As filed with the Securities and Exchange Commission on August 7, 1998
Registration No. 333-58739
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================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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SENECA FOODS CORPORATION
(Exact name of registrant as specified in its charter)
New York 0-1989 16-0733425
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code No.) Identification No.)
1162 Pittsford-Victor Road
Pittsford, New York 14534
(716) 385-9500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
KRAIG H. KAYSER
President and Chief Executive Officer
1162 Pittsford-Victor Road
Pittsford, New York 14534
(716) 385-9500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
WILLIAM I. SCHAPIRO, Esq.
COLLEEN A. VAN GELDER, Esq.
Jaeckle Fleischmann & Mugel, LLP
800 Fleet Bank Building, Twelve Fountain Plaza
Buffalo, New York 14202
(716) 856-0600
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Share Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Rights to purchase shares of
Convertible Participating Preferred
Stock, stated value $12.00 per share ---- ----- ----- -----
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Convertible Participating Preferred
Stock, stated value $12.00 per share ---- ----- ----- -----
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Class A Common Stock, par value
$0.25 per share ---- ----- $50,000,004 $14,750.00
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<FN>
(1) This Registration Statement also covers such indeterminate number of
additional shares as may be required to be issued upon exercise of rights as a
consequence of rounding.
(2) The Convertible Participating Preferred Stock are convertible
immediately on a share-for-share basis into shares of Class A Common Stock.
(3) No fee or consideration is required to be paid for the Rights.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
SENECA FOODS CORPORATION
5,939,680 Rights to acquire shares of Convertible Participating
Preferred Stock, with $0.025 par value per share.
4,166,667 shares of Convertible Participating Preferred Stock with
$0.025 par value per share.
4,166,667 shares of Class A Common Stock, $0.25 par value per
share.
Seneca Foods Corporation (the "Company") is distributing to
holders of record of its Class A Common Stock, $0.25 par value per share ("Class
A Common Stock") and Class B Common Stock, $0.25 par value per share ("Class B
Common Stock and, together with the Class A Common Stock, the "Common Stock"),
as of the close of business on July 13, 1998 (the "Record Date"), transferable
rights (the "Rights") to subscribe for and purchase shares of Convertible
Participating Preferred Stock, with $0.025 par value per share, Class A (the
"New Preferred Stock") which is immediately convertible on a share-for-share
basis into shares of Class A Common Stock (the "Rights Offering").
Shareholders of record will receive one-half of a Right for each
share of Common Stock held by them as of the Record Date. Each whole Right will
entitle the holder to purchase one share of New Preferred Stock for $12.00 per
share (the "Subscription Price"). No fractional Rights or cash in lieu thereof
will be distributed or paid by the Company. The number of Rights distributed to
each holder of Common Stock will be rounded up to the nearest whole number. As a
consequence of such rounding, the total number of shares that may be issued
pursuant to the Rights Offering may be increased by up to 269 shares. Once a
holder has exercised Rights, such exercise may not be revoked. Unless the Rights
Offering is extended, the Rights will expire at 5:00 pm, Eastern Daylight Time,
on August 27, 1998, the twentieth calendar day after commencement of the
Rights Offering.
The Company's Class A Common Stock is traded in the
over-the-counter market and quoted on the Nasdaq National Stock Market under the
symbol "SENEA." On August 3, 1998, the average of the high and low sales prices
of the Class A Common Stock as reported by the Nasdaq National Stock Market was
$13.125 per share. The New Preferred Stock will not pay regular dividends
(except for dividends paid at the same rate and at the same time as dividends
paid on the Company's Common Stock) and will be convertible on a share-for-share
basis into the Company's Class A Common Stock at any time. The New Preferred
Stock does not have any voting rights. Neither the Rights nor the New Preferred
Stock will be listed on an exchange.
<PAGE>
See "Risk Factors" commencing on page 9 for certain factors and
considerations relevant to an investment in the Rights, the New Preferred Stock
and the Class A Common Stock offered hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE
<TABLE>
<CAPTION>
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Proceeds to
Price to Company(1)(2)
Public Minimum(3) Maximum(2)(4)
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<S> <C> <C> <C>
Per Share............................ $ 12.00 $ 12.00 $ 12.00
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Total................................ $ $44,000,004 $50,000,004
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<FN>
(1) The securities registered hereunder are being offered and sold directly
by the Company, and no commission or other remuneration will be paid to
any person for soliciting purchases.
(2) Before deducting expenses payable by the Company, estimated at $310,000.
(3) Assumes the sale only of the 1,166,667 shares that the New Investors
(as hereinafter defined) are obligated to purchase under the Stock
Purchase Agreement (as hereinafter defined) and the 2,500,000 shares
under the Rights Offering that are the subject of commitments of the
New Investors.
(4) Assumes the sale of the 1,166,667 shares that the New Investors are
obligated to purchase under the Stock Purchase Agreement and all of the
shares being offered in the Rights Offering without adjustment for
rounding.
</FN>
</TABLE>
The date of this Prospectus is August 7, 1998.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected at, and,
upon payment of the Commission's customary charges, copies obtained from, the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
DC 20549. Such reports, proxy statements and other information are also
available for inspection and copying at prescribed rates at the Commission's
regional offices in New York, New York (Seven World Trade Center, 13th Floor,
New York, New York 10048) and in Chicago, Illinois (Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661-2511). The Commission maintains
a Web site (http://www.sec.gov) that also contains reports, proxy statements and
other information concerning the Company. In addition, the Company's Class A
Common Stock and Class B Common Stock are listed on the Nasdaq National Stock
Market under the symbols "SENEA" and "SENEB," respectively and reports and other
information can be inspected and copies made at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, with respect to the New Preferred Stock, Class A Common Stock, and
the Rights offered hereby. This Prospectus constitutes the Prospectus of the
Company, filed as part of the Registration Statement. As permitted by the rules
and regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement, and reference is made to the
Registration Statement and the exhibits listed therein, which can be inspected
at the public reference facilities of the Commission noted above, and copies of
which can be obtained from the Commission at prescribed rates as indicated
above. Statements contained in this Prospectus as to the contents of any
contract or other documents are not necessarily complete, and in each instance,
reference is made to the copy of such contract or document filed as an exhibit
or appendix to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company will furnish holders of the securities offered hereby with
annual reports containing, among other information, audited financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited financial information for the first three quarters of each
fiscal year. The Company will also furnish such other reports as it may
determine or as may be required by law.
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<PAGE>
No dealer, salesman, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus, and
any information or representation not contained herein must not be relied upon
as having been authorized by the Company. This Prospectus does not constitute an
offer to sell, or a solicitation of any offer to buy, any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any date subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date or,
in the case of information incorporated herein by reference, the date of filing
with the Commission.
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.................................................... 2
PROSPECTUS SUMMARY....................................................... 5
RISK FACTORS............................................................. 9
DESCRIPTION OF THE TRANSACTION........................................... 23
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................. 33
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS............................................ 35
USE OF PROCEEDS.......................................................... 35
CAPITALIZATION........................................................... 36
PLAN OF DISTRIBUTION..................................................... 37
DESCRIPTION OF CAPITAL STOCK............................................. 38
THE COMPANY.............................................................. 45
MANAGEMENT'S DISCUSSION AND ANALYSIS..................................... 51
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY..................... 54
DIRECTORS AND EXECUTIVE OFFICERS......................................... 54
OWNERSHIP OF SECURITIES.................................................. 59
LEGAL MATTERS............................................................ 66
EXPERTS ................................................................ 66
INDEX TO FINANCIAL STATEMENTS............................................F-1
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. Unless the context otherwise
requires, all references in this Prospectus to the "Company" shall mean Seneca
Foods Corporation and its subsidiaries on a consolidated basis. This Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. The Company's actual results
could differ materially from those set forth in the forward-looking statements.
See "Risk Factors" for a discussion of certain factors that might cause such
a difference.
The Company
The Company, which was founded in 1949, conducts its business almost
entirely in food processing, which currently accounts for approximately 99% of
the Company's sales. Canned and frozen vegetables represent approximately 78%
and fruit and fruit juice products approximately 22%, of the Company's food
processing volume. Apple products contribute approximately 10% of the Company's
sales; the Company's Seneca(R) brand frozen apple concentrate is the
largest-selling brand of frozen apple concentrate in the United States. Of the
remaining sales in the fruit and fruit juice products, grape products account
for approximately 2%, and bottled, canned and frozen fruit juice drinks account
for approximately 10% of the Company's sales.
Approximately 19% of the Company's food products are packed under its
own brands including Seneca(R), Libby's(R) (under license), Aunt Nellie's Farm
Kitchen(R), Blue Boy(R) and TreeSweet(R). Approximately 30% of the processed
foods are packed under private labels, that is, under brand names owned or
controlled by the purchasers, and approximately 11% are sold to institutional
food distributors. The remainder, approximately 40%, is packed pursuant to a 20
year First Amended and Restated Alliance Agreement dated December 8, 1994 as
amended on February 10, 1995, February 25, 1997 and July 1, 1998 (the "Alliance
Agreement") with The Pillsbury Company ("Pillsbury") and Grand Metropolitan
Incorporated ("GMI"), the parent of Pillsbury (on those dates) and a
wholly-owned subsidary of Grand Metropolitan plc and carry Pillsbury's Green
Giant(R) brand name. See "Risk Factors--Dependence on Alliance Agreement."
The Company's sole non-food division, Seneca Flight Operations,
provides air charter service primarily to industries located in upstate New York
and contributes approximately 1% to the Company's sales. The address and
telephone number of the Company's principal executive offices are: 1162
Pittsford-Victor Road, Pittsford, New York 14534, (716) 385-9500.
The Company maintains a website at www.senecafoods.com.
The Offering
The Rights Offering. The Board of Directors of the Company has
determined to make a Rights Offering to the holders of its Common Stock, whereby
each holder of Common Stock will receive one-half of a right (the "Right") to
purchase for the Subscription Price, shares of the New Preferred Stock. The
shares of New Preferred Stock will be immediately convertible on a share-for-
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<PAGE>
share basis into shares of Class A Common Stock. The Company will distribute
one-half of a Right for each share of Common Stock held of record as of the
Record Date. Each whole Right will entitle the holder thereof (a "Rights
Holder") to receive upon payment of the Subscription Price, one share of New
Preferred Stock. The Rights will be evidenced by subscription certificates which
are transferable by the holders thereof ("Subscription Certificates"). Unless
the Rights Offering is extended, the Rights that are not exercised by the
holders thereof will expire at 5:00 p.m., Eastern Daylight Time, on August 27,
1998 (the twentieth calendar day after commencement of the Rights Offering) (the
"Expiration Date"). Rights may be exercised by delivering to Sarah S. Mortensen
(the "Subscription Agent"), on or before the Expiration Date, the properly
completed Subscription Certificate evidencing such Rights with any required
signatures guaranteed, together with payment in full of the Subscription Price.
Once a Rights Holder has exercised the subscription privilege, such exercise may
not be revoked. The Rights may be purchased or sold through usual investment
channels, including banks and brokers. Resales of the Rights have not been
registered with the Commission.
The Stock Purchase Agreement and its Relationship to the Rights
Offering. The Company has entered into a Stock Purchase Agreement dated as of
June 22, 1998 (the "Stock Purchase Agreement") with Carl Marks Strategic
Investments, L.P., and related entities (collectively, the "New Investors")
whereby, subject to the terms and conditions of the Stock Purchase Agreement,
the New Investors have agreed to (i) purchase 1.167 million shares of New
Preferred Stock at a price of $12.00 per share (for total consideration of $14
million) and (ii) purchase at $12.00 per share up to 2.5 million shares of New
Preferred Stock which the Company's shareholders do not purchase in the Rights
Offering. If not less than 2.5 million shares become available for purchase by
the New Investors, their total purchase price for the 2.5 million shares will be
$30 million. Pursuant to the terms of the Stock Purchase Agreement, the New
Investors have the right to purchase up to 1,181,996 shares of New Preferred
Stock (the "Option Shares"). The Option Shares may be purchased at any time
prior to the closing of the Transaction (as hereinafter defined) and may be
purchased even if shareholder approval of the Rights Offering and Charter
Amendments (as hereinafter defined) is not obtained. The Company will not be
required to issue in connection with the Stock Purchase Agreement (including the
Option Shares) and the Rights Offering more than 4,166,667 shares of New
Preferred Stock, or a total sale of up to $50,000,004 (the "$50 Million Limit")
to the New Investors and to shareholders who exercise their purchase rights
under the Rights Offering. This limitation affects only the purchase rights of
the New Investors. Each of the Company's shareholders who is issued Rights under
this Rights Offering may exercise all Rights so received, except for those
shareholders who have agreed not to exercise their Rights as described in the
following paragraphs.
Concurrently with the Stock Purchase Agreement, the Company and
certain of its substantial shareholders, including the New Investors, and the
Related Marks Shareholders (as hereinafter defined) entered into a Shareholders
Agreement (the "Shareholders Agreement") whereby certain substantial holders of
the Company's stock, including members of the Wolcott and Kayser families who
control the Company, agreed that they would not exercise, sell or otherwise
transfer the Rights to which they were entitled pursuant to the terms of the
Rights Offering and will vote all of their voting securities in favor of the
Transaction (as hereinafter defined) in any shareholder vote of the Company. In
a separate agreement,
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<PAGE>
Pillsbury has also agreed that it will not exercise, sell or otherwise transfer
the Rights to which it is entitled pursuant to the terms of the Rights Offering
and that it will vote all of its voting securities in favor of the Transaction
(as hereinafter defined) in any shareholder vote of the Company (the "Pillsbury
Agreement"). The Stock Purchase Agreement (including the purchase of the Option
Shares by the New Investors), Shareholders Agreement and the Rights Offering are
sometimes collectively referred to herein as the "Transaction."
Inasmuch as certain of the Company's shareholders have agreed not to
exercise, sell or otherwise transfer their Rights distributed on their present
holdings of 1,620,747 shares of Common Stock pursuant to the Shareholders
Agreement and the Pillsbury Agreement, the New Investors are assured of
acquiring not less than 1,977,041 shares of New Preferred Stock in the
Transaction, and, subject to the $50 Million Limit, may purchase additional
shares of New Preferred Stock.
Assuming none of the Company's shareholders exercise their Rights, the
New Investors will be entitled to purchase 3.667 million shares of New Preferred
Stock which if immediately converted into 3.667 million shares of Class A Common
Stock would give the New Investors ownership of 4.6% of the voting power of the
Company. The combined voting power of the New Investors and the Related Marks
Shareholders in the election of directors will be 16.6% (assuming conversion of
the New Preferred Stock into Class A Common Stock).
The consummation of the Transaction results in significant
participation by the New Investors in the governance of the Company. The number
of directors comprising the Company's Board of Directors will be increased from
seven to nine members, with the two new positions being filled by designees of
the New Investors (the "Investor Designees"). The Investor Designees will
continue to be nominated for election to the Board and shareholders who executed
the Shareholders Agreement will continue to vote for the Investor Designees
until the Stock Purchase Agreement is terminated or such time as the New
Investors no longer own, in the aggregate, at least 10% of the Class A Common
Stock (assuming conversion of all shares of the New Preferred Stock into Class A
Common Stock). The Shareholders Agreement also requires that the Investor
Designees will comprise at least 22% of any committee of the Board of Directors.
The New Investors also required as a condition to consummation of the
Transaction, that the Company's Restated Certificate of Incorporation, as
amended (the "Charter") be amended to require unanimous approval of the
Company's Board of Directors (excluding directors who choose to abstain) for
certain defined "major corporate actions", including (i) any amendment or
modification to the Company's Charter or Bylaws (as hereinafter defined); (ii)
any business combination; (iii) any sale or transfer of all or substantially all
of the assets of the Company; (iv) certain issuances of securities; (v) any
acquisitions or dispositions of assets involving gross consideration in excess
of $15 million; (vi) certain changes in the Company's line of business; (vii)
any change in the Company's certified public accountants; (viii) the settlement
of certain litigation; or (ix) the commencement by the Company of proceedings
relating to bankruptcy, insolvency, reorganization or relief of debtors.
A shareholder who votes in favor of the Rights Offering is not
---
obligated to exercise the Rights and purchase shares of New Preferred Stock if
the Rights Offering is approved. When the Rights are issued, each shareholder
may decide at that time whether to exercise the Rights which that shareholder
receives.
The Charter Amendments. To accomplish the intent of the Transaction,
the Company will amend its Charter by filing a Certificate of Amendment (the
"Certificate of Amendment") which will: (i) increase the number
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<PAGE>
of authorized shares of Class A Common Stock from 10,000,000 shares to
20,000,000 shares; (ii) increase the number of authorized shares of Preferred
Stock with $0.025 par value per share, Class A from 4,000,000 shares to
8,200,000 shares; (iii) create a new series of Preferred Stock with $0.025 par
value per share, Class A to be designated as Convertible Participating Preferred
Stock, $0.025 par value per share, convertible immediately into shares of Class
A Common Stock of the Company; (iv) require unanimous approval of the Company's
Board of Directors to authorize certain Major Corporate Actions (as hereinafter
defined); and (v) amend Article 4, paragraph (a)(C) to remove from operation of
the Class A Special Rights (as hereinafter defined) provisions, the acquisition
by the New Investors of the shares of Class A Common Stock issuable upon
conversion of the New Preferred Stock acquired by the New Investors in the
Transaction. See "Description of Capital Stock--Description of Class A Common
Stock and Class B Common Stock--Class A Special Rights."
The Reason For The Transaction. For reasons described below (see "Risk
Factors--High Ratio of Debt to Equity"), the Company has concluded that its
level of debt should be reduced in the amount of between $44 million and $50
million. At March 31, 1998, the close of its fiscal year, the Company was in
violation of certain financial covenants in its agreements with its short and
long-term lenders. See "Risk Factors--Defaults as to Certain Loan Covenants."
The purpose of the Transaction is to apply the net proceeds of the Transaction
to reduce the Company's indebtedness. See "Use Of Proceeds."
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<PAGE>
RISK FACTORS
An investment in the Rights and the New Preferred Stock, which is
convertible into Class A Common Stock, involves various risks. Prospective
purchasers should carefully consider the following information in conjunction
with the other information appearing elsewhere in this Prospectus before making
a decision to exercise the Rights.
Impact of the Transaction on Existing Shareholders
The Subscription Price of the Rights was determined on April 3, 1998
as a result of arm's length negotiations between the Company and the New
Investors and was approved by the Board of Directors of the Company, taking into
account the financial position of the Company and the size of the Transaction.
At the time the Subscription Price was approved by the Board of Directors, the
Subscription Price was equal to approximately 70.59% of the then current market
price of the Class A Common Stock. Although on the date of this Prospectus, the
Subscription Price may be less than the market price of the Class A Common
Stock, the Subscription Price may be less than or greater than the market price
of the Class A Common Stock at any time prior to the Expiration Date (such
period commencing on the date of this Prospectus and ending on the Expiration
Date, the "Subscription Period"). The following table shows the high and low
trading price for the Class A Common Stock for the six months immediately
preceding the date of this Prospectus:
Market Price -- Nasdaq National Stock Market
High Low
---- ---
February 1998 $16.500 $15.875
March 1998 $17.625 $15.750
April 1998 $17.125 $16.750
May 1998 $16.750 $15.625
June 1998 $16.375 $13.500
July 1998 $14.500 $13.000
The consummation of the Stock Purchase Agreement and the purchase of
the Option Shares will decrease the existing shareholders' proportionate
interests in the Company (assuming conversion of the New Preferred Stock into
Class A Common Stock). Those shareholders who do not exercise their Rights will
experience an even further dilution of their proportionate interests in the
Company. If none of the Company's existing shareholders exercise their Rights,
the New Investors will purchase up to 3.667 million shares of the New Preferred
Stock which (assuming conversion of the New Preferred Stock into Class A Common
Stock) will decrease the existing shareholders' proportionate interest in the
Class A Common Stock by approximately 46.5%.
The purchase price for the New Preferred Stock is $12.00 per share
which is less than the market price and tangible book value of the Class A
Common Stock. Accordingly, the Company's existing shareholders will suffer
potential dilution to the market value and tangible book value per share of the
Common Stock.
