UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10 - K
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996
______________________________
IBP, inc.
DELAWARE CORPORATION 42-0838666
(State of Incorporation) (Employer Identification Number)
IBP AVENUE
POST OFFICE BOX 515
DAKOTA CITY, NE 68731
(Address) (Zip Code)
Telephone Number: (402) 494-2061
_________________________________________________
Securities registered pursuant to section 12(g) of Act:
Common Stock Registered with the New York
Stock Exchange and the Pacific
Stock Exchange.
Registrant has filed all reports required to be filed by
Section 13 or 15(d) of the Security Exchange Act of 1934 during
the preceding 12 months, and has been subject to such filing
requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is contained in definitive Proxy Statement
incorporated by reference in Part III of this Form 10-K.
The aggregate market value of the registrant's common
stock held by non-affiliates (91,808,349 shares) based on the New
York Stock Exchange average bid and ask price on March 24, 1997,
was approximately $2.24 billion.
As of March 24, 1997, the registrant had outstanding
92,067,635 shares of its common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1996 Annual Report to
Stockholders (the "Annual Report") are incorporated by reference
in Parts I, II and IV of this Report. Portions of the
registrant's definitive Proxy Statement dated March 24, 1997,
(the "Proxy Statement") are incorporated by reference in Part III
of this Report. Other documents incorporated by reference in
this Report are listed in the Exhibit Index on page 13.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
General
IBP, inc., ("IBP") a Delaware corporation, principally
produces fresh beef and pork products. IBP's primary products
include boxed beef and fresh pork which are marketed mainly in
the United States to grocery chains, meat distributors,
wholesalers, retailers, restaurant and hotel chains, and
processors who produce cured and smoked products, such as bacon,
ham, luncheon meats and sausage items. IBP also produces
inedible allied products, such as hides and other items used to
manufacture products such as leather, animal feed and
pharmaceuticals, and edible allied products, which include
variety meat items.
IBP operates an extensive sales network to service its
customers with regional sales and service centers in the United
States (including an independently-owned contractor in Los
Angeles that is licensed to use IBP trademarks) as well as
service centers in foreign countries. The mailing address of
IBP's corporate headquarters is IBP Avenue, Post Office Box 515,
Dakota City, Nebraska 68731-0515; its telephone number is (402)
494-2061. All references to "IBP" include IBP, inc. and its
subsidiaries.
IBP operates 12 fed beef carcass production facilities in
eight cattle-producing states and Canada, which reduce live
cattle to dressed carcass form. Eight of these locations include
processing facilities which conduct fabricating operations to
produce boxed beef. IBP also operates four cow boning facilities
in Iowa, Nebraska and Texas, which reduce cows and bulls to
dressed carcass form and boneless meat product. Fed beef
consists primarily of young steers and heifers specifically
raised for beef consumption. Cows and bulls processed by IBP are
primarily breeding or dairy stock which have been culled for
various reasons.
IBP operates seven pork facilities in Indiana, Iowa and
Nebraska that include carcass production and processing of fresh
pork products employing a production process similar to that
employed in its beef operation.
On March 25, 1997, IBP entered into an Agreement and Plan
of Merger (the "Merger Agreement") among the company, IBP Sub,
Inc. - a Delaware corporation and a wholly-owned subsidiary of
IBP (the "Purchaser"), and FoodBrands America, Inc., a Delaware
corporation ("Foodbrand"), providing for the acquisition of
Foodbrand by IBP. Pursuant to the Merger Agreement, and subject
to the terms and conditions therein, the Purchaser will commence a
tender offer (the "Tender Offer") for any and all outstanding
shares of common stock, par value $.01 per share, of Foodbrand
(the "Common Stock") at a price of $23.40 per share net to the
seller in cash. Upon consummation of the Tender Offer, the
Merger Agreement contemplates that the Purchaser will be merged
with and into Foodbrand (the "Merger"), with Foodbrand being the
surviving corporation and becoming a wholly-owned subsidiary of
IBP. At the effective time of the Merger, each outstanding share
of Common Stock (other than shares held by IBP, Foodbrand or their
respective subsidiaries and other than shares the holders of which
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have validly perfected their dissenters rights under Delaware law)
shall be cancelled and become the right to receive $23.40 per share
in cash.
Concurrently with the execution and delivery of the Merger
Agreement, Joseph Littlejohn & Levy, L.P., a Delaware limited
partnership, and Joseph Littlejohn & Levy Fund II, L.P., a Delaware
limited partnership (together, "JLL"), entered into a Tender
Agreement dated as of March 25, 1997 (the "JLL Tender Agreement")
among JLL, IBP and the Purchaser whereby JLL has agreed to tender
all of their shares of Common Stock in the Tender Offer. Concurrently
with the execution and delivery of the Merger Agreement, The Airlie
Group, L.P., a Delaware limited partnership ("Airlie"), entered
into a Tender Agreement dated as of March 25, 1997 (the "Airlie
Tender Agreement") among Airlie, IBP and the Purchaser whereby Airlie
has agreed to tender a number of shares which, when taken together
with the number of shares of Common Stock (i) beneficially owned by
IBP or its subsidiaries and (ii) which IBP or its affiliates have the
right to acquire from JLL pursuant to the JLL Tender Agreement, would
cause IBP or its affiliates to beneficially own 49.9% of the aggregate
voting power represented by the issued and outstanding capital stock
of Foodbrand. In addition, each of JLL and Airlie has granted to the
Purchaser an option to purchase shares of Common Stock upon certain
circumstances, and each of JLL and Airlie has agreed to vote in favor
of the Merger Agreement, the Merger and the transactions contemplated
therein and to oppose any other acquisition proposal and to vote
against any such acquisition proposal.
The following table reflects the approximate percentages
of revenues during the last three fiscal years from IBP's
principal product categories, all of which are within one
industry segment:
1996 1995 1994
---- ---- ----
Processed Beef Products 62% 64% 66%
Beef Carcasses (1) 4 5 4
Processed Pork Products 20 17 17
Beef And Pork Allied Products 14 14 13
--- --- ---
100% 100% 100%
=== === ===
(1) Represents beef carcasses sold to third parties that are not
used in IBP's processing operation.
History of IBP's Business
IBP was first incorporated in 1960. It began operations
in 1961 with a single fed beef carcass production facility
located near Denison, Iowa, in what was then the nation's major
cattle-producing region. IBP grew in the Northern and Central
Plains states over the following nine years and added beef plants
in Dakota City, Nebraska; Emporia, Kansas; Luverne, Minnesota;
and West Point, Nebraska. IBP expanded into the Southern Plains
in 1975, when it built its Amarillo, Texas, facility near the
large commercial feedlot operations of that region. In 1976, it
moved into the Pacific Northwest through the acquisition and
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expansion of plants in Pasco, Washington, and Boise, Idaho.
Company expansion continued in 1980 with construction of a
facility in Finney County, Kansas, and in 1983 with the purchase
and expansion of a plant in Joslin, Illinois. In 1990, IBP opened
its Lexington, Nebraska, fed beef plant and in 1994 IBP
purchased Lakeside Farm Industries, Ltd. ("Lakeside"), an
agribusiness company with a fed beef plant in Brooks, Alberta,
Canada, IBP's first plant outside of the United States.
IBP began its cow boning operations in 1995 by acquiring
facilities in Tama, Iowa; Gibbon, Nebraska; and Sealy, Texas. In
1996, IBP acquired its fourth cow boning facility in Palestine,
Texas. The plants will supplement IBP's expansion into hamburger
patty production.
IBP began pork operations in 1982 when it purchased,
expanded and commenced operation of a pork facility in Storm
Lake, Iowa. Additional pork facilities were added in 1986 in
Louisa County, and Council Bluffs, Iowa; in 1987 in Madison,
Nebraska; in 1989 in Perry, Iowa; in 1990 in Waterloo, Iowa; and
in 1993 in Logansport, Indiana. In 1994 IBP constructed ham
processing facilities at its Council Bluffs, Iowa, and Madison,
Nebraska, locations. The ham facilities are operated by the
Consumer Products Division.
In 1995, IBP's newly formed Allied Group entered into a
joint venture with Sand Livestock Systems, Inc. of Columbus,
Nebraska, and China's Shandong Province to develop a fully
integrated pork production operation in China. Plans tentatively
call for the joint venture to begin production in 1998.
In 1994, the Consumer Products Division purchased Prepared
Foods, Inc. from International Multifoods, Inc. Prepared Foods,
Inc. is a wholly-owned subsidiary of IBP with a plant in Santa
Teresa, New Mexico. In 1995 the Consumer Products Division
purchased and renovated a facility in Columbia, South Carolina,
for processing fresh meat into value-added, consumer-ready
items. The Santa Teresa, New Mexico, plant, the Columbia, South
Carolina, plant and the cooked meats facility connected to the
Waterloo, Iowa, pork facility process fresh meat into value-added,
consumer-ready items.
In August 1981, when it was acquired by Occidental
Petroleum Corporation ("Occidental"), IBP was a publicly-held
corporation that was listed on the New York Stock Exchange (the
"NYSE"). From August 1981 to October 1987, IBP was a wholly-owned
subsidiary of Occidental. In October 1987, IBP sold 49.5%
of its common stock and was again listed on the NYSE.
On September 4, 1991, Occidental offered all of its shares
of IBP Common Stock to its stockholders and certain standby
underwriters in an underwritten rights offering. As a result of
this transaction, Occidental no longer owns any shares of IBP
Common Stock.
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Operations
Cattle and Hog Supplies
IBP does not currently raise cattle or hogs in the United
States. IBP's Canadian subsidiary, Lakeside, has cattle feeding
facilities, other agricultural divisions and a beef carcass
production and boxed beef processing facility. In 1996,
Lakeside's feedlots provided approximately 19% of that facility's
live cattle needs. IBP's main supply of live cattle and hogs is
purchased by IBP buyers who are trained to select high quality
animals that are candidates for higher yields. IBP's buyers
purchase cattle and hogs on a daily basis, generally a few days
before the animals are required for production, and live animals
are generally held in IBP's holding pens for only a few hours.
Production Process
IBP's fed beef carcass production facilities reduce live
fed cattle to dressed carcass form and process allied products,
and its processing facilities conduct fabricating operations to
produce boxed beef. IBP's fed carcass and beef processing
facilities operated in 1996 at approximately 85% and 88%,
respectively, of their production capacities.
IBP's cow boning facilities produce beef trimmings and
boneless cuts of beef that are sold to customers who produce
hamburger, sausage and deli meats. IBP's cow boning facilities
operated in 1996 at approximately 70% of their production
capacity.
IBP's pork facilities produce fresh boxed pork for
shipment to retailers and also produce pork bellies, hams and
boneless picnic meat for shipment to customers who further
process the pork into bacon, cooked hams, luncheon meats and
sausage items. In 1996, IBP's pork plants operated at
approximately 68% of their production capacity.
Throughout production, edible beef, cow boning and pork
allied products, such as variety meat items, are segregated and
prepared for shipment or further refinement. Inedible beef, cow
boning and pork products derived from processing operations are
used in the manufacture of leather, animal feed, gelatin,
pharmaceuticals and cosmetics.
Eight of IBP's fed beef and cow boning plants include hide
treatment facilities. The majority of the hides from IBP's other
fed beef and cow boning plants are transported to these
facilities, which include brine curing operations and, in four
locations, chrome hide tanneries. The chrome tanning process
produces a semifinished product that is shipped to leather good
manufacturers worldwide. Brine-cured hides are sold to other
tanneries. IBP is the largest chrome tanner of cattle hides in
the United States.
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Consumer Products Division
Management believes that significant opportunities exist
for the sale of value-added, consumer-ready products as consumer
acceptance of such products grows and packaging technology
improves. Currently, the Consumer Products Division produces
cooked meats for food service customers and other consumer-ready
products. The Consumer Products Division is continually
exploring the potential for additional consumer-ready products.
Facilities
The corporate headquarters of IBP are located primarily in
Dakota City, Nebraska, with some facilities in Dakota Dunes,
South Dakota. IBP has recently begun construction of a new
corporate headquarters in Dakota Dunes, South Dakota that is
expected to be completed in the Fall of 1997. IBP believes that
its plants are among the most modern in the world and strives to
maintain and enhance its facilities. Generally, plants and
additions are designed and constructed by IBP's personnel. IBP
considers its existing plants and equipment to be in excellent
condition. IBP's capital spending for 1997 is expected to be in
the range of $200 million, which includes expenditures for
environmental compliance activities. Its principal plants as of
December 28, 1996, are described below.
Beef
IBP's eleven United States fed beef carcass production
facilities are located in the states of Idaho, Illinois, Iowa,
Kansas, Minnesota, Nebraska, Texas and Washington. IBP's twelfth
fed beef carcass production facility is in Alberta, Canada. At
these locations, eight have processing facilities, eight have
hide treatment or tanning operations, five have cold storage
freezer operations and one has a tallow refining plant. IBP's
cow boning facilities are located in Iowa, Nebraska and Texas.
Pork
IBP's seven pork carcass production and seven processing
facilities are located in the states of Indiana, Iowa and
Nebraska. At these locations, four have cold storage freezer
operations and two have skinning operations.
Consumer Products
IBP's cooked meats facilities are in Iowa, New Mexico and
South Carolina. IBP's two ham processing facilities are located
next to pork facilities in Iowa and Nebraska.
Sales and Distribution
IBP's customers include domestic and international grocery
chains, meat distributors, wholesalers, retailers, restaurant and
hotel chains, and meat processors who produce cured and smoked
products, such as bacon, ham, luncheon meat and sausage items.
Most sales are made pursuant to daily orders as opposed to long-term
supply contracts. In each of the past three years, IBP's
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largest beef customer accounted for less than 5% of its annual
beef gross sales, and its largest pork customer accounted for
less than 7% of its annual pork gross sales. For the same
periods, IBP's largest customer for beef and pork combined
accounted for less than 5% of its annual gross product sales.
Most IBP products are shipped by trucks, generally from
plants located closest to the purchaser, although other plants
may supplement such deliveries, depending upon prevailing
supplies and product demand.
IBP sells to international customers through foreign and
domestic sales offices. In fiscal 1996, export sales accounted
for approximately 13% of IBP's net sales, which compares to
approximately 14% in fiscal 1995 and 13% in fiscal 1994.
Some allied products are sold as commodities in bulk,
while other items are trimmed, boxed and frozen by IBP. Cattle
hides are sold for both domestic and international use. Uncured
and brine-cured hides are sold to tanneries for further
processing. Chrome-tanned hides are sold to tanneries and
directly to further processors of leather.
Competition
The industry in which IBP operates is highly competitive
and characterized by very small margins. IBP considers its
principal competition to come from domestic producers of fresh
beef and pork products although IBP also competes with other
suppliers of protein, including other red meats, poultry,
seafood, grain, dairy products, eggs, soya and other protein
products. Competition exists both in the purchase of live cattle
and hogs and in the sale of beef and pork products. The
principal competitive element in both buying and selling is
price.
Failure to accurately assess the quality of cattle and
hogs can result in (i) the payment of an excessive price if the
livestock yields less than expected or (ii) the failure to bid a
price sufficiently high to purchase high quality livestock. To
effectively compete in the purchase of cattle, a cattle buyer
must be able to accurately judge the yield and quality of the
cattle to establish a fair price to the producer. As part of
IBP's cattle buying process, each cattle buyer prepares an
estimate by lot of the yield and quality of the cattle purchased.
IBP's information systems prepare a report on each lot that
compares the actual yield and quality to the buyer's initial
estimate. This enables IBP to monitor the quality of various
cattle producers and to measure the skill of its cattle buyers,
which are critical factors in determining IBP's success and
competitiveness.
IBP's hog buyers generally purchase hogs based upon an
average daily bid price. The average daily bid price is adjusted
for each producer by tracking the producer's yield and quality
results. From the results of the producer's prior sales, IBP is
able to generate a discount or a premium which adjusts the
average daily bid for that individual producer. IBP believes
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this purchasing system is one of the most advanced and accurate
methods for establishing fair prices in the industry.
In addition to price, product quality, product mix,
location and service are important competitive elements in the
sale of fresh beef and pork products.
IBP is the largest producer of fresh beef and pork
products in the United States. IBP believes that its two largest
beef competitors in 1996 were ConAgra, Inc. ("ConAgra") and Excel
Corporation, a subsidiary of Cargill, Inc. It believes that its
largest pork competitors in 1996 were Smithfield, ConAgra and
Hormel.
Employees
As of December 28, 1996, IBP had approximately 34,000
employees. Whenever possible, production employees are recruited
locally and trained by IBP for specific tasks.
IBP considers its relations with its employees at its
plants to be good. Approximately 10,000 hourly employees at
seven of IBP's 28 production facilities are represented by labor
organizations. The labor contracts applicable to these plants
expire as follows:
Contract Expiration
Plant Union Date
- --------------------- ------------- --------------------
Amarillo, Texas Teamsters (1) April 1998
Pasco, Washington Teamsters (1) May 1999
Tama, Iowa Teamsters (1) January 2001
Dakota City, Nebraska UFCW(2) August 1999
Joslin, Illinois UFCW(2) December 2000
Perry, Iowa UFCW(2) April 1999
Waterloo, Iowa UFCW(2) September 1998
_________________
(1) Teamsters local unions affiliated with The International
Brotherhood of Teamsters, Chauffeurs, Warehousemen, and
Helpers of America.
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(2) United Food and Commercial Workers, International Union,
AFL-CIO.
Regulatory Matters
IBP's operations are subject to the constant inspection
and regulation of the United States Department of Agriculture
(the "USDA"), including (i) regulations of the USDA's Packers and
Stockyards Administration, (ii) continuous in-plant inspection of
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IBP's production facilities (along with each live animal, each
carcass and all edible products) by USDA employees to ensure
compliance with USDA standards and (iii) grading of beef
carcasses by USDA employees.
IBP is subject to federal, state and local laws and
regulations governing environmental protection, which require
significant expenditures to maintain compliance. IBP believes
that it is in substantial compliance with such laws and
regulations. IBP is not aware of any violations of, or pending
changes in, such laws and regulations that are likely to result
in material penalties or material increases in compliance costs.
IBP incurred $4 million in capital expenditures for environmental
control facilities in fiscal 1996 and anticipates capital
expenditures of approximately $22 million for such facilities in
fiscal 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Age at Positions With IBP and
January 27, Five-Year Employment
Name 1997 History
- ------------------------ ---------- -----------------------------
Richard L. Bond 49 President -- Fresh Meats
since 1995; 1994-1995
Executive Vice President --
Beef; 1989-1994 Group Vice
President -- Beef Sales and
Marketing; 1982-1989 Vice
President -- Boxed Beef
Sales and Marketing
Kenneth W. Browning, Jr. 47 Executive Vice President
since 1996; 1989-1996
Senior Vice President --Hide
Division; 1982-1989 Vice
President -- Hides
Lonnie O. Grigsby 57 Executive Vice President
and General Counsel since
1995; Secretary since 1985;
1988-1995 Executive Vice
President -- Finance &
Administration; General
Counsel 1985-1990 and since
1993; 1987-1988 Senior Vice
President; 1985-1987 Vice
President
Craig J. Hart 41 Vice President --
Controller since 1995;
1993-1995 Assistant Vice
President, Controller;
1990-1993 Controller
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David C. Layhee 52 President -- Consumer
Products since 1995; 1994-
1995 Executive Vice President
-- Design Products; 1989-1994
Group Vice President -- Design
Products; 1983-1989 Group
Vice President -- Sales &
Marketing
Eugene D. Leman 54 President -- Allied Group
since 1995; Director since
1989; 1986-1995 Executive
Vice President -- Pork
Division; 1981-1986 Group
Vice President -- Pork
Division
James V. Lochner 44 Executive Vice President --
Technical Services/
Engineering since 1995;
1993-1995 Senior Vice
President -- Technical
Services; 1989-1993 Vice
President -- Technical
Services; 1986-1989
Assistant Vice President
Quality Control -- Beef;
1984-1986 Director --
Quality Control
Charles F. Mostek 49 Executive Vice President --
Fresh Meats Sales and
Marketing since 1995; 1989-
1995 Vice President -- Beef
Sales; 1985-1989 Vice
President -- Slaughter
Division Sales; 1981-1985
Assistant Vice President --
Carcass Grading and
Administration
Robert L. Peterson 64 Chairman of the Board of
Directors since 1981; Chief
Executive Officer since
1980; Director since 1976;
1979-1995 President
Kenneth L. Rose 52 Executive Vice President --
Operations Services since
1995; 1989-1995 Senior Vice
President -- Logistics
Services; 1982-1989 Vice
President -- Transportation
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Jerry S. Scott 51 Executive Vice President --
Fresh Meats Operations
since 1995; 1986-1995 Vice
President -- Pork
Operations
Larry Shipley 41 Executive Vice President --
Corporate Development since
1995; 1995 Senior Vice
President -- Corporate
Development; 1994-1995
Assistant to the Chairman;
1989-1994 Assistant to the
President.
ITEM 3. LEGAL PROCEEDINGS
Incorporated by reference from the Annual Report, page
19, section entitled "Notes to Consolidated Financial
Statements," at note "J. Commitments and Contingencies."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of IBP's security
holders during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference from Annual Report, page 13,
section entitled "Consolidated Statements of Changes in
Stockholders' Equity"; from page 19, section entitled "Notes to
Consolidated Financial Statements," at note "K. Quarterly
Financial Data (Unaudited)"; and from page 21, section entitled
"Stockholders and Market Data." The Annual Report is an exhibit
to this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from Annual Report, page 22,
section entitled "Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Incorporated by reference from the Annual Report, pages
20-21, section entitled "Management's Discussion and Analysis."
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from the Annual Report, pages
9-23, sections entitled "Consolidated Financial Statements,"
"Notes to Consolidated Financial Statements" and "Report of
Independent Accountants."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Incorporated by reference from the Proxy Statement, page
11, section entitled "INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS."
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Proxy Statement,
pages 2-4, section entitled "ELECTION OF DIRECTORS" and
reference is also made to the information regarding executive
officers set forth in "EXECUTIVE OFFICERS OF THE REGISTRANT" in
Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Proxy Statement,
pages 7-10, section entitled "SUMMARY COMPENSATION TABLE";
"OPTION GRANTS TABLE," "AGGREGATED OPTION EXERCISES AND YEAR-END
OPTION VALUE TABLE," "PERFORMANCE GRAPH," and from pages 4-5,
section entitled "ELECTION OF DIRECTORS," subsection
"Information Regarding Director's Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference from the Proxy Statement,
pages 2 and 5, sections entitled "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF MANAGEMENT."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Proxy Statement,
pages 4-5, sections entitled "ELECTION OF DIRECTORS," subsection
"Information Regarding the Board of Directors and its Committees"
and from page 7, section entitled "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
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(a) Documents filed as part of this report.
The following financial information is
incorporated by reference from the
Annual Report, as identified below, or
is found in this report.
1. Consolidated Financial Statements Location
--------------------------------- ---------------------
Report of Independent Accountants Annual Report, page
23 and pages 17 and
18 of this report
Consolidated Statements of Earnings Annual Report, page 9
Consolidated Balance Sheets Annual Report, pages
10-11
Consolidated Statements of Cash Flows Annual Report, page
12
Consolidated Statements of Changes Annual Report, page
in Stockholders' Equity 13
Notes to Consolidated Financial Annual Report, pages
Statements 14-19
2. Financial Statement Schedule
----------------------------
Reports of Independent Accountants on Financial
Statement Schedules
Schedule II Valuation and Qualifying Accounts and
Reserves
All other schedules are omitted because they are not
applicable or not required.
3. Exhibits
--------
2.1 Agreement and Plan of Merger, dated as of March 25,
1997, among IBP, IBP Sub, Inc. and Foodbrands
America, Inc.
2.2 Tender Agreement dated as of March 25, 1997 among
IBP, IBP Sub, Inc., Joseph Littlejohn & Levy, L.P.
and Joseph Littlejohn & Levy Fund II, L.P.
2.3 Tender Agreement dated as of March 25, 1997 among
IBP, IBP Sub, Inc. and The Airlie Group, L.P.
3.1 Restated Certificate of Incorporation of IBP.
3.2 Restated By-laws of IBP.
10.5* IBP's 1987 Stock Option Plan (filed as Exhibit No.
28(a) to IBP's Registration Statement on Form S-8,
dated January 5, 1988, File No. 33-19441)
(Executive Compensation Plan).
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10.5.1* Form of Stock Option Agreement (10/1/87) (filed as
Exhibit No. 28(b) to IBP's Registration Statement
on Form S-8, dated January 5, 1988, File No. 33-19441).
10.5.2* Form of Stock Option Agreement (12/31/87) (filed
as Exhibit No. 28(c) to IBP's Registration
Statement on Form S-8, dated January 5, 1988, File
No. 33-19441).
10.5.3* IBP Officer Long-Term Stock Plan (filed as Exhibit
No. 10.5.3 to the Annual Report on Form 10-K of
IBP for the fiscal year ended December 25, 1993,
File No. 1-6085).
10.5.4* IBP Directors Stock Option Plan (filed as Exhibit
No. 10.5.4 to the Annual Report on Form 10-K of
IBP for the fiscal year ended December 25, 1993,
File No. 1-6085).
10.5.5* IBP 1993 Stock Option Plan (filed as Exhibit No.
10.5.5 to the Annual Report on Form 10-K of IBP
for the fiscal year ended December 25, 1993, File
No. 1-6085).
10.5.6 1996 Officer Long-Term Stock Plan.
10.5.7 1996 Stock Option Plan.
10.14* Form of IBP's Indemnification Agreement with
officers and directors (filed as Exhibit No. 10.18
to IBP's Registration Statement on Form S-1, dated
August 19, 1987, File No. 1-6085).
10.21* Credit Agreement (Revolving/Term Credit Facility)
dated as of December 21, 1995, between IBP, inc.
and various lenders with First Bank National
Association as Administrative Agent and Bank of
America National Trust and Savings Association as
Co-Agent.
10.23* Intercompany Agreement, dated as of September 4,
1991, between IBP and Occidental Petroleum
Corporation (filed as Exhibit No. 10.23 to the
Annual Report on Form 10-K of IBP for the fiscal
year ended December 28, 1991, File No. 1-6085).
10.24 Employment Agreement, effective as of December 22,
1995, between IBP and Jerry S. Scott.
10.25* Employment Agreement, effective as of March 1,
1995, between IBP and Richard L. Bond.
10.26* Employment Agreement, effective as of March 1,
1995, between IBP and Eugene D. Leman.
10.27* Employment Agreement, effective as of March 1,
1995, between IBP and David C. Layhee.
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10.28* Text of Retirement Income Plan of IBP, inc. (As
Amended and Restated Effective as of January 1,
1992), as amended. (Executive Compensation Plan)
(filed as Exhibit No. 10.28 to the Annual Report
on Form 10-K of IBP for the fiscal year ended
December 26, 1992, File No. 1-6085).
10.29* Employment Agreement, effective January 1, 1993,
between IBP and Dale Tinstman (filed as Exhibit
No. 10.29 to the Annual Report on Form 10-K of IBP
for the fiscal year ended December 25, 1993, File
No. 1-6085).
11. Statement regarding computation of earnings per
share.
13. 1996 Annual Report to Stockholders.
16.* Letter regarding change in certifying accountant.
21. Subsidiaries of IBP, inc. as of December 28, 1996.
22.* Matters submitted to vote of security holders
(filed as Item 4 to the Quarterly Report on Form
10-Q for the 26 weeks ended June 29, 1996, File
No. 1-6085).
23.1 Consent of Independent Public Accountants (Coopers
& Lybrand L.L.P.).
23.2 Consent of Independent Public Accountants (Price
Waterhouse LLP).
99.1 Press release of IBP dated March 26, 1997.
__________________
* Incorporated herein by reference
(b) Reports on Form 8-K
Not Applicable.
(c) Other Matters
With the exception of the information expressly referenced
and thereby incorporated in ITEMS 3, 5, 6, 7 and 8, the Annual
Report is not to be deemed "filed" with the Securities and
Exchange Commission or otherwise subject to the liabilities of
Section 18 of the Securities and Exchange Act of 1934.
For the purpose of complying with the amendments to the
rules governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, IBP hereby undertakes as follows, which
undertaking shall be incorporated by reference into IBP's
Registration Statement on Form S-8 No. 33-19441 (filed January 5,
1988):
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of IBP pursuant to the foregoing
-15-
provisions, or otherwise, IBP has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by IBP of expenses incurred or paid by a
director, officer or controlling person of IBP in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, IBP will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
-16-
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of IBP, inc.
Our report on the consolidated financial statements of IBP, inc.
has been incorporated by reference in this Form 10-K from page 23 of
the 1996 Annual Report to Stockholders of IBP, inc. In connection with
our audits of such financial statements, we have also audited the
related financial statement schedule as of December 28, 1996 and December
30, 1995 and for the years then ended listed in Item 14(a)2 of this Form
10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
January 24, 1997
-17a-
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
FINANCIAL STATEMENT SCHEDULE
----------------------------
To the Board of Directors of
IBP, inc.
Our audits of the consolidated financial statements referred to in our
report dated February 3, 1995 appearing on page 23 of the 1994 Annual
Report to Stockholders of IBP, inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report
on Form 10-K) also included an audit of the Financial Statement Schedule
at December 31, 1994 and for the fiscal year then ended listed in item
14(a)2 of this Annual Report on Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 3, 1995
-17b-
IBP, inc. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AND RESERVES
Fiscal Years 1994, 1995 and 1996
(In thousands)
Allowance
for Doubtful
Accounts
------------
Balance, December 25, 1993 $4,198
Amounts charged to costs and expenses 4,852
Recoveries of amounts previously
written off 89
Write-off of uncollectible accounts (552)
Other 810
-----
Balance, December 31, 1994 9,397
Amounts charged to costs and expenses 478
Recoveries of amounts previously
written off 106
Write-off of uncollectible accounts (508)
Other 21
-----
Balance, December 30, 1995 9,494
Amounts charged to costs and expenses 379
Recoveries of amounts previously
written off 115
Write-off of uncollectible accounts (112)
Other (3)
-----
Balance, December 28, 1996 $9,873
=====
-18-
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, thereto duly authorized.
IBP, inc.
By: /s/ Robert L. Peterson
------------------------
Robert L. Peterson
Chairman of the Board
and Chief Executive Officer
Date: 03/27/97
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
- ------------------------- ------------------------ ---------
/s/ Robert L. Peterson Chairman of the Board 03/27/97
- ---------------------- and Chief Executive ---------
Robert L. Peterson Officer (principal
executive officer)
/s/ Larry Shipley Executive Vice 03/27/97
- ---------------------- President - Corporate ---------
Larry Shipley Development (principal
financial officer)
/s/ Craig J. Hart Vice President and 03/27/97
- ---------------------- Controller ---------
Craig J. Hart
/s/ Richard L. Bond Director 03/27/97
- ---------------------- ---------
Richard L. Bond
/s/ John S. Chalsty Director 03/24/97
- ---------------------- ---------
John S. Chalsty
/s/ Wendy L. Gramm Director 03/24/97
- ---------------------- ---------
Wendy L. Gramm
-19-
Signature Title Date
- ------------------------ ----------------- --------
/s/ David C. Layhee Director 03/27/97
- ------------------------ ---------
David C. Layhee
/s/ Eugene D. Leman Director 03/27/97
- ------------------------ ---------
Eugene D. Leman
/s/ Martin A. Massengale Director 03/22/97
- ------------------------ ---------
Martin A. Massengale
/s/ JoAnn R. Smith Director 03/21/97
- ------------------------ ---------
JoAnn R. Smith
/s/ Dale C. Tinstman Director 03/21/97
- ------------------------ ---------
Dale C. Tinstman
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 94,164
<SECURITIES> 169,476
<RECEIVABLES> 510,654
<ALLOWANCES> 9,873
<INVENTORY> 299,700
<CURRENT-ASSETS> 1,110,585
<PP&E> 1,513,716
<DEPRECIATION> 697,510
<TOTAL-ASSETS> 2,174,495
<CURRENT-LIABILITIES> 604,131
<BONDS> 260,008
0
0
<COMMON> 4,750
<OTHER-SE> 1,198,905
<TOTAL-LIABILITY-AND-EQUITY> 2,174,495
<SALES> 12,538,753
<TOTAL-REVENUES> 12,538,753
<CGS> 12,095,550
<TOTAL-COSTS> 12,095,550
<OTHER-EXPENSES> 120,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,373
<INCOME-PRETAX> 319,535
<INCOME-TAX> 120,800
<INCOME-CONTINUING> 198,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,735
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.06
</TABLE>
Exhibit 11
IBP, inc. and SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 28, 1996 (52 WEEKS),
DECEMBER 30, 1995 (52 WEEKS) AND DECEMBER 31, 1994 (53 WEEKS)
(In thousands except per share data)
1996 1995 1994
---- ---- ----
FINANCIAL STATEMENT COMPUTATIONS:
Earnings before extraordinary item $198,735 $280,112 $182,289
Extraordinary item - (22,189) -
------- ------- -------
Net earnings $198,735 $257,923 $182,289
======= ======= =======
PRIMARY EARNINGS PER SHARE:
Shares used in this computation:
Weighted average shares outstanding 94,688 94,745 94,870
Dilutive effect of shares under
employee stock plans 1,944 1,926 1,293
------ ------ ------
Common and common equivalent shares 96,632 96,671 96,163
====== ====== ======
Primary earnings per share:
Earnings before extraordinary item $2.06 $2.90 $1.90
Extraordinary item - (.23) -
---- ---- ----
Net earnings $2.06 $2.67 $1.90
==== ==== ====
FULLY-DILUTED EARNINGS PER SHARE:
Shares used in this computation:
Weighted average shares outstanding 94,688 94,745 94,870
Dilutive effect of shares under
employee stock plans 2,002 2,274 1,496
------ ------ ------
Common and common equivalent shares 96,690 97,019 96,366
====== ====== ======
Fully-diluted earnings per share:
Earnings before extraordinary item $2.06 $2.89 $1.89
Extraordinary item - (.23) -
---- ---- ----
Net earnings $2.06 $2.66 $1.89
==== ==== ====
Selected Financial Data
(in thousands except per share data)
Fiscal Year Ended
December December December December December
28, 30, 31, 25, 26,
1996 1995 1994(1) 1993 1992
OPERATIONS:
Net sales $12,538,753 $12,667,562 $12,075,427 $11,671,397 $11,128,405
Gross profit 443,203 604,068 460,109 258,666 236,791
Selling,
general and
administrative
expense 120,295 123,972 112,772 84,197 76,349
Earnings from
operations 322,908 480,096 347,337 174,469 160,442
Interest expense,
net (3,373) (20,784) (38,448) (43,212) (51,826)
Earnings before
income taxes,
extraordinary
item and
accounting
change 319,535 459,312 308,889 131,257 108,616
Income taxes 120,800 179,200 126,600 53,800 45,000
Extraordinary
loss (2) - (22,189) - - -
Accounting
change (3) - - - 12,626 -
Net earnings 198,735 257,923 182,289 90,083 63,616
PER SHARE DATA:
Earnings per
share:
Earnings before
extraordinary
item and
accounting
change $2.06 $2.90 $1.90 $ .81 $ .67
Extraordinary loss - (.23) - - -
Accounting change - - - .13 -
Net earnings 2.06 2.67 1.90 .94 .67
Dividends per share .10 .10 .10 .10 .15
FINANCIAL CONDITION:
Working capital $ 506,454 $ 427,241 $ 359,238 $ 336,668 $ 329,727
Total assets 2,174,495 2,027,601 1,865,463 1,538,907 1,499,427
Long-term
obligations 260,008 260,752 361,760 460,723 510,900
Stockholders'
equity 1,203,655 1,022,939 780,494 612,796 534,077
(1) 53-week year.
(2) Extraordinary loss on early extinguishment of debt.
(3) Cumulative effect of change in accounting for income taxes.
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
December 28, December 30,
1996 1995
ASSETS ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 94,164 $ 116,277
Marketable securities 169,476 63,851
Accounts receivable, less allowance for
doubtful accounts of $9,873 and $9,494 500,781 529,796
Inventories (Note B) 299,700 303,711
Deferred income tax benefits (Note E) 42,364 51,482
Prepaid expenses 4,100 3,773
--------- ---------
TOTAL CURRENT ASSETS 1,110,585 1,068,890
PROPERTY, PLANT AND EQUIPMENT, at cost (Note F):
Land and land improvements 99,765 95,217
Buildings and stockyards 385,328 374,988
Equipment 860,712 802,466
--------- ---------
1,345,805 1,272,671
Less accumulated depreciation (697,510) (632,666)
--------- ---------
648,295 640,005
Construction in progress 167,911 86,854
--------- ---------
816,206 726,859
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $121,644 and $113,301 206,587 208,434
Other 41,117 23,418
--------- ---------
247,704 231,852
--------- ---------
$2,174,495 $2,027,601
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note D) $ 509,520 $ 548,934
Federal and state income taxes 83,484 81,817
Deferred income taxes (Note E) 8,115 7,916
Other 3,012 2,982
--------- ---------
TOTAL CURRENT LIABILITIES 604,131 641,649
LONG-TERM OBLIGATIONS (Notes C and F) 260,008 260,752
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes (Note E) 68,026 69,079
Other 38,675 33,182
--------- ---------
106,701 102,261
COMMITMENTS AND CONTINGENCIES (Note J)
STOCKHOLDERS' EQUITY (Note G):
Preferred stock, 25,000,000 shares
authorized; none issued
Common stock, $.05 par value per share;
authorized 200,000,000 shares; issued
95,000,000 shares 4,750 4,750
Additional paid-in capital 427,456 432,726
Retained earnings 779,199 589,936
Currency translation adjustments (32) 116
Treasury stock at cost, 372,780 and 253,252
shares (7,718) (4,589)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,203,655 1,022,939
--------- ---------
$2,174,495 $2,027,601
========= =========
See notes to consolidated financial statements.
-1-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share data)
53 Weeks
52 Weeks Ended Ended
December 28, December 30, December 31,
1996 1995 1994
----------- ----------- -----------
Net sales (Note A) $12,538,753 $12,667,562 $12,075,427
Cost of products sold 12,095,550 12,063,494 11,615,318
---------- ---------- ----------
Gross profit 443,203 604,068 460,109
Selling, general and
administrative expense 120,295 123,972 112,772
---------- ---------- ----------
Earnings from operations 322,908 480,096 347,337
Interest:
Incurred (19,536) (38,551) (45,124)
Capitalized 6,813 9,039 3,957
Income 9,350 8,728 2,719
---------- ---------- ----------
(3,373) (20,784) (38,448)
---------- ---------- ----------
Earnings before income taxes
and extraordinary item 319,535 459,312 308,889
Income taxes (Note E) 120,800 179,200 126,600
---------- ---------- ----------
Earnings before extraordinary
item 198,735 280,112 182,289
Extraordinary loss on early
extinguishment of debt,
less applicable taxes
(Note F) - (22,189) -
---------- ---------- ----------
Net earnings $ 198,735 $ 257,923 $ 182,289
========== ========== ==========
Earnings per share:
Earnings before extraordinary
item $2.06 $2.90 $1.90
Extraordinary item - (.23) -
---- ---- ----
Net earnings $2.06 $2.67 $1.90
==== ==== ====
See notes to consolidated financial statements.
