<TABLE>
<CAPTION>
1999 1998
Payable in U.S. Dollars:
<S> <C> <C>
9.06% senior notes due through July 2004 $ 29,000 $ 34,000
7.59% senior notes due through December 2008 30,000 30,000
7.06% senior notes due through December 2002 30,000 30,000
6.99% senior notes due through December 2007 40,000 40,000
6.77% senior notes due through January 2010 15,000 15,000
6.70% senior notes due through December 2009 20,000 20,000
6.68% senior notes due through January 2011 15,000 15,000
6.38% senior notes due through December 2003 20,000 20,000
6.60% notes due April 2009 148,918 --
Commercial paper and other short-term notes -- 70,000
Various mortgage notes, capital lease obligations
and other notes 6,964 4,714
Notes and credit facilities payable in foreign
currencies 39,999 19,814
-------- --------
394,881 298,528
Current maturities 9,484 6,940
- ---------------------------------------------------------------------------------------------------------
Total long-term debt $385,397 $291,588
-------- --------
</TABLE>
In November 1998, the Company filed a shelf registration statement with the
Securities and Exchange Commission pursuant to which the Company may from time
to time issue debt securities of up to $300 million in the aggregate. The first
transaction under the shelf registration statement was the issuance of $150
million in unsecured notes due April 1, 2009 with an annual stated interest rate
of 6.50% (effective rate 6.60%).
The Company has a $70,000,000 multicurrency revolving loan agreement with a
group of three 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 August 2003.
The Company issues short-term commercial paper obligations supported by
committed lines of credit included in the Revolving Loan Agreement. The
<PAGE> 23
Company also issues other short-term notes. At September 30, 1999, the Company
had $57,000,000 available under the revolving loan agreement and $78,000,000
available under uncommitted lines of credit from several banks.
At September 30, 1998, $70,000,000 of short-term borrowings were classified as
long-term debt reflecting the Company's intent and ability, through the
existence of the unused credit facility, to refinance these borrowings.
The aggregate amounts of maturities on long-term debt each year for the five
years subsequent to September 30, 1999 are as follows: 2000, $9,484,000; 2001,
$15,973,000; 2002, $15,589,000; 2003, $49,387,000, and 2004, $18,958,000.
Substantially all of the senior loan agreements contain restrictions concerning
working capital, borrowings, investments and dividends. Earnings reinvested of
$18,740,000 at September 30, 1999 were unrestricted.
Short-term borrowings consist of commercial paper, uncommitted loans and loans
to foreign subsidiaries denominated in local currencies which are borrowed under
various foreign uncommitted lines of credit. The weighted average interest rates
on short-term borrowings were 6.04% and 5.75% at September 30, 1999 and 1998,
respectively. This includes $70,000,000 reclassified to long-term debt on
September 30, 1998.
6 Financial Instruments and Risk Management
Foreign Currency 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, 1999
and 1998, the Company had forward exchange contracts, generally with maturities
of one year or less, of $73,939,000 and $65,709,000, respectively.
The Company has foreign currency and related interest rate swap agreements which
were executed to reduce the Company's borrowing costs and serve as hedges of the
Company's net assets in foreign subsidiaries, principally those denominated in
Euros. At September 30, 1999 and 1998, the notional principal amounts of these
agreements were $90,175,000 and $15,175,000, respectively. Aggregate maturities
are $75,000,000 in 2000 and $15,175,000 in 2008. The notional amount is used to
calculate interest payments which are exchanged over the life of the swap
transaction and is equal to the amount of foreign currency or dollar principal
exchanged at maturity. Net unrealized gains and losses associated with the
Company's foreign currency contracts as of September 30, 1999 and 1998 were not
material.
<PAGE> 24
Concentrations of Credit Risk
Counterparties to currency exchange and interest rate swap contracts 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 amount of cash and cash equivalents, trade receivables,
investments, financial instruments, accounts payable and short-term borrowings
approximated fair value as of September 30, 1999 and 1998.