Industry Conditions and Price and Volume Fluctuations
The Company's financial performance and growth are related to
conditions in the food processing industry, primarily the vegetable processing
industry. The United States vegetable processing industry is a mature industry
with a relatively modest compounded annual growth rate of less than 1% from 1992
to 1996. The Company's net sales are a function of product availability and
market pricing. In the vegetable processing industry, product availability and
market prices tend to have an inverse relationship: market prices tend to
decrease as more product is available and to increase if less product is
available. Product availability is a direct result of plantings, growing
conditions, crop yields and inventories, all of which vary from year to year. In
addition, market prices can be affected by the planting, inventory level and
individual pricing decisions of the three or four largest processors in the
industry. Generally, market prices in the vegetable processing industry adjust
more quickly to variations in product availability than an individual processor
can adjust its cost structure; thus, in an oversupply situation, a processor's
margins likely will weaken. The Company typically has experienced lower margins
during times of industry oversupply.
In the last three fiscal years, the vegetable processing industry has
been characterized by excess capacity, with resulting pressure on the Company's
prices and profit margins. In these years many of the Company's competitors have
closed processing plants in response to the downward pressure on prices. There
can be no assurance that the Company's margins will improve in response to
favorable market conditions or that the Company will be able to operate
profitably during depressed market conditions. See "--Losses Incurred in Fiscal
Years 1998 and 1996" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Year Ended March 31, 1998--Results
of Operations."
Dependence on Alliance Agreement
In connection with the acquisition by the Company of certain plants
and other assets of the Green Giant Division of Pillsbury, the Company entered
into the Alliance Agreement. Pursuant to the Alliance Agreement and related
agreements, the Company processes and sells to Pillsbury or Pillsbury's
designee, on a "cost plus" basis, cases of shelf-stable vegetables and processes
or partially processes certain frozen vegetables and asparagus for Pillsbury or
its designee.
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<PAGE>
In a transaction concurrent with the Alliance Agreement, the Company
acquired from Pillsbury a substantial percentage of the tangible production
assets of Pillsbury's Green Giant brand of shelf-stable and frozen vegetable
products, including six plants located in the midwestern and northwestern United
States. Additional Green Giant production assets were acquired from Pillsbury
subsequent to February 1995. All Green Giant plants referred to in this
paragraph are collectively referred to as the "Alliance Plants". Five Green
Giant production plants were retained by Pillsbury of which four have been
closed. The total purchase price for the Alliance Plants was $93.7 million, in
payment of which the Company initially paid Pillsbury $13.1 million in cash and
issued to Pillsbury an 8% Secured Nonrecourse Subordinated Promissory Note due
September 30, 2009 (the "Pillsbury Note") for the unpaid principal amount of
$80,583,000. The Pillsbury Note requires the Company to pay annual installments
of principal on each October 20 and a final major principal payment on September
30, 2009. Interest on the Pillsbury Note is required to be paid quarterly on
each of the last days of March, June, September and December. As a result of
Pillsbury's conversion of two annual principal installments totaling $6 million
into Class A Common Stock, and the payment of an annual principal installment on
the Pillsbury Note on October 20, 1997, the outstanding principal balance at
March 31, 1998 was $71,583,000.
Inasmuch as Pillsbury sold to the Company or closed substantially all
of its Green Giant production facilities and hopes to benefit under the Alliance
Agreement by paying lower product costs than it might otherwise incur, the
Company, beginning in its fiscal year ended March 31, 1996, has been a major
supplier of Pillsbury's Green Giant vegetable products. Green Giant products
packed by the Company in the Company's fiscal years ended March 31, 1997 and
March 31, 1998 constituted approximately 54% and 40%, respectively, of the
Company's sales for such period. The Company expects that, in the foreseeable
future while the Alliance Agreement remains in effect, Green Giant vegetables
will be the largest single product line of the Company.
The Alliance Agreement has an initial term ending December 31, 2014,
and will be extended automatically for additional five year terms unless
terminated in accordance with the provisions of the Alliance Agreement. Upon
virtually all of the causes of termination enumerated in the Alliance Agreement,
Pillsbury will acquire legal title to the Alliance Plants and certain of the
other assets which the Company acquired from Pillsbury, and various financial
adjustments between the parties will occur. If Pillsbury terminates the Alliance
Agreement without cause, it must pay the Company a termination payment of $20
million. Pillsbury holds mortgage and security interests in the property
transferred to the Company and any replacement property to enforce its rights
under the Alliance Agreement and the Pillsbury Note. Pillsbury will look to that
property, and not to the other property of the Company, to satisfy its claims
under the Pillsbury Note (except for damages in particular circumstances, such
as the Company's fraud or intentional misconduct, its failure to turn over
insurance or condemnation proceeds of the secured property or to turn over the
property as required by the Pillsbury Note or comply with the termination
provisions of the Alliance Agreement or under certain provisions of the
Bankruptcy Code). The Pillsbury Note has extensive provisions defining the
remedies against the Company and the relative rights of Pillsbury and the
Company's long-term insurance lenders and revolving credit bank lenders in
certain circumstances such as default by the Company.
The Company's sales and financial performance under the Alliance
Agreement and its sales of Green Giant products depend to a significant extent
on the Company's success in
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producing quality Green Giant vegetables at competitive costs and Pillsbury's
success in marketing the products produced by the Company. The ability of
Pillsbury to successfully market these products will depend upon Pillsbury's
sales efforts, as well as the factors described above under "--Industry
Conditions and Price and Volume Fluctuations." The Company cannot give assurance
as to the volume of Pillsbury's sales and cannot control many of the key factors
affecting that volume. The Alliance Agreement contains extensive covenants by
the Company with respect to quality and delivery of products, maintenance of the
Alliance Plants and other standards related to performance. If the Company were
to fail in its performance of these covenants, Pillsbury would be entitled to
terminate the Alliance Agreement.
Termination of the Alliance Agreement will, in most cases, entitle the
Company's principal lenders, including long-term insurance lenders and revolving
credit bank lenders (and other lenders whose loan agreements incorporate the
default provisions of the Company's revolving credit agreement), to declare a
default under the Company's loan agreements with them. The principal lenders
have a security interest in certain payments to be received by the Company from
Pillsbury on termination of the Alliance Agreement from Pillsbury or other
buyers of Green Giant inventory. Unless the Company were to enter into a new
substantial supply relationship with Pillsbury or another major vegetable
marketer and acquire substantial production capacity to replace the Alliance
Plants, any such termination would substantially reduce the Company's sales. If
termination were to occur while substantial indebtedness of the Company to its
long-term insurance lenders and revolving credit bank lenders were outstanding,
as is currently the case, a restructuring of the debt payment terms would likely
be necessary to avoid a payment default in addition to the default by reason of
the termination of the Alliance Agreement.
Losses Incurred in Fiscal Years 1998 and 1996
Fiscal Year 1998. For the fiscal year ended March 31, 1998, the Company
reported a net loss of $5,144,000 (loss of $0.87 per share) on sales of $703.2
million as compared to fiscal year 1997 in which the Company reported earnings
of $7.5 million (earnings of $1.27 per share) on sales of $730.2 million.
The major causes for the losses were:
(1) Lower selling prices on vegetables due to an ongoing industry
oversupply due in part to an above-budget pack for the second consecutive year.
See "--Industry Conditions and Price and Volume Fluctuations."
(2) Declines in apple product prices which were greater than the decline in
apple product costs. See "--Trends Resulting in Fluctuating Prices in Apple
Products."
(3) Increased pressure on pricing for frozen apple concentrate as a result
of the decline in consumption of frozen concentrates. See "--Trends Resulting in
Fluctuating Prices in Apple Products."
The losses in the 1998 fiscal year were attributable primarily to the
continued oversupply conditions in the vegetable industry and the pressure on
both vegetable and fruit product prices. The difficult competitive conditions
required a more costly selling program than in the preceding year, further
eroding margins.
Fiscal Year 1996. The Company's fiscal year ended March 31, 1996, resulted
in an after-tax loss of $10.147 million (loss of $1.81 per share ) for the
Company. The major causes of the losses were:
(1) Reduced production in the 1995 pack season, particularly
in the Company's Eastern Division vegetable plants. The Company
experienced start-up problems during and after installation of new
equipment and relocation and modification of existing Pillsbury
equipment which was removed from closed Pillsbury plants and installed
in the Company's plants. The Company made aggregate capital
expenditures of approximately $68 million involving 37 separate
projects to prepare for a larger volume pursuant to the Alliance
Agreement. The magnitude of that capital program, which had to be
completed in approximately six months' time to be ready for the 1995
pack season, exceeded any prior capital program by the Company within a
comparable period of time. During the 1996 pack season (in fiscal year
1997), the Eastern Division plants, which had generated the greatest
problems in 1995, generally performed in accordance with the Company's
expectations.
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<PAGE>
(2) During the summer of 1995, operations in the Eastern
Division (New York plants) were adversely affected by the worst drought
in New York in 20 years, which further reduced Eastern Division
vegetable production.
The combination of these two factors resulted in a non-recurring charge of
approximately $15.1 million, before income tax benefit, for the 1996 fiscal
year.
The 1996 fiscal year was the first year of operation under the Alliance
Agreement. The Company did not receive orders from Pillsbury at the
originally-anticipated levels because of the existence of substantial Green
Giant vegetable inventories carried over from the prior year (pre-Alliance
Agreement). Consequently, the Company substantially increased its finished
inventory levels and had to defer the conversion of inventory to sales. This
adversely affected the Company's cash flow and income and necessitated a
modification of certain financial covenants in the Company's loan agreements
with its revolving credit bank lenders and its long-term insurance lenders, as
the Company could not have complied with the unmodified covenants.
Trends Resulting in Fluctuating Prices in Apple Products
The Company has been the leader in U.S. sales of frozen concentrate
apple juice in which its Seneca brand name has had strong consumer acceptance.
However, total sales of all brands in this product category have declined at an
annual rate of approximately 5% in recent years, as consumers have shown
preference for the non-concentrate, ready-to-drink juice products. The Company
expects this trend to continue. The Company's product is not the largest selling
brand in the ready-to-drink category and competes with a number of well-
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established competitors with larger advertising budgets than the Company's. In
fiscal year 1998, the Company expended approximately $3.2 million converting
certain juice production lines to plastic bottles in its southwest and
midwestern facilities. Competition from other drinks and juices and the limited
amount of available shelf space at the retailer level is also limiting the
overall sales of apple juice regardless of package type.
A substantial portion of the Company's apple juice supply is purchased
in the form of concentrate from world-wide sources. The cost of this commodity
has fluctuated during the Company's existence. During the two-year period ended
March 31, 1997, a shortage of apple juice concentrate increased the Company's
total costs. In the Company's experience, raising prices to maintain profit
margins on apple juice products has reduced consumer demand for the product, so
that the Company's profit margin has eroded in periods of high supply costs. In
the juice business, the apple industry is going through enormous structural
changes with increasing quantities of apple concentrate being imported into the
U.S. from overseas, primarily South America, China and Eastern Europe.
Therefore, the current cost of apple concentrate is lower than it had been in
the period from 1995 to 1997, but the Company expects that, at some undetermined
future date, the recent downward trend in costs will reverse itself.
Furthermore, the import of large quantities of apple concentrate is reducing the
amount of apples that the Company is processing at its plants located in
Washington, New York and North Carolina, as the imports currently cost less than
the product produced in the Company's plants. In the Company's four
apple-pressing facilities, only one facility pressed any quantities of apples in
the fiscal year ended March 31, 1998. While the imported concentrate lowers the
cost of goods for products sold by the Company and its competitors, the Company,
unlike several competitors, must absorb the overhead burden of its
under-utilized domestic facilities.
High Ratio of Debt to Equity
The purchase of the Alliance Plants, the cost of the substantial
capital improvements effected prior to the 1995 packing season and the
significant increase in the Company's working capital requirements to produce
and hold large inventories of products packed under the Alliance Agreement has
resulted in an increase in both Company debt and the ratio of Company debt to
its assets. The following table illustrates the increased debt to equity ratio
of the Company at the end of the fiscal years and periods listed below and on a
pro forma basis (assuming a $44 million equity investment pursuant to the
Transaction).
<TABLE>
<CAPTION>
Pro Forma
March 31 March 31, March 31, March 31, March 31, July 31,
1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total outstanding debt (000 omitted) $257,703 $301,703 $251,593 $340,264 $227,074 $59,425
Current ratio
(current assets:current 2.60:1.00 1.79:1.00 2.78:1.00 1.59:1.00 3.30:1.00 2.28:1.00
liabilities)
Ratio of total assets to total 1.39:1.00 1.23:1.00 1.29:1.00 1.21:1.00 1.31:1.00 1.76:1.00
liabilities
Long-term debt/equity 171% 256% 239% 249% 244% 58%
Total liabilities/equity 257% 433% 344% 476% 324% 131%
</TABLE>
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<PAGE>
The terms and conditions of the Company's revolving credit facility
and the other indebtedness of the Company currently impose limitations that
restrict, among other things, the ability of the Company to incur debt, create
liens, pay dividends, make acquisitions and make capital expenditures. Terms of
the Company's indebtedness also require it to satisfy certain financial
covenants on a quarterly basis. The ability of the Company to make cash payments
to satisfy its indebtedness and to comply with such financial or similar
covenants as may be contained in future agreements will depend upon its future
operating performance, which is subject to prevailing economic conditions, and
to financial, business and other factors beyond the Company's control. The high
debt to equity ratio of the Company could affect the Company in the following
circumstances, among others: (i) limiting the Company's ability to withstand
competitive pressures or a downturn in its business or in the economy; (ii)
impairing the Company's ability to obtain additional financing; and (iii)
limiting the Company's flexibility to take advantage of market trends in the
food processing industry. See "--Dependence on Alliance Agreement" and "--Losses
Incurred in Fiscal Years 1998 and 1996."
Defaults as to Certain Loan Covenants
The Company currently is in default of certain loan covenants with
certain of its short-term and long-term lenders. As a remedy for default, each
lender has the right to require the Company to immediately prepay all amounts
owing to the lenders. The agent bank for the short-term lenders has indicated
its intention to waive the Company's defaults subject to securing required
consents from other participating banks. The long-term lenders have
unconditionally waived the defaults as of March 31, 1998 and have amended (or in
one instance agreed to amend) the covenants effective in fiscal year 1999 so as
to conform to financial results which the Company believes to be achievable if
it successfully executes its fiscal 1999 business plan. The Company can give no
assurance that it will successfully execute the 1999 business plan.
Seasonality and Quarterly Fluctuations
The Company's operations are affected by the growing cycles of the
vegetables it processes. When the vegetables are ready to be picked, the Company
must harvest and process the vegetables or forego the opportunity to process
fresh picked vegetables for an entire year. Most of the Company's vegetables are
grown by farmers under contract to the Company. Consequently, the Company must
pay the contract grower for the vegetables even if the Company cannot or does
not harvest or process them. Most of the Company's production occurs during the
second quarter (July through September) of each fiscal year (due to the timing
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<PAGE>
of crop production and climate conditions) and a majority of sales occur during
the third and fourth quarter of each fiscal year (due to seasonal consumption
patterns for its products). Accordingly, inventory levels are highest during the
second and third quarters, and accounts receivable levels are highest during the
third and fourth quarters. Net sales generated during the third and fourth
quarters of each fiscal year have a significant impact on the Company's results
of operations. Because of seasonal fluctuations, the results of any particular
quarter will not necessarily be indicative of results for the full year or for
future years.
Some Characteristics of the Competition
All of the Company's products compete with those of other national,
major and smaller regional food processing companies under highly competitive
conditions. Some of the Company's major competitors in the vegetable business
are Del Monte Corporation, Dean Foods and Chiquita Brands International. The
Company also sells vegetable products which compete with Pillsbury products
manufactured by the Company under the Alliance Agreement. The Company's
competitors in the fruit juice and fruit products business include the Minute
Maid division of Coca-Cola Company, the Mott's product line of Cadbury-Schweppes
plc, Tropicana Products, Welch's, Ocean Spray, Tree Top and others.
Welch's, Ocean Spray and Tree Top are cooperatives. They are able to
obtain financing through cooperative banks, which generally provide financing at
lower costs and on more favorable terms than non-cooperatives such as the
Company are able to obtain from their lenders. Because cooperatives are owned by
the growers, they are able to pay the growers last (i.e., after inventory has
been sold) whereas the Company and other non-cooperatives are required to pay
the growers first regardless of whether the inventory has been sold.
All but one of the competitors specifically identified in the two
preceding paragraphs have greater sales and assets than the Company.
The vegetable business in the last three years has undergone
consolidation as a result of adverse market conditions, and many smaller
companies have been acquired by the Company or its competitors. Future
acquisitions may increase the market strength of the Company's larger
competitors.
Uncertain Market for the Rights and the New Preferred Stock
The New Preferred Stock and the Rights will not be listed for trading.
There can be no assurance that a market for the Rights will develop prior to
their Expiration Date, which is 20 days after the date of this Prospectus,
unless it is extended; nor is there assurance that a market for the New
Preferred Stock will develop. If a market develops for the Rights or the New
Preferred Stock, there is no assurance as to the price at which the Rights or
New Preferred Stock will trade. Any market that may develop may be volatile and
unreliable.
Following the Expiration Date, a subscribing Rights Holder may or may
not be able to sell shares of New Preferred Stock purchased in the Rights
Offering at a price equal to or greater than the Subscription Price. When made,
the election of a Rights Holder to exercise Rights in the Rights Offering is
irrevocable. Moreover, until certificates are delivered, subscribing Rights
Holders may not be able to sell the New Preferred Stock that they have purchased
in the Rights Offering. Certificates representing shares of the New Preferred
Stock purchased pursuant to the Rights Offering will be delivered to subscribers
as soon as practicable after the date of purchase thereof. No interest will be
paid to Rights Holders on funds delivered to the Subscription Agent pursuant to
the exercise of Rights pending delivery of shares of New Preferred Stock to such
holders.
Tax Consequences to Shareholders on Sale of Rights or New Preferred Stock
When stock or stock rights are received in a non-taxable distribution
as is the case with respect to the Rights received in the Rights Offering,
certain restrictions may apply to a subsequent sale of the Rights or stock
acquired on exercise of the Rights. If the Rights or stock acquired is
characterized, for federal income tax purposes, as being "stock other than
common stock," then the amount realized from the sale of such stock or rights
may, in whole or in part, be treated as ordinary income. The Company believes
that, because the participation rights granted to holders of the New Preferred
Stock permit full participation in corporate growth, the Rights and the New
Preferred Stock should be treated as common stock for these purposes. There is
no clear statutory definition of the term "stock other than common stock"
however, and it is possible for the Internal Revenue Service (the "IRS") to
challenge this position.
Even if the Rights or the New Preferred Stock are classified as "stock
other than common stock," there are several methods available to shareholders to
avoid the adverse tax consequences arising from this designation. Ordinary
income treatment will not apply on sale or other disposition of the Rights or
the New Preferred Stock: (i) if the sale terminates the entire stock interest of
the shareholder in the Company; (ii) if the New Preferred Stock is converted to
Class A Common Stock and the sale is of the Class A Common Stock; (iii) in
transactions where gain or loss to the shareholder is not recognized; or (iv)
where it is established to the satisfaction of the Secretary of the Treasury
that the transactions were not in pursuance of a plan having one
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<PAGE>
of its principal purposes the avoidance of federal income tax. If the Rights and
the New Preferred Stock are not treated as "stock other than common stock," or
if one of the above exceptions apply, then a shareholder who sells the Rights or
the New Preferred Stock will recognize gain or loss equal to the difference
between the sale proceeds and such shareholder's basis (if any) in the Rights or
the New Preferred Stock sold. Such gain or loss will generally be capital gain
or loss for individual U.S. shareholders, short or long-term, depending upon
whether the shareholder has held the Rights or the New Preferred Stock for up to
one year (for application of the maximum 39.6% federal short-term rate), or more
than one year (for application of the maximum 20% federal long-term rate).
Inasmuch as the Rights will have no value after the Expiration Date, sale of the
Rights will necessarily have involved a short-term holding period.
Possible Adverse Future Accounting Effect on Earnings-Per-Share Allocable to
Common Stock
If, on issuance of the New Preferred Stock, its $12.00 per share
stated value is less than the then-current market price of a share of Class A
Common Stock into which it is convertible, the excess of that market price over
$12.00 multiplied by the number of shares of New Preferred Stock issued (the
"Aggregate Discount"), will be treated under accounting rules applicable to the
Company as analogous to a dividend with respect to the New Preferred Stock. For
accounting purposes, the Aggregate Discount will be charged against earnings per
share of the Company's Common Stock in the fiscal year ending March 31, 1999.