-2-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands except per share data)
Common Stock Additional Currency
Par Paid-In Retained Translation Treasury
Shares Value Capital Earnings Adjustments Stock
Balances, ------ ------ --------- -------- ----------- --------
December 25, 1993 47,500 $2,375 $441,959 $168,695 $ - $ (233)
Net earnings 182,289
Dividends declared,
$.10 per share (9,492)
Treasury shares
purchased (8,928)
Treasury shares
delivered under
employee stock
plans (2,392) 7,295
Foreign currency
translation
adjustments (1,074)
Balances, ------ ----- ------- ------- ----- -----
December 31, 1994 47,500 2,375 439,567 341,492 (1,074) (1,866)
Net earnings 257,923
Dividends declared,
$.10 per share (9,479)
Additional shares
issued in two-
for-one stock
split effected
in the form of
a stock dividend
(Note G) 47,500 2,375 (2,375)
Treasury shares
purchased (13,441)
Treasury shares
delivered under
employee stock
plans (4,466) 10,718
Foreign currency
translation
adjustments 1,190
Balances, ------ ----- ------- ------- ----- -----
December 30, 1995 95,000 4,750 432,726 589,936 116 (4,589)
Net earnings 198,735
Dividends declared,
$.10 per share (9,472)
Treasury shares
purchased (15,405)
Treasury shares
delivered under
employee stock
plans (5,270) 12,276
Foreign currency
translation
adjustments (148)
Balances, ------ ----- ------- ------- ------ ------
December 28, 1996 95,000 $4,750 $427,456 $779,199 $ (32) $(7,718)
====== ===== ======= ======= ====== ======
See notes to consolidated financial statements.
-3-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
53 Weeks
52 Weeks Ended Ended
Dec. 28, Dec. 30, Dec. 31,
1996 1995 1994
----------- ----------- ----------
Inflows (outflows)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $198,735 $ 257,923 $ 182,289
Adjustments to reconcile net earnings
to cash flows from operations:
Depreciation and amortization 82,690 92,539 63,443
Deferred income tax provision (benefit) 7,500 (11,600) (16,800)
Extraordinary loss on
extinguishment of debt - 22,189 -
Net changes in:
Accounts payable and accrued
liabilities (57,976) 60,943 143,997
Accounts receivable 28,950 (14,336) (32,811)
Inventories 3,912 (58,705) (6,179)
Other adjustments, net 4,167 2,127 4,962
--------- -------- --------
69,243 93,157 156,612
Net cash flows provided by --------- -------- --------
operating activities 267,978 351,080 338,901
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (1,043,180) (576,167) (156,307)
Proceeds from disposals of marketable
securities 922,051 588,591 80,000
Capital expenditures (170,664) (160,626) (83,868)
Payment for stock of new subsidiaries,
net of cash acquired - - (51,973)
Other investing activities, net 1,944 2,188 860
Net cash flows used in investing --------- -------- --------
activities (289,849) (146,014) (211,288)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in borrowings under
revolving credit agreements (200,000) 250,000 (25,661)
Proceeds from issuance of long-term
debt 197,878 - -
Net change in checks in process of
clearance 22,520 (18,135) 82,333
Dividends paid (9,473) (9,484) (9,495)
Principal payments on long-term
obligations (615) (350,761) (111,766)
Premiums paid on early retirement of debt - (35,420) -
Other financing activities, net (10,626) (9,767) (3,991)
Net cash flows used in financing --------- -------- --------
activities (316) (173,567) (68,580)
Effect of exchange rate on cash and --------- -------- --------
cash equivalents 74 549 -
Net change in cash and cash --------- -------- --------
equivalents (22,113) 32,048 59,033
Cash and cash equivalents at beginning
of year 116,277 84,229 25,196
Cash and cash equivalents at end --------- -------- --------
of year $ 94,164 $ 116,277 $ 84,229
========= ======== ========
See notes to consolidated financial statements.
-4-
IBP, inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 28, 1996 (52 weeks), DECEMBER 30, 1995
(52 weeks) AND DECEMBER 31, 1994 (53 weeks)
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION - In 1981, IBP, inc. (IBP)
became a wholly-owned subsidiary of Occidental Petroleum Corporation
(Occidental) through a reorganization and plan of merger. The
accompanying financial statements include the assets, liabilities and
stockholders' equity of IBP, after giving effect to the allocation of
Occidental's acquisition cost to the net assets acquired, as determined
under the purchase method of accounting. Occidental no longer controls
IBP nor has any person acquired control of IBP.
NATURE OF OPERATIONS AND INDUSTRY SEGMENT INFORMATION - IBP's
operations relate to the meat packing industry and primarily involve
cattle and hog slaughter, beef and pork fabrication and related allied
product processing activities. The company also produces precooked
meats for the retail and food service industries. IBP's customers
include food retailers, distributors, wholesalers, restaurant and hotel
chains, other food processors and leather makers, as well as
manufacturers of pharmaceuticals and animal feeds. Management
considers its operations to comprise one industry segment.
PRINCIPLES OF CONSOLIDATION - All subsidiaries are wholly-owned
and are consolidated in the accompanying financial statements. All
material intercompany balances, transactions and profits have been
eliminated.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
FISCAL YEAR - IBP's fiscal year ends on the last Saturday of the
calendar year.
EXPORT SALES - In 1996, 1995 and 1994, net export sales,
principally to customers in Asia and also to destinations in Canada,
Mexico and Europe, amounted to $1.7 billion, $1.8 billion and $1.5
billion, respectively.
STATEMENT OF CASH FLOWS - For purposes of the statement of cash
flows, management considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents. Such investments are carried at cost, which approximates
fair value.
DERIVATIVE FINANCIAL INSTRUMENTS - To manage interest rate and
currency exposures, the company uses interest rate swaps and currency
forward contracts. IBP specifically designates interest rate swaps as
hedges of debt instruments and recognizes interest differentials as
adjustments to interest expense in the period they occur. Gains and
losses related to foreign currency hedges of firmly committed
transactions are deferred and are recognized in income when the hedged
transaction occurs.
-5-
MARKETABLE SECURITIES - These securities are classified as
available for sale, are highly liquid and are purchased and sold on a
short-term basis as part of IBP's management of working capital. Such
securities consist of auction market preferred stock, which management
does not intend to hold more than one year, and tax-exempt securities
and commercial paper with maturities of less than one year. Marketable
securities are carried at cost, which approximates fair value.
INVENTORIES - Inventories are valued on the basis of the lower of
first-in, first-out cost or market.
PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided for
property, plant and equipment on the straight-line method over the
estimated useful lives of the respective classes of assets as follows:
Land improvements..................8 to 20 years
Buildings and stockyards..........10 to 40 years
Equipment..........................3 to 12 years
Management adjusted its estimate of salvage value for most fixed
assets during 1995 to better reflect actual experience. This
adjustment increased cost of products sold by approximately $18
million.
Leasehold improvements, included in the equipment class, are
amortized over the life of the lease or the life of the asset,
whichever is shorter.
CAPITAL LEASES - Lease arrangements entered into by IBP that
constitute capital lease obligations are capitalized at the present
value of future lease payments. The values assigned to leased assets
are included in property, plant and equipment and accounted for
accordingly. Amortization of leased assets is included in depreciation
and amortization expense. The capital lease obligations are amortized
over the lease terms as payments are made.
ENVIRONMENTAL LIABILITIES - Environmental expenditures are
accrued, except to the extent costs can be capitalized, based on
estimates of known environmental remediation exposures. Such accruals
are made even if some uncertainties exist over the ultimate cost of the
remediation processes.
GOODWILL - Goodwill is amortized on a straight-line basis over
periods ranging from 15 years to 40 years. Management reviews goodwill
as well as other long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.
FOREIGN CURRENCY TRANSLATION - The translation of foreign currency
into U.S. dollars is performed for balance sheet accounts using the
current exchange rate in effect at the balance sheet date and for
revenue and expense accounts using the average exchange rate during the
period. The gains or losses resulting from translation are included
in stockholders' equity. Exchange adjustments resulting from foreign
currency transactions, which were not material in any of the years
presented, are generally recognized in net earnings.
-6-
EARNINGS PER SHARE - Earnings per share for the years 1996, 1995
and 1994 were calculated using average common and common equivalent
shares of 96,632,000, 96,671,000 and 96,163,000, respectively.
RECLASSIFICATIONS - Certain reclassifications have been made to
prior financial statements to conform to the current year presentation.
B. INVENTORIES:
Inventories are comprised of the following:
December 28, December 30,
1996 1995
----------- -----------
(In thousands)
Held for sale:
Beef products $169,068 $185,500
Pork products 39,913 34,788
Other 8,460 8,478
------- -------
217,441 228,766
Livestock 28,345 25,355
Supplies 53,914 49,590
------- -------
$299,700 $303,711
======= =======
C. CREDIT ARRANGEMENTS:
At December 28, 1996, IBP had in place a $500,000,000 multi-year
credit agreement (the Multi-Year Facility). From time to time, IBP
also may use uncommitted lines of credit for some or all of its short-
term borrowing needs.
The Multi-Year Facility is a revolving facility with a maturity
date of December 20, 2000, which may be extended for one-year
increments annually during the revolving period with consent of the
banks involved. Facility fees can vary from .085 to .200 of 1% on the
total amount of the facility.
Total outstanding borrowings of $50,000,000 at December 28, 1996
under the Multi-Year Facility have been classified as long-term in the
consolidated balance sheet. The company intends to refinance this
amount on a long-term basis at a later date. The interest rate at
December 28, 1996 on these borrowings was 5.5%.
During fiscal 1996, the maximum amount of borrowings under all of
IBP's credit arrangements, including any amounts considered long-term,
was $250,000,000. Average borrowings under IBP's credit arrangements
and the weighted average interest rate during fiscal 1996 were
$68,288,000 and 5.7%. The comparable 1995 figures were $13,327,000 in
average borrowings and an average interest rate of 6.1%.
-7-
D. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are comprised of the
following:
December 28, December 30,
1996 1995
----------- -----------
(In thousands)
Accounts payable, principally
trade creditors $181,161 $210,157
------- -------
Checks in process of clearance 118,624 96,114
------- -------
Accrued expenses:
Employee compensation 76,034 95,102
Employee benefits 55,509 56,122
Other 78,192 91,439
------- -------
209,735 242,663
------- -------
$509,520 $548,934
======= =======
E. INCOME TAXES:
Income tax expense consists of the following:
1996 1995 1994
------- ------- -------
(In thousands)
Current:
Federal $100,775 $173,600 $135,550
State 8,275 12,100 7,275
Foreign 4,250 5,100 575
------- ------- -------
113,300 190,800 143,400
------- ------- -------
Deferred:
Federal 6,575 (10,375) (15,350)
State 550 (850) (1,300)
Foreign 375 (375) (150)
------- ------- -------
7,500 (11,600) (16,800)
------- ------- -------
$120,800 $179,200 $126,600
======= ======= =======
Total income tax expense varies from the amount which would be
provided by applying the U.S. federal income tax rate to earnings
before income taxes. The major reasons for this difference (expressed
as a percentage of pre-tax earnings) are as follows:
1996 1995 1994
---- ---- ----
Federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net
of federal benefit 1.7 1.8 1.5
Goodwill amortization 0.8 0.7 0.9
Foreign Sales Corporation
benefits (0.5) (0.4) (0.4)
Targeted jobs credits - - (0.3)
Income tax contingencies 0.8 2.1 4.6
Other, net - (0.2) (0.3)
---- ---- ----
37.8% 39.0% 41.0%
==== ==== ====
-8-
The Internal Revenue Service (IRS) has proposed certain income tax
adjustments which are being contested by the company involving the
years 1989, 1990, and 1991. The IRS is currently examining the years
1992 and 1993. In management's opinion, adequate provisions for income
taxes have been made for all years.
Deferred income tax liabilities and assets were comprised of:
December 28, December 30,
1996 1995
---------- -----------
(In thousands)
Deferred tax liabilities:
Fixed assets basis differences $ 81,428 $ 80,928
Farm accounting basis differences 8,115 8,062
------- -------
89,543 88,990
------- -------
Deferred tax assets:
Nondeductible accrued liabilities (50,796) (56,927)
State tax credit carryforwards (13,897) (11,949)
Bad debt and claims reserves (3,890) (3,846)
Safe harbor leases (708) (1,640)
Federal and state operating
loss carryforwards (7) (8)
Other (372) (1,064)
------- -------
Gross deferred tax assets (69,670) (75,434)
Valuation allowance 13,904 11,957
------- -------
Net deferred tax assets (55,766) (63,477)
------- -------
$ 33,777 $ 25,513
======= =======
The net $1.9 million increase in the valuation allowance for
deferred tax assets is the result of a net increase in state tax credit
carryforwards. No benefit has been recognized for these state tax
credit carryforwards, which expire primarily in the years 2004 through
2008.
F. LONG-TERM OBLIGATIONS:
Long-term obligations are summarized as follows:
December 28, December 30,
1996 1995
----------- -----------
(In thousands)
6 1/8% Senior Notes due 2006 $100,000 $ -
7 1/8% Senior Subordinated
Debentures due 2026 100,000 -
Multi-Year Facility 50,000 250,000
Present value of minimum
capital lease obligations 9,610 9,900
Other 1,044 1,467
------- -------
260,654 261,367
Less amounts due within one
year 646 615
------- -------
$260,008 $260,752
======= =======
-9-
In the fourth quarter of 1995, IBP began a process of refinancing
its long-term debt. On December 15, 1995, IBP prepaid its $275 million
principal amount of 9.82% Senior Notes due 2000 and its $75 million
principal amount of 10.39% Senior Subordinated Debentures due 2002.
The prepayments were funded with available cash and $250 million
borrowed under available credit facilities. This amount was classified
as long-term at December 30, 1995, due to IBP's ability and intent to
refinance this amount on a long-term basis. Net prepayment premiums
and the accelerated amortization of unamortized deferred financing
costs totaled $36.4 million, before applicable income tax benefit of
$14.2 million, which has been accounted for as a net extraordinary loss
of $22.2 million in 1995.
In January 1996, IBP completed its public offerings of $100
million principal amount of 6 1/8% Senior Notes due 2006 and $100
million principal amount of 7 1/8% Senior Subordinated Debentures due
2026. These offerings were part of a total shelf registration of $500
million. Proceeds from the offerings were used to reduce borrowings under
the Multi-Year Facility to $50 million. This amount was classified as
long-term at December 28, 1996, due to IBP's ability and intent to
refinance this amount on a long-term basis.
IBP's loan agreements contain certain restrictive covenants which,
among other things, (1) require the maintenance of a minimum debt
service coverage ratio; and (2) provide for a maximum funded debt
ratio.
Aggregate maturities of long-term obligations for each of the five
fiscal years subsequent to 1996 are $646,000; $622,000; $834,000;
$50,355,000 and $375,000.
Substantially all of the leased assets under capital leases can
be purchased by IBP for nominal consideration at the end of the lease
terms. Leased assets, which are included with owned property in the
consolidated balance sheets, totaled $5.4 million at December 28, 1996,
and $6.5 million at December 30, 1995, net of accumulated depreciation.
The company leases various facilities and equipment under
noncancelable operating lease arrangements. Future minimum payments
under noncancelable operating leases with lease terms in excess of one
year at December 28, 1996 totaled $49,500,000. These operating leases
expire at various dates through the year 2015.
G. CAPITAL STOCK AND STOCK PLANS:
Preferred Stock:
The Board of Directors is authorized to issue up to 25,000,000
shares of preferred stock at such time or times, in such series, with
such designations, preferences or other special rights as it may
determine.
Stock Split:
On December 18, 1995, the company's Board of Directors authorized
a two-for-one stock split effected in the form of a 100% stock dividend
and was distributed on January 19, 1996 to shareholders of record on
December 28, 1995.
-10-
Officer Long-Term Stock Plans:
IBP has officer long-term stock plans which provide for awards to
key employees of IBP which, subject to certain restrictions, will vest
generally after five years resulting in the delivery of shares of
common stock. Initial awards effective in 1992 were granted in 1993,
totaling approximately 1,110,000 shares at $8.06 per share. Additional
awards totaling approximately 320,000 shares have been granted through
1996 at an average cost of $20.50 per share. The plans allow for a
maximum of 2,400,000 shares of common stock to be delivered; at
December 28, 1996, there were approximately 1,010,000 shares available
for future awards. The company recognized compensation expense for
these plans totaling $3.0 million, $2.2 million and $2.4 million,
respectively, in 1996, 1995 and 1994.
Stock Option Plans:
IBP has stock option plans under which incentive and non-qualified
stock options may be granted to key employees and directors of IBP and
its subsidiaries. As of December 28, 1996, the plans provide for the
delivery of up to 8,476,000 shares of common stock upon exercise of
options granted at no less than the fair market value of the shares on
the date of grant. The options may be granted for terms up to but not
exceeding ten years and are generally fully vested after five years
from the date granted. At December 28, 1996 and December 30, 1995,
there were 3,926,000 and 867,000 options, respectively, reserved for
future grants.
The company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been
recognized for the stock option plans. Had compensation cost for IBP's
stock option plans been determined based on the fair value at the grant
date for awards in 1995 and 1996 consistent with the provisions of SFAS
No. 123, IBP's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
1996 1995
------- -------
Net earnings - as reported $198,735 $257,923
Net earnings - pro forma 196,518 256,407
Earnings per share - as reported 2.06 2.67
Earnings per share - pro forma 2.03 2.65
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for options granted in 1995 and 1996:
1996 1995
---------------------- ----------------------
Officers Non-officers Officers Non-officers
--------- ------------ --------- ------------
Expected option life 6.4 years 5.5 years 6.4 years 5.5 years
Expected annual
volatility 29.7% 29.7% 29.7% 29.7%
Risk-free interest
rate 6.54% 6.46% 5.56% 5.51%
Dividend yield .44% .44% .44% .44%
-11-
The status of stock options under the plans is summarized as follows:
Number of Weighted Average Options
Shares Price Per Share Exercisable
--------- ---------------- -----------
Balance at
December 25, 1993 3,557,672 $10.56
Granted 1,049,900 16.78
Exercised (468,936) 7.49
Forfeited (284,560) 10.43
Balance at --------- -----
December 31, 1994 3,854,076 11.47 1,489,924
Granted 1,526,097 24.55
Exercised (466,626) 8.49
Forfeited (329,952) 13.88
Balance at --------- -----
December 30, 1995 4,583,595 14.93 1,256,358
Granted 675,388 24.25
Exercised (464,362) 10.04
Forfeited (244,693) 19.88
Balance at --------- -----
December 28, 1996 4,549,928 $16.09 1,721,044
========= =====
The following table summarizes information about stock options
outstanding at December 28, 1996:
Number Weighted Average
Range of Outstanding Remaining Weighted Average
Exercisable prices At 12/28/96 Contractual Life Exercise Price
- ------------------ ----------- ---------------- ----------------
$ 6 to 15 2,247,085 5.0 Years $ 9.68
16 to 25 2,191,724 8.7 Years 21.99
26 to 35 111,119 9.1 Years 28.10
- ---------------------------------------------------------------------
$ 6 to 35 4,549,928 6.9 Years $16.09
Number
Range of Exercisable Weighted Average
Exercisable prices At 12/28/96 Exercise Price
- ------------------ ----------- ----------------
$ 6 to 15 1,504,751 $ 8.54
16 to 25 215,933 16.48
26 to 35 360 31.38
- ---------------------------------------------------
$ 6 to 35 1,721,044 $ 9.54
Share Delivery Restrictions:
Shares of common stock to be delivered for approximately
1,600,000 options under the stock option plans must come from
previously issued shares. All other shares of stock to be delivered
pursuant to the stock option plans and the officer long-term stock
plans may alternatively come from previously authorized but unissued
common stock.
-12-
H. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental information on cash payments is presented as
follows:
1996 1995 1994
------- ------- ------
(In thousands)
Interest, net of amounts
capitalized $ 2,045 $ 34,040 $39,527
Income taxes 108,625 192,028 68,491
I. FINANCIAL INSTRUMENTS:
Interest and Currency Rate Derivatives:
The company's policy is to manage interest cost using a mix of
fixed and variable rate debt. To manage this mix in a cost effective
manner, the company enters into interest rate swaps in which the
company agrees to exchange, at specified intervals, the difference
between fixed and variable interest amounts calculated by reference to
an agreed-upon notional principal amount. These interest rate swaps
effectively convert a portion of the company's fixed-rate debt to
variable-rate debt.
The notional amounts of these swap agreements were $100 million
at year-end 1996 and zero at year-end 1995. The notional amounts of
these and other derivative instruments do not represent assets or
liabilities of the company but, rather, are the basis for the
settlements under the contract terms.
The company enters into foreign currency forward exchange
contracts to hedge its sales denominated in foreign currencies. At
December 28, 1996, the company's Canadian subsidiary had outstanding
forward contracts to sell US$5.0 million through January 1997. At
December 30, 1995, outstanding contracts to sell US dollars totaled
$5.5 million.
The company's Canadian subsidiary also enters into currency
futures contracts to hedge its exposure on live cattle purchase
commitments in foreign currencies. At December 28, 1996, the company
had outstanding contracts to buy CDN$22.6 million through June 1997.
Similar outstanding contracts at year-end 1995 totaled CDN$14.9
million.
There were no material realized or unrealized gains or losses for
any derivative financial instruments in any of the fiscal years
presented. The company monitors the risk of default by its financial
instrument counterparties, all of which are major financial
institutions, and does not anticipate nonperformance.
-13-
Fair Value of Financial Instruments:
The following methods and assumptions are used in estimating the
fair value of each class of the company's financial instruments at
December 28, 1996:
For cash and cash equivalents, marketable securities, accounts
receivable and accounts payable, the carrying amount is a reasonable
estimate of fair value because of the short-term nature of these
instruments.
For securities included in other assets, fair value is based upon
quoted market prices for these or similar securities. The carrying
amount approximates fair value for these securities.
For long-term debt, fair value was determined using valuation
techniques that considered cash flows discounted at current market
rates and management's best estimate for instruments without quoted
market prices. At year-end 1996, the carrying value exceeded the fair
value by $9.3 million. At year-end 1995, the carrying value
approximated the fair value.
For derivatives, the fair value was estimated using termination
cash values. At year-end 1996, interest rate swap agreement values
would represent an obligation of $5.8 million. The market impact of
this obligation is offset by the opposite market impact on the related
long-term debt. The fair value of foreign currency derivatives at
December 28, 1996 would represent an obligation of $0.2 million and at
December 30, 1995 would represent an asset of $0.2 million.
J. COMMITMENTS AND CONTINGENCIES:
IBP is involved in numerous disputes incident to the ordinary
course of its business. In the opinion of management, any liability
for which provision has not been made relative to the various
lawsuits, claims and administrative proceedings pending against IBP,
including that described below, will not have a material adverse
effect on its consolidated results of operations, financial position
or liquidity.
A $15,004,000 jury verdict was returned against IBP in November
1994 in an Iowa State District Court. The plaintiff, a former IBP
employee, sued the company and another former employee in February
1993 for slander and breach of fiduciary duty regarding his treatment
as a workers' compensation claimant. The jury determined that the
plaintiff sustained $4,000 in actual damages, and awarded him
$15,000,000 punitive damages, all of which was provided for by the
company in 1994. Although the District Court reduced punitive damages
to $100,000, on appeal the Iowa Supreme Court ordered IBP to pay
$2,000,000 in punitive damages. The company is seeking a rehearing by
the Iowa Supreme Court and possible review by the United States
Supreme Court. The company reduced its $15,000,000 reserve for this
case to $100,000 in the fourth quarter 1996.
-14-
K. QUARTERLY FINANCIAL DATA (UNAUDITED):
Quarterly results are summarized as follows: (In thousands except per
share data)
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter Annual
- ---- --------- --------- --------- --------- ----------
Net sales $3,084,722 $3,260,268 $3,175,940 $3,017,823 $12,538,753
Gross profit 117,900 175,587 94,472 55,244 443,203
Net earnings 53,027 86,988 40,467 18,253 198,735
Earnings per share .55 .90 .42 .19 2.06
Dividends per share .025 .025 .025 .025 .10
Market price:
High 27 1/8 28 7/8 27 5/8 26 1/2
Low 23 1/4 23 3/8 22 3/4 23 1/8
1995
- ----
Net sales $3,006,663 $3,209,140 $3,290,644 $3,161,115 $12,667,562
Gross profit 117,848 182,209 178,165 125,846 604,068
Earnings before
extraordinary
item 51,815 85,844 85,412 57,041 280,112
Net earnings 51,815 85,844 85,412 34,852 257,923
Earnings per share:
Earnings before
extraordinary item .54 .89 .88 .59 2.90
Net earnings .54 .89 .88 .36 2.67
Dividends per share .025 .025 .025 .025 .10
Market price:
High 16 5/8 21 3/4 26 11/16 33 5/16
Low 14 9/16 15 15/16 21 5/8 22 1/16
-15-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of IBP, inc.
We have audited the accompanying consolidated balance sheets of
IBP, inc. and subsidiaries as of December 28, 1996 and December 30,
1995, and the related consolidated statements of earnings, changes
in stockholders' equity, and cash flows for the years then ended.
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. The financial statements
of IBP, inc. and subsidiaries for the year ended December 31, 1994
were audited by other auditors, whose report, dated February 3,
1995 expressed an unqualified opinion on those statements.
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
also 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, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of IBP, inc. and subsidiaries as of December 28,
1996 and December 30, 1995, and the consolidated results of their
operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
January 24, 1997
MANAGEMENT'S REPORT ON FINANCIAL INFORMATION
The management of IBP, inc. is responsible for the integrity of
the financial data reported by IBP and its subsidiaries. Fulfilling this
responsibility requires the preparation and presentation of consolidated
financial statements in accordance with generally accepted accounting
principles. Management uses internal accounting controls, corporate-wide
policies and procedures, estimates and judgments in order that such state-
ments reflect fairly the consolidated financial position, results of
operations and cash flows of IBP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
IBP achieved solid results with an earnings performance in
1996 that was the second highest in the company's history.
However, a combination of tight livestock supplies and reduced
export sales in the second half of 1996 put significant pressure on
operating margins, creating a difficult comparison to the record
financial results attained in 1995.
Earnings from operations as a percentage of net sales measured
2.6% in 1996 versus 3.8% in 1995. The Fresh Meats division
experienced reduced capacity utilization levels, especially in its
pork operations, thereby increasing per unit
costs and reducing margins. Cow boning operating earnings improved
in 1996 over 1995, while the Consumer Products division experienced
less favorable results in 1996 compared to 1995. Recent industry
reports on cattle inventories and placements into feedlots show
positive numbers of available market-ready cattle
until late in 1997, when supplies are expected to tighten
moderately. Market analysts are predicting the opposite situation
for hog supplies, expecting that supplies will remain tight for
most of 1997 but increase later this year and into
1998. Management expects pork margins to remain under pressure
until hog numbers improve and/or processing capacity is reduced.
While IBP's pork operations have been adversely affected by
the tight hog supplies and a substantial expansion of pork industry
processing capacity, management believes that favorable global
market dynamics, which include a strong consumer preference for
pork protein, growing income levels among emerging nations and the
low cost producer status of the U.S. industry from producer to
processor, will bring long-term success for the company's pork
operations.
The matters discussed herein contain forward-looking
statements that involve risks and uncertainties including risk of
changing market conditions with regard to livestock supplies and
demand for the company's products, domestic and international
regulatory risks, competitive and other risks over which IBP has
little or no control. Consequently, future results may differ from
management's expectations. Moreover, past financial performance
should not be considered a reliable indicator of future
performance.
-1-
COMPARISON OF 1996 to 1995
SALES
Net sales in 1996 were 1.0% below the record level achieved in
1995. A decrease in pounds of beef and pork products sold in IBP's
core fresh meats operations in 1996 versus 1995 as well as a
decrease in the average price of beef products sold were the
primary factors in the lower 1996 net sales. These factors were
partially offset by an increase in the average price of pork
products sold and a full year of cow boning operations in 1996
(nine months in 1995 for the three plants purchased in 1995 and no
prior year sales for the Palestine plant purchased in the second
quarter 1996).
IBP's net export sales in 1996 were 8% lower than in 1995. An
outbreak of E. Coli, a bacterial illness, in Japan, the company's
most significant export market, caused a food safety scare among
Japanese consumers. This problem significantly reduced IBP exports
to the Pacific Rim during the second half of 1996, even though the
source of the illnesses appeared to be non-meat related.
Management expects that shipments to Japan will return to more
normal levels as these concerns subside. Exports accounted for
13.4% of consolidated net sales in 1996 compared to 14.4% in 1995.
COST OF PRODUCTS SOLD
A 1% increase in 1996 cost of products sold from 1995 was due
primarily to a full year of operations in 1996 for three cow boning
plants purchased in 1995 versus nine months in the prior year.
Meanwhile, 1996 livestock costs in the company's core beef and pork
operations decreased from 1995. A lower average price paid for
live cattle and fewer pounds of beef products sold were partially
offset by the effect of a higher average price paid for live hogs.
Livestock costs comprised 88% of total cost of products sold in
1996 and 1995.
The cost of products sold in 1996 was reduced $13 million
(after bonus impact) by reduction of a workers' compensation
lawsuit reserve due to favorable developments in the fourth quarter
1996 (more fully described in Note J to the consolidated financial
statements). In addition, 1995 cost of products sold included $18
million (after bonus impact) for a second quarter adjustment to
salvage value for most fixed assets to better reflect actual
experience.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Reduced incentive compensation based upon lower 1996 operating
earnings was the most significant factor in the 3% decrease in 1996
expense from 1995. Administrative costs were higher in 1996 as a
result of higher personnel-related costs to support the company's
expanding operations. Selling expense also increased in 1996 over
1995 due principally to higher international selling costs as the
company added foreign service centers in Korea and Taiwan.
-2-
INTEREST EXPENSE
Net interest expense in 1996 fell 84% from the year earlier.
These reductions resulted in part from a lower effective interest
rate due to the refinancing of substantially all of IBP's long-term
obligations at lower rates early in 1996. Additionally, 1996
borrowings averaged almost $100 million less than in 1995 due to
continued strong operating cash flows.
INCOME TAXES
The lower 1996 income tax provision compared to 1995 resulted
primarily from the decrease in pre-tax earnings.
COMPARISON OF 1995 TO 1994
SALES
The 4.9% increase in net sales from 1994 was attributable
primarily to the additions of its Canadian subsidiary, Lakeside
Farm Industries, Ltd. (Lakeside), purchased in October 1994, and
three beef cow boning plants acquired in 1995. Net sales from
fresh beef and pork operations, excluding Lakeside and the beef
boning plants, were down slightly from the previous year due mainly
to a reduction in pounds of pork products sold.
Net export sales in 1995 totaled $1.8 billion or 14.4% of
total net sales as compared to $1.5 billion and a 12.8% share of
total net sales in 1994. An overall increase in pounds of products
sold, especially of higher-value red meat products to Asian
markets, was the chief factor in the export sales increase.
Exports to the Far East, IBP's most significant export market, have
risen in part due to increased demand, lowered import restrictions,
favorable currency exchange rates and the development of additional
markets.
COST OF PRODUCTS SOLD
The Lakeside and beef boning plants acquisitions were the
chief reason for the 3.9% increase in cost of products sold in 1995
compared to 1994. The company's fresh meats division, exclusive of
new operations, experienced a higher average cost of livestock in
1995 which was offset somewhat by a decrease in pounds of products
sold from 1994. Management adjusted the estimated salvage value
for most fixed assets in the second quarter 1995 to better reflect
actual experience, which increased plant costs by approximately $18
million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The principal components of the 9.9% increase in 1995 selling,
general and administrative expense versus 1994 were higher accruals
for earnings-based incentive compensation, incremental selling and
administrative expense associated with new operations and increased
export-related selling expense.
-3-
INTEREST EXPENSE
IBP's 1995 net interest expense decreased 45.9% from 1994 due
to several factors. Average outstanding borrowings were 21.0% less
in 1995 than in 1994 due to strong operating cash flows and debt
reductions in the second half of 1994. In addition, an increase in
capital spending caused 1995 capitalized interest to increase $5.1
million (128.4%) over 1994. Finally, a surplus of cash over and
above IBP's working capital needs, especially in the second half of
1995, brought about a $6.0 million (221.0%) increase in interest
income.
INCOME TAXES
The higher 1995 income tax provision over 1994 was due
primarily to the increase in pre-tax earnings.
LIQUIDITY AND CAPITAL RESOURCES
The meat processing industry is characterized by significant
working capital requirements. This is due largely to statutory
provisions that generally provide for immediate payment for
livestock, while it takes IBP on average about one week to turn its
product inventories and two weeks to convert its trade receivables
to cash. These factors, combined with fluctuations in production
levels, selling prices and prices paid for livestock, can impact
cash requirements substantially on a day-to-day basis. To provide
cash for its working capital requirements, the company's credit
facility (more fully described in Note C to the consolidated
financial statements) provides IBP with same-day access to an
aggregate of $500 million in potential borrowings. The unused
portion of the credit line was $450 million at December 28, 1996
and was unchanged at the end of January 1997.
Although IBP has significant working capital requirements, its
accounts receivable and inventories are highly liquid,
characterized by rapid turnover. The following are key indicators
relating to IBP's working capital and asset-based liquidity:
December 28, December 30,
1996 1995
----------- -----------
Working capital (in thousands) $506,454 $427,241
Current ratio 1.8:1 1.7:1
Quick ratio 1.3:1 1.1:1
Number of days' sales in accounts
receivable 14.0 14.3
Inventory turnover 40.3 42.0
The company's financial position has continued to strengthen
as a result of significant operating cash flows and long-term debt
reductions.
-4-
Capital expenditures in 1996 totaled $171 million compared to
$161 million in 1995. Current year additions included construction
of a processing facility at the company's Brooks, Alberta, Canada,
beef plant, which began production in the first quarter 1997,
purchase of a cow processing facility in Palestine, Texas,
conversion of a facility in Columbia, South Carolina, for cooked
meats production (also a first quarter 1997 start up) and
expansions and/or improvements of box handling facilities at some
of the company's major beef complexes.
Management's estimate of 1997 capital spending is in the range
of $200 million, which the company expects to fund from operating
cash flows and available debt facilities.
YEAR 2000
Management has made an assessment of the capability of its
computer-based systems to properly handle dates of January 1, 2000
and beyond. Management does not expect that costs incurred to
address this issue will be material.
STOCKHOLDERS AND MARKET DATA
IBP's common shares were held by approximately 6,700
stockholders of record at year-end 1996. The common stock is
listed on the New York and Pacific Stock Exchanges.
-5-
EXHIBIT 21
SUBSIDIARIES OF IBP, inc.
December 28, 1996
IBP Foreign Sales Corporation
IBP Hog Markets, Inc.*
IBP International, Inc.
IBP International, Inc. Asia**
IBP International, Inc. Europe**
IBP of Wisconsin, inc.
IBP Service Center Corp.
Lakeside Farm Industries Ltd.
Lakeside Packers Ltd. ***
PBX, inc.
Prepared Foods, Inc.
Rural Energy Systems, Inc.
Southern Beef Processors, Inc.
Supreme Processed Foods, Inc.
Texas Transfer, Inc.
_______________________
* Also doing business as Heinold Hog Market
** Stock is 100% owned by IBP International, Inc.
*** Stock is 100% owned by Lakeside Farm Industries Ltd.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the
registration statements of IBP, inc. on Form S-3 (File No.
33-64459) and on Form S-8 (File No. 33-19441) of our report
dated January 24, 1997, on our audits of the consolidated
financial statements and financial statement schedule of IBP,
inc. as of December 28, 1996 and December 30, 1995 and for the
years ended December 28, 1996 and December 30, 1995, which
report is incorporated by reference in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 27, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (Nos. 33-19441 and 1-6085)
relating to the IBP 1987 and 1993 Stock Option Plans of our
report dated February 3, 1995 appearing on page 23 of the 1994
Annual Report to Stockholders which is incorporated by reference
in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 12 of this Annual
Report on Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 27, 1997
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
FOODBRANDS AMERICA, INC.
AND
IBP, inc.
AND
IBP SUB, INC.