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, 1999 and 1998 was approximately $383,357,000 and $314,669,000,
respectively.
7 Shareholders' Equity
On April 9, 1998, the Company declared a 2-for-1 stock split in the form of a
100% stock dividend, which was distributed on May 22, 1998, to shareholders of
record on May 6, 1998.
On June 25, 1998, the Board of Directors declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of common stock, par
value of $.10 per share, of the Company. The dividend was paid on August 6,
1998, to the stockholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series A Participating Cumulative Preferred Stock, without par value (the
"Preferred Share"), of the Company at a price of $125 per one one-thousandth of
a Preferred Share, subject to adjustment. The Right becomes exercisable and
tradable 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 $250 worth of Company
common stock for $125. 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 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 on which a person or group
acquires beneficial ownership of 20% or more of the Company's common stock. The
Rights expire on September 30, 2008. The Rights replace rights issued under a
prior rights plan, which were redeemed on August 6, 1998.
<PAGE> 25
The Company is authorized to issue 250,000 shares of cumulative preferred stock,
of which 100,000 shares are classified as Series A Participating Cumulative
Preferred Stock and were initially reserved for issuance under the Rights plan.
8 Stock Plans
In January 1998, the shareholders approved the 1998 Stock Option Plan. Under the
1998 Plan up to 2,400,000 shares of common stock are available for awards, of
which no more than 600,000 shares may be restricted stock. The Company may also
issue up to 2,400,000 shares of common stock pursuant to the exercise of stock
options or the grant of restricted stock under the 1994 Employee Stock Plan.
Under the 1994 Plan, up to 500,000 shares may be awarded as restricted stock.
Generally, stock options become exercisable over a three year vesting period and
expire 10 years from the date of grant. Awarded shares of restricted stock
become freely transferable at the end of 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. The 1994 Plan
also authorizes the grant of up to 800,000 stock appreciation rights (SARs) in
connection with stock options.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the Company's stock option plans. If the Company had elected
to recognize compensation cost based on the fair value of the options granted at
grant date as prescribed by SFAS No. 123, net earnings and earnings per common
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Pro forma net earnings $78,225 $71,120 $63,626
Pro forma net earnings per common share:
Basic $ 1.55 $ 1.39 $ 1.25
Diluted 1.53 1.37 1.24
</TABLE>
The pro forma effect on net earnings is not representative of the pro forma
effect on net earnings in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1996.
The weighted-average fair value per share of options granted was $6.21 in 1999,
$3.83 in 1998 and $3.90 in 1997.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- -------------------------------------------------------------------------
Dividend yield 2.3% 2.5% 2.6%
Volatility 24% 19% 19%
Risk-free interest rate 5.8% 4.2% 5.8%
Expected term (years) 6 5 5
</TABLE>
<PAGE> 26
The changes in outstanding stock options during the three years ended September
30, 1999 are summarized below:
<TABLE>
<CAPTION>
Shares Weighted
Outstanding average
options Available price
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Balances at September 30, 1996 3,880 1,112 $15.56
Granted 685 (685) 18.71
Restricted stock -- (28) 20.09
Exercised (648) -- 13.68
Cancelled (121) 121 16.81
- ----------------------------------------------------------------------------------------
Balances at September 30, 1997 3,796 520 16.43
Authorized under the 1998 Plan -- 2,400 --
Granted 600 (600) 20.79
Restricted stock -- (42) 21.56
Exercised (867) -- 15.01
Cancelled (146) 146 17.80
- ----------------------------------------------------------------------------------------
Balances at September 30, 1998 3,383 2,424 17.61
Granted 621 (621) 22.37
Restricted stock -- (39) 22.19
Exercised (237) -- 16.16
Cancelled (43) 43 20.39
- ----------------------------------------------------------------------------------------
Balances at September 30, 1999 3,724 1,807 $18.52
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Weighted
Options average
exercisable price
<S> <C> <C>
September 30, 1997 2,462 $15.75
September 30, 1998 2,208 $16.46
September 30, 1999 2,555 $17.07
</TABLE>
The following summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
<CAPTION>
Range of exercise price
<S> <C> <C> <C>
$12.06- $16.16- $20.51-
16.15 20.50 23.50
- ---------------------------------------------------------------------------------------------------------
Number outstanding 999 1,555 1,170
Weighted average remaining contractual life, in years 5.6 5.8 9.2
Weighted average exercise price $15.36 $17.88 $22.08
- ---------------------------------------------------------------------------------------------------------
Number exercisable 999 1,368 188
Weighted average exercise price $15.36 $17.73 $21.40
</TABLE>
<PAGE> 27
9 Retirement Plans
The Company 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 based on a percentage (6% each of the last three years) of each
employee's compensation. Total expense for the Company's defined contribution
plans was $8,001,000, $6,746,000 and $6,984,000 in 1999, 1998 and 1997,
respectively.