The Company cannot predict the market price of the Class A Common Stock on the
issuance of New Preferred Stock, and therefore it cannot now estimate whether an
Aggregate Discount will exist or, if it does exist, the amount of the Aggregate
Discount with respect to any assumed number of shares of New Preferred Stock to
be issued in the Transaction.
Solely as an example of the accounting effect, assuming that (1) the
$13.125 reported closing price of Class A Common Stock on August 3, 1998 was
also the price at the time of issuance of the New Preferred Stock and (2)
3,666,667 shares of New Preferred Stock were issued in the Transaction, the
Aggregate Discount would be $4,125,000. This Aggregate Discount would reduce
earnings per share (diluted) in the fiscal year ending March 31, 1999, by $0.43
per share (based upon 9,606,347 shares of the Company's Common Stock
outstanding), thereby reducing per share earnings or increasing per share loss
for the fiscal 1999 year.
Failure to Satisfy Closing Conditions to Stock Purchase Agreement
The Rights Offering is not conditioned upon the closing of the Stock
Purchase Agreement and, if the parties to the Stock Purchase Agreement fail to
satisfy the conditions to Closing or otherwise terminate the Stock Purchase
Agreement, the shareholders purchasing shares of New Preferred Stock will hold
the shares of the New Preferred Stock they purchased for $12.00 per share, yet
the New Investors will not have made their equity investment of $44 million. The
Company's equity investment and ability to reduce its outstanding indebtedness
will be substantially limited. See "High Ratio of Debt to Equity."
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<PAGE>
New Investors' Influence On the Company's Policies
Assuming none of the Company's shareholders exercise the Rights, the
New Investors will be entitled to purchase 3.667 million shares of New Preferred
Stock pursuant to the Transaction, which if immediately converted into 3.667
million shares of Class A Common Stock, would give the New Investors ownership
of 4.6% of the voting power of the Company. The combined voting power in the
election of directors of the New Investors and the Related Marks Shareholders
(as hereinafter defined) (assuming conversion of the New Preferred Stock into
shares of Class A Common Stock) will be approximately 16.6%.
Even if the Transaction is not consummated, the New Investors will have
the option to purchase 1,181,996 shares of New Preferred Stock which is
immediately convertible into
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<PAGE>
1,181,996 shares of Class A Common Stock. Assuming such immediate conversion the
combined voting power of the New Investors and the Related Marks Shareholders
in the election of directors (as hereinafter defined) will be 18.6%.
Certain provisions in the Stock Purchase Agreement, the Shareholders
Agreement and the Certificate of Amendment provide other opportunities for the
New Investors to exercise influence over the Company. One such provision
requires that the size of the Company's Board of Directors be increased from
seven to nine members and that the Investor Designees be elected to fill the
newly created positions. Another provision assures that the Investor Designees
will comprise at least 22% of the membership of each committee of the Board of
Directors. The Investor Designees may be removed by the New Investors and the
resulting vacancy shall be filled with persons designated by the New Investors.
The New Investors' right to have its designees nominated to the Company's Board
of Directors and serve on committees of the Board of Directors continues until
such time as the New Investors, in the aggregate, own less than 10% of the
outstanding Class A Common Stock (assuming conversion of all shares of New
Preferred Stock into Class A Common Stock).
Furthermore, the Charter will be amended to require that certain Major
Corporate Actions (as hereinafter defined) including, but not limited to,
certain sales of assets, mergers and change in accountants will require
unanimous approval of the Company's Board of Directors. Therefore, any one
director of the Company, including the Investor Designees, will have the ability
to prohibit any of these major decisions from being approved. See "Description
of the Transaction--The Charter Amendments."
Wolcott and Kayser Families' Influence on the Company's Policies
In comparison to the voting power of the New Investors and the Related
Marks Shareholders (as hereinafter defined), the members of the Wolcott and
Kayser families, which have been identified in prior Company proxy statements
and other Company documents as collectively in control of the Company, will
continue to have approximately 42% of the total voting power in the election of
directors of all classes of outstanding stock of the Company after issuance of
4.167 million shares of New Preferred Stock and prior to any conversion of such
shares into Class A Common Stock. Assuming that (1) the New Investors acquire
the maximum number of shares which they can acquire in the Transaction and none
of the Company's Existing Shareholders exercise their Rights distributed to them
as current shareholders, (2) the New Investors convert all shares of New
Preferred Stock acquired by them into shares of Class A Common Stock and except
for that conversion, neither reduce nor increase their aggregate holdings of
Company voting stock, (3) the Wolcott and Kayser families neither reduce nor
increase their aggregate holdings of Company voting stock after the Transaction
and (4) the Company issues no more shares of voting stock after the Transaction
except in conversion of New Preferred Stock, the aggregate voting power in the
election of directors of the New Investors and Related Marks Shareholders will
be 16.6% and, of the Wolcott and Kayser families, will be 40%. The Company
cannot predict whether any assumption stated in the preceding sentence will be
correct or, if correct, will occur within any definite future period; from time
to time, the Company will be obligated to issue additional shares of Class B
Common Stock to satisfy certain Company contribution requirements under its
existing Employees Savings Plan, but these issuances are not expected to effect
in any material way the allocation of voting power.
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<PAGE>
The Shares of Class A Common Stock Have Low Voting Power
Each share of Class A Common Stock (into which the New Preferred Stock
is convertible) has one-twentieth (1/20) of one vote on all matters requiring a
shareholder vote, while each share of Class B Common Stock, as well as each
share of the Company's outstanding preferred stock has one vote (other than the
New Preferred Stock which have no votes and the Six Percent (6%) Cumulative
Voting Preferred Stock which are only entitled to vote with respect to the
election of directors). In the election of directors and other matters which are
not subject to a class vote, holders of Class A Common Stock have substantially
less voting power than holders of Class B Common Stock proportionate to the
relative market value of those two classes of stock. See "Description of Capital
Stock--Description of Class A Common Stock and Class B Common Stock--Voting."
Concentration of Voting Power
As of the date of this Prospectus, the families of Arthur S. Wolcott
and Kraig H. Kayser (the "Wolcott and Kayser Families" and "Wolcott or Kayser
Families") collectively exercise approximately 41.9% of the total voting power
of the Company. The capital structure and the concentrated ownership of the
Wolcott and Kayser Families in the Class B Common Stock and the Company's
preferred stock are likely to limit substantially the possibility of and chances
of success for a hostile tender offer, which is usually at a premium over
then-current market price of a target company's stock or other takeover proposal
or proxy contest which could remove directors if the Wolcott and Kayser Families
are opposed to such offer or proposal.
As set forth (with relevant assumptions) under "--New Investors'
Influence on the Company's Policies" and "--Wolcott and Kayser Families'
Influence on the Company's Policies," after consummation of the Transaction, the
Wolcott and Kayser families will control approximately 40% of the total
shareholder vote and the New Investors and their Related Marks Shareholders (as
hereinafter defined) will control approximately 16.6% of such vote.
Certain Anti-Takeover Provisions
Certain provisions of the Alliance Agreement and the Company's credit
facilities, the Company's Charter, and the Company's Bylaws, as amended (the
"Bylaws"), could have the effect of preventing or delaying a person from
acquiring or seeking to acquire a substantial equity interest in, or control of,
the Company. The Bylaws and Charter provide, among other things, for staggered
board of directors' terms. See "Description of Capital Stock--Restrictions on
Acquisition of the Company--Certain Charter and Bylaw Provisions." The Alliance
Agreement states that it may be terminated by Pillsbury if any person acquires
30% or more of the combined voting power of the Company's then outstanding
voting securities, or the shareholders of the Company approve certain specified
business transactions. The Company's long-term credit facility provides that
certain lenders may require the Company to prepay certain of its indebtedness if
(i) any person or group (other than the Wolcott or Kayser Families) acquires
shares of the Company representing 50% or more of the total number of votes
which the Company's shareholders shall be entitled to cast; or (ii) the Wolcott
and Kayser Families shall cease to own, directly or indirectly, at least 25% of
the Company. The Company's revolving credit facility provides that an event of
default occurs if (i) any person or group, other than the Wolcott or Kayser
Families, acquires capital stock possessing either 30% or more of the total
number of votes which the Company's shareholders shall be entitled to cast or
the right
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<PAGE>
to elect 30% or more of the Company's Board of Directors; or (ii) during any
period of 12 consecutive months, the individuals who at the beginning of such 12
month period were directors of the Company cease for any reason to constitute a
majority of the Board of Directors of the Company.
No Dividends
The terms of the New Preferred Stock provide for dividends per share
equal to the dividends per share paid on Class A Common Stock. The Company
historically has not declared or paid any cash dividends on its shares of Common
Stock and does not anticipate paying such dividends in the foreseeable future.
Furthermore, the Company's multi-year credit facilities restrict, and future
credit agreements may restrict, the payment of dividends on Common Stock without
lender permission. See "--High Ratio of Debt to Equity."
Dependence on Key Personnel
The Company's success is dependent to a great extent on its current
management team and other key personnel, the loss of one or more of whom could
have a material adverse effect on the Company. The Company does not maintain key
person life insurance policies on any of its executive officers.
Regulation
United States and foreign governmental laws, regulations and policies
directly affect the agricultural industry and the vegetable processing industry.
The Company is subject to regulation by the Food and Drug Administration, the
United States Department of Agriculture, the Federal Trade Commission, the
Environmental Protection Agency and various state agencies with respect to the
production, packaging, labeling and distribution of its food products. In
addition, the disposal of solid and liquid vegetable waste material resulting
from the preparation and processing of foods is subject to various federal,
state and local laws and regulations relating to the protection of the
environment. In some international markets, there are regulations and policies
designed to discourage the importation of agricultural commodities. The
application or modification of existing, or the adoption of new, laws,
regulations or policies could have an adverse effect on the Company's business
and results of operations.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Prospectus contains or will contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such statements include information
relating to the effect of amendments to and dependence on the Alliance
Agreement, reduction or mitigation of debt to equity ratio, industry conditions,
losses incurred in the fiscal years ended March 31, 1996 and 1998, fluctuating
apple concentrate prices, impact of the Transaction on the
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Company's shareholders, market for the Rights and the New Preferred Stock, tax
consequences, future capital expenditures, business development activities,
financing sources and availability and the effects of regulations (including
environmental regulations) and competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
anticipated results in the future, and accordingly, such results may differ from
those expressed in any forward-looking statements contained in this Prospectus.
These risks and uncertainties include, but are not limited to, uncertainties
affecting the food processing industry, risks relating to the dependence on
certain contractual arrangements (including the Alliance Agreement) and risks
relating to seasonal fluctuations.
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<PAGE>
DESCRIPTION OF THE TRANSACTION
The Stock Purchase Agreement
General. The Board of Directors of the Company has approved the Stock
Purchase Agreement, dated as of June 22, 1998, by and among the Company and the
New Investors. The discussion and description of the material terms of the Stock
Purchase Agreement in this Prospectus are subject to and qualified in their
entirety by reference to the Stock Purchase Agreement, a copy of which is
attached hereto as Appendix A and which is incorporated herein by this
reference. Pursuant to the Stock Purchase Agreement, and subject to the approval
of the Transaction by the shareholders of the Company, 1.167 million shares of
New Preferred Stock will be issued and sold by the Company to the New Investors
in exchange for $14 million, or $12.00 per share and the New Investors will act
as standby purchasers with respect to up to 2.5 million shares of New Preferred
Stock.
Representations and Warranties. The Stock Purchase Agreement contains
customary representations and warranties of the Company relating to, among other
things: (i) due organization of the Company and similar corporate matters; (ii)
corporate power and authority to execute and deliver and perform its obligations
under the Stock Purchase Agreement, the Shareholders Agreement, the Registration
Rights Agreement (as hereinafter defined) and the Rights; (iii) nonexistence of
certain material transactions with any shareholder, director, officer, employee
or affiliate of the Company; (iv) the absence of certain contraventions,
conflicts, and breaches arising out of the execution, delivery and performance
of the Stock Purchase Agreement, the Shareholders Agreement, the Registration
Rights Agreement, the Rights and the Certificate of Amendment (collectively, the
"Transaction Documents"); (v) consents, approvals, authorizations, orders,
registrations, filings or qualifications necessary for the execution, delivery
and performance of the Transaction Documents; (vi) capital structure of the
Company; (vii) nonexistence of a shareholders' rights plan, poison pill or
similar arrangement; (viii) nonexistence of certain registration rights
inconsistent with those granted to the New Investors in the Registration Rights
Agreement; (ix) subsidiaries of the Company; (x) delivery and accuracy of
certain documents filed with the Commission; (xi) preparation and delivery of
certain financial statements of the Company; (xii) absence of certain violations
or defaults of the Company and its subsidiaries; (xiii) licenses and permits;
(xiv) sufficient title to all material properties owned by the Company or its
subsidiaries that are necessary for the conduct of the business of the Company
and its subsidiaries; (xv) the Company's intellectual property, environmental
matters, litigation, tax, labor, and employee benefits, status of material
adverse events since March 31, 1997, contingent liabilities and absence of
finder's fees, (xvi) the Company not being an "investment company" within the
meaning of the Investment Company Act of 1940, as amended; (xvii) exemption of
the issuance of the New Preferred Stock, Class A Common Stock and the Rights
from registration under the Securities Act; (xviii) use of proceeds; and (xix)
to the Company's knowledge, full disclosure by the Company in the Stock Purchase
Agreement, the Company's disclosure letter prepared in connection with the Stock
Purchase Agreement, documents filed with the Commission or other documents
delivered by the Company to the New Investors.
The Stock Purchase Agreement contains customary representations and
warranties of the New Investors relating to, among other things: (i) due
organization and other corporate and partnership matters; (ii) power and
authority to enter into the Stock Purchase Agreement,
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Shareholders Agreement and Registration Rights Agreement; (iii) the absence of
certain contraventions, conflicts or breaches arising out of the execution,
delivery and performance of the Stock Purchase Agreement, the Shareholders
Agreement and the Registration Rights Agreement; (iv) consents, approvals,
authorizations, orders, registrations, filings or qualifications; (v) the
acquisition of the New Preferred Stock and Class A Common Stock by the New
Investors for their own account and for investment purposes and with no
intention of distributing or reselling the New Preferred Stock and the Class A
Common Stock in any transaction that would be in violation of the Securities Act
or the securities laws of any state; (vi) third party agreements; (vii) finder's
fees; (viii) ownership of common stock by the New Investors; and (ix) full
disclosure by the New Investors in connection with this Registration Statement
and the proxy statement to be filed by the Company in connection with the 1998
Annual Meeting of its Shareholders at which the Transaction will be voted upon.
The representations, warranties and covenants contained in the Stock
Purchase Agreement survive the execution and delivery and the closing thereof
(the "Closing") for three years after the date of closing (the "Closing Date");
provided, however, that the representations and warranties regarding corporate
existence, power and authority, capitalization of the Company, environmental
matters, tax matters and employee benefits matters shall survive for an
indefinite time period.
Closing Conditions. The obligations of the New Investors are subject
to satisfaction of the following conditions, among others, at or prior to the
Closing (unless waived): (i) the Company and certain of its substantial
shareholders shall have complied with and performed in all material respects the
terms, covenants and conditions of the Stock Purchase Agreement and the
representations and warranties made therein by the Company will be true and
correct at and as of the Closing; (ii) the shareholders shall have approved the
Transaction (although an affirmative vote on the Transaction by a shareholder
does not obligate that shareholder to exercise the Rights or purchase shares of
---
New Preferred Stock received in the Rights Offering); (iii) this Registration
Statement shall become effective; (iv) the shareholders entitled to vote thereon
shall have approved the Certificate of Amendment, such amendment shall have been
filed with the Secretary of State of the State of New York (the "Secretary of
State") and such amendment shall be in full force and effect; (v) the Board of
Directors shall increase the size of the Board of Directors from seven to nine
members and shall elect two new members designated by the New Investors to fill
the newly created positions; (vi) all necessary consents shall have been
obtained including any required consents and waivers from the Company's short
and long-term lenders; (vii) no event or events shall have occurred after March
31, 1997 that individually or in the aggregate has had or would reasonably be
expected to have a material adverse effect on the business of the Company;
(viii) the Class A Common Stock issuable upon conversion of the New Preferred
Stock (the "Conversion Shares") shall have been approved for listing, subject to
notice of issuance, on the Nasdaq National Stock Market; (ix) the five
consecutive trading day average of the closing price of the Class A Common Stock
(as reported in the Wall Street Journal) for any five consecutive trading day
period after June 22, 1998 shall not be $12.00 per share or lower; (x) the
Company shall have furnished to the New Investors the opinion of its legal
counsel, Jaeckle Fleischmann & Mugel, LLP; (xi) the Board of Directors shall
have taken all necessary action to unconditionally exempt the Transaction and
any future transactions between the Company and the New Investors (and their
"affiliates" or "associates" as defined in Section 912 of the BCL) from the
provisions of such Section 912 of the BCL;
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(xii) the New Investors shall have received a certificate of an officer of the
Company certifying that the closing conditions have been satisfied; (xiii) the
New Investors shall have received a certificate signed by the Secretary of the
Company certifying the truth and correctness of certain documents; (xiv) there
shall be no judgment, injunction, order or decree enjoining the Company or the
New Investors from consummating the transactions contemplated by the Stock
Purchase Agreement; and (xv) no person or group shall have acquired 25% or more
of the voting power of the Company.
The obligations of the Company to consummate the Transaction are
subject to satisfaction of the following conditions, among others, at or prior
to the Closing (unless waived): (i) the New Investors will have complied with
and performed in all material respects all of the terms, covenants and
conditions of the Stock Purchase Agreement and the representations and
warranties made therein by the New Investors as of the date of the execution of
the Stock Purchase Agreement will be true and correct as of the Closing; (ii)
the shareholders of the Company will have approved the Transaction and the
Certificate of Amendment; (iii) all consents, approvals, authorizations, orders,
registrations, filings or qualifications will have been obtained; (iv) the
Conversion Shares shall have been approved for listing, subject to notice of
issuance, on the Nasdaq National Stock Market; and (vi) there will be no
judgment, injunction, order or decree enjoining the Company or the New Investors
from consummating the transactions contemplated by the Stock Purchase Agreement.
The provisions of the Stock Purchase Agreement may be modified or amended, and
waivers and consents given by written instrument executed and delivered by the
Company and the New Investors.
Pre-Closing Covenants. The Company has agreed that it: (i) will cause a
meeting of its shareholders to be duly called and held as soon as practicable;
(ii) will offer to holders of its Common Stock of record on the Record Date the
right to purchase shares of New Preferred Stock for $12.00 per share on the
basis of one-half of a right to purchase one share of New Preferred Stock for
every share of Common Stock held; (iii) will promptly prepare and file this
Registration Statement; (iv) will conduct business in the ordinary course and
use its best efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of the
present directors, officers, and key employees; (v) will grant to each New
Investor the right to purchase the Option Shares prior to Closing; and (vi) will
afford the New Investors and their representatives reasonable access to the
Company's properties, books, contracts, records, personnel and advisors.
The Company and the New Investors mutually have agreed that (i) the
Company and the New Investors shall act with good faith towards, and shall use
their best efforts to consummate, the transactions contemplated by the Stock
Purchase Agreement, and neither the Company nor the New Investors will take any
action that would prohibit or impair their ability to consummate the
Transaction; (ii) the Company and the New Investors will make all filings
required (if any) and furnish all information required with respect to the
Transaction by the Hart-Scott-Rodino Act; and (iii) neither the Company nor the
New Investors will, without the consent of the other, make any public
announcement or issue any press release with respect to the Transaction.
Purchase of the Option Shares. Pursuant to the terms of the Stock
Purchase Agreement the New Investors have the option to purchase the Option
Shares for $12.00 per share prior to the Rights Offering and prior to the
closing of the Transaction. The New Investors have the right to purchase
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the Option Shares even if shareholder approval of the Transaction does not occur
and the conditions to closing set forth above are not satisfied. The New
Investors may elect to purchase the Option Shares by providing written notice to
the Company setting forth the aggregate number of Option Shares to be purchased
and the date of such purchase (which must be prior to the Closing and no earlier
than 15 business days after the date of such notice). The New Investors' right
to purchase the Option Shares shall expire immediately prior to the closing of
the Transaction.