Dated as of
March 25, 1997
TABLE OF CONTENTS
Page
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Company Action. . . . . . . . . . . . . . . . . . . . . . .4
1.3 Board of Directors of the Company . . . . . . . . . . . . .5
ARTICLE II THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Effect of Merger. . . . . . . . . . . . . . . . . . . . . .7
(a)Name of Surviving Corporation. . . . . . . . . . . . . .7
(b)Certificate of Incorporation . . . . . . . . . . . . . .7
(c) Bylaws. . . . . . . . . . . . . . . . . . . . . . . . .7
(d)Corporate Organization . . . . . . . . . . . . . . . . .7
(e)Directors and Officers . . . . . . . . . . . . . . . . .8
(f)Closing. . . . . . . . . . . . . . . . . . . . . . . . .8
(g)Filing of Certificate of Merger;
Effective Date and Effective Time . . . . . . . . . .8
2.3 Conversion of Shares. . . . . . . . . . . . . . . . . . . .8
2.4 Dissenters' Rights. . . . . . . . . . . . . . . . . . . . .9
2.5 Payment for Shares; Surrender of Certificates . . . . . . .9
2.6 Stock Options . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Lost Certificates . . . . . . . . . . . . . . . . . . . . 12
2.8 Closing of Company Transfer Books . . . . . . . . . . . . 12
2.9 Further Assurances. . . . . . . . . . . . . . . . . . . . 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 13
3.1 Organization of the Company . . . . . . . . . . . . . . . 13
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Capitalization of the Company . . . . . . . . . . . . . . 14
3.4 Subsidiaries of the Company . . . . . . . . . . . . . . . 15
3.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . 16
3.6 Absence of Certain Changes or Events. . . . . . . . . . . 16
3.7 Title to Assets, Etc. . . . . . . . . . . . . . . . . . . 18
3.8 Condition of Tangible Assets. . . . . . . . . . . . . . . 18
3.9 Contracts and Commitments . . . . . . . . . . . . . . . . 19
3.10 No Conflict or Violation; Third Party Consents. . . . . . 20
3.11 Consents and Approvals. . . . . . . . . . . . . . . . . . 20
3.12 Compliance with Law . . . . . . . . . . . . . . . . . . . 20
3.13 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.14 No Other Agreements to Sell the Company . . . . . . . . . 21
3.15 Intellectual Property . . . . . . . . . . . . . . . . . . 21
3.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 22
3.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 23
3.18 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 24
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . 25
3.20 Proxy Statement; Information Statement. . . . . . . . . . 27
3.22 Vote Required . . . . . . . . . . . . . . . . . . . . . . 28
3.23 Opinion of Financial Advisor. . . . . . . . . . . . . . . 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . 28
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Consents and Approvals. . . . . . . . . . . . . . . . . . 29
4.4 No Conflict or Violation; Third Party Consents. . . . . . 29
4.5 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . 30
4.6 Proxy Statement; Information Statement. . . . . . . . . . 30
4.7 Share Ownership . . . . . . . . . . . . . . . . . . . . . 31
4.8 Financing . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V ACTIONS BY THE COMPANY, THE PARENT
AND THE PURCHASER PRIOR TO THE EFFECTIVE DATE . . . . . . 31
5.1 Maintenance of Business . . . . . . . . . . . . . . . . . 31
5.2 Certain Prohibited Transactions . . . . . . . . . . . . . 31
5.3 Investigation by the Parent and the Purchaser . . . . . . 34
5.4 Consents and Reasonable Best Efforts. . . . . . . . . . . 35
5.5 Notification of Certain Matters.. . . . . . . . . . . . . 36
5.6 Stockholders' Meeting; Board Recommendations;
Proxy Material . . . . . . . . . . . . . . . . . . . . . 36
5.7 Information Statement . . . . . . . . . . . . . . . . . . 38
ARTICLE VI CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . 41
6.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . 41
6.2 Conditions to Obligation of the Parent to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII ADDITIONAL COVENANTS OF THE COMPANY, THE PARENT
AND THE PURCHASER . . . . . . . . . . . . . . . . . . . . 42
7.1 Employee Benefits . . . . . . . . . . . . . . . . . . . . 42
7.2 Officers' and Directors' Insurance;
Indemnification. . . . . . . . . . . . . . . . . . . . . 43
7.3 Transition Agreements . . . . . . . . . . . . . . . . . . 44
7.4 Restructuring of Transaction. . . . . . . . . . . . . . . 45
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 45
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . 46
8.3 No Survival of Representations, Warranties
and Covenants. . . . . . . . . . . . . . . . . . . . . . 46
8.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . 47
8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.6 Choice of Law . . . . . . . . . . . . . . . . . . . . . . 49
8.7 Entire Agreement; Amendments and Waivers. . . . . . . . . 49
8.8 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 49
8.9 No Third Party Beneficiary. . . . . . . . . . . . . . . . 50
8.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 50
8.11 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . 50
8.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 50
8.13 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 50
Annex A
Exhibits
Exhibit "A" Tender Agreements
Exhibit "B" Charter Amendment
<PAGE>
DEFINITIONS
The following terms are defined in the Sections indicated and shall have
the meanings ascribed to them therein unless the context clearly indicates
otherwise.
Defined in
Term Section
"Acquisition Proposal" . . . . . . . . . . . . . . . . . . . . . . . . .5.8
"Antitrust Improvements Act" . . . . . . . . . . . . . . . . . . . 3.11
"Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5
"CERCLA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(a)
"CERCLIS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(c)
"Certificate of Amendment" . . . . . . . . . . . . . . . . . . . . . 3.2(c)
"Certificate of Merger" . . . . . . . . . . . . . . . . . . . . . 2.2(g)
"Charter Amendment". . . . . . . . . . . . . . . . . . . . . . . . . 3.2(c)
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(f)
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
"Company Disclosure Letter". . . . . . . . . . . . . . . . . . . . . . .3.3
"Company Permits". . . . . . . . . . . . . . . . . . . . . . . 3.12
"Company SEC Documents" . . . . . . . . . . . . . . . . . . . . . 3.18
"Confidentiality Agreement". . . . . . . . . . . . . . . . . . . . . . .8.7
"Constituent Corporations" . . . . . . . . . . . . . . . . . . . . 2.1
"Delaware Law" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Disbursing Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.5
"Dissenters' Shares" . . . . . . . . . . . . . . . . . . . . . . . 2.4
"Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(g)
"Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(g)
"Employment Agreements". . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
"Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . 3.19(a)
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
"Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.10(c)
"Financial Statements" . . . . . . . . . . . . . . . . . . . . . . 3.5
"FINDS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(c)
"Governmental Entity". . . . . . . . . . . . . . . . . . . . . . . . . 3.11
"Hazardous Material" . . . . . . . . . . . . . . . . . . . . . . . 3.19(b)
"Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . 7.2(a)
"Information Statement". . . . . . . . . . . . . . . . . . . . . . . . .5.7
"Intellectual Property". . . . . . . . . . . . . . . . . . . . . 3.15
"Investment Banker". . . . . . . . . . . . . . . . . . . . . . . . 4.5
"JLL". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
"Licenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
"Material Adverse Change". . . . . . . . . . . . . . . . . . . . . . . .3.1
"Material Adverse Effect". . . . . . . . . . . . . . . . . . . . . . . .3.1
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Merger Consideration" . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
"Minimum Condition". . . . . . . . . . . . . . . . . . . . . . . . .Annex A
"Morgan Stanley" . . . . . . . . . . . . . . . . . . . . . . . . . 3.13
"NOLs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17
"Notice of a Superior Proposal". . . . . . . . . . . . . . . . . . . . .5.8
"Offer". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
"Offer Documents". . . . . . . . . . . . . . . . . . . . . . . . . . .1.(b)
"Offer to Purchase". . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
"OSHA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(a)
"Option Settlement Amount" . . . . . . . . . . . . . . . . . . . . 2.6
"Parent Companies" . . . . . . . . . . . . . . . . . . . . . . . . . . .5.6
"Patents". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
"Pension Plans". . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Personnel" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(b)
"Plans". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
"Preferred Stock". . . . . . . . . . . . . . . . . . . . . . . . . 3.3
"Proxy Statement". . . . . . . . . . . . . . . . . . . . . . . . . 5.6(c)
"RCRA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(a)
"SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
"Share Price" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
"Special Meeting". . . . . . . . . . . . . . . . . . . . . . . . . 5.6(a)
"Stock Option Plans" . . . . . . . . . . . . . . . . . . . . . . . 2.6
"Subsidiary" or "Subsidiaries" . . . . . . . . . . . . . . . . . . 3.4
"Superior Proposal". . . . . . . . . . . . . . . . . . . . . . . . . . .5.8
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . 2.1
"Takeover Proposal". . . . . . . . . . . . . . . . . . . . . . . 5.10(c)
"Tender Agreements". . . . . . . . . . . . . . . . . . . . . . . Recitals
"Termination Fee". . . . . . . . . . . . . . . . . . . . . . . . . .5.10(b)
"Trademarks" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
"Transition Agreements". . . . . . . . . . . . . . . . . . . . . . 7.3
"Warrant Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . .3.3
"Welfare Plans" . . . . . . . . . . . . . . . . . . . . . . . . . 3.16
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of March 25, 1997 (the
"Agreement") is by and
among Foodbrands America, Inc., a Delaware corporation (the "Company"), IBP,
inc., a Delaware
corporation (the "Parent"), and IBP Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of
the Parent (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the Parent, Purchaser and
the Company have each approved the acquisition of the Company by the Parent
upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, to induce the Parent and the Purchaser to enter into this
Agreement, each of
Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P.
(collectively, "JLL") and The
Airlie Group L.P. are concurrently entering into a Tender Agreement with the
Parent and the Purchaser in
the form attached hereto as Exhibit A (each a "Tender Agreement" and
collectively, the "Tender
Agreements"), each of which Tender Agreements have been approved by the Board
of Directors of the
Company; and
WHEREAS, the Parent, the Purchaser and the Company desire to make
certain
representations, warranties, covenants and agreements in connection with the
March 28, 1997 Offer and the Merger (each
as hereafter defined) and also to prescribe certain conditions to the Offer
and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and
agreements herein contained, and intending to be legally bound hereby, the
Parent, the Purchaser and the
Company hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.1 The Offer.
(a) In accordance with the provisions of this Agreement and
provided that nothing
shall have occurred which would result in a failure of any of the conditions
set forth in Annex A, attached
hereto and made a part hereof, as promptly as practicable, and in no event
later than the fifth (5th) business
day following the date hereof, the Parent shall cause the Purchaser to, and
the Purchaser shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange
Act"), a tender offer (as it may be amended from time to time as permitted
hereunder, the "Offer") for all
of the issued and outstanding shares (the "Shares") of the Common Stock
(defined hereafter) at a price of
Twenty Three Dollars and Forty Cents ($23.40) per share net to the seller in
cash, without interest thereon
(such price or such higher price per share as may be paid in the Offer, being
referred to herein as the "Share
Price"), which Offer, and the obligation of the Purchaser to accept payment
and pay for Shares tendered
pursuant to the Offer, shall be in accordance with the terms of this
Agreement, subject to the conditions
set forth in Annex A hereto. The Purchaser shall, subject only to the
satisfaction or waiver of the
conditions set forth on Annex A hereto, accept for payment and pay for all
Shares validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the expiration
of the Offer. The Offer shall
be made by means of an offer to purchase (the "Offer to Purchase") containing
the terms set forth in this
Agreement, the Minimum Condition (as defined in Annex A hereto) and the other
conditions set forth in
Annex A hereto. Notwithstanding the foregoing, the Purchaser expressly
reserves the right to increase the
price per Share payable in the Offer and make any other changes to the terms
or conditions of the Offer
(or waive in whole or in part, at the sole discretion of the Purchaser any of
such conditions), provided,
however, that the Purchaser will not, without the prior written consent of
the Company (such consent to
be authorized by the Board of Directors of the Company), (i) waive the
Minimum Condition, (ii) subject
to clause (z) of the proviso in the immediately following sentence, extend
the Offer if all of the Offer
conditions are satisfied or waived, (iii) decrease the Share Price, change
the form of consideration payable
in the Offer or decrease the number of Shares sought, (iv) impose additional
conditions to the Offer, (v)
waive the condition described in clause (x) of Annex A hereto or (vi) amend
the conditions of the Offer
or any other term of the Offer in any manner adverse to the holders of Shares
(other than insignificant
changes or amendments or other than to waive any condition). The initial
expiration date of the Offer shall
be 20 business days following commencement of the Offer (such date and time,
as may be extended in
accordance with the terms hereof, is referred to as the "Expiration Date");
provided, however, and
notwithstanding anything in the foregoing to the contrary, it is understood
and agreed that the Purchaser
may, from time to time, in its sole discretion extend the Expiration Date,
but not beyond September 24,
1997, without the consent of the Company (x) if any of the conditions to the
Offer have not been satisfied,
for the minimum period of time necessary to satisfy such condition; (y) for
any period required by any
order, decree or ruling of, or any rule, regulation, interpretation or
position of, any Governmental Entity
(as hereafter defined) applicable to the Offer; or (z) for a period of not
more than five business days beyond
the latest expiration date that would otherwise be permitted under clause (x)
or (y) of this sentence solely
for the purpose of obtaining valid tenders (which are not withdrawn) of 90%
of the Shares. A record holder
who validly tenders, and does not withdraw, pursuant to the Offer at least
500,000 shares of Common
Stock which such holder beneficially owns, may receive, upon acceptance of
such shares by the Purchaser
pursuant to the Offer, payment therefor by wire transfer of immediately
available funds to an account in
the United States designated in writing by such holder at the time such
shares are tendered pursuant to the
Offer.
(b) As soon as practicable on the date the Offer is
commenced, the Parent and the
Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer (together with
all amendments and
supplements thereto and including the exhibits thereto, the "Schedule
14D-1"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of
transmittal and summary advertisement
(collectively, together with any amendments and supplements thereto, the
"Offer Documents"). The Offer
Documents will comply as to form in all material respects with the provisions
of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by
the Parent or the Purchaser with respect to information furnished by the
Company for inclusion or
incorporation by reference in the Offer Documents. The information supplied
in writing by the Company
for inclusion or incorporation by reference in the Offer Documents and by the
Parent or the Purchaser for
inclusion or incorporation by reference in the Schedule 14D-9 (as hereinafter
defined) will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were
made, not misleading. Each of the Parent and the Purchaser will take all
steps necessary to cause the Offer
Documents to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and
to the extent required by applicable federal securities laws. Each of the
Parent and the Purchaser, on the
one hand, and the Company, on the other hand, will promptly correct any
information provided by it for
use in the Offer Documents if and to the extent that it shall have become
false and misleading in any
material respect and the Purchaser will take all steps necessary to cause the
Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to
the extent required by applicable federal securities laws. The Company and
its counsel shall be given the
opportunity to review the Schedule 14D-1 before it is filed with the SEC. In
addition, the Parent and the
Purchaser will provide the Company and its counsel in writing with any
comments, whether written or oral,
the Parent, the Purchaser or their counsel may receive from time to time from
the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
1.2 Company Action.
(a) The Company hereby approves of and consents to the Offer
and represents that
its Board of Directors has duly adopted resolutions approving the Offer, the
Merger, this Agreement, the
Tender Agreements and the acquisition of shares of Common Stock pursuant
thereto, has determined that
the Merger is advisable and that the terms of the Offer and the Merger are
fair to, and in the best interests
of, the Company's stockholders and has resolved to recommend acceptance of
the Offer and approval of
the Merger by the stockholders of the Company. The Company hereby consents
to the inclusion in the
Offer Documents of the recommendation of the Board of Directors of the
Company described in this
Section 1.2(a), subject to the right of the Board of Directors of the Company
to withdraw or modify its
approval or recommendation of the Offer in accordance with Section 5.7(b)
hereof.
(b) Concurrently with the commencement of the Offer, the
Company shall file with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together
with all amendments and
supplements thereto and including the exhibits thereto, the "Schedule 14D-9")
which shall, subject to the
right of the Board of Directors of the Company to withdraw or modify its
approval or recommendation of
the Offer in accordance with Section 5.7(b) hereof, contain the
recommendation referred to in Section
1.2(a) hereof. The Schedule 14D-9 will comply in all material respects with
the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by
the Company with respect to information furnished by the Parent or the
Purchaser for inclusion or
incorporation by reference in the Schedule 14D-9. The Company further agrees
to take all steps necessary
to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated
to holders of the Shares, in
each case as and to the extent required by applicable federal securities
laws. Each of the Company, on the
one hand, and the Parent and the Purchaser, on the other hand, agrees
promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it
shall have become false and
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares,
in each case as and to the extent required by applicable federal securities
laws. The Parent and its counsel
shall be given the opportunity to review the Schedule 14D-9 before it is
filed with the SEC. In addition,
the Company agrees to provide the Parent, the Purchaser and their counsel
with any comments, whether
written or oral, that the Company or its counsel may receive from time to
time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such
comments or other communications.
The Company has been advised by each of its directors that as of the date
hereof each such person intends
to tender all of the shares of Common Stock owned by such person pursuant to
the Offer.
(c) In connection with the Offer, the Company will promptly
furnish or cause to
be furnished to the Purchaser mailing labels, security position listings and
any available listing or computer
file containing the names and addresses of all record holders of the Shares
as of a recent date, and shall
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of
holders of the Shares and their addresses, mailing labels and lists of
security positions) and assistance as
the Purchaser or its agents may reasonably request in communicating the Offer
to the record and beneficial
holders of the Shares. Except for such steps as are necessary to disseminate
the Offer Documents, the
Parent and the Purchaser shall hold in confidence the information contained
in any of such labels and lists
and the additional information referred to in the preceding sentence, will
use such information only in
connection with the Offer and the Merger, and, if this Agreement is
terminated, will upon request of the
Company deliver or cause to be delivered to the Company all copies of such
information then in its
possession or the possession of its agents or representatives.
1.3 Board of Directors of the Company.
(a) Promptly upon the purchase of and payment for any Shares
by the Parent or
any of its subsidiaries which represents at least a majority of the
outstanding Shares (on a fully diluted
basis), the Parent shall be entitled to designate such number of directors,
rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product
of the total number of
directors on such Board (giving effect to the directors designated by the
Parent pursuant to this sentence)
multiplied by the percentage that the number of Shares so accepted for
payment bears to the total number
of Shares then outstanding. In furtherance thereof, the Company shall, upon
request of the Purchaser, use
its best efforts promptly either to increase the size of its Board of
Directors or secure the resignations of
such number of its incumbent directors, or both, as is necessary to enable
the Parent's designees to be so
elected to the Company's Board, and shall take all actions available to the
Company to cause the Parent's
designees to be so elected. At such time, the Company shall also cause
persons designated by the Parent
to constitute at least the same percentage (rounded up to the next whole
number) as is on the Company's
Board of Directors of (i) each committee of the Company's Board of Directors,
(ii) each board of directors
(or similar body) of each Subsidiary (as defined hereafter) of the Company,
and (iii) each committee (or
similar body) of each such board. Notwithstanding the foregoing, until the
Effective Time (as defined
hereafter), the Company shall use all reasonable efforts to have at least two
members of the Board of
Directors who are neither officers of the Parent or designees, stockholders
or affiliates of the Parent.
Subject to receipt by the Company from the Parent or the Purchaser of the
information referred to in the
penultimate sentence of this Section 1.3(a), the Company shall promptly take
all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its
obligations under this Section 1.3(a), including mailing to stockholders the
information required by such
Section 14(f) and Rule 14f-1 as is necessary to enable the Parent's designees
to be elected to the Company's
Board of Directors. The Parent or the Purchaser will supply the Company any
information with respect
to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and
Rule 14f-1. The provisions of this Section 1.3(a) are in addition to and
shall not limit any rights which the
Purchaser, the Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise.
(b) From and after the time, if any, that the Parent's
designees constitute a majority
of the Company's Board of Directors and prior to the Effective Date (as
hereinafter defined), any
amendment of this Agreement by the Company, any termination of this Agreement
by the Company, any
extension of time for performance of any of the obligations of the Parent or
the Purchaser hereunder, any
waiver of any condition to the Company's obligations hereunder or any of the
Company's rights hereunder
or action to amend or otherwise modify the Company's Amended and Restated
Certificate of Incorporation
or Amended and Restated By-Laws may be effected only by the action of a
majority of the directors of the
Company then in office who were not officers of the Parent or designees,
stockholders or affiliates of the
Parent, which action shall be deemed to constitute the action of any
committee specifically designated by
the Board of Directors to approve the actions and transactions contemplated
hereby and the full Board of
Directors; provided, that if there shall be no such directors, such actions
may be effected by majority vote
of the entire Board of Directors of the Company.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time, the Purchaser shall be
merged with and into the
Company (the "Merger") upon the terms and subject to the conditions
hereinafter set forth as permitted by
and in accordance with the provisions of Section 251 (or other applicable
provision) of the General
Corporation Law of the State of Delaware (the "Delaware Law"). The Company
and the Purchaser are
sometimes referred to herein as the "Constituent Corporations." The Company
shall be the surviving
corporation following the effectiveness of the Merger (sometimes referred to
herein as the "Surviving
Corporation"). Notwithstanding anything to the contrary herein, at the
election of the Parent, any direct
or indirect wholly-owned subsidiary of the Parent may be substituted for the
Purchaser as a Constituent
Corporation in the Merger; provided, however, that such substitution shall
not impede or delay the
consummation of the transactions contemplated by this Agreement. In such
event, the parties agree to
execute an appropriate amendment to this Agreement, in form and substance
reasonably satisfactory to the
Parent and the Company, in order to reflect such substitution.
2.2 Effect of Merger. The parties agree to the following
provisions with respect to the
Merger:
(a) Name of Surviving Corporation. The name of the Surviving
Corporation from
and after the Effective Date shall be "Foodbrands America, Inc."
(b) Certificate of Incorporation. The Certificate of
Incorporation of the Purchaser
as in effect immediately prior to the Effective Date shall from and after the
Effective Date be the Certificate
of Incorporation of the Surviving Corporation until changed or amended in
accordance with the provisions
of applicable law.
(c) Bylaws. The Bylaws of the Purchaser as in effect
immediately prior to the
Effective Date shall from and after the Effective Date be and continue to be
the Bylaws of the Surviving
Corporation until changed or amended as provided therein or the Certificate
of Incorporation of the
Surviving Corporation or in accordance with the provisions of applicable law.
(d) Corporate Organization. The separate corporate existence
of the Purchaser
shall cease at the Effective Time. All the rights, privileges, immunities
and franchises, of a public as well
as a private nature, and all property, real, personal and mixed, of each of
the Constituent Corporations, and
all debts due on whatever account to each of them, including subscriptions
for stock and other choses in
action belonging to each of them, shall be taken and deemed to be transferred
to and vested in the Surviving
Corporation in accordance with Delaware Law without further act or deed. The
title to any real estate, or
any interest therein, vested in either of the Constituent Corporations shall
not revert or be in any way
impaired by reason of Merger. The Surviving Corporation shall thenceforth
be responsible for all the
liabilities and obligations of each of the Constituent Corporations, with the
effect set forth in the Delaware
Law. Any claim, action or proceeding existing or pending by or against any
of the Constituent
Corporations may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may
be substituted in its place. The Surviving Corporation shall have all the
rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a
corporation organized under the Delaware
Law, and neither the rights of creditors nor any liens upon the property of
the Purchaser or the Company
shall be impaired by the Merger.
(e) Directors and Officers. The directors of the Purchaser
immediately prior to the
Effective Time will be the initial directors of the Surviving Corporation,
and the officers of the Company
immediately prior to the Effective Time will be the initial officers of the
Surviving Corporation, in each
case until the earlier of their resignation or removal or until their
successors are elected or appointed and
qualified.
(f) Closing. The Merger shall be consummated and the closing
of this Agreement
(the "Closing") shall take place at the offices of Sidley & Austin, One First
National Plaza, Chicago,
Illinois 60603, or at such other place as the parties may mutually agree, no
later than the second business
day (the "Closing Date") after the satisfaction or waiver of the conditions
to the obligations of the parties
hereto set forth in Article VI hereof.
(g) Filing of Certificate of Merger; Effective Date and
Effective Time. On the
Closing Date (or such other date as the Parent and the Company may agree) the
Parent, the Purchaser and
the Company shall cause a certificate of merger or, if applicable, a
certificate of ownership and merger (the
"Certificate of Merger") to be executed and filed with the Secretary of State
of the State of Delaware as
provided in the Delaware Law. The Merger shall become effective on the date
and time at which the
Certificate of Merger shall have been duly filed with the Secretary of State
of the State of Delaware or at
such other time as the Parent, the Purchaser and the Company shall agree
should be specified in the
Certificate of Merger (the date and time the Merger becomes effective being
referred to herein respectively
as the "Effective Date" and the "Effective Time").
2.3 Conversion of Shares. By virtue of the Merger and without any
action on the part of
the Parent, the Purchaser or any stockholder of the Company, as of the
Effective Time pursuant to this
Agreement:
(a) Each share of common stock, $.01 par value per share, of
the Company (the
"Common Stock") then issued and outstanding immediately prior to the
Effective Time (other than shares
of Common Stock held by the Company as treasury stock or by any wholly-owned
subsidiary of the
Company or owned by the Parent, the Purchaser or any other subsidiaries of
the Parent and other than the
Dissenters' Shares (as defined in Section 2.4)) shall be cancelled and
converted into and become the right
to receive, upon surrender of the certificate representing such share an
amount in cash, without interest
thereon, equal to the Share Price (the "Merger Consideration");
(b) Each outstanding share of Common Stock held by the
Company as a treasury
share or by any wholly-owned subsidiary of the Company and any shares of
Common Stock owned by the
Parent, the Purchaser or any other subsidiary of the Parent shall be
cancelled and retired and cease to exist
and no consideration shall be delivered in exchange therefor; and
(c) Each share of common stock, $.01 par value per share, of
the Purchaser then
issued and outstanding shall be converted into one fully paid and
nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
2.4 Dissenters' Rights. Each outstanding share of Common Stock
held by stockholders
who shall have properly exercised and perfected appraisal rights with respect
thereto under Section 262
of the Delaware Law ("Dissenters' Shares") shall not be cancelled and
converted into the right to receive
the Merger Consideration in cash, without interest, pursuant to the Merger,
but shall be entitled to receive
payment of the appraised value of such Dissenters' Shares in accordance with
provisions of such Section
262, except that any Dissenters' Shares held by a stockholder who fails to
perfect or withdraws his or her
demand for appraisal of such Dissenters' Shares or loses his or her right to
such payment shall be cancelled
and converted, as of the Effective Time, into the right to receive the Merger
Consideration. The Company
will give the Parent prompt written notice of any demands received by the
Company for appraisals of
shares of Common Stock. The Company shall not, except with the prior written
consent of the Parent,
make any payment with respect to any demands for appraisal or offer to settle
or settle any such demands.
2.5 Payment for Shares; Surrender of Certificates. In order that
the cash payments
provided for by Sections 2.3(a) and 2.6 hereof may be made, the Parent shall
cause Purchaser to deliver
to a bank or trust company designated by the Parent prior to the Effective
Time (herein referred to as the
"Disbursing Agent"), at or prior to the Effective Time, in trust for the
benefit of the holders of Common
Stock and persons entitled to any portion of the Option Settlement Amount (as
defined in Section 2.6),
cash, in immediately available funds, in an aggregate amount necessary to pay
the Merger Consideration
pursuant to Section 2.3(a) (determined as though there are no Dissenters'
Shares), plus the Option
Settlement Amount. As soon as practicable after the Effective Time, the
Parent shall cause the Disbursing
Agent to mail (and to make available for collection by hand) to each record
holder of an outstanding
certificate or certificates which immediately prior to the Effective Time
represented shares of Common
Stock, a form letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and
title to the certificates shall pass, only upon actual delivery of the
certificates to the Disbursing Agent and
shall be in a form and have such other provisions as the Parent may
reasonably specify) and instructions
for use in effecting the surrender of such certificate or certificates for
payment therefor. Such letter of
transmittal and instructions shall request that each such record holder shall
surrender such holder's
certificate or certificates to the Disbursing Agent promptly following the
Effective Date.
Upon surrender of a certificate formerly representing shares of Common
Stock, together with
a letter of transmittal duly completed and validly executed in accordance
with the instructions thereto, and
such other documents as may be reasonably required pursuant to such
instructions, the Disbursing Agent
shall promptly pay to the persons entitled thereto the amount to which such
persons are entitled. No
interest will be paid or accrued on the cash payable upon the surrender of
any certificate or certificates (it
being understood that any interest earned on funds made available to the
Disbursing Agent pursuant to this
Agreement shall be turned over to the Parent).
If payment is to be made to a person other than the person in whose name
the certificate so
surrendered is registered, it shall be a condition of payment that such
certificate shall be properly endorsed
or otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer
or other taxes required by reason of the delivery of such payment to a person
other than the registered
holder of such certificate or establish to the satisfaction of the Parent
that any such taxes have been paid
or are not applicable. Until surrendered as contemplated by this Section
2.5, each certificate (other than
certificates representing Dissenters' Shares and certificates representing
any shares of Common Stock
owned by the Parent or any subsidiaries of the Parent, the Company or any
wholly-owned subsidiary of
the Company) shall be deemed at any time after the Effective Date to
represent only the right to receive
upon such surrender the amount of cash, without interest, into which the
shares of Common Stock
theretofore represented by such certificate shall have been converted
pursuant to Section 2.3(a).
Notwithstanding the foregoing, none of the Disbursing Agent, the Surviving
Corporation or any party
hereto shall be liable to a former stockholder of the Company for any cash or
interest delivered to a public
official as is required pursuant to applicable abandoned property, escheat or
similar laws.
After six months after the Effective Date, any remaining funds,
including any interest or other
income thereon, held by the Disbursing Agent pursuant to this Section shall
be released from trust and shall
be paid by the Disbursing Agent to the Surviving Corporation. Thereafter,
holders of shares of Common
Stock shall look only to the Parent or the Surviving Corporation (subject to
the terms of this Agreement
and abandoned property, escheat and other similar laws) as general creditors
thereof with respect to the
Merger Consideration, without any interest thereon, that may be payable per
share of Common Stock upon
due surrender of the certificates held by them.
The Parent or the Disbursing Agent shall be entitled to deduct and
withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Common Stock such
amounts as the Parent or the Disbursing Agent is required to deduct and
withhold with respect to the
making of such payment under the Code (as hereinafter defined) or under any
provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Parent or
the Disbursing Agent, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of
the shares of Common Stock in respect of which such deduction and withholding
was made by the Parent
or the Disbursing Agent.
2.6 Stock Options. Immediately prior to the Effective Time,
subject to obtaining any
consent which may be necessary from the holder of the outstanding options,
the Company shall cancel and
settle, by cash payment to the holders thereof (the "Option Settlement
Amount"), all the outstanding options
to purchase shares of Common Stock (whether or not such options are currently
exercisable or vested)
which have heretofore been granted under the following stock plans and
agreements of the Company: (i)
Foodbrands America, Inc. 1992 Stock Incentive Plan, as amended, (ii)
Foodbrands America, Inc. Associate
Stock Purchase Plan, (iii) Foodbrands America, Inc. Nonqualified Associate
Stock Purchase Plan, (iv)
Deferred Stock Compensation Plan for the non-employee directors of
Foodbrands, and (v) the 25,000
options issued to certain directors of the Company pursuant to option
agreements dated April 27, 1995.
(Such plans and agreements are referred to herein collectively as the "Stock
Option Plans.") Except as
otherwise provided pursuant to the terms of the Stock Option Plans in clauses
(ii) and (iii) above, such
Option Settlement Amount with respect to each cancelled option shall be in an
amount equal to the excess,
if any, of the Merger Consideration over the per share exercise price of such
cancelled option, multiplied
by the number of shares of Common Stock into which such cancelled option
would be exercisable, less any
amounts that the Company is required to withhold and pay over to any federal
and state, local or other tax
authorities under applicable law with respect to such Option Settlement
Amount. The remaining proceeds,
if any, will be paid to the option holder in cash. Such cash settlement
shall constitute full performance of
the Company's obligations under the Stock Option Plans and any related stock
option agreements. Except
as otherwise agreed to by the parties, the Stock Option Plans shall terminate
before or as of the Effective
Time.
2.7 Lost Certificates. If any certificate representing Common
Stock shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation,
the posting by such person of
a bond, in such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim
that may be made against it with respect to such certificate, the Disbursing
Agent will pay in exchange for
such lost, stolen or destroyed certificate the Merger Consideration
multiplied by the number of shares of
Common Stock represented by such certificate, to which the holder thereof is
entitled pursuant to this
Article II.
2.8 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books
of the Company shall be closed, and no transfer of shares of Common Stock
shall thereafter be made. If,
after the Effective Time, share certificates are presented to the Surviving
Corporation, the Disbursing Agent
or the Parent, they shall be cancelled and exchanged for the Merger
Consideration as provided in this
Article II.
2.9 Further Assurances. If at any time the Surviving Corporation
shall consider or be
advised that any further assignments or assurances are necessary or desirable
to vest in the Surviving
Corporation, according to the terms hereof, the title of any property or
rights of the Company or the
Purchaser, the last acting officers and directors of the Company or the
Purchaser, as the case may be, or
the corresponding officers and directors of the Surviving Corporation shall
and will execute and make all
such proper assignments and assurances and do all things necessary or proper
to vest title in such property
or rights in the Surviving Corporation, and otherwise to carry out the
purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and the
Purchaser as follows:
3.1 Organization of the Company. The Company is duly organized,
validly existing and
in good standing under the laws of the State of Delaware, has full corporate
power and authority to conduct
its business as it is presently being conducted and to own and lease its
properties and assets. Each of the
direct and indirect Subsidiaries of the Company is duly organized, validly
existing and in good standing
under the laws of its respective state of incorporation, has full corporate
power and authority to conduct
its business as it is presently being conducted and to own, operate and lease
its properties and assets. Each
of the Company and its Subsidiaries is duly qualified to do business as a
foreign corporation and is in good
standing in each jurisdiction in which (i) such qualification is necessary
under the applicable law as a result
of its conduct of its business or ownership of assets or properties held
under lease, and (ii) where the failure
to be so qualified would have a Material Adverse Effect (as defined below) on
the Company. "Material
Adverse Change" or "Material Adverse Effect" means, when used with respect to
the Parent or the
Company, as the case may be, any change or effect, either individually or in
the aggregate, that is or can
reasonably be expected to be materially adverse to the business, assets,
liabilities, properties, condition
(financial or otherwise) or results of operations of the Parent and its
subsidiaries taken as a whole, or the
Company and its Subsidiaries taken as a whole, as the case may be.
3.2 Authorization.
(a) The Company has all necessary corporate power and
authority to enter into this
Agreement and will at the Closing have taken all necessary corporate action,
including stockholder consent
or approval (if necessary), to consummate the transactions contemplated
hereby and to perform its
obligations hereunder. The execution and delivery of this Agreement by the
Company and the performance
of its obligations hereunder have been duly and validly authorized by the
Board of Directors of the
Company and, other than the approval and adoption of this Agreement by the
requisite vote of the
Company's stockholders, no other corporate proceedings on the part of the
Company are necessary, and
this Agreement has been duly executed and delivered by the Company and
(assuming the valid
authorization, execution and delivery of this Agreement by the Parent and the
Purchaser) constitutes a valid
and binding obligation of the Company enforceable against it in accordance
with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar
laws, now or hereafter in effect, relating to or limiting creditors' rights
generally and (ii) general principles
of equity (whether considered in an action in equity or at law) which
provide, among other things, that the
remedy of specific performance and injunctive and other forms of equity
relief are subject to equitable
defenses and the discretion of the court before which any proceedings
therefor may be brought.
(b) The Board of Directors of the Company has duly and validly
approved and taken all
corporate action required to be taken by the Board of Directors for the
approval and confirmation of the
transactions contemplated by this Agreement and the Tender Agreements,
including, without limitation,
all actions necessary to render the provisions of Section 203 of the Delaware
Law inapplicable to
transactions contemplated by this Agreement or the Tender Agreements. No
Oklahoma takeover statute
or similar statute or regulation applies or purports to apply to the Parent,
the Purchaser, the Merger, this
Agreement, the Tender Agreements or any of the transactions contemplated by
this Agreement or the
Tender Agreements in connection with the transactions contemplated by this
Agreement or the Tender
Agreements.
(c) The Board of Directors of the Company has duly and validly
approved and taken all
corporate actions required to be taken by the Board of Directors for the
approval of the amendments to the
Amended and Restated Certificate of Incorporation of the Company (which
amendments are attached as
Exhibit B hereto) (the "Charter Amendment"). The stockholders of the Company
have duly and validly
approved the Charter Amendment. Subject to (i) the provisions of the
Exchange Act relating to the
distribution of an information statement to the stockholders of the Company
and (ii) the filing of a
certificate of amendment ("Certificate of Amendment") with the Secretary of
State of the State of
Delaware, no further action is required to make effective the Charter
Amendment. The execution and
delivery of the Tender Agreements, the tender of shares of Common Stock
pursuant to the Offer and the
grant of the options contemplated by the Tender Agreements do not conflict
with Article Fifth of the
Amended and Restated Certificate of Incorporation of the Company, and upon
the effectiveness of the
Charter Amendment neither the purchase of shares of Common Stock pursuant to
the Offer nor the exercise
of any such options under the Tender Agreement will violate the Amended and
Restated Certificate of
Incorporation of the Company.
3.3 Capitalization of the Company. The Company has an authorized
capital stock of
20,000,000 shares of Common Stock and 4,000,000 shares of preferred stock,
par value $.01 per share (the
"Preferred Stock"). As of the date hereof, 12,465,107 shares of Common Stock
and no shares of Preferred
Stock were issued and outstanding. Such issued shares of Common Stock are
duly authorized, validly
issued and are fully paid and nonassessable and are not subject to preemptive
rights. As of the date hereof,
there are no treasury shares, and there are no outstanding stock appreciation
rights. There are no
outstanding contractual obligations of the Company or any of its Subsidiaries
to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of the Company or
any of its Subsidiaries.
Except as set forth on Schedule 3.3 of the letter from the Company to the
Parent dated the date hereof
which relates to this Agreement and is designated therein as the Company
Disclosure Letter (the "Company
Disclosure Letter") and except for the outstanding options and warrants to
purchase 1,762,752 shares of
Common Stock granted under the Company's Stock Option Plans and the Warrant
Agreement dated
October 31, 1991 among the Company and certain banks (the "Warrant
Agreement"), there are no
outstanding options, warrants or rights to purchase or acquire any capital
stock of the Company or any
securities convertible, exchangeable or exercisable for any of its capital
stock, and except as set forth on
Schedule 3.3 of the Company Disclosure Letter, there are no contracts,
commitments, understandings,
arrangements or restrictions by which the Company is bound to sell or issue
any shares of its capital stock
or any securities convertible, exchangeable or exercisable for any of its
capital stock. As of the Effective
Time, the Company will have no obligation to issue any shares of Common
Stock.
3.4 Subsidiaries of the Company. Schedule 3.4 of the Company
Disclosure Letter sets
forth a complete and correct description of the name and jurisdiction of
incorporation or formation of each
of the direct and indirect subsidiaries of the Company of which the Company
owns more than a 50% equity
interest. Such subsidiaries are sometimes hereafter collectively referred to
as the "Subsidiaries" or
"Subsidiary." Except as set forth on Schedule 3.4 of the Company Disclosure
Letter, all of the issued and
outstanding shares of common stock or other equity interest of each
Subsidiary have been duly authorized,
validly issued, are fully paid and nonassessable and are owned beneficially
by the Company or a Subsidiary
of the Company free and clear of any liens, claims or other encumbrances or
rights of third parties. There
are no outstanding options, warrants or rights to purchase or acquire any
capital stock of any of the
Subsidiaries of the Company, and there are no contracts, commitments,
understandings, arrangements or
restrictions by which the Company or any Subsidiary of the Company is bound
to sell or issue any shares
of capital stock of such Subsidiary. Except for the Company's interest in
its Subsidiaries and except as
disclosed on Schedule 3.4 of the Company Disclosure Letter, neither the
Company nor its Subsidiaries
owns directly or indirectly any interest or investment (whether equity or
debt) in, nor is the Company or
any of its Subsidiaries subject to any obligation or requirement to provide
for or to make any investment
(in the form of a loan, capital contribution or otherwise) to or in, any
corporation, partnership, joint
venture, limited liability company, business, trust or entity.