10 Other Postretirement Benefits
The Company provides certain health insurance benefits to eligible domestic
retirees and their dependents. In 1997, the Company implemented programs
intended to mitigate rising costs, including adopting a provision that limits
its future obligation to absorb health care cost inflation. The amendment
resulted in an unrecognized prior service gain of $4,318,000 which is being
amortized over the employees average remaining service life. The Company funds
benefit costs on a pay-as-you- go basis, with retirees paying a portion of the
costs.
The funded status of the postretirement benefit plan at September 30 was:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 13,120 $ 13,290
Service cost 415 418
Interest cost 859 966
Benefits paid (1,106) (622)
Actuarial gain (398) (932)
- --------------------------------------------------------------------------------
Benefit obligation at end of year 12,890 13,120
Plan assets -- --
- --------------------------------------------------------------------------------
Funded status (12,890) (13,120)
Unrecognized prior service cost (7,395) (7,943)
Unrecognized net actuarial gain (10,777) (10,874)
- --------------------------------------------------------------------------------
Net amount recognized $ (31,062) $(31,937)
--------- --------
</TABLE>
Components of net periodic benefit cost were:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
Service cost $ 415 $ 418 $ 419
Interest cost 859 966 959
Amortization of prior service cost (548) (548) (548)
Recognized actuarial gain (506) (425) (441)
- ----------------------------------------------------------------------------------
Postretirement benefit expense $ 220 $ 411 $ 389
----- ----- -----
</TABLE>
The weighted average discount rates used in determining the accumulated
postretirement benefit obligation at September 30, 1999 and 1998 were 7.25% and
6.75%, respectively. The health care cost trend rates were assumed to be 7.75%
in 1999 and 8.50% in 1998, gradually declining to 5.5% by the year 2002 and
remaining at that level thereafter.
<PAGE> 28
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1% 1%
increase decrease
- --------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost 100 (92)
components
Effect on postretirement benefit obligation 890 (827)
</TABLE>
11 Income Taxes
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Currently payable:
Federal $14,524 $12,831 $10,556
State 3,385 3,195 3,192
Foreign 11,784 9,509 8,171
Deferred (benefit):
Federal 7,070 8,640 3,426
State 1,108 1,059 403
Foreign 1,067 (201) --
- --------------------------------------------------------------------------------
$38,938 $35,033 $25,748
------ ------ ------
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
Deferred tax assets:
Benefit plans $(16,988) $(18,501)
Liabilities and reserves (4,875) (9,417)
Other (17,551) (16,393)
------- -------
Gross deferred tax assets (39,414) (44,311)
Valuation allowance 14,307 13,697
------- -------
Total deferred tax assets (25,107) (30,614)
------- -------
Deferred tax liabilities:
Property, plant and equipment 24,839 21,867
Other 18,328 18,471
------- -------
Total deferred tax liabilities 43,167 40,338
- --------------------------------------------------------------------------------
Net deferred tax liabilities $ 18,060 $ 9,724
------- -------
</TABLE>
<PAGE> 29
The effective tax rate differs from the statutory Federal income tax rate of 35%
as described below:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Taxes at statutory rate 35.0% 35.0% 35.0%
State income taxes, net of Federal income tax benefit 2.5 2.6 2.6
Tax credits (4.2) (3.9) (4.6)
Settlements of prior years' issues (1.2) (1.4) (5.3)
Other, net 0.6 0.2 0.8
- --------------------------------------------------------------------------------
Effective tax rate 32.7% 32.5% 28.5%
---- ---- ----
</TABLE>
The effective tax rates reflect the reversal of tax accruals no longer required
resulting from settlement of prior years' issues. The effective tax rates would
have been 33.9%, 33.9% and 33.8%, in 1999, 1998 and 1997, respectively excluding
the favorable impact of these items.