Indemnification. The Company has agreed to indemnify and hold harmless
the New Investors, their partners, stockholders and affiliates and the officers,
directors, agents, employees, subsidiaries, partners, advisors, representatives
and controlling persons of each of the foregoing (each, the "Indemnified Party")
to the fullest extent permitted by law from and against any and all losses,
claims, damages, expenses (including reasonable fees, disbursements and other
charges of counsel) or other liabilities (collectively, the "Liabilities")
resulting from any legal, administrative or other action brought by any person
or entity, proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of the Stock
Purchase Agreement or the transactions contemplated thereby. Notwithstanding the
foregoing, the Company shall not be required to indemnify an Indemnified Party
to the extent (i) that it is finally judicially determined that such Liabilities
resulted primarily from the willful malfeasance of such Indemnified Party or
(ii) of any Liability arising out of the failure to make any filings under the
Hart-Scott-Rodino Act. If any such indemnification is unenforceable for any
reason (other than the immediately preceding sentence), the Company shall make
the maximum contribution to the payment and satisfaction of such indemnified
Liabilities that shall be permissible under applicable laws.
Termination. The Stock Purchase Agreement may be terminated at any time
prior to the Closing: (i) by the New Investors if: (a) the Board of Directors
determines not to give, withdraws, modifies or changes its approval or
recommendation of the sale of the New Preferred Stock to the New Investors, (b)
a person or group acquires 25% or more of the voting power of the Company, (c)
the Company's shareholders fail to approve the sale of the shares of New
Preferred Stock to the New Investors, (d) there has been a material breach of
any representation, warranty, covenant or agreement of the Company which breach
is incurable or has not been cured by the Company within thirty days after
written notice from the New Investors, or (e) if any one or more of the
conditions to the obligation of the New Investors to close has not been
fulfilled as of the closing date; (ii) by the Company if: (a) there has been a
material breach of any representation, warranty, covenant or agreement of the
New Investors which breach is incurable or has not been cured by the New
Investors within thirty days after written notice from the Company, or (b) any
one or more of the conditions to the obligation of the Company to close has not
been fulfilled as of the closing date; (iii) by the Company or the New Investors
if: (a) the Closing shall not have occurred on or before October 30, 1998;
provided, however, that the right to terminate under this clause shall not be
available to any party whose failure to fulfill any obligation under the Stock
Purchase Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date, or (b) any judgment, injunction, order
or decree enjoining the Company or the New Investors from consummating the
transactions contemplated by the Stock Purchase Agreement is entered and such
judgment, injunction, order or decree becomes final and nonappealable; provided,
however, that the party seeking to terminate the Stock Purchase Agreement must
use all reasonable efforts to remove such
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judgment, injunction, order or decree; or (iv) by mutual written consent of the
Company and the New Investors.
Expenses. Except as otherwise provided in the Registration Rights
Agreement, each party to the Stock Purchase Agreement shall bear their own
expenses arising out of the drafting, negotiation and execution of the Stock
Purchase Agreement, the Shareholders Agreement, this Registration Statement, the
Registration Rights Agreement and the transactions contemplated herein and
therein.
Waiver. Performance of the representations, warranties and covenants
contained in the Stock Purchase Agreement may be waived by written instrument
executed and delivered by the Company and the New Investors.
Shareholders Agreement
The following discussion describes the Shareholders Agreement dated as
of June 22, 1998 by and among the Company, the New Investors, CMCO, Inc., Edwin
S. Marks, Marjorie Boas and Nancy Marks (CMCO, Inc., Edwin S. Marks, Marjorie
Boas and Nancy Marks collectively are referred to as the "Related Marks
Shareholders"), Arthur S. Wolcott (Chairman of the Board of the
Company)(individually and as a trustee), Audrey S. Wolcott (as trustee), Susan
W. Stuart (a director of the Company)(individually and as a trustee of Alexius
Lyle Wadell and Kyle Aaron Wadell), Donald Stuart, Kraig H. Kayser (President,
Chief Executive Officer and a director of the Company)(individually and as a
trustee for certain Kayser family trusts), Kurt C. Kayser, Karl E. Kayser,
Marilyn W. Kayser, Robert Oppenheimer (as trustee of certain Kayser family
trusts), Mark S. Wolcott (individually and as a trustee for Erin Lorraine
Wolcott and Cassandra Jean Wolcott), Kari R. Wolcott, Bruce S. Wolcott
(individually and as a trustee for Kaitlin Kerr Wolcott, Michael Stanton Wolcott
and Paige Strode Wolcott), Constance Wolcott, Aaron Wadell and Grace W. Wadell
(individually and as trustee for Sara Elizabeth Stuart, Jennifer Grace Stuart
and Donald Arthur Stuart)(collectively, the "Existing Shareholders"). A copy of
the Shareholders Agreement is attached hereto as Appendix B. This discussion is
qualified in its entirety by the more detailed provisions contained in the
Shareholders Agreement.
The Shareholders Agreement places certain limitations and restrictions
on the Existing Shareholders' ability to sell or otherwise transfer shares of
the Company's capital stock owned by each of them and also prohibits the
Existing Shareholders from participating in the Rights Offering. Additionally,
following a two year restricted period, if an Existing Shareholder intends to
sell any securities to a third party, the New Investors and the Related Marks
Shareholders are granted the right to have their shares included in such sale.
The Shareholders Agreement also provides the New Investors and the
Related Marks Shareholders with the right (subject to certain limitations), in
the event the Company issues any voting securities, to purchase a certain
percentage of any new issuance to maintain their percentage ownership in the
Company. To the extent an individual New Investor does not purchase its
respective percentage of the new issuance, the remaining New Investors are
granted the right to purchase such percentage.
The Shareholders Agreement requires that the Company's Board of
Directors be increased from seven to nine members and that two individuals
chosen by the New Investors be elected to fill such vacancies. The Shareholders
Agreement also provides for the Investor
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Designees to constitute at least 22% of the members on any committee of the
Board. The presence of the Investor Designees on the Board and committees
thereof will give the New Investors increased representation on the Board and
greater ability to direct the management of the Company. See "Risk Factors--New
Investors' Influence on the Company's Policies."
Registration Rights Agreement
General. None of the shares of New Preferred Stock to be issued to the
New Investors under the Stock Purchase Agreement have been registered with the
Commission under the Securities Act or with any state or other jurisdiction
under any of their registration or qualification laws. The securities to be
issued to the New Investors will contain a legend indicating that they may not
be resold unless they are registered with the Commission or are resold pursuant
to an exemption from such registration. Also, the New Investors may be deemed to
be affiliates of the Company as a result of the percentage of stock they own. If
the New Investors are affiliates of the Company, any securities of the Company
that they own may be considered to be control shares and could be resold only
(i) pursuant to a registration statement filed with the Commission; (ii)
pursuant to Rule 144 of the Securities Act which limits the time, volume and
manner of any resales; or (iii) pursuant to another exemption from the
registration requirements of the Securities Act. Because of these restrictions,
the Company has granted the New Investors certain rights relating to the resale
of the securities.
Concurrently with the execution of the Stock Purchase Agreement and
the Shareholders Agreement, the Company, the New Investors, and the Related
Marks Shareholders entered into a Registration Rights Agreement dated as of June
22, 1998 (a copy of which is attached hereto as Appendix C) (the "Registration
Rights Agreement"). The Registration Rights Agreement provides that at any time
after the first anniversary of the Closing, upon the written request of one or
more holders (the "Initiating Holders") of 10% or more of (i) the shares of the
New Preferred Stock purchased by the New Investors under the Stock Purchase
Agreement (including the Options Shares); (ii) the Conversion Shares; (iii) any
other shares of Common Stock or securities entitled to vote generally in the
election of directors ("Voting Securities") or stock convertible into Voting
Securities of the Company beneficially owned by any New Investor or Related
Marks Shareholder and (iv) any securities of the Company issued or issuable with
respect to any of the foregoing by way of a dividend or stock split or in
connection with a combination of shares, recapitalization, reclassification,
merger, consolidation, reconstitution or other reorganization or otherwise
("Registrable Securities"), the Company shall effect the registration of such
Initiating Holders' Registrable Securities ("Demand Registration Rights"). Upon
receipt of such demand, the Company will promptly give written notice to all
registered holders of Registrable Securities and the Company shall use its best
efforts to effect, at the earliest possible date, the registration under the
Securities Act of: (i) the Registrable Securities which the Company has been
requested to register by the Initiating Holders and (ii) all other Registrable
Securities which the Company has been requested to register by the holders
thereof. The Initiating Holders and those holders requesting registration after
receipt of such notice collectively are referred to as the "Selling Holders."
Whenever the Company shall effect a registration statement pursuant to the
Demand Registration Rights no securities other than Registrable Securities shall
be included among the securities covered by such registration unless
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the holders of not less than 66-2/3% of all Registrable Securities to be covered
by such registration (assuming conversion of any Registrable Securities that are
Class B Common Stock into Class A Common Stock) shall have consented in writing
to the inclusion of such other securities. In addition to the Demand
Registration Rights, the New Investors also have so-called "piggy-back" rights.
If the Company at any time proposes to register any of its Common Stock or any
other class of Registrable Securities or any securities convertible into or
exchangeable for any of such securities on any form other than Forms S-4 or S-8,
the New Investors will have the option of including any or all of the
Registrable Securities in such registration.
The Company's obligations to effect the registration of the Registrable
Securities is limited so that in no event will the Company be required to: (i)
effect a registration within the six-month period occurring immediately
subsequent to the effectiveness of a registration statement filed under the
Demand Registration Rights unless a majority of Disinterested Directors (as
defined in the Registration Rights Agreement) determines that effecting a second
registration within the six-month period would not have a material adverse
effect on the market price of the Common Stock or (ii) effect a registration
with respect to any class of Registrable Securities pursuant to the Demand
Registration Rights covering less than such number of Registrable Securities
having an estimated Market Price (as defined in the Registration Rights
Agreement) at the time of such request of at least $5 million.
Expenses. In connection with registrations pursuant to the Demand
Registration Rights, the Selling Holders will pay the following registration
expenses which will be allocated pro rata based on the number and type of
Registrable Securities included in the registration statement: all registration
and filing fees with the Commission, all filing fees of the National Association
of Securities Dealers, Inc., and all filing fees to comply with securities or
blue sky laws which relate solely to such Registrable Securities (the "Fee
Expenses"), all reasonable printing, messenger and delivery expenses incurred in
such registration, the reasonable fees and disbursements of counsel for the
Company and of its independent public accountants incurred in such registration
and the reasonable fees and expenses of one counsel to the Selling Holders
incurred in such registration (the "Registration Expenses"). The Company will
pay all other fees and expenses. If the registration is withdrawn under certain
circumstances, the Company would also be required to pay the Registration
Expenses. Also, if any registration statement filed pursuant to the Demand
Registration Rights includes securities other than Registrable Securities then
the Company shall pay all Registration Expenses and incidental expenses and the
Selling Holders shall pay the Fee Expenses. If a registration is effected
pursuant to the New Investors "piggy back" rights, then the Company will pay the
Registration Expenses and the Selling Holders will pay all Fee Expenses.
Indemnification. The Company has agreed to indemnify and hold harmless
each seller of any Registrable Securities and each other person who participates
as an underwriter in the offering or sale of such securities and each other
person who controls such seller or underwriter and their respective directors,
officers, partners, agents and affiliates against any losses, claims, damages or
liabilities, joint or several (collectively, "Losses"), to which such person may
become subject under the Securities Act insofar as such Losses arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in a registration statement.
As a condition to including any Registrable Securities in any
registration statement, the Company shall have received a satisfactory
undertaking from the prospective seller to indemnify
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<PAGE>
and hold harmless the Company and each director, officer and underwriter of the
Company and each person who controls any of the foregoing, from any statement or
alleged statement in or omission or alleged omission from such registration
statement, if such statements or omissions were made in reliance upon and in
conformity with written information furnished to the Company by such seller
specifically for use in the registration statement. This indemnification is
limited to the amount of proceeds received by such indemnifying party in the
offering giving rise to such liability.
The Rights
General. The Company is distributing the Rights, at no cost, to the
Rights Holders. The Company will distribute one-half of a Right for each share
of Common Stock held of record on the Record Date. Upon surrender of a whole
Right and upon payment of the Subscription Price, the Rights Holder will be
entitled to receive one share of New Preferred Stock. The Rights will be
evidenced by transferable Subscription Certificates. No fractional shares of New
Preferred Stock will be issued or paid and the number of shares of New Preferred
Stock distributed upon surrender of the Subscription Certificates will be
rounded up to the nearest whole number.
Expiration Date of the Subscription Period. The Rights will expire at
5:00 p.m., Eastern Daylight Time, on August 27, 1998 (the "Expiration Date").
After the Expiration Date, unexercised Rights will be null and void (the
"Expired Rights"). Failure to pay the Subscription Price on or before the
Expiration Date will lead to the expiration of the Rights. After the expiration
of the Rights on the Expiration Date, the New Investors shall purchase all
shares of New Preferred Stock represented by the Expired Rights (up to a maximum
of 2.5 million shares).
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE SUBSCRIPTION PRIVILEGE, SUCH
EXERCISE MAY NOT BE REVOKED.
Transferability of Rights. Rights may be purchased or sold through
usual investment channels, including banks and brokers commencing on the first
day of the Subscription Period. See "Risk Factors--Uncertain Market for the
Rights and the New Preferred Stock." The Rights evidenced by a single
Subscription Certificate may be transferred in whole by endorsing the
Subscription Certificate for transfer in accordance with the instructions
accompanying the Subscription Certificate. A portion of the Rights evidenced by
a single Subscription Certificate may be transferred by delivering to Sarah S.
Mortensen (the "Subscription Agent"), a Subscription Certificate properly
endorsed for transfer, with instructions to register such portion of the Rights
evidenced thereby in the name of the transferee (and to issue a new Subscription
Certificate to the transferee evidencing such transferred Rights). In such
event, a new Subscription Certificate evidencing the balance of the Rights will
be issued to the Rights Holder or, if the Rights Holder so instructs, to an
additional transferee.
The Company anticipates that the Rights will be eligible for transfer
through, and that the exercise of the subscription privilege may be effected
through, the facilities of the Depository Trust Company. The Rights may not be
exercised by any person, and neither this Prospectus nor any Subscription
Certificate shall constitute an offer to sell or a solicitation of an offer to
purchase any shares of New Preferred Stock or Class A Common Stock in any
jurisdiction in which such transactions would be unlawful. The Company believes
that any action required to be taken by the Company has been taken in all
jurisdictions of the United States to permit exercise of the Rights and
purchases of New Preferred Stock and Class A Common Stock (upon
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conversion of the New Preferred Stock) by the New Investors and the Rights
Holders. No action has been taken in any jurisdiction outside the United States
to permit offers and sales of the Rights, the New Preferred Stock or the Class A
Common Stock. Consequently, the Company may reject subscriptions pursuant to the
exercise of Rights by any Rights Holders outside the United States, and the
Company may also reject subscriptions from Rights Holders in jurisdictions
within the United States if it should later determine that it may not lawfully
issue shares to such Rights Holders, even if it could do so by qualifying the
shares for sale or by taking other actions in such jurisdictions.
The Charter Amendments
In connection with the Transaction, the Company will file a
Certificate of Amendment which will: (i) increase the number of shares of its
Preferred Stock with $0.025 par value per share, Class A from 4,000,000 shares
to 8,200,000 shares; (ii) increase the number of authorized shares of Class A
Common Stock from 10,000,000 shares to 20,000,000 shares; (iii) create a new
series of Preferred Stock with $0.025 par value per share, Class A to be
designated as Convertible Participating Preferred Stock, $12.00 stated value per
share, convertible immediately into Class A Common Stock of the Company; (iv)
pursuant to Section 709 of the BCL require that certain actions be approved by
the unanimous vote of all members of the Company's Board of Directors; and (v)
amend Article 4, paragraph (a)(C) to state that the acquisition by the New
Investors of the Conversion Shares were deemed made for an "equitable price"
thereby removing the acquistion by the New Investors of the Conversion Shares
from operation of the Class A Special Rights (as hereinafter defined)
provisions. See "Description of Capital Stock--Description of Class A Common
Stock and Class B Common Stock--Class A Special Rights."
The amendments listed in subparagraphs (ii) and (iii) above are
necessary to consummate the Transaction. By increasing the number of authorized
shares of Class A Common Stock, as set forth in subparagraph (i) above, the
Company will be able to issue the Conversion Shares and will still have enough
authorized but unissued shares for use in other transactions (i.e., public and
private offerings and acquisitions using capital stock of the Company as
consideration).
The Charter, after filing of the Certificate of Amendment, in
accordance with Section 709 of the BCL, will require unanimous approval of the
Company's Board of Directors (except for directors who choose to abstain) for
the following actions: (i) any amendment or modification to the Company's
Charter or Bylaws; (ii) any business combination; (iii) any sale or transfer of
all or substantially all of the assets of the Company; (iv) any issuance of
securities (except for (a) stock buybacks not to exceed $100,000 in any one
transaction or $1 million in the aggregate or (b) issuances of Class A Common
Stock pursuant to the Seneca Foods Corporation Employees' Savings Plan); (v) any
single acquisition or disposition or series of related acquisitions or
dispositions of assets involving gross consideration in excess of $15 million;
(vi) any change in the Company's line of business except for changes in or
dispositions of existing businesses or acquisitions of new lines of business
that do not exceed 2% of the consolidated net sales of the Company in such
business; (vii) any change in the Company's certified public accountants; (viii)
the settlement of any litigation involving the payment by the Company of an
aggregate amount greater than 5% of the Company's Adjusted Tangible Net Worth
(as hereinafter defined) or involving the consent to any injunctive or similar
relief; or (ix) the commencement by the Company of proceedings relating to
bankruptcy, insolvency, reorganization or relief of debtors (the "Major
Corporate Actions"). The failure to obtain the affirmative vote of each of the
Company's directors (excluding directors who choose to abstain) upon
consideration of any of the above Major Corporate Actions would mean that the
Company could not take such
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action. "Adjusted Tangible Net Worth" shall mean (i) the net book value (after
deducting related depreciation, obsolescence, amortization, valuation and other
proper reserves, which reserves will be determined in accordance with generally
accepted accounting principles) at which certain assets of the Company are shown
on the latest available consolidated balance sheet of the Company on such date
minus (ii) the amount at which the Company's liabilities are shown on such
consolidated balance sheet (including as liabilities all reserves for
contingencies and other potential liabilities as shown on such consolidated
balance sheet).
The amendments to Article 4, paragraph (a)(C) of the Charter were
required by the New Investors as a condition to the consummation of the
Transaction. The Company's Charter contains a two-pronged "Class A Special
Rights" provision which ensures that holders of Class A Common Stock will not be
unfairly treated in the event that a person attempts to gain control of the
Company. First, the Class A Special Rights seek to prevent a person who acquires
more than 15% of the outstanding Class B Common Stock after August 5, 1995 from
gaining control of the Company by buying Class B Common Stock without buying
Class A Common Stock. Solely as an example, if a person acquires 20% of the
Class B Common Stock after August 5, 1995 but acquires no Class A Common Stock,
that person would be unable to vote the 5% of the Class B Common in excess of
the 15% threshold. The second prong of the Class A Special Rights is an
"Equitable Price" requirement. It is intended to prevent a person seeking to
acquire control of the Company from paying a discounted price for the Class A
Common Stock required to be purchased by the acquiring person under the first
prong discussed above. Under the proposed Charter Amendment, the acquisition of
the Conversion Shares by the New Investors under the Stock Purchase Agreement
and pursuant to their commitment as standby purchasers in the Rights Offering
will be deemed to have been acquired for an "equitable price" thereby offsetting
any purchases of Class B Common Stock made by the New Investors after August 5,
1995. The New Investors do not currently own any shares of Class B Common Stock.
- 32 -
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A GENERAL DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE RIGHTS OFFERING TO CERTAIN OF THE COMPANY'S SHAREHOLDERS AND
DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH
SHAREHOLDER'S TAX STATUS AND ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX
CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT APPLY TO EACH
SHAREHOLDER. ACCORDINGLY, EACH SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE RIGHTS OFFERING,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
The following discussion is a general summary of the material United
States federal income tax consequences of the receipt, transfer, exercise and
lapse of the Rights to the Company's shareholders that receive the Rights in the
Rights Offering. The discussion does not address all aspects of federal income
taxation that may be applicable to the Company's shareholders in light of their
status or personal investment circumstances, nor does it address the federal
income tax consequences to the Company's shareholders that are subject to
special federal income tax treatment, including (without limitation) foreign
persons, insurance companies, tax-exempt entities, retirement plans, dealers in
securities, persons who acquired their Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation, and persons who hold their
New Preferred Stock as part of a "straddle," "hedge" or "conversion
transaction." In addition, the discussion does not address the effect of any
applicable state, local or foreign tax laws, or the effect of any federal tax
laws other than those pertaining to federal income tax. As a result, each of the
Company's shareholders should consult his or her own tax advisor to determine
the specific tax consequences to such shareholder of the receipt, transfer,
exercise or lapse of the Rights. The discussion is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), regulations proposed or
promulgated thereunder, judicial precedent relating thereto, and current
administrative rulings and practice, all of which are subject to change. Any
such change, which may be retroactive, could alter the tax consequences
discussed herein. The discussion assumes that shares of Common Stock are held as
capital assets (within the meaning of Section 1221 of the Code).