3.5 Undisclosed Liabilities. Except as set forth in the Company
SEC Documents (as
hereafter defined) and in the audited financial statements of the Company and
Subsidiaries as of and for
the fiscal year ended December 28, 1996 (the "Financial Statements") listed
on and attached to Schedule
3.5 of the Company Disclosure Letter neither the Company nor any of its
Subsidiaries has any liabilities
or obligations, either accrued, absolute, contingent or otherwise, which
would be required to be reflected
on a balance sheet, or in the notes thereto, prepared in accordance with
generally accepted accounting
principles, consistently applied, except for liabilities and obligations
listed in Schedule 3.5 of the Company
Disclosure Letter, or incurred in the ordinary course of business consistent
with past practice since
December 28, 1996, or which would not have a Material Adverse Effect on the
Company.
3.6 Absence of Certain Changes or Events. Except as otherwise
contemplated by this
Agreement or as disclosed in any of the Company's SEC Documents or the
Financial Statements, since
December 28, 1996, the Company and its Subsidiaries have operated their
respective businesses in the
ordinary course consistent with past practices and there has not been,
occurred or arisen:
(a) any Material Adverse Change in the Company (other than
changes which are
the result of general economic changes affecting the industries or businesses
in which the Company or any
of its Subsidiaries operate);
(b) except as required by the Transition Agreements (as
hereafter defined) (i) any
increase in the compensation payable or to become payable by the Company or
its Subsidiaries to any of
their respective officers, employees or agents (collectively, "Personnel")
whose total compensation for
services rendered to the Company or its Subsidiaries is currently at an
annual rate of more than $75,000,
except for normal periodic increases in the ordinary course of business
consistent with past practice; or (ii)
any new employment agreement to which the Company or any Subsidiary is a
party, other than agreements
entered into in the ordinary course of business, consistent with past
practices which provide for an annual
salary less than $75,000 and have no provisions with respect to a change of
control of the Company;
(c) except for the Transition Agreements (as hereafter
defined) (true and complete
copies of which have heretofore been furnished to the Parent), any material
addition to or modification of
any of the employee benefit plans, arrangements or practices affecting
Personnel other than the extension
of coverage to other Personnel who became eligible after December 28, 1996;
(d) any sale, assignment or transfer (except for intercompany
transfers or sales out
of inventory in the ordinary course of business) of any asset or group of
related assets of the Company or
its Subsidiaries, having a fair market value in excess of $500,000;
(e) any waiver of any rights of substantial value to the
Company and its
Subsidiaries taken as a whole, whether or not in the ordinary course of
business;
(f) any failure to repay any obligation of the Company or its
Subsidiaries, except
where such failure would not have a Material Adverse Effect on the Company;
(g) any entry into or any commitment or transaction that,
individually or in the
aggregate, has or is reasonably likely to have, a Material Adverse Effect on
the Company;
(h) any change by the Company or any of its Subsidiaries in
accounting methods,
principles or practices, except for any such change required by reason of a
concurrent change in generally
accepted accounting principles;
(i) any amendments or changes in the Amended and Restated
Certificate of
Incorporation or Amended and Restated Bylaws, as amended, of the Company;
(j) any revaluation by the Company or any of its Subsidiaries
of any of their
respective assets, including, without limitation, write-offs of accounts
receivable, other than in the ordinary
course of the Company's and each of its Subsidiaries' businesses consistent
with past practices;
(k) any damage, destruction or loss affecting the business or
assets of the Company
or any Subsidiary which, individually or in the aggregate resulted in or is
reasonably likely to be materially
adverse to the business, assets, liabilities, properties, condition
(financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole;
(l) any declaration, setting aside or payment of any dividend
or other distribution
with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other
acquisition by the Company or any of its Subsidiaries of any outstanding
shares of capital stock or other
securities of, or other ownership interests in, the Company; or
(m) any agreement by the Company or any of its Subsidiaries
to do any of the
foregoing or take any action which would make any representation or warranty
in Article III hereof untrue
or incorrect.
3.7 Title to Assets, Etc. The Company or its Subsidiaries have,
or on the Effective Date
will have, good and marketable title to the assets (the "Assets") reflected
on the Financial Statements other
than those that are leased or assets which have been acquired or disposed of
as contemplated by this
Agreement or in the ordinary course of business consistent with past practice
since December 28, 1996,
and (b) none of the Assets is subject to any mortgage, deed of trust, pledge,
lien, security interest,
encumbrance, claim, charge or adverse interest (collectively, "Encumbrances")
of any other person or entity
not reflected on the Financial Statements, except for liens incurred in the
ordinary course of business
consistent with past practice and except for minor liens which in the
aggregate are not substantial in
amount, do not materially detract from the value of the property or assets
subject thereto or interfere with
the present use thereof.
Neither the Company nor any of its Subsidiaries has received notice of
any violation of any
zoning, use, occupancy, building or environmental regulation, ordinance or
other law, order, regulation or
requirement relating to its owned or leased real property that would have a
Material Adverse Effect on the
Company.
3.8 Condition of Tangible Assets. The facilities and equipment of
the Company and its
Subsidiaries necessary to the operations of their businesses are in good
operating condition and repair
except for (a) ordinary wear and tear and (b) any defect the cost of
repairing which would not be material
to the Company and its Subsidiaries taken as a whole.
All meats (fresh and frozen), frozen pizza crusts, appetizers, sauces,
soups, processed meat
products, supplies, and any other inventories on hand constituting assets of
the Company and its
Subsidiaries are (i) in good and marketable condition and usable or saleable
in the ordinary course of
business (normal waste and spoilage excepted) and (ii) the Company is in
compliance as to content labeling
and packaging with applicable laws and regulations (including without
limitation those of the U.S.
Department of Agriculture and Federal Food and Drug Administration), except
where the failure to be in
such condition or in compliance would not have a Material Adverse Effect on
the Company.
3.9 Contracts and Commitments. Except (i) as set forth on
Schedule 3.9 of the Company
Disclosure Letter hereto, (ii) for employee benefit plans set forth on
Schedule 3.16 of the Company
Disclosure Letter and (iii) contracts entered into pursuant to the terms of
Section 5.2 after the date hereof,
neither the Company nor any of its Subsidiaries is a party to any written or
oral:
(a) commitment, contract, purchase order, letter of credit or
agreement, other than
as described in subsections (b) or (c) below, involving any obligation or
liability on the part of the
Company or its Subsidiaries in excess of $250,000 and not cancelable (without
liability) within sixty (60)
days, except for purchases made in the ordinary course of business in amounts
not substantially in excess
of past practice;
(b) lease of real property involving an annual expense on the
part of the Company
or its Subsidiaries in excess of $250,000 per year;
(c) lease of personal property involving an annual expense on
the part of the
Company or its Subsidiaries in excess of $250,000, which lease is not
cancelable (without liability) within
sixty (60) days; or
(d) contracts and commitments not in the ordinary course of
business not otherwise
described above or listed on Schedule 3.9 of the Company Disclosure Letter
relating to the businesses of
the Company and its Subsidiaries and materially affecting the Company's and
its Subsidiaries' businesses.
Except as set forth on Schedule 3.9 of the Company Disclosure Letter,
neither the Company
nor any of its Subsidiaries is (and to the best knowledge of the Company, no
other party is) in material
breach or violation of, or default under, any of the contracts, letters of
credit, purchase orders, leases,
commitments, licenses or permits described on Schedule 3.9 of the Company
Disclosure Letter, the breach
or violation of which would have a Material Adverse Effect on the Company.
3.10 No Conflict or Violation; Third Party Consents. Assuming the
accuracy and
completeness of the representations and warranties of the Parent and the
Purchaser herein, and assuming
all consents and approvals referred to in Section 3.11 hereof are obtained
and except for the third party
consents identified on Schedule 3.10 of the Company Disclosure Letter, the
execution and delivery of this
Agreement does not, and consummation of the transactions contemplated hereby
will not, result in (a) a
violation of or a conflict with any provision of the Amended and Restated
Certificate of Incorporation or
Amended and Restated Bylaws of the Company or the charter or bylaws or
operating agreements of any
Subsidiary, (b) a breach or default under any provision of any material
contract, agreement, lease,
commitment, license, franchise or permit to which the Company or any of its
Subsidiaries is a party or by
which the Assets are bound until such time as a "Change of Control" (as
defined in that certain Indenture
dated as of May 15, 1996 relating to the Company's $120,000,000 10 3/4%
Senior Subordinated Notes due
2006) to occur, (c) a violation of any statute, rule, regulation, ordinance,
order, judgment, writ, injunction
or decree the violation of which would have a Material Adverse Effect on the
Company, or (d) an
imposition of any material lien, mortgage, pledge, encumbrance, claim,
restriction or charge on the business
of the Company or any of its Subsidiaries or on any of the Assets.
3.11 Consents and Approvals. Except where such consent, approval
or authorization,
declaration, filing or registration is not material to the Company and its
Subsidiaries taken as a whole or
would not materially impair the ability of the Company to perform its
obligation hereunder, no consent,
approval or authorization of, or declaration, filing or registration with,
any foreign, federal, state or local
governmental or regulatory authority (each a "Governmental Entity") is
required to be made or obtained
by the Company in connection with the execution, delivery and performance of
this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby, other than (i)
the filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the
"Antitrust Improvements Act"), (ii) the filing of the Certificate of Merger
with the Secretary of State of
Delaware, and (iii) filings made in compliance with any applicable provisions
of the Exchange Act.
3.12 Compliance with Law. The Company and its Subsidiaries hold,
and at all required
times have held, all permits, licenses, variances, exemptions, orders and
approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses as
currently being conducted (the
"Company Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and
approvals which have not had, and will not have a Material Adverse Effect on
the Company. The
Company and its Subsidiaries are, and at all times have been, in compliance
with the terms of the Company
Permits, except where the failure so to comply would not have, a Material
Adverse Effect on the Company.
The Company and its Subsidiaries are in compliance with all applicable laws,
statutes, ordinances and
regulations of any Governmental Entity, except where the failure to comply
would not have a Material
Adverse Effect on the Company. The Company (or its Subsidiaries) has not
received any written notice
to the effect that, or otherwise been advised that, it is not in compliance
with any of such statutes,
regulations and orders, ordinances or other laws where the failure to comply
would have a Material
Adverse Effect on the Company, and, assuming the accuracy and completeness of
the representations and
warranties of the Parent and the Purchaser herein, the Company has no reason
to anticipate that any
presently existing circumstances are likely to result in violations of any
such regulations which would have
a Material Adverse Effect on the Company. No investigation or review by any
Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company,
threatened, nor, to the knowledge of the Company, has any Governmental Entity
indicated an intention to
conduct the same, other than, in each case, those which will not have a
Material Adverse Effect on the
Company.
3.13 Brokers. Other than the arrangement between the Company and
Morgan Stanley &
Co. Incorporated ("Morgan Stanley"), neither the Company nor any affiliates
of the Company has entered
into or will enter into any agreement, arrangement or understanding with any
person or firm which will
result in the obligation of the Parent or any affiliate of the Parent or the
Company to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby. The
parties hereby acknowledge the written arrangement (a copy of which has been
delivered to the Parent)
with respect to this transaction between the Company and Morgan Stanley, with
respect to which all fees
due to Morgan Stanley will be paid by the Company.
3.14 No Other Agreements to Sell the Company. Except as contained
in this Agreement,
the Company has no legal obligation, absolute or contingent, to any other
person or firm to sell the
Common Stock or the stock of any of its Subsidiaries, to sell substantially
all of the assets of the Company
or to effect any merger, consolidation or other reorganization of the Company
or to enter into any
negotiations or agreement with respect thereto.
3.15 Intellectual Property. (a) For purposes of this Agreement,
"Intellectual Property"
means (i) all United States and foreign copyrights, whether registered or
unregistered, and pending
applications to register the same, and all copyrightable works, including,
without limitation, software; (ii)
all United States, state and foreign trademarks, service marks and trade
names (including all assumed or
fictitious names under which the Company or any Subsidiary is conducting the
business, whether registered
or unregistered, and pending applications to register the foregoing
("Trademarks"); (iii) all United States
and foreign patents, patent applications, continuations,
continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable or reduced to practice) or
improvements thereto
("Patents"); (iv) all confidential ideas, know-how, methods, formulae, trade
secrets, processes, reports,
data, customer lists, business plans, or other proprietary information; (v)
all agreements, commitments,
contracts, understandings, licenses, sublicenses, assignments and indemnities
which relate or pertain to any
of the intellectual property identified in subsections (i) through (iv) above
or to disclosure or use of ideas
or third parties ("Licenses"). All Trademarks, Patents and Licenses of the
Company and its Subsidiaries
which are material to the operation of the business of the Company and its
Subsidiaries taken as a whole
, are listed on Schedule 3.15 of the Company Disclosure Letter. The Company
owns or has the right to use
all Intellectual Property required to permit the conduct of the Company's or
any Subsidiary's business in
the ordinary course. To the best knowledge of the Company, the Company's and
its Subsidiaries' use of
their Intellectual Property are not infringing upon or otherwise violating
the rights of any third party in or
to such Intellectual Property, and no proceedings have been instituted
against or claims received by the
Company or any Subsidiary that are presently outstanding alleging that the
Company's (or any
Subsidiary's) use of it Intellectual Property infringe upon or otherwise
violate any right of a third party in
or to such Intellectual Property.
3.16 Employee Benefit Plans. Schedule 3.16 of the Company
Disclosure Letter contains
a complete list of "employee welfare benefit plans" (as that term is defined
in Section 3(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA") in which employees of the
Company and its
Subsidiaries participate (which plans, as applied to such active and former
employees are hereinafter
referred to as "Welfare Plans"). Schedule 3.16 of the Company Disclosure
Letter also contains a complete
list of "employee pension benefit plans" (as that term is defined in Section
3(2) of ERISA), including any
"multi-employer plans" (as that term is defined in Section 3(37) of ERISA) in
which such employees of
the Company and its Subsidiaries participate (which plans as applied to such
employees are hereinafter
referred to as "Pension Plans"). The Welfare Plans and Pension Plans are
hereinafter collectively referred
to as the "Plans." Each of the Plans is in compliance with the provisions of
all applicable laws, rules and
regulations, which shall include by example and not by limitation ERISA and
the Internal Revenue Code
of 1986, as amended (the "Code"). None of the Pension Plans have incurred
any "accumulated funding
deficiency" (as defined in Section 412(a) of the Code). The Company and its
Subsidiaries have not
incurred any liability to the Pension Benefit Guaranty Corporation under
Sections 4062, 4063 or 4064 of
ERISA which has not been paid with respect to any of the Plans or any
withdrawal liability under Title IV
of ERISA with respect to any of the Pension Plans.
3.17 Tax Matters. The Company, any predecessor of the Company and
all members of any
affiliated group of corporations of which the Company or any such predecessor
corporation is or has been
a member, have duly filed all tax returns and reports required to be filed by
them, including all federal,
state, local and foreign income tax returns and reports, and have timely paid
all taxes shown as due on such
returns and reports (except where failures to file such returns and reports
or failures to pay such taxes
would not have a Material Adverse Effect on the Company, any predecessor of
the Company or any such
member). All such returns and reports required to have been filed are
complete and accurate in all material
respects. The Company has made adequate provision, in conformity with GAAP,
for the payment of all
taxes of the Company or such Subsidiary, as the case may be, existing as of
the Effective Date for all
periods ending on or prior to the date of the Balance Sheet.
Except as reflected on Schedule 3.17 of the Company Disclosure Letter,
the consolidated
federal income tax returns of the Company (and any predecessor of the
Company) have been examined by
the Internal Revenue Service. Except as set forth on Schedule 3.17 of the
Company Disclosure Letter
neither the Company, any predecessor of the Company, nor any Subsidiary (i)
has waived any statute of
limitations, (ii) has filed a statement under Section 341(f) of the Code, or
(iii) is a party to any tax sharing
agreement. Except as set forth on Schedule 3.17 of the Company Disclosure
Letter, (i) the state income
tax returns of the Company, any predecessor of the Company and all
Subsidiaries and the federal income
tax returns of all Subsidiaries have been examined by the appropriate taxing
authority, (ii) there is no
action, suit, investigation, audit, claim or assessment pending or proposed
or threatened in writing with
respect to taxes of the Company, any predecessor of the Company or any
Subsidiary, (iii) there are no liens
for taxes upon the assets of the Company or any Subsidiary except liens
relating to current taxes not yet
due, (iv) all taxes which the Company or any predecessor of the Company or
any Subsidiary are required
by law to withhold or collect for payment have been duly withheld and
collected, and have been paid or
accrued, reserved against and entered on the books of the Company (except
where failures to withhold and
collect and to pay or accrue, reserve against or enter on the books of the
Company would not have a
Material Adverse Effect on the Company, any predecessor of the Company or any
Subsidiary), (v) none
of the Company, any predecessor of the Company or any Subsidiary has been a
member of any group of
corporations filing tax returns on a consolidated, combined, unitary or
similar basis other than each such
group of which it is currently a member, and (vi) as a result of a change in
accounting method for a tax
period beginning on or before the Effective Date, none of the Company or any
Subsidiary will be required
to include any adjustment under Section 481(c) of the Code (or any
corresponding provision of state or
local tax law) in taxable income for any tax period beginning on or after the
Effective Date.
Except as may be limited as a result of the transactions contemplated by
this Agreement, the
"regular" and "alternative minimum tax" net operating loss carryforwards of
the Company and the
Subsidiaries for each of the taxable years ended prior to the date of this
Agreement (collectively, the
"NOLs") are set forth (for each year) on Schedule 3.17 of the Company
Disclosure Letter and are each
available to the Company (or the applicable Subsidiary) for a period of
fifteen taxable years from the end
of the taxable year in which the applicable NOL was incurred. Except as may
be limited as a result of the
transactions contemplated by this Agreement and except as set forth on
Schedule 3.17 of the Company
Disclosure Letter, none of the NOLs constitute separate return limitation
year ("SRLY") losses immediately
prior to the Effective Date, none of the NOLs will be limited immediately
prior to the Effective Date by
Section 382 or 384 of the Code and regulations thereunder, and none of the
NOLs constitutes "dual
consolidated losses" immediately prior to the Effective Date (as defined in
Section 1503 of the Code and
the regulations thereunder).
No transaction contemplated by this Agreement is subject to withholding
under Section 1445
of the Code (relating to "FIRPTA").
For purposes of this Agreement, "tax" (and, with a correlative meaning,
"taxes") shall mean
(i) any federal, state, local or foreign net income, gross income, gross
receipts, windfall profit, severance,
property, production, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative
or add-on minimum, ad valorem, value-added, transfer stamp, or environmental
tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with
any interest or penalty, addition to tax or additional amount imposed by any
governmental authority; and
(ii) any liability of the Company or any Subsidiary for the payment of
amounts with respect to payments
of a type described in clause (i) as a result of being a member of an
affiliated group, or as a result of any
obligation of the Company or any Subsidiary under any tax sharing arrangement
or tax indemnity
arrangement.
3.18 SEC Documents. The Company has filed all required reports,
proxy statements, forms
and other documents with the SEC since January 2, 1994 (the "Company SEC
Documents"). As of their
respective dates, and giving effect to any amendments thereto, (a) the
Company SEC Documents,
including, without limitation, any financial statements and schedules
contained therein, complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the applicable rules and
regulations of the SEC promulgated
thereunder, and (b) none of the Company SEC Documents contained any untrue
statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
The financial statements of the Company included in the Company SEC Documents
as at the dates thereof
complied as to form in all material respects with applicable accounting
requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated
therein or in the notes thereto) and fairly present in all material respects
the consolidated financial position
of the Company and its consolidated Subsidiaries as at the dates thereof and
the consolidated results of
their operations and changes in financial position for the periods then ended
(subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described
therein).
3.19 Environmental Matters.
(a) Except as set forth in Schedule 3.19 of the Company
Disclosure Letter, the
Company and each of its Subsidiaries have complied with all applicable
foreign, federal, state and local
laws, statutes, regulations, codes or ordinances enacted, adopted, issued or
promulgated by any
Governmental Entity relating to or addressing the environment, health or
safety as in effect at the relevant
time, including the Comprehensive Environmental Response, Compensation and
Liability Act, any
amendments thereto, any successor statute and any regulations promulgated
thereunder ("CERCLA"), the
Occupational Safety and Health Act, any amendments thereto, any successor
statute and any regulations
promulgated thereunder ("OSHA") and the Resource Conservation and Recovery
Act, any amendments
thereto, any successor statute and any applicable regulations promulgated
thereunder ("RCRA"), and any
state equivalent ("Environmental Laws"), except for such failures to so
comply that would not have a
Material Adverse Effect on the Company.
(b) Except as set forth on Schedule 3.19 of the Company
Disclosure Letter, or
where the failure to do so would not have a Material Adverse Effect on the
Company, (i) any handling,
transportation, storage, treatment or usage of Hazardous Material that has
occurred on any tract of real
property owned by the Company or a Subsidiary during the period of such
ownership or real property
covered by any real property lease to which the Company or a Subsidiary is a
party during the term of such
lease, has been in compliance with all applicable Environmental Laws, (ii) no
leak, spill, release, discharge,
emission or disposal of any Hazardous Material has occurred on any such tract
during the period of such
ownership or term of such lease pertinent to each such tract which would
subject the property to remedial
action under any Environmental Laws, (iii) each such tract is in substantial
compliance with applicable
Environmental Laws, and (iv) each underground storage tank located on any
such tract, has been registered,
maintained and operated during the Company's or a Subsidiary's ownership or
operation of such tank in
accordance with all applicable Environmental Laws. Schedule 3.19 of the
Company Disclosure Letter, lists
all reports, studies and tests in the possession of the Company or a
Subsidiary relating to the presence or
suspected presence of any Hazardous Material on any such tract in violation
of any Environmental Law
or relating to the existence of any underground storage tank thereon and the
Company and each Subsidiary
agree that they will, promptly following the Company's or a Subsidiary's
receipt thereof, furnish to the
Parent all such reports, studies and tests hereafter obtained by the Company
or a Subsidiary on or prior to
the Closing Date. "Hazardous Material" means asbestos, petroleum (including
without limitation, oil, used
oil, waste oil, gasoline, diesel and petroleum based fuels), petroleum
products and by-products, petroleum
wastes, petroleum contaminated soils, and any substance, material or waste
which is regulated as
"hazardous", "toxic" or under any other similar designation under any
Environmental Law. Such term
includes, without limitation, (i) any material, substance or waste defined as
a "hazardous waste" pursuant
to Section 1004 of the RCRA, (ii) any material, substance or waste defined as
a "hazardous substance"
pursuant to Section 101 of CERCLA or (iii) any material, substance or waste
defined as a "regulated sub-
stance" pursuant to Subchapter IX of the Solid Waste Disposal Act (42 U.S.C.
Section 6991, et seq.).
(c) Except as disclosed on Schedule 3.19 of the Company
Disclosure Letter, or
where the failure to do so would not have a Material Adverse Effect on the
Company, (i) Hazardous
Materials have not been generated, used, treated, handled or stored on, or
transported to or from, or
released or disposed on or from any tract of real property owned by the
Company during the period of such
ownership or any real property covered by any real property lease to which
the Company is a party during
the term of such lease in violation of any Environmental Law ; (ii) the
Company has disposed of all wastes,
including those wastes containing Hazardous Materials, in compliance with all
applicable Environmental
Laws; (iii) there are no past unresolved, pending or, to the knowledge of the
Company or the Subsidiaries,
threatened, actions against the Company relating to compliance with
Environmental Laws or asserting
damages or injury to natural resources, wildlife or the environment; (iv) no
such tract or, to the knowledge
of the Company or the Subsidiaries, any property adjoining such tract, is
listed or proposed for listing on
the National Priorities List under CERCLA or on the Comprehensive
Environmental Response,
Compensation and Liability Act Information System ("CERCLIS"), the Facility
Index System ("FINDS"),
RCRA, Hazardous Waste Registrations Listing Report as a result of any alleged
violation of any applicable
Governmental Law; and (v) to the knowledge of the Company or the
Subsidiaries, neither the Company
nor the Subsidiaries has transported or arranged for the transportation of
any Hazardous Materials to any
location that is listed or proposed for listing on the National Priorities
List under CERCLA or on the
CERCLIS or FINDS or which is the subject of any environmental claim arising
because of any alleged
violation of an Environmental Law.
3.20 Proxy Statement; Information Statement. (a) None of the
information supplied or to
be supplied by the Company for inclusion in the Proxy Statement (as defined
hereafter) (and any
amendments thereof or supplements thereto), if any, will, with respect to
information relating to the
Company, at the time of the mailing of the Proxy Statement to the
stockholders of the Company and at the
time of the Special Meeting (as defined hereafter), contain any untrue
statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The Proxy Statement will, with
respect to information relating to the Company, comply as to form in all
material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no
representation is made in this Section 3.20(a) by the Company with respect to
the statements made in the
Proxy Statement relating to the Parent or the Purchaser or their affiliates
or based on information supplied
by the Parent or the Purchaser for inclusion in the Proxy Statement.
(b) None of the information supplied or to be supplied by the
Company for inclusion in
the Information Statement (as defined hereafter) (and any amendments thereof
or supplements thereto), if
any, will, with respect to information relating to the Company, at the time
of the mailing of the Information
Statement to the stockholders of the Company, contain any untrue statement of
a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The Information Statement will,
with respect to information relating to the Company, comply as to form in all
material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no
representation is made in this Section 3.20(b) by the Company with respect to
the statements made in the
Information Statement relating to the Parent or the Purchaser or their
affiliates or based on information
supplied by the Parent or the Purchaser for inclusion in the Information
Statement.
3.21 Certain Agreements. Except as set forth on Schedule 3.21 of
the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to any
oral or written stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
incentive compensation or
bonus plan, employment agreement, severance or termination agreement,
consulting agreement or other
benefit plan or arrangement, any of the benefits of which will be increased,
or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement
or the Tender Agreements or the value of any of the benefits of which will be
calculated on the basis of
any of the transactions contemplated by this Agreement or the Tender
Agreements.
3.22 Vote Required. The affirmative vote of the holders of a
majority of the outstanding
shares of Common Stock of the Company entitled to vote with respect to the
Merger is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve the Merger.
3.23 Opinion of Financial Advisor. The Company has received the
opinion of Morgan
Stanley dated as of a date which is on or prior to this Agreement
substantially to the effect that, as of the
date of this Agreement, the consideration to be received pursuant to the
Merger Agreement by the
Company's stockholders (other than the Parent or any of its affiliates) is
fair to such stockholders from a
financial point of view. A complete and correct signed copy of such opinion
has been delivered to the
Parent, and such opinion has not been withdrawn or modified as of the date
hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER
The Parent and the Purchaser hereby represent and warrant to the Company
as follows:
4.1 Organization. The Parent is duly organized, validly existing
and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business
and to own and lease its properties. The Purchaser is duly organized,
validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business
and to own and lease its properties. The Purchaser has been formed for the
purpose of effecting the Offer
and the Merger in accordance with the terms of this Agreement. The Purchaser
has not transacted, and
prior to the Effective Date will not transact any business or engage in any
activities other than in
connection with the transactions contemplated by this Agreement.
4.2 Authorization. Each of the Parent and the Purchaser has all
necessary corporate power
and authority to enter into this Agreement and will at the Closing have taken
all necessary corporate action
to consummate the transactions contemplated hereby and to perform its
obligations hereunder. The
execution and delivery of this Agreement by the Parent and the Purchaser and
the performance of their
obligations hereunder have been duly authorized by the Board of Directors of
each of the Parent and the
Purchaser and no other corporate proceeding on the part of the Parent or
Purchaser are necessary. This
Agreement has been duly executed and delivered by each of the Parent and the
Purchaser and (assuming
the valid authorization, execution and delivery of this Agreement by the
Company) constitutes a valid and
binding obligation of the Parent and the Purchaser, enforceable against each
of them in accordance with
its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, relating to or
limiting creditors' rights
generally and (ii) general principles of equity (whether considered in an
action in equity or at law) which
provide, among other things, that the remedy of specific performance and
injunctive and other forms of
equitable relief are subject to equitable defenses and the discretion of the
court before which any
proceedings therefor may be brought.
4.3 Consents and Approvals. Except where such consent, approval
or authorization,
declaration, filing or registration would not have a Material Adverse Effect
on the Purchaser or would not
materially impair the ability of the Parent and the Purchaser to perform its
obligations hereunder, no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Entity
is required to be made or obtained by the Parent in connection with the
execution, delivery and
performance by the Parent and the Purchaser of this Agreement and the
consummation by the Parent and
the Purchaser of the transactions contemplated hereby other than (i) the
filings required under the Antitrust
Improvements Act, (ii) the filing of the Certificate of Merger, and (iii)
filings made in compliance with any
applicable provisions of the Exchange Act.
4.4 No Conflict or Violation; Third Party Consents. Assuming the
accuracy and
completeness of the representations and warranties of the Company herein, and
assuming all consents and
approvals referred to in Section 4.3 hereof are obtained, the execution and
delivery of this Agreement does
not, and consummation of the transactions contemplated hereby will not,
result in (a) a violation of or a
conflict with any provision of the certificates of incorporation or bylaws or
other organizational documents
of the Parent or the Purchaser, (b) a breach or default under any provision
of any material contract,
agreement, lease, commitment, license, franchise or permit to which the
Parent or the Purchaser is a party
or by which any of their respective assets are bound, (c) a violation of any
statute, rule, regulation,
ordinance, order, judgment, writ, injunction or decree the violation of which
would have a Material
Adverse Effect on the Parent, or (d) an imposition of any material lien,
mortgage, pledge, encumbrance,
claim, restriction or charge on the business of the Parent or the Purchaser
or any of their respective assets.
4.5 No Brokers. Other than the arrangements between the Parent
and Donaldson, Lufkin
& Jenrette Securities Corporation (the "Investment Banker"), neither the
Parent, the Purchaser nor any
affiliate of the Parent or the Purchaser has entered into or will enter into
any agreement, arrangement or
understanding with any person or firm which will result in the obligation of
the Parent or any affiliate of
the Parent to pay any finder's fee, brokerage commission or similar payment
in connection with the
transactions contemplated hereby. The parties hereby acknowledge the
arrangement with respect to this
transaction between the Parent and the Investment Banker, with respect to
which all fees due to the
Investment Banker will be paid by the Parent.
4.6 Proxy Statement; Information Statement. (a) None of the
information supplied or to
be supplied by the Parent or the Purchaser for inclusion in the Proxy
Statement (including any amendments
thereof or supplements thereto) will, at the time of mailing the Proxy
Statement and at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under
which they were made, not misleading, except that no representation or
warranty is made by the Parent or
the Purchaser with respect to statements made or incorporated by reference
therein based on information
supplied by the Company for inclusion or incorporation by reference therein.
(b) None of the information supplied or to be supplied by the
Parent or the Purchaser for
inclusion in the Information Statement (including any amendments thereof or
supplements thereto) will,
at the time of mailing the Information Statement contain any untrue statement
of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except that no representation
or warranty is made by the Parent or the Purchaser with respect to statements
made or incorporated by
reference therein based on information supplied by the Company for inclusion
or incorporation by
reference therein.
4.7 Share Ownership. As of the date of this Agreement, the Parent
and the Purchaser own
497,800 shares of Common Stock and will not acquire beneficial ownership of
any additional shares of
Common Stock except pursuant to this Agreement and the Tender Agreements if
the result would be a
Change of Control.
4.8 Financing. The Parent and the Purchaser have on the date of
the execution of this
Agreement and will have upon acceptance of any Shares pursuant to the Offer
and at the Closing sufficient
available funds (through existing credit arrangements or otherwise) to pay
the Share Price or the Merger
Consideration, as applicable, for all shares to be purchased or converted
pursuant to Section 1.1(a), or
Section 2.3(a), pay the Option Settlement Amount, pay all fees and expenses
required to be paid in
connection with the Merger and perform their obligations hereunder and the
obligations of the Surviving
Corporation and its Subsidiaries following the Effective Time.
ARTICLE V
ACTIONS BY THE COMPANY, THE PARENT
AND THE PURCHASER PRIOR TO THE EFFECTIVE DATE
The Company, the Parent and the Purchaser covenant as follows for the
period from the date
hereof through the Effective Date:
5.1 Maintenance of Business. The Company shall carry on, and
cause its Subsidiaries to
carry on, their respective businesses in the ordinary course of business
consistent with past practice and
use their commercially reasonable efforts to preserve the goodwill of those
having business relationships
with them and use their reasonable best efforts to preserve intact their
current business organizations, keep
available the services of their current officers and key employees and
preserve their relationships with
customers, suppliers and others having business dealings with them.
5.2 Certain Prohibited Transactions. Except as otherwise
contemplated by this
Agreement, each of the Company and its Subsidiaries shall not, without the
prior written consent of the
Parent (which consent shall not be unreasonably withheld or delayed) from and
after the date hereof:
(a) incur any additional indebtedness for borrowed money,
assume, guarantee,
endorse or otherwise become responsible for the obligations of any other
individual, partnership, firm or
corporation or make any loans or advances to any individual, partnership,
firm or corporation in an amount
in excess of $30,000,000; provided, however, that total indebtedness for
borrowed money under the
Company's Credit Agreement with Chase Manhattan Bank, as of the Effective
Date, shall not exceed
$251,000,000; and provided further, however, that the Company shall not be
prohibited from repaying any
indebtedness of the Company or its Subsidiaries prior to the Effective Date
if such repayments are made
without penalty;
(b) enter into any capital or operating leases of equipment
except in accordance
with the Master Equipment Lease Agreement by and between NationBanc Leasing
Corporation of North
Carolina and the Company, dated October, 1995 the Master Lease Agreement by
and between BancBoston
Leasing, Inc. and the Company, dated June 1996, and a new lease for equipment
to be installed at KPR
Foods not to exceed $3,000,000;
(c) except for the Charter Amendment, amend its Amended and
Restated
Certificate of Incorporation or Amended and Restated Bylaws or the articles
or certificate of incorporation
or bylaws of any of its Subsidiaries issue, deliver, sell, pledge, dispose of
or otherwise encumber any shares
of its capital stock, any other voting securities or equity equivalent or any
securities convertible or
exchangeable into, or any rights, warrants or options to acquire, any such
shares, voting securities or
convertible securities or equity equivalent, except for the issuance of up to
1,762,752 shares of Common
Stock pursuant to the exercise of stock options to purchase shares of Common
Stock under the Stock
Option Plans and the Warrant which are outstanding on the date hereof;
(d) mortgage, pledge or otherwise encumber any of its
material properties or assets
or sell, transfer (except pursuant to intercompany transfers) or otherwise
dispose of any of its material
properties or material assets or cancel, release or assign any indebtedness
owed to it or any claims held by
it, except in the ordinary course of business and consistent with past
practice;
(e) acquire or agree to acquire by merging or consolidating
with, or by purchasing
a substantial portion of the assets of or equity in, or by any other manner,
any business or any corporation,
partnership, limited liability company, association or other business
organization or division thereof or
otherwise acquire or agree to acquire any assets, in each case that are
material, individually or in the
aggregate, to the Company and its Subsidiaries, taken as a whole;
(f) enter into, terminate or permit any renewal or extension
options to expire with
respect to any material contract or agreement, or make any material change in
any of its leases and
contracts, other than in the ordinary course of business and consistent with
past practice; provided,
however, the Company may (i) enter into, an amendment to the June 3, 1996
Lease Agreement with Option
to Purchase between Continental Deli Foods, Inc., a subsidiary of the
Company, and Thorn Apple Valley,
Inc., which covers the Concordia, Missouri facility, to extend the term from
May 31, 1997, to May 31,
2002, and to increase the rent to equal the purchase price payments under the
promissory note provided
for in such lease and to retain the option to purchase the property for a
nominal amount at the end of the
extended lease term, or, at the option of the Parent, exercise the option to
purchase under the current
agreement and (ii) enter into two new office leases in Riverside and Irvine,
California, with annual rentals
not to exceed $300,000 each;
(g) declare, set aside or pay any dividend or distribution
with respect to the capital
stock of the Company or any of its Subsidiaries or directly or indirectly
redeem, purchase or otherwise
acquire any capital stock of the Company or any of its Subsidiaries or effect
a split or reclassification of
any capital stock of the Company or any of its Subsidiaries or a
recapitalization of the Company or any of
its Subsidiaries, except for intercompany transactions in the ordinary course
of business consistent with
past practice;
(h) alter through merger, liquidation, reorganization,
restructuring or in any other
fashion the corporate structure or ownership of the Company or any of its
Subsidiaries;
(i) enter into or adopt or amend any existing severance plan,
severance agreement
or severance arrangement, any benefit plan or arrangement (including without
limitation, the Stock Option
Plans) or employment or consulting agreement except as required by law;
(j) increase the compensation payable or to become payable to
its officers or
employees, except for increases in the ordinary course of business in
accordance with past practices, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with any
director or officer of the Company or any of its Subsidiaries, or establish,
adopt, enter into or, except as
may be required to comply with applicable law, amend in any material respect
or take action to enhance
in any material respect or accelerate any rights or benefits under any
collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the
benefit of any director, officer or employee;
(k) settle or compromise any suit, proceeding or claim or
threatened suit,
proceeding or claim for an amount that is more than $50,000 in the case of
any individual suit provided
that such settlement or compromise shall be made in the ordinary course of
business in accordance with
past practice, other than the Marshall fire case as to which there is an
agreement in principle to settle ;
(l) knowingly violate or fail to perform any material
obligation or duty imposed
upon it by any applicable foreign, federal, state or local law, rule,
regulation, guideline, ordinance, order,
judgment or decree;
(m) make any tax election or change any method of accounting
for tax purposes,
in each case except to the extent required by law, or settle or compromise
any tax liability;
(n) change any of the accounting principles or practices used
by it except as
required by the SEC or the Financial Accounting Standards Board;
(o) grant any license relating to its Intellectual Property,
except as required by
existing agreements of the Company, except in connection with the settlement
of a protest by the Company
of the use of the mark El Posado by a third party; or
(p) enter into any agreement to enter a new line of business,
nor will the Company
expend over $10,000 to produce or provide a product in a new line of
business;
(q) authorize or enter into an agreement, contract,
commitment or arrangement to
do any of the foregoing.
