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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4/A-1
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
---------------------
<TABLE>
<C> <C>
UNITED FOODS, INC. UNITED FOODS, INC.
(Name of Issuer) (Name of Person Filing Statement)
</TABLE>
CLASS A COMMON STOCK, PAR VALUE $1.00 PER SHARE
CLASS B COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
CLASS A 910365 30 3
CLASS B 910365 10 5
(CUSIP Number of Class of Securities)
DANIEL B. TANKERSLEY
VICE CHAIRMAN AND SECRETARY
UNITED FOODS, INC.
TEN PICTSWEET DRIVE
BELLS, TENNESSEE 38006-0119
(901) 422-7600
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Person Filing Statement)
Copy to:
BONNIE J. ROE
BASS, BERRY & SIMS PLC
FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37238
(615) 742-6200
MAY 20, 1997
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
$2,500,000.00 $500.00
</TABLE>
- ---------------
* Estimated solely for purposes of determining the filing fee, based upon the
purchase of 1,000,000 shares of Common Stock at $2.50 per share.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: $ Filing Party:
- -------------------------------------------- ----------------------------------------
Form of Registration No.: Date Filed:
- -------------------------------------------- -----------------------------------------
</TABLE>
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ITEM 1. SECURITY AND ISSUER
(a) The Issuer of the securities to which this Schedule relates is United
Foods, Inc., a Delaware corporation (the "Company"), and the address of its
principal executive office is Ten Pictsweet Drive, Bells, Tennessee 38006-0119.
(b) This Schedule relates to an offer by the Company, upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer"), to purchase up to
1,000,000 shares of its Class A Common Stock, par value $1.00 per share and
Class B Common Stock, par value $1.00 per share (the "Shares"), at a price of
$2.50 per Share, net to the seller in cash, without interest thereon for up to
an aggregate price of $2,500,000 (assuming the Offer is fully subscribed). The
Company has been advised that none of its executive officers and directors
currently intend to tender Shares pursuant to the Offer. However, purchases of
any Shares held by officers, directors and affiliates will be on the same terms
and subject to the same conditions and limitations as set forth in the Offer to
Purchase. Also, the information contained in the Offer to Purchase on the cover
page, in the "Introduction" and under the section entitled "Purpose of the
Offer; Certain Effects of the Offer" is incorporated herein by reference.
(c) The information contained in the Offer to Purchase under the section
entitled "Price Range of the Shares; Dividends" is incorporated herein by
reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information contained in the Offer to Purchase under the
section entitled "Source and Amount of Funds" is incorporated herein by
reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
The information contained in the Offer to Purchase under the section
entitled "Purpose of the Offer; Certain Effects of the Offer" is incorporated
herein by reference.
(a) The information relating to the possible acquisition or disposition of
Shares pursuant to this Offer by executive officers and directors of the
Company, including James I. Tankersley, Chairman of the Board of Directors and
Chief Executive Officer of the Company, and Daniel B. Tankersley, Vice Chairman
of the Board of Directors and Secretary of the Company, contained in the Offer
to Purchase under the section entitled "Purpose of the Offer; Certain Effects of
the Offer" is incorporated herein by reference.
(b)-(d) Not applicable.
(e) The information regarding the change in the Company's capitalization
resulting from the purchase of Shares pursuant to the Offer contained in the
Offer to Purchase under the section entitled "Purpose of the Offer; Certain
Effects of the Offer" is incorporated herein by reference.
(f) The information contained in the Offer to Purchase under the sections
entitled "Purpose of the Offer; Certain Effects of the Offer" and "Certain
Information Concerning the Company" is incorporated herein by reference.
(g) Not applicable.
(h) The information contained in the Offer to Purchase under the section
entitled "Purpose of the Offer; Certain Effects of the Offer," is incorporated
herein by reference.
(i) Not applicable.
(j) Not applicable.
2
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ITEM 4. INTEREST IN THE SECURITIES OF THE ISSUER
The information contained in the Offer to Purchase under the section
entitled "Transactions and Arrangements Concerning the Shares" is incorporated
herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES
The information relating to the disposition of Shares pursuant to the Offer
by the Tankersley Family and the possible disposition of Shares pursuant to the
Offer by other executive officers and directors of the Company contained in the
Offer to Purchase under the section entitled "Purpose of the Offer; Certain
Effects of the Offer" is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information contained in the Offer to Purchase under the section
entitled "Fees and Expenses" is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION
(a)-(b) The historical and unaudited pro forma financial information
contained in the Offer to Purchase under the section entitled "Certain
Information Concerning the Company" is incorporated herein by reference. In
addition, the audited financial statements of the Company contained in the
Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997
are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION
(a) Not applicable.
(b) The information contained in the Offer to Purchase under the section
entitled "Certain Legal Matters; Regulatory and Foreign Approvals" is
incorporated herein by reference.
(c) The information contained in the Offer to Purchase under the section
entitled "Purpose of the Offer; Certain Effects of the Offer" is incorporated
herein by reference.
(d) Not applicable.
(e) Reference is made to the Offer to Purchase and the related Letter of
Transmittal which are Exhibits (a)(1) and (a)(2) hereto, respectively, and
incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
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<S> <C> <C>
(a)(1) -- Offer to Purchase, dated May 20, 1997.
(a)(2) -- Letter of Transmittal, dated May 20, 1997.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees, dated May 20, 1997.
(a)(5) -- Letter to Stockholders for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees, dated
May 20, 1997.
(a)(6) -- Letter to Stockholders from the Chairman and Chief Executive
Officer dated May 20, 1997.
(a)(7) -- Press Release, dated May 19, 1997.
(a)(8) -- Guidelines for Certification of Taxpayer Identification
Number in Substitute Form W-9.
(b)(1) -- Loan Agreement, Revolving Credit Note and Security Agreement
between First American National Bank and United Foods, Inc.,
all dated April 7, 1993, Exhibit 10.6 to the Annual Report
on Form 10-K of United Foods, Inc. filed for the fiscal year
ended February 28, 1993, is incorporated by reference
herein.
</TABLE>
3
<PAGE> 4
(b)(2) -- First Amendment dated June 29, 1994, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.10 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1995, is
incorporated by reference herein.
(b)(3) -- Second Amendment dated June 1, 1995, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.12 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 29, 1996, is
incorporated by reference herein.
(b)(4) -- Modification dated June 21, 1995, to that certain Revolving
Loan Agreement between First American National Bank and
United Foods, Inc., dated April 7, 1993, Exhibit 10.13 to
the Annual Report on Form 10-K of United Foods, Inc. filed
for the fiscal year ended February 29, 1996, is incorporated
by reference herein.
(b)(5) -- Third Amendment dated September 1, 1995, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.14 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 29, 1996, is
incorporated by reference herein.
(b)(6) -- Modification dated December 31, 1995, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.15 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 29, 1996, is
incorporated by reference herein.
(b)(7) -- Fourth Amendment, dated February 7, 1997, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.19 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1997, is
incorporated by reference herein.
(b)(8) -- Fifth Amendment, dated May 15, 1997, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc. dated April 7, 1993.
(c) -- None.
(d) -- None.
(e) -- None.
(f) -- None.
(g) -- Pages 14 through 34 of the Company's Annual Report on Form
10-K for the year ended February 28, 1997.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
By: /s/ DANIEL B. TANKERSLEY
--------------------------------------
Daniel B. Tankersley
Vice Chairman and Secretary
Dated: May 20, 1997
4
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C> <C>
(a)(1) -- Offer to Purchase, dated May 20, 1997.
(a)(2) -- Letter of Transmittal, dated May 20, 1997.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees, dated May 20, 1997.
(a)(5) -- Letter to Stockholders for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees, dated
May 20, 1997.
(a)(6) -- Letter to Stockholders from the Chairman and Chief Executive
Officer dated May 20, 1997.
(a)(7) -- Press Release, dated May 19, 1997.
(a)(8) -- Guidelines for Certification of Taxpayer Identification
Number in Substitute Form W-9.
(b)(1) -- Loan Agreement, Revolving Credit Note and Security Agreement
between First American National Bank and United Foods, Inc.,
all dated April 7, 1993, Exhibit 10.6 to the Annual Report
on Form 10-K of United Foods, Inc. filed for the fiscal year
ended February 28, 1993, is incorporated by reference
herein.
(b)(2) -- First Amendment dated June 29, 1994, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.10 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1995, is
incorporated by reference herein.
(b)(3) -- Second Amendment dated June 1, 1995, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.12 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 29, 1996, is
incorporated by reference herein.
(b)(4) -- Modification dated June 21, 1995, to that certain Revolving
Loan Agreement between First American National Bank and
United Foods, Inc., dated April 7, 1993, Exhibit 10.13 to
the Annual Report on Form 10-K of United Foods, Inc. filed
for the fiscal year ended February 29, 1996, is incorporated
by reference herein.
(b)(5) -- Third Amendment dated September 1, 1995, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.14 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 29, 1996, is
incorporated by reference herein.
(b)(6) -- Modification dated December 31, 1995, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.15 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 29, 1996, is
incorporated by reference herein.
(b)(7) -- Fourth Amendment, dated February 7, 1997, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc., dated April 7, 1993, Exhibit
10.19 to the Annual Report on Form 10-K of United Foods,
Inc. filed for the fiscal year ended February 28, 1997, is
incorporated by reference herein.
(b)(8) -- Fifth Amendment, dated May 15, 1997, to that certain
Revolving Loan Agreement between First American National
Bank and United Foods, Inc. dated April 7, 1993.
(c) -- None.
(d) -- None.
</TABLE>
5
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<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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(e) -- None.
(f) -- None.
(g) -- Pages 14 through 34 of the Company's Annual Report on Form
10-K for the year ended February 28, 1997.
</TABLE>
6
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EXHIBIT (A)(1)
<PAGE> 2
UNITED FOODS, INC.
OFFER TO PURCHASE
FOR CASH UP TO 1,000,000 SHARES OF ITS
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
AT A PRICE OF $2.50 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON TUESDAY, JUNE 17, 1997, AS SUCH DATE MAY BE EXTENDED.
United Foods, Inc., a Delaware corporation (the "Company"), is offering to
purchase up to 1,000,000 shares of its Class A Common Stock, par value $1.00 per
share and Class B Common Stock, par value $1.00 per share (the "Shares"), at a
price of $2.50 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which together constitute the "Offer"). The Company will treat
the two classes of stock equally for all purposes in connection with the Offer.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
The Shares are listed and principally traded on the American Stock Exchange
(the "Amex"). The Shares are also listed and traded on the Pacific Exchange (the
"PE"). On May 16, 1997, the last trading day before the day on which the Company
announced its intention to commence the Offer, the closing sales price of the
Class A Common Stock as reported by the Amex was $1 5/8 per share. No sale of
Class B Common Stock occurred on May 16, 1997, but the then most recent sale was
at $1 9/16 per share on May 15, 1997. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
Questions and requests for assistance or for additional copies of this
Offer may be directed to the Information Agent at the address and telephone
number set forth on the back cover of this Offer to Purchase.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS
TO WHETHER ANY STOCKHOLDER SHOULD TENDER ANY OR ALL OF SUCH STOCKHOLDER'S SHARES
PURSUANT TO THE OFFER. EACH STOCKHOLDER MUST MAKE THE DECISION WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION
OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR MADE, AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
May 20, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
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INTRODUCTION......................................................... 1
THE OFFER............................................................ 1
1. NUMBER OF SHARES, PRORATION; EXTENSION OF THE OFFER......... 1
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES................. 2
3. PROCEDURE FOR TENDERING SHARES.............................. 3
Proper Tender of Shares..................................... 3
Signature Guarantees and Method of Delivery................. 3
Federal Income Tax Withholding.............................. 4
Book-Entry Delivery......................................... 4
Guaranteed Delivery......................................... 5
Determinations of Validity; Rejection of Shares; Waiver of
Defects; No Obligation to Give Notice of Defects............ 5
4. WITHDRAWAL RIGHTS........................................... 5
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE
PRICE....................................................... 6
6. CERTAIN CONDITIONS OF THE OFFER............................. 7
7. PRICE RANGE OF THE SHARES; DIVIDENDS........................ 8
8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.......... 9
9. CERTAIN INFORMATION CONCERNING THE COMPANY.................. 12
Historical and Unaudited Pro Forma Financial Information.... 12
Additional Information...................................... 14
10. SOURCE AND AMOUNT OF FUNDS.................................. 14
11. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES......... 15
12. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS..... 15
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 15
14. EXTENSION OF THE TENDER PERIOD; TERMINATION; AMENDMENTS..... 18
15. FEES AND EXPENSES........................................... 19
16. MISCELLANEOUS............................................... 19
</TABLE>
i
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To the Holders of Class A and Class B Common Stock of United Foods, Inc.:
INTRODUCTION
United Foods, Inc., a Delaware corporation (the "Company"), is offering to
purchase up to 1,000,000 shares of its Class A Common Stock, par value $1.00 per
share and Class B Common Stock, par value $1.00 per share (the "Shares"), at a
price of $2.50 per Share (the "Purchase Price"), net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which together constitute the "Offer").
The Company will treat the two classes of stock equally for all purposes in
connection with the Offer.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
As of May 15, 1997, the Company had issued and outstanding 5,116,075 shares
of Class A Common Stock and 5,693,854 shares of Class B Common Stock. As of May
15, 1997, 829,384 shares of Class A Common Stock were reserved for issuance
pursuant to the exercise of employee stock options (the "Options"). The Company
is not offering to purchase any of the Options. Holders of Options who wish to
participate in the Offer must first exercise such Options, in accordance with
the terms and provisions thereof. The maximum number of Shares that the Company
is offering to purchase represents approximately 9.3% of the Shares outstanding
as of May 15, 1997.
If, before the Expiration Date (as defined in Section 1), more than
1,000,000 Shares (or such greater number of Shares as the Company may elect to
purchase pursuant to the Offer) are properly tendered and not withdrawn, the
Company will upon the terms and subject to the conditions of the Offer, purchase
Shares first from all Odd Lot Owners (as defined below) who properly tender all
of their Shares and then on a pro rata basis from all other stockholders who
properly tender Shares. See Sections 1, 2 and 3. The Company will return all
Shares not purchased under the Offer, including Shares not purchased because of
proration. Tendering stockholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to the Instructions to the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Company. The
Company will pay all charges and expenses of the Depositary and Information
Agent incurred in connection with the Offer.
The Shares are listed and principally traded on the Amex. The Shares are
also listed on the PE. On May 16, 1997, the last trading day before the day on
which the Company announced its intention to commence the Offer, the closing
sales price of the Class A Common Stock as reported by the Amex was $1 5/8 per
share. No sale of Class B Common Stock occurred on May 16, 1997, but the then
most recent sale was at $1 9/16 per share on May 15, 1997. See Section 7.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER ANY STOCKHOLDER SHOULD TENDER ANY OR ALL OF SUCH STOCKHOLDER'S SHARES
PURSUANT TO THE OFFER. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
THE OFFER
1. NUMBER OF SHARES, PRORATION; EXTENSION OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) 1,000,000 Shares or such lesser number
of Shares as are properly tendered on or before the Expiration Date (and not
withdrawn in accordance with Section 4) at the Purchase Price. The term
"Expiration Date" means 5:00 p.m., New York City time, on June 17, 1997, unless
and until the Company shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall refer to the
latest time and date at which the Offer, as so extended by the Company, shall
expire.
1
<PAGE> 5
See Section 14 for a description of the Company's right to extend the time
during which the Offer is open and to delay, terminate or amend the Offer. If
the Offer is oversubscribed, Shares tendered before the Expiration Date will be
subject to proration. The proration period also expires on the Expiration Date.
The Company expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. See Section 14. There can be no assurance,
however, that the Company will exercise its right to extend the Offer.
The Offer is not conditioned on any minimum number of Shares being validly
tendered. The Offer is, however, subject to certain other conditions. See
Section 6.
If (a) the Company (i) increases or decreases the price to be paid for
Shares, (ii) increases the number of Shares being sought and any such increase
in the number of Shares being sought exceeds 2% of the outstanding Shares, or
(iii) decreases the number of Shares being sought and (b) the Offer is scheduled
to expire at any time earlier than the tenth business day from and including the
date that notice of such increase, decrease or waiver is first published, sent
or given in the manner specified in Section 14, the Offer will be extended until
the expiration of such period of ten business days. For purposes of the Offer,
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time.
All Shares purchased pursuant to the Offer will be purchased at the
Purchase Price, net to the seller in cash. The Company expressly reserves the
right, in its sole discretion, to amend the Offer and purchase more than
1,000,000 Shares pursuant to the Offer, but does not currently expect to do so.
See Section 14.
All Shares not purchased pursuant to the Offer, including Shares not
purchased because of proration and Shares tendered and withdrawn, will be
returned to the tendering stockholders at the Company's expense as promptly as
practicable following proration or withdrawal, as the case may be.
Upon the terms and subject to the conditions of the Offer, in the event
that prior to the Expiration Date the number of Shares properly tendered and not
withdrawn is greater than 1,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase pursuant to the Offer), the Company will
accept Shares for purchase in the following order of priority:
(a) first, all Shares properly tendered and not withdrawn prior to the
Expiration Date by any Odd Lot Owner (as defined in Section 2) who: (i)
tenders all Shares beneficially owned by such Odd Lot Owner (partial
tenders will not qualify for this preference); and (ii) completes the box
captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on
the Notice of Guaranteed Delivery; and
(b) then, after purchase of all of the foregoing Shares, all other
Shares properly tendered and not withdrawn before the Expiration Date on a
pro rata basis.