Federal Income Tax Consequences To The Company
The Company will not recognize gain or loss from the Rights Offering or
from the exercise or lapse of the Rights.
Federal Income Tax Consequences To Shareholders
Receipt of the Rights. A shareholder will not recognize any gain or
loss upon the receipt of Rights in the Rights Offering.
Basis of the Rights. A shareholder's tax basis in the Rights received
in the Rights Offering and subsequently allowed to lapse will be zero. Except as
provided in the following sentence, a shareholder's tax basis in the Rights
received in the Rights Offering and subsequently
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<PAGE>
exercised also will be zero. If, however, either (i) the fair market value of
the Rights on the date of the Rights Offering is 15% or more of the fair market
value (on the date of the Rights Offering) of the stock with respect to which
they are received or (ii) the shareholder properly elects, in accordance with
procedures set forth in Treasury Regulation Section 1.307-2, to allocate part of
his or her basis in such stock to the Rights (the "Basis Election"), then the
shareholder's basis in such stock will be allocated between the stock and the
Rights in proportion to the fair market value of each on the date of the Rights
Offering.
The Company, based on the absence of a current market for the New
Preferred Stock, believes that it is unlikely that the value of a Right on the
proposed date of issuance will be 15% or more of the fair market value of the
stock with respect to which such Right is distributed. As a result, shareholders
desiring to allocate a portion of their stock basis to Rights that will be
exercised may wish to consider making a Basis Election. See "Risk
Factors--Impact of the Transaction on Existing Shareholders."
Exercise of the Rights; Basis and Holding Period of New Preferred
Stock. A shareholder will not recognize any gain or loss upon the exercise of
Rights received in the Rights Offering. A shareholder's basis in New Preferred
Stock acquired through exercise of the Rights will be equal to the sum of the
Subscription Price therefor and the shareholder's basis in such Rights (if any).
A shareholder's holding period for the New Preferred Stock acquired through
exercise of the Rights will begin on the date the Rights are exercised.
Lapse of the Rights. A shareholder will not recognize any gain or loss
upon the lapse of Rights received in the Rights Offering. No adjustment in
respect of Rights allowed to lapse will be made to the basis of New Preferred
Stock owned by such shareholder.
Conversion of New Preferred Stock. A shareholder who converts New
Preferred Stock into Class A Common Stock will not recognize any gain or loss
upon such conversion. A shareholder's basis in the Class A Common Stock acquired
through conversion will be equal to the basis which the shareholder had in the
New Preferred Stock so converted. A shareholder's holding period for the Class A
Common Stock received in the conversion will begin on the date the New Preferred
Stock was acquired.
Tax Consequences on Sale of Rights or New Preferred Stock. When stock
or stock rights are received in a non-taxable distribution as is the case with
respect to the Rights received in the Rights Offering, certain restrictions may
apply to a subsequent sale of the Rights or stock acquired on exercise of the
Rights. If the Rights or stock acquired is characterized, for federal income tax
purposes, as being "stock other than common stock," then the amount realized
from the sale of such stock or Rights may, in whole or in part, be treated as
ordinary income. The Company believes that, because the participation rights
granted to holders of the New Preferred Stock permit full participation in
corporate growth, the Rights and the New Preferred Stock should be treated as
common stock for these purposes. There is no clear statutory definition of the
term "stock other than common stock," however, and it is possible for the IRS to
challenge this position.
Even if the Rights or the New Preferred Stock are classified as "stock
other than common stock," there are several methods available to shareholders to
avoid the adverse tax consequences arising from this designation. Ordinary
income tax treatment will not apply on sale or other disposition of the Rights
or the New Preferred Stock: (i) if the sale terminates the
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<PAGE>
entire stock interest of the shareholder in the Company; (ii) if the New
Preferred Stock is converted to Class A Common Stock and the sale is of the
Class A Common Stock; (iii) in transactions where gain or loss to the
shareholder is not recognized; or (iv) where it is established to the
satisfaction of the Secretary of the Treasury that the transactions were not in
pursuance of a plan having one of its principal purposes the avoidance of
federal income tax. If the Rights and the New Preferred Stock are not treated as
"stock other than common stock," or if one of the above exceptions apply, then a
shareholder who sells the Rights or the New Preferred Stock will recognize gain
or loss equal to the difference between the sale proceeds and such shareholder's
basis (if any) in the Rights or the New Preferred Stock sold. Such gain or loss
will generally be capital gain or loss for individual U.S. shareholders short or
long-term depending upon whether the shareholder has held the Rights or the New
Preferred Stock for up to one year (for application of the maximum 39.6% federal
short-term rate), or more than one year (for application of the maximum 20%
federal long-term rate).
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to fixed charges and preferred stock
dividends for the year ended March 31, 1998 was .68, for the year ended March
31, 1997 was 1.41, for the year ended March 31, 1996 was .46, for the year ended
March 31, 1995 (8 months) was 1.33, for the year ended July 31, 1994 was 2.32,
and for the year ended July 31, 1993 was 1.08. Earnings were inadequate to cover
fixed charges in fiscal year 1998 by $8.457 million and in fiscal year 1996 by
$15.2 million.
USE OF PROCEEDS
The Company intends to apply the proceeds from the Transaction to the
repayment of certain indebtedness the Company owes to its revolving credit
lenders under the Amended and Restated Credit Agreement dated as of September
24, 1997 ("Credit Agreement"). As of July 25, 1998, there was $69,000,000
outstanding under the Credit Agreement bearing interest at an average rate of
7.853%. The revolving credit indebtedness matured on varying dates in June 1998.
The Company expects this indebtedness to fluctuate as a result of sales and
purchases of inventory made after July 25, 1998 but before the date of closing
of the Transaction.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 27, 1998 on (i) a historical basis; (ii) a pro forma basis giving effect to
the Tansaction and (iii) a pro forma as adjusted basis after giving effect to
the transaction and the application of the net proceeds therefrom (assuming a
$44 million equity investment via the purchase of 3.667 million shares of New
Preferred Stock, and that the per share purchase price for a share of Class A
Common Stock on June 27, 1998 was $14.75).
<TABLE>
<CAPTION>
As of May 23, 1998
-------------------------------------------------------------------
Pro Forma,
Historical Pro Forma As Adjusted
------------------- ------------------- -------------------
(dollars in thousands)
<S> <C> <C> <C>
Indebtedness
Notes payable to banks.................................. $ 82,112 $(44,000) $ 38,112
Long term debt and capital lease obligations............ 239,362 ___ 239,362
Stockholders equity
Series A Preferred Stock, $0.025 par value,
1,000,000 shares authorized, 407,240 shares issued
and outstanding on a historical, pro forma basis and
on a pro forma as adjusted basis.................... 10 ___ 10
Series B Preferred Stock, $0.025 par value, 400,000
shares authorized, 400,000 shares issued and
outstanding on a historical basis, a pro forma
basis and on a pro forma as adjusted basis.......... 10 ___ 10
New Preferred Stock, 4,200,000 shares authorized,
no shares issued and outstanding on a historical basis,
4,166,667 shares issued and outstanding on a pro forma
basis and on a pro forma as adjusted basis........... ___ 44,000 44,000
Six Percent (6%) Voting Cumulative Preferred
Stock, 200,000 shares authorized, 200,000 shares
issued and outstanding on a historical basis,
a pro forma basis and on a pro forma as adjusted basis. 50 ___ 50
Preferred Stock without Par Value, 30,000
authorized, no shares issued and outstanding
on a historical basis, a pro forma basis and
on a pro forma adjusted basis........................ ___ ___ ___
Class A Common Stock, $0.25 par value,
10,000,000 shares authorized, 3,187,808 issued
and outstanding on a historical basis, a pro forma
and on a pro forma as adjusted basis................ 797 ___ 797
Class B Common Stock, $0.25 par value,
10,000,000 shares authorized, 2,796,555 shares
issued and outstanding on a historical basis, a pro
forma basis and on a pro forma as adjusted basis... 699 ___ 699
Additional paid-in capital................................. 6,585 10,083 16,668
Retained earnings.......................................... 77,555 (10,083) 67,472
Accumulated other comprehensive income..................... 2,154 ___ 2,154
------------- --------------- --------------
Total Capitalization.................................... $409,334 ___ $409,334
============= =============== ==============
- --------------
</TABLE>
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<PAGE>
PLAN OF DISTRIBUTION
The Class A Common Stock, the Rights and the New Preferred Stock
offered hereby are being offered by the Company. To the extent that any of the
Rights expire, subject to the terms and conditions of the Stock Purchase
Agreement, the New Investors have agreed to purchase the amount of underlying
shares of New Preferred Stock up to a maximum of 2.5 million shares, for a
purchase price of $12.00 per share.
The Subscription Price for the Rights and the purchase price for
shares of the New Preferred Stock under the Stock Purchase Agreement were
established as a result of arm's length negotiations between the Company and the
New Investors and were approved by the Company's Board of Directors. At the time
the Subscription Price and the purchase price under the Stock Purchase Agreement
were approved by the Board of Directors, the Subscription Price and the purchase
price under the Stock Purchase Agreement was equal to approximately 70.59% of
the then-current market price of the Class A Common Stock. In approving the
Subscription Price and the purchase price under the Stock Purchase Agreement,
the Board of Directors considered the size of the Transaction, and the financial
position of the Company, including, but not limited to the history and the
prospects of the Company, its past operating losses, its prospects for future
earnings and the present state of the Company's development. Furthermore, at the
end of fiscal year 1998, the Company was in violation of certain financial
covenants in its agreements with it short and long-term lenders. See "Risk
Factors--Defaults as to Certain Loan Covenants." Because the shareholders are
participating in the Rights Offering, the Company's Board of Directors did not
seek or obtain an opinion from an independent financial consultant or advisor as
to whether the terms of the Transaction are fair from a financial point of view
to the Company's shareholders.
There can be no assurance that the market price for the Rights, the New
Preferred Stock or the Class A Common Stock will be equal to or above the
Subscription Price, or that, following the issuance of the Rights and the shares
of New Preferred Stock subscribed for by Rights Holders or the New Investors,
the holders will be able to sell shares of New Preferred Stock or Class A Common
Stock issued upon conversion of the New Preferred Stock at a price equal to or
greater than the Subscription Price or the purchase price for the shares under
the Stock Purchase Agreement. Neither the New Preferred Stock nor the Rights
will be listed for trading. The Company intends to list the Conversion Shares
with Nasdaq National Stock Market, but can make no assurances that such listing
will occur.
- 37 -
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Assuming consummation of the Transaction, the Company will be
authorized to issue 20,000,000 shares of Class A Common Stock; 10,000,000 shares
of Class B Common Stock; 200,000 shares of Six Percent (6%) Voting Cumulative
Preferred Stock, $0.25 par value per share ("6% Preferred Stock"); 30,000 shares
of Preferred Stock Without Par Value; 1,000,000 shares of Ten Percent (10%)
Cumulative Convertible Voting Preferred Stock - Series A Preferred Stock, $0.025
stated value per share ("10% Series A Preferred Stock"); 400,000 shares of Ten
Percent (10%) Cumulative Convertible Voting Preferred Stock - Series B Preferred
Stock, $0.025 stated value per share ("10% Series B Preferred Stock"; (the 10%
Series A Preferred Stock and the 10% Series B Preferred Stock collectively are
referred to as the "Class A Preferred Stock") (the 6% Preferred Stock, No Par
Value Preferred Stock, 10% Series A Preferred Stock and 10% Series B Preferred
Stock are collectively referred to as "Preferred Stock"); and 4,166,667 shares
of New Preferred Stock. There are 2,633,333 shares of Class A Preferred Stock
which are unissued and undesignated. As of August 6, 1998, the Company had
issued and outstanding: 3,187,808 shares of Class A Common Stock; 2,796,555
shares of Class B Common Stock; 200,000 shares of 6% Preferred Stock; 407,240
shares of 10% Series A Preferred Stock and 400,000 shares of 10% Series B
Preferred Stock.
Description of New Preferred Stock
Stated Value. The stated value for each share of New Preferred Stock
is $12.00.
Dividends and Distributions. The New Preferred Stock has the right to
receive dividends or distributions at a rate per share equal to the amount of
any dividend or distribution as that declared or made on any shares of the
Company's stock into which the New Preferred Stock is convertible on the date of
such dividend or distribution. Any such dividend or distribution shall be paid
to the holders of the New Preferred Stock at the same time such dividend or
distribution is made to the holders of Class A Common Stock. Dividends and
distributions on the New Preferred Stock shall be cumulative from and after the
date of issuance of the New Preferred Stock, but any arrearage in payment shall
not pay interest.
Voting Rights. The holders of shares of New Preferred Stock shall not
be entitled or permitted to vote on any matter required or permitted to be voted
upon by shareholders of the Company except as required by law and for class
voting on proposals to: (i) authorize the issuance after the first date on which
shares of New Preferred Stock are issued (the "Issue Date") of any class of
capital stock that will rank as to payment of dividends or rights on
liquidation, dissolution or winding up of the Company senior to the New
Preferred Stock, (ii) authorize, adopt or approve an amendment to the Charter
that would increase or decrease the par value of the shares of New Preferred
Stock, (iii) amend, alter or repeal the Charter so as to affect the shares of
New Preferred Stock adversely or (iv) effect the voluntary liquidation,
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<PAGE>
dissolution, winding up, recapitalization or reorganization of the Company, or
the consolidation or merger of the Company with or into any other person, or the
sale or other distribution to another person of all or substantially all of the
assets of the Company; provided, however, that no separate vote of the holders
of New Preferred Stock shall be required to effect any of the transactions
described in clause (iv) above unless such transaction would either require a
class vote pursuant to clause (i), (ii) or (iii) above or would require a vote
by any shareholders of the Company.
Redemption. The shares of New Preferred Stock shall not be redeemed or
subject to redemption, whether at the option of the Company or any holder
thereof.
Company Acquired Shares. Any shares of New Preferred Stock converted,
exchanged, redeemed, purchased or otherwise acquired by the Company shall be
retired and cancelled promptly after acquisition. The cancelled shares of New
Preferred Stock shall become authorized but unissued shares of Class A Preferred
Stock, which may (upon filing of an appropriate certificate with the Secretary
of State ) be reissued as part of another series of Class A Preferred Stock
subject to certain conditions or restrictions on issuance, but in any event may
not be reissued as shares of New Preferred Stock unless all shares of New
Preferred Stock issued on the closing date of the Transaction shall have already
been converted or exchanged.
Conversion. Subject to certain limitations discussed below, any holder
of New Preferred Stock shall have the right, at its option, at any time, to
convert any or all of the holder's shares of New Preferred Stock into such
number of fully paid and non-assessable shares of Class A Common Stock as is
equal to the product of the Conversion Shares, multiplied by the quotient of (i)
the Stated Value divided by (ii) the conversion price of $12.00 per share (the
"Conversion Price"). Unless prohibited by law on the date of conversion (the
"Conversion Date"), all unpaid dividends declared (whether or not currently
payable) on the New Preferred Stock so converted, shall be immediately due and
payable and must accompany the shares of Class A Common Stock issued upon such
conversion. Upon conversion of any shares of New Preferred Stock, the Company
shall not issue any fractional shares or scrip representing fractional shares
and, in lieu thereof, the Company shall issue cash in lieu of fractional shares
in an amount equal to such fraction multiplied by the current market price of
the Class A Common Stock on the business day preceding the date the shares are
converted. The same rights and limitations apply if the New Preferred Stock is
convertible into any securities or property other than Class A Common Stock.
The Conversion Price shall be subject to adjustment if: (i) the
Company shall at any time or from time to time (A) pay a dividend or make a
distribution on the outstanding shares of Class A Common Stock in Class A Common
Stock, (B) sub-divide the outstanding shares of Class A Common Stock into a
larger number of shares, (C) combine the outstanding shares of Class A Common
Stock into a smaller number of shares or (D) issue any shares of its capital
stock in a reclassification of the Class A Common Stock; (ii) the Company shall
at any time or from time to time issue or sell shares of Common Stock (or
securities convertible into or exchangeable for shares of Common Stock), or any
options, warrants or other rights to acquire shares of Common Stock (other than
(x) options granted to any employee or director of the Company pursuant to a
stock option plan approved by the shareholders of the Company, (y)options,
warrants or rights granted to each holder of Class A Common Stock or (z)rights
issued pursuant to a shareholder right plans, "poison pill" or similar
arrangement in accordance with the Charter) for a consideration per share less
than the current market price (as defined in the Charter) at the record date or
issuance date; (iii) the Company or any subsidiary thereof shall, at any time or
from time to time while any of the New Preferred Stock is outstanding, make a
purchase by the Corporation of the Common Stock effected while any of the shares
of New Preferred Stock are outstanding, which purchase is subject to Section
13(e) of the Exchange Act or is made pursuant to an offer made available to all
holders of Class A Common Stock or Class B Common Stock; or (iv) the Company at
any time or from time to time shall take any action affecting its Class A Common
Stock, other than an action permitted by the Charter.
The Company may make such reductions in the Conversion Price, in
addition to those required by subparagraphs (i) through (iv) above, as the Board
of Directors considers to be advisable in order to avoid or to diminish any
income tax to holders of Class A Common Stock or rights to purchase Class A
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes.
Notwithstanding anything herein to the contrary, no adjustment of the Conversion
Price (i) shall be required by reason of the initial issuance or sale of any of
the 4,166,667 authorized shares of New Preferred Stock or (ii) need to be made
to the Conversion Price unless such adjustment would require an increase or
decrease of at least 1% of the Conversion Price then in effect. Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment, which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 1% of such Conversion Price. Any adjustment to the
Conversion Price carried forward and not theretofore made shall be made
immediately prior to the conversion of any shares of New Preferred Stock
pursuant hereto; provided, however, that any such adjustment shall in any event
-------- -------
be made no later than one year after the occurrence of the event giving rise to
such adjustment.
Participating Distribution upon Liquidation. In addition to the
preferential distribution to holders of New Preferred Stock equal to the stated
value per share (the "Preferential Distribution"), an additional participating
distribution shall be payable to holders of New Preferred Stock upon voluntary
or involuntary liquidation, dissolution or winding up of the Company (the
"Participating Distribution"), with the effect that the total distribution to
holders of the New Preferred Stock shall be the greater of (i) the Preferential
Distribution or (ii) the total distribution which holders of New Preferred Stock
would have received if they had converted all outstanding shares of New
Preferred Stock into shares of Class A Common Stock immediately prior to the
date for calculating the total distribution available to holders of preferred
stocks and common stocks. To achieve the foregoing distribution, the following
calculation shall be made:
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<PAGE>
(1) Calculate the sum of (a) the total amounts available for
distribution to holders of all classes of Common Stock after payment of all
preferential distributions to all classes of preferred stocks of the Company,
including the Preferential Distribution to the holders of all outstanding shares
of New Preferred Stock, plus (b) the total amount of the Preferential
Distribution to holders of all outstanding shares of New Preferred Stock.