Earnings before income taxes are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
United States $ 85,656 $ 81,311 $67,960
Foreign 33,420 26,366 22,476
- --------------------------------------------------------------------------------
$119,076 $107,677 $90,436
------- ------- ------
</TABLE>
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.
12 Segment and Geographic Information
In 1999, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 131 "Disclosures about Segments of an Enterprise and Related Information."
This statement establishes standards for the reporting of financial information
about a company's operating segments for both interim and annual reporting. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on operating income of the respective business units before goodwill
amortization, interest expense and income taxes. Total revenue and operating
income by business segment and geographic region include both sales to
customers, as reported in the Company's consolidated statements of earnings, and
intersegment sales, which are accounted for at prices which approximate market
prices and are eliminated in consolidation. Corporate and other revenue consist
primarily of flavor and color products sold by the Asia Pacific division.
Assets by business segment and geographic region are those assets used in
company operations in each segment and geographic region. Corporate and other
assets consist primarily of property, investments and goodwill. Capital
expenditures are reported exclusive of acquisitions.
Segment Information The Company's operations, except for the Asia Pacific
division, are managed on a products and services basis. The Company's two
reportable segments are Performance Products and Natural
<PAGE> 30
Products. The Company's Performance Products segment produces flavor and color
products that impart a desired taste, smell or color to a broad range of
consumer products. The Natural Products segment produces yeast and dehydrated
vegetable products which are used by manufacturers of various food products.
<TABLE>
<CAPTION>
Performance Natural Corporate
Products Products and Other Consolidated
1997
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Revenue from external
customers $492,158 $289,959 $43,597 $ 825,714
Intersegment revenue 21,047 4,362 -- 25,409
------- ------- ------ -------
Total revenue 513,205 294,321 43,597 851,123
Operating income 68,347 51,092 (12,205) 107,234
Interest expense -- -- 16,798 16,798
Earnings before income taxes 68,347 51,092 (29,003) 90,436
Assets 414,852 209,671 263,206 887,729
Capital expenditures 39,261 32,467 1,774 73,502
Depreciation and amortization 20,455 10,275 6,596 37,326
Restructuring/integration costs 7,500 -- -- 7,500
1998
Revenue from external
customers $511,214 $300,633 $44,925 $ 856,772
Intersegment revenue 30,390 10,417 -- 40,807
------- ------- ------ -------
Total revenue 541,604 311,050 44,925 897,579
Operating income 92,403 56,567 (20,108) 128,862
Interest expense -- -- 21,185 21,185
Earnings before income taxes 92,403 56,567 (41,293) 107,677
Assets 462,310 234,491 294,425 991,226
Capital expenditures 42,158 20,586 3,319 66,063
Depreciation and amortization 22,571 13,501 8,160 44,232
1999
Revenue from external
customers $572,370 $301,238 $ 46,584 $ 920,192
Intersegment revenue 33,778 10,075 -- 43,853
------- ------- ------ -------
Total revenue 606,148 311,313 46,584 964,045
Operating income 101,953 60,503 (17,346) 145,110
Interest expense -- -- 26,034 26,034
Earnings before income taxes 101,953 60,503 (43,380) 119,076
Assets 529,757 232,228 380,723 1,142,708
Capital expenditures 40,437 16,623 5,495 62,555
Depreciation and amortization 25,144 13,926 9,847 48,917
</TABLE>
Geographic Information
The Company has manufacturing plants or sales offices in North and South
America, Europe, Asia, Australia and Africa.