In the event that proration of tendered Shares is required, the Company
will determine the final proration factor as promptly as practicable after the
Expiration Date. Although the Company does not expect to be able to announce the
final results of such proration until at least approximately eight Amex trading
days after the Expiration Date, it will announce preliminary results of
proration by press release as promptly as practicable after the Expiration Date.
Stockholders may obtain such preliminary information from the Information Agent
and may be able to obtain such information from their brokers or financial
advisors.
As described in Section 13, because of proration the Company may not
purchase from a stockholder all of the shares tendered pursuant to the Offer,
thus potentially affecting the United States federal income tax consequences to
the stockholder. The Letter of Transmittal affords each tendering stockholder
the opportunity to designate the order of priority in which Shares tendered are
to be purchased in the event of proration.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES
The Company, upon the terms and subject to the conditions of the Offer,
will accept for purchase, without proration, all Shares properly tendered and
not withdrawn on or before the Expiration Date by or on
2
<PAGE> 6
behalf of stockholders who beneficially owned as of the close of business on May
15, 1997, and continue to beneficially own as of the Expiration Date, an
aggregate of fewer than 100 Shares ("Odd Lot Owners"). See Section 1. To avoid
proration, however, an Odd Lot Owner must properly tender all Shares that such
Odd Lot Owner beneficially owns; partial tenders will not qualify for this
preference. This preference is not available to owners of 100 or more Shares,
even if such owners have separate stock certificates for fewer than 100 Shares.
Any Odd Lot Owner wishing to tender all Shares beneficially owned by the Odd Lot
Owner pursuant to this Offer must complete the box captioned "Odd Lots" on the
Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery.
See Section 3.
The Company reserves the right, but will not be obligated, to purchase all
shares properly tendered and not withdrawn by any stockholder who has so
tendered all Shares owned by the stockholder beneficially or of record and as a
result of proration would the own an aggregate of fewer than 100 Shares.
3. PROCEDURE FOR TENDERING SHARES
Proper Tender of Shares. For Shares to be properly tendered pursuant to
the Offer:
i. the certificates for such Shares (or confirmation of receipt of
such Shares pursuant to the procedures for book-entry transfer set forth
below), together with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof, in the case of an Eligible Institution
as defined herein), with any required signature guarantees, and any other
documents required by the Letter of Transmittal, must be received before
the Expiration Date by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase; or
ii. the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
A tender of Shares made pursuant to any method of delivery set forth herein
will constitute a binding agreement between the tendering stockholder and the
Company upon the terms and subject to the conditions of the Offer, including the
tendering stockholder's representation that (i) such stockholder has a "net long
position" in the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) the tender of such Shares complies with Rule 14e-4.
It is a violation of Section 14(e) of the Exchange Act and Rule 14e-4
promulgated thereunder for a person to tender Shares for such person's own
account unless the person so tendering at the time of tender and as of the
Expiration Date has a net long position at least equal to the number of Shares
tendered and:
a. owns the number of Shares tendered; or
b. owns other securities convertible into or exchangeable for such
Shares or owns an option, warrant or right to purchase such Shares and will
acquire Shares for tender by conversion, exchange or exercise of such
option, warrant or right.
Section 14(e) and Rule 14e-4 provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letter of Transmittal if the Letter of Transmittal is signed by
the registered owner of the Shares (which term, for purposes of this Section,
includes any participant in The Depository Trust Company (the "DTC") or the
Philadelphia Depository Trust Company (the "PDTC") (collectively, the
"Book-Entry Transfer Facilities") whose name appears on a security position
listing as the owner of the Shares) tendered therewith, and payment and delivery
are to be made directly to such registered owner at such owner's address shown
on the records of the Company, or if Shares are tendered for the account of a
bank, broker, dealer, credit union, savings association or other entity that is
a member in good standing of a recognized Medallion Program approved by The
Securities Transfer Association Inc. (each such entity being hereinafter
referred to as an "Eligible Institution"). In all other cases, all signatures on
the Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If a certificate representing Shares
is registered in the name of a person other than the signer of a Letter of
Transmittal, or if payment is to be made,
3
<PAGE> 7
or Shares not purchased or tendered are to be issued, to a person other than the
registered owner, the certificate must be endorsed or accompanied by an
appropriate stock power, in either case signed exactly as the name of the
registered owner appears on the certificate, with the signature on the
certificate or stock power guaranteed by an Eligible Institution. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of certificates for such
Shares (or a timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at one of the Book-Entry Transfer Facilities), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof, in the case of an Eligible Institution) and any other documents
required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
Federal Income Tax Withholding. Unless an exemption applies under the
applicable law and regulations concerning "backup withholding" of federal income
tax, the Depositary will be required to withhold, and will withhold, 31% of the
gross proceeds otherwise payable to a stockholder or other payee pursuant to the
Offer unless the stockholder or other payee provides such person's tax
identification number (social security number or employer identification number)
and certifies that such number is correct. Each tendering stockholder, other
than a noncorporate foreign stockholder, should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proved in
a manner satisfactory to the Company and the Depositary. Noncorporate foreign
stockholders should generally complete and sign a Form W-8, Certificate of
Foreign Status, a copy of which may be obtained from the Depositary, in order to
avoid backup withholding. In the case of any foreign stockholder, the Depositary
will withhold 30% of the Purchase Price of Shares purchased from such
stockholder in order to satisfy certain withholding requirements, unless such
foreign stockholder proves in a manner satisfactory to the Company and the
Depositary that either (i) the sale of its Shares pursuant to the Offer will
qualify as a sale or exchange, rather than a dividend, for federal income tax
purposes (see Section 13), in which case no withholding will be required, or
(ii) the foreign stockholder is eligible for a reduced tax treaty rate with
respect to dividend income, in which case the Depositary will withhold at the
reduced treaty rate.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry delivery of the Shares by causing such facility to
transfer such Shares into the Depositary's account in accordance with such
facility's procedure for such transfer. Even though delivery of Shares may be
effected through book-entry transfer into the Depositary's account at one of the
Book-Entry Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof, in the case of an Eligible Institution),
with any required signature guarantees and other required documents, must, in
any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the guaranteed delivery procedure set forth below must be
followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS
TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
4
<PAGE> 8
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates are not immediately available (or
the procedures for book-entry transfer cannot be completed on a timely basis) or
time will not permit all required documents to reach the Depositary before the
Expiration Date, such Shares may nevertheless be tendered provided that all of
the following conditions are satisfied:
a. such tender is made by or through an Eligible Institution;
b. the Depositary receives (by hand, mail, overnight courier, telegram
or facsimile transmission), on or prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form the Company has provided with this Offer to Purchase, including
(where required) a signature guarantee by an Eligible Institution in the
form set forth in such Notice of Guaranteed Delivery; and
c. the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities),
together with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) and any other documents required by
the Letter of Transmittal, are received by the Depositary within three Amex
trading days after the date the Depositary receives such Notice of
Guaranteed Delivery.
Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted and the validity, form, eligibility (including time of receipt)
and acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, which determination shall be final and binding
on all parties. The Company reserves the absolute right to reject any or all
tenders it determines not to be in proper form or the acceptance for payment of
which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any of the conditions of the Offer and
any defect or irregularity in the tender of any particular Shares. No tender of
Shares will be deemed to be properly made until all defects or irregularities
have been cured or waived. None of the Company, the Depositary, the Information
Agent or any other person is or will be obligated to give notice of any defects
or irregularities in tenders, and none of them will incur any liability for
failure to give any such notice.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, a tender of Shares pursuant
to the Offer is irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time before the Expiration Date and, unless theretofore
accepted for payment by the Company, may also be withdrawn after 12:00 Midnight,
New York City time, on July 16, 1997.
If the Company extends the period of time during which the Offer is open,
is delayed in accepting for payment or paying for Shares or is unable to accept
for payment or pay for Shares pursuant to the Offer for any reason, then,
without prejudice to the Company's rights under the Offer, the Depositary may,
on behalf of the Company, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in this Section 4, subject to Rule
13e-4(f)(5) under the Exchange Act, which provides that the issuer making the
tender offer shall either pay the consideration offered, or return the tendered
securities promptly after the termination or withdrawal of the tender offer.
For a withdrawal to be effective, the Depositary must receive (at one of
its addresses set forth on the back cover of this Offer to Purchase) a written,
telegraphic or facsimile transmission notice of withdrawal on a timely basis.
Such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered owner, if different from that of the person who tendered such Shares.
If the certificates have been delivered or otherwise identified to the
Depositary, then, prior to the release of such certificates, the tendering
stockholder must also submit the serial numbers shown on the particular
certificates evidencing the Shares and the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution (except in the case of Shares
tendered by an Eligible
5
<PAGE> 9
Institution). If Shares have been delivered pursuant to the procedure for
book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and the number of the account at the applicable Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with the procedures of such facility.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. None of the
Company, the Depositary, the Information Agent or any other person is or will be
obligated to give any notice of any defects or irregularities in any notice of
withdrawal, and none of them will incur any liability for failure to give any
such notice. A withdrawal of a tender of Shares may not be rescinded, and Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. Withdrawn Shares may, however, be retendered before the Expiration
Date by again following any of the procedures described in Section 3.
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer, promptly after
the Expiration Date, the Company will purchase and pay the Purchase Price for
1,000,000 Shares (subject to increase or decrease as provided in Section 1 and
Section 14) or such lesser number of Shares as are properly tendered and not
withdrawn as permitted in Section 4. For purposes of the Offer, the Company will
be deemed to have accepted for payment (and thereby purchased), subject to
proration, Shares which are validly tendered and not withdrawn when, as and if
it gives oral or written notice to the Depositary of its acceptance of such
Shares for payment pursuant to the Offer.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Date; however, the Company does not expect to be able to
announce the final results of any such proration until at least approximately
eight Amex trading days after the Expiration Date. Certificates for all Shares
not purchased will be returned (or, in the case of Shares delivered by
book-entry transfer, such Shares will be credited to the account maintained with
one of the Book-Entry Transfer Facilities by the participant therein who so
delivered such Shares) as soon as practicable after the Expiration Date without
expense to the tendering stockholder.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payment
from the Company and transmitting payment to the tendering stockholders.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for such Shares (or a timely
confirmation by a Book-Entry Transfer Facility of book-entry transfer of such
Shares to the Depositary), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof, in the case of an Eligible Institution) with
any required signature guarantees and any other required documents. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE COMPANY, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
The Company will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the Purchase Price is to be made to, or if certificates for Shares
not tendered or accepted for purchase are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person(s) signing the Letter
of Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the Purchase Price unless satisfactory evidence of
the payment of such taxes or exemption therefrom is submitted. See Instruction 6
of the Letter of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE
CASE OF A NONCORPORATE FOREIGN STOCKHOLDER, FORM W-8 OBTAINABLE FROM THE
DEPOSITARY) MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX WITH-
6
<PAGE> 10
HOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE
PURSUANT TO THE OFFER. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, subject to any applicable
rules and regulations under the Exchange Act, including Rule 13e-4(f), the
Company shall not be required to accept for payment, purchase or pay for any
shares tendered, may delay the acceptance for payment of or payment for any
shares tendered, and may terminate or amend the Offer, if at any time after May
19, 1997 and prior to the time of payment for any such Shares (whether any
Shares have theretofore been accepted for payment, purchased or paid for
pursuant to the Offer) any of the following shall have occurred (or shall have
been determined by the Company to have occurred):
a. there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, before any court or governmental, regulatory or
administrative authority, agency or tribunal, domestic or foreign, which
(i) challenges the making of the Offer, the acquisition of Shares pursuant
to the Offer or otherwise relates in any manner to the Offer; or (ii) in
the sole judgment of the Company, could materially affect the business,
condition (financial or other), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, or otherwise materially
impair in any way the contemplated future conduct of the business of the
Company or any of its subsidiaries or materially impair the Offer's
contemplated benefits to the Company;
b. there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any government or governmental,
regulatory or administrative authority, agency or tribunal, domestic or
foreign, which, in the Company's sole judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, Shares
illegal or otherwise restrict or prohibit consummation of the Offer; (ii)
delay or restrict the ability of the Company, or render the Company unable,
to accept for payment, or pay for, Shares; (iii) materially impair the
contemplated benefits of the Offer to the Company; or (iv) materially
affect the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of the Company or any of its subsidiaries;
c. there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any United States national
securities exchange or in the over-the-counter market (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index); (ii) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States;
(iii) the commencement of a war, armed hostilities or other international
or national crisis directly or indirectly involving the United States; (iv)
any limitation (whether or not mandatory) by any governmental, regulatory
or administrative agency or authority on, or any event which, in the sole
judgment of the Company, might affect the extension of credit by banks or
other lending institutions in the United States; (v) any significant
decrease in the market price of the Shares; (vi) any change in the general
political, market, economic or financial conditions in the United States or
abroad that could, in the sole judgment of the Company, have a material
adverse effect on the Company's business, operations, prospects or the
trading in the Shares; (vii) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or (viii) any decline in either the Dow Jones Industrial
Average or the Standard and Poor's Index of 500 Industrial Companies by an
amount in excess of 15% measured from the close of business on May 19,
1997;
d. any tender or exchange offer with respect to the Shares (other than
the Offer), or any merger, acquisition, business combination or other
similar transaction with or involving the Company or any subsidiary, shall
have been proposed, announced or made by any person or entity;
7
<PAGE> 11
e. any change shall occur or be threatened in the business, condition
(financial or other), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, which, in the sole judgment of the
Company, is or may be material to the Company; or
f. (i) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to acquire,
beneficial ownership of more than 5% of the outstanding Shares (other than
a person, entity or group which had publicly disclosed such ownership in a
Schedule 13D or 13G (or an amendment thereto) on file with the Securities
and Exchange Commission prior to May 19, 1997); (ii) any new group shall
have been formed which beneficially owns more than 5% of the outstanding
Shares; or (iii) any person, entity or group, other than James I.
Tankersley and/or Daniel B. Tankersley, shall have filed a Notification and
Report Form under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
or made a public announcement reflecting an intent to acquire the Company
or any of its subsidiaries or any of their respective assets or securities;
and, in the sole judgment of the Company, in any such case and regardless
of the circumstances (including any action or inaction by the Company)
giving rise to such condition, such event makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition, and any such
condition may be waived by the Company, in whole or in part, at any time and
from time to time in its sole discretion; provided, however, that the Exchange
Act and the rules and regulations promulgated thereunder require that all
conditions to the Offer, other than those relating to the receipt of certain
necessary governmental approvals, must be satisfied or waived prior to the
Expiration Date. The Company's failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts or circumstances; and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Company concerning the events
described above and any related judgment by the Company regarding the
inadvisability of proceeding with the acceptance for payment or payment for any
tendered Shares will be final and binding on all parties.
7. PRICE RANGE OF THE SHARES; DIVIDENDS
The Shares are listed on the Amex and the PE, and principally traded on the
Amex. The following table sets forth, for each period shown, the high and low
sales prices of the Shares as reported by the Amex:
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
PRICE RANGE PRICE RANGE
------------------ ------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL YEAR 1996
Quarter ended May 31, 1995........................ 2 5/8 2 2 3/4 2 1/8
Quarter ended August 31, 1995..................... 2 9/16 1 5/8 2 9/16 1 3/4
Quarter ended November 30, 1995................... 2 5/16 1 3/4 2 1/2 1 3/4
Quarter ended February 29, 1996................... 2 1/8 1 5/8 2 1/8 1 5/8
FISCAL YEAR 1997
Quarter ended May 31, 1996........................ 2 1/8 1 3/4 2 1/8 1 3/4
Quarter ended August 31, 1996..................... 2 1/4 1 5/8 2 1/4 1 3/4
Quarter ended November 30, 1996................... 1 15/16 1 5/8 2 1 5/8
Quarter ended February 28, 1997................... 1 7/8 1 1/2 1 7/8 1 1/2
</TABLE>
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<PAGE> 12
The Company has not declared or paid a cash dividend on the Shares in the
last two years(1). On May 16, 1997, the last trading day before the day on which
the Company announced its intention to commence the Offer, the closing sales
price of the Class A Common Stock as reported by the Amex was $1 5/8 per share.
No sale of Class B Common Stock occurred on May 16, 1997, but the then most
recent sale was at $1 9/16 per share on May 15, 1997. STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
8. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
The following discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in forward-looking statements. Factors that might cause
such a difference include, but are not limited to, the matters discussed below
as well as factors described in the Company's Annual Report of Form 10-K for the
fiscal year ended February 28, 1997.
The current market prices of the Shares are less than their book value. The
Company believes that such market prices do not adequately reflect the value of
the Company's business, assets and prospects. The Company believes that the
purchase of its Shares at this time represents a good use of a substantial
portion of the cash, cash equivalents and credit it has available and is an
attractive investment opportunity for the Company. The Offer will afford to
stockholders the opportunity to dispose of Shares without the usual transaction
costs associated with a market sale. Stockholders whose Shares are not purchased
in the Offer will obtain an increase in their ownership interest in the Company
and thus in the Company's assets and future earnings, subject to the Company's
right to sell or issue additional shares and other equity securities. The
Company and its Board of Directors believe that the purchase of the Shares
covered by the Offer at this time represents an attractive investment
opportunity that will benefit the Company and its stockholders. The Company and
its Board of Directors believe that the Offer is in the best interest of the
Company and its stockholders.