5.3 Investigation by the Parent and the Purchaser. Upon
reasonable advance notice, the
Company shall allow the Parent and the Purchaser at their own expense, during
regular business hours
through the Parent's and the Purchaser's employees, agents and
representatives, to make such investigation
of the businesses, properties, books and records of the Company and
Subsidiaries, and to conduct such
examination of the condition of the Company and Subsidiaries as the Parent
and the Purchaser deem
necessary or advisable to familiarize themselves further with such
businesses, properties books, records,
condition and other matters, and to verify the representations and warranties
of the Company hereunder,
provided that all requests for information, to visit plants or facilities
shall be directed to and coordinated
with the vice-president of finance of the Company; and provided, further that
the foregoing shall be subject
in each case to the Confidentiality Agreement referred to in Section 8.7
hereof.
5.4 Consents and Reasonable Best Efforts.
(a) The Parent, the Purchaser and the Company shall use their
reasonable best
efforts to make all filings required under the Antitrust Improvements Act as
soon as practicable after the
execution and delivery of this Agreement.
(b) The Parent, the Purchaser and the Company shall, as soon
as practicable, use
their reasonable best efforts required (i) to obtain all waivers, consents,
approvals and agreements of, and
to give all notices and make all other filings with, any persons, including
Governmental Entities, necessary
or appropriate to authorize, approve or permit the Merger, including all
necessary consents or releases from
holders of options or warrants under the Stock Option Plans and to take all
such other action as may be
necessary to give effect to the transactions contemplated by Section 2.6, and
(ii) to defend and cooperate
with each other in defending any lawsuits or other legal proceedings,
including appeals, whether individual
or administrative and whether brought derivatively or on behalf of third
parties (including Governmental
Entities or officials) challenging this Agreement or the consummation of the
transactions contemplated
hereby. The Parent and the Purchaser will furnish to the Company, and the
Company will furnish to the
Parent and the Purchaser, such necessary information and reasonable
assistance as the Company, or the
Parent and the Purchaser, as the case may be, may request in connection with
its or their preparation of all
necessary filings with any third parties, including Governmental Entities.
The Parent and the Purchaser
will furnish to the Company, and the Company will furnish to the Parent and
the Purchaser, copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between the
Parent and the Purchaser, or the Company, or any of their respective
representatives, on the one hand, and
any governmental agency or authority, or members of the Staff of such agency
or authority, on the other
hand, with respect to this Agreement, the Offer or the Merger.
(c) Prior to the Effective Date, the Company and the Parent
shall each use its
respective commercially reasonable efforts to obtain the consent or approval
of each person whose consent
or approval shall be required in order to permit the Company, the Parent or
the Purchaser, as the case may
be, to consummate the Offer and the Merger, including, without limitation,
consents or waivers from the
third parties identified on Schedule 3.10 of the Company Disclosure Letter.
(d) Upon the terms and subject to the conditions contained
herein, each of the
parties hereto covenants and agrees to use its reasonable best efforts to
take, or cause to be taken, all action
or do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations
to consummate and make effective the transactions contemplated hereby.
Notwithstanding anything to the
contrary contained in this Agreement, in connection with any filing or
submission required or action to be
taken by either the Parent or the Company to consummate the Offer, to effect
the Merger and to
consummate the other transactions contemplated hereby, the Company shall not,
without the Parent's prior
written consent, commit to any divestiture transaction and neither the Parent
nor any of its affiliates shall
be required to divest or hold separate or otherwise take or commit to take
any action that limits its freedom
of action with respect to, or its ability to retain, the Company or any of
the material businesses, product
lines or assets of the Parent or any of its affiliates.
5.5 Notification of Certain Matters. The Company shall give
prompt- notice to the Parent
and the Purchaser, and the Parent and the Purchaser shall give prompt notice
to the Company, of (i) the
occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect
any time from the date hereof to the Effective Date and (ii) any material
failure of the Company, the Parent
or the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be
complied with or satisfied by it hereunder.
5.6 Stockholders' Meeting; Board Recommendations; Proxy Material.
(a) If required to consummate the Merger, following the
expiration of the Offer
the Company shall, in accordance with applicable law and the Amended and
Restated Certificate of
Incorporation and the Amended and Restated Bylaws of the Company duly call,
give notice of, convene
and hold a special meeting of its stockholders (the "Special Meeting") as
promptly as practicable for the
purpose of considering and taking action upon this Agreement and the Merger
and such other matters as
may be appropriate at the Special Meeting. At such Special Meeting, the
Parent shall vote, or cause to be
voted, all of the Shares of Common Stock then owned by the Parent or
Purchaser, or any of their affiliates
(collectively, the "Parent Companies") in favor of this Agreement and the
Merger.
(b) The Board shall recommend acceptance of the Offer and
approval and adoption
of this Agreement and the Merger by the Company's stockholders and, to the
extent required, shall use its
reasonable best efforts to obtain stockholder approval of this Agreement and
the Merger; provided that the
Board may withdraw, modify or change such recommendation if it has reasonably
determined in good faith,
after consultation with outside legal counsel, that the Board is required to
withdraw, modify or change such
recommendation or the recommendation of the Offer to comply with the Board's
fiduciary duties to the
Company's stockholders under applicable law. In the event the Parent
acquires at least 90% of the
outstanding shares of each class of capital stock of the Company pursuant to
the Offer or otherwise, the
Parent, the Purchaser and the Company shall take all necessary and
appropriate action to cause the Merger
to become effective as soon as practicable after such acquisition, without a
meeting of the stockholders of
the Company, in accordance with Delaware Law.
(c) If approval by the stockholders of the Company of this
Agreement or the
Merger is required by law, the Company shall, as soon as practicable
following the termination of the
Offer, prepare and file with the SEC, and the Parent and the Purchaser shall
cooperate with the Company
in such preparation and filing, a preliminary proxy statement relating to
this Agreement and the transactions
contemplated hereby and use its reasonable best efforts to furnish the
information required to be included
by the SEC in the Proxy Statement (as defined hereafter) and, after
consultation with the Parent, to respond
promptly to any comments made by the SEC with respect to the preliminary
proxy statement and shall,
cause a definitive proxy statement (the "Proxy Statement") to be mailed to
the Company's stockholders that
contains the recommendation of the Board that stockholders of the Company
approve and adopt this
Agreement. If applicable to the Merger, the Parent agrees to comply with
the requirements of Rule 13e-3
under the Exchange Act. The Company will notify the Parent and the Purchaser
of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or
supplements to the preliminary proxy statement and the Proxy Statement or for
additional information and
will supply the Parent and the Purchaser with copies of all correspondence
between the Company or any
of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the
preliminary proxy statement and the Proxy Statement or the Merger. The
Company shall give the Parent
and the Purchaser and its counsel the opportunity to review the preliminary
proxy statement and the Proxy
Statement prior to its being filed with the SEC and shall give the Parent and
the Purchaser and its counsel
the opportunity to review all amendments and supplements to the preliminary
proxy statement and the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to
their being filed with, or sent to, the SEC. If at any time prior to the
approval of this Agreement by the
Company's stockholders there shall occur any event that is required to be set
forth in an amendment or
supplement to the Proxy Statement, the Company will prepare and mail to its
stockholders such an
amendment or supplement.
5.7 Information Statement. As soon as practicable after the date
of this Agreement, the
Company will prepare and file with the SEC, and the Parent and the Purchaser
shall cooperate with the
Company in such preparation and filing, a preliminary information statement
relating to the Charter
Amendment and use its reasonable best efforts to furnish the information
required to be included by the
SEC in the Information Statement and, after consultation with the Parent, to
respond promptly to any
comments made by the SEC with respect to the preliminary information
statement and shall use its
reasonable best efforts to cause a definitive information statement (the
"Information Statement") to be
mailed to the Company's stockholders as soon as practicable. The Company
will notify the Parent and the
Purchaser of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its
staff for amendments or supplements to the preliminary information statement
and the Information
Statement or for additional information and will supply the Parent and the
Purchaser with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its
staff, on the other hand, with respect to the preliminary information
statement and the Information
Statement or the Merger. The Company shall give the Parent and the Purchaser
and its counsel the
opportunity to review the preliminary information statement and the
Information Statement prior to its
being filed with the SEC and shall give the Parent and the Purchaser and its
counsel the opportunity to
review all amendments and supplements to the preliminary information
statement and the Information
Statement and all responses to requests for additional information and
replies to comments prior to their
being filed with, or sent to, the SEC. The Company will cause the
Certificate of Amendment to be filed
with Secretary of State of Delaware the next business day after all
applicable time periods for taking such
actions have expired. If at any time prior to the effectiveness of the
Charter Amendment there shall occur
any event that is required to be set forth in an amendment or supplement to
the Information Statement, the
Company will prepare and mail to its stockholders such an amendment or
supplement.
5.8 Acquisition Proposals. From and after the date of this
Agreement until the earlier of
the Effective Date or the consummation of the Offer, except as provided
below, the Company agrees that
(a) neither the Company nor its Subsidiaries shall, and the Company shall not
authorize or permit its
officers, directors, employees, agents or representatives (including, without
limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) to,
initiate, solicit or knowingly
encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders)
with respect to a merger,
acquisition, consolidation, tender offer, exchange offer or similar
transaction involving, or any purchase
of all or any significant portion of the assets or any significant portion of
the equity securities (excluding
any issuable pursuant to agreement existing on the date hereof) of, the
Company or its Subsidiaries (any
such proposal or offer, other than by the Parent or its affiliates, being
hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning, or provide
any confidential information
or data to, or have any substantive discussions with, any person relating to
an Acquisition Proposal, or
otherwise knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing; and
(c) it will notify the Parent
immediately (but in no event later than 24 hours) if any such Acquisition
Proposals are received by the
Company, any such information is requested from the Company, or any such
negotiations or discussions
are sought to be initiated or continued with the Company. Any such notice
pursuant to clause (c) of the
previous sentence shall include the identity of the party making the
Acquisition Proposal and the terms of
such proposal. Notwithstanding the foregoing, nothing contained in this
Section 5.8 shall prohibit the
Board of Directors of the Company from (i) furnishing information to or
entering into discussions or
negotiations with, any person or entity that indicates an interest in making
a Superior Proposal (as
hereinafter defined), if, and only to the extent that, (A) the Board of
Directors reasonably determines in
good faith after consultation with outside counsel that such action is
required for the Board of Directors
to comply with its fiduciary duties to its stockholders under applicable law
and (B) the Company keeps the
Parent informed of the status and terms of any such discussions or
negotiations; and (ii) to the extent
applicable, complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard
to an Acquisition Proposal. If any person or entity makes a Superior
Proposal, upon receipt and
determination thereof, the Company shall promptly (but in no event later than
24 hours after determination)
provide written notice (a "Notice of a Superior Proposal") to the Parent of
such Superior Proposal,
including the identity of the parties and the terms thereof. For purposes of
this Agreement, "Superior
Proposal" means an unsolicited bona fide Acquisition Proposal by a third
party in writing that the Board
of Directors of the Company determines in its good faith reasonable judgment
(based on the advice of a
nationally recognized investment banking firm) provides greater aggregate
value to the Company's
stockholders than the transactions contemplated by this Agreement and for
which any required financing
is committed or which, in the good faith reasonable judgment of the Board of
Directors (based on the
advice of a nationally recognized investment banking firm), is reasonably
capable of being financed by
such third party.
Nothing in this Section 5.8 shall (x) permit the Company to terminate
this Agreement, (y)
permit the Company to enter into any agreement with respect to an Acquisition
Proposal during the term
of this Agreement, or (z) affect any other obligation of any party under this
Agreement.
5.9 Third Party Standstill Agreements. During the period from the
date of this Agreement
until the earlier of the Effective Date or termination hereof, the Company
shall not terminate, amend,
modify or waive any provision of any confidentiality or standstill agreement
to which the Company or any
of its Subsidiaries is a party (other than those involving the Parent or its
affiliates). During such period,
the Company agrees to enforce, to the fullest extent under applicable law,
the provisions of any such
agreements, including, but not limited to, injunctions to prevent any
breaches of such agreements and to
enforce specifically the terms and provisions thereof in any court of the
United States or any state thereof
having jurisdiction.
5.10 Expenses. (a) All costs and expenses incurred in connection
with this Agreement, the
Merger and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense.
(b) Notwithstanding any provision in this Agreement to the
contrary, the Company shall
pay, or cause to be paid, in same day funds, to Parent (x) the Expenses (as
hereinafter defined) in an
amount up to but not to exceed $3,000,000 and (y) $9,900,000 (the
"Termination Fee") under the
circumstances and at the times set forth as follows:
(i) if the Company or the Parent terminates this
Agreement under Section
8.1(b) and after the date hereof a Takeover Proposal (as defined hereafter)
shall have been made and
concurrently with or within twelve months after such termination, the Company
shall enter into an
agreement providing for a Takeover Proposal or a Takeover Proposal shall have
been consummated, the
Company shall pay the Expenses and the Termination Fee concurrently with the
earlier of the entering into
of such agreement or the consummation of such Takeover Proposal; and
(ii) if the Company or the Parent terminates this
Agreement under Section
8.1(c) and after the date hereof (but on or prior to the date of termination)
aTakeover Proposal shall have
been made , the Company shall pay the Expenses and the Termination Fee
concurrently with such
termination; and
(iii) if the Company or the Parent terminates this
Agreement under Section
8.1(e) as a result of the occurrence of paragraphs (b) or (h) of Annex A, the
Company shall pay the
Expenses; and
(iv) if the Company or the Parent terminates this
Agreement under Section
8.1(e) as a result of clause (x) of Annex A, paragraph (b) of Annex A or the
failure to attain the Minimum
Condition and, after the date hereof (but on or prior to the date of
termination) a Takeover Proposal shall
have been made, the Company shall pay, the Expenses and the Termination Fee
concurrently with such
termination; and
(v) if the Parent terminates this Agreement under
Section 8.1(f), the Company
shall pay the Expenses and the Termination Fee concurrently with such
termination.
(c) As used herein, (i) "Expenses" shall mean all out-of-pocket
fees and expenses incurred
or paid by or on behalf of the Parent or any affiliate of the Parent in
connection with this Agreement and
the transactions contemplated herein, including all fees and expenses of
counsel, investment banking firms,
accountants and consultants which are evidenced by written invoice or other
supporting documentation
provided by Parent; and (ii) "Takeover Proposal" shall mean any proposal or
offer to the Company or its
stockholders by a third party with respect to (x) a tender offer or exchange
offer for 30% or more of the
outstanding shares of capital stock of the Company, (y) a merger,
consolidation or sale of all or
substantially all of the assets of the Company, or similar transaction or (z)
any liquidation or
recapitalization having the foregoing effect.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation
of each party to effect the Merger shall be subject to the satisfaction or
waiver, where permissible, prior
to the Effective Time, of the following conditions:
(a) If approval of this Agreement and the Merger by the
holders of Common Stock
is required by applicable law, this Agreement and the Merger shall have been
approved by the requisite
vote of such holders.
(b) No injunction or any other order, decree or ruling shall
have been issued by
a court of competent jurisdiction or by a Governmental Entity, nor shall any
statute, rule, regulation or
executive order have been promulgated or enacted by any Governmental Entity,
in each case that prevents
the consummation of the Merger; provided, however, that each of the parties
shall have used reasonable
efforts to prevent the entry of any such injunction or other order, decree or
ruling and to appeal promptly
the same after issuance thereof.
6.2 Conditions to Obligation of the Parent to Effect the Merger.
The obligations of the
Parent and the Purchaser to effect the Merger shall be further subject to the
satisfaction or waiver on or
prior to the Effective Time of the condition that the Purchase shall have
accepted for payment and paid for
Shares tendered pursuant to the Offer; provided, that this condition shall be
deemed satisfied if the
Purchaser's failure to accept for payment and pay for such shares breaches
this Agreement or violates the
terms and conditions of the Offer.
ARTICLE VII
ADDITIONAL COVENANTS OF THE
COMPANY, THE PARENT AND THE PURCHASER
7.1 Employee Benefits.
(a) The Surviving Corporation and its subsidiaries will
honor, and the Parent agrees
to cause the Surviving Corporation and its subsidiaries to honor, all of the
Company's employment,
transition employment, non-compete, consulting, benefit, compensation or
severance agreements (the
"Employment Agreements") in accordance with their terms and, for a period of
not less than twelve (12)
months immediately following the Effective Date, all of the Company's written
employee severance plans
(or policies), in existence on the date hereof, including, without
limitation, the separation pay plan for
corporate officers. Schedule 7.1 of the Company Disclosure Letter hereto
lists all Employment Agreements
not terminable upon 30 days' written notice and which require annual payments
in excess of $75,000, true
and complete copies of all of which have been furnished to the Parent.
(b) If any salaried employee of the Company becomes a
participant in any
employee benefit plan, practice or policy of the parent, the Purchaser, any
of their affiliates or the
Surviving Corporation, such employee shall be given credit under such plan,
practice or policy for all
service prior to the Effective Time with the Company, or any predecessor
employer (to the extent such
credit was given by the Company), and all service after the Effective Time
and prior to the time such
employee becomes such a participant, for purposes of eligibility and vesting
and for all other purposes for
which such service is either taken into account or recognized; provided,
however, such service need not
be credited to the extent it would result in a duplication of benefits,
including, without limitation, benefit
accrual service under defined benefit plans.
(c) For at least twelve months following the Effective Date,
the Parent shall cause
the Surviving Corporation to maintain employee benefits for management and
hourly employees of the
Company and its Subsidiaries that are no less than the employee benefits, in
the aggregate, available to
similarly situated management and hourly employees of the Parent and its
subsidiaries. Nothing contained
herein shall be construed to obligate the Parent or any of its subsidiaries
to employ, or cause the Company
or its Subsidiaries from and after the Effective Date to continue to employ,
any management or hourly
employee of the Company or its Subsidiaries.
7.2 Officers' and Directors' Insurance; Indemnification.
(a) The Company shall indemnify and hold harmless, and, after
the Effective Date,
the Surviving Corporation and the Parent shall indemnify and hold harmless,
each present and former
director and officer of the Company (the "Indemnified
Parties") against any expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement
actually and reasonably incurred by such Indemnified Party in connection with
any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative to which
such Indemnified Party was made, or threatened to be made, a party by reason
of the fact that such
Indemnified Party was or is a director, officer, employee or agent of the
Company, or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint
venture trust or other enterprise and which arises out of or pertains to any
action or omission occurring
prior to the Effective Date (including, without limitation, any which arise
out of or relate to the transactions
contemplated by this Agreement) to the full extent permitted under the
Delaware Law (and the Company
or the Surviving Corporation and the Parent, as the case may be, will advance
expenses to each such person
to the full extent so permitted); provided, that any determination required
to be made with respect to
whether an Indemnified Party's conduct complied with the standards set forth
in the Delaware Law shall
be made by independent counsel selected by such Indemnified Party and
reasonably satisfactory to the
Company or the Surviving Corporation and the Parent, as the case may be
(which shall pay such counsel's
fees and expenses). In the event any such claim, action, suit, proceeding or
investigation if brought against
any Indemnified Party (whether arising before or after the Effective Date),
(a) the Company (or the Parent
and the Surviving Corporation after the Effective Date) shall retain counsel
for the Indemnified Parties
reasonably satisfactory to them, (b) the Company (or the Surviving
Corporation and the Parent after the
Effective Date) shall pay all fees and expenses of such counsel for the
Indemnified Parties promptly as
statements therefor are received, and (c) the Company (or the Surviving
Corporation and the Parent after
the Effective Date) will use its reasonable best efforts to assist in the
vigorous defense of any such matter,
provided, that neither the Company, the Surviving Corporation nor the Parent
shall be liable for any such
settlement effected without their written consent, which consent, however,
shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 7.2, upon learning
of any such claim, action, suit, proceeding or investigation, shall notify
the Company or the Surviving
Corporation or the Parent thereof and shall deliver to the Company or the
Surviving Corporation or the
Parent an undertaking to repay any amounts advanced pursuant hereto in the
event a court of competent
jurisdiction shall ultimately determine, after exhaustion of all avenues of
appeal, that such Indemnified
Party was not entitled to indemnification under this Section.
(b) For five years after the Effective Date, the Surviving
Corporation and the Parent
shall use their respective reasonable best efforts to provide officers' and
directors' liability insurance for
events occurring prior to the Effective Time covering the Indemnified Parties
who are currently covered
by the Company's officers' and directors' liability insurance policy (a copy
of which has heretofore been
delivered to the Parent) on terms no less favorable than those of such policy
in terms of coverage and
amounts or, if substantially similar insurance coverage is unavailable, the
best available coverage; provided,
however, that the Surviving Corporation shall not be required to pay a per
annum amount of premiums for
such officers' and directors' insurance in excess of 200 percent of the last
per annum amount of premiums
incurred prior to the date hereof, but in such case shall purchase as much
coverage as possible for such
amount. The Company represents and warrants that the last per annum amount
of such premiums incurred
by the Company is approximately $280,000.
(c) This Section 7.2 shall survive the consummation of the
Merger. Subject to the
Delaware Law, the certificate of incorporation and bylaws of the Company and
the Surviving Corporation
shall not be amended in a manner which adversely affects the rights of the
Indemnified Parties under this
Section 7.2.
7.3 Transition Agreements. The Parent and the Purchaser agree
that the Surviving
Corporation shall maintain and shall comply with the Company's Transition
Employment Agreements, as
amended, and Stay Bonus Agreements, with several officers of the Company
listed on Schedule 7.3 of the
Company Disclosure Letter and the Employment Agreement, as amended, with R.
Randolph Devening set
forth on Schedule 7.3 of the Company Disclosure Letter (collectively referred
to herein as the "Transition
Agreements"). The Company agrees not to amend the Transition Agreements
after the date hereof without
first obtaining the Parent's consent.
7.4 Restructuring of Transaction. Notwithstanding any provision
contained in this
Agreement to the contrary, in the event that any claim, suit, proceeding or
action is brought against any of
the Parent, the Purchaser or the Company seeking to limit, void or enjoin any
of the transactions
contemplated by this Agreement, the Tender Agreements or any action taken by
the Board of Directors of
the Company to facilitate any transaction contemplated by this Agreement or
the Tender Agreements on
the basis of the transfer restriction contained in Article Fifth of the
Company's Amended and Restated
Certificate of Incorporation or the rules of the New York Stock Exchange,
either the Parent or the Company
may, at its option, upon written notice to the other parties, elect to amend
this Agreement to provide for
a cash merger of the Purchaser with and into the Company in lieu of the Offer
upon terms and conditions
which are substantially consistent with those contained in this Agreement,
and all parties shall as promptly
as practicable following receipt of such notice amend this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. Notwithstanding anything herein to the contrary,
this Agreement may
be terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before
or after the Company has obtained stockholder approval:
(a) by the mutual written consent of the Board of Directors
of each of the Company
and the Parent;
(b) by either the Company or the Parent, if the Merger has
not been consummated
by the close of business on September 24, 1997, or such other date, if any,
as the Company and the Parent
shall agree upon; provided, however, that the right to terminate this
Agreement pursuant to this Section
8.1(b) shall not be available to any party whose failure to fulfill any of
its obligations contained in this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have occurred prior to the
aforesaid date;
(c) by either the Company or the Parent, if the acquisition
of the Company has
been restructured to be a cash merger pursuant to Section 7.4 and the
stockholders of the Company fail to
approve and adopt this Agreement and the Merger, at the Special Meeting or
any postponement or
adjournment thereof;
(d) by either the Company or the Parent, if any Governmental
Entity shall have
issued any judgment, injunction, order or decree enjoining Parent or the
Company from consummating the
Offer or the Merger and such judgment, injunction, order or decree shall
become final and nonappealable;
or
(e) by the Company or the Parent if the Offer terminates or
expires on account of
the failure of any condition specified in Annex A without the Parent having
purchased any Shares
thereunder; provided, however, that the right to terminate this Agreement
pursuant to this Section 8.1(e)
shall not be available to any party whose failure to fulfill any of its
obligations contained in this Agreement
has been the cause of, or resulted in, the failure of any such condition;
(f) by the Parent prior to the consummation of the Offer if
(i) the Board of
Directors of the Company shall not have recommended, or shall have resolved
not to recommend, or shall
have modified or withdrawn its recommendation of the Offer or the Merger or
determination that the Offer
or the Merger is fair to and in the best interest of the Company and its
stockholders, or shall have resolved
to do so, or (ii) the Board of Directors of the Company fails to recommend
against acceptance of an
Acquisition Proposal within five business days after a request by Parent or
Purchaser to do so.
The party desiring to terminate this Agreement pursuant to
this Section 8.1 shall give
written notice of such termination to the other party.
8.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1 hereof,
this Agreement shall become void and of no effect with no liability on the
part of any party hereto;
provided, that the agreements contained in this Section 8.2 and in Sections
5.10 and 8.3 and the second
proviso of Section 5.3 hereof shall survive the termination hereof; and,
provided, further, that the
termination of this Agreement shall not relieve any party for liability for
any willful and knowing breach
of this Agreement.
8.3 No Survival of Representations, Warranties and Covenants.
Except for the agreements
set forth in Sections 7.1, 7.2 and 7.3 hereof, the respective
representations, warranties and covenants of the
Company, Parent and the Purchaser contained herein shall expire with, and be
terminated and extinguished
upon, consummation of the Merger, and thereafter neither the Company, Parent
nor the Purchaser nor any
officer, director or principal thereof shall be subject to any liability
whatsoever based on any such
representation, warranty or covenant.
8.4 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder
may be assigned by the Company without the prior written consent of the
Parent and the Purchaser, or by
the Parent or the Purchaser without the prior written consent of the Company,
except that Purchaser may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to the
Parent or to any direct or indirect wholly-owned subsidiary of the Parent,
but no such assignment shall
relieve the Purchaser of any of its obligations hereunder; provided, that
such assignment shall not
materially impede or delay the consummation of the transactions contemplated
by this Agreement. Subject
to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and
their respective successors and assigns.
8.5 Notices. All notices, requests, demands and other
communications hereunder to any
party shall be in writing and shall be delivered or transmitted by (i)
delivery in person, (ii) courier or
messenger service, (iii) telegram, telex, telecopy, or similar electronic or
facsimile transmission, or (iv)
registered or certified United States Mail, postage prepaid and return
receipt requested, in each case as
follows:
If to the Company, addressed to: Foodbrands America, Inc.
1601 N.W. Expressway
Suite 1700
Oklahoma City, OK 73118-1495
Attn: Mr. R. Randolph Devening
Chairman, President and
Chief Executive Officer
Facsimile No. (405) 840-2447
With copies to: McAfee & Taft
A Professional Corporation
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7103
Attention: John M. Mee, Esq.
W. Chris Coleman, Esq.
Facsimile No. (405) 235-0439
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
Attention: Mark C. Smith, Esq.
Facsimile No. (212) 735-2000
If to the Parent or the Purchaser,
addressed to: IBP, inc.
IBP Avenue
P. O. Box 515
Dakota City, Nebraska 68731
Attention: Robert L. Peterson
Facsimile No. (402) 241-2427
With a copy to: Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden, Esq.
Paul L. Choi, Esq.
Facsimile No. (312) 853-7036
or to such other place and with such other copies as a party may designate as
to itself by written notice to
the others. All notices delivered or transmitted by any method described in
clauses (i), (ii), and (iv) of this
Section 8.5 shall be deemed given and effective upon receipt or refusal of
receipt by the addressee, with
the courier's delivery record or the return receipt being conclusive evidence
of such receipt or attempted
delivery. All notices delivered or transmitted by any method described in
clause (iii) of this Section 8.4
shall be given and effective upon receipt of transmission, with the
answerback or the facsimile or electronic
confirmation of transmission being conclusive evidence of such receipt
(unless the addressee promptly
gives a notice to the transmitting party of the incompleteness or
illegibility of the original notice); provided,
however, any communication provided under clause (iii) shall be followed by
a duplicate communication
under either clause (i), clause (ii) or clause (iv). In any event, if
receipt or refusal of receipt is on a day that
is not a Business Day, then receipt shall be deemed to have occurred on the
first Business Day thereafter.
A "Business Day" is any day that is not a Saturday, Sunday, or state or
federal legal holiday.
8.6 Choice of Law. This Agreement shall be construed, interpreted
and the rights of the
parties determined in accordance with the laws of the State of Delaware
except with respect to matters of
law concerning the internal corporate affairs of any corporate entity which
is a party to or the subject of
this Agreement but is not incorporated in the State of Delaware, and as to
those matters the law of the
jurisdiction under which the respective entity derives its powers shall
govern.
8.7 Entire Agreement; Amendments and Waivers. This Agreement,
together with all
schedules contained in the Company Disclosure Letter and exhibits hereto and
the confidentiality
agreement between the Parent and the Company dated January 25, 1997 (the
"Confidentiality Agreement"),
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions, whether
oral or written, of the parties.
To the extent any of the provisions of this Agreement or the Tender
Agreements conflict with any of the
provisions of the Confidentiality Agreement, the provisions of this Agreement
or the Tender Agreements,
as the case may be, shall control and any such provisions of the
Confidentiality Agreement shall be deemed
amended and superseded. No supplement, notification or waiver of this
Agreement shall be binding unless
executed in writing by the party or parties to be bound thereby. No waiver
of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
8.8 Schedules. Notwithstanding anything to the contrary contained
in this Agreement,
the Company, the Parent and the Purchaser hereby agree that the schedules
attached to the Company
Disclosure Letter are made a part of this Agreement for all purposes. The
parties further understand and
agree that disclosure made in any schedule shall be deemed disclosure in all
other schedules as if set forth
therein, i.e., information set forth in one schedule shall be deemed
disclosure in all schedules other than
as to the matters disclosed in Schedules 3.3 and 3.10.
8.9 No Third Party Beneficiary. This Agreement is for the benefit
of, and may be
enforced only by, the Parent, the Purchaser and the Company and their
respective assignees, and is not for
the benefit of, and may not be enforced by, any third party except for
Section 7.2.
8.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument
and shall be effective when two or more counterparts have been signed by each
of the parties hereto and
delivered to the other parties.
8.11 Invalidity. In the event that any one or more of the
provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any
reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other
provision of this Agreement or any other such instrument.
8.12 Headings. The headings of the Articles and Sections herein
are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation
of this Agreement.
8.13 Publicity. Unless required by law or the rules of any
applicable securities exchange,
neither party shall issue any press release or make any public statement
regarding the transactions
contemplated hereby, without the prior approval of the other party (which
approval shall not be
unreasonably withheld).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed
on their respective behalf, by their respective officers, thereunto duly
authorized, as of the day and year
first above written.
FOODBRANDS AMERICA, INC.
("Company")
By
R. Randolph Devening, Chairman,
President and Chief Executive Officer
IBP, inc.
("Parent")
By
Robert L. Peterson, Chairman and Chief
Executive Officer
IBP Sub, Inc.
(the "Purchaser")
By
Larry Shipley, President
<PAGE>
ANNEX A
Certain Conditions Of The Offer
Notwithstanding any other provision of the Agreement or the Offer, the
Purchaser shall not
be required to accept for payment or pay for, or may delay the acceptance for
payment of or payment for,
any tendered Shares, or may, in its sole discretion, at any time, terminate
or amend the Offer as to any
Shares not then paid for if (v) a majority of the Shares outstanding on a
fully diluted basis shall not have
been validly tendered pursuant to the Offer and not withdrawn prior to the
expiration of the Offer (the
"Minimum Condition"), (w) any waiting period under the Antitrust Improvements
Act applicable to the
purchase of shares of Common Stock pursuant to the Offer shall not have
expired or shall not have been
terminated prior to the expiration of the Offer, (x) the Certificate of
Amendment shall not have been filed
with the Secretary of State of the State of Delaware and the Charter
Amendment shall not be in full force
and effect prior to the close of business on September 24, 1997, (y) the
Agreement shall have been
terminated in accordance with its terms, or (z) on or after the date of the
Agreement, and at or before the
time of payment for any such Shares, any of the following events shall occur:
(a) there shall have occurred (i) any general suspension of, or
limitation on prices for,
trading in securities on the New York Stock Exchange or on
NASDAQ, (ii) a
declaration of a banking moratorium or any suspension of
payments in respect of
banks in the United States, (iii) a commencement of a war,
armed hostilities or other
international or national calamity directly involving the
armed forces of the United
States, (iv) any general limitation (whether or not mandatory)
by any governmental
authority on the extension of credit by banks or other lending
institutions, (v) in the
case of any of the foregoing existing at the time of the
commencement of the Offer,
a material acceleration or worsening thereof, (vi) a decline
of at least thirty percent
(30%) in the Dow Jones Industrial Average or the Standard and
Poors 500 Index from
the date of this Agreement to the expiration or termination of
the Offer or (vii) a
change in general financial, bank or capital market conditions
which materially and
adversely affects the ability of financial institutions in the
United States to extend
credit or syndicate loans;
(b) any of the representations and warranties of the Company set
forth in the Agreement
that are qualified as to materiality shall not be true and
correct or any such
representations and warranties that are not so qualified shall
not be true and correct
in any material respect, in each case, on the date when made
and at the Expiration
Date, or in the case of any representations and warranties
that are made as of a
different date, as of that date; or
(c) the Company shall have breached or failed to comply in any
material respect with any
of its obligations under the Agreement and such failure
continues for two (2) days
after receipt by the Company of notice from the Parent
specifying such failure; or
(d) there shall have been instituted or pending any litigation by
a Governmental Entity
thereof (i) which prohibits the consummation of the
transactions contemplated by the
Offer or the Merger; (ii) which prohibits the Parent's or the
Purchaser's ownership or
operation of all or any material portion of their or the
Company's business or assets,
or which compels the Parent or the Purchaser to dispose of or
hold separate all or any
material portion of the Parent's or the Purchaser's or the
Company's business or assets
as a result of the transactions contemplated by the Offer or
the Merger, (iii) which
makes the acceptance for payment, purchase of, or payment for,
some or all of the
Shares illegal; (iv) which imposes material limitations on the
ability of the Parent or
the Purchaser to acquire or hold or to exercise effectively
all rights of ownership of
Shares including, without limitation, the right to vote any
Shares purchased by the
Purchaser or the Parent on all matters properly presented to
the stockholders of the
Company, or (v) which imposes any limitations on the ability
of the Parent or the
Purchaser, or any of their respective subsidiaries,
effectively to control in any material
respect the business or operations of the Company;
(e) any statute, rule, regulation, order or injunction shall be
enacted, promulgated,
entered, enforced or deemed applicable to the Offer or the
Merger or any other action
shall have been taken by any United States governmental
authority or court (i) which
prohibits the consummation of the transactions contemplated by
the Offer or the
Merger; (ii) which prohibits the Parent's or the Purchaser's
ownership or operation of
all or any material portion of their or the Company's business
or assets, or which
compels the Parent or the Purchaser to dispose of or hold
separate all or any material
portion of the Parent's or the Purchaser's or the Company's
business or assets as a
result of the transactions contemplated by the Offer or the
Merger, (iii) which makes
the acceptance for payment, purchase of, or payment for, some
or all of the Shares
illegal; (iv) which imposes material limitations on the
ability of the Parent or the
Purchaser to acquire or hold or to exercise effectively all
rights of ownership of
Shares including, without limitation, the right to vote any
Shares purchased by the
Purchaser or the Parent on all matters properly presented to
the stockholders of the
Company, or (v) which imposes any limitations on the ability
of the Parent or the
Purchaser, or any of their respective subsidiaries,
effectively to control in any material
respect the business or operations of the Company;
(f) Parent or the Purchaser shall have reached an agreement or
understanding in writing
with the Company providing for termination of the Offer or the
Agreement;
(g) any filing required to be made by the Company with, or any
consent, approval or
authorization required to be obtained prior to the Effective
Time by the Company
from, any Governmental Entity in connection with the execution
and delivery of the
Agreement by the Company or the consummation of the Offer or
the transactions
contemplated by the Agreement, shall not have been made or
obtained; or
(h) a Material Adverse Change in the Company has occurred,
which, in the sole judgment of the Purchaser, regardless of the circumstances
giving rise to any such
conditions, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment of or
payment for Shares.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser and may be
asserted by the Parent or the Purchaser regardless of the circumstances or
may be waived by the Parent or
Purchaser in whole or in part at any time and from time to time in its sole
discretion.
Exhibit 2.2
TENDER AGREEMENT
TENDER AGREEMENT dated as of March 25, 1997 (this
"Agreement"), among IBP, inc., a Delaware corporation (the
"Parent"), IBP Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of the Parent ("Purchaser"), and Joseph Littlejohn &
Levy, L.P., a Delaware limited partnership, and Joseph, Littlejohn
& Levy Fund II, L.P., a Delaware limited partnership (together, the
"Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement the Parent, Purchaser and Foodbrands America, Inc., a
Delaware corporation (the "Company"), have entered into an
Agreement and Plan of Merger dated as of the date hereof (such
Agreement and Plan of Merger, as amended from time to time, the
"Merger Agreement"), which provides, among other things, that
Purchaser shall make the Offer (as defined in the Merger Agreement)
to purchase at a price of $23.40 per share, net to the sellers in
cash, all of the issued and outstanding shares of the Company's
Common Stock, par value $.01 per share (the "Company Common
Stock"), and shall merge with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in the
Merger Agreement (any term used herein without definition shall
have the definition ascribed thereto in the Merger Agreement);
WHEREAS, the Stockholder owns beneficially and of record
shares of Company Common Stock (such shares of Company Common Stock
being collectively referred to herein as the "Stockholder Shares"
or individually referred to herein as the "Stockholder Share") and;
WHEREAS, as a condition to the willingness of the Parent and
Purchaser to enter into the Merger Agreement, and as an inducement
to them to do so, the Stockholder has agreed for the benefit of the
Parent and Purchaser to tender the Stockholder Shares and any other
shares of Company Common Stock at any time during the term of this
Agreement held by the Stockholder, pursuant to the Offer, to vote
all the Stockholder Shares and any other shares of Company Common
Stock owned by the Stockholder in favor of the Merger, and to grant
to Purchaser an option to acquire all Stockholder Shares and all
other shares of Company Common Stock owned by the Stockholder under
certain circumstances, all on the terms and conditions contained in
this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement,
the parties hereby agree as follows:
ARTICLE I
Tender Offer and Option
SECTION 1.01. Tender of Shares. (a) Within five business
days of the commencement by Purchaser of the Offer, the Stockholder
shall tender to the Depository designated in the Offer to Purchase
(the "Offer to Purchase") distributed by Purchaser in connection
with the Offer (i) a letter of transmittal with respect to the
Stockholder Shares and any other shares of Company Common Stock
held by the Stockholder (whether or not currently held by the
Stockholder; the Stockholder Shares, together with any shares
acquired by the Stockholder in any capacity after the date hereof
and prior to the termination of this Agreement whether upon the
exercise of options, warrants or rights, the conversion or exchange
of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise (the "Shares"), complying with
the terms of the Offer to Purchase, (ii) the certificates
representing the Shares, and (iii) all other documents or
instruments required to be delivered pursuant to the terms of the
Offer to Purchase.