(2) Divide the sum calculated in subparagraph (1) by the total
number of shares of Common Stock into which the New Preferred Stock is
convertible and of all classes of Common Stock deemed outstanding for purposes
of calculating the distribution on liquidation, dissolution or winding up of the
Company. The product of this calculation is the "Per Share Distribution on
Assumed Conversion."
(3) The excess, if any, of the Per Share Distribution on
Assumed Conversion over the Preferential Distribution shall be distributable as
a Participating Distribution to the holders of New Preferred Stock upon
liquidation, dissolution or winding up of the Company.
Description of Class A Common Stock and Class B Common Stock
Voting. Under the Charter, the holders of Common Stock have the right
to vote for the election of all directors and on all other matters submitted to
the shareholders of the Company. Subject to the Class A Special Rights discussed
in detail below, each share of Class B Common Stock is entitled to one full vote
on all matters on which shareholders currently are entitled to vote, including
the election of directors. Each holder of Class A Common Stock is entitled to
one-twentieth (1/20) of one vote per share on all matters on which shareholders
are entitled to vote, including the election of directors. Cumulative voting is
not authorized for the holders of Common Stock. See "Risk Factors--The Shares of
Class A Common Stock have Low Voting Power."
The holders of Class A Common Stock are entitled to vote as a separate
class on any proposal to amend the Charter to increase the authorized number of
shares of Class B Common Stock, unless the increased authorization does not
exceed the number of shares of Class B Common Stock which must be issued in a
proposed stock dividend with respect to Class B Common Stock and an equivalent
stock dividend of Class A Common Stock will be effected concurrently with
respect to Class A Common Stock.
In addition, Section 804 of the BCL confers upon the holders of Class A
Common Stock the right to vote as a class on any amendment to the Company's
Charter which would (i) exclude or limit the shareholders' right to vote on any
matter, except as such rights may be limited by voting rights given to new
shares then being authorized; (ii) change Class A Common Stock by (a) reducing
the par value, (b) changing the shares into a different number of shares of the
same class or into a different or same number of shares of a different class, or
(c) fixing, changing or abolishing the designation of Class A Common Stock or
any series thereof or any of the relative rights, preferences and limitations of
the shares; or (iii) subordinate their rights by authorizing shares having
preferences which would be in any respect superior to their rights. Other
provisions of the BCL would entitle holders of Class A Common Stock to vote as a
separate class for approval of any plan of merger, consolidation or exchange
which would effect any change in Class A Common Stock described in the preceding
sentence.
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<PAGE>
On proposals on which holders of Class A Common Stock are entitled to
vote as a separate class, the proposal must be approved by a majority of the
Class A Common Stock votes cast at the meeting at which the voting occurs.
Consequently, holders of Class A Common Stock, by withholding such approval, can
defeat a proposal notwithstanding that holders of a majority of Class B Common
Stock vote in favor of the proposal.
Dividends and Other Distributions. Each share of Class A Common Stock
and Class B Common Stock is equal in respect to dividends and other
distributions in cash, stock or property except that (i) if declared, a dividend
or distribution in shares of the Company on Class A Common Stock will be paid
only in Class A Common Stock; and (ii) if declared, a dividend or distribution
in shares of the Company on Class B Common Stock will be paid only in Class B
Common Stock. The number of shares so paid as a dividend or distribution on each
share of Class A Common Stock and Class B Common Stock shall be equal, although
the class of the shares so paid shall differ depending upon whether the
recipient of the dividend is a holder of Class A Common Stock or Class B Common
Stock.
Mergers and Consolidations. In the event of a merger, consolidation or
combination of the Company with another entity (whether or not the Company is
the surviving entity) or in the event of dissolution of the Company, the holders
of Class A Common Stock will be entitled to receive the same per share
consideration as the per share consideration, if any, received by holders of
Class B Common Stock in that transaction. However, any shares of common stock
that holders of Class A Common Stock become entitled to receive in the
transaction may have terms substantially similar to the Class A Common Stock.
Thus, the surviving entity in any such transaction could have a dual-class
capital structure like that of the Company and could, upon consummation of the
merger or consolidation, give full voting shares to the holders of Class B
Common Stock and one-twentieth (1/20) voting shares to the holders of Class A
Common Stock.
Class A Special Rights. The Company's Charter contains a two-pronged
"Class A Special Rights" provision which ensures that holders of Class A Common
Stock will not be unfairly treated in the event that a person attempts to gain
control of the Company. Assuming that the New Investors converted the shares of
New Preferred Stock acquired in the Transaction into shares of Class A Common
Stock, the Class A Special Rights provisions could be triggered if the New
Investors acquired shares of Class B Common Stock. As a condition to the
Closing, the New Investors' acquisitions have been deemed acquired for an
equitable price thereby exempting the acquisition by the New Investors from the
Class A Special Rights.
First, the Class A Special Rights seek to prevent a person who has
crossed a certain ownership threshold from gaining control of the Company by
acquiring Class B Common Stock without buying Class A Common Stock. If any
person acquires more than 15% of the outstanding Class B Common Stock after
August 5, 1995 (the "Threshold Date"), and does not acquire after the Threshold
Date a percentage of the Class A Common Stock outstanding at least equal to the
percentage of Class B Common Stock that the person acquired in excess of the 15%
threshold, such person will not be allowed to vote shares of Class B Common
Stock acquired in excess of the 15% threshold. For example, if a person acquires
20% of the outstanding Class B Common Stock after the Threshold Date but
acquires no Class A Common Stock, that person would be unable to vote the 5% of
the Class B Common Stock acquired in excess of the 15% threshold. With respect
to persons who owned Common Stock of the Company on or prior to the Threshold
Date, only shares of Class B Common Stock acquired after the Threshold Date will
be counted in determining whether that shareholder has exceeded the 15%
threshold for
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<PAGE>
acquisitions of Class B Common Stock and only acquisitions of Class A Common
Stock after the Threshold Date will be counted in determining whether that
shareholder's Class A Common Stock acquisitions have been at least equal to the
acquisition of Class B Common Stock in excess of the 15% threshold. The
inability of the person to vote the excess Class B Common Stock will continue
until such time as a sufficient number of shares of Class A Common Stock have
been acquired by the person to satisfy the requirements of the Class A Special
Rights.
The second prong of the Class A Special Rights is an "Equitable Price"
requirement. It is intended to prevent a person seeking to acquire control of
the Company from paying a discounted price for the Class A Common Stock required
to be purchased by the acquiring person under the first prong of the Class A
Special Rights. These provisions provide that an Equitable Price has been paid
for shares of Class A Common Stock only when they have been acquired at a price
at least equal to the greater of (i) the highest per share price paid by the
acquiring person, in cash or in non-cash consideration, for any Class B Common
Stock acquired within the 60 day periods preceding and following the acquisition
of the Class A Common Stock or (ii) the highest closing market sale price of
Class B Common Stock during the 30 day periods preceding and following the
acquisition of the Class A Common Stock. The value of any non-cash consideration
will be determined by the Board of Directors of the Company acting in good
faith. The highest closing market sale price of a share of Class B Common Stock
will be the highest closing sale price reported by the Nasdaq National Stock
Market or on any such other securities exchange then constituting the principal
trading market for either class of the Common Stock. In the event that no
quotations are available, the highest closing market sale price will be the fair
market value during the 30 day periods preceding and following the acquisition
of a share of Class B Common Stock as determined by the Board of Directors of
the Company acting in good faith. The Equitable Price provision is intended to
require a person seeking to acquire control of the Company to buy the Class B
Common Stock and the Class A Common Stock at virtually the same time and the
same price, as might occur in a tender offer, to ensure that the acquiring
person would be able to vote the Class B Common Stock acquired in excess of the
15% threshold.
Under the Class A Special Rights, an acquisition of Class B Common
Stock is deemed to include any shares that an acquiring Person acquires directly
or indirectly, in one transaction or a series of transactions, or with respect
to which that person acts or agrees to act in concert with any other person (an
"Acquisition"). As used in the preceding sentence, "Person" includes one or more
persons and entities who act or agree to act in concert with respect to the
Acquisition or disposition of Class B Common Stock or with respect to proposing
or effecting a plan or proposal involving (i) a merger, reorganization or
liquidation of the Company or a sale of a material amount of its assets; (ii) a
change in the Company's Board of Directors or management, including any plan or
proposal to fill vacancies on the Board of Directors or change the number or
term of Directors; (iii) a material change in the business or corporate
structure of the Company; or (iv) any material change in the capitalization or
dividend policy of the Company. Unless there are affirmative attributes of
concerted action, however, "acting or agreeing to act in concert with any other
Person" does not include acts or agreements to act by Persons pursuant to their
official capacities as directors or officers of the Company or because they are
related by blood or marriage.
For purposes of calculating the 15% threshold, the following
Acquisitions and increases are excluded: (i) shares of Class B Common Stock held
by any Person on the Threshold Date; (ii) an increase in a holder's percentage
ownership of Class B Common Stock resulting solely
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<PAGE>
from a change in the total number of shares of Class B Common Stock outstanding
as a result of a repurchase of Class B Common Stock by the Company since the
last date on which that holder acquired Class B Common Stock; and (iii)
Acquisitions of Class B Common Stock (a) made pursuant to contracts existing
prior to the Threshold Date, including the Acquisition of Class B Common Stock
pursuant to the conversion provisions of Class A Preferred Stock outstanding
prior to the Threshold Date, (b) by bequest or inheritance or by operation of
law upon the death or incompetency of any individual, and (c) by any other
transfer made without valuable consideration, in good faith and not for the
purpose of circumventing the Class A Special Rights. A gift made to any Person
who is related to the donor by blood or marriage, a gift made to a charitable
organization qualified under Section 501(c)(3) of the Code or a successor
provision and a gift to a Person who is a fiduciary solely for the benefit of,
or which is owned entirely by, one or more persons or entities (a) who are
related to the donor by blood or marriage or (b) which is a tax-qualified
charitable organization or (c) both will be presumed to be made in good faith
and not for purposes of circumventing the restrictions imposed by the Class A
Special Rights.
The Class A Special Rights also provide that, to the extent that the
voting power of any share of Class B Common Stock cannot be exercised pursuant
to the provision, that share will be excluded from the determination of the
total shares eligible to vote for any purpose for which a vote of shareholders
is taken.
Convertibility. The Class B Common Stock is convertible into Class A
Common Stock at any time on a share-for-share basis. The Class A Common Stock is
not convertible into shares of Class B Common Stock unless the number of
outstanding shares of Class B Common Stock falls below 5% of the aggregate
number of outstanding shares of Class B Common Stock and Class A Common Stock.
In that event, immediately upon the occurrence thereof, all of the outstanding
Class A Common Stock is converted automatically into Class B Common Stock on a
share-for-share basis and Class B Common Stock will no longer be convertible
into Class A Common Stock. For purposes of this provision, Class B Common Stock
or Class A Common Stock repurchased by the Company and not reissued is not
considered to be "outstanding" from and after the date of repurchase.
In the event of any such conversion of the Class A Common Stock,
certificates which formerly represented outstanding shares of Class A Common
Stock thereafter will be deemed to represent a like number of shares of Class B
Common Stock, and all common stock then authorized will be deemed to be Class B
Common Stock.
Preemptive Rights. Neither the Class A Common Stock nor the Class B
Common Stock carry any preemptive rights enabling a holder to subscribe for or
receive shares of the Company of any class or any other securities convertible
into any class of the Company's shares.
Transferability; Trading Market. The Class A Common Stock and the Class
B Common Stock are freely transferable and are listed for trading on the Nasdaq
National Stock Market under the symbols SENEA and SENEB, respectively.
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<PAGE>
Description of Preferred Stock (Other Than New Preferred Stock)
Other than New Preferred Stock, none of the Company's Preferred Stock
will be issued in the Transaction. No dividends or other distributions are
payable on the Company's Common Stock unless such dividends or distributions are
first paid on the Preferred Stock. In the event of a liquidation or dissolution
of the Company, the outstanding shares of Preferred Stock would have priority
over the Common Stock in the distribution of the remaining assets of the
Company. The 10% Series A Preferred Stock is convertible into shares of Common
Stock on the basis of one share of Class A Common Stock and one share of Class B
Common Stock for every 20 shares of 10% Series A Preferred Stock. The 10% Series
B Preferred Stock is convertible into Common Stock on the basis of one share of
Class A Common Stock and one share of Class B Common Stock for every 30 shares
of 10% Series B Preferred Stock.
Restrictions on Acquisition of the Company--Certain Charter and Bylaw Provisions
In addition to the restrictions imposed by the "Class A Special Rights"
provisions, the Company's Charter contains two super-majority voting provisions.
Paragraph 5 of the Company's Charter provides that the affirmative vote of
two-thirds of the shares present and entitled to vote at the meeting is
necessary to amend the Bylaws of the Company. Paragraph 6 of the Charter
provides that a director may be removed regardless of cause only upon the
affirmative vote of two-thirds of the shares entitled to vote for the election
of that director. Both of these provisions reduce the possibility of: (i) the
Company's shareholders receiving and accepting hostile takeover bids; (ii)
mergers; (iii) proxy contests; (iv) removal of current management; (v) removal
of directors or (vi) other changes in control.
The Bylaws of the Company require the affirmative vote of two-thirds of
the shares present and entitled to vote to (i) effectuate an amendment to the
Bylaws of the Company and (ii) remove a director of the Company.
The Bylaws provide for the staggered voting of directors for three-year
terms so that shareholders desiring to replace the incumbent directors and gain
control of the Board would be required to win at least two successive annual
contests before their nominees constituted a majority of directors. See "Risk
Factors--Certain Anti-Takeover Provisions."
Assuming shareholder approval of the Charter Amendments, the Charter
will require the unanimous approval of the Company's Board of Directors (except
for directors choosing to abstain) to approve any merger, consolidation or other
form of business combination or any sale or disposition of all or substantially
all of the Company's assets.
Agreements Restricting Change in Control of the Company
The Alliance Agreement and certain significant agreements between the
Company and its lenders provide for penalties in the event of a change of
control of the Company as defined in the respective agreement. See "Risk
Factors--Certain Anti-Takeover Provisions."
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<PAGE>
THE COMPANY
Business
The Company conducts its business almost entirely in food processing
which currently accounts for approximately 99% of the Company's sales. Canned
and frozen vegetables represent approximately 78% and fruit and fruit juice
products approximately 22% of the food processing volume. Apple products
contribute approximately 10% of all processed food sales; the Company's
Seneca(R) brand frozen apple concentrate is the largest-selling brand of frozen
apple concentrate in the United States. Of the remaining fruit and fruit juice
product sales, grape products account for approximately 2%, and bottled, canned
and frozen fruit juice drinks account for the remaining approximately 10%.
Approximately 19% of the Company's food products are packed under its
own brands including Seneca(R), Libby's(R) (under license), Aunt Nellie's Farm
Kitchen(R), Blue Boy(R) and TreeSweet(R). Approximately 30% of the processed
foods are packed under private labels and approximately 11% are sold to
institutional food distributors. The remaining 40% are sold under the Alliance
Agreement with Pillsbury. See "Risk Factors--Dependence on Alliance Agreement."
The Company's sole non-food division, Seneca Flight Operations,
provides air charter service primarily to industries located in upstate New York
and contributes approximately 1% to the Company's sales.
The Company was organized in 1949 and incorporated under the laws of
the State of New York. The Company purchased six Green Giant vegetable plants
from Pillsbury effective February 1, 1995, resulting in vegetable products
becoming 78% of the Company's overall business. Consequently, the Company
changed its fiscal year-end from July 31 to March 31 to avoid overlapping pack
seasons between fiscal years. Therefore, fiscal year 1995 was an eight-month
transition period.
The Company's principal executive office is located at 1162
Pittsford-Victor Road, Pittsford, New York 14534. Its telephone number is (716)
385-9500 and it maintains a web site (http://www.senecafoods.com).
Principal Products and Markets
Food Processing. The principal products of this segment include grape
products, apple products and vegetables. The products are canned, bottled and
frozen and are sold to retail and institutional markets. The Company has divided
the United States into four major marketing sections: Eastern, Southern,
Northwestern and Southwestern. Plant locations in New York, Michigan, North
Carolina and Washington provide ready access to domestic sources of grapes and
apples necessary to support marketing efforts in their respective sections of
the country. Vegetable operations are primarily supported by plants located in
New York, Wisconsin, Washington, Idaho and Minnesota.
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<PAGE>
The following summarizes net sales by major category and for the five
fiscal years ended March 31, 1998, 1997, 1996 and 1995 and July 31, 1994:
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
(8 Months)
--------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Vegetable $544,646 $562,265 $330,654 $117,504 $145,010
Apple 68,108 93,047 87,585 62,688 78,453
Grape 18,303 19,605 19,159 10,325 17,457
Other 69,123 52,017 66,453 40,809 45,334
--------------------------------------------------------------------------------------------------------
Total $700,180 $726,934 $503,851 $231,326 $286,254
</TABLE>
Other. Seneca Flight Operations provides air charter service primarily to
industries in upstate New York.
Source and Availability of Raw Material
Food Processing. The Company's food processing plants are located in
major vegetable, grape and apple producing states. Fruits and vegetables are
primarily obtained through contracts with growers. Apple concentrate is
purchased domestically and abroad to supplement raw fruit purchased under
contract. The Company's sources of supply are considered equal or superior to
its competition for all of its food products.
Seasonal Business
Food Processing. While individual fruits and vegetables have seasonal
cycles of peak production and sales, the different cycles are usually offsetting
to some extent. The supply of commodities, current pricing, and expected new
crop quantity and quality affect the timing of the Company's sales and earnings.
An "Off Season Allowance" is established during the year to minimize the effect
of seasonal production on earnings. The Off-Season Allowance is zero at each
fiscal year-end.
Backlog
Food Processing. In the food processing business the end of year sales
order backlog is not considered meaningful. Traditionally, larger customers
provide tentative bookings for their expected purchases for the upcoming season.
These bookings are further developed as data on the expected size of the related
national harvests becomes available. In general, these bookings serve as a
yardstick, rather than as a firm commitment, since actual harvest results can
vary notably from early estimates. In actual practice, the Company has
substantially all of its expected seasonal production identified to potential
sales outlets before the seasonal production is completed.
- 46 -
<PAGE>
Competition and Customers
Food Processing. Competition in the food business is substantial
with imaginative brand registration, quality service and pricing being the major
determinants in the Company's relative market position. Except for the Seneca(R)
apple and grape products and Libby's(R) vegetable products data mentioned below,
no reliable statistics are available to establish the exact market position of
the Company's own food products. During the 1998 fiscal year approximately 19%
of the Company's processed foods were packed for retail customers under the
Company branded labels of Libby's(R) (under license), TreeSweet(R) and
Seneca(R). About 11% of the processed foods were packed for institutional food
distributors and 30% of processed foods were retail packed under the private
label of customers. The remaining 40% is sold under the Green Giant(R) label
pursuant to the Alliance Agreement. The customers represent a full cross section
of the retail, institutional, distributor and industrial markets. In 1997 and
1998 Pillsbury and its designees represented and, in the foreseeable future, are
expected to represent, the Company's largest customers as a result of the
Alliance Agreement. A termination of the Alliance Agreement would have a
material adverse impact on the Company. See "Risk Factors--Dependence on
Alliance Agreement."
The Company's principal branded products are Seneca(R) Frozen Apple
Juice Concentrate, which is the largest-selling brand of frozen apple
concentrate in the United States, Seneca(R) Frozen Natural Grape Juice
Concentrate, Seneca(R) applesauce and Libby's(R) canned vegetable products which
rate among the top five national brands. See "Risk Factors--Trends Resulting in
Fluctuating Prices in Apple Products" and "Management's Discussion and Analysis
of Financial Condition and Results of Operation for the Year Ended March 31,
1998--Liquidity and Capital Resources."
Environmental Protection
Environmental protection is an important requirement at each food
processing facility. In all locations the Company believes that it is
cooperating with federal, state and local environmental protection authorities
in developing and maintaining suitable antipollution facilities. In general,
current pollution control facilities are equal to or somewhat superior to those
of competitors. The Company does not expect that any material capital
expenditures will be necessary for the Company to comply with environmental
regulations in the near future; it anticipates spending approximately $1.5
million in the two fiscal years ending March 31, 2000, to improve wastewater
facilities in Minnesota and New York. The Company is a potentially responsible
party with respect to certain of its sites but the Company does not believe the
aggregate liability is material.