Shares the Company acquires pursuant to the Offer initially will be held in
the Company's treasury or retired (or a combination thereof) and will be
available for the Company to issue without further stockholder action (except as
required by applicable law or the rules of the Amex or the PE) for such purposes
as, among others, the acquisition of other businesses, the raising of additional
capital for use in the Company's business, the distribution of stock dividends
and the implementation of, or the satisfaction of obligations under, employee
benefit plans. The Company has no present plans for the use of the Shares
acquired pursuant to the Offer.
The Company has been advised that none of its executive officers and
directors and none of the members of the Tankersley family currently intend to
tender Shares pursuant to the Offer.
James I. Tankersley and Daniel B. Tankersley have advised the Company that
the Offer is not a "Rule 13e-3 transaction" or a step in any series of
transactions constituting a Rule 13e-3 transaction. A Rule 13e-3 transaction
(also known as a "going private" transaction) is defined in Rule 13e-3 under the
Exchange Act to include a transaction such as the Offer if it has either a
reasonable likelihood or a purpose of producing, either directly or indirectly,
the effect of causing a class of equity securities that is registered under
Section 12(b) or 12(g) of the Exchange Act to be neither listed on the Amex, the
PE or another national securities exchange or authorized to be quoted on an
inter-dealer quotation system of a registered national securities association.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of stockholders, which could adversely affect the liquidity and market
value of the remaining Shares. Nonetheless, the Company believes that there
still will be a sufficient number of Shares outstanding and publicly traded
following the consummation of the Offer to ensure a continued trading market in
the Shares. Based on the published guidelines of the Amex and the PE,
- ---------------
(1) Restrictive covenants in various loan agreements limit retained earnings
available for payment of dividends to $5,393,000 at February 28, 1997 (See Note
3 -- Notes to Financial Statements).
9
<PAGE> 13
the Company does not believe the purchase by the Company of Shares pursuant to
the Offer will cause its remaining Shares to be delisted from either of such
exchanges.
According to the Amex's published guidelines, the Amex would consider
delisting the Shares if, among other things, the number of holders of round lots
should fall below 300, the number of publicly held Shares (exclusive of holdings
of officers, directors, their immediate families and other concentrated holdings
of 10% or more ("Amex Excluded Holdings"), should drop below 200,000 Shares or
the aggregate market price of publicly held Shares (exclusive of Amex Excluded
Holdings) should fall below $1,000,000. The published guidelines of the Amex
also state that any development which substantially reduces the number of
holders of shares may occasion review of continued listing by Amex. The Board of
Directors does not believe any such review would result in delisting of the
Shares as a result of the Offer.
According to the PE's published guidelines, the PE would consider delisting
the Shares if, among other things, the number of holders of Shares should fall
below 800, the number of publicly held Shares (exclusive of holdings of
officers, directors, their immediate families and other concentrated holdings of
10% or more ("PE Excluded Holdings")), should drop below 500,000 or the
aggregate market price of publicly held Shares (exclusive of PE Excluded
Holdings) should fall below $3,000,000. The published guidelines of the PE also
state that it will examine qualitative criteria, which may include unwarranted
use of company funds for the repurchase of equity securities as a factor which
could lead to delisting. The Board of Directors does not believe that the
repurchase of Shares pursuant to the Offer would be considered unwarranted or
would result in the delisting of the Shares.
The market value of the Shares remaining after the Company's purchase of
Shares pursuant to the Offer also may be adversely affected because the Purchase
Price is substantially in excess of recent market prices at which the Shares
have traded prior to announcement of the Company's intention to commence the
Offer. The Company has not undertaken any studies or made any analysis of the
market prices at which the remaining Shares are likely to trade following
consummation of the Offer, and can provide no assurance as to the market value
of the Shares following the Company's purchase pursuant to the Offer.
The reduction in cash assets or the increased borrowings resulting from
purchase of Shares pursuant to the Offer will reduce the resources of the
Company available to make acquisitions and other capital investments. While the
Company regularly reviews its business strategy and evaluates various options
available to it, the Company does not currently contemplate any acquisition or
other strategic investment.
It is possible that the purchase of Shares pursuant to the Offer may cause
an "ownership change" with respect to the Company within the meaning of Section
382 of the Internal Revenue Code of 1986, as amended (the "Code"). Generally, an
ownership change would be deemed to occur if, immediately following the
Company's purchase of Shares pursuant to the Offer, the percentage of Shares
owned by one or more stockholders who then own five percent or more of the
outstanding Shares has increased, in the aggregate, by more than 50 percentage
points over the lowest percentage owned by such stockholders during the
three-year period ending on the day that the Shares tendered pursuant to the
Offer are purchased by the Company. The purchase of Shares pursuant to the Offer
will continue to affect the determination of whether an ownership change occurs
at some point in the next three years. If the Company experiences an ownership
change, its ability to offset taxable income generated in taxable periods ending
after the ownership change with its existing net operating loss carry forwards
and the general business and minimum tax credit carry forwards will be subject
to an annual limitation. The amount of the annual limitation is equal to the
product of the value of the Company's outstanding stock determined after the
completion of the Company's purchase of Shares pursuant to the Offer or future
triggering event (reduced by certain capital contributions made in the two-year
period prior to the ownership change) and the "long-term tax-exempt rate"
(determined monthly and, for ownership changes occurring in the month of May,
1997, 5.64%). The Company will be required to pay federal income taxes in any
year in which its taxable income exceeds the annual limitation, notwithstanding
the existence of the net operating loss carryforwards and the general business
and minimum tax credit carryforwards. The Company cannot predict whether an
ownership change will occur as a result of the purchase of Shares pursuant to
the Offer. If an ownership change does occur, the effect would depend upon the
number and value of Shares remaining outstanding after such purchase and the
federal long-term tax-exempt rate for the month
10
<PAGE> 14
of the ownership change; thus, this effect cannot be predicted with certainty.
The Company, however, no longer has a net operating loss carryforward. Although
the Company does have significant general business and minimum tax
carryforwards, the use of these carryforwards is already limited by other
sections of the Code. Accordingly, the Company does not believe that any
limitation on the use of such carryforwards triggered by an ownership change
will result in a material adverse change in the Company's financial condition or
results of operations.
As of May 15, 1997 the Company had issued and outstanding 10,809,929 Shares
and had reserved for issuance upon exercise of outstanding stock options 829,384
Shares. Pursuant to the United Foods, Inc. Second Management Retirement Plan
dated February 26, 1997, all holders of outstanding options have agreed to
refrain from exercising such options in consideration of deferred compensation
as provided in the plan. The 1,000,000 Shares the Company is offering to
purchase represent approximately 9.3% of the Shares then outstanding. With
respect to the election of directors, the holders of Class A Common Stock are
entitled to elect 25% (or the next highest whole number) of the Company's Board
of Directors, and the holders of the Class B Common Stock are entitled to elect
the remaining directors. On matters requiring the two classes of common stock to
vote together, the holders of Class A Common Stock are entitled to one tenth of
a vote per share and the holders of Class B Common Stock are entitled to one
vote per share. As of May 15, 1997 the Company's directors and executive
officers as a group (14 persons) beneficially owned 4,412,395 shares of Class A
Common Stock and 2,928,798 shares of Class B Common Stock, representing
approximately 50.7% of the Class A Common Stock and 51.4% of the Class B Common
Stock. As of May 15, 1997 James I. Tankersley and Daniel B. Tankersley
beneficially owned 3,265,591 shares of Class A Common Stock and 2,866,198 shares
of Class B Common Stock, representing approximately 40.9% of the Class A Common
Stock and 50.3% of the Class B Common Stock. Beneficial ownership of the Class A
Common Stock as set forth above includes beneficial ownership of Shares of Class
A Common Stock which may be acquired upon the conversion of Class B Common Stock
or upon the exercise of outstanding options. As of May 15, 1997 James I.
Tankersley and Daniel B. Tankersley directly owned 399,393 shares of Class A
Common Stock and 2,866,198 shares of Class B Common Stock, representing
approximately 7.8% of the Class A Common Stock and 50.3% of the Class B Common
Stock, respectively.
Assuming the Company purchases 1,000,000 Shares and no Shares are tendered
by directors, officers or affiliates of the Company, based on the Shares
outstanding on May 15, 1997, the percentage of the outstanding Class A Common
Stock and Class B Common Stock beneficially owned by the Company's directors and
executive officers as a group may increase as a result of the Offer to as much
as 57.2% of the Class A Common Stock (assuming only Class A Common Stock is
purchased pursuant to the Offer) and 62.3% of the Class B Common Stock (assuming
only Class B Common Stock is purchased pursuant to the Offer), respectively.
Assuming the Company purchases 1,000,000 Shares and no Shares are tendered by
directors, officers or affiliates of the Company, based on the Shares
outstanding on May 15, 1997, the percentage of the outstanding Class A Common
Stock and Class B Common Stock beneficially owned by James I. Tankersley and
Daniel B. Tankersley will increase as a result of the Offer to as much as 46.8%
of the Class A Common Stock (assuming only Class A Common Stock is purchased
pursuant to the Offer) and 61.1% of the Class B Common Stock (assuming only
Class B Common Stock is purchased pursuant to the Offer), respectively. Assuming
the Company purchases 1,000,000 Shares and no Shares are tendered by directors,
officers or affiliates of the Company, based on the Shares outstanding on May
15, 1997, the percentage of the outstanding Class A Common Stock and Class B
Common Stock directly owned by James I. Tankersley and Daniel B. Tankersley will
increase as a result of the Offer to as much as 9.7% of the Class A Common Stock
(assuming only Class A Common Stock is purchased pursuant to the Offer) and
61.1% of the Class B Common Stock (assuming only Class B Common Stock is
purchased pursuant to the Offer), respectively.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Following the repurchase of
Shares pursuant to the Offer, the Company believes the Shares will continue to
be "margin securities" for purposes of the Federal Reserve Board's margin
regulations.
The Shares are registered under the Exchange Act which requires, among
other things, that the Company furnish certain information to its stockholders
and to the Commission and comply with the
11
<PAGE> 15
Commission's proxy rules in connection with meetings of the Company's
stockholders. The Company does not believe that the purchase by the Company of
Shares pursuant to the Offer will result in the Shares becoming eligible for
deregistration under the Exchange Act.
A tender offer by the Company for a portion of its Shares initially was
proposed to the Company's Board of Directors by management of the Company at a
meeting on April 19, 1997. The terms discussed at the April 19, 1997 meeting
were similar to those embodied in the Offer. The final terms of the Offer were
proposed by management and unanimously approved by the Executive Committee of
the Board of Directors (the "Executive Committee") by action taken upon
unanimous written consent on May 19, 1997. The Executive Committee unanimously
determined that the Company would make no recommendation as to whether any
stockholder should tender any or all of such stockholder's shares pursuant to
the Offer. The Board of Directors did not authorize any committee of independent
directors to evaluate or otherwise act in connection with the Offer and did not
engage any investment banking firm to evaluate the financial terms of the Offer
or otherwise assist in structuring the Offer.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS
TO WHETHER ANY STOCKHOLDER SHOULD TENDER ANY OR ALL OF SUCH STOCKHOLDER'S SHARES
PURSUANT TO THE OFFER AND NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS
AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. EACH STOCKHOLDER MUST
MAKE SUCH STOCKHOLDER'S OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES TO TENDER.
9. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company was incorporated under the laws of Texas on March 9, 1956 and
became a Delaware corporation on September 30, 1983. The Company is a leading
processor of frozen vegetables and fresh mushrooms, with six facilities located
in Tennessee, Utah, Oregon and California. Its products are sold in retail
grocery stores under the Pictsweet brand, and also to private label and food
service accounts.
Historical and Unaudited Pro Forma Financial Information. The table below
sets forth summary historical financial information for the Company and summary
unaudited pro forma financial information giving effect to the purchase of
Shares pursuant to the Offer. The historical financial information for the
fiscal years ended February 29, 1996 and February 28, 1997 (other than the
ratios of earnings to fixed charges) has been derived from, and should be read
in conjunction with, the audited consolidated financial statements of the
Company contained in the Company's Annual Report on Form 10-K for the year ended
February 28, 1997, which is hereby incorporated herein by reference. The summary
historical financial information should be read in conjunction with, and is
qualified by reference to, the audited financial information and related notes
thereto from which it has been derived. The summary unaudited pro forma
financial information gives effect to the purchase of Shares pursuant to the
Offer, based on certain assumptions described in the table, as if it had
occurred on March 1, 1996 with respect to income statement data and on February
28, 1997 with respect to balance sheet data. The unaudited pro forma financial
information should be read in conjunction with the historical financial
information incorporated herein by reference and does not purport to be
indicative
12
<PAGE> 16
of the results that would actually have been obtained had the purchase of the
Shares pursuant to the Offer been completed at the dates indicated or that may
be obtained in the future.
SUMMARY HISTORICAL
AND UNAUDITED PRO FORMA INFORMATION
SUMMARY HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28 OR 29,
---------------------
1997 1996
--------- ---------
(AMOUNTS IN THOUSANDS
EXCEPT PER SHARE
DATA AND RATIOS)
<S> <C> <C>
STATEMENT OF OPERATIONS INFORMATION:
Net sales and service revenue............................. $ 195,820 $ 191,714
Net income (loss)......................................... 922 (660)
Earnings (loss) per share of common stock and common stock
equivalents............................................ $ 0.08 $ (0.06)
Weighted average common stock and common stock equivalents
outstanding............................................ 11,077 11,470
Ratio of Earnings to Fixed Charges(a)....................... 1.39 to 1 0.74 to 1
BALANCE SHEET INFORMATION:
Working capital........................................... $ 40,738 $ 42,164
Total assets.............................................. 119,108 128,188
Total assets, less goodwill............................... 119,108 128,188
Total indebtedness........................................ 63,652 73,654
Stockholders' equity...................................... 55,456 54,534
Shares outstanding........................................ 10,810 10,810
Book value per share...................................... $ 5.13 $ 5.04
</TABLE>
- ---------------
(a) Earnings used in computing the ratio of earnings to fixed charges consists
of income before fixed charges and income taxes. Fixed charges consist of
interest expense.
PRO FORMA EFFECT OF PURCHASE OF 1,000,000 SHARES AT $2.50 PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, 1997
------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(AMOUNTS IN THOUSANDS EXCEPT PER
SHARE DATA AND RATIOS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS INFORMATION:
Net sales and service revenue............................. $ 195,820 $ 195,820
Net income (loss)......................................... 922 (148) 774
Earnings (loss) per share of common stock and common stock
equivalents............................................ $ 0.08 -- $ 0.08
Weighted average common stock and common stock equivalents
outstanding............................................ 11,077 (1,000) 10,077
Ratio of Earnings to Fixed Charges(a)....................... 1.39 to 1 1.31 to 1
</TABLE>
- ---------------
(a) Earnings used in computing the ratio of earnings to fixed charges consists
of income before fixed charges and income taxes. Fixed charges consist of
interest expense.
13
<PAGE> 17
<TABLE>
<CAPTION>
AT FEBRUARY 28, 1997
------------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital..................................... $ 40,738 $ 40,738
Total assets........................................ 119,108 119,108
Total assets, less goodwill......................... 119,108 119,108
Total indebtedness.................................. 63,652 $ 2,700 66,352
Stockholders' equity................................ 55,456 (2,700) 52,756
Shares outstanding.................................. 10,810 (1,000) 9,810
Book value per share................................ $ 5.13 $ 5.38
</TABLE>
Additional Information. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company. The Company has also filed an Issuer
Tender Offer Statement on Schedule 13E-4 with the Commission which includes
certain additional information relating to the Offer.
Such material can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at its regional offices at 7 World Trade Center, Suite 1300, New
York, New York 10048, and CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Reports, proxy materials and other information
about the Company are also available at the offices of the American Stock
Exchange, 86 Trinity Place, New York, NY 10006 and the Pacific Exchange, 301
Pine Street, San Francisco, CA 94104. Copies also may be obtained by mail, upon
payment of the Commission's customary charges, from the Commission's Public
Reference Branch, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The
Commission also maintains a Web site on the World Wide Web at http://www.sec.gov
that contains reports, proxy statements and other material filed electronically
by the Company with the Commission. The Company's Schedule 13E-4 will not be
available at the Commission's regional offices.
10. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 1,000,000 Shares pursuant to the Offer,
the total amount required by the Company to purchase such Shares and pay related
fees and expenses will be approximately $2,700,000. The Company anticipates that
it will fund the purchase of Shares pursuant to the Offer and the payment of
related fees and expenses from available cash or by borrowings under that
certain Loan Agreement, Revolving Credit Note and Security Agreement between
First American National Bank ("First American") and the Company dated April 7,
1993, as amended (the "Revolver"). The Company has available credit of
$18,000,000 under the Revolver at a rate equal to First American's prime rate or
a Euro dollar rate, at the Company's option. The Revolver matures on June 1,
1999. Any indebtedness incurred pursuant to the Revolver is secured by certain
of the Company's accounts receivable and inventory. The Revolver contains
certain restrictive covenants including covenants pertaining to minimum tangible
net worth, working capital, the ratio of debt to equity and a coverage ratio.
The Revolver also restricts stock repurchases by the Company to $2,500,000 for
the fiscal year ending February 28, 1998. The Company anticipates that
borrowings under the Revolver to finance the purchase of Shares in the Offer
will be repaid from cash generated from the Company's operations.