(b) The Stockholder shall not, subject to applicable law,
withdraw the tender effected in accordance with Section 1.01(a);
provided, however, that the Stockholder may decline to tender, or
may withdraw, any and all Shares owned by the Stockholder if the
Purchaser amends the Offer to (w) reduce the Offer Price to less
than $23.40 in cash, net to the stockholders, (x) reduce the number
of shares of Company Common Stock subject to the Offer, (y) change
the form of consideration payable in the Offer or (z) amend or
modify any term or condition of the Offer in a manner adverse to
the stockholders of the Company (other than insignificant changes
or amendments or other than to waive any condition). The
Stockholder shall give Purchaser at least two business days' prior
notice of any withdrawal of Shares owned by the Stockholder
pursuant to the immediately preceding proviso.
SECTION 1.02. Option. (a) The Stockholder hereby irrevocably
grants Purchaser an option (the "Option"), exercisable only upon
the events and subject to the conditions set forth herein, to
purchase any or all of the Shares at a purchase price per share
equal to $23.40 (or such higher per share price as may be offered
by Purchaser in the Offer).
(b) Subject to the conditions set forth in Section 1.03 and
the termination provisions of Section 6.07, Purchaser may exercise
the Option in whole or in part at any time prior to the date 60
days after the expiration or termination of the Offer (such
sixtieth day being herein called the "Option Expiration Date") if
(x) the Stockholder fails to comply with any of its obligations
under this Agreement or withdraws the tender of the Shares except
under the circumstances set forth in the proviso to Section 1.01(b)
(but the Option shall not limit any other right or remedy available
to the Parent or Purchaser against the Stockholder for breach of
this Agreement) or (y) the Offer is not consummated because of the
failure to satisfy any of the conditions to the Offer set forth in
Annex A to the Merger Agreement (other than as a result of any
action or inaction of the Parent or Purchaser which constitutes a
breach of the Merger Agreement).
Upon the occurrence of any of such circumstances,
Purchaser shall be entitled to exercise the Option and (subject to
Section 1.03) Purchaser shall be entitled to purchase the Shares
and the Stockholder shall sell the Shares to Purchaser. Purchaser
shall exercise the Option by delivering written notice thereof to
the Stockholder (the "Notice"), specifying the number of Shares to
be purchased and the date, time and place for the closing of such
purchase which date shall not be less than three business days nor
more than five business days from the date the Stockholder receives
the Notice and in no event shall such date be later than the Option
Expiration Date. The closing of the purchase of Shares pursuant to
this Section 1.02 (the "Closing") shall take place on the date, at
the time and at the place specified in such notice; provided, that
if at such date any of the conditions specified in Section 1.03
shall not have been satisfied (or waived), Purchaser may postpone
the Closing until a date within five business days after such
conditions are satisfied (but not later than the Option Expiration
Date).
(c) At the Closing, the Stockholder will deliver to Purchaser
(in accordance with Purchaser's instructions) the certificates
representing the Shares owned by the Stockholder and being
purchased pursuant to Section 1.02(c), duly endorsed or accompanied
by stock powers duly executed in blank. At such Closing, Purchaser
shall deliver to the Stockholder, by bank wire transfer of
immediately available funds, an amount equal to the number of
Shares being purchased from the Stockholder as specified in the
Notice multiplied by $23.40 (or such higher per share price as may
be offered by Purchaser in the Offer).
SECTION 1.03. Conditions to Option. The obligation of
Purchaser to purchase the Shares at the Closing is subject to the
following conditions:
(a) all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") applicable
to such purchase shall have expired or been terminated; and
(b) there shall be no preliminary or permanent
injunction or other order, decree or ruling issued by any
Governmental Entity, nor any statute, rule, regulation or
order promulgated or enacted by any Governmental Entity
prohibiting, or otherwise restraining, such purchase.
SECTION 1.04. No Purchase. Purchaser may allow the Offer to
expire without accepting for payment or paying for any Shares, on
the terms and conditions set forth in the Offer to Purchase, and
may allow the Option to expire without exercising the Option and
purchasing all or any Shares pursuant to such exercise. If all
Shares validly tendered and not withdrawn are not accepted for
payment and paid for in accordance with the terms of the Offer to
Purchase or pursuant to the exercise of the Option, they shall be
returned to the Stockholder, whereupon they shall continue to be
held by the Stockholder subject to the terms and conditions of this
Agreement.
ARTICLE II
Consent and Voting
The Stockholder hereby revokes any and all previous proxies
granted with respect to the Shares owned by the Stockholder. By
entering into this Agreement, the Stockholder hereby consents to
the Merger Agreement and the transactions contemplated thereby,
including the Merger. So long as the Merger Agreement is in
effect, the Stockholder hereby agrees (i) to vote all Shares now or
hereafter owned by such Stockholder or execute a consent and not
revoke any proxy, vote or consent, in favor of the Merger
Agreement, the Merger and the transactions contemplated thereby,
and (ii) to oppose any Acquisition Proposal and to vote all Shares
now or hereafter owned by such Stockholder, or execute a consent,
against any Acquisition Proposal.
ARTICLE III
Representations, Warranties and Covenants
of the Stockholder
The Stockholder represents, warrants and covenants to the
Purchaser that:
SECTION 3.01. Ownership. As of the date hereof the
Stockholder is the sole, true, lawful and beneficial owner of
5,515,833 Shares and that there are no restrictions on voting
rights or rights of disposition pertaining to such Shares other
than those specified herein or any applicable provisions of Article
Fifth of the Company's Amended and Restated Certificate of
Incorporation. To the extent permitted by Article Fifth of the
Company's Amended and Restated Certificate of Incorporation, the
Stockholder will convey good and valid title to the Shares owned by
the Stockholder and being acquired pursuant to the Offer, the
Merger or the exercise of the Option, as the case may be, free and
clear of any and all liens, restrictions, security interests or any
encumbrances whatsoever (collectively, "Liens"). None of the
Shares owned by the Stockholder is subject to any voting trust or
other agreement, arrangement or restriction with respect to the
voting of such Shares. Until this Agreement is terminated, the
Stockholder shall not, directly or indirectly, sell, exchange,
encumber, pledge, assign or otherwise transfer or dispose of, or
agree to or solicit any of the foregoing, or grant any right or
power to any person that limits the Stockholder's sole power to
vote, sell, assign, transfer, pledge, encumber or otherwise dispose
of the Shares owned by the Stockholder or otherwise directs the
Stockholder with respect to such Shares.
SECTION 3.02. Authority and Non-Contravention. The
execution, delivery and performance by the Stockholder of this
Agreement and the consummation of the transactions contemplated
hereby (i) are within the Stockholder's power and authority, have
been duly authorized by all necessary action (including any
consultation, approval or other action by or with any other
person), (ii) require no action by or in respect of, or filing
with, any Governmental Entity (except as may be required under the
HSR Act and under the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange
Act")), and (iii) do not and will not contravene or constitute a
default under, or give rise to a right of termination, cancellation
or acceleration of any right or obligation of the Stockholder or to
a loss of any benefit of the Stockholder under, any provision of
applicable law or regulation or any agreement, judgment,
injunction, order, decree, or other instrument binding on the
Stockholder or result in the imposition of any Lien on any assets
of the Stockholder.
SECTION 3.03. Binding Effect. This Agreement has been duly
executed and delivered by the Stockholder and is the valid and
binding agreement of the Stockholder, enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights generally.
SECTION 3.04. Total Shares. The Stockholder Shares owned by
the Stockholder are the only shares of Company Common Stock
beneficially owned as of the date hereof by the Stockholder and the
Stockholder has no option to purchase or right to subscribe for or
otherwise acquire any securities of the Company and has no other
interest in or voting rights with respect to any other securities
of the Company.
SECTION 3.05. Finder's Fees. No investment banker, broker or
finder is entitled to a commission or fee from Purchaser or the
Company in respect of this Agreement based upon any arrangement or
agreement made by or on behalf of the Stockholder, except as
otherwise disclosed in the Merger Agreement.
ARTICLE IV
Representations, Warranties and Covenants
of the Parent and Purchaser
The Parent and Purchaser represent, warrant and covenant to
the Stockholder:
SECTION 4.01. Corporate Power and Authority;
Noncontravention. The Parent and Purchaser have all requisite
corporate power and authority to enter into this Agreement and to
perform their obligations hereunder. The execution, delivery and
performance by the Parent and Purchaser of this Agreement and the
consummation by the Parent and Purchaser of the transactions
contemplated hereby (i) have been duly authorized by all necessary
corporate action on the part of the Parent and Purchaser, (ii)
require no action by or in respect of, or filing with, any
Governmental Entity (except as may be required under the HSR Act
and under the Exchange Act, or (iii) do not and will not contravene
or constitute a default under, the certificate of incorporation or
by-laws of Parent or Purchaser or any provision of applicable law
or regulation or any, judgment, injunction, order, decree, material
agreement or other material instrument binding on the Parent or
Purchaser.
SECTION 4.02. Binding Effect. This Agreement has been duly
executed and delivered by the Parent and Purchaser and is a valid
and binding agreement of the Parent and Purchaser, enforceable
against each of them in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally.
SECTION 4.03. Acquisition for Purchaser's Account. Any
Shares to be acquired upon consummation of the Offer, or upon
exercise of the Option will be acquired by Purchaser for its own
account and not with a view to the public distribution thereof and
will not be transferred except in compliance with the Securities
Act and the rules and regulations promulgated thereunder.
ARTICLE V
Additional Agreements
SECTION 5.01. Agreements of Stockholder. The Stockholder
hereby covenants and agrees that:
(a) No Solicitation. The Stockholder shall not directly
or indirectly (i) solicit, initiate or knowingly encourage (or
authorize any person to solicit, initiate or encourage) any
Acquisition Proposal, or (ii) participate in any discussion or
negotiations regarding, or furnish to any other person any
information with respect to, or otherwise knowingly cooperate
in any way with, or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek the
foregoing. The Stockholder shall promptly advise the
Purchaser of the terms of any communications it or any of its
affiliates may receive relating to any Acquisition Proposal
(including, without limitation, the identify of the party
making any such Acquisition Proposal).
(b) Adjustment upon Changes in Capitalization or Merger.
In the event of any change in the Company's capital stock by
reason of stock dividends, stock splits, mergers,
consolidations, recapitalization, combinations, conversions,
exchanges of shares, extraordinary or liquidating dividends,
or other changes in the corporate or capital structure of the
Company which would have the effect of diluting or changing
Purchaser's rights hereunder, the number and kind of shares or
securities subject to this Agreement and the price set forth
herein at which Shares may be purchased from the Stockholder
pursuant to the Offer or the exercise of the Option shall be
appropriately and equitably adjusted so that Purchaser shall
receive pursuant to the Offer or the exercise of the Option
the number and class of shares or other securities or property
that Purchaser would have received in respect of the Shares
purchasable pursuant to the Offer or the exercise of the
Option if such purchase had occurred immediately prior to such
event.
ARTICLE VI
Miscellaneous
SECTION 6.01. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring
such cost or expense.
SECTION 6.02. Further Assurances. The Parent, Purchaser and
the Stockholder will execute and deliver or cause to be executed
and delivered all further documents and instruments and use its
reasonable best efforts to secure such consents and take all such
further action as may be reasonably necessary in order to
consummate the transactions contemplated hereby and by the Merger
Agreement.
SECTION 6.03. Additional Agreements. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees
to use all reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations and which
may be required under any agreements, contracts, commitments,
instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is
governed or bound, to consummate and make effective the
transactions contemplated by this Agreement.
SECTION 6.04. Specific Performance. The parties acknowledge
and agree that performance of their respective obligations
hereunder will confer a unique benefit on the other and that a
failure of performance will not be compensable by money damages.
The parties therefore agree that this Tender Agreement shall be
specifically enforceable and that specific enforcement and
injunctive relief shall be available to the Parent, Purchaser or
the Stockholder for any breach by the other party or parties of any
agreement, covenant or representation hereunder.
SECTION 6.05. Notices. All notices, requests, claims,
demands and other communications hereunder shall be deemed to have
been duly given when delivered in person, by telecopy, or by
registered or certified mail (postage prepaid, return receipt
requested) to such party at its address set forth on the signature
page hereto.
SECTION 6.06. Survival of Representations and Warranties.
All representations and warranties contained in this Agreement
shall survive delivery of and payment for the Shares pursuant to
Section 1.02 hereof. None of the representations and warranties
contained in this Agreement shall survive the acceptance for
payment and payment for the Shares pursuant to the Offer.
SECTION 6.07. Amendments; Termination. This Agreement may
not be modified, amended, altered or supplemented, except upon the
execution and delivery of a written agreement executed by the
parties hereto. Notwithstanding anything herein to the contrary,
this Agreement shall expire and be of no further force or effect if
(i) the conditions to the Purchaser's obligations to accept for
payment and pay for Shares pursuant to the Offer shall have been
satisfied and the Purchaser breaches any obligation of Purchaser
under the Merger Agreement to accept for payment and promptly pay
for all Shares validly tendered and not withdrawn pursuant to the
Offer upon expiration of the Offer or (ii) Purchaser amends the
Offer to (w) reduce the Offer Price to less than $23.40 in cash,
net to the sellers, (x) reduce the number of shares of Company
Common Stock subject to the Offer, (y) change the form of
consideration payable in the Offer or (z) amend or modify any term
or condition of the Offer in a manner adverse to the stockholders
of the Company (other than insignificant changes or amendments or
other than to waive any condition). This Agreement will also
terminate upon the earlier of (i) the close of business on
September 24, or (ii) the Effective Time.
SECTION 6.08. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that Purchaser may assign its rights and
obligations to another wholly-owned subsidiary of the Parent which
is the assignee of Purchaser's rights under the Merger Agreement;
and provided further that except as set forth in the prior clause,
a party may not assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of
the other parties hereto and any purported assignment, delegation
or transfer without such consent shall be null and void.
SECTION 6.09. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of Delaware
without giving effect to the principles of conflicts of laws
thereof.
SECTION 6.10. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be
an original, with the same effects as if the signatures thereto and
thereof were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
SECTION 6.11. Stockholder Capacity. The Stockholder signs
solely in its capacity as the record holder and beneficial owner of
the Shares and nothing herein shall limit or affect any actions
taken by any officer, director, partner, employee or affiliate of
the Stockholder in his or her capacity as an officer or director of
the Company and no such actions shall be deemed a breach of this
Agreement.
SECTION 6.12. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the
fullest extent possible. To the extent that any provision of this
Agreement and the Merger Agreement conflict, the provisions of the
Merger Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
IBP, inc.
By: /s/ Robert L. Peterson
-------------------------
Name: Robert L. Peterson
Title: Chairman and Chief
Executive Officer
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
IBP SUB, INC.
By: /s/ Larry Shipley
--------------------
Name: Larry Shipley
Title: President
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
JOSEPH LITTLEJOHN & LEVY FUND, L.P.
By: JLL Associates, L.P., General
Partner
By /s/ Paul S. Levy
-------------------
Name: Paul S. Levy
Title: General Partner
Address for Notices:
Joseph Littlejohn & Levy
450 Lexington Avenue, Suite 3350
New York, New York 10017
Attn: Paul S. Levy
JOSEPH LITTLEJOHN & LEVY FUND II,
L.P.
By: JLL Associates, L.P., General
Partner
By /s/ Paul S. Levy
-------------------
Name: Paul S. Levy
Title: General Partner
Address for Notices:
Joseph Littlejohn & Levy
450 Lexington Avenue, Suite 3350
New York, New York 10017
Attn: Paul S. Levy
Exhibit 2.3
TENDER AGREEMENT
TENDER AGREEMENT dated as of March 25, 1997 (this
"Agreement"), among IBP, inc., a Delaware corporation (the
"Parent"), IBP Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of the Parent ("Purchaser"), and The Airlie Group, L.P.
a Delaware limited partnership (the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement the Parent, Purchaser and Foodbrands America, Inc., a
Delaware corporation (the "Company"), have entered into an
Agreement and Plan of Merger dated as of the date hereof (such
Agreement and Plan of Merger, as amended from time to time, the
"Merger Agreement"), which provides, among other things, that
Purchaser shall make the Offer (as defined in the Merger Agreement)
to purchase at a price of $23.40 per share, net to the sellers in
cash, all of the issued and outstanding shares of the Company's
Common Stock, par value $.01 per share (the "Company Common
Stock"), and shall merge with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in the
Merger Agreement (any term used herein without definition shall
have the definition ascribed thereto in the Merger Agreement);
WHEREAS, the Stockholder owns beneficially and of record
shares of Company Common Stock (such shares of Company Common Stock
being collectively referred to herein as the "Stockholder Shares")
and;
WHEREAS, as a condition to the willingness of the Parent and
Purchaser to enter into the Merger Agreement, and as an inducement
to them to do so, the Stockholder has agreed for the benefit of the
Parent and Purchaser to tender the Stockholder Shares and any other
shares of Company Common Stock at any time during the term of this
Agreement held by the Stockholder, pursuant to the Offer, to vote
all the Stockholder Shares and any other shares of Company Common
Stock owned by the Stockholder in favor of the Merger, and to grant
to Purchaser an option to acquire all Stockholder Shares and all
other shares of Company Common Stock owned by the Stockholder under
certain circumstances, all on the terms and conditions contained in
this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement,
the parties hereby agree as follows:
ARTICLE I
Tender Offer and Option
SECTION 1.01. Tender of Shares. (a) From time to time
following the commencement by Purchaser of the Offer, the
Stockholder shall, if so requested in writing by Parent (the
"Request"), promptly tender to the Depository designated in the
Offer to Purchase (the "Offer to Purchase") distributed by
Purchaser in connection with the Offer (i) a letter of transmittal
with respect to such number as specified in the Request not in
excess of the then applicable Maximum Share Number), of the
Stockholder Shares and any other shares of Company Common Stock
held by the Stockholder (whether or not currently held by the
Stockholder; the Stockholder Shares, together with any shares
acquired by the Stockholder in any capacity after the date hereof
and prior to the termination of this Agreement whether upon the
exercise of options, warrants or rights, the conversion or exchange
of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise (the "Shares"), complying with
the terms of the Offer to Purchase; provided, that the number of
Shares the Stockholder shall be required to tender from time to
time pursuant to a Request, when taken together with all Shares
previously tendered in the Offer and not withdrawn, shall not
exceed the aggregate number of Shares owned by the Stockholder
beneficially and of record, at such time (ii) the certificates
representing the Shares specified in the Request, and (iii) all
other documents or instruments required to be delivered pursuant to
the terms of the Offer to Purchase.
(b) The Stockholder shall not, subject to applicable law,
withdraw the tender effected in accordance with Section 1.01(a);
provided, however, that the Stockholder may decline to tender, or
may withdraw, any and all Shares owned by the Stockholder and
tendered or requested to be tendered in excess of the Maximum Share
Number or if Purchaser amends the Offer to (w) reduce the Offer
Price to less than $23.40 in cash, net to the sellers, (x) reduce
the number of shares of Company Common Stock subject to the Offer,
(y) change the form of consideration payable in the Offer or (z)
amend or modify any term or condition of the Offer in a manner
adverse to the stockholders of the Company (other than
insignificant changes or amendments or other than to waive any
condition). The Stockholder shall give Purchaser at least two
business days' prior notice of any withdrawal of Shares owned by
the Stockholder pursuant to the immediately preceding proviso.
SECTION 1.02. Option. (a) The Stockholder hereby irrevocably
grants Purchaser an option (the "Option"), exercisable from time to
time only upon the events and subject to the conditions set forth
herein, to purchase such number (not in excess of the then
applicable Maximum Share Number), of the Shares at a purchase price
per share equal to $23.40 (or such higher per share price as may be
offered by Purchaser in the Offer).
(b) Subject to the conditions set forth in Section 1.03 and
the termination provisions of Section 6.07, Purchaser may exercise
the Option in whole or in part at any time prior to the date 60
days after the expiration or termination of the Offer (such
sixtieth day being herein called the "Option Expiration Date") if
(x) the Stockholder fails to comply with any of its obligations
under this Agreement or withdraws the tender of the Shares except
under the circumstances set forth in the proviso to Section 1.01(b)
(but the Option shall not limit any other right or remedy available
to the Parent or Purchaser against the Stockholder for breach of
this Agreement) or (y) the Offer is not consummated because of the
failure to satisfy any of the conditions to the Offer set forth in
Annex A to the Merger Agreement (other than as a result of any
action or inaction of the Parent or Purchaser which constitutes a
breach of the Merger Agreement).
Upon the occurrence of any of such circumstances,
Purchaser shall be entitled to exercise the Option and (subject to
Section 1.03) Purchaser shall be entitled to purchase the Shares
and the Stockholder shall sell the Shares to Purchaser. Purchaser
shall exercise the Option by delivering written notice thereof to
the Stockholder (the "Notice"), specifying the number of Shares to
be purchased and the date, time and place for the closing of such
purchase which date shall not be less than three business days nor
more than five business days from the date the Stockholder receives
the Notice and in no event shall such date be later than the Option
Expiration Date. The closing of the purchase of Shares pursuant to
this Section 1.02 (the "Closing") shall take place on the date, at
the time and at the place specified in such notice; provided, that
if at such date any of the conditions specified in Section 1.03
shall not have been satisfied (or waived), Purchaser may postpone
the Closing until a date within five business days after such
conditions are satisfied (but not later than the Option Expiration
Date).
(c) At the Closing, the Stockholder will deliver to Purchaser
(in accordance with Purchaser's instructions) the certificates
representing the Shares owned by the Stockholder and being
purchased pursuant to Section 1.02(c), duly endorsed or accompanied
by stock powers duly executed in blank; provided, that the number
of Shares the Stockholder shall be required to deliver from time to
time pursuant to a Notice, when taken together with all Shares
previously delivered pursuant to all Notices, shall not exceed the
aggregate number of shares owned by the Stockholder beneficially
and of record, at such time. At such Closing, Purchaser shall
deliver to the Stockholder, by bank wire transfer of immediately
available funds, an amount equal to the number of Shares being
purchased from the Stockholder as specified in the Notice
multiplied by $23.40 (or such higher per share price as being
offered by Purchaser in the Offer).
SECTION 1.03. Conditions to Option. The obligation of
Purchaser to purchase the Shares at the Closing is subject to the
following conditions:
(a) all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (the "HSR Act") applicable
to such purchase shall have expired or been terminated; and
(b) there shall be no preliminary or permanent
injunction or other order, decree or ruling issued by any
Governmental Entity, nor any statute, rule, regulation or
order promulgated or enacted by any Governmental Entity
prohibiting, or otherwise restraining, such purchase.
SECTION 1.04. No Purchase. Purchaser may allow the Offer to
expire without accepting for payment or paying for any Shares, on
the terms and conditions set forth in the Offer to Purchase, and
may allow the Option to expire without exercising the Option and
purchasing all or any Shares pursuant to such exercise. If all
Shares validly tendered and not withdrawn are not accepted for
payment and paid for in accordance with the terms of the Offer to
Purchase or pursuant to the exercise of the Option, they shall be
returned to the Stockholder, whereupon they shall continue to be
held by the Stockholder subject to the terms and conditions of this
Agreement.
SECTION 1.05. Maximum Share Number. For purposes of this
Agreement, the term "Maximum Share Number" shall mean, as of any
time of determination, such number of Shares that, when taken
together with all shares of the Company Common Stock that Parent or
any of its Affiliates (i) owns directly or indirectly, beneficially
or of record, at such time of determination and (ii) has the right
to acquire, at such time of determination, from Joseph Littlejohn
& Levy, L.P. and Joseph Littlejohn & Levy Fund II, L.P. in
accordance with the terms of the Tender Agreement dated March 25,
1997 among Parent, Purchaser and Joseph Littlejohn & Levy, L.P. and
Joseph Littlejohn & Levy Fund II, L.P. pursuant to the Offer or the
exercise of the Option (as defined in such Tender Agreement), would
cause Parent or its Affiliates to own directly or indirectly,
beneficially or of record, 49.9% of the aggregate voting power
represented by the issued and outstanding capital stock of the
Company.
ARTICLE II
Consent and Voting
The Stockholder hereby revokes any and all previous proxies
granted with respect to the Shares owned by the Stockholder. By
entering into this Agreement, the Stockholder hereby consents to
the Merger Agreement and the transactions contemplated thereby,
including the Merger. So long as the Merger Agreement is in
effect, the Stockholder hereby agrees (i) to vote all Shares (not
to exceed the Maximum Share Number) now or hereafter owned by such
Stockholder or execute a consent and not revoke any proxy, vote or
consent, in favor of the Merger Agreement, the Merger and the
transactions contemplated thereby, and (ii) to oppose any
Acquisition Proposal and to vote all Shares (not to exceed the
Maximum Share Number) now or hereafter owned by such Stockholder,
or execute a consent, against any Acquisition Proposal.
ARTICLE III
Representations, Warranties and Covenants
of the Stockholder
The Stockholder represents, warrants and covenants to the
Purchaser and AC that:
SECTION 3.01. Ownership. As of the date hereof the
Stockholder is the sole, true, lawful and beneficial owner of
827,200 Shares and that there are no restrictions on voting rights
or rights of disposition pertaining to such Shares other than those
specified herein or any applicable provisions of Article Fifth of
the Company's Amended and Restated Certificate of Incorporation.
To the extent permitted by Article Fifth of the Company's Amended
and Restated Certificate of Incorporation, the Stockholder will
convey good and valid title to the Shares owned by the Stockholder
and being acquired pursuant to the Offer, the Merger or the
exercise of the Option, as the case may be, free and clear of any
and all liens, restrictions, security interests or any encumbrances
whatsoever (collectively, "Liens"). None of the Shares owned by
the Stockholder is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting of such
Shares. Until this Agreement is terminated, the Stockholder shall
not, directly or indirectly, sell, exchange, encumber, pledge,
assign or otherwise transfer or dispose of, or agree to or solicit
any of the foregoing, or grant any right or power to any person
that limits the Stockholder's sole power to vote, sell, assign,
transfer, pledge, encumber or otherwise dispose of the Shares owned
by the Stockholder or otherwise directs the Stockholder with
respect to such Shares.
SECTION 3.02. Authority and Non-Contravention. The
execution, delivery and performance by the Stockholder of this
Agreement and the consummation of the transactions contemplated
hereby (i) are within the Stockholder's power and authority, have
been duly authorized by all necessary action (including any
consultation, approval or other action by or with any other
person), (ii) require no action by or in respect of, or filing
with, any Governmental Entity (except as may be required under the
HSR Act and under the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange
Act")), and (iii) do not and will not contravene or constitute a
default under, or give rise to a right of termination, cancellation
or acceleration of any right or obligation of the Stockholder or to
a loss of any benefit of the Stockholder under, any provision of
applicable law or regulation or any agreement, judgment,
injunction, order, decree, or other instrument binding on the
Stockholder or result in the imposition of any Lien on any assets
of the Stockholder.
SECTION 3.03. Binding Effect. This Agreement has been duly
executed and delivered by the Stockholder and is the valid and
binding agreement of the Stockholder, enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights generally.
SECTION 3.04. Total Shares. The Stockholder Shares owned by
the Stockholder are the only shares of Company Common Stock
beneficially owned as of the date hereof by the Stockholder and the
Stockholder has no option to purchase or right to subscribe for or
otherwise acquire any securities of the Company and has no other
interest in or voting rights with respect to any other securities
of the Company.
SECTION 3.05. Finder's Fees. No investment banker, broker or
finder is entitled to a commission or fee from Purchaser or the
Company in respect of this Agreement based upon any arrangement or
agreement made by or on behalf of the Stockholder, except as
otherwise disclosed in the Merger Agreement.
ARTICLE IV
Representations, Warranties and Covenants
of the Parent and Purchaser
The Parent and Purchaser represent, warrant and covenant to
the Stockholder:
SECTION 4.01. Corporate Power and Authority; Noncontra-
vention. The Parent and Purchaser have all requisite corporate
power and authority to enter into this Agreement and to perform
their obligations hereunder. The execution, delivery and
performance by the Parent and Purchaser of this Agreement and the
consummation by the Parent and Purchaser of the transactions
contemplated hereby (i) have been duly authorized by all necessary
corporate action on the part of the Parent and Purchaser, (ii)
require no action by or in respect of, or filing with, any
Governmental Entity (except as may be required under the HSR Act
and under the Exchange Act), or (iii) do not and will not
contravene or constitute a default under, the certificate of
incorporation or by-laws of Parent or Purchaser or any provision of
applicable law or regulation or any judgment, injunction, order,
decree, material agreement or other material instrument binding on
the Parent or Purchaser.
SECTION 4.02. Binding Effect. This Agreement has been duly
executed and delivered by the Parent and Purchaser and is a valid
and binding agreement of the Parent and Purchaser, enforceable
against each of them in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally.
SECTION 4.03. Acquisition for Purchaser's Account. Any
Shares to be acquired upon consummation of the Offer, or upon
exercise of the Option will be acquired by Purchaser for its own
account and not with a view to the public distribution thereof and
will not be transferred except in compliance with the Securities
Act and the rules and regulations promulgated thereunder.
ARTICLE V
Additional Agreements
SECTION 5.01. Agreements of Stockholder. The Stockholder
hereby covenants and agrees that:
(a) No Solicitation. The Stockholder shall not directly
or indirectly (i) solicit, initiate or knowingly encourage (or
authorize any person to solicit, initiate or encourage) any
Acquisition Proposal, or (ii) participate in any discussion or
negotiations regarding, or furnish to any other person any
information with respect to, or otherwise knowingly cooperate
in any way with, or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek the
foregoing. The Stockholder shall promptly advise the
Purchaser of the terms of any communications it or any of its
affiliates may receive relating to any Acquisition Proposal
(including, without limitation, the identify of the party
making any such Acquisition Proposal).
(b) Adjustment upon Changes in Capitalization or Merger.
In the event of any change in the Company's capital stock by
reason of stock dividends, stock splits, mergers, consolida-
tions, recapitalization, combinations, conversions, exchanges
of shares, extraordinary or liquidating dividends, or other
changes in the corporate or capital structure of the Company
which would have the effect of diluting or changing Pur-
chaser's rights hereunder, the number and kind of shares or
securities subject to this Agreement and the price set forth
herein at which Shares may be purchased from the Stockholder
pursuant to the Offer or the exercise of the Option shall be
appropriately and equitably adjusted so that Purchaser shall
receive pursuant to the Offer or the exercise of the Option
the number and class of shares or other securities or property
that Purchaser would have received in respect of the Shares
purchasable pursuant to the Offer or the exercise of the
Option if such purchase had occurred immediately prior to such
event.
ARTICLE VI
Miscellaneous
SECTION 6.01. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring
such cost or expense.
SECTION 6.02. Further Assurances. The Parent, Purchaser and
the Stockholder will execute and deliver or cause to be executed
and delivered all further documents and instruments and use its
reasonable best efforts to secure such consents and take all such
further action as may be reasonably necessary in order to
consummate the transactions contemplated hereby and by the Merger
Agreement.
SECTION 6.03. Additional Agreements. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees
to use all reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations and which
may be required under any agreements, contracts, commitments,
instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is
governed or bound, to consummate and make effective the
transactions contemplated by this Agreement.
SECTION 6.04. Specific Performance. The parties acknowledge
and agree that performance of their respective obligations
hereunder will confer a unique benefit on the other and that a
failure of performance will not be compensable by money damages.
The parties therefore agree that this Agreement shall be
specifically enforceable and that specific enforcement and
injunctive relief shall be available to the Parent, Purchaser or
the Stockholder for any breach by the other party or parties of any
agreement, covenant or representation hereunder.
SECTION 6.05. Notices. All notices, requests, claims,
demands and other communications hereunder shall be deemed to have
been duly given when delivered in person, by telecopy, or by
registered or certified mail (postage prepaid, return receipt
requested) to such party at its address set forth on the signature
page hereto.
SECTION 6.06. Survival of Representations and Warranties.
All representations and warranties contained in this Agreement
shall survive delivery of and payment for the Shares pursuant to
Section 1.02 hereof. None of the representations and warranties
contained in this Agreement shall survive the acceptance for
payment and payment for the Shares pursuant to the Offer.
SECTION 6.07. Amendments; Termination. This Agreement may
not be modified, amended, altered or supplemented, except upon the
execution and delivery of a written agreement executed by the
parties hereto. Notwithstanding anything herein to the contrary,
this Agreement shall expire and be of no further force or effect if
(i) the conditions to the Purchaser's obligations to accept for
payment and pay for Shares pursuant to the Offer shall have been
satisfied and the Purchaser breaches any obligation of Purchaser
under the Merger Agreement to accept for payment and promptly pay
for all Shares validly tendered and not withdrawn pursuant to the
Offer upon expiration of the Offer or (ii) the Purchaser amends the
Offer to (w) reduce the Offer Price to less than $23.40 in cash,
net to the sellers, (x) reduce the number of shares of Company
Common Stock subject to the Offer, (y) change the form of
consideration payable in the Offer or (z) amend or modify any term
or condition of the Offer in a manner adverse to the stockholders
of the Company (other than insignificant changes or amendments or
other than to waive any condition). This Agreement will also
terminate upon the earlier of (i) the close of business on
September 24, or (ii) the Effective Time.
SECTION 6.08. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that Purchaser may assign its rights and
obligations to another wholly-owned subsidiary of the Parent which
is the assignee of Purchaser's rights under the Merger Agreement;
and provided further that except as set forth in the prior clause,
a party may not assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of
the other parties hereto and any purported assignment, delegation
or transfer without such consent shall be null and void.
SECTION 6.09. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of Delaware
without giving effect to the principles of conflicts of laws
thereof.
SECTION 6.10. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be
an original, with the same effects as if the signatures thereto and
thereof were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
SECTION 6.11. Stockholder Capacity. The Stockholder signs
solely in its capacity as the record holder and beneficial owner of
the Shares and nothing herein shall limit or affect any actions
taken by any officer, director, partner, employee or affiliate of
the Stockholder in his or her capacity as an officer or director of
the Company and no such actions shall be deemed a breach of this
Agreement.
SECTION 6.12. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the
fullest extent possible. To the extent that any provision of this
Agreement and the Merger Agreement conflict, the provisions of the
Merger Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
IBP, inc.
By: /s/ Robert L. Peterson
-------------------------
Name: Robert L. Peterson
Title: Chairman and Chief
Executive Officer
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
IBP SUB, INC.
By: /s/ Larry Shipley
--------------------
Name: Larry Shipley
Title: President
Address for Notices:
IBP Avenue
P.O. Box 515
Dakota City, Nebraska 68731
Attn: Lonnie Grigsby, Esq. (#141)
THE AIRLIE GROUP, L.P.
By: EBD L.P., General Partner
By: TMT-FW, Inc., General
Partner
By: /s/ Dort A. Cameron III
--------------------------
Name: Dort A. Cameron III
Title:
Address for Notices:
115 E. Putnam Ave.
Greenwich, Connecticut 06830
Attn: Dort A. Cameron III
RESTATED CERTIFICATE OF INCORPORATION
OF
IBP, INC.
The undersigned, Robert L. Peterson and Lonnie O. Grigsby,
certify that they are the President and the Secretary,
respectively, of IBP, inc., a corporation organized and existing
under the laws of the State of Delaware (the Corporation ), and do
hereby further certify as follows:
1. The name of the Corporation is IBP, inc. The name under
which the Corporation was originally incorporated is Iowa Beef
Packers, Inc.
2. The original Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of
Delaware on June 23, 1969.
3. The Restated Certificate of Incorporation was duly
adopted by the written consent of the stockholders of the
Corporation in accordance with Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation as amended
hereby is restated to read in its entirety, as follows:
ARTICLE I
The name of the Corporation is IBP, inc.
ARTICLE II
The address of the Corporation s registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, in the city of Wilmington, County of
New Castle. The name of the Corporation s registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 225,000,000 shares,
consisting of 200,000,000 shares of Common Stock, par value $0.05
per share (the Common Stock ), and 25,000,000 shares of Preferred
Stock, par value $1.00 per share (the Preferred Stock ).
The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares
of Preferred Stock, for one or more series of Preferred Stock.
Except as may be required by law, the shares in any series of
Preferred Stock or any shares of stock of any other class need not
be identical. Before any shares of any such series are issued, the
Board of Directors shall fix, and hereby is expressly empowered to
fix, by resolution or resolutions (a Preferred Stock
Designation ), the number of shares to be included in any series
and the designation, relative powers, preferences and rights and
qualifications, limitations or restrictions of the shares of such
series, including, without limiting the generality of the
foregoing, any or all of the following provisions of the shares
thereof:
(a) the designation of such series, the number of shares
to constitute such series and the stated value thereof if
different from the par value thereof;
(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and,
if so, the terms of such voting rights, which may be general
or limited;
(c) the dividends, if any, or method of determining the
dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates,
the conditions and dates upon which such dividends shall be
payable, the preference or relation which such dividends shall
bear to the dividends payable on any shares of stock of any
other class or any other series of Preferred Stock;
(d) whether the shares of such series shall be subject
to redemption by the Corporation and, if so, the times, prices
and other conditions of such redemption;
(e) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such series in,
the voluntary or involuntary liquidation, dissolution or
winding up, or upon any distribution of the assets, of the
Corporation;
(f) whether the shares of such series shall be subject
to the operation of a retirement or sinking fund and, if so,
the extent to and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption of
the shares of such series for retirement or other corporate
purposes and the terms and provisions relative to the
operation thereof;
(g) whether the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any
other class or any other series of Preferred Stock or any
other securities (whether or not issued by the Corporation)
and, if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
the same, and other terms and conditions of conversion or
exchange;
(h) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon
the payment of dividends or the making of other distributions
on, and upon the purchase, redemption or other acquisition by
the Corporation of, the Common Stock or shares of stock of any
other class or any other series of Preferred Stock or any
other securities;
(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation, or upon the issue
of any additional stock, including additional shares of such
series or of any other series of Preferred Stock or of any
other class of stock or any other securities; and
(j) any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof.
The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares then
outstanding) by the affirmative vote of holders of a majority of
the stock of the Corporation entitled to vote, with all such
holders voting as a single class.
Each holder of Common Stock of the Corporation entitled to
vote shall have one vote for each share thereof held.
Except as may be provided by the terms of any Preferred Stock
Designation or any other securities of the Corporation or by law,
the Common Stock shall have the exclusive right to vote for the
election of directors and for all other purposes, and holders of
Preferred Stock shall not be entitled to receive notice of any
meeting of stockholders at which they are not entitled to vote or
consent.