- 47 -
<PAGE>
Employment
Food Processing - Fulltime 2,534
- Seasonal 420
------
2,954
Other 108
-----
Total 3,062
Employees are organized in various unions at the facilities located in
Prosser, Washington; Rochester, Minnesota; Janesville, Wisconsin; Covington,
Kentucky; Jackson, Wisconsin and Clyman, Wisconsin. The contract covering the
employees at the Prosser, Washington facility is currently being negotiated
after a representation election. The remaining contracts do not expire until
1999, 2000 and 2002.
Foreign Operations
Export sales for the Company are a relatively small portion
(approximately 5%) of the food processing sales.
Properties
The Company has eleven fruit and vegetable processing, packaging and
warehousing facilities located in New York that provide approximately 2,054,000
square feet of food packaging, freezing and freezer storage, and warehouse
storage space. The Company is a lessee under a number of operating and capital
leases for equipment and real property used for processing and warehousing.
Four other processing, packaging and warehousing facilities are located
in the states of North Carolina (223,000 square feet) and in Washington (three
facilities totaling 292,000 square feet). Processing operations in North
Carolina are primarily devoted to apple juice products and in Washington to
grape juice, apple juice, apple chips and sauce.
Four facilities in Minnesota, one facility each in Washington, Idaho,
Michigan and Kentucky, and seven facilities in Wisconsin provide, in the
aggregate, approximately 5,459,000 square feet of food packaging, freezing and
freezer storage, and warehouse storage space. These facilities process and
package various vegetable and fruit products. The facilities are owned by the
Company.
The Company owns one food distribution facility in Massachusetts
totaling approximately 59,000 square feet which is leased out to another company
through 2004. In addition, the Company's air charter division has a 14,000
square foot facility located in New York.
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<PAGE>
All of the properties are well maintained and equipped with modern
machinery. Nearly all locations have the ability to expand or to increase
production as sales requirements justify, notwithstanding that most locations
(except apple processing facilities) are highly utilized. In periods when
relatively low-cost apple concentrate is available from world-wide sources, as
occurred in the Company's fiscal year ending March 31, 1998, the Company's apple
processing facilities operated at substantially less than full capacity. See
"Risk Factors--Trends Resulting in Fluctuating Prices in Apple Products."
Because of the seasonal production cycles the exact extent of utilization is
difficult to measure. In certain circumstances the theoretical full efficiency
levels are being reached, however, expansion of the number of production days or
hours could increase the output by up to 20% for a season.
Certain of the Company's facilities are mortgaged to financial
institutions to secure long-term debt and capital lease obligations.
Legal Proceedings
In the ordinary course of its business, the Company is made a party to
certain legal proceedings seeking monetary damages. The Company does not believe
that an adverse decision in any of these proceedings, in which the claims are
insured against (subject to non-material deductible amounts), would have a
material adverse impact on the Company.
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<PAGE>
<TABLE>
Five Year Selected Financial Data
Summary of Operations and Financial Condition
(In thousands of dollars, except per share data)
<CAPTION>
(Eight Months)
Years ended March 31 and July 31, 1998 1997 1996 1995 1994 1993
- --------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 703,220 $ 730,135 $ 507,988 $ 234,073 $ 290,185 $257,402
- --------------------------------------------------------------------------------------------------------------------------
Operating earnings (before Corporate
interest and administrative expense) $ 22,372 $ 44,165 $ 16,418 $ 11,380 $ 18,251 $ 10,029
Earnings (loss) from continuing
operations before extraordinary item and
cumulative effect of accounting change (5,144) 7,531 (10,147) 1,321 5,274 1,293
Earnings from discontinued operations -- -- -- -- 90 965
Gain on the sale of discontinued operations -- -- -- -- 2,273 --
Earnings (loss) before extraordinary item and
cumulative effect of accounting change (5,144) 7,531 (10,147) 1,321 7,637 2,258
Extraordinary loss -- -- -- -- (606) --
Cumulative effect of accounting change -- -- -- -- 2,006 --
Net earnings (loss) (5,144) 7,531 (10,147) 1,321 9,037 2,258
- --------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing
operations per common share $ (0.87) $ 1.27 $ (1.81) $ .23 $ .91 $ .21
Earnings (loss) per common share before
extraordinary item and cumulative
effect of accounting change (0.87) 1.27 (1.81) .23 1.31 .36
Net earnings (loss) per common share (0.87) 1.27 (1.81) .23 1.55 .36
- --------------------------------------------------------------------------------------------------------------------------
Working capital $ 112,299 $132,351 $111,301 $ 138,030 $ 67,591 $90,706
Inventories 194,044 158,197 229,759 138,113 98,202 88,181
Net property, plant, and equipment 218,408 207,439 222,720 179,718 78,216 74,089
Total assets 474,926 416,023 523,859 385,502 204,899 208,733
Long-term debt and capital lease
obligations 227,858 224,128 226,574 221,480 51,476 72,556
Stockholders' equity 89,125 93,736 90,939 90,821 88,620 84,698
- --------------------------------------------------------------------------------------------------------------------------------
Additions to property, plant, and equipment $ 15,693 $ 11,650 $ 67,897 $ 26,966 $ 9,384 $ 1,723
Interest expense, net 26,780 28,827 28,157 6,296 6,046 5,834
- --------------------------------------------------------------------------------------------------------------------------
Net earnings/average equity (5.6) 8.2% (11.2)% 1.5% 10.4% 2.7%
Continuing earnings before taxes/sales (1.2) 1.6% (3.0)% 0.9% 2.8% 0.2%
Net earnings/sales (0.7) 1.0% (2.0)% 0.6% 3.1% 0.9%
Long-term debt/equity 256% 239% 249% 244% 58% 86%
Current ratio 1.8:1 2.8:1 1.6:1 3.3:1 2.3:1 3.4:1
- ---------------------------------------------------------------------------------------------------------------------------------
Common stockholder's equity per share $ 14.99 $ 15.77 $ 15.30 $ 16.23 $ 15.83 $ 13.79
Class A National Market System
closing price range 18 3/4 -15 3/4 18 3/4-14 3/4 20-15 -- -- --
Class B National Market System
closing price range 18 1/2 -15 1/2 19-14 1/2 22-16 17 3/4-10 1/2 11 3/8-7 3/4 8 3/16-7 3/8
Common cash dividends declared per share -- -- -- -- -- --
Ratio of earnings to Fixed Charges and
Preferred Stock Dividends .68:1.00 (1) 1.41:1.00 .46:1.00 (1) 1.33:1.00 2.32:1.00 1.08:1.00
Price earnings ratio NM 13.7x NM 74.5x 6.9x 21.5x
- ------------------------------------------------------------------------------------------------ --------------------------
<FN>
1995 represents eight months ended March 31 due to a change in the Company's
fiscal year end. Fiscal Years 1994-1992 ended July 31.
(1) Earnings were inadequate to cover fixed charges in fiscal year 1998 by
$8.457 million and in fiscal year 1996 by $15.2 million.
NM = Not meaningful.
</FN>
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Year Ended March 31, 1998
Liquidity and Capital Resources. Because of the food processing
segment, the Company's yearly business cycle shows large inventory growth during
the summer and fall harvest period. The inventory peaks in the early winter and
drops to its minimum level immediately prior to the next pack season. These
peaks are financed through seasonal borrowings whose high and low points
essentially correspond with the changes in inventory, or by a reduction in
short-term investments. Accordingly, inventory management is key to liquidity.
During May 1996 the Company sold its investment in Moog Inc. Class A
Common Stock back to Moog. This sale generated cash proceeds of $12.9 million
and a pre-tax gain of $7.5 million. During August 1996 the Company sold its
Clifton Park, New York facility for cash resulting in net cash proceeds of $4.6
million and a gain of $1.6 million before income tax expense. The Company had
leased this facility to a third party.
During September 1995 the Company entered into a sale and leaseback
transaction whereby three of its wastewater facilities in New York State were
sold to the Wayne County Water and Sewer Authority for net proceeds of $9.3
million.
During 1995 the Company acquired certain assets of the Green Giant
Division of Pillsbury. Under an Alliance Agreement concurrently executed in 1995
by the Company, Pillsbury and Grand Metropolitan Incorporated, Pillsbury
continues to be responsible for all of the sales, marketing and customer service
functions for the Green Giant brand, while the Company will handle vegetable
processing and canning operations. Pillsbury continues to own all the trademark
rights to the Green Giant brand and its proprietary seed varieties. The assets
acquired included certain raw material and supplies inventory and six
manufacturing facilities located in the Midwestern and Northwestern United
States. The purchase price of $86.1 million was funded by the Pillsbury Note
issued by the Company for $73.0 million and the balance was funded out of
working capital. The Pillsbury Note decreased $6.0 million in 1996 as a result
of an agreement reached with Pillsbury to convert that amount to the Company's
Class A Common Stock. Such conversion was completed in March 1996. The Pillsbury
Note increased by $7.6 million in 1997 due to the addition of capital projects
that Pillsbury has completed and green bean processing equipment acquired from
Pillsbury, which was transferred to the Company.
In conjunction with this acquisition, the Company entered into a
revolving credit facility for up to $150.0 million (now $130.0 million) from a
syndicate of eleven (now eight) banks. In addition, the Company issued two new
senior debt notes. The first was a $75.0 million unsecured note issued to The
Prudential Insurance Company of America, with repayment due beginning in March
1998, a final maturity date of February 2005, and an interest rate of 10.78%.
The second was a $50.0 million unsecured note issued to John Hancock Mutual Life
Insurance Company, with repayment due beginning in March 2001, a final maturity
of January 2009, and an interest rate of 10.81%. The proceeds of these two notes
were used to finance or replenish working capital for the following: (i) capital
expenditures of $50.0 million related to the Alliance Agreement with Pillsbury;
(ii) repayment of two notes due an insurance company, one repaid in July 1994
for $13.8 million, the other repaid when the new debt was issued for $26.6
million; (iii) three small acquisitions made over the previous fifteen months
totaling $15.6 million; and (iv) the balance, $19.0 million, for capital
expenditures made over the previous three years.
As mentioned above, during 1995 the Company entered into an unsecured
revolving credit agreement for up to $150.0 million (now $130.0 million).
Previously, the Company maintained uncommitted lines of credit. Credit lines
provide for interest rate options based on Prime, Eurodollar, or Money Market.
There were $62.3 million of borrowings outstanding under these lines at the end
of 1998, 18.0 million at the end of 1997, and $113.0 million at the end of 1996.
- 51 -
<PAGE>
The decrease in cash and short-term investments of $22.5 million over
the three year period ended in 1998 was primarily due to Aunt Nellie's Farm
Kitchens and Curtice Burns acquisitions of $53.7 million, the debt repayments
totaling $14.9 million; capital additions of $15.7 million, $11.7 million, and
$67.9 million, in 1998, 1997, and 1996, respectively. This was partially offset
by the proceeds of the new long-term debt issues totaling $25.7 million;
proceeds from the sale of Moog Inc. stock of $12.9 million; proceeds from the
disposal of assets totaling $13.5 million; and net earnings (before depreciation
effect which is non-cash).
In 1998, accounts receivable increased by $12.2 million to $48.6
million. This was due in part to Non-Alliance sales being $87.7 million higher
fueled by the two acquisitions (see below).
In 1998 inventories increased $35.8 million over 1997. This was largely
due to the acquisitions made during the year (see below). In 1997 inventories
declined by $71.6 million due to the sales increase on Alliance sales.
In 1998 capital expenditures were $15.7 million as compared to $11.7
million in 1997. In 1998 certain juice production lines were converted to PET
(plastic bottles) totaling $3.2 million at plants in the south and midwest. The
1997 capital expenditures are down substantially from 1996. The largest project
was the green bean expansion in Cumberland related to the Alliance where $4.4
million was spent in 1997. The 1996 capital expenditures of $67.9 million were
substantially due to a major capital expansion relating to the Company's
alliance with Pillsbury (the "Alliance"), integrated six of Pillsbury's Green
Giant vegetable processing plants and significantly increased the Company's own
production capabilities to accommodate the production of four Pillsbury plants
that were concurrently closed. This capital expansion was originally expected to
be $50.0 million, but to meet the Company's ambitious goals, an additional $25.0
million was spent on this project, primarily in the Company's New York State
operations in order to meet operational needs of the Alliance.
Acquisitions in the Fiscal Year Ended March 31, 1998. In 1998 the
Company completed two acquisitions. The first acquisition was Aunt Nellie's Farm
Kitchens, which produces, markets and sells fruit and vegetable products from
their plants in the midwest, for approximately $24.3 million. The second
acquisition was the Curtice Burns canned branded and private label vegetable
business for approximately $29.4 million.
Results of Operations. Net sales for 1998 were $703.2 million, which
includes $277.1 million sold under the Alliance. Net sales for 1997 were $730.1
million, which includes $391.7 million sold under the Alliance with Pillsbury.
Net sales for 1996 were $508.0 million, which includes $168.0 million of sales
to Pillsbury under the Alliance. In 1998 Non-Alliance sales increased by $87.7
million. In 1997 Non-Alliance sales decreased by $1.6 million. If 1996 net sales
are compared with the last full year sales (1994), the increase for the two year
period is 22.7% excluding the effect of the Alliance. In 1998 vegetable unit
sales increased due to the two acquisitions and the high pack levels of the last
two years. Also in 1998 juice dollar sales declined $12.8 million or 7.8%. In
1997 vegetable unit sales increased due to getting higher packs than the prior
year. In 1997 vegetable unit prices increased for part of the year but declined
later in the year due to excess inventories. In 1996 vegetable unit sales were
lower due to a less than budget pack. Unit vegetable selling prices dropped in
1996, while apple pricing rose due to the worldwide shortage of processing
apples.
The 1997 results include a $7.5 million gain on the sale of Moog Inc.
Class A Common Stock back to Moog and a gain on the sale of a Clifton Park, New
York warehouse of $1.6 million. The 1996 results include a non-recurring charge
of $15.1 million, before income tax benefit, due to a combination of start-up
costs related to the Pillsbury Alliance and severe drought conditions in New
York State throughout the entire summer. The Company undertook an ambitious
capital expenditure program related to the Alliance. In the relatively short
time between the February 1995 closing of the Alliance and the beginning of the
1995 vegetable
- 52 -
<PAGE>
pack, 37 separate major capital projects needed to be completed. There were some
unforeseen problems related to a few of these projects, mostly in the New York
plants. Some of the used equipment transferred from the closed plants had
operating difficulties and were not always easily repaired, thus causing
downtime. Therefore, plant throughput and yields were poor at some plants
resulting in unfavorable manufacturing variances. The problems were magnified
when the drought and the hot weather conditions forced the uneven timing of
maturities of vegetables.
In 1998 earnings decreased for the following reasons: (i) lower selling
prices on vegetables due to an ongoing industry oversupply due in part to the
second consecutive above budget pack, (ii) apple product price declines were
greater than apple product cost declines, and (iii) a decline in the consumption
of frozen concentrates put further pressure on pricing. In 1997 earnings
increased for the following reasons: (i) the Moog Inc. gain of $7.5 million
detailed above, (ii) higher vegetable selling prices for part of the year, and
(iii) greater sales under the Alliance Agreement produced additional earnings.
In 1996 earnings decreased for the following reasons: (i) the $15.1 million
non-recurring charge detailed above, (ii) higher apple cost of product sold due
to a world-wide shortage of processing apples, and (iii) lower selling prices on
vegetables due to an ongoing industry oversupply.
In 1996, the Company changed its inventory valuation method from the
lower of cost; last-in, first-out; or market to the lower of cost; first-in,
first-out; or market. The major reason for the change is the Alliance
inventories are on the first-in, first-out method which represent the majority
of the Company's inventory dollars. The change has been applied retroactively by
restating the financial statements of prior years.
In general, inflation played a relatively small role in the operating
results and cash flows of 1998, 1997, and 1996 since the Company depreciates its
fixed assets under accelerated depreciation methods for tax purposes.
New Accounting Pronouncements. Three new accounting standards were
issued during the past year that the Company must comply with beginning in 1999.
They are (i) SFAS No. 130, "Reporting Comprehensive Income"; (ii) SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information"; and (iii)
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." These standards expand or modify current disclosures and,
accordingly, will have no impact on the Company's reported financial position,
results of operations and cash flows.
Year 2000.The Company recognizes the need to ensure its operations will
not be adversely impacted by Year 2000 software failures. Software failures due
to processing errors potentially arising from calculations using the Year 2000
data are a known risk. The Company is in the process of replacing some systems,
which are known not to be Year 2000 compliant, and updating others to be Year
2000 compliant. The Company is addressing the computing environment along with
any other systems in the operating facilities, which may also not be Year 2000
compliant. The Company is using internal resources to make systems Year 2000
compliant as much as possible only using external resources for specialized
equipment, which is mostly at our plants. The total cost of compliance, above
and beyond normal software upgrades, is not expected to exceed $750,000.00.
- 53 -
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Company's common stock is traded on the Nasdaq National Stock
Market. The high and low sales prices of the Company's common stock during the
periods indicated are shown below.
<TABLE>
<CAPTION>
Class A: 1998 1997 1996
-------------------------------------------------------------------------------------------------
Quarter High Low High Low High Low
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $18.75 $16.75 $18.00 $14.75 $ __ $ __
Second 18.50 16.75 17.75 15.75 20.00 19.50
Third 18.25 16.50 17.00 15.00 19.75 15.00
Fourth 17.62 15.75 18.75 15.00 19.00 15.25
Class B: 1998 1997 1996
--------------------------------------------------------------------------------------------------
Quarter High Low High Low High Low
- -------------------------------------------------------------------------------------------------------------------------------
First $18.50 $16.75 $18.00 $14.50 $17.88 $16.75
Second 18.50 16.75 17.75 16.00 22.00 17.25
Third 18.25 16.50 17.50 15.25 21.25 16.50
Fourth 17.25 15.50 19.00 15.25 20.00 16.00
</TABLE>
The Company may pay common dividends only from consolidated net
earnings available for distribution, of which there were none as of March 31,
1998. Payment of dividends to common stockholders is made at the discretion of
the Company's Board of Directors and depends, among other factors, on earnings,
capital requirements, and the operating and financial condition of the Company.
The Company has not declared or paid a dividend on its Common Stock since
1981. See "Risk Factors--No Dividends."
DIRECTORS AND EXECUTIVE OFFICERS
Directors. The following table sets forth certain information with respect to
the Company's directors:
<TABLE>
<CAPTION>
Served
as
Director Principal Occupation for Past Five Years(1) Age Director
Since
- -------- ------------------------------------------- --- --------
<S> <C> <C> <C>
Robert T. Brady President and Chief Executive Officer of Moog Inc., East 57 1989
Aurora, New York.(2)
David L. Call Emeritus Dean and Professor of the College of Agriculture 66 1985
and Life Sciences, Cornell University, Ithaca, New York,
since 1995; Dean of the College of Agriculture and Life
Sciences, until 1995.
Edward O. Gaylord President of Gaylord & Company, Houston, Texas 66 1975
and the Chairman of EOTT Energy Corporation,
Houston, Texas.(3)
G. Brymer Humphreys President, Humphreys Farm Inc., New Hartford, New York. 57 1983
- 54 -
<PAGE>
Kraig H. Kayser President and Chief Executive Officer of the Company since 37 1985
1993 and Vice President, Secretary and Chief Financial
Officer of the Company until 1993.(4)
Susan W. Stuart(5) Marketing Consultant, Fairfield, Connecticut. 43 1986
Arthur S. Wolcott(5) Chairman of the Company. 72 1949
Andrew M. Boas(6) General Partner, Carl Marks Management Company, L.P., New York, 43 --
New York; President, Carl Marks Offshore Management, Inc.;
Managing Director, CMCO, Inc.; Vice President, CM Capital;
Vice President, Carl Marks & Co., Inc.
Arthur H. Baer President, Hudson Valley Publishing, Inc., Albany, New York 51 --
since 1998; President, Xyan Inc, from 1996 to 1998;
Dean, College of Business and Administration, Drexel University
until 1996.
<FN>
(1) Unless otherwise indicated, each nominee has had the same principal
occupation for at least the past five years.