14
<PAGE> 18
11. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES
Based upon the Company's records and upon information provided to the
Company by its directors, executive officers and affiliates, neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any of
the directors or executive officers of the Company or any of its subsidiaries,
nor any associates of any of the foregoing, has effected any transactions in the
Shares during the 40 business days prior to the date hereof.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers, or any of the executive officers or directors of its
subsidiaries, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company (including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer of the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding or proxies, consents or authorizations).
12. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS
The Company is not aware of any license or regulatory permit that appears
to be material to its business which might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, that would be required for the Company's
acquisition or ownership of Shares as contemplated by the Offer. Should any such
approval or other action be required, the Company currently contemplates that it
will seek such approval or other action. The Company cannot predict whether it
may determine that it is required to delay the acceptance for payment of Shares
tendered pursuant to the Offer pending the outcome of any such matter. There can
be no assurance that any such approval or other action, if needed, would be
obtained or would be obtained without substantial conditions or that the failure
to obtain any such approval or other action might not result in adverse
consequences to the Company's business. The Company's obligation under the Offer
to accept Shares for payment is subject to certain conditions. See Section 6.
Although repurchases of voting securities by issuers of securities are
normally exempt from the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act ("Hart Scott"), the staff of the Federal Trade Commission has
indicated that compliance may nonetheless be required when the result of such
repurchases is to increase the percentage of voting securities held by a
stockholder who may be deemed to control the issuer above a reporting threshold.
The Company believes that compliance with Hart Scott is not required with
respect to purchases of Shares pursuant to the Offer.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain federal income tax
considerations to stockholders resulting from the sale of Shares pursuant to the
Offer. These summaries are included for general information only. They do not
discuss all aspects of federal income taxation that may be relevant to a
particular investor in light of his or her personal investment or tax
circumstances or to certain types of stockholders subject to special treatment
under the federal income tax laws, such as, but not limited to, insurance
companies, tax-exempt organizations or retirement accounts, financial
institutions, dealers in securities, foreign corporations, and persons who are
neither citizens nor residents of the United States; nor do these summaries
discuss any aspect of state, local or foreign taxation. No legal opinion
regarding such tax considerations is being rendered hereby. No rulings have been
nor will be requested from the Internal Revenue Service (the "Service"), and the
Service or a court may disagree with some of the conclusions set forth below.
The following discussion is based on existing provisions of the Code, as
amended, existing and proposed Treasury Department regulations (the
"Regulations") and existing administrative interpretations and court decisions.
Future legislation, Regulations, administrative interpretations or court
decisions could significantly change such authorities, either prospectively or
retroactively. The discussion is limited to Shares held as "capital assets" as
defined by the Code.
15
<PAGE> 19
EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR TO
DETERMINE THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THE
STOCKHOLDER OF THE SALE OF SHARES PURSUANT TO THE OFFER AND POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
In general, sales of Shares by stockholders pursuant to the Offer will be
taxable transactions for federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other tax laws. As a
result of such sale, a stockholder will, depending upon the stockholder's
particular facts and circumstances, be treated for federal income tax purposes
either as having sold the Shares tendered or as having received a dividend
distribution from the Company with the consequences described below.
Under Section 302 of the Code, a sale of Shares pursuant to the Offer will,
as a general rule, be treated as a sale or exchange if the receipt of cash upon
such sale (a) is "substantially disproportionate" with respect to the
stockholder, (b) results in a "complete redemption" of the stockholder's
interest in the Company or (c) is "not essentially equivalent to a dividend"
with respect to the stockholder. If any of those three tests is satisfied, a
tendering stockholder will recognize gain or loss equal to the difference
between the amount of cash received by the stockholder pursuant to the Offer and
the stockholder's tax basis in the Shares sold pursuant to the Offer. Recognized
gain or loss will be capital gain or loss, assuming the Shares are held as
capital assets, which will be long-term capital gain or loss if the Shares have
been held for more than one year. Long-term capital gains of individuals,
estates and trusts currently are subject to federal income tax at the maximum
statutory rate of 28%. Gain or loss must be determined separately for each block
of Shares (i.e., shares acquired at the same cost in a single transaction) that
is exchanged pursuant to the Offer. The stockholder is permitted to designate
which blocks of Shares are tendered pursuant to the Offer if less than all of
such stockholders' Shares are tendered, and the order in which different blocks
would be exchanged for cash in the event of proration pursuant to the Offer.
Such designation may be made on the Letter of Transmittal. Stockholders should
consult their tax advisors concerning the mechanics and desirability of such a
designation.
In determining whether any of the tests under Section 302 of the Code are
satisfied, stockholders must take into account not only the Shares they actually
own, but also Shares they are deemed to own pursuant to the constructive
ownership rules of Section 318 of the Code. Pursuant to such constructive
ownership rules, a stockholder is deemed to own the Shares actually owned, and
in some cases, Shares constructively owned by certain related individuals or
entities, and any Shares that the stockholder has the right to acquire by
exercise of an option or by conversion or exchange of a security.
The receipt of cash will be "substantially disproportionate" with respect
to a stockholder within the meaning of Section 302(b) of the Code if the
percentage of the outstanding voting stock of the Company actually and
constructively owned by the stockholder immediately following the sale of Shares
pursuant to the Offer (treating as no longer outstanding all Shares purchased
pursuant to the Offer) is less than 80% of the percentage of the outstanding
voting stock of the Company actually and constructively owned by such
stockholder immediately before the sale of Shares pursuant to the Offer
(treating as outstanding all Shares purchased pursuant to the Offer).
Stockholders should consult their tax advisors with respect to the application
of the "substantially disproportionate" test to their particular facts and
circumstances.
The receipt of cash by a stockholder will result in a "complete redemption"
of the stockholder's interest in the Company within the meaning of Section
302(b)(3) of the Code if either (a) all the Shares actually and constructively
owned by the stockholder are sold pursuant to the Offer or (b) all the Shares
actually owned by the stockholder are sold pursuant to the Offer and the
stockholder is eligible to waive and does effectively waive attribution of all
Shares constructively owned by the stockholder in accordance with Section 302(c)
of the Code.
Even if the receipt of cash by a stockholder fails to satisfy the
"substantially disproportionate" test or the "complete redemption" test, such
stockholder may nevertheless satisfy the "not essentially equivalent to a
dividend" test, if the stockholder's sales of Shares pursuant to the Offer
results in a "meaningful reduction" in the stockholder's proportionate interest
in the Company. Whether the receipt of cash by a stockholder will be "not
essentially equivalent to a dividend" will depend upon the individual
stockholder's facts and circumstances. In certain circumstances, even a small
reduction in a stockholder's proportionate interest may satisfy
16
<PAGE> 20
this test. For example, the Service has indicated in a published ruling that a
3.3% reduction in the proportionate interest of a small minority (substantially
less than 1%) stockholder in a publicly held corporation who exercises no
control over corporate affairs constitutes such a "meaningful reduction."
Stockholders expecting to rely upon the "not essentially equivalent to a
dividend" test should, therefore, consult with tax advisors as to its
application in their particular situations.
Stockholders should be aware that, because proration may occur as to Shares
tendered pursuant to the Offer, fewer than all such Shares may be purchased in
the Offer. This must be taken into account in determining whether a stockholder
is able to satisfy the tests under Section 302 of the Code for sale or exchange
treatment. In general, however, stockholders who tender all of their Shares can
expect to satisfy the "substantially disproportionate" test and thus recognize
sale or exchange treatment, assuming all Shares constructively owned by such
stockholder are also tendered.
It may be possible for a tendering stockholder to satisfy one of the above
three tests by contemporaneously selling or otherwise disposing of all or some
of the Shares that are actually or constructively owned by such stockholder but
are not purchased pursuant to the Offer. Correspondingly, a tendering
stockholder may not be able to satisfy one of the above three tests because of
contemporaneous acquisitions of Shares by such stockholder or a related party
whose Shares would be attributed to such stockholder. Stockholders should
consult their tax advisors regarding the tax consequences of such sales or
acquisitions in their particular circumstances.
If none of the three tests under Section 302 is satisfied and if, as is
anticipated, the Company has sufficient earnings and profits, the tendering
stockholder will be treated as having received a dividend includible in gross
income in an amount equal to the entire amount of cash received by the
stockholder pursuant to the Offer (without regard to gain or loss, if any). The
stockholder's basis in the Shares tendered generally will be added to the basis
of such stockholder's remaining Shares.
In the case of a corporate stockholder, if the cash paid is treated as a
dividend, the dividend income may be eligible for the 70% dividends-received
deduction. The dividends-received deduction is subject to certain limitations,
and may not be available if the corporate stockholder does not satisfy certain
holding period requirements with respect to the Shares or if the Shares are
treated as "debt financed portfolio stock." Generally, if a dividends-received
deduction is available, it is expected that the dividend will be treated as an
"extraordinary dividend" under Section 1059(a) of the Code, in which case such
corporate stockholder's tax basis in Shares retained by such stockholder would
be reduced, but not below zero, by the amount of the nontaxed portion of the
dividend. Any amount of the nontaxed portion of the dividend in excess of the
stockholder's basis will generally be subject to tax upon sale or disposition of
those Shares. Corporate stockholders are urged to consult their tax advisors as
to the effect of Section 1059 of the Code on their tax basis in Shares.
A tendering stockholder or other payee who fails to complete fully and sign
the Substitute Form W-9 included in the Letter of Transmittal may be subject to
backup federal income tax withholding equal to 31% of the gross payments made
pursuant to the Offer.
The Depositary will withhold federal income taxes equal to 30% of the gross
amounts paid to a foreign stockholder or that stockholder's agent, unless the
company determines (i) that a reduced rate of withholding applies pursuant to a
tax treaty or (2) that an exemption from withholding applies because such gross
amounts are effectively connected with the conduct of a trade or business by the
foreign stockholder within the United States. For this purpose, a foreign
stockholder generally is any stockholder that is not, under United States tax
laws, (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or any State, or (iii) an estate or trust the income of which is
subject to United States income taxation regardless of its source.
Under current Regulations, dividends paid to an address outside the United
States are presumed to be paid to a resident of such country for purposes of
withholding. Therefore, the Company will determine the applicable rate of
withholding by reference to a stockholder's address, unless the facts and
circumstances
17
<PAGE> 21
indicate that such reliance is not warranted or if applicable law (such as an
applicable treaty or regulation thereunder) requires some other method for
determining a stockholder's residence.
To claim an exemption from withholding on the grounds that gross amounts
paid pursuant to the Offer are effectively connected with the conduct of a trade
or business by the foreign stockholder within the United States, the foreign
stockholder must deliver to the Company a properly executed statement claiming
such exemption. Such statement, on Service Form 4224, may be obtained from the
Company. If the gross amounts are effectively connected with the conduct of a
trade or business by the foreign stockholder within the United States, the gross
amounts (as adjusted by any applicable deductions) would be subject to United
States federal income tax at regular graduated rates and would be exempt from
the 30% withholding tax described above.
A foreign stockholder that is eligible for a reduced rate of U.S.
withholding tax pursuant to a tax treaty or because such foreign stockholder
meets the "complete termination", "substantially disproportionate," or "not
essentially equivalent to a dividend" tests generally may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
Service. Foreign stockholders are urged to consult their own tax advisors
regarding the application of federal income tax withholding, including
eligibility for a withholding tax reduction or exemption and the refund
procedures.
Stockholders who do not tender any Shares will not incur any tax liability
as a result of the Offer.
The foregoing discussion may not apply to Shares acquired pursuant to
certain compensation arrangements with the Company.
14. EXTENSION OF THE TENDER PERIOD; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, at any
time or from time to time and regardless of whether or not any of the events set
forth in Section 6 shall have occurred or shall be deemed by the Company to have
occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. During any such extension, all Shares previously tendered
and not purchased or withdrawn will remain subject to the Offer, except to the
extent that such Shares may be withdrawn as set forth in Section 4. The Company
also expressly reserves the right, in its sole discretion, to terminate the
Offer and not accept for payment or pay for any Shares not theretofore accepted
for payment or paid for or, subject to applicable law, to postpone payment for
Shares upon the occurrence of any of the conditions specified in Section 6 by
giving oral or written notice of such termination or postponement to the
Depositary and making a public announcement thereof. The Company's reservation
of the right to delay payment for Shares which it has accepted for payment is
limited by Rule 13e-4(f)(5) under the Exchange Act, which requires that an
issuer must pay the consideration offered or return the securities tendered
promptly after termination or withdrawal of a tender offer. Subject to
compliance with applicable law, the Company further reserves the right, in its
sole discretion, and regardless of whether or not any of the events set forth in
Section 6 shall have occurred or shall be deemed by the Company to have
occurred, to amend the Offer in any respect (including, without limitation, by
decreasing or increasing the consideration offered in the Offer to owners of
Shares or by decreasing the number of Shares being sought in the Offer) or to
waive the limitation on the maximum number of shares to be purchased pursuant to
the Offer. Amendments to the Offer may be made at any time or from time to time
effected by public announcement thereof, such announcement, in the case of an
extension, to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled or announced Expiration Date. Any
public announcement made pursuant to the Offer will be disseminated promptly to
stockholders in a manner reasonably designed to inform stockholders of such
change. Without limiting the manner in which the Company may choose to make a
public announcement, except as required by applicable law (including Rule
13e-4(e)(2) under the Exchange Act), the Company shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by
18
<PAGE> 22
Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act, which
require that the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer
(other than a change in price or a change in percentage of securities sought)
will depend on the facts and circumstances, including the relative materiality
of such terms or information. The Commission has stated that, as a general rule,
it is of the view that an offer should remain open for a minimum of five
business days from the date that notice of such a material change is first
published, sent or given. If (a) the Company (i) increases or decreases the
price to be paid for Shares, (ii) increases the number of Shares being sought by
an amount exceeding 2% of the outstanding Shares, or (iii) decreases the number
of Shares being sought, and (b) the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from
and including the date that notice of such increase, decrease or waiver is first
published, sent or given, the Offer will be extended until the expiration of
such period of ten business days.
The Company has considered making an offer to purchase more than 1,000,000
Shares and reserves the right to amend the Offer to increase the number of
Shares sought to be purchased pursuant to the Offer. Any such amendment would
require an extension of the Offer for at least ten business days, to the extent
described above. The Board of Directors has not authorized the Company to offer
to purchase more than 1,000,000 Shares. Any increase in the number of Shares to
be purchased would require the approval of the Company's lenders. The Company
does not expect to increase the number of Shares covered by the Offer if such
increase would cause the Offer to be deemed a Rule 13e-3 transaction (a going
private transaction) or any step in any series of a transactions constituting a
Rule 13e-3 transaction. Any increase in the number of Shares purchased in the
Offer would increase the percentage of the outstanding Shares owned by James I.
Tankersley and Daniel B. Tankersley following consummation of the Offer.
15. FEES AND EXPENSES
The Company has retained First Union National Bank of North Carolina
("First Union") as Depositary and D.F. King & Co., Inc. ("D.F. King") as
Information Agent in connection with the Offer. The Information Agent will
assist stockholders who request assistance in connection with the Offer and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners. The Depositary and the Information
Agent will receive reasonable and customary compensation for their services in
connection with the Offer and will also be reimbursed for certain out-of-pocket
expenses, including the reasonable fees and expenses of their counsel. The
Company has agreed to indemnify the Depositary and the Information Agent against
certain liabilities in connection with the Offer, including certain liabilities
under the federal securities laws. Neither First Union nor D.F. King has been
retained to make solicitations or recommendations in their respective roles as
Depositary and Information Agent.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person for soliciting any Shares
pursuant to the Offer. The Company will, however, on request, reimburse such
persons for customary handling and mailing expenses incurred in forwarding
materials in respect of the Offer to the beneficial owners for which they act as
nominees. No such broker, dealer, commercial bank or trust company has been
authorized to act as the Company's agent for purposes of this Offer. The Company
will pay (or cause to be paid) any stock transfer taxes on its purchase of
Shares, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
16. MISCELLANEOUS
The Offer is not being made to, nor will the Company accept tenders from,
owners of Shares in any jurisdiction in which the Offer or its acceptance would
not be in compliance with the laws of such jurisdiction. The Company is not
aware of any jurisdiction where the making of the Offer or the tender of Shares
would not be in compliance with applicable law. If the Company becomes aware of
any jurisdiction where the making of the Offer or the tender of Shares is not in
compliance with any applicable law, the Company will make a good faith effort to
comply with such law. If, after such good faith effort, the Company cannot
comply with such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares residing in such
jurisdiction.
19
<PAGE> 23
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER THAN
THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
UNITED FOODS, INC.
May 20, 1997
20
<PAGE> 24
UNITED FOODS, INC.
OFFER TO PURCHASE
FOR CASH UP TO 1,000,000 SHARES OF ITS
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
AT A PRICE OF $2.50 PER SHARE
The Depositary for the Offer is:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<TABLE>
<C> <C> <C>
By Hand Delivery or
By Mail: By Facsimile Transmission: Overnight Courier:
FIRST UNION NATIONAL BANK (704) 590-7628 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA (FOR ELIGIBLE INSTITUTIONS OF NORTH CAROLINA
40 BROAD STREET, SUITE 550 ONLY) 40 BROAD STREET, SUITE 500
NEW YORK, NEW YORK 10004 Confirm by Telephone: NEW YORK, NEW YORK
(800) 829-8432
</TABLE>
Any questions or requests for assistance or for additional copies of this
Offer to Purchase or the Letter of Transmittal may be directed to the
Information Agent. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 WATER STREET
NEW YORK, NY 10005
CALL TOLL FREE (800) 549-6864
<PAGE> 1
EXHIBIT (A)(2)
<PAGE> 2
LETTER OF TRANSMITTAL
TO TENDER SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
OF
UNITED FOODS, INC.