<PAGE> 31
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------
Revenue from
external customers
U.S.A. $518,455 $513,828 $501,457
Europe 229,679 172,292 158,759
Asia Pacific 47,156 45,017 55,831
Other 124,902 125,635 109,667
- -----------------------------------------------------------------------------
Consolidated $920,192 $856,772 $825,714
------- ------- -------
Long-lived assets
U.S.A. $375,529 $351,774 $334,003
Europe 279,675 202,667 146,122
Asia Pacific 8,258 7,697 8,525
Other 74,676 71,333 56,831
- -----------------------------------------------------------------------------
Consolidated $738,138 $633,471 $545,481
------- ------- -------
</TABLE>
13 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.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
[ Years ended September 30, 1999, 1998 and 1997 ]
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
<PAGE> 32
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.
/s/ Kenneth P. Manning /s/ Michael Fung
Kenneth P. Manning Michael Fung
Chairman, President and Vice President and
Chief Executive Officer Chief Financial Officer
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, 1999 and 1998, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended September 30, 1999. 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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1999 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
November 11, 1999
<PAGE> 33
FIVE YEAR REVIEW
<TABLE>
<CAPTION>
[Dollars in thousands
except per share data] 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Revenue $ 920,192 100.0% $ 856,772 100.0% $ 825,714 100.0% $ 806,352 100.0% $ 792,971 100.0%
Cost of products sold 599,797 65.2 556,048 64.9 551,090 66.7 533,260 66.1 518,194 65.3
Selling and administrative
expenses 175,285 19.0 171,862 20.1 167,390 20.3 164,186 20.4 171,914 21.7
Unusual items -- -- -- -- -- -- 25,000 3.1 (26,847) (3.4)
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income 145,110 15.8 128,862 15.0 107,234 13.0 83,906 10.4 129,710 16.4
Interest expense 26,034 2.9 21,185 2.4 16,798 2.0 15,266 1.9 15,107 1.9
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 119,076 12.9 107,677 12.6 90,436 11.0 68,640 8.5 114,603 14.5
Income taxes 38,938 4.2 35,033 4.1 25,748 3.2 24,435 3.0 48,500 6.2
- -----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 80,138 8.7% $ 72,644 8.5% $ 64,688 7.8% $ 44,205 5.5% $ 66,103 8.3%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Net earnings per common
share:
Basic $ 1.59 $ 1.42 $ 1.27 $ .86 $ 1.27
Diluted 1.57 1.40 1.26 .85 1.26
------------------------------------------------------------------------------------------------------
OTHER RELATED DATA
Earnings per common share
excluding unusual items:
Basic $ 1.59 $ 1.42 $ 1.27 $ 1.18 $ 1.09
Diluted 1.57 1.40 1.26 1.17 1.09
Dividend per common share,
declared and paid .53 .53 .52 .50 .48
Average shares outstanding:
Basic 50,527,998 51,155,000 51,025,542 51,596,964 52,122,538
Diluted 51,109,097 51,836,577 51,389,997 51,936,078 52,338,578
Book value per common share $ 8.60 $ 7.95 $ 7.45 $ 6.93 $ 6.95
Price range per common share 19.44-27.75 18.72-25.44 15.94-20.69 14.00-20.50 13.06-17.44
Share price at September 30 22.94 20.88 20.13 16.25 17.44
Research and development
expenditures 29,533 29,413 31,510 29,824 28,558
Capital expenditures 62,555 66,063 73,502 59,012 42,562
Depreciation 41,264 38,011 32,399 29,178 28,206
Amortization 7,653 6,221 4,927 4,341 6,435
Total assets 1,142,708 991,226 887,729 780,472 776,870
Long-term debt 385,397 291,588 252,526 196,869 160,678
Shareholders' equity 431,582 405,645 380,451 350,966 361,780
Return on average
shareholders' equity 19.2% 18.4% 17.5% 12.2% 18.5%
Total debt to total capital 50.8% 45.7% 41.1% 36.9% 34.3%
Employees 4,252 4,196 4,127 4,035 4,104
</TABLE>
The 1997 results include a pretax charge of $7.5 million for integrating two
divisions.