The Corporation shall be entitled to treat the person in whose
name any share of its stock is registered as the owner thereof, for
all purposes, and shall not be bound to recognize any equitable or
other claim to, or interest in, such share on the part of any other
person, whether or not the Corporation shall have notice thereof,
except as expressly provided by applicable law.
ARTICLE V
Section 1. Except as otherwise provided by the terms of any
Preferred Stock Designation or any other securities of the
Corporation, the number of directors of the Corporation shall be
fixed from time-to-time by or pursuant to the By-laws of the
Corporation. The term of each director of the Corporation shall
expire at the next annual meeting of stockholders following such
director's election and until such director's successor shall have
been elected and qualified. The election of directors need not be
by written ballot.
Section 2. Except as otherwise provided by the terms of any
Preferred Stock Designation or any other securities of the
Corporation, newly created directorships resulting from any
increase in the number of directors may be filled by the
affirmative vote of a majority of the Board of Directors then in
office, provided that a quorum of the Board of Directors is
present, or as otherwise provided in the By-laws, and any vacancies
on the Board of Directors resulting from death, resignation,
removal or other cause shall only be filled by the affirmative vote
of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a sole
remaining director, or as otherwise provided in the By-laws.
ARTICLE VI
In furtherance and not in limitation of the powers conferred
upon it by law, the Board of Directors of the Corporation is
expressly authorized (1) to adopt, repeal, alter or amend the By-
laws of the Corporation by the vote of a majority of the entire
Board of Directors and (2) to adopt any By-laws which the Board of
Directors may deem necessary or desirable for the efficient conduct
of the affairs of the Corporation, including, without limitation,
provisions governing the conduct of, and the matters which may
properly be brought before, meetings of the stockholders and
provisions specifying the manner and extent to which prior notice
shall be given of the submission of proposals to be submitted at
any meeting of stockholders or of nominations for the election of
directors to be held at any such meeting.
ARTICLE VII
Subject to the provisions of this Restated Certificate of
Incorporation, the Corporation reserves the right to amend, alter
or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all right conferred upon stockholders herein are
subject to this reservation.
ARTICLE VIII
No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this
Article VIII by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification.
IN WITNESS WHEREOF, IBP, inc. has caused this Restated
Certificate of Incorporation to be duly executed in its corporate
name this 30th day of September, 1987.
IBP, inc.
By: /s/ Robert L. Peterson
-----------------------
Robert L. Peterson,
President
ATTEST
By: /s/ Lonnie O. Grigsby
----------------------
Lonnie O. Grigsby,
Secretary
_________________________________________________________________
BY-LAWS
OF
IBP, inc.
(Incorporated under the Laws of the State of Delaware)
As amended through October 17, 1996
_________________________________________________________________
TABLE OF CONTENTS
ARTICLE I
Offices
Section 1. Registered Office
................................................ 1
Section 2. Other Offices
............................ ........... 1
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting
............................................ 1
Section 2. Annual Meetings
................................................ 1
Section 3. Special Meetings
.............................................. 2
Section 4. Notice of Meetings
..................... ........................ 2
Section 5. Quorum
............................................. 3
Section 6. Adjournments
............................................. 3
Section 7. Conduct of Meeting
.............................................. 3
Section 8. List of Stockholders
................................................. 4
Section 9. Voting
................................................. 5
Section 10. Inspectors
................................................. 6
ARTICLE III
Board of Directors
Section 1. General Powers
......................................................... 7
Section 2. Number, Qualification and Election
............................................ 7
Section 3. Notification of Nominations
..................................................... 8
Section 4. Quorum and Manner of Acting
.......................................... ......... 9
Section 5. Place of Meeting
........................................................ 9
Section 6. Regular Meeting
........................................................ 10
Section 7. Special Meetings
........................................................ 10
Section 8. Notice of Meetings
........................................................ 10
Section 9. Rules and Regulations
........................................................ 10
Section 10. Participation in Meeting by Means
of Communications Equipment
..................................... ... 11
Section 11. Action Without Meeting
................................................... 11
Section 12. Resignations
....................................................... 11
Section 13. Removal of Directors
....................................................... 11
Section 14. Vacancies
....................................................... 12
Section 15. Compensation
....................................................... 12
ARTICLE IV
Executive and Other Committees
Section 1. Executive Committee
....................................................... 13
Section 2. Other Committees
........................................................ 15
Section 3. Procedure; Meetings; Quorum
...................................................... 15
ARTICLE V
Officers
Section 1. Number; Term of Office
........................................................ 16
Section 2. Removal
........................................................ 17
Section 3. Resignation
........................................................ 17
Section 4. Vacancies
........................................................ 18
Section 5. Chairman of the Board
................................................... 18
Section 6. The President
...................................................... 18
Section 7. Vice-Presidents
....................................................... 18
Section 8. Treasurer
........................................................ 18
Section 9. Secretary
........................................................ 18
Section 10. Controller
........................................................ 19
Section 11. Assistant Treasurers, Secretaries
and Controllers
....................................................... 19
ARTICLE VI
Indemnification of Directors, Officers,
Employees and Agents
Section 1. Third Party Actions
....................................................... 19
Section 2. Derivative Actions
....................................................... 20
Section 3. Determination of Indemnification
.............................................. .. 21
Section 4. Right of Indemnification
.................................................. 21
Section 5. Advance of Expenses
....................................................... 22
Section 6. Indemnification by a Court
....................................................... 22
Section 7. Indemnification Not Exclusive
........................ .............................. 22
Section 8. Insurance
........................................................ 23
Section 9. Indemnification to Continue
..................................................... 23
Section 10. Definitions of Certain Terms
................................................... 23
ARTICLE VII
Capital Stock
Section 1. Certificates for Shares
....................................................... 25
Section 2. Transfer of Shares
....................................................... 25
Section 3. Addresses of Stockholders
....................................................... 26
Section 4. Lost, Destroyed and Mutilated Certificates
.......................... ....... 26
Section 5. Regulations
....................................................... 27
Section 6. Fixing Date for Determination of
Stockholder of Record
.................................................. 27
ARTICLE VIII
Seal
ARTICLE IX
Fiscal Year
ARTICLE X
Waiver of Notice
ARTICLE XI
Amendments
ARTICLE XII
Miscellaneous
Section 1. Execution of Documents
...................................................... 29
Section 2. Deposits
...................................................... 29
Section 3. Checks
...................................................... 30
Section 4. Proxies in Respect of Stock or Other Securities
of Other Corporations
................................................... 30
Section 5. By-laws Subject to Law and Restated Certificate
of Incorporation of the Corporation
.............................. .... 30
ARTICLE I
Offices
Section 1. Registered Office. The registered office of IBP,
inc. (hereinafter called the "Corporation" in the State of Delaware
shall be at Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, in the City of Wilmington, County of
New Castle, and the registered agent in charge thereof shall be The
Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have an
office or offices, and keep the books and records of the
Corporation, except as may otherwise be required by law, at such
other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine
or the business of the Corporation require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. All meetings of the
stockholders of the Corporation shall be held at the office of the
Corporation or at such other places, within or without the State of
Delaware, as may from time to time be fixed by the Board of
Directors.
Section 2. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of directors and
for the transaction of such other business as may properly come
before the meeting shall be held on the first Wednesday in June in
each year, if not a legal holiday under the laws of the place where
the meeting is to be<PAGE>
held, and, if a legal holiday, then on the next
succeeding day
which is not a legal holiday under the laws of such place, or on
such other date and at such hour as may from time to time be fixed
by the Board of Directors.
Section 3. Special Meetings. Subject to the provisions of
any Preferred Stock Designation (as such term is defined in the
Restated Certificate of Incorporation of the Corporation), special
meetings of the stockholders for any purpose or purposes may be
called only by the Chairman of the Board of Directors of the
Corporation or a majority of the entire Board of Directors. Only
such business as is specified in the notice of any special meeting
of the stockholders shall come before such meeting.
Section 4. Notice of Meetings. Written notice of each
meeting of the stockholders, whether annual or special, shall be
given, either by personal delivery or by mail, not less than 10 nor
more than 60 days before the date of the meeting to each
stockholders or record entitled to notice of the meeting. If
mailed, such notice shall be deemed given when deposited in the
United States mail, postage prepaid, directed to the stockholder at
such stockholder's address as it appears on the records of the
Corporation. Each such notice shall state the place, date and hour
of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Notice of any meeting
of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy
without protesting, prior to or at the commencement of the meeting,
the lack of proper notice to such stockholder, or who shall waive
notice thereof as provided in Article X of these By-laws. Notice
of adjournment of a meeting of stockholders need not be given if
the time and place to which it is adjourned are announced at such
meeting, unless the adjournment is for more than 30 days or, after
adjournment, a new record date is fixed for the adjournment
meeting.
Section 5. Quorum. The holders of a majority of the votes
entitled to be cast by the stockholders entitled to vote, which if
any vote is to be taken by classes shall mean the holders of a
majority of the votes entitled to be cast by the stockholders of
each such class, present in person or by proxy, shall constitute a
quorum for the transaction of business at any meeting of the
stockholders.
Section 6. Adjournments. In the absence of a quorum, the
holders of a majority of the votes entitled to be cast by the
stockholders, present in person or by proxy, may adjourn the
meeting from time to time. At any such adjourned meeting at which
a quorum may be present, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 7. Conduct of Meeting. At each meeting of the
stockholders, the Chairman of the Board, or, in the absence of the
Chairman of the Board, such person designated by the Board of
Directors, shall act as chairman. At any annual meeting only such
business shall be conducted as shall have been brought before the
annual meeting (i) by or at the direction of the Board of Directors
or (ii) by any stockholder who complies with the procedures set
forth in this Section 7.
For business properly to be brought by a stockholder before an
annual meeting, the stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation
not less than 60 days nor more than 90 days prior to the annual
meeting; provided; however, that in the event that less than 40
days' notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date
of the annual meeting was first mailed or such public disclosure
was first made, whichever first occurs. To be in proper written
form, a stockholder's notice to the Secretary shall set forth in
writing as to each matter the stockholder proposes to bring before
the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; (ii) the name and
address, as they appear on the Corporation's books, of the
stockholder proposing such business; (iii) the class, series, if
any, and number of shares of the Corporation which are owned of
record by the stockholder; and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in the By-
laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this
Section 7. The chairman of an annual meeting shall, if the facts
warrant, determine and declare to the annual meeting that business
was not properly brought before the annual meeting in accordance
with the provisions of this Section 7 and, if he should so
determine, he shall so declare to the annual meeting, and any such
business not properly brought before the annual meeting shall not
be transacted.
Section 8. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who has charge of the
stock ledger to prepare and make, at least 10 days before each
meeting of the stockholders, a complete list of the stockholders
entitled to vote thereat, arranged in alphabetical order, and
showing the address of each stockholder and the number of shares
registered in such stockholder's name. Such list shall be produced
and kept available at the times and places required by law.
Section 9. Voting. Each stockholder of record of any class
or series of stock having a preference over any class of Common
Stock of the Corporation as to dividends or upon liquidation shall
be entitled at each meeting of stockholders to such number of votes
for each share of such stock as may be fixed in the Restated
Certificate of Incorporation or pursuant to the provisions of any
Preferred Stock Designation and each stockholder of record of
Common Stock shall be entitled at each meeting of stockholders to
one vote for each share of such stock, in each case, registered in
such stockholder's name on the books of the Corporation;
(1) on the date fixed pursuant to Section 6 of Article
VII of these By-laws as the record date for the determination of
stockholders entitled to notice of and to vote at such meeting; or
(2) if no such record date shall have been so fixed,
then at the close of business on the day next preceding the day on
which notice of such meeting is given, or, if notice is waived, at
the close of business on the day next preceding the day on which
the meeting is held, or, if action is taken by written consent
without a meeting (to the extent permitted by these By-laws and the
Restated Certificate of Incorporation of the Corporation) and no
record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting shall have
been fixed, the day on which the first written consent is
expressed.
Each shareholder entitled to vote at any meeting of
stockholders may authorize not in excess of three persons to act
for such stockholder by a proxy signed by such stockholder or such
stockholder's attorney-in-fact. Any such proxy shall be delivered
to the secretary of such meeting at or prior to the time designated
for holding such meeting, but in any event not later than the time
designated in the order of business for so delivering such proxies.
No such proxy shall be voted or acted up after three years from its
date, unless the proxy provides for a longer period.
At each meeting of the stockholders, all corporate
actions to be taken by vote of the stockholders shall be authorized
by a majority of the votes cast by the stockholders entitled to
vote thereon, present in person or represented by proxy, and where
a separate vote by class is required, a majority of the votes cast
by the stockholders of such class, present in person or represented
by proxy, shall be the act of such class; subject, in each case, to
such greater vote as may be prescribed by the Restated Certificate
of Incorporation of the Corporation or by law. Unless required by
law or determine by the chairman of the meeting to be advisable,
the vote on any matter, including the election of directors, need
not be by written ballot. In the case of a vote by written ballot,
each ballot shall be signed by the stockholder voting, or by such
stockholder's proxy, and shall state the number of shares voted.
Section 10. Inspectors. Either the Board of Directors or, in
the absence of designation of inspectors by the Board, the chairman
of any meeting of stockholders may, in its or such person's
discretion, appoint on e or three inspectors to act at any meeting
of stockholders; provided, that no director or nominee for the
office of director shall be appointed an inspector. Such
inspectors shall perform such duties as shall be specified by the
Board or the chairman of the meeting. Inspectors need not be
stockholders.
ARTICLE III
Board of Directors
Section 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board
of Directors, which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not be law, by the
Restated Certificate of Incorporation of the Corporation or by
these By-laws directed or required to be exercised or done by the
stockholders.
Section 2. Number, Qualification and Election. Except as
otherwise provided pursuant to provisions of any Preferred Stock
Designation, the number of directors of the Corporation shall be
determined from time to time by vote of a majority of the entire
Board of Directors, provided that the number thereof may not be
less than three.
Each of the directors of the Corporation shall hold office
until the next annual meeting of stockholders following such
director's election and until such director's successor shall have
been elected and qualified, or until his earlier death, or
resignation or removal in the manner hereinafter provided. No
decrease in the number of directors shall shorten the term of any
incumbent director.
Directors need not be stockholders of the Corporation.
In any election of directors, the persons receiving a
plurality of the votes case, up to the number of directors to be
elected in such election, shall be deemed elected.
Section 3. Notification of Nominations. Except as provided
in any Preferred Stock Designation, nominations for the election of
directors may be made by the Board of Directors or by any
stockholder entitled to vote for the election of directors. Any
stockholder entitled to vote for the election of directors at a
meeting may nominate persons for election as directors by giving
timely notice thereof in proper written form to the Secretary of
the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90
days prior to the meeting; provided; however, that in the event
that less than 40 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. To be in proper
written form, such stockholder's notice shall set forth in writing
(i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, including, without limitation, such
person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected; and (ii) as to
the stockholder giving the notice (x) the name and address, as they
appear on the Corporation's books, of such stockholder and (y) the
class, series, if any, and number of shares of the Corporation
which are owned of record by such stockholder. The Corporation may
require any person proposed for nomination to furnish such other
information as many reasonably be required by the Corporation to
determine the eligibility of such person to serve as a director of
the Corporation. At the request of the Board of Directors, any
person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation the
information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. The chairman of the
meeting shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded.
Section 4. Quorum and Manner of Acting. Except as otherwise
provided by these By-laws, a majority of the entire Board of
Directors shall constitute a quorum for the transaction of business
at any meeting of the Board, and, except as so provided, the vote
of a majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board. In the absence of
a quorum, a majority of the directors present may adjourn the
meeting to another time and place, without notice other than
announcement at the meeting. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 5. Place of Meeting. The Board of Directors may hold
its meetings at such place or places within or without the State of
Delaware as the Board may from time to time determine or as shall
be specified or fixed in the respective notices or waivers or
notice thereof.
Section 6. Regular Meetings. Regular meetings of the Board
of Directors shall be held at such times and places as the Board
shall from time to time by resolution determine. If any day fixed
for a regular meeting shall be a legal holiday under the laws of
the place where the meeting is to be held, the meeting which would
otherwise to be held on that day shall be held at the same hour on
the next succeeding business day.
Section 7. Special Meetings. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the
Board or by a majority of the directors.
Section 8. Notice of Meetings. Notice of regular meetings of
the Board of Directors or of any adjourned meeting thereof need not
be given. Notice of each special meeting of the Board shall be
mailed to each directors, addressed to such director at such
director's residence or usual place of business, at least two days
before the day on which the meeting is to be held or shall be sent
to such director at such place by telegraph or be given personally
or by telephone, not later than the day before the meeting is to be
held, but notice need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of such
notice or who shall attend such meeting without protesting, prior
to or at its commencement, the lack of notice to such director.
Every such notice shall state the time and place but need not state
the purpose of the meeting.
Section 9. Rules and Regulations. The Board of Directors may
adopt such rules and regulations not inconsistent with the
provisions of these By-laws for the conduct of its meetings and
management of the affairs of the Corporation as the Board may deem
proper. In the absence of the Chairman of the Board, such person
as may be designated by the Board of Directors shall preside at
meetings of the Board.
Section 10. Participation in Meetings by Means of
Communications Equipment. Any one or more members of the Board of
Directors or any committee thereof may participate in any meeting
of the Board or of any such committee by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at
such meeting.
Section 11. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting if all of the
members of the Board or of any such committee consent thereto in
writing and the writing or writings are filed without the minutes
of proceedings of the Board or of such committee.
Section 12. Resignations. Any director of the Corporation
may at any time resign by giving written notice to the Board of
Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Such resignation shall take effect
at the time specified therein or, if the time be not specified,
upon receipt thereof; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective. If the resignation of a director is effective at a
future time, the Board of Directors may elect a successor prior to
such effective time to take office when such resignation becomes
effective.
Section 13. Removal of Directors. Subject to the terms of
any Preferred Stock Designation, any director may be removed at any
time for cause or without cause by vote of the holders of a
majority in voting interest of shares then entitled to vote in the
election of directors. Any director may also be removed at any
time for cause by vote of a majority of the entire Board of
Directors. The vacancy in the Board caused by any such removal may
be filled by the stockholders or as provided in Section 14 of
Article III of these By-laws.
Section 14. Vacancies. Except as otherwise provided by the
terms of any Preferred Stock Designation or any other securities of
the Corporation, newly created directorships resulting from any
increase in the number of directors may be filled by the
affirmative vote of a majority of the Board of Directors then in
office, provided that a quorum of the Board of Directors is
present, and any vacancies on the Board of Directors resulting from
death, resignation, removal or other cause shall only be filled by
the affirmative vote of a majority of the remaining directors then
in office, even though less than a quorum of the Board of
Directors, or by a sole remaining directors, or by the stockholders
in accordance with Section 13 of this Article III or at a meeting
called for that purpose in accordance with Section 3 of Article II
of these By-laws. The director elected to fill a vacancy shall
hold office for the unexpired term in respect of which such vacancy
occurred and until his successor shall be elected and shall qualify
or until his earlier death or resignation or removal in the manner
provided herein.
Section 15. Compensation. Each director who shall not at the
time also be a salaried officer or employee of the Corporation or
any of its subsidiaries (hereinafter referred to as an "outside
director"), in consideration of such person serving as a director,
shall be entitled to receive from the Corporation such amount per
annum and such fees for attendance at meetings of the Board of
Directors or of committees of the Board, or both, as the Board
shall from time to time determine. In addition, each director,
whether or not an outside director, shall be entitled to receive
from the Corporation reimbursement for the reasonable expenses
incurred by such person in connection with the performance of such
person's duties as a director. Nothing contained in this Section
shall preclude any director from serving the Corporation or any of
its subsidiaries in any other capacity and receiving proper
compensation therefor.
ARTICLE V
Executive and Other Committees
Section 1. Executive Committee. The Board of Directors may,
by resolution adopted by a majority of the entire Board, designate
annually three or more of its members to constitute members or
alternate members of an Executive Committee. The Board of
Directors may designate one or more directors as alternate members
of the Executive Committee, who may replace any absent or
disqualified member at any meeting of such committee. In the
absence or disqualification of a member of the Executive Committee,
and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or
disqualified member. The Executive Committee shall have and may
exercise, between meetings of the Board, all the powers and
authority of the Board in the management of the business and
affairs of the Corporation, including, if such Committee is so
empowered and authorized by resolution adopted by a majority of the
entire Board, the power and authority to declare a dividend, to
authorize the issuance of stock, to adopt a certificate of
ownership and merger pursuant to Section 253 of the General
Corporation Law of the State of Delaware and may authorize the seal
of the Corporation to be affixed to all papers which may require
it, except that the Executive Committee shall not have such power
or authority in reference to:
(a) amending the Restated Certificate of Incorporation
of the Corporation;
(b) adopting an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of the
State of Delaware involving the Corporation;
(c) recommending to the stockholders the sale, lease or
exchange of all or substantially all of the property and assets of
the Corporation;
(d) recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution;
(e) adopting, amending or repealing any By-law;
(f) filling vacancies on the Board or on any committee
of the Board, including the Executive Committee; or
(g) amending or repealing any resolution of the Board
which by its terms may be amended or repealed only by the Board.
The Board shall have power at any time to change the
membership of the Executive Committee, to fill all vacancies in it
and to discharge it, either with or without cause.
Section 2. Other Committees. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate
one or more other committees, each committee to consist of one or
more of the members of this Board and each of which committee shall
have such authority of the Board as may be specified in the
resolution of the Board designating such committee. A majority of
all the members of such committee may determine its action and fix
the time and place of its meetings, unless the Board shall
otherwise provide. The Board shall have power at any time to
change the membership of, to fill all vacancies in and to discharge
any such committee, either with or without cause.
Section 3. Procedure; Meetings, Quorum. Regular meetings of
the Executive Committee or any other committee of the Board of
Directors, of which no notice shall be necessary, may be held at
such times and places as shall be fixed by resolution adopted by a
majority of the members thereof. Special meetings of the Executive
Committee or any other committee of the Board shall be called at
the request of any member thereof. Notice of each special meeting
of the Executive Committee or any other committee of the Board
shall be sent by mail, telegraph or telephone, or be delivered
personally to each member thereof not later than the day before the
day on which the meeting is to be held, but notice need not be
given to any member who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend such
meeting without protesting, prior to or at its commencement, the
lack of such notice to such member. Any special meeting of the
Executive Committee or any other committee of the Board shall be a
legal meeting without any notice thereof having been given, if all
the members thereof shall be present thereat. Notice of any
adjourned meeting of any committee of the Board need not be given.
The Executive Committee or any other Committee of the Board may
adopt such rules and regulations not inconsistent with the
provisions of law, the Restated Certificate of Incorporation of the
Corporation or these By-laws for the conduct of its meetings as the
Executive Committee or such other committee of the Board may deem
proper. A majority of the Executive Committee or any other
committee of the Board shall constitute a quorum for the
transaction of business at any meeting, and the vote of a majority
of the members thereof present at any meting at which a quorum is
present shall be the act of such committee. The Executive
Committee or any other committee of the Board of Directors shall
keep written minutes of its proceedings and shall report on such
proceedings to the Board.
ARTICLE V
Officers
Section 1. Number; Term of Office. The officers of the
Corporation shall be a Chairman of the Board, a President, one or
more Vice-Presidents, one or more of whom may be designated as
Executive, Group or Senior Vice-Presidents, a Treasurer, a
Secretary, a Controller, and such other officers or agents with
such titles and such duties as the Board of Directors may from time
to time determine, each to have such authority, functions or duties
as in these By-laws provided or as the Board may from time to time
determine, and each to hold office for such term as may be
prescribed by the Board and until such person s successor shall
have been chosen and shall qualify, or until such person s death or
resignation, or until such person s removal in the manner
hereinafter provided. The Chairman of the Board shall be elected
from among the directors. One person may hold the offices and
perform the duties of any two or more of said officers; provided,
however, that no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required
by law, the Restated Certificate of Incorporation of the
Corporation or these By-laws to be executed, acknowledged or
verified by two or more officers. The Board may from time to time
authorize any officer to appoint and remove any such other officers
and agents and to prescribe their powers and duties.
Section 2. Removal. Any officer may be removed, either with
or without cause, by the Board of Directors at any meeting thereof
called for the purpose, or, except in the case of any officer
elected by the Board, by any committee or superior officer upon
whom such power may be conferred by the Board.
Section 3. Resignation. Any officer may resign at any time
by giving written notice to the Board of Directors, the Chairman of
the Board, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein or, if
the time is not specified, upon receipt thereof; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of
death, resignation, removal or any other cause may be filled for
the unexpired portion of the term in the manner prescribed in these
By-laws for election to such office.
Section 5. Chairman of the Board. The Chairman of the Board
shall be the chief executive officer of the Corporation and as such
shall have general supervision and direction of the business and
affairs of the Corporation, subject to the control of the Board of
Directors. The Chairman of the Board shall, if present, preside at
meetings of the Board of Directors and, if present, preside at
meetings of the stockholders.
Section 6. The President. The President, if any, shall be
the chief operating officer of the Corporation. The President
shall perform such other duties as the Board may from time to time
determine.
Section 7. Vice-Presidents. Each Vice-President shall have
such powers and duties as shall be prescribed by the Chairman of
the Board or the Board of Directors.
Section 8. Treasurer. The Treasurer shall perform all duties
incident to the office of Treasurer and such other duties as from
time to time may be assigned to the Treasurer by the Chairman of
the Board or the Board of Directors.
Section 9. Secretary. The Secretary shall see that all
notices required to be given by the Corporation are duly given and
served; the Secretary shall be custodian of the seal of the
Corporation and shall affix the seal or cause it to be affixed to
all certificates of stock of the Corporation (unless the seal of
the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and to all documents, the execution of which
on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these By-laws. The Secretary
shall have charge of the stock ledger and also of the other books,
records and papers of the Corporation and shall see that the
reports, statements and other documents required by law are
properly kept and filed; and shall in general perform all the
duties incident to the office of Secretary and such other duties as
from time to time may be assigned to such person by the Chairman of
the Board or the Board of Directors.
Section 10. Controller. The Controller shall perform all of
the duties incident to the office of the Controller and such other
duties as may from time to time be assigned to such person by the
Chairman of the Board or the Board of Directors.
Section 11. Assistant Treasurers, Secretaries and
Controllers. The Assistant Treasurers, the Assistant Secretaries
and the Assistant Controllers shall perform such duties as shall be
assigned to them by the Treasurer, Secretary or Controller,
respectively, or by the Chairman of the Board or the Board of
Directors.
ARTICLE VI
Indemnification of Directors, Officers,
Employees and Agents
Section 1. Third Party Actions. The Corporation shall
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director or
officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be
in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, that such person
had reasonable cause to believe that his or her conduct was
unlawful.
Section 2. Derivative Actions. The Corporation shall
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit
by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys fees)
actually and reasonably incurred by such person in connection with
the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of such person s duty to the Corporation unless and
only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court
of Chancery of Delaware or such other court shall deem proper.
Section 3. Determination of Indemnification. Any
indemnification under Section 1 or 2 of the Article VI (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because such person has met the
applicable standard of conduct set forth in Section 1 or 2 of this
Article VI. Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum
of disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders.
Section 4. Right to Indemnification. Notwithstanding the
other provisions of this Article VI, to the extent that a director,
officer, employee or agent of the Corporation has been successful
on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or 2 of this Article VI, or in
defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys fees) actually
and reasonably incurred by such person in connection therewith.
Section 5. Advance of Expenses. Expenses incurred in
defending or investigating a threatened or pending civil or
criminal action, suit or proceeding may be paid by the Corporation
in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it
shall ultimately be determined that such person is not entitled to
be indemnified by the Corporation as authorized in this Article VI.
Section 6. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this
Article VI, and notwithstanding the absence of any determination
thereunder, any director, officer, employee or agent may apply to
any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VI. The basis of such indemnification by
a court shall be a determination by such court that indemnification
of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standards of
conduct set forth in Section 1 or 2 of this Article VI, as the case
may be. Notice of any application for indemnification pursuant to
this Section 6 shall be given to the Corporation promptly upon the
filing of such application.
Section 7. Indemnification Not Exclusive. The
indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall not be deemed exclusive of any
other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any law, agreement,
vote of stockholders or disinterested directors or otherwise, both
as to action in such person s official capacity and as to action in
another capacity while holding such office. The provisions of this
Article VI shall not be deemed to preclude the indemnification of
any person who is not specified in Sections 1 or 2 of this Article
VI but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any
such capacity, or arising out of such person s status as such,
whether or not the Corporation would have the power to indemnify
such person against such liability under the provisions of this
Article VI.
Section 9. Indemnification To Continue. The indemnification
and advancement of expenses provided by, or granted pursuant to,
this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Section 10. Definitions of Certain Terms. For purposes of
this Article VI, references to the Corporation shall include, in
addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is
or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or
another enterprise, shall stand in the same position under the
provisions of this Article VI with respect to the resulting or
surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had
continued.
For purposes of this Article VI, references to other
enterprises shall include employee benefit plans; references to
fines shall include any excise taxes assessed on a person with a
respect to an employee benefit plan; references to serving at the
request of the Corporation shall include any service as a
director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of any employee
benefit plan shall be deemed to have acted in a manner not opposed
to the best interests of the Corporation as referred to in this
Article VI.
ARTICLE VII
Capital Stock
Section 1. Certificates for Shares. Certificates
representing shares of stock of each class of the Corporation,
whenever authorized by the Board of Directors, shall be in such
form as shall be approved by the Board. The certificates
representing shares of stock of each class shall be signed by, or
in the name of, the Corporation by the Chairman of the Board, the
President or a Vice-President and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer of the
Corporation, and sealed with the seal of the Corporation, which may
be a facsimile thereof. Any or all such signatures may be
facsimiles if countersigned by a transfer agent or registrar.
Although any officer, transfer agent or registrar whose manual or
facsimile signature is affixed to such a certificate ceases to be
such officer, transfer agent or registrar before such certificate
has been issued, it may nevertheless be issued by the Corporation
with the same effect as if such officer, transfer agent or
registrar were still such at the date of its issue.
The stock ledger and blank share certificates shall be kept by
the Secretary or by a transfer agent or by a registrar or by any
other officer or agent designated by the Board.
Section 2. Transfer of Shares. Transfers of shares of stock
of each class of the Corporation shall be made only on the books of
the Corporation by the holder thereof, or by such holder s attorney
thereunto authorized by a power of attorney duly executed and filed
with the Secretary of the Corporation or a transfer agent for such
stock, if any, and on surrender of the certificate or certificates
for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The
person in whose name shares stand on the books of the Corporation
shall be deemed the owner thereof for all purposes as regards the
Corporation; provided, however, that whenever any transfer of
shares shall be made for collateral security and not absolutely,
and written notice thereof shall be given to the Secretary or to
such transfer agent, such fact shall be stated in the entry of the
transfer. No transfer of shares shall be valid as against the
Corporation, its stockholders and creditors for any purpose, except
to render the transferee liable for the debts of the Corporation to
the extent provided by law, until it shall have been entered in the
stock records of the Corporation by an entry showing from and to
whom transferred.
Section 3. Addresses of Stockholders. Each stockholder shall
designate to the Secretary or transfer agent of the Corporation an
address at which notices of meetings and all other corporate
notices may be served or mailed to such person, and, if any
stockholder shall fail to designate such address, corporate notices
may be served upon such person by mail directed to such person at
such person s post office address, if any, as the same appears on
the share record books of the Corporation or at such person s last
know post office address.
Section 4. Lost, Destroyed and Mutilated Certificates. The
holder of any share of stock of the Corporation shall immediately
notify the Corporation of any loss, theft, destruction or
mutilation of the certificate therefor; the Corporation may issue
to such holder a new certificate or certificates for shares, upon
the surrender of the mutilated certificate or, in the case of loss,
theft or destruction of the certificate, upon satisfactory proof of
such loss, theft or destruction; the Board of Directors, or a
committee designated thereby, or the transfer agents and registrars
for the stock, may, in their discretion, require the owner of the
lost, stolen or destroyed certificates, or such person s legal
representative, to give the Corporation a bond in such sum and with
such surety or sureties as they may direct to indemnify the
Corporation and said transfer agents and registrars against any
claim that may be made on account of the alleged loss, theft or
destruction of any such certificate the issuance of such new
certificate.
Section 5. Regulations. The Board of Directors may make such
additional rules and regulations as it may deem expedient
concerning the issue and transfer of certificates representing
shares of stock of each class of the Corporation and may make such
rules and take such action as it may deem expedient concerning the
issue of certificates in lieu of certificates claimed to have been
lost, destroyed, stolen or mutilated.
Section 6. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment or any
rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any
other action. A determination of stockholders entitled to notice
of or to vote at a meeting of the stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE VIII
Seal
The Board of Directors shall provide a corporate seal, which
shall be in the form of a circle and shall bear the full name of
the Corporation and such other words or figures as the Board of
Directors may approve and adopt. The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall end on the last
Saturday in December in each year.
ARTICLE X
Waiver of Notice
Whenever any notice whatsoever is required to be given by
these By-laws, by the Restated Certificate of Incorporation of the
Corporation or by law, the person entitled thereto may, either
before or after the meeting or other matter in respect of which
such notice is to be given, waive such notice in writing, which
writing shall be filed with or entered upon the records of the
meeting or the records kept with respect to such other matter, as
the case may be, and in such event such notice need not be given to
such person and such waiver shall be deemed equivalent to such
notice.
ARTICLE XI
Amendments
Any By-law (other than this By-law) may be adopted, repealed,
altered or amended by a majority of the entire Board of Directors
at any meeting thereof, provided that such proposed action in
respect thereof shall be stated in the notice of such meeting.
ARTICLE XII
Miscellaneous
Section 1. Execution of Documents. The Board of Directors or
any committee thereof shall designate the officers, employees and
agents of the Corporation who shall have power to execute and
deliver deeds, contracts, mortgages, bonds, debentures, notes,
checks, drafts and other orders for the payment of money and other
documents for and in the name of the Corporation and may authorize
such officers, employees and agents to delegate such power
(including authority to redelegate) by written instrument to other
officers, employees or agents of the Corporation. Such delegation
may be by resolution or otherwise and the authority granted shall
be general or confined to specific matters, all as the Board or any
such committee may determine. In the absence of such designation
referred to in the first sentence of this Section, the officers of
the Corporation shall have such power so referred to, to the extent
incident to the normal performance of their duties.
Section 2. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation or otherwise as the Board of Directors or
any committee thereof or any officer of the Corporation to whom
power in that respect shall have been delegated by the Board or any
such committee shall select.
Section 3. Checks. All checks, drafts and other orders for
the payment of money out of the funds of the Corporation, and all
notes or other evidences of indebtedness of the Corporation, shall
be signed on behalf of the Corporation in such manner as shall from
time to time be determined by resolution of the Board of Directors
or of any committee thereof.
Section 4. Proxies in Respect of Stock or Other Securities of
Other Corporations. The Board of Directors or any committee
thereof shall designate the officers of the Corporation who shall
have authority from time to time to appoint an agent or agents of
the Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as
the holder of stock or other securities in any other corporation,
and to vote or consent in respect of such stock or securities; such
designated officers may instruct the person or persons so appointed
as to the manner of exercising such powers and rights; and such
designated officers may execute or cause to be executed in the name
and on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, powers of attorney or other
instruments as they may deem necessary or proper in order that the
Corporation may exercise its said powers and rights; provided,
however, that in the absence of any such designation, the Chairman
of the Board shall exercise the rights of the Corporation
hereunder.
Section 5. By-laws Subject to Law and Restated Certificate of
Incorporation of the Corporation. Each provision of these By-laws
is subject to any contrary provision of the Restated Certificate of
Incorporation of the Corporation or of any applicable law as from
time to time in effect, and to the extent any such provision is
inconsistent therewith, such provision shall be superseded thereby
for as long as and to the extent which it is inconsistent, but for
all other purposes of these By-laws shall continue in full force
and effect.
* * * * * * * * * * * *
Exhibit 10.5.6
1996 OFFICER LONG-TERM STOCK PLAN
1. Purposes. The purposes of this 1996 Officer Long-Term
Stock Plan (the "Plan") are to assist IBP and its subsidiaries
(unless the context otherwise requires, the "Company") (a) in the
attraction and retention of officers who have demonstrated superior
ability, and (b) to provide the officers with an incentive to exert
extraordinary efforts toward the achievement of increased growth
and profitability in the operations of the Company in order that
the value of the Company's Common Stock may appreciate accordingly.
2. Administration. The Plan shall be administered by a
committee consisting of three or more members of the board of
directors, all of whom shall not (either while members of the
Committee or at any time within one year prior to becoming members
of the Committee) be or have been eligible for selection as a
person to whom awards may be made under the Plan (the "Committee").
The Committee is authorized to adopt operating rules necessary to
implement and administer the Plan. The Committee shall
periodically review the performance of the Plan and its rules and
make any necessary revisions in such rules to assure the Plan's
purposes are met. The interpretation and construction of any
provision of the Plan by the Committee shall be final and
conclusive.
3. Participants. The Committee shall select as
participants in the Plan the officers who are in a position
directly and significantly to enhance the growth and profitability
of the Company's operations and whose continued employment by the
Company would favorably affect such operations.
4. Awards. The Plan shall be effective when approved by
the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled to
vote at a meeting duly held in accordance with the laws of the
State of Delaware. All awards made by the Committee prior to such
approval are contingent upon that approval. Each participant in
the Plan shall be awarded a number of Common Shares ("Deferred
Stock" or "Stock") of the Company as determined by the Committee,
such shares to be awarded in consideration of services to be
rendered to the Company and on its behalf. Upon the making of any
award, the Committee shall set by resolution its determination of
the fair value in monetary terms of the services to be rendered to
the Company and which serves as the employee's consideration for
the award. The number of shares of Common Stock awarded as
Deferred Stock shall be the result of dividing the fair value in
monetary terms of the services so determined by the Closing Price
of the Company's Common Stock on the date of any such award; the
Closing Price being that reported for the Company's Common Stock in
the New York Stock Exchange Composite Transactions Index, as
published in The Wall Street Journal, or in such other national
financial press or information service available from time to time
over the duration of the Plan. All shares so granted are declared
and taken to be fully paid shares of Stock and not liable to any
1
further call, nor shall the holders thereof be liable for any
further payment therefor. All shares so awarded will be subject to
the restrictions described in Section 5. No more than one million
(1,000,000) shares of Stock (subject to adjustment to reflect any
Stock dividend, split- up, combination of shares, reclassification,
merger or consolidation) shall be awarded under the Plan, but any
shares forfeited prior to the expiration of the Deferral Period as
described in Section 5 shall revert to the status of shares not
awarded. Shares delivered pursuant to this Plan may be Common
Stock acquired by the Company on the open market and held in the
treasury of the Company or previously authorized but unissued
Common Stock.