PURSUANT TO ITS OFFER TO PURCHASE
DATED MAY 20, 1997
This Letter of Transmittal (the "Letter of Transmittal") is to be
completed, signed and mailed or delivered by the holders (the "stockholders") of
Class A Common Stock, par value $1.00 per share and Class B Common Stock, par
value $1.00 per share (the "Shares") of United Foods, Inc., a Delaware
corporation (the "Company"), who wish to tender their Shares at a price of $2.50
per Share, net to the Seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 20, 1997 (the "Offer to
Purchase") and this Letter of Transmittal (which together constitute the
"Offer").
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON JUNE 17, 1997,
(AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION DATE").
The Depositary for the Offer is:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand Delivery or
First Union National Bank (704) 590-7628 Overnight Courier:
of North Carolina (For Eligible Institutions Only) First Union National Bank
40 Broad Street, Suite 550 Confirm by Telephone: of North Carolina
New York, New York 10004 (800) 829-8432 40 Broad Street, Suite 500
New York, New York
</TABLE>
FOR INFORMATION CALL THE INFORMATION AGENT:
D.F. KING & CO., INC.
(800) 549-6864
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER
OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS
COMPLETED.
This Letter of Transmittal can be used only if (a) Shares are to be
delivered herewith or (b) Shares are being delivered concurrently by book-entry
transfer to the account maintained by the Depositary at The Depository Trust
Company (the "DTC") or the Philadelphia Depository Trust Company (the "PDTC")
(collectively, the "Book-Entry Transfer Facilities") as set forth in Section 3
of the Offer to Purchase (as defined below).
Stockholders who cannot deliver the certificates for their Shares to the
Depositary prior to the Expiration Date (as defined in the Offer to Purchase) or
who cannot complete the procedure for book-entry transfer on a timely basis or
who cannot deliver a Letter of Transmittal and all other required documents to
the Depositary prior to the Expiration Date, in any such case, must tender their
Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. See Instruction 2. Delivery of documents to the Company
or to a Book-Entry Transfer Facility does not constitute a valid delivery.
The name(s) and address(es) of the registered holder(s) should be printed
below, if they are not already printed below, exactly as they appear on the
certificate(s) representing the Shares tendered herewith. The certificate(s) and
the number of Shares that the registered holder(s) wish(es) to tender should be
indicated in the appropriate boxes below.
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 5 AND 7)
- ------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) ON SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------
NUMBER OF
CLASS AND SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
- ------------------------------------------------------------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL SHARES
- ------------------------------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which Shares are to be purchased in the
event of proration.*** (Attach additional signed list if necessary).
1st: ---------------------- 2nd:---------------------- 3rd:---------------------- 4th:
----------------------
- ------------------------------------------------------------------------------------------------------
* Need not be completed by Stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates
delivered to the Depositary are being tendered. See Instruction 4.
*** If you do not designate an order, then in the event less than all Shares are purchased due to
proration, Shares will be selected for purchase by the Depositary.
- ------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
(BOX BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Check Box of Book-Entry Transfer Facility: [ ] DTC [ ] PDTC
Account No.
-----------------
Transaction Code No.
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Stockholder(s)
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
- --------------------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
- --------------------------------------------------------------------------------
If delivery is by book-entry transfer:
Name of Tendering Institution
- --------------------------------------------------------------------------------
Check Box of Book-Entry Transfer Facility: [ ] DTC [ ] PDTC
Account No.
------------------
Transaction Code No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 4)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on May 15, 1997, an
aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[ ] was the beneficial owner as of the close of business on May 15, 1997
and will continue to be the beneficial owner as of the Expiration Date,
of an aggregate of fewer than 100 Shares, all of which are being
tendered; or
[ ] is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for the beneficial owners thereof, shares with respect to
which it is the record holder; and
(b) believes, based upon representations made to it by such beneficial
owners, that each person was the beneficial owner as of the close of
business on May 15, 1997 and each such person will continue to be the
beneficial owner as of the Expiration Date, of an aggregate of fewer
than 100 shares and is tendering all of such Shares.
- --------------------------------------------------------------------------------
3
<PAGE> 5
LADIES AND GENTLEMEN:
The undersigned hereby tenders to United Foods, Inc., a Delaware
corporation (the "Company"), the above-described Shares, pursuant to the
Company's offer to purchase up to 1,000,000 Shares at a price of $2.50 per Share
(the "Purchase Price"), net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated May 20, 1997 (the "Offer
to Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together constitute the "Offer").
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith in accordance with the terms of the Offer (including,
if the Offer is extended or amended, the terms or conditions of any such
extension or amendment), the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to all the
Shares that are being tendered hereby, or orders the registration of such Shares
delivered by book-entry transfer, that are purchased pursuant to the Offer and
hereby irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares, with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to:
(a) deliver certificates for such Shares, or transfer ownership of
such Shares on the account books maintained by any of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the
Company, upon receipt by the Depositary, as the undersigned's agent, of the
Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of
the Offer.
The undersigned hereby represents and warrants that:
(a) the undersigned has a "net long position" in the Shares tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and the undersigned has full power and
authority to validly tender, sell, assign and transfer the Shares tendered
hereby;
(b) the tender of Shares by the undersigned complies with Rule 14e-4;
(c) when and to the extent the Company accepts the Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to the Shares, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(d) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(e) the undersigned has read and agrees to all the terms of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may not be required to accept for payment any of the Shares tendered herewith or
may accept for payment fewer than all of the Shares tendered herewith.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
All authority herein conferred, or agreed to be conferred, shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
4
<PAGE> 6
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price and/or return or issue the certificate(s)
evidencing any Shares not tendered or not accepted for payment in the name(s) of
the registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the Purchase Price and/or the certificate(s)
evidencing any Shares not tendered or not accepted for payment (and accompanying
documents, as appropriate) to the address of the registered holder(s) appearing
under "Description of Shares Tendered." In the event that both the "Special
Delivery Instructions" and "Special Payment Instructions" are completed, please
issue the check for the Purchase Price and/or issue or return the certificate(s)
evidencing any Shares not tendered or accepted for payment in the name(s) of,
and deliver said check and/or certificate(s) to, the person or persons so
indicated. In the case of book-entry delivery of Shares, please credit the
account maintained at the Book-Entry Transfer Facility indicated above with any
Shares not accepted for payment. The undersigned recognizes that the Company has
no obligation pursuant to the "Special Payment Instructions" to transfer any
Shares from the name(s) of the registered holder(s) thereof if the Company does
not accept for payment any of the Shares so tendered.
---------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6, 7, 8 AND 9)
To be completed ONLY if the check for the aggregate Purchase Price of
Shares purchased and/or certificates for Shares not tendered or not
purchased are to be issued in the name of someone other than the
undersigned.
Issue [ ] check, and/or [ ] certificates to:
Name
---------------------------------------------------------------------
(PLEASE PRINT)
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
(INCLUDE ZIP CODE)
(SEE FORM W-9 ON REVERSE SIDE)
---------------------------------------------------------------
(TAXPAYER IDENTIFICATION NO.)
---------------------------------------------------------------
---------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if the check for the aggregate Purchase Price of
Shares purchased and/or certificates for Shares not tendered or not
purchased are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that shown below the undersigned's
signature(s).
Mail [ ] check, and/or [ ] certificates to:
Name
---------------------------------------------------------------------
(PLEASE PRINT)
Address:
-----------------------------------------------------------------
-----------------------------------------------------------------
(INCLUDE ZIP CODE)
(SEE FORM W-9 ON REVERSE SIDE)
---------------------------------------------------------------
(TAXPAYER IDENTIFICATION NO.)
---------------------------------------------------------------
5
<PAGE> 7
SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
Dated: , 1997
---------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Tax Identification Number
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and
Telephone Number
- --------------------------------------------------------------------------------
Dated:
- ---------------------------, 1997
6
<PAGE> 8
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") and, if applicable,
make certain certifications on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, or if any other information is not correctly
provided, the Internal Revenue Service may subject the stockholder or other
payee to a $50 penalty. In addition, payments that are made to such stockholder
or other payee with respect to Shares purchased pursuant to the Offer may be
subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements and should indicate their status by writing "exempt" across the
face of the Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the stockholder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding, each stockholder must complete Parts 1 and 2
of the Substitute Form W-9 below. In Part 1 of the Substitute Form W-9, the
stockholder must give the Depositary the TIN (e.g., social security number or
employer identification number) of the record owner of the Shares or of the last
transferee attached to, or endorsed on, the certificates evidencing the Shares.
If the Shares are registered in more than one name or are not registered in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report. In Part 2 of the Substitute Form W-9, the stockholder
must certify that the TIN provided in Part 1 is correct and that (i) the
stockholder is exempt from backup withholding, (ii) the stockholder has not been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding as a result of a failure to report all interest or dividends,
or (iii) the Internal Revenue Service has notified the stockholder that such
stockholder is no longer subject to backup withholding. The box in Part 3 of the
Substitute Form W-9 may be checked if the tendering stockholder has not been
issued a TIN and has applied for a TIN or intends to apply for a TIN in the near
future. If the box in Part 3 is checked, the stockholder or other payee must
also complete the Certificate of Awaiting Taxpayer Identification Number below
Part 3 in order to avoid backup withholding. Notwithstanding that the box in
Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number
is completed, the Depositary will withhold 31% on all payments made prior to the
time a properly certified TIN is provided to the Depositary.
7
<PAGE> 9
Please print or type
<TABLE>
<S> <C> <C>
Form W-9 Give form to the requester. Do
(Rev. December 1996) REQUEST FOR TAXPAYER NOT send to the IRS
Department of the Treasury IDENTIFICATION NUMBER AND CERTIFICATION
Internal Revenue Service
Name (If a joint account or you changed your name, see Specific Instructions on page 2.)
Business name, if different from above. (See Specific Instructions on page 2.)
Check appropriate box: [ ] Individual/Sole proprietor [ ] Corporation [ ] Partnership [ ] Other .........
Address (number, street, and apt. or suite no.) Requester's name and address
(optional)
City, state and ZIP code
PART I TAXPAYER IDENTIFICATION NUMBER (TIN)
Enter your TIN in the appropriate box. For individuals, Social security number List account number(s) here
this is your social security number (SSN). However, if (optional)
you are a resident alien OR a sole proprietor, see the
instructions on page 2. For other entities, it is your PART II FOR PAYEES EXEMPT FROM
employer identification number (EIN). If you do not have BACKUP WITHHOLDING
a number, see HOW TO GET A TIN on page 2. (See the instructions on page 2.)
NOTE: If the account is in more than one name, see the OR
chart on page 2 for guidelines on whose number to enter.
Employer Identification
number
PART III CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to
me), and
2. I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of failure to report all
interests or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. -- You must cross out item 2 above if you have been notified by the IRS that you are currently
subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate
transactions, Item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation
of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and
dividends, you are not required to sign the Certification, but you must provide your correct TIN. (See the instructions on page
2.)
SIGN HERE Signature Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM W-9 MAY RESULT IN A BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
8
<PAGE> 10
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office, or (b) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number within sixty (60) days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ------------------------------
SIGNATURE DATE
</TABLE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm which is an "Eligible Institution" (as
defined in the Offer to Purchase). Signatures on this Letter of Transmittal need
not be guaranteed if (a) this Letter of Transmittal is signed by the registered
owner of the Shares (which term, for purposes of this document, shall include
any participant in one of the Book-Entry Transfer Facilities whose name appears
on a security position listing as the owner of Shares) tendered herewith and
such holder(s) have not completed either of the boxes entitled "Special Payment
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal
or (b) such Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF THE LETTER OF TRANSMITTAL AND SHARES
This Letter of Transmittal is to be used only if (a) certificates for
Shares are to be forwarded herewith or (b) delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer of all Shares delivered electronically
into the Depositary's account at one of the Book-Entry Transfer Facilities,
together in each case with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) with any required signature guarantees, and
any other documents required by this Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the front page of this
Letter of Transmittal by the Expiration Date (as defined in the Offer to
Purchase). Delivery of documents to one of the Book-Entry Transfer Facilities
does not constitute delivery to the Depositary.
Stockholders who cannot deliver the certificates for their Shares to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
book-entry transfer on a timely basis or who cannot deliver a Letter of
Transmittal and all other required documents to the Depositary by the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a)
such tender must be made by or through an Eligible Institution, (b) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by the Company must be received (by hand, mail or facsimile
transmission) by the Depositary by the Expiration Date and (c) the certificates
for all physically delivered Shares, in proper form for transfer (or a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), together with a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three American
Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
9
<PAGE> 11
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional, or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
facsimile thereof), each tendering stockholder waives any right to receive any
notice of the acceptance of such stockholder's tender.
3. INADEQUATE SPACE
If the space provided in the box captioned "Description of Shares Tendered"
is inadequate, the certificate numbers and/or the number of Shares should be
listed on a separate signed schedule and attached to this Letter of Transmittal.
4. PARTIAL TENDERS, UNPURCHASED SHARES; ODD LOTS
Unless you are delivering Shares by book-entry transfer, if fewer than all
the Shares represented by any certificate delivered to the Depositary are to be
tendered, fill in the number of Shares that are to be tendered in the box
entitled "Number of Shares Tendered." If such Shares are purchased, a new
certificate for the remainder of the Shares represented by the old
certificate(s) will be sent to and in the name of the registered holder(s)
(unless otherwise provided by such holder(s) having completed either of the
boxes entitled "Special Payment Instructions" or "Special Delivery Instructions"
on this Letter of Transmittal) as promptly as practicable following the
expiration or termination of the Offer. All Shares represented by the
certificate(s) listed and delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated. An Odd Lot Owner (as defined below)
may check the box in the above section entitled "Odd Lots" indicating that all
of the stockholders' shares are being tendered. As described in Section 2 of the
Offer to Purchase, if the Company is to purchase less than all Shares properly
tendered and not withdrawn before the Expiration Date, the Shares purchased
first will consist of all Shares properly tendered and not withdrawn by any
stockholder who owned beneficially as of the close of business on May 15, 1997
and who continues to own as of the Expiration Date, an aggregate of fewer than
100 Shares and who tenders all of the stockholder's shares (an "Odd Lot Owner").
This preference will not be available unless the box captioned "Odd Lots" is
completed.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, the signature(s) must correspond with the name(s)
as written on the face of the certificates without any change whatsoever.
(b) If any of the Shares tendered herewith are registered in the names of
two or more joint owners, each such owner must sign this Letter of Transmittal.
(c) If any of the Shares tendered herewith are registered in different
names on different certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, no endorsements of certificates of separate stock
powers are required unless payment is to be made, and/or the certificates for
Shares not tendered or not purchased are to be issued, in the name(s) of any
person(s) other than the registered holder(s). If this Letter of Transmittal is
signed by a person other than the registered holder(s) of the Shares tendered
herewith, however, the certificates must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered holder(s) appear(s) on the certificates for such Shares. Signature(s)
on any such certificates or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
10
<PAGE> 12
(e) If this Letter of Transmittal or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to the Company of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES
The Company will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the Purchase Price is to be made to, or if certificates for Shares
not tendered or accepted for purchase are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder or such person) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS
If the check for the Purchase Price of any Shares purchased is to be issued
to, or any Shares not tendered or not purchased are to be returned in the name
of, a person other than the person(s) signing this Letter of Transmittal or if
the check or any certificates for Shares not tendered or not purchased are to be
mailed to someone other than the person(s) signing this Letter of Transmittal or
to the person(s) signing this Letter of Transmittal at an address other than
that shown in the box entitled "Description of Shares Tendered," the boxes
entitled "Special Payment Instructions" and/or "Special Delivery Instructions"
on this Letter of Transmittal should be completed.
8. FEDERAL INCOME TAX WITHHOLDING
Except as provided above under "Important Tax Information" each tendering
stockholder is required to provide the Depositary with a correct TIN on
Substitute Form W-9 which is provided under "Important Tax Information" above.
Failure to provide the information and make the certifications on the form may
subject the tendering stockholder to a $50 penalty and 31% federal backup
withholding tax may be imposed on the payments made to the stockholder or other
payee with respect to Shares purchased pursuant to the Offer.
9. WITHHOLDING ON FOREIGN STOCKHOLDERS
The Depositary will withhold federal income taxes equal to 30% of the gross
payments payable to a foreign stockholder unless such foreign stockholder proves
in a manner satisfactory to the Company and the Depositary that either (i) the
sale of its Shares pursuant to the Offer will qualify as a sale or exchange,
rather than as a dividend, for federal income tax purposes (as described in
Section 13 of the Offer to Purchase), in which case no withholding will be
required, or (ii) the foreign stockholder is eligible for a reduced tax treaty
rate with respect to dividend income, in which case the Depositary will withhold
at the reduced treaty rate. For this purpose, a foreign stockholder is any
stockholder that is not (i) an individual citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof or
(iii) any estate or trust the income of which is subject to United States
federal income taxation regardless of the source of such income. The Depositary
will determine a stockholder's status as a foreign stockholder and eligibility
for a tax treaty reduced rate of withholding by reference to the stockholder's
address and to any outstanding certificates or statements concerning eligibility
for a reduced rate of withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign stockholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of withholding for which such stockholder may be eligible should consider
doing so in order to avoid over withholding. A foreign stockholder may be
eligible to obtain from the U.S. Internal Revenue Service a refund of tax
withheld if such stockholder meets one of the three tests for sale or exchange
treatment described in Section 13 of the Offer to Purchase or is otherwise able
to establish that no tax or reduced amount of tax was due.