The 1996 results include pretax charges of $25 million relating to adopting SFAS
No. 121 and restructuring costs.
The 1995 results include a net pretax gain of $26.8 million relating to the sale
of the Frozen Foods business, the cost of discontinuing a product line and other
items.
<PAGE> 34
QUARTERLY DATA
[Dollars in thousands except per share amounts]
<TABLE>
<CAPTION>
[ Unaudited ] Earnings Earnings
Gross Net per share per share
Revenue profit earnings basic diluted
1999
<S> <C> <C> <C> <C> <C>
First Quarter $217,535 $75,688 $16,875 $.33 $.33
Second Quarter 219,914 76,137 19,032 .38 .37
Third Quarter 236,556 81,979 20,726 .41 .41
Fourth Quarter 246,187 86,591 23,505 .47 .46
1998
First Quarter $208,889 $71,882 $15,271 $.30 $.30
Second Quarter 205,015 72,441 17,354 .34 .33
Third Quarter 214,506 74,994 19,174 .37 .37
Fourth Quarter 228,362 81,407 20,845 .41 .40
</TABLE>
COMMON STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
Market price Dividends
High Low per share
1999
<S> <C> <C> <C>
First Quarter $27.75 $19.44 $.1325
Second Quarter 27.38 20.00 .1325
Third Quarter 23.63 20.06 .1325
Fourth Quarter 23.56 20.13 .1325
1998
First Quarter $21.47 $18.72 $.1325
Second Quarter 24.69 20.38 .1325
Third Quarter 25.44 21.88 .1325
Fourth Quarter 24.00 20.06 .1325
</TABLE>
<PAGE> 1
EXHIBIT 21
<TABLE>
<S> <C>
Universal Foods Corporation and Subsidiaries
Universal Foods Corporation
Universal Foods Canada, Inc. Canada
Universal Foods Foreign Sales Corporation Virgin Islands
Universal Holding, Inc. Nevada
Universal Foods Corporation - Ireland Ireland
Universal Health Care Management Company Wisconsin
Universal Foods (UK) Limited United Kingdom
Universal Foods Holding Sarl (Luxembourg) Luxembourg
Universal Foods (Luxembourg) Sarl Luxembourg
UF Holdings (Malta) Limited Malta
Universal Holdings Cayman Cayman
Universal Foods Holding Deutschland GmbH Germany
Min-Dak North Dakota
Yeast Industries Company Jordan
General Milling Corporation Philippines
Universal Foods Products Int'l Co. Ltd. Costa Rica
Red Star De Peru Peru
Leviatan Y Universal CIA Guatemala
Productos Alimenticios Nacionales, SA Costa Rica Costa Rica
Industrias Mexicana De Aliamentos SA Mexico
Levadura Azteca SA De CV Mexico
Universal Flavor Corporation Delaware
Universal Flavors Canada, Incorporated Canada
Universal Flavors International, Incorporated Indiana
Universal Flavors SARL France
DGF Universal Fragrances, S.A . Spain
Universal Flavors Belgium N.V. Belgium
Universal Flavors SRL Italy
Universal Flavors Mexico S.A. de C.V. Mexico
DGF - Universal Fragrances Mexico S.A. de C.V. Mexico
Flavor Burst, Inc. Illinois
Flavor Burst Co. Indiana
Biolux Finance S.A. (Biofin) Belgium
U.F. Biolux S.A. Belgium
Red Star BioProducts (Anciennement Vitalevor) S.A.S. France
Promavil S.A. Belgium
Red Star BioProducts Limited United Kingdom
Universal Flavors Limited United Kingdom
D.C. Flavours Limited United Kingdom
Sundi Aromen Distribution GmbH Germany
Sundi Aromen GmbH Germany
Warner-Jenkinson Universal Foods B.V. Netherlands
Warner-Jenkinson (Canada) Limited Canada