5. Restrictions. During the Mandatory Deferral Period (as
determined in the discretion of the Committee and as defined in
each "Deferred Stock Award Agreement", such Mandatory Deferral
Period being for a period of at least six months unless otherwise
provided for in the Plan) any shares of Stock awarded pursuant to
the Plan shall not be sold, assigned, pledged, hypothecated or
otherwise transferred or encumbered. At the expiration of the
Mandatory Deferral Period, the certificate representing those
shares for which the Mandatory Deferral Period has expired shall be
delivered to the participant, or his legal representative, in a
number equal to such shares unless otherwise further deferred by
Participant ("Elective Deferral") pursuant to Section 7 below.
Unless otherwise provided in the Deferred Stock Award Agreement to
be entered into between the Company and the participant, the
Mandatory Deferral Period with respect to shares of Stock awarded
to a participant in the Plan shall terminate at the close of
business on the fifth anniversary of the Award Date, or as
otherwise determined at the discretion of the Committee and as
defined in each Deferred Stock Award Agreement, provided that if
such participant shall cease to perform officer duties for the
Company during the Mandatory Deferral Period with respect to such
shares:
(a) in the event he shall cease to perform such duties by
reason of resignation or Company Termination, as defined
below, such Deferred Stock shall be forfeited by the
participant. Company Termination means in the event the
Company concludes, in its sole discretion, that it is no
longer in the interest of the Company to continue the
participant's employment; and
(b) in the event he shall cease to perform such duties for
the Company by reason of death, total and permanent
disability or retirement at age 65, the Mandatory Deferral
Period shall terminate with respect to all of the remaining
shares covered under the Deferred Stock Award.
6. Dividend Reinvestment. Amounts equal to any dividends
declared during the Mandatory Deferral Period with respect to the
number of shares covered by a Deferred Stock Award will be deferred
and deemed to be reinvested in additional Deferred Stock. Except
as set forth in the preceding sentence, the Participant shall have
none of the rights of a stockholder with respect to shares of
Common Stock covered by a Deferred Stock Award until the shares of
Common Stock are transferred to such Participant at the expiration
of the Deferral Period.
2
7. Elective Deferral. Prior to rendering service for
which the shares are earned, Participant may make an irrevocable
election to defer receipt of the Deferral Amount, as defined below,
beyond the Mandatory Deferral Period. The Deferral Amount shall
equal the number of shares of Deferred Stock the Participant would
receive upon termination of the Mandatory Deferral Period
multiplied by the Closing Price of IBP on the termination date, or
if there was no reported sale on such date, then the Closing Price
of IBP from the next preceding date on which such a sale is
transacted. If an Elective Deferral is made, the Company shall
credit the Deferral Amount to the Participant's account in the
Retirement Income Plan of IBP, inc.
8. Tax Withholding. Any Deferred Stock Award granted
hereunder shall provide as determined by the Committee for
appropriate arrangements for the satisfaction by the Company and
the participant of all Federal, state, local or other income,
excise or employment taxes or tax withholding requirements
applicable to the transfer of Common Stock pursuant to a
Deferred Stock Award or other right or payment and all such
additional taxes or amounts as determined by the Committee in its
discretion, including without limitation, the right of the Company
or any subsidiary thereof to receive transfers of shares of Common
Stock or other property from the Participant or to deduct or
withhold in the form of cash or shares from any transfer of payment
to a Participant, in such amount or amounts deemed required or
appropriate by the Committee in its discretion.
9. Modifications. The Company's board of directors shall
have the power to modify or supplement the Plan in such manner as
it may from time to time determine, provided that unless the
holders of a majority of shares of capital stock of the Company
having voting power present or represented and entitled to vote at
a meeting of such holders shall have first given their approval,
(a) the number of shares of Stock (except for adjustments in
accordance with Section 4) which may be awarded under the Plan
shall not be increased, (b) the benefits accruing to the
Participants in the Plan shall not be materially increased, and (c)
the requirements as to eligibility for participation in the Plan
shall not be materially modified.
3
Exhibit 10.5.7
1996 STOCK OPTION PLAN
1. Purpose. The purpose of this 1996 Stock Option Plan (the
"Plan") is to enhance the value of the stockholders' investment in
IBP, inc. (the "Company") by encouraging key employees, upon whose
performance the Company and its subsidiaries is largely dependent
for the successful conduct of its operations, to acquire and retain
a financial interest in the Company. In addition, the Plan is
intended to enable the Company and its subsidiaries to compete
effectively for and retain the services of such employees.
It is intended that the incentive stock options ("ISOs") (as
defined by Section 422 of the Internal Revenue Code of 1990, as
amended or superseded (the "Code")), other stock options and stock
appreciation rights ("SARs"), may be granted under this Plan.
2. Administration of the Plan.
(a) The Plan shall be administered by a committee (the
"Committee") consisting of not less than three members of the board
of directors designated from time to time by the board of
directors, all of whom shall not, either while members of the
Committee or at any time within one year prior to becoming members
of the Committee, be or have been eligible for selection as a
person to whom awards may be made under the Plan. The
interpretation and construction of any provision of the Plan or any
option or right granted hereunder and all determinations by the
Committee in each case shall be final, binding and conclusive with
respect to all interested parties, unless otherwise determined by
the board of directors. No member of the Committee shall be
personally liable for any action, failure to act, determination,
interpretation or construction made in good faith with respect to
the Plan or any option or right or transaction thereunder.
(b) The Committee shall have full power and authority in its
discretion to take any and all action required or permitted to be
taken under the Plan. Such full power and authority shall include,
without limitation, the selection of participants to whom stock
options or SARs may be granted pursuant to the Plan; the
determination of the number of shares of Common Stock which may be
covered by stock options or SARs granted to any such participant of
the Plan and the purchase price thereof; the granting of options
and related rights; the right to interpret and construct any
provision of the Plan or any option or right granted hereunder; the
making of all required or appropriate determinations under the Plan
or any option or right granted hereunder; the fixing and
determination of the terms, provisions, conditions and restrictions
of all option instruments or agreements (and any related rights),
which need not be identical, entered into or issued in connection
with grants under the Plan; and the adoption, amendment and
rescission of such rules related to the Plan as the Committee shall
determine in its discretion, subject to the express provisions of
the Plan.
1
3. Participants. Participants in the Plan shall be key
employees of the Company or its subsidiaries selected as
hereinafter provided. Key employees may include officers of the
Company or its subsidiaries who are also directors of the Company
but not directors who are not employees of the Company or its
subsidiaries. Nothing contained in this Plan, nor in any option or
right granted pursuant to the Plan, shall confer upon any employee
any right to continue in the employ of the Company or any
subsidiary nor limit in any way the right of the Company or any
subsidiary to terminate his employment at any time.
4. The Stock. The shares of stock available for
issuance pursuant to the grant of options (with or without related
SARs) under this Plan shall consist of three million five hundred
thousand (3,500,000) shares of Common Stock, par value $0.05 per
share (the "Common Stock"), of the Company, subject to adjustment
as provided in Section 8 hereof. The maximum number of shares with
respect to which options or SARs may be granted to any employee
during any one year shall not exceed 60,000. Shares may be (a)
previously issued Common Stock purchased by the Company in the open
market, and held in the treasury of the Company, or (b) previously
authorized but unissued Common Stock. Should any option grant (or
a portion thereof) be terminated, expire, or be cancelled for any
reason without being exercised (e.g., by reason of the exercise of
related SARs for stock or for cash), the shares subject to the
portion of such option grant not so exercised shall be available
for subsequent grants under this Plan.
5. Effective Date and Termination of Plan. The Plan shall be
effective when approved by the affirmative votes of the holders of
a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting duly held in
accordance with the laws of the state of Delaware, but in no event
later than January 31, 1997. All grants made by the Committee
prior to such approval shall be contingent upon such approval.
This Plan shall terminate upon the earlier of (i) 10 years from
the date the Plan is adopted by the Company; or (ii) 10 years from
the date the Plan is approved by Shareholders; or (iii) the date on
which all shares available for issuance under the Plan have been
issued pursuant to the exercise of options granted hereunder; or
(iv) the determination of the board of directors that the Plan
shall terminate. No options may be granted under the Plan after
the termination date, provided that the options granted and
outstanding on such date shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such
options.
6. Grant, Terms, and Conditions. Options and SARs may be
granted at any time and from time to time prior to the termination
of the Plan to such eligible employees and on such terms and
conditions as determined by the Committee. All options and SARs
shall be granted under the Plan by execution of instruments in
writing in the form approved by the Committee. Notwithstanding any
contrary provision of this Plan other than Section 9 hereof, with
respect to any ISOs granted under any plan of the Company or its
subsidiaries or any parent, the aggregate fair market value
(determined at the time the option is granted) of the shares with
2
respect to which such ISOs are exercisable for the first time by an
optionee during any calendar year (under all such plans of the
Company its subsidiaries and any parent) shall not exceed One
Hundred Thousand Dollars ($100,000.00) or the
maximum amount permitted under the Code.
All options and SARs granted pursuant to the Plan shall be
subject to the following terms and conditions and such other terms
and conditions determined by the Committee which are not
inconsistent therewith:
(a) Price. The option exercise price per share of each option
shall be determined by the Committee, provided that, except as
provided below, in no instance shall such price be less than the
fair market value of a share of Common Stock (as defined by
subsection (j) hereof) on the effective date of the option grant.
The option exercise price shall be subject to adjustment only as
provided in Section 8 hereof.
(b) Term of Options. Options may be granted for terms of up to
but not exceeding ten (10) years from date granted. Each grant
shall be subject to earlier termination as provided in subsection
(f) of this Section 6.
(c) Exercise of Options. Except in the event of death,
retirement or disability, or as otherwise provided in this Plan,
stock options granted under this Plan shall be exercisable as
follows: forty percent after two years and an additional twenty
percent each of the succeeding three years.
(d) Alternate Exercise in Case of Hardship. In the case of
options other than ISOs, in the event of the imminent expiration of
the grant where the optionee is absent from the United States or is
otherwise subject to a hardship which renders exercise of the grant
by such optionee unreasonable or impossible prior to its expiration
date, the Committee in its sole and absolute discretion may issue
or cause to have issued to the optionee (in lieu of the exercise of
said grant) the number of shares which represent the difference (if
any) between the aggregate option exercise price and aggregate fair
market value of the shares of the Common Stock with respect to
which the grant is then exercisable, determined as of the date of
issuance of said shares. In such event the grant shall be deemed
fully exercised for all purposes hereof.
(e) Notice of Exercise and Payment. To the extent options are
exercisable, they shall be exercised by written notice to the
Company, stating the number of shares with respect to which options
are being exercised and the intended manner of payment. The date
of the notice shall be the exercise date. Payment for the shares
purchased shall be made in full to the company within ten (10)
business days after the exercise date by check payable to the order
of the Company equal to the option price for the shares being
purchased, in whole shares of Common Stock of the Company owned
by the optionee having a fair market value on the exercise date (as
defined by subsection (j) hereof) equal to the option price for the
shares being purchased, or a combination of Common Stock and check
equal in the aggregate to the option price for the shares being
3
purchased. Payments of Common Stock shall be made by delivery of
stock certificates properly endorsed for transfer in negotiable
form. If other than the optionee, the person or persons exercising
shall be required to furnish to the Company appropriate
documentation that such person or persons have the full legal right
and power to exercise on behalf of and for the optionee.
(f) Termination of Employment.
(i) Except as otherwise provided in this Plan, an
optionee's options (A) are exercisable only by the optionee, (B)
are exercisable only while the optionee is in the employ of the
Company, and (C) if not exercisable by their terms at the time the
optionee ceases to be in the employ of the Company, shall
immediately expire on the date of termination of employment.
(ii) Except as provided herein, an optionee's
options which are exercisable by their terms at the time the
optionee ceases to be in the employ of the Company must be
exercised on or before the earlier of three months after the date
of termination of employment or the fixed expiration date of such
options after which period such options shall expire.
(iii) In the event of the death of the optionee
while in the employ of the Company, all of that optionee's
unexercised options (whether or not then exercisable by their
terms) shall become immediately exercisable by his estate for a
period ending on the earlier of the fixed expiration date of such
options or twelve months after the date of death, after which
period such options shall expire. For purposes hereof, the estate
of an optionee shall be defined to include the legal
representatives thereof or any person who has acquired the right to
exercise an option by reason of the death of the optionee.
(iv) In the case of options other than ISOs, in the
event of the termination of employment by reason of the permanent
disability (as defined below) of the optionee, all of that
optionee's unexercised options (whether or not then exercisable by
their terms) shall become exercisable for a period ending on the
earlier of the fixed expiration date of such options or twelve
months from the date of termination after which period such options
shall expire. For purposes hereof "permanent disability" shall be
deemed to be the inability of the optionee to perform the duties of
his job with the Company because of a physical or mental disability
as evidenced by the opinion of a Company-approved doctor of
medicine licensed to practice medicine in the United States of
America.
(v) In the case of options other than ISOs, in the
event of the normal retirement of the optionee, all of that
optionee's unexercised options (whether or not then exercisable by
their terms) granted to that optionee on or before his 65th
birthday shall become immediately exercisable for a period ending
on the earlier of the fixed expiration date of such options or
twelve months after the date of the retirement, after which period
such options shall expire. Also, in the event of the normal
retirement of the optionee, all of the optionee's unexercised
4
options (whether or not then exercisable by their terms) granted to
the optionee after his 65th birthday and held for a period of at
least twelve consecutive months of active employment with the
Company after the date of grant shall become immediately
exercisable for a period ending on the earlier of the fixed
expiration date of such options or twelve months after the date
of retirement, after which period such options shall expire. For
purposes hereof, retirement shall be deemed to be "normal
retirement" if the optionee is at least 65 years of age and has
completed at least five consecutive years of employment with the
Company at the date of retirement.
(vi) In the case of ISOs, in the event of the
termination of employment by reason of the permanent disability or
the normal retirement of the optionee (as defined in (iv) and (v)
above), each ISO then held by the optionee shall terminate on the
earlier of the period ending three months after the termination of
employment or the fixed expiration date of such options; provided
however, that if such termination of employment occurs by reason of
disability within the meaning of Section 422(c)(6) of the Code said
three-month period shall be extended to twelve months.
(g) Transferability of Options. Any option granted
hereunder shall be transferable only by will or the laws of descent
and distribution, or for non-ISO options pursuant to a Qualified
Domestic Relations Order, and shall be exercisable during the
lifetime of the optionee only by him.
(h) Other Terms and Conditions. Options may contain such
other terms, conditions, or provisions, which shall not be
inconsistent with this Plan, as the Committee shall deem
appropriate.
(i) Tax Withholding. Any option and related SAR granted
hereunder shall provide, as determined by the Committee, for
appropriate arrangements for the satisfaction by the Company and
the optionee of all federal, state, local or other income, excise
or employment taxes or tax withholding requirements applicable to
the exercise of the option or any related SAR or the later
disposition of the shares of Common Stock or other property
thereby acquired and all such additional taxes or amounts as
determined by the Committee in its discretion, including without
limitation, the right of the Company or any subsidiary thereof to
receive transfers of shares of common Stock or other property from
the optionee or, beginning one year after the Company becomes
subject to the reporting requirements of Section 13 of the
Securities Exchange Act of 1934, to deduct or withhold in the form
of cash or shares from any transfer or payment to an optionee, in
such amount or amount deemed required or appropriate by the
Committee in its discretion.
(j) Fair Market Value. The "fair market value" of a share
of Common Stock on any relevant date for purposes of any provision
of the Plan shall be the closing price reported for the Common
Stock in the New York Stock Exchange Composite Transactions Index
on such date or, if there were no reported sales on such date, then
the closing price reported for the Common Stock in the New York
5
Stock Exchange Composite Index on the next preceding day on which
such a sale is transacted, as published in The Wall Street Journal,
or such other national financial press or service as may be
available from time to time over the duration of the Plan.
7. Stock Appreciation Rights. Any options granted or to
be granted under this Plan may, in the sole and absolute discretion
of the Committee, include related SARs with respect to all or part
of the shares of Common Stock subject to options as determined by
the Committee. SARs may be granted at the time options are granted
or (in the case of options other than ISOs) at a later date with
respect to existing options. Optionees granted SARs may exercise
the SARs by written notice to the Company, stating the number of
shares with respect to which the SARs are being exercised, to
the extent that said SARs are then exercisable. In the event of
the exercise of SARs, the obligation of the Company in respect of
the options to which the SARs related shall be discharged by
payment of the SARs so exercised.
(a) SAR Payment. Any SAR granted hereunder shall set forth
the method of computation and form of payment of the SAR and such
other terms and conditions as determined by the Committee in its
discretion or as otherwise required by this Plan, provided that no
SAR shall exceed the difference between one hundred percent (100%)
of the then fair market value on the date of exercise of the share
of Common Stock subject to the option surrendered by the optionee,
and the option exercise price of such share. Without limiting the
generality of the foregoing, the Committee may provide for the
payment of said SAR in cash or in shares of Common Stock valued at
fair market value as of the date of exercise, or in any combination
thereof as determined by the Committee.
(b) Other Provisions. Notwithstanding any contrary
provisions hereof, (i) SARs shall be exercisable only to the extent
the options to which such SARs relate are then exercisable (further
subject to such additional conditions and restrictions as may be
imposed by the Committee) and shall expire upon expiration of the
options to which such SARs relate, and (ii) in the case of any SARs
related to ISOs granted hereunder, said SARs shall be exercisable
only when the then fair market value of the shares of Common Stock
subject to the options (or portion thereof) surrendered by the
optionee exceeds the exercise price of such options (or such
portion thereof).
(c) "Option." References in this Plan to the term "option"
shall, unless the context requires otherwise, include an SAR.
8. Adjustment and Changes in the Common Stock.
(a) In the event that the shares of Common Stock as
presently constituted shall be changed into or exchanged for a
different kind of share of stock or other securities of the Company
or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up,
combination of shares or otherwise) or if the number of such shares
of stock shall be increased through the payment of a stock
6
dividend, then unless such change results in the termination of all
outstanding options pursuant to the provisions of Section 9 hereof,
there shall be substituted for or added to each share of stock of
the Company therefore appropriated or thereafter subject or which
may become subject to an option under this Plan, the number and
kind of shares of stock or other securities into which each
outstanding share of stock of the Company shall be so changed, or
for which each such share shall be exchanged, or to which each
share shall be entitled, as the case may be. Outstanding options
shall also be appropriately amended as to price and other terms as
may be necessary to reflect the foregoing events. In the event
there shall be any other change in the number or kind of the
outstanding shares of the stock of the Company of any stock or
other securities into which such stock shall have been changed, or
for which it shall have been exchanged, then if the Committee
shall, in its sole discretion, determine that such change equitably
requires an adjustment in any option theretofore granted or which
may be granted under the Plan, such adjustment shall be made in
accordance with such determination. Fractional shares resulting
from any adjustment in options pursuant to this Section 8 shall be
rounded down to the nearest whole number of shares.
(b) Notwithstanding the foregoing, any and all adjustments
in connection with an ISO shall comply in all respects with
Sections 422 and 424 of the Code and the regulations thereunder.
(c) Notice of any adjustment shall be given by the Company
to each holder of an option which shall have been so adjusted,
provided that such adjustment (whether or not such notice is given)
shall be effective and binding for all purposes of the Plan and any
instrument or agreement issued thereunder.
9. Acceleration of Options.
(a) In the event that the Company enters into one or more
agreements to dispose of all or substantially all of the assets of
the Company or the Company's stockholders dispose of or become
obligated to dispose of fifty- percent (50%) or more of the
outstanding capital stock of the Company other than to the Company
or a subsidiary of the Company, in either case by means of sale
(whether as a result of a tender offer or otherwise), merger,
reorganization or liquidation in one or a series of related
transactions ("Acceleration Event"), then each option outstanding
under the Plan shall become exercisable during the fifteen (15)
days immediately prior to the scheduled consummation of the
Acceleration Event with respect to the full number of shares of
which such option has been granted.
(b) In the event of the occurrence of an Acceleration Event
(as defined by subsection (a) of this Section 9), any optionee who
is subject to the filing requirements imposed under Section 16(a)
of the Securities Exchange Act of 1934 with respect to the Company
shall receive a payment of cash equal to the difference between the
aggregated Fair Value of the shares of Common Stock subject to such
accelerated options and the aggregate option exercise price of such
shares. For this purpose, "Fair Value" shall mean the highest
aggregate fair market value (as determined under Section 6(j)
7
hereof) of the subject shares of Common Stock during the 60-day
period immediately preceding the date of the consummation of the
Acceleration Event. Payment of said cash shall be made within 10
days after said consummation of the Acceleration Event. The
foregoing payments under this subsection (b) shall be made in lieu
of and in full discharge of any and all obligations of the Company
in respect of all subject options and any related SARs of the
optionee. Notwithstanding any of the foregoing, the provisions
of this subsection (b) shall not be applicable to ISOs granted
under this Plan.
(c) The grant of options (or related rights) under this
Plan shall in no way affect the right of the Company to adjust,
reclassify, reorganize or otherwise change its capital or business
structure of to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
10. Listing and Regulatory Requirement. No options granted
pursuant to this Plan shall be exercisable if at any time,
including after receipt of notice of exercise, the Committee shall
determine in its discretion that the listing, registration,
qualification, or acquisition of the shares of Common Stock subject
to such options on any securities exchange or under any applicable
law, or the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with,
the granting of such option or the acquisition or issuance of
shares by IBP thereunder, unless such listing, registration,
qualification, acquisition, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
11. Amendment of the Plan. The board of directors may from
time to time amend or modify or make such changes in and additions
to this Plan as it may deem desirable, without further action on
the part of the stockholders of the Company; provided, however,
that unless the holders of a majority of the securities of the
Company present or represented and entitled to vote at a duly held
meeting shall have first given their approval, then (a) the maximum
number of shares of Common Stock issuable under the Plan shall not
be increased (except for permissible adjustments under Section 8
hereof), (b) the benefits accruing to the participants in the Plan
shall not be materially increased, and (c) the requirements as to
eligibility for participation in the Plan shall not be materially
modified. Subject to and without limiting the generality of the
foregoing, the board of directors may amend or modify the Plan and
any outstanding options under the Plan to the extent necessary to
qualify any or all of such options or future options to be granted
for such beneficial federal income tax treatment as may be afforded
employee stock options under the Code or any amendments thereto or
other statutes or regulations or rules (or any interpretations
thereof by any applicable governmental agency or entity) which
become effective after the effective date of the Plan (including
without limitation any proposed or final Treasury regulations).
12. Stockholder Rights. An optionee shall have none of the
rights of a stockholder of the Company with respect to any shares
subject to any options granted hereunder until such individual
shall have exercised the options and been issued share therefor.
8
13. Use of Proceeds. The proceeds received by the Company
from the sale of shares pursuant to the options granted under this
Plan shall be used for general corporate purposes.
9
Exhibit 10.24
EMPLOYMENT AGREEMENT
PRODUCTION AND ADMINISTRATIVE
This Agreement, effective the 22nd day of December, 1995(the
"Effective Date"), by and between IBP, inc., a Delaware corporation
(hereinafter referred to as "Employer"), and Jerry S. Scott
(hereinafter referred to as "Employee").
WITNESSETH:
Employer hereby agrees to employ, or agrees to continue to
employ Employee, and Employee agrees to be employed upon the
following terms and conditions.
1. Duties. Employee shall perform the duties of Executive
Vice President-Fresh Meats Plant Operations or shall serve in such
other capacity and with such other duties for Employer as Employer
shall hereafter from time to time prescribe.
2. Term of Employment. The term of employment shall be for
a period of five (5) years, commencing on the Effective Date of
this Agreement, unless terminated prior thereto in accordance with
the provisions of this Agreement.
3. Compensation. For the services to be performed
hereunder, Employee shall be compensated by Employer at the rate of
not less than One Hundred Fifty Thousand Dollars ($150,000.00) per
year payable monthly, and in addition may receive awards under
Employer's Cash Bonus Plan subject to the discretion of the senior
management of Employer. Such compensation will be subject to
review from time to time when salaries of other officers and managers
of Employer are reviewed for consideration of increases therein.
4. Participation in Benefit Programs. Employee shall be
entitled to participate in any benefit programs generally
applicable to officers of Employer adopted by Employer from time to
time.
5. Limitation on Outside Activities. Employee shall devote
full employment energies, interest, abilities and time (except for
personal investments) to the performance of obligations hereunder
and shall not, without the written consent of the Chief Executive
Officer of the Company, render to others any service of any kind or
engage in any activity which conflicts or interferes with the
performance of duties hereunder.
6. Ownership of Employee's Inventions. All ideas,
inventions, and other developments or improvements conceived by
Employee, alone or with others, during the term of his employment,
whether or not during working hours, that are within the scope of
Employer's business operations or that relate to any of Employer's
work or projects, are the exclusive property of Employer. Employee
agrees to assist Employer, at its expense, to obtain patents on any
such patentable ideas, inventions, and other developments, and
agrees to execute all documents necessary to obtain such patents in
the name of Employer.
7. Termination.
(a) Voluntary Termination. Employee may terminate this
Agreement at any time by not less than one year's prior written
notice to Employer. Employee shall not be entitled to any
compensation from Employer for any period beyond Employee's actual
date of termination.
(b) Resignation. In the event Employee shall resign
from employment at the request of employer, employer shall
compensate Employee at the rate and in the manner provided in
Paragraph 3 above for a period after termination equivalent to the
lesser of (i) one year, or (ii) the remainder of the term of this
Agreement. During the time Employee is being compensated in lieu
of continued employment, the Employer shall have the right to
require the Employee to perform consulting services from time to
time on behalf of the Employer. Any out-of-pocket expenses
associated with any such assignment shall be, upon proper
documentation, reimbursed by Employer to Employee. In the event
Employer compensates Employee in lieu of continued employment, all
remuneration or wages earned by Employee during such period, either
as an employee, independent contractor or consultant to any person,
firm, or corporation other than Employer, shall be a set-off to
Employer's duty of compensation to Employee.
(c) Company Termination. In the event Employer shall
conclude, in its sole discretion, that it is no longer in the
interest of the Company to continue the employment of Employee, the
Employer may terminate this Agreement, and Employer shall have no
further obligation to pay compensation to Employee after the
effective date of termination.
(d) Incapacity. If Employee is materially incapacitated
from fully performing his duties pursuant to this Agreement by
reason of illness or other incapacity or by reason of any statute,
law, ordinance, regulation, order, judgment or decree, Employer may
terminate this Agreement by 30 days written notice to Employee, but
only in the event that such incapacity shall aggregate not less
than one hundred twenty (120) days during any one year.
8. Confidential Information, Trade Secrets, Limitation on
Solicitation and Non-Compete Clause.
(a) Employee shall receive, in addition to all regular
compensation for services as described in Section 3 of this
Employment Agreement, as additional consideration for signing this
Employment Agreement and for agreeing to abide and be bound by the
terms, provisions and restrictions of this Section 8, the
following:
(i) an award of such number of shares of Common
Stock of Employer under the terms and conditions of the
Employer's IBP Officer Long-Term Stock Plan and/or 1996
Officer Long-Term Stock Plan as shall be equal to an
aggregate value of $450,000 less amounts due to
restrictions on promotional grants (see Employee Award;
Letter)
(ii) a grant of options to purchase an aggregate of
Four thousand eight hundred (4,800) shares of Common
Stock of Employer under the terms and conditions of the
Employer's Stock Option Plans and each year on the annual
grant date for stock options an annual option grant of
options to purchase shares of Common Stock of the
Employer which is equal to three times (3x) the annual
option level of the Employee's officer-position band
option level, provided that the Employee has been on the
payroll, whether as an officer or otherwise, at least six
months prior to the annual grant date; and
(iii) the right to receive bonus option grants,
pursuant to the terms and conditions made available by
the Plans Administration Committee of Employer's Board of
Directors, from the employer's stock option plans, upon
the Employee's exercise of any options granted to the
Employee.
(b) Employee recognizes that, as a result of his
employment hereunder (and his employment, if any, with Employer for
periods prior to the Effective Date), he has had and will continue
to have access to confidential information, trade secrets,
proprietary information, intellectual property, and other
documents, data, and information concerning methods, processes,
controls, techniques, formula, production, distribution,
purchasing, financial analysis, returns and reports which is the
property of and integral to the operations and success of Employer,
and therefore agrees to be bound by the provisions of this Section
8, which Employee agrees and acknowledges to be reasonable and to
be necessary to protect legitimate and important business interests
and concerns of Employer.
(c) Employee agrees that he will not divulge to any
person, nor use to the detriment of Employer or any of its
subsidiaries, nor use in any business or process of manufacture
competitive with or similar to any business or process of
manufacture of Employer or any of its subsidiaries, at any time
during the term of this Agreement or thereafter, any of the
Employer's trade secrets, without first obtaining the express
written permission of Employer. A trade secret shall include any
formula, pattern, device or compilation of information used by
Employer in its business. For purposes of this Section 8, the
compilation of information shall include, without limitation, the
identity of customers and suppliers and information reflecting
their interests, preferences, credit-worthiness, likely receptivity
to solicitation for participation in various transactions and
related information obtained during the course of his employment
with Employer.
(d) Employee agrees that at the time of leaving the
employ of Employer he will deliver to Employer, and not keep or
deliver to anyone else, any and all notebooks, memoranda, documents
and, in general, any and all materials relating to Employer's
business, or constituting Employer's property. Employee further
agrees that he will not, directly or indirectly, request or advise
any customers or suppliers of Employer or any of its subsidiaries
to withdraw, curtail or cancel its business with Employer or any of
its subsidiaries.
(e) During the term of Employee's employment with the
Employer and for a period of one (1) year from the termination of
Employee's employment for any reason whatsoever, Employee (i) will
not directly or indirectly, in the United States, own, manage,
operate, control, or participate in as a partner, director, holder
of more than 5% of the outstanding voting shares, principal or
officer, any business in direct competition with the business of
the Employer and (ii) will not accept employment or be employed by
any such firm or corporation in any position where he would perform
services materially similar to those which he has provided for
Employer during the term hereof.
(f) Employee recognizes that he possesses confidential
information and trade secrets about other employees of Employer and
its subsidiaries relating to their education, experience, skills,
abilities, salary and benefits, and interpersonal relationships
with customers and suppliers of Employer and its subsidiaries.
Employee recognizes that the information he possesses about these
other employees is not generally known, is of substantial value to
Employer in securing and retaining customers and suppliers, and was
acquired by Employee because of his business position with
Employer. Employee agrees that during his employment hereunder,
and for a period of three (3) years thereafter, Employee shall not,
directly or indirectly, solicit or contact any employee or agent of
Employer or any of its subsidiaries, with a view to inducing or
encouraging such employee or agent to leave the employ of Employer
or any of its subsidiaries, for the purpose of being hired by
Employee, an employer affiliated with Employee, or any competitor
of Employer or any of its subsidiaries. Employee agrees that he
will not convey any such confidential information or trade secrets
about other employees to anyone affiliated with Employee or to any
competitor of Employer or any of its subsidiaries.
(g) Employee acknowledges that the restrictions
contained in this Section 8 are reasonable and necessary to protect
Employer's interest in this agreement and that any breach thereof
will result in an irreparable injury to Employer for which Employer
has no adequate remedy at law. Employee therefore agrees that, in
the event that Employee breaches any of the provisions contained in
this Section 8, Employer shall be authorized and entitled to seek
from any court of competent jurisdiction (i) a temporary
restraining order, (ii) preliminary and permanent injunctive
relief, (iii) an equitable accounting of all profits or benefits
arising out of such breach, and (iv) direct, incidental and
consequential damages arising from such breach.
(h) Employer and Employee have attempted to specify a
reasonable period of time, a reasonable area and reasonable
restrictions to which this Section 8 shall apply. Employer and
Employee agree that if a court or administrative body should
subsequently determine that the terms of this Section 8 are greater
than reasonably necessary to protect Employer's interest, Employer
agrees to waive those terms which are found by a court or
administrative body to be greater than reasonably necessary to
protect Employer's interest and to request that the court or
administrative body reform this Agreement specifying a reasonable
period of time and such other reasonable restrictions as the court
or administrative body deems necessary.
(i) Employee further agrees that this Section 8 is an
integral part of this agreement, and that should a court fail or
refuse to enforce the restrictions contained herein in such a
manner as to effectively enjoin competitive activity, the Employer
shall recover from Employee, and the court shall award as damages
to the Employer, the consideration provided to and elected by
Employee under the terms of Section 8(a) above (or the monetary
equivalent thereof), its costs and its reasonable attorney's fees.
9. Modification. This Agreement contains all the terms and
conditions agreed upon by the parties hereto, and no other
agreements, oral or otherwise, regarding the subject matter of this
Agreement shall be deemed to exist or bind either of the parties
hereto, except for a confidentiality agreement between the parties
dated February 14, 1978. This Agreement cannot be modified except
by a writing signed by both parties.
10. Assignment. This Agreement shall be binding upon
Employee, his heirs, executors and assigns and upon Employer, its
successors and assigns.
11. Applicable Law. This agreement is made and entered into
in the State of South Dakota, which is also the domicile of
Employee. The validity, interpretation, performance and
enforcement of this agreement shall be governed by the internal
laws of said State of South Dakota, without giving effect to the
conflict of laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
IBP, inc.
By /s/ Robert L. Peterson
-----------------------
/s/ Jerry S. Scott
-----------------------
(Employee)
Exhibit 99.1
IBP AGREES TO ACQUIRE FOODBRANDS
Broadens IBP's Exposure to Foodservice, Value-Added Products
Advances IBP's Efforts to Pursue Growth Outside Core business
Dakota City, Nebraska and Oklahoma City, Oklahoma -- March 26,
1997 -- IBP inc. (NYSE: IBP) and Foodbrands America, Inc. (NYSE:
FDB) today announced that they have reached an agreement for IBP
to acquire Foodbrands for $23.40 per share in cash for a
transaction valued at $640 million, including Foodbrands' debt.
IBP said the acquisition, which increases its presence in the
foodservice industry, represents a significant advancement in
its strategy to diversify beyond the core fresh meat processing
business and extend its product base with value-added, branded
products.
IBP and Foodbrands have entered into a definitive agreement and
plan of merger allowing for the acquisition of the company by
IBP. By 5 p.m. E.S.T., on April 1, 1997, IBP will commence a
cash tender offer for all the approximately 12.47 million issued
and outstanding shares of Foodbrands at $23.40 per share.
Foodbrands' largest shareholders, the Joseph Littlejohn and Levy
Limited Partnerships, owners of approximately 44% of Foodbrands
shares, have agreed to tender all of their shares. Foodbrands'
second largest shareholder, The Airlie Group, has also agreed to
tender shares.
Foodbrands is a leading U.S. producer, marketer and distributor
of frozen and refrigerated products to the fastest-growing
segment of the food industry, the away-from-home food
preparation market. The leader in the pizza toppings industry,
Foodbrands is also a leading provider of value-added pork based
products to the foodservice industry. The company produces over
1,600 branded and custom products, including pizza toppings and
crusts, burritos, frozen stuffed pastas, breaded appetizers,
soups, sauces, and side dishes as well as deli meats and
processed beef, poultry and pork. Foodbrands' products are
designed to meet the foodservice industry's growing demand of
products that offer consistent quality and flavor, require
little back-of-house preparation, and improve food safety.
Robert Peterson, Chairman and CEO of IBP, said, "The acquisition
of Foodbrands is a major step forward in IBP's strategy to
pursue growth beyond our core fresh meats business, and to
diversify into foodservice and value-added products. We have
been exploring ways to capitalize on the trend by Americans of
spending more on food prepared outside the home than on
groceries to prepare at home. Our fresh beef and pork reach
supermarket cases, restaurants and foodservice companies all
over the world. The addition of Foodbrands' business is a
perfect complement to IBP's core processing business and will
allow us to further extend our reach into restaurants and
supermarket deli cases with high quality branded products."
Larry Shipley, Executive Vice President, Corporate Development
of IBP said, "Foodbrands has consistently proven their strength
in developing, manufacturing and marketing customized product
solutions to the foodservice industry, in the U.S. and Europe.
Foodbrands is number one in the large and growing market for
pre-made pizza toppings and crusts, and defined many of today's
standard products in deli meats and appetizers. We will continue
to foster Foodbrands' creativity and marketing prowess through
investment and by providing them with greater access to world
markets. We intend to operate Foodbrands as a largely independent
business within the IBP family, and welcome its 3,300 managers and
employees to our company. Our companies share many common customers,
and we expect to explore ways to leverage our distribution channels
to better serve the needs of a rapidly changing foodservice
industry."
Randy Devening, Chairman, President and CEO of Foodbrands, said,
"We are very pleased to be joining IBP, and are excited about
the growth and expansion possibilities that this new
relationship brings Foodbrands. IBP is a $13 billion company
and is highly respected in the food processing industry for the
quality of their products and for their operating strength and
efficiency. By becoming part of the IBP family, Foodbrands
gains access to this operating expertise and to increased
financial resources. We look forward to continuing our focus on
strong customer relationships and capitalizing on our enhanced
opportunity for growth."
During the past few years Foodbrands has transformed from a
broad-based food company into a focused and innovative food
processing company. This was achieved through increased and
targeted investments in production technology and research and
development, and through an acquisition and divestiture program
to refocus on the company's core foodservice customer.
The transaction was unanimously approved by IBP's and
Foodbrands' respective Board of Directors and is subject to
regulatory approval and certain other closing conditions.
Closing is expected to occur in the second calendar quarter of
1997. The acquisition will be treated as a purchase for
accounting purposes. The Joseph Littlejohn and Levy Limited
Partnerships and The Airlie Group have granted IBP the option to
purchase their shares under certain circumstances.
Foodbrands, headquartered in Oklahoma City, Oklahoma, produces,
markets and distributes frozen and refrigerated products
targeted to growth segments of the foodservice market.
Customers include large multi-unit restaurant chains, major
foodservice distributors, warehouse clubs, and grocery store
delicatessens. The company employs approximately 3,300
personnel.
IBP, headquartered in Dakota City, Nebraska, is the world's
premier producer of red meat, marketing fresh beef, pork and
related allied products around the globe. The company employs
over 34,000 people.
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Contacts: At IBP, Media: Gary Mickelson (402) 241-2986 or Lisa
La Magna (212) 484-7423
Investors: John Borgh or Dean Hanish (402) 241-2041/2167
At Foodbrands: Bryant Bynum (405) 879-4100