11
<PAGE> 13
10. IRREGULARITIES
All questions as to the number of Shares to be accepted and the validity,
form, eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company, in its sole discretion, and
its determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any or all tenders it determines not to be
in proper form or the acceptance of or payment for which may, in the opinion of
the Company's counsel, be unlawful. The Company also reserves the absolute right
to waive any of the conditions of the Offer or any defect or irregularity in the
tender of any particular Shares. No tender of Shares will be deemed to be
properly made until all defects and irregularities have been cured or waived,
any defect or irregularity in connection with tenders must be cured within such
time as the Company shall determine. None of the Company, the Depositary, the
Information Agent or any other person is or will be obligated to give notice of
any defect or irregularity in tenders, and none of them will incur any liability
for failure to give such notice.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Requests for assistance or additional copies of the Offer to Purchase and
this Letter of Transmittal may be obtained from the Information Agent at the
address or telephone numbers set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH CERTIFICATES FOR SHARES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER OF SHARES AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO
THE EXPIRATION DATE.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Call Toll Free (800) 549-6864
<PAGE> 1
EXHIBIT (A)(3)
<PAGE> 2
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK OF
UNITED FOODS, INC.
This form or a form substantially equivalent to this form must be used to
accept the Offer (as defined below) if:
(a) certificates for shares of Class A Common Stock, par value $1.00
per share or Class B Common Stock, par value $1.00 per share (the
"Shares"), of United Foods, Inc., a Delaware corporation (the "Company"),
cannot be delivered to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Company's Offer to Purchase dated May 20, 1997
(the "Offer to Purchase")); or
(b) the procedure for book-entry transfer (set forth in Section 3 of
the Offer to Purchase) cannot be completed on a timely basis; or
(c) the Letter of Transmittal and all other required documents cannot
be delivered to the Depositary prior to the Expiration Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
The Depositary for the Offer is:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<TABLE>
<C> <C> <C>
By Hand Delivery or
By Mail: By Facsimile Transmission: Overnight Courier:
FIRST UNION NATIONAL (704) 590-7628 FIRST UNION NATIONAL BANK
BANK (FOR ELIGIBLE INSTITUTIONS ONLY) OF NORTH CAROLINA
OF NORTH CAROLINA Confirm by Telephone: 40 BROAD STREET, SUITE
40 BROAD STREET, SUITE (800) 829-8432 500
550 NEW YORK, NEW YORK
NEW YORK, NEW YORK 10004
</TABLE>
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NY 10005
CALL TOLL FREE (800) 549-6864
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR A
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
(as defined in the Offer to Purchase) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares specified below pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
ODD LOTS
(SEE INSTRUCTION 4)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on May 15, 1997, an
aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[ ] was the beneficial owner as of the close of business on May 15, 1997 and
will continue to be the beneficial owner as of the Expiration Date, of an
aggregate of fewer than 100 Shares, all of which are being tendered;
or
[ ] is a broker, dealer, commercial bank, trust company or other nominee which:
(a) is tendering, for the beneficial owners thereof, shares with respect to
which it is the record holder; and
(b) believes, based upon representations made to it by such beneficial owners,
that each person was the beneficial owner as of the close of business on May
15, 1997, and each such person will continue to be the beneficial owner as
of the Expiration Date, of an aggregate of fewer than 100 shares and is
tendering all of such Shares.
<TABLE>
<S> <C>
Number of Shares of Class A Common Stock
---- Signature(s)
-----------------------------------------
Name(s):
--------------------------------------------
Certificate Nos. (if available): (Please Print)
- ---------------------------------------------
Address:
- --------------------------------------------- ---------------------------------------------
Number of Shares of Class B Common Stock
---- Area Code and Telephone Number:
Certificate Nos. (if available):
---------------------------------------------
- ---------------------------------------------
- ---------------------------------------------
If Shares will be tendered by book entry
transfer:
Name of Tendering Institution
Account No. at (check one):
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
</TABLE>
2
<PAGE> 4
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an "Eligible Institution," guarantees (a) that the above
named person(s) has a "net long position" in the Shares tendered hereby within
the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
(b) that such tender of Shares complies with Rule 14e-4 and (c) to deliver to
the Depositary either the stock certificates representing the Shares tendered
hereby, in proper form for transfer, or confirmation of the book-entry transfer
of such Shares into the Depositary's account at The Depository Trust Company or
the Philadelphia Depository Trust Company, in any such case together with a
properly completed and duly executed Letter(s) of Transmittal (or facsimile(s)
thereof) and any other required documents, all within three American Stock
Exchange trading days after the date of execution of this notice.
<TABLE>
<S> <C>
Name of firm: Address:
----------------------------------------- --------------------------------------------
- ----------------------------------------------------- --------------------------------------------
Authorized Signature
Name:
------------------------------------------------- --------------------------------------------
Please print Zip Code
Area Code and Telephone Number:
-----------------------
Date: , 1997
-------------------------------------------
</TABLE>
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT (A)(4)
<PAGE> 2
UNITED FOODS, INC.
OFFER TO PURCHASE
FOR CASH UP TO 1,000,000 SHARES OF ITS
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
AT A PRICE OF $2.50 PER SHARE
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE 17, 1997, (AS SUCH DATE MAY BE EXTENDED, THE
"EXPIRATION DATE").
May 20, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
United Foods, Inc. (the "Company") is offering to purchase up to 1,000,000
shares of its Class A Common Stock, par value $1.00 per share and Class B Common
Stock, par value $1.00 per share (the "Shares"), at a price of $2.50 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated May 20, 1997 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which together constitute the "Offer")
enclosed herewith. Please furnish copies of the enclosed materials to those of
your clients for whose accounts you hold Shares registered in your name or in
the name of your nominee.
If, prior to the Expiration Date (as defined in the Offer to Purchase),
more than 1,000,000 Shares (or such greater number of Shares as the Company may
elect to purchase pursuant to the Offer) are properly tendered and not
withdrawn, the Company will, upon the terms and subject to the conditions of the
Offer, buy Shares first from all Odd Lot Owners (as defined in the Offer to
Purchase) who properly tender and do not withdraw all their Shares and then on a
pro rata basis from all other stockholders whose Shares are properly tendered
and not withdrawn.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6 OF THE OFFER TO PURCHASE.
Enclosed herewith for your information and for forwarding to your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee are copies of the following documents:
1. The Offer to Purchase, dated May 20, 1997;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or if such
certificates and all other required documents cannot be delivered to the
Depositary (as defined in the Offer to Purchase) before the expiration of
the Offer or if the procedures for book-entry transfer cannot be completed
on a timely basis;
4. A printed form of letter which may be sent to your clients for
whose account you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer; and
5. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL
<PAGE> 3
RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 17, 1997, UNLESS
THE OFFER IS EXTENDED.
In order to accept the Offer, (i) a duly executed and properly completed
Letter of Transmittal with any required signature guarantees or any other
documentation should be sent to the Depositary, and (ii) either certificates
representing the tendered Shares should be delivered to the Depositary or such
Shares should be tendered by book-entry transfer into the Depositary's account
maintained at one of the Book-Entry Transfer Facilities (as defined in the Offer
to Purchase), all in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impractical for them to
forward their certificates for such Shares or other required documentation on or
prior to the expiration of the Offer or to comply with the book-entry transfer
procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified in Section 3 of the Offer to Purchase.
The Company will not pay any commissions or fees to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer. The Company
will, however, upon request, reimburse you for customary clerical and mailing
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Company will pay or cause to be paid any transfer taxes payable on
the transfer of Shares to it, except as otherwise provided in Instruction 6 of
the enclosed Letter of Transmittal.
Any questions or requests for assistance may be directed to the Information
Agent as its address and telephone number set forth on the back cover of the
Offer to Purchase. Requests for additional copies of the Offer to Purchase, the
Letter of Transmittal and other tender offer materials may be directed to the
Information Agent as its address and phone numbers listed on the back cover of
the enclosed Offer to Purchase.
Very truly yours,
/s/ JAMES I. TANKERSLEY
--------------------------------------
James I. Tankersley
Chairman and Chief Executive Officer
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY, THE DEPOSITARY, THE INFORMATION AGENT
OR ANY AFFILIATE OF ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE
OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
EXHIBIT (A)(5)
<PAGE> 2
UNITED FOODS, INC.
OFFER TO PURCHASE
FOR CASH UP TO 1,000,000 SHARES OF ITS
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
AT A PRICE OF $2.50 PER SHARE
May 20, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated May 20,
1997, and the related Letter of Transmittal (which together constitute the
"Offer"), in connection with the Offer by United Foods, Inc., a Delaware
corporation (the "Company"), to purchase up to 1,000,000 shares of its Class A
Common Stock, par value $1.00 per share and Class B Common Stock, par value
$1.00 per share (the "Shares"), at a price of $2.50 per Share, net to the seller
in cash, upon the terms and subject to the conditions of the Offer. We are the
holder of record of Shares held for your account. A tender of such Shares can be
made only by us as the holder of record and pursuant to your instructions. THE
LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT
BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, upon the terms and subject to the conditions
set forth in the Offer to Purchase and the Letter of Transmittal.
Your attention is invited to the following:
1. The Offer, proration period and withdrawal rights expire at 5:00
p.m., New York City time, on Monday, June 17, 1997, unless the Offer is
extended.
2. The Offer is not conditioned on any minimum number of Shares being
validly tendered. The Offer is, however, subject to certain other
conditions described in the Offer to Purchase.
3. Any stock transfer taxes applicable to the sale of Shares to the
Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
4. As described in the Offer to Purchase, if, prior to the Expiration
Date (as defined in the Offer to Purchase), more than 1,000,000 Shares (or
such greater number of Shares as the Company may elect to purchase pursuant
to the Offer) are properly tendered and not withdrawn, the Company will,
upon the terms and subject to the conditions of the Offer, buy Shares first
from all Odd Lot Owners (as defined in the Offer to Purchase) who properly
tender and do not withdraw all their Shares and then on a pro rata basis
from all other stockholders whose Shares are properly tendered and not
withdrawn.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the attached instruction form.
An envelope to return your instructions to us is enclosed. If you authorize
tender of your Shares, all such Shares will be tendered unless otherwise
specified on the attached instruction form. Your instructions should be
forwarded to us in ample time to permit us to subject a tender on your behalf by
the expiration of the Offer.
THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. IN THOSE JURISDICTIONS THE LAWS OF WHICH REQUIRE THAT THE OFFER BE
MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON
BEHALF OF THE COMPANY BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED
UNDER THE LAWS OF SUCH JURISDICTION.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF COMMON STOCK
OF
UNITED FOODS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated May 20, 1997, and the related Letter of Transmittal in
connection with the Offer by United Foods, Inc. (the "Company") to purchase up
to 1,000,000 shares of its Class A Common Stock, par value $1.00 per share and
Class B Common Stock, par value $1.00 per Share (the "Shares"), at a price of
$2.50 per Share, net to the undersigned in cash.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
1. [ ] By checking this box, all Shares held for the account of the
undersigned will be tendered. If fewer than all such Shares are to
be tendered, please do not check this box but instead complete Item
2 below.
2. [ ] By checking this box, only the number of Shares specified below will
be tendered.
Number of shares of Class A
Common Stock Tendered:
- ---------------------------------------------------------------------
Number of shares of Class B
Common Stock Tendered:
- ---------------------------------------------------------------------
ODD LOTS
[ ] By checking this box, the undersigned represents that the undersigned
owned beneficially as of the close of business on May 15, 1997 and
will continue to own beneficially as of the Expiration Date an
aggregate of fewer than 100 Shares and is instructing the holder to
tender all such Shares.
SIGN HERE
<TABLE>
<S> <C>
Signature ------------------------------------------- Name(s) (Please Print) ---------------------------
Signature ------------------------------------------- Name(s) (Please Print) ---------------------------
(If more than one account holder)
Dated: --------------------------- , 1997 -----------------------------------------------------
Address
-----------------------------------------------------
Zip Code
Area Code and
Telephone Number --------------------------------
</TABLE>
2
<PAGE> 1
EXHIBIT (A)(6)
<PAGE> 2
[UNITED FOODS LOGO]
May 20, 1997
Dear Stockholder:
United Foods, Inc. (the "Company") is offering to purchase up to 1,000,000
shares of its Class A Common Stock, par value $1.00 per share and Class B Common
Stock, par value $1.00 per share (the "Shares"), at a price of $2.50 per Share,
net to the seller in cash (the "Offer"). The Company will treat the two classes
of stock equally for all purposes in connection with the tender offer. The Offer
is subject to certain conditions. The Offer is explained in detail in the
enclosed Offer to Purchase and Letter of Transmittal. The instructions on how to
tender your Shares are also explained in detail in the enclosed accompanying
materials. We encourage you to read these materials carefully.
On May 16, 1997, the last trading day before the day on which the Company
announced its intention to commence the Offer, the closing sales price of the
Class A Common Stock was $1 5/8 per share. No sale of Class B Common Stock
occurred on May 16, 1997, but the then most recent sale was at $1 9/16 per share
on May 15, 1997. Any stockholder whose Shares are purchased in the Offer will
not incur the usual transaction cost associated with open market sales.
The Board of Directors of the Company has approved the making of the Offer.
However, neither the Company nor the Board of Directors makes any recommendation
to any stockholder as to whether to tender any or all Shares. Stockholders must
make their own decision as to whether to tender Shares and, if so, how many
Shares to tender.
We have retained D.F. King & Co., Inc. as our Information Agent to help you
respond to the Offer. Please contact them between the hours of 8:00 a.m. and
6:00 p.m., Eastern Time, at their toll free number (1-800-549-6864), if you have
any questions. Their representatives will be pleased to answer your questions
and can help you complete the enclosed materials.
Very truly yours,
For the Board of Directors,
/s/ JAMES I. TANKERSLEY
James I. Tankersley
Chairman and Chief Executive Officer
[United Foods, Inc., Ten Pictsweet Drive, Bells, TN 38006-0119, (901) 422-7600]
<PAGE> 1
EXHIBIT (A)(7)
<PAGE> 2
CONTACT:
Daniel B. Tankersley
United Foods, Inc.
(901) 422-7600
UNITED FOODS, INC. COMMENCES TENDER OFFER FOR UP TO
1 MILLION COMMON SHARES
Bells, TN -- May 19, 1997 -- United Foods, Inc. (Amex: UFDA and UFDB)
announced that it will commence a cash tender offer for up to 1 million shares
of its Class A and Class B Common Stock at a price of $2.50 per share. The
Company will treat the two classes of stock equally for all purposes in
connection with the tender offer. The offer will be made on the terms and
subject to the conditions set forth in the Company's definitive tender offer
materials, which are being mailed to stockholders May 20, 1997. The tender offer
will expire at 5:00 p.m., New York City Time, on June 17, 1997, unless extended.
The offer is subject to certain conditions set forth in the offer
materials.
The information agent for the tender offer is D. F. King & Co., Inc.
Additional copies of the Offer to Purchase and the Letter of Transmittal for the
tender offer will be available from the information agent.
<PAGE> 1
EXHIBIT (A)(8)
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, the
first individual on
the account(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult, or if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent
minor, or incompetent person person(3)
7. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
<C> <S> <C>
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension Legal entity (Do
trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district
or prison) that receives
agricultural program payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on interest, dividends, and
broker transactions payments include the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE> 1
EXHIBIT (B)(8)
<PAGE> 2
FIFTH AMENDMENT TO REVOLVING LOAN AGREEMENT
THIS FIFTH AMENDMENT TO REVOLVING LOAN AGREEMENT (the "Agreement") made and
entered into as of May 15, 1997, by and between FIRST AMERICAN NATIONAL BANK, a
national banking association organized and existing under the statutes of the
United States of America (hereinafter "Lender"), and UNITED FOODS, INC., a
corporation organized and existing under the laws of the State of Delaware
("Borrower").
WITNESSETH:
WHEREAS, Lender and Borrower executed a Loan Agreement dated as of April 7,
1993 (the "Loan Agreement") pursuant to which the Lender made a Twenty-Three
Million Dollar ($23,000,000.00) revolving credit loan to Borrower for the
purpose of providing working capital to the Borrower (the "Revolving Loan");
WHEREAS, the Lender and Borrower have previously amended the Loan
Agreement; and
WHEREAS, the Lender and Borrower desire to further modify the Loan
Agreement as hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged by each of the parties, the parties do mutually agree as follows:
4. Section 6.1(m) of the Loan Agreement is hereby deleted in its entirety
and the following subparagraph is substituted in lieu thereof:
(m) Tangible Net Worth. As of the fiscal year end of February 28,
1997, and thereafter, Borrower shall maintain on a consolidated basis as of
the last day of each fiscal quarter a Tangible Net Worth of not less than
Forty Nine Million Three Hundred Nineteen Thousand Dollars
($49,319,000.00), adjusted upward by fifty percent (50%) of its net
earnings, and adjusted downward by fifty percent (50%) of its net losses,
and adjusted downward by eighty percent (80%) of the actual amount expended
by the Borrower in repurchasing its stock, as permitted by Section 6.1(w)
hereof, in each case on a cumulative basis during the term of the Revolving
Loan; provided that the adjustment required hereby as a result of fifty
percent (50%) of net losses shall never reduce the Tangible Net Worth
requirement below $49,319,000.00, less eighty percent (80%) of any stock
repurchases permitted under Section 6.1(w) hereof. As used herein, the term
"Tangible Net Worth" means the remainder of (i) all assets of Borrower,
other than intangible assets (including, without limitation, patents,
copyrights, licenses, franchises, goodwill, trade names, trade secrets and
leases other than leases required to be capitalized under generally
accepted accounting principles), minus (ii) Borrower's Debt. The term
"Borrower's Debt" means all liabilities and similar balance sheet items of
Borrower.