Tricon Colors, LLC New Jersey
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Warner-Jenkinson Company, Inc. New York
Warner-Jenkinson S.A. de C.V. Mexico
Warner-Jenkinson Europe Limited United Kingdom
Warner-Jenkinson Europe SARL France
Reggiana - Warner Jenkinson S.r.l. Italy
Warner - Jenkinson S.A. Argentina
SCI Cesar France
SCI Griseda France
Warner Jenkinson Europe GmbH Germany
Warner Jenkinson Europe - Goldmann Geschaftsfuhrungs GmbH Germany
Warner Jenkinson Europe - Goldmann GmbH & Co KG Germany
Universal Foods S.A.S. France
Financiere Wackherr France
Les Colorants Wackherr France
LCW do Brasil Brazil
LCW Polska Poland
LCW Iberica Spain
Pointing Holdings Limited United Kingdom
Pointing Chemicals Limited United Kingdom
Dinoval Chemicals Limited United Kingdom
Pointing Limited United Kingdom
Dinoval Chemicals UK Limited United Kingdom
Pointing International Limited United Kingdom
Pointing (SA) (Pty.) Limited South Africa
Pointing Color Inc. Minnesota
Monarch Food Colour L.P. Missouri
Pointing Canada Limited Canada
Pointing Mexico S.A. de C.V. Mexico
Antociani Italia S.r.l. Italy
Ratina Partecipation Luxembourg Luxembourg
Inter Agro U.S.A., Inc. New York
Universal Dehydrates Ltd. Ireland
Freshfield Foods Ltd. Ireland
Rogers Foods, Inc. California
Universal Dehydrates B.V. Netherlands
Universal Foods Limited United Kingdom
Universal Dehydrates France SARL France
Hecon Groningen B.V. Netherlands
Universal Foods Corporation (Asia Pacific) Pte. Ltd. Singapore
Universal Flavors (Thailand), Ltd. Thailand
Universal Foods Corporation (Australia) Pty. Ltd. Australia
Universal Foods Corporation (Japan) Japan
Universal Flavors (Philippines), Inc. Philippines
Universal Foods Corporation (China) Ltd. Hong Kong
Pointing Asia Limited Hong Kong
Pointing Hodgsons Pty. Limited Australia
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 1 to Registration
Statements No. 33-34555 and 33-55437, Registration Statements No. 33-27356,
333-35877 and 333-45931 of Universal Foods Corporation on Form S-8 and
Registration Statement No. 333-67015 of Universal Foods Corporation on Form S-3
of our reports dated November 11, 1999, appearing in and incorporated by
reference in this Annual Report on Form 10-K of Universal Foods Corporation for
the year ended September 30, 1999.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
December 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 4,645
<SECURITIES> 0
<RECEIVABLES> 147,514
<ALLOWANCES> 4,079
<INVENTORY> 217,217
<CURRENT-ASSETS> 404,570
<PP&E> 681,763
<DEPRECIATION> 291,455
<TOTAL-ASSETS> 1,142,708
<CURRENT-LIABILITIES> 241,693
<BONDS> 385,397
0
0
<COMMON> 5,396
<OTHER-SE> 426,186
<TOTAL-LIABILITY-AND-EQUITY> 1,142,708
<SALES> 920,192
<TOTAL-REVENUES> 920,192
<CGS> 599,797
<TOTAL-COSTS> 599,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 431
<INTEREST-EXPENSE> 26,034
<INCOME-PRETAX> 119,076
<INCOME-TAX> 38,938
<INCOME-CONTINUING> 80,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,138
<EPS-BASIC> 1.59
<EPS-DILUTED> 1.57
</TABLE>