5. Section 6.1(w) of the Loan Agreement is hereby deleted in its entirety
and the following subparagraph is substituted in lieu thereof:
6.1(w). Stock Repurchase. Notwithstanding any other provision of this
Loan Agreement, the Borrower shall be permitted to repurchase up to Two
Million Five Hundred Thousand Dollars ($2,500,000.00) of its own shares,
through the end of the fiscal year ending February 28, 1998. There shall be
no future stock repurchases of the Borrower's shares by the Borrower
without the Lender's written consent.
6. In consideration of the amendments set out herein, and in the Second
Amendment to Term Loan Agreement between the parties, of even date herewith, the
Borrower agrees to pay to the Lender an amendment fee of Ten Thousand Dollars
($10,000.00).
As amended hereby, the Loan Agreement, as previously amended, is confirmed
and ratified in all other respects.
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been executed on the day and year
first above written.
FIRST AMERICAN NATIONAL BANK
By: /s/ MARIAH G. LUNDBERG
------------------------------------
Mariah G. Lundberg
Title: Assistant Vice President
UNITED FOODS, INC.
By: /s/ CARL W. GRUENEWALD, II
------------------------------------
Carl W. Gruenewald, II
Title: Senior Vice President,
Chief Financial Officer & Treasurer
2
<PAGE> 1
Exhibit(g)
<PAGE> 2
EXHIBIT G
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
United Foods, Inc.
We have audited the accompanying balance sheets of United Foods, Inc. as
of February 28, 1997 and February 29, 1996, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended February 29, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United Foods, Inc. at
February 28, 1997 and February 29, 1996, and the results of its operations and
its cash flows for each of the three years in the period ended February 28,
1997 in conformity with generally accepted accounting principles.
S/ BDO Seidman, LLP
Memphis, Tennessee
April 4, 1997
14
<PAGE> 3
UNITED FOODS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
---------------------------
ASSETS 1997 1996
- -------------------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT:
Cash and cash equivalents......................... $ 3,772,000 $ 1,029,000
Trade accounts receivable, less allowance of
$308,000 and $260,000 for possible losses (Notes
1 and 3)........................................ 17,533,000 14,502,000
Inventories (Notes 2 and 3)....................... 36,694,000 43,099,000
Prepaid expenses and miscellaneous................ 3,871,000 4,592,000
Deferred income taxes (Note 5).................... 1,255,000 777,000
------------ ------------
TOTAL CURRENT ASSETS............................ 63,125,000 63,999,000
------------ ------------
PROPERTY AND EQUIPMENT (Notes 3 and 7):
Land and land improvements........................ 8,846,000 8,965,000
Buildings......................................... 21,060,000 21,039,000
Machinery and equipment........................... 91,942,000 92,536,000
------------ ------------
121,848,000 122,540,000
Less accumulated depreciation and amortization.... (67,210,000) (60,204,000)
------------ ------------
NET PROPERTY AND EQUIPMENT...................... 54,638,000 62,336,000
------------ ------------
OTHER ASSETS...................................... 1,345,000 1,853,000
------------ ------------
$119,108,000 $128,188,000
============ ============
</TABLE>
15
See accompanying summary of accounting policies
<PAGE> 4
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
---------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ---------------------------------------------------------------- --------------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................................... $11,982,000 $11,092,000
Accruals:
Compensation and related taxes............................... 2,656,000 2,816,000
Pension contributions (Note 8)............................... 726,000 550,000
Income taxes (Note 5)........................................ 328,000 206,000
Workers' compensation claims (Note 9)........................ 849,000 1,144,000
Interest..................................................... 437,000 665,000
Miscellaneous................................................ 637,000 695,000
Current maturities of long-term debt (Notes 3 and 8)........... 4,772,000 4,667,000
--------------- ----------------
TOTAL CURRENT LIABILITIES................................. 22,387,000 21,835,000
LONG-TERM DEBT, less current maturities (Notes 3 and 8)......... 36,244,000 46,650,000
DEFERRED INCOME TAXES (Note 5).................................. 5,021,000 5,169,000
--------------- ----------------
TOTAL LIABILITIES......................................... 63,652,000 73,654,000
--------------- ----------------
COMMITMENTS AND CONTINGENCIES (Notes 4, 8, and 9)
STOCKHOLDERS' EQUITY (Notes 4 and 6):
Preferred stock, $1 par - shares authorized, 10,000,000........ - -
Common stock, Class A, $1 par (one-tenth vote per share when
Class A and B vote together, elects 25% of Board), shares
authorized 12,000,000 and 25,000,000; issued 5,116,075 and
7,649,457.................................................... 5,116,000 7,650,000
Common stock, Class B, $1 par, convertible into Class A on a
share for share basis (elects 75% of Board) - shares authorized
6,000,000 and 10,000,000; issued 5,693,854 and 7,096,180..... 5,694,000 7,096,000
Additional paid-in capital..................................... 2,463,000 8,644,000
Retained earnings (Note 3)..................................... 42,183,000 41,261,000
--------------- ----------------
55,456,000 64,651,000
Treasury stock, at cost, 3,935,708 shares at February 29, 1996. - (10,117,000)
--------------- ----------------
TOTAL STOCKHOLDERS' EQUITY................................ 55,456,000 54,534,000
--------------- ----------------
$119,108,000 $128,188,000
=============== ================
</TABLE>
16
and notes to financial statements.
<PAGE> 5
UNITED FOODS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES AND SERVICE REVENUES................. $195,820,000 $191,714,000 $190,256,000
COST OF SALES AND SERVICES..................... 159,120,000 155,343,000 148,760,000
------------ ------------ ------------
Gross profit................................. 36,700,000 36,371,000 41,496,000
SELLING, ADMINISTRATIVE AND GENERAL............ 32,028,000 33,457,000 34,512,000
EXPENSES ------------ ------------ ------------
Operating income............................. 4,672,000 2,914,000 6,984,000
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense............................. (3,871,000) (3,976,000) (2,831,000)
Miscellaneous income (expense), net.......... 707,000 28,000 (176,000)
------------ ------------ ------------
Total other income (expense), net........... (3,164,000) (3,948,000) (3,007,000)
------------ ------------ ------------
Income (loss) before taxes on income (benefit) 1,508,000 (1,034,000) 3,977,000
TAXES ON INCOME (BENEFIT) (Note 5)............ 586,000 (374,000) 1,575,000
------------ ------------ ------------
NET INCOME (LOSS).............................. $ 922,000 $ (660,000) $ 2,402,000
------------ ------------ ------------
EARNINGS (LOSS) PER SHARE (Note 6):
Net income (loss)............................ $ 0.08 $ (0.06) $ 0.19
============ ============ ============
</TABLE>
17
See accompanying summary of accounting policies and notes to financial
statements
<PAGE> 6
UNITED FOODS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK - CLASS A COMMON STOCK - CLASS B
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, February 28, 1994......... 7,647,832 $ 7,648,000 7,097,805 $ 7,098,000
Net income for the year............ - - - -
Exchange of Class B common stock
for Class A common stock.......... 100 - (100) -
Purchase of treasury stock (Note 6) - - - -
Exercise of options................ - - - -
---------- ----------- ---------- -----------
Balance, February 28, 1995......... 7,647,932 7,648,000 7,097,705 7,098,000
Net loss for the year.............. - - - -
Exchange of Class B common stock
for Class A common stock.......... 1,525 2,000 (1,525) (2,000)
Purchase of treasury stock (Note 6) - - - -
Exercise of options................ - - - -
---------- ----------- ---------- -----------
Balance, February 29, 1996......... 7,649,457 7,650,000 7,096,180 7,096,000
Net income for the year............ - - - -
Exchange of Class B common stock
for Class A common stock.......... 6,000 6,000 (6,000) (6,000)
Retirement of treasury stock (Note
6)................................ (2,539,382) (2,540,000) (1,396,326) (1,396,000)
---------- ----------- ---------- -----------
Balance, February 28, 1997......... 5,116,075 $ 5,116,000 5,693,854 $ 5,694,000
========== =========== ========== ===========
</TABLE>
18
See accompanying summary of accounting policies
<PAGE> 7
<TABLE>
<CAPTION>
TREASURY STOCK
-------------------------
ADDITIONAL RETAINED
PAID-IN CAPITAL EARNINGS SHARES AMOUNT TOTAL
- --------------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
$8,693,000 $39,519,000 1,875,062 $ (5,339,000) $57,619,000
- 2,402,000 - - 2,402,000
- - - - -
- - 1,083,077 (2,588,000) (2,588,000)
(6,000) - (5,000) 13,000 7,000
- --------------- ----------- ---------- ------------ -----------
8,687,000 41,921,000 2,953,139 (7,914,000) 57,440,000
- (660,000) - - (660,000)
- - - - -
- - 1,012,569 (2,284,000) (2,284,000)
(43,000) - (30,000) 81,000 38,000
- --------------- ----------- ---------- ------------ -----------
8,644,000 41,261,000 3,935,708 (10,117,000) 54,534,000
- 922,000 - - 922,000
- - - - -
(6,181,000) - (3,935,708) 10,117,000 -
- --------------- ----------- ---------- ------------ -----------
$2,463,000 $42,183,000 - $ - $55,456,000
=============== =========== ========== ============ ===========
</TABLE>
19
and notes to financial statements.
<PAGE> 8
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
--------------------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................... $ 922,000 $ (660,000) $ 2,402,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation................................... 7,859,000 7,362,000 6,637,000
Provision for losses on accounts receivable.... 60,000 43,000 20,000
Loss (gain) on disposal of property and
equipment..................................... (314,000) (34,000) 475,000
Loss (recovery) of write down on property held
for disposal.................................. (212,000) - 300,000
Deferred income taxes.......................... (626,000) (943,000) (292,000)
Change in operating assets and liabilities:
Accounts and notes receivable................. (3,091,000) 783,000 (1,378,000)
Inventories................................... 6,405,000 (2,735,000) (4,957,000)
Refundable income taxes....................... - - 959,000
Prepaid expenses and miscellaneous............ 721,000 469,000 (695,000)
Other assets.................................. 508,000 716,000 228,000
Income taxes payable.......................... 122,000 (536,000) 600,000
Accounts payable and accruals................. 485,000 1,407,000 2,237,000
Changes in net assets of discontinued operations - 18,000 211,000
---------- ----------- -----------
Net cash provided by operating activities... 12,839,000 5,890,000 6,747,000
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................... (693,000) (12,064,000) (11,031,000)
Proceeds from sale of property and equipment... 898,000 58,000 443,000
---------- ----------- -----------
Net cash provided (used) by investing
activities................................. 205,000 (12,006,000) (10,588,000)
========== =========== ===========
</TABLE>
20
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE> 9
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS
(CONCLUDED)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings......... $ 14,884,000 $ 1,169,000 $ 1,073,000
Exercise of stock options.................. - 38,000 7,000
Net (repayments) borrowings under line of
credit agreement.......................... (20,095,000) 12,209,000 6,386,000
Reduction of long-term debt................ (5,090,000) (4,439,000) (4,581,000)
Purchase of treasury stock................. - (2,284,000) (2,588,000)
------------ ------------ ------------
Net cash provided (used) by financing
activities.............................. (10,301,000) 6,693,000 297,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH FOR THE YEAR 2,743,000 577,000 (3,544,000)
CASH AND CASH EQUIVALENTS, beginning of year 1,029,000 452,000 3,996,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year...... $ 3,772,000 $ 1,029,000 $ 452,000
------------ ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................... $ 3,690,000 $ 3,452,000 $ 2,706,000
Income taxes............................... $ 1,084,000 $ 1,157,000 $ 1,169,000
Non-cash investing and financing activities:
In September 1995, the Company purchased the facility it was previously leasing in Santa
Maria, California for $8,000,000, financed with mortgage notes (Note 3).
Capital expenditures of $160,000 and $310,000 are included in accounts payable at
February 29 or 28, 1996 and 1995, respectively.
</TABLE>
21
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE> 10
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
LINES OF BUSINESS
The Company is principally engaged in the growing, processing, marketing
and distribution of food products, primarily frozen vegetables and fresh
mushrooms.
Food products are distributed for resale in the retail market directly to
large national grocery chains and through food brokers to numerous independent
food stores located throughout the United States, both under the Company's
brand name and under buyers' labels, and to military commissaries in the United
States and overseas under the Company's brand name.
The Company also sells certain of its food products, directly and through
food brokers, to institutions located throughout the United States, such as
restaurants, schools, hospitals, hotels, and federal and state government
agencies.
The Company is currently operating six owned facilities in California,
Oregon, Tennessee and Utah. Although production varies with the seasons at the
respective frozen vegetable plants, all the facilities operate during a
substantial part of the year. In addition, the Company purchases and sells
certain products under reciprocal supply agreements with other food processors.
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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company classifies cash
on hand, savings and checking accounts and short-term investments with initial
maturities of less than 90 days as cash equivalents.
INVENTORY VALUATION
Substantially all of the Company's inventories are valued at the lower of
cost (first-in, first-out) or market. Market for finished goods is based on
net realizable value; raw materials and growing crops are based on replacement
cost.
PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation and amortization
on property and equipment are computed principally on the straight-line method
for financial reporting purposes over the following estimated useful lives:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
- ------------ -----
<S> <C>
Buildings................................... 5-60
Machinery and equipment..................... 3-13
</TABLE>
For income tax purposes, depreciation on property and equipment is
computed primarily on accelerated methods.
The Company continually reviews plant and equipment to determine that the
carrying values have not been impaired.
22
<PAGE> 11
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)
REVENUE RECOGNITION
Sales and related cost of sales are recognized primarily upon shipment of
products.
PRODUCT INTRODUCTION AND MARKETING COSTS
In connection with the introduction of new product lines or the expansion
of its market position in the United States, the Company historically deferred
and amortized product introduction and related costs over a twelve-month
period. In February 1997, the Company began expensing such costs in the period
incurred due to the increasingly competitive nature of the industry which has
resulted in the inability to reasonably estimate the period benefited by these
costs. The effect of this change was to decrease after-tax net income for the
year ended February 28, 1997, by $551,000.
PENSION PLANS
The Company has separate defined contribution pension plans for hourly
non-clerical employees and for salaried and hourly clerical employees. The
Company funds pension costs as accrued. See Note 8 - Other Benefit Plans.
TAXES ON INCOME
The Company provides for estimated income taxes payable or refundable on
current year income tax returns and for the estimated future tax effects
attributable to temporary differences and carryforwards. Measurement of
deferred income taxes is based on enacted tax laws and tax rates, with the
measurement of deferred income tax assets being reduced by estimated amounts of
tax benefits not likely to be realized.
STOCK OPTIONS
Stock options have been granted to certain key employees at the prevailing
market price on the date of the grant. Proceeds from the sale of unissued
common stock under these options are credited to common stock and additional
paid-in capital at the time the options are exercised. If treasury stock is
issued, the Company credits cost of treasury stock and charges additional
paid-in capital for the excess of cost over the option price. The Company
makes no charge to earnings with respect to these options. See Note 8 - Other
Benefit Plans.
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common
shares outstanding during each year. Common stock equivalents in the form of
stock options are also considered in the computation when the effect is
dilutive.
23
<PAGE> 12
UNITED FOODS, INC.
SUMMARY OF ACCOUNTING POLICIES
(CONCLUDED)
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"). This
statement simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion No. 15, "Earnings Per Share," as the
presentation of primary and fully-diluted EPS is replaced with Basic and
Diluted EPS. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.
FAS 128 is effective for financial statements issued for periods ending
after December 15, 1997. The Company will adopt FAS 128 in financial
statements issued for the year ending February 28, 1998. If the provisions of
FAS 128 had been applied to the year ended February 28, 1997, estimated Basic
EPS and Diluted EPS would have been $.08.
24
<PAGE> 13
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. RECEIVABLES
Activity in the allowance for possible losses is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of year........... $260,000 $235,000 $215,000
Charged to expense..................... 60,000 43,000 21,565
Balances written off, net of recoveries (12,000) (18,000) (1,565)
--------- --------- ---------
Balance at end of year................. $308,000 $260,000 $235,000
========= ========= =========
</TABLE>
NOTE 2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Finished products....... $30,807,000 $36,863,000
Raw materials........... 2,525,000 3,129,000
Growing crops........... 2,111,000 1,948,000
Merchandise and supplies 1,251,000 1,159,000
------------ ------------
$36,694,000 $43,099,000
============ ============
</TABLE>
25
<PAGE> 14
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
--------------------------
1997 1996
----------- ------------
<S> <C> <C>
6.97% term note, payable in quarterly installments
of $643,000, plus interest, through July 1999,
collateralized by certain trade receivables,
inventory, farms and equipment located in
California, Oregon and Utah (approximate carrying
value of $8,000,000)............................... $ 6,429,000 $ 9,000,000
9.10% term note, payable in monthly installments of
$194,000 through March 1998, and $148,000
thereafter, including interest, through March 2007,
collateralized by certain real estate and equipment
located in Bells, Tennessee (approximate carrying
value of $27,100,000).............................. 15,000,000 8,965,000
9.25% term notes, payable in monthly installments
of $82,000, including interest, through October
2010, collateralized by certain real estate and
equipment located in California (approximate
carrying value of $7,300,000)...................... 7,649,000 7,916,000
8.98% term note, payable in monthly installments of
$61,000, including interest, through January 2007,
collateralized by certain real estate and equipment
located in Ogden, Utah (approximate carrying value
of $1,900,000)..................................... 6,000,000 -
6.48% term note, payable in quarterly installments
of $179,000, plus interest, through October 1999,
collateralized by certain real estate and equipment
located in West Tennessee (approximate carrying
value of $1,300,000)............................... 1,403,000 2,427,000
$18 million revolving credit note payable to bank
($23,000,000 in 1996), collateralized by certain
trade receivables and inventories; borrowing limit
$18,000,000, due June 1999, with interest at the
bank's prime rate (8.25% at February 28, 1997)
(approximate carrying value of $45,400,000)........ - 17,095,000
$3 million revolving credit note payable to bank,
collateralized by certain trade receivables,
inventory, farms and equipment located in
California, Oregon and Utah, due August 1999, with
interest at 1.3% over the Term Federal Funds rate
(6.3% at February 28, 1997) (approximate carrying
value of $7,400,000)............................... - 3,000,000
Deferred compensation agreements and miscellaneous
notes, with interest at prime (8.25% at February
28, 1997) (Note 8)................................. 4,535,000 2,914,000
----------- -----------
Totals............................................... 41,016,000 51,317,000
Less current maturities.............................. (4,772,000) (4,667,000)
----------- -----------
Long-term debt, less current maturities.............. $36,244,000 $46,650,000
=========== ===========
</TABLE>
26
<PAGE> 15
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. LONG-TERM DEBT (CONTINUED)
Principal payments required to be made for each of the next five fiscal
years and thereafter are summarized as follows:
<TABLE>
<S> <C>
1998............................................ $ 4,772,000
1999............................................ 4,427,000
2000............................................ 2,508,000
2001............................................ 1,333,000
2002............................................ 1,454,000
After 2002...................................... 26,522,000
------------
Total........................................... $41,016,000
</TABLE>
In January 1997, the Company modified the 9.10% term loan. The
modification lowered the interest rate from 10.00%, extended the term to March
2007, and increased the principal amount of the note to $15,000,000.
The terms of various notes include certain negative covenants which
provide for, among other things, restrictions relating to the maintenance of
minimum levels of working capital and equity, payment of dividends and the
incurrence of additional indebtedness. Under the most restrictive of these
provisions, retained earnings of $35,302,000 is restricted at February 28,
1997.
NOTE 4. COMMON STOCK
Each Class B common share is convertible into one share of Class A common
stock at the holders' election. Holders of the Class A common stock are
entitled to a preference dividend of $.025 per share for any quarter and each
preceding quarter of the Company's fiscal year before the holders of the Class
B common stock are entitled to any regular cash dividend. With respect to
election of directors, holders of Class A common stock are entitled to elect
25% of the directors, and holders of Class B common stock are entitled to elect
the remaining directors. On matters requiring the classes to vote together,
the Class A holders are entitled to 1/10 vote per share and holders of Class B
common stock are entitled to one vote per share.
The Company has an incentive stock option plan for granting key employees
options to purchase shares of the Company's Class A common stock. The exercise
price of the incentive stock options is the fair market value of the Class A
common stock on the date the option is granted. Options are exercisable upon
issuance and expire up to ten years from the date granted. See Note 8 - Other
Benefit Plans.
27
<PAGE> 16
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4. COMMON STOCK (CONTINUED)
Class A common shares reserved for issuance of options and unexercised
outstanding options were as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- ------------
<S> <C> <C>
Outstanding, February 28, 1994 924,384 $1.25
Exercised..................... (5,000) 1.25
--------
Outstanding, February 28, 1995 919,384 1.25
Exercised..................... (30,000) 1.25
--------
Outstanding, February 29, 1996 889,384 1.25
Cancelled..................... (10,000) 1.25
--------
Outstanding, February 28, 1997 879,384 1.25
========
</TABLE>
All of the options outstanding expire in December 1997. The holders of
the 829,384 options agreed not to exercise their options and the remaining
50,000 options will expire in April 1997 if not exercised by a former employee.
At February 28, 1997, 77,616 options are available for grant under the
incentive stock option plan.
NOTE 5. TAXES ON INCOME
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal.................... $1,006,000 $ 498,000 $1,625,000
State...................... 206,000 71,000 242,000
---------- ---------- ----------
1,212,000 569,000 1,867,000
---------- ---------- ----------
Deferred:
Federal.................... (502,000) (868,000) (261,000)
State...................... (124,000) (75,000) (31,000)
---------- ---------- ----------
(626,000) (943,000) (292,000)
---------- ---------- ----------
Income tax expense (benefit) $ 586,000 $(374,000) $1,575,000
========== ========== ==========
</TABLE>
28
<PAGE> 17
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5. TAXES ON INCOME (CONTINUED)
The components of the net deferred income tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......... $ - $ 766,000
Jobs and other tax credit carryforwards... 3,399,000 3,445,000
Inventory overhead adjustment............. 466,000 659,000
Accrued vacation.......................... 458,000 475,000
Deferred compensation..................... 1,699,000 1,072,000
Other..................................... 661,000 799,000
------------ ------------
Total deferred income tax assets........... 6,683,000 7,216,000
------------ ------------
Deferred income tax liabilities:
Fixed asset basis difference.............. (10,334,000) (10,873,000)
LIFO spread adjustment.................... - (313,000)
Product introduction allowances........... - (254,000)
Other..................................... (115,000) (168,000)
------------ ------------
Total deferred income tax liabilities...... (10,449,000) (11,608,000)
------------ ------------
Net deferred income tax liabilities........ (3,766,000) (4,392,000)
Current deferred income tax asset.......... 1,255,000 777,000
------------ ------------
Net long-term deferred income tax liability $ (5,021,000) $ (5,169,000)
============ ============
</TABLE>
29
<PAGE> 18
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5. TAXES ON INCOME (CONTINUED)
The effective tax rate on income before taxes on income is different from
the federal statutory tax rate. The following summary reconciles taxes at the
federal statutory tax rate with the effective rate:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
---------------------------------
1997 1996 1995
PERCENT PERCENT PERCENT
--------- --------- ---------
<S> <C> <C> <C>
Taxes on income at statutory rate.................. 34.0 34.0 34.0
Increase (reduction) resulting from:
State income taxes, net of federal tax benefit 2.2 0.3 3.5
Fuels and jobs tax credits....................... (3.3) 3.2 (1.0)
Other items...................................... 5.9 (1.3) 3.1
--------- --------- ---------
Taxes on income (benefit) at effective rate........ 38.8 36.2 39.6
========= ========= =========
</TABLE>
NOTE 6. EARNINGS PER SHARE AND CAPITAL STOCK
Earnings per share of common stock and common stock equivalents have been
computed using 11,077,372 shares in 1997, 11,470,173 shares in 1996, and
12,480,161 shares in 1995, which represent the weighted average number of
shares of Class A and Class B common stock required to be recognized during the
respective periods. The effect of shares issuable under the stock option plan
was excluded for 1996 as the effect would be anti-dilutive, and were included
in computing the weighted average number of shares for 1995 and 1997. The
effect was included in 1997 due to the fact that the agreements to allow
options to expire were not signed until late February 1997.
In August 1996, the Company amended its certificate of incorporation to
reduce the number of authorized shares of Class A and Class B Common Stock to
12,000,000 and 6,000,000 shares, respectively. As a result of this amendment,
the Company retired 2,539,382 and 1,396,326 Treasury shares of the Company's
Class A and Class B Common Stock, respectively.
In May 1994, the Company commenced a tender offer, which was completed in
June 1994, to repurchase 956,401 shares of Class A and 126,674 shares of Class
B common stock at a cost of $2.25 per share, plus expenses of approximately
$150,000. In November 1995, the Company purchased 831,169 shares of Class A
and 181,400 shares of Class B common stock at a cost of $2.25 per share, plus
expenses of approximately $5,000. The Company funded the purchases of these
shares from borrowings under a $23,000,000 revolving credit facility, which was
reduced to $18,000,000 effective February 1997.
30
<PAGE> 19
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7. LEASES
The Company leases certain property, including land used in farming
operations, and equipment under noncancellable leases which expire at various
dates to 2013. In most cases, management expects that in the normal course of
business, leases that expire will be renewed or replaced by other leases.
The future minimum lease payments required under operating leases that
have initial or remaining noncancellable terms in excess of one year were as
follows:
<TABLE>
<CAPTION>
YEAR ENDING FEBRUARY 28 OR 29,
- ------------------------------
<S> <C>
1998.......................... $ 2,638,000
1999.......................... 2,350,000
2000.......................... 2,241,000
2001.......................... 2,173,000
2002.......................... 1,391,000
After 2002.................... 3,068,000
------------
Total minimum lease payments.. $13,861,000
</TABLE>
Rent expense under operating leases amounted to $3,552,000, $4,066,000 and
$4,212,000 for the years ended February 28, 1997, February 29, 1996 and
February 28, 1995, respectively.
Certain leases contain renewal options and some have purchase options, and
generally provide that the Company shall pay for insurance, taxes and
maintenance.
NOTE 8. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has a defined contribution pension plan for hourly
non-clerical employees. Contributions to the plan are based upon hours worked
during the plan year and participants may make voluntary contributions to the
plan of up to 10% of their compensation (as defined). The Company pays all
administrative expenses related to the plan. Costs of the plan charged to
operations for fiscal 1997, 1996 and 1995 amounted to approximately $463,000,
$492,000, and $445,000, respectively.
The Company also provides either an unfunded management retirement
compensation plan or a funded defined contribution pension plan for salary and
hourly clerical employees. Company contributions to the plans are discretionary
but may not exceed 15% of participants' compensation. Participants may make
voluntary contributions up to 10% and 25% of their compensation (as defined) to
the funded and unfunded plans, respectively. Costs of these plans charged to
operations for fiscal 1997 and 1995 amounted to approximately $94,000 and
$317,000, respectively. No costs were charged to operations for fiscal 1996.
INCENTIVE PLANS
The Company has an incentive compensation plan which covers 37 key
employees. The costs of the plan are computed in accordance with a formula
which incorporates return on average assets and return on equity. Costs of the
plan charged to operations for fiscal 1997, 1996 and 1995 were approximately
$241,000, $126,000 and $484,000, respectively.
31
<PAGE> 20
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8. EMPLOYEE BENEFIT PLANS (CONTINUED)
OTHER BENEFIT PLANS
The Company also has two deferred compensation plans which permit
directors and certain management employees to defer portions of their
compensation and earn a guaranteed interest rate on the deferred amounts. The
salaries, which have been deferred since the inception of the plans, have been
accrued and the primary expense, other than salaries, related to these plans is
interest on the deferred amounts. Interest is calculated at prime (8.25% at
February 28, 1997). Interest expense during fiscal 1997, 1996 and 1995
includes $175,500, $139,700 and $69,900, respectively, related to these plans.
In February 1997, the Company adopted a non-contributory, unqualified
supplemental retirement plan for management employees, whereby an amount
specified by the board of directors is held in a deferred compensation account
for each covered employee to be paid either in a lump sum or in approximate
equal installments over ten years at the date of such employee's retirement
from the Company. The board of directors specified that each management
employee currently holding the Company's incentive stock options be offered the
alternative of receiving deferred compensation under the plan in an amount
equal to $1 for each unexercised stock option currently held. Any employee
electing to so participate was required to agree not to exercise the related
options through the option expiration date in December 1997. As of February
28, 1997, employees holding 829,384 options had elected to participate in this
new deferred compensation plan, resulting in a charge to operations of
$829,384.
During fiscal 1995, the Company approved a non-contributory, unqualified
supplemental retirement plan for eight officers whereby a calculated amount is
held in a deferred salary account for each covered officer. The calculation
provides an amount sufficient to adjust the officers' annual United Foods,
Inc.-sourced after income tax earnings for 1993 and each year thereafter to the
level it would have been using 1992 federal tax rates, assuming standard
deductions and no other income. The deferred salary will be paid in
approximate equal installments over ten years at the later of such officer's
date of disability as defined, termination from the Company, or 65th birthday.
The expense for this plan in fiscal 1997, 1996 and 1995 was $330,000, $378,400
and $522,900, respectively.
The Company has included $4,435,000 and $2,780,000 in long-term debt at
February 28, 1997 and February 29, 1996, respectively, to reflect its liability
under these unfunded plans.
NOTE 9. COMMITMENTS AND CONTINGENCIES
A. SALES AND MAJOR CUSTOMER
A large part of the Company's sales are made in the retail market and a
significant proportion of the retail grocery trade in the United States is
concentrated in the hands of national grocery chains. As such, a large part of
the Company's revenue is derived from sales to these chains. Sales to one of
the Company's customers totaled $22,328,000, $20,977,000 and $21,370,000,
representing 11.4%, 10.9% and 11.2% of total Company revenues in 1997, 1996 and
1995, respectively. Competition results in changes in the Company's customer
base over time and it is, therefore, possible that the Company may lose one or
more of its largest customers over time and, as a result, operations could be
materially impacted.
32
<PAGE> 21
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
B. PRODUCT PROCUREMENT AND AVAILABILITY
Crops have seasonal features and availability is subject to unpredictable
changes in growing conditions that are inherent in the agriculture industry.
The Company bears part of the growing risks and all of the processing and
marketing risks associated with its agricultural products. Weather
abnormalities and other adverse growing conditions sometimes result in
substantial reductions in the annual volumes processed in the Company's plants.
When this occurs, the Company may have to procure raw and processed vegetables
from alternative sources at higher than expected costs and the reduced volume
of vegetables processed in the Company's plants results in increased unit
costs. When growing conditions result in yields that exceed expectations, the
Company will generally pack only volumes required by anticipated demand through
the next pack season. Additionally, selling prices are impacted by
industry-wide production and inventory levels. Bumper crops and resulting
increased inventory levels will tend to decrease average selling prices, while
crop shortages will generally result in increased selling prices.
C. LEGAL PROCEEDINGS
There are several lawsuits against the Company on a variety of matters.
While it is not feasible to predict the ultimate outcome of these matters with
certainty, based on evaluations of the facts and on advice of counsel handling
the defense of these matters, the Company does not believe their outcome will,
in the aggregate, have a material adverse effect on its financial position or
its results of operations.
D. SUPPLY AGREEMENTS
The Company has entered into two multi-year reciprocal supply agreements
with other food processing companies. Through these agreements the Company
procures frozen vegetables to meet production and inventory requirements.
Also, the Company sells frozen vegetables processed at the Company's Tennessee
and California facilities to the other food processors.
E. WORKERS' COMPENSATION
The Company is self-insured for workers' compensation claims up to
$300,000 each. Provisions for expected future payments are accrued based on
the Company's estimate of its aggregate liability for all open claims. The
Company has secured its liability for potential workers' compensation claims in
the states where they are self-insured by obtaining bonds totaling
approximately $2,700,000.
NOTE 10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments bearing a variable interest rate, it is presumed
that recorded book values are reasonable estimates of fair value. For all
other financial instruments, the following methods and assumptions are used to
estimate fair values:
Cash and cash equivalents, receivables, accounts payable and accruals -
Recorded book values are a reasonable estimate of fair value.
33
<PAGE> 22
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
NOTE 10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Long-term debt - Current market values for debt instruments with fixed
interest rates are estimated based on borrowing rates currently available to
the Company for loans with similar terms. At February 28, 1997, the estimated
fair value of debt instruments with fixed interest rates was approximately
$37,353,000 as compared with the carrying value of such instruments of
$36,481,000.
The remaining assets and liabilities of the Company are not considered
financial instruments and have not been valued differently than is customary
under historical cost accounting.
NOTE 11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
-----------------------------------------------------
YEAR ENDED FEBRUARY 28, 1997: 1ST 2ND 3RD 4TH
- ------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues........................... $48,708,000 $42,628,000 $52,669,000 $51,815,000
Gross profit....................... 8,867,000 7,819,000 10,013,000 10,001,000
Income from operations before
taxes on income.................. 159,000 42,000 925,000 382,000
Net income......................... 98,000 26,000 570,000 228,000
EARNINGS PER SHARE OF COMMON
STOCK AND COMMON STOCK
EQUIVALENTS:
Net income....................... .01 .00 .05 .02
YEAR ENDED FEBRUARY 29, 1996:
- ------------------------------
Revenues........................... $44,819,000 $39,885,000 $52,847,000 $54,163,000
Gross profit....................... 9,176,000 7,396,000 8,483,000 11,316,000
Income (loss) from operations
before taxes on income
(benefit)........................ 523,000 (914,000) (1,147,000) 504,000
Net income (loss).................. 316,000 (552,000) (712,000) 288,000
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK AND COMMON STOCK
EQUIVALENTS:
Net income (loss).................. .03 (.05) (.06) .03
</TABLE>
As discussed in Note 8, the Company recorded a charge to operations of
$829,000 ($507,000, or $.05 per share, effect on after-tax net income) in the
fourth quarter of 1997 related to a new unqualified supplemental retirement
plan.
In addition, as discussed under "Product Introduction and Marketing Costs"
in the Summary of Accounting Policies, the Company began expensing such costs
in February 1997, the effect of which was to decrease after-tax net income for
fiscal 1997 by $551,000, or $.05 per share.
34