(2) Mr. Brady is also a director of the following publicly-held companies:
Acme Electric Corporation; Astronics Corporation; M&T Bank Corporation (formerly,
First Empire State Corporation); and National Fuel Gas Corp.
(3) Mr. Gaylord is also a director of the following publicly-held companies:
Essex International, Inc.; Kinder Morgan Energy Partners, L.P.
and Imperial Holly Corporation.
(4) Mr. Kayser is also a director of the following publicly-held company: Moog
Inc.
(5) Susan W. Stuart and Arthur S. Wolcott are daughter and father.
(6) Mr. Boas is also director of the following publicly-held companies; Thousand
Trails, Inc. and Vertientes Camaguey Sugar Company, Inc.
</FN>
</TABLE>
<TABLE>
Executive Officers. The following is a listing of the Company's executive
officers:
Served
as
Officer
Officer Principal Occupation for Past Five Years(1) Age Since
- ------- ------------------------------------------- --- -------
<S> <C> <C> <C>
Arthur S. Wolcott See table under "Election of Directors." 72 1949
Kraig H. Kayser See table under "Election of Directors." 37 1991
Philip G. Paras Vice President-Finance of the Company since 1996 and 37 1996
Treasurer of the Company since 1997; Vice President of the
Chase Manhattan Bank, Syracuse, New York, 1993 until
1996.
Jeffrey L. Van Riper Secretary and Controller of the Company. 41 1986
Sarah S. Mortensen Assistant Secretary of the Company. 53 1986
- --------------------------------------------------------------------
<FN>
(1) Unless otherwise indicated, each officer has had the same principal occupation for at least the past five years.
</FN>
</TABLE>
- 55 -
<PAGE>
Executive Compensation
The following table sets forth the compensation paid by the Company to
the chief executive officer and to the most highly compensated executive
officers whose compensation exceeded $100,000 (the "Named Officers") for
services rendered in all capacities to the Company and its subsidiaries during
the fiscal years ended March 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Annual Compensation
Name of Individual and Fiscal -------------------
Principal Position Year Salary Bonus
---------------------- ------ ------ -----
<S> <C> <C> <C>
Arthur S. Wolcott 1998 $ 336,000 $ ---
Chairman and Director 1997 340,000 ---
1996 340,000 ---
Kraig H. Kayser 1998 $ 292,000 $ ---
President, Chief Executive 1997 287,000 ---
Officer and Director 1996 287,000 ---
</TABLE>
- 56 -
<PAGE>
Pension Benefits
The executive officers of the Company are entitled to participate in the
Pension Plan (referred to in this section as the "Plan"), which is for the
benefit of all employees meeting certain eligibility requirements. Effective
August 1, 1989, the Company amended the Plan to provide improved pension
benefits under the Plan's Excess Formula. The Excess Formula for the calculation
of the annual retirement benefit is: total years of credited service (not to
exceed 35) multiplied by the sum of (i) 0.6% of the participant's average salary
(five highest consecutive years, excluding bonus), and (ii) 0.6% of the
participant's average salary in excess of his compensation covered by Social
Security.
Participants who were employed by the Company prior to August 1, 1988 are
eligible to receive the greater of their benefit determined under the Excess
Formula or their benefit determined under the Offset Formula. The Offset Formula
is: (i) total years of credited service multiplied by $120, plus (ii) average
salary multiplied by 25%, less 74% of the primary Social Security benefit.
Pursuant to changes required by the Tax Reform Act of 1986 (the "1986 Act"), the
Company amended the Plan to cease further accruals under the Offset Formula as
of July 31, 1989. Participants who were eligible to receive a benefit under the
Offset Formula will receive the greater of their benefit determined under the
Excess Formula or their benefit determined under the Offset Formula as of July
31, 1989. The maximum permitted annual retirement income under either formula is
$130,000.
The following table sets forth estimated annual retirement benefits payable
at age 65 for participants in certain compensation and years of service
classifications using the highest number obtainable under both formulas (based
on the maximum Social Security benefit in effect for the calendar year ending
December 31, 1997):
<TABLE>
<CAPTION>
Five Highest
Consecutive ANNUAL BENEFITS
Years' Earnings
-------------------------------------------------------------------------------------------------------------
15 Years 20 Years 25 Years 30 Years 35 Years
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 90,000 $ 13,500 $17,900 $22,400 $26,900 $31,300
120,000 19,900 25,100 31,400 37,700 43,900
150,000 27,400 32,300 40,400 48,500 56,500
180,000 or higher 28,400 33,300 41,600 49,900 58,200
</TABLE>
Under the Plan, Arthur S. Wolcott and Kraig H. Kayser have 49 years and 6
years of credited service, respectively. Their compensation during fiscal year
1998 covered by the Plan was $336,000 for Mr. Wolcott and $292,000 for Mr.
Kayser. The Code limits the amount of compensation that can be taken into
account in calculating retirement benefits (for 1998 the limit is $160,000).
Directors' Fees
During fiscal year 1998, directors were paid a fee of $1,000 per month. Any
director who is also an officer of the Company receives no director's fee.
- 57 -
<PAGE>
Stock Options
No options were granted or exercised in the period from April 1, 1997, to
the date of this Prospectus, nor were any unexpired options held at the latter
date by any officer or director of the Company.
Profit Sharing Bonus Plan
The Company has a Profit Sharing Bonus Plan for certain eligible employees
of the Company ("Corporate Profit Sharing" for the officers and certain key
corporate employees and "Operating Unit Profit Sharing" for certain key
operating unit employees). Under Corporate Profit Sharing, some or all of the
Corporate Profit Sharing Pool (10% of the Corporate Bogey as defined below) will
be paid only if Pre-Tax Profits (as defined) equal or exceed the Corporate
Bogey. The bonuses will be distributed at the sole discretion of the Company's
chief executive officer upon approval of such bonuses by the Compensation
Committee of the Board of Directors. Under the Operating Unit Profit Sharing,
the Operating Unit Profit Sharing pool (10% of Pre-Tax Profit less the Operating
Unit Bogey as defined below) will be paid only if the Pre-Tax Profit of the
Operating Unit equals or exceeds the Operating Unit Bogey. The bonuses will be
distributed at the discretion of the Operating Unit President. For fiscal 1998
the Corporate Bogey will be equal to the greater of (i) five percent of the
prior year's Consolidated Net Worth of the Company plus the Pillsbury
Subordinated Note or (ii) five percent plus the annual increase in the Consumer
Price Index greater than five percent, times the prior year's Consolidated Net
Worth of the Company. The Operating Unit Bogey will be an amount equal to the
average gross assets employed by the Vegetable, Juice or Flight Operations for
the preceding 12 months divided by the consolidated average gross assets of the
Company for the same period multiplied by the Corporate Bogey.
The bonuses earned by the Company's Named Officers for the 1998 fiscal year
are included in the executive compensation table above. No bonuses were earned
in 1998, 1997 or 1996 under the Plan.
Compensation Committee Interlocks and Insider Participation
Mr. Kayser serves as a member of the Compensation Committee of Moog Inc.
and as a director on its Board. Mr. Brady, who is the President and Chief
Executive Officer of Moog Inc., serves as a director on Company's Board. Members
of the Company's Compensation Committee are David L. Call (Chairman), Edward O.
Gaylord and Susan W. Stuart.
- 58 -
<PAGE>
OWNERSHIP OF SECURITIES
Ownership by Management. The following table sets forth certain
information with respect to beneficial ownership of the Company's outstanding
Class A Common Stock, Class B Common Stock, 6% Preferred Stock, 10% Series A
Preferred Stock and 10% Series B Preferred Stock by each director and by all
directors and officers as a group as of July 6, 1998 (assuming the (i) purchase
of an aggregate of 3,666,667 shares of New Preferred Stock by the New Investors;
(ii) the conversion of the New Preferred Stock into 3,666,667 shares of Class A
Common Stock by the New Investors; and (iii) that none of the Company's existing
shareholders exercise the Rights issued to the them in the Rights Offering
Shareholders; ("beneficial ownership" for these purposes is determined in
accordance with applicable Securities and Exchange Commission ("SEC") rules and
includes shares over which a person has sole or shared voting power or
investment power):
<TABLE>
<CAPTION>
Name Title of Class Shares Beneficially
Owned(1) Percent of Class
Prior to After Prior to After
Offering Offering Offering Offering
---- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Edward O. Gaylord Class A Common Stock 4,544 4,544 --- (2) --- (2)
Class B Common Stock 4,544 4,544 --- (2) --- (2)
G. Brymer Humphreys Class A Common Stock 800 800 --- (2) --- (2)
Class B Common Stock 800 800 --- (2) --- (2)
Kraig H. Kayser Class A Common Stock (3) 269,929 269,929 8.46% 3.93%
Class B Common Stock (4) 278,329 278,329 10.00 10.00
6% Preferred Stock (5) 8,000 8,000 4.00 4.00
10% Series A Preferred Stock (6) 173,812 173,812 42.70 42.70
10% Series B Preferred Stock (7) 165,080 165,080 41.30 41.30
David L. Call Class A Common Stock (8) 600 600 --- (2) --- (2)
Class B Common Stock (8) 600 600 --- (2) --- (2)
Susan W. Stuart Class A Common Stock (9) 186,151 186,151 5.83 2.71
Class B Common Stock (10) 191,733 191,733 6.90 6.90
6% Preferred Stock 25,296 25,296 12.60 12.60
Arthur S. Wolcott Class A Common Stock (11) 252,549 252,549 7.92 3.68
Class B Common Stock (12) 264,634 264,634 9.50 9.50
6% Preferred Stock (13) 63,288 63,288 31.60 31.60
10% Series A Preferred Stock (14) 212,840 212,840 52.30 52.30
10% Series B Preferred Stock (15) 212,200 212,200 53.00 53.00
Andrew M. Boas Class A Common Stock (16) 0 3,666,667 --- (2) 53.49
Robert T. Brady 0 0 --- (2) --- (2)
Arthur H. Baer 0 0 --- (2) --- (2)
All directors and Class A Common Stock (18) 481,759 4,148,426 15.11 60.52
officers as a group (17) Class B Common Stock (19) 509,826 509,826 18.20 18.20
6% Preferred Stock (20) 96,584 296,584 48.30 48.30
10% Series A Preferred Stock (21) 386,652 386,652 94.90 94.90
10% Series B Preferred Stock (22) 377,280 377,280 94.30 94.30
<FN>
(1) Unless otherwise stated, each person named in the
table has sole voting and investment power with
respect to the shares indicated as beneficially owned
by that person. No stock options are held by any of
the named individuals or the group. The holdings of
Class A Common Stock and Class B Common Stock listed
in the table do not include the shares obtainable
upon conversion of the 10% Series A Preferred Stock
and the 10% Series B Preferred Stock, which are
currently convertible into Class A Common Stock and
Class B Common Stock on the basis of 20 and 30 shares
of Preferred Stock, respectively, for each share of
Common Stock.
(2) Less than 1.0%.
(3) Mr. Kayser has sole voting and investment power over
51,928 shares of Class A Common Stock owned by him
and sole voting but no investment power over 24,950
shares owned by his siblings and their children which
are subject to a voting trust agreement of which Mr.
Kayser is a trustee. Mr. Kayser has shared voting and
investment power with respect to 76,644 shares held
in two trusts of which he is a co-trustee and in
which he and members of his family are beneficiaries.
Robert Oppenheimer of Rochester, New York is the
other co-trustee of the trusts. The shares in the
table include (i) 6,117 shares held by the Company's
Tax Credit Employee Stock Ownership Plan Trust (the
"PAYSOP"), of which Mr. Kayser is a trustee; (ii)
78,188 shares held by the Seneca Foods Corporation
Employees' Pension Benefit Plan (the "Pension Plan"),
of which Mr. Kayser is a trustee; and (iii) 32,102
shares held by the Seneca Foods Foundation (the
"Foundation"), of which Mr. Kayser is a director. The
shares reported in the table do not include (i)
14,912 shares owned by Mr. Kayser's mother, (ii)
19,000 shares held in trust for Mr. Kayser's mother,
or (iii) 10,534 shares held by the Seneca Foods
Corporation Employees Savings Plan (the "401(k)
Plan"), over which the Company's officers may be
deemed to have shared voting and investment power.
Mr. Kayser has shared voting and investment power
with respect to the shares held by the PAYSOP, the
Pension Plan and the Foundation. He disclaims
beneficial ownership of the shares held by his mother
and in trust for his mother and the shares held by
the 401(k) Plan.
(4) Mr. Kayser has sole voting and investment power over
53,628 shares of Class B Common Stock owned by him
and sole voting but no investment power over 32,650
shares owned by his siblings and their children which
are subject to a voting trust agreement of which Mr.
Kayser is a trustee. Mr. Kayser has shared voting and
investment power with respect to 76,644 shares held
in two trusts of which he is a co-trustee and in
which he and members of his family are beneficiaries.
Robert Oppenheimer of Rochester, New York is the
other co-trustee of the trusts. The shares in the
table include (i) 6,117 shares held by the PAYSOP, of
which Mr. Kayser is a trustee; (ii) 78,188 shares
held by the Pension Plan, of which Mr. Kayser is a
trustee; and (iii) 31,102 shares held by the
Foundation, of which Mr. Kayser is a director. The
shares in the table do not include (i) 14,912 shares
owned by Mr. Kayser's mother; (ii) 19,000 shares held
in trust for Mr. Kayser's mother; and (iii) 3,916
shares held by the 401(k) Plan, over which the
Company's officers may be deemed to have shared
voting and investment power. Mr. Kayser has shared
voting and investment power with respect to the
shares held by the PAYSOP, the Pension Plan and the
Foundation. He disclaims beneficial ownership of the
shares held by his mother and in trust for his mother
and the shares held by the 401(k) Plan.
(5) Does not include 27,536 shares of 6% Preferred Stock
held by Mr. Kayser's brother, as to which Mr. Kayser
disclaims beneficial ownership. See the table under
"--Principal Owners of Voting Stock."
(6) Mr. Kayser has shared voting and investment power
with respect to 141,644 shares of 10% Series A
Preferred Stock held in two trusts described in note
3 above. The total 173,812 shares of 10% Series A
Preferred Stock are convertible into 8,690 shares of
Class A Common Stock and 8,690 shares of Class B
Common Stock.
(7) Mr. Kayser has shared voting and investment power
with respect to 165,080 shares of 10% Series B
Preferred Stock held in two trusts described in notes
3 and 4 above. These shares are convertible into
5,502 shares of Class A Common Stock and 5,502 shares
of Class B Common Stock.
(8) Dr. Call has sole voting and investment power over
200 shares of Class A Common Stock and 200 shares of
Class B Common Stock he owns. He has shared voting
and investment power over 400 shares of Class A
Common Stock and 400 shares of Class B Common Stock
owned jointly with his spouse.
(9) The shares in the table include (i) 11,276 shares of
Class A Common Stock held by Ms. Stuart's husband;
(ii) 2,594 shares owned by her sister's son, of which
Ms. Stuart is the trustee; (iii) 6,117 shares held by
the PAYSOP, of which Ms. Stuart is a trustee; (iv)
78,188 shares held by the Pension Plan, of which Ms.
Stuart is a trustee; and (v) 32,102 shares held by
the Foundation of which Ms. Stuart is a director. Ms.
Stuart has shared voting and investment power with
respect to the shares held by the PAYSOP, the Pension
Plan and the Foundation and sole voting and
investment power with respect to the shares owned by
her sister's son. She disclaims beneficial ownership
of the shares held by her husband.
(10) The shares in the table include (i) 12,668 shares of
Class B Common Stock held by Ms. Stuart's husband;
(ii) 6,392 shares owned by her sister's sons, of
which Ms. Stuart is the trustee; (iii) 6,117 shares
held by the PAYSOP, of which Ms. Stuart is a trustee;
(iv) 78,188 shares held by the Pension Plan, of which
Ms. Stuart is a trustee; and (v) 31,102 shares held
by the Foundation of which Ms. Stuart is a director.
Ms. Stuart has shared voting and investment power
with respect to the shares held by the PAYSOP, the
Pension Plan and the Foundation and sole voting and
investment power with respect to the shares owned by
her sister's sons. She disclaims beneficial ownership
of the shares held by her husband.
(11) The shares in the table include (i) 46,826 shares of
Class A Common Stock held by Mr. Wolcott's wife; (ii)
6,117 shares held by the PAYSOP, of which Mr. Wolcott
is a trustee; (iii) 78,188 shares held by the Pension
Plan, of which Mr. Wolcott is a trustee; and (iv)
32,102 shares held by the Foundation, of which Mr.
Wolcott is a director. The shares reported in the
table do not include (i) 278,540 shares of Class A
Common Stock held directly by Mr. and Mrs. Wolcott's
offspring and their families (including Susan W.
Stuart) or (ii) 10,534 shares held by the 401(k)
Plan, over which the Company's officers may be deemed
to have shared voting and investment power. Mr.
Wolcott has shared voting and investment power with
respect to the shares held by the PAYSOP, the Pension
Plan and the Foundation. He disclaims beneficial
ownership with respect to the shares held by his
wife, his offspring and their families and the 401(k)
Plan.
(12) The shares in the table include (i) 34,338 shares of
Class B Common Stock held by Mr. Wolcott's wife; (ii)
6,117 shares held by the PAYSOP, of which Mr. Wolcott
is a trustee; (iii) 78,188 shares held by the Pension
Plan, of which Mr. Wolcott is a trustee; and (iv)
31,102 shares held by the Foundation, of which Mr.
Wolcott is a director. The shares in the table do not
include (i) 316,516 shares of Class B Common Stock
held directly by Mr. and Mrs. Wolcott's offspring and
their families (including Susan W. Stuart) or (ii)
3,916 shares held by the 401(k) Plan, over which the
Company's officers may be deemed to have shared
voting and investment power. Mr. Wolcott has shared
voting and investment power with respect to the
shares held by the PAYSOP, the Pension Plan and the
Foundation. He disclaims beneficial ownership with
respect to the shares held by his wife, his offspring
and their families and the 401(k) Plan.
(13) Includes 30,444 shares of 6% Preferred Stock held
under a shareholder voting agreement giving Mr.
Wolcott sole voting power of the shares, but not
investment power or beneficial ownership of the
shares. Does not include 101,176 shares of 6%
Preferred Stock held directly by Mr. and Mrs.
Wolcott's offspring (including Susan W. Stuart), as
to which Mr. Wolcott disclaims beneficial ownership.
(14) These shares are convertible into 10,642 shares of
Class A Common Stock and 10,642 shares of Class B
Common Stock.
(15) These shares are convertible into 7,073 shares of
Class A Common Stock and 7,073 shares of Class B
Common Stock.
(16) Includes 3,666,667 shares of Class A Common Stock
(assuming conversion of the shares of New Preferred
Stock) owned by the New Investors as to which Mr.
Boas disclaims beneficial ownership.
(17) Does not include 300 shares of Class A Common Stock
and 300 shares of Class B Common Stock owned by Mr.
Brady's children as to which Mr. Brady disclaims
beneficial ownership.
(18) See notes 3, 8, 9, 11, 16 and 17 above.
(19) See notes 4, 8, 10 and 12 above.
(20) See notes 5 and 13 above.
(21) See notes 6 and 14 above.
(22) See notes 7 and 15 above.
</FN>
</TABLE>
Principal Owners of Voting Stock. The following table sets
forth, as of July 6, 1998, certain information with respect to persons known by
the Company to be the beneficial owners of more than five percent of the classes
of stock ("beneficial ownership" for these purposes is determined in accordance
with applicable Commission rules and includes shares over which a person has
sole or shared voting power or investment power). The holdings of Common Stock
listed in the table do not include the shares obtainable upon conversion of the
10% Series A Preferred Stock and the 10% Series B Preferred Stock, which
currently are convertible into Class A Common Stock and Class B Common Stock on
the basis of 20 and 30 shares of Preferred Stock, respectively, for each share
of Common Stock. The holdings of Class A Common Stock listed in the table as
held "After Offering" assumes (i) the issuance to the New Investors of 3.667
million shares of New Preferred Stock and the conversion of such shares on a
share-for-share basis into shares of Class A Common Stock and; (ii) that none of
the Company's existing shareholders exercise their Rights in the Rights
Offering.
<PAGE>
<TABLE>
6% Preferred Stock
<CAPTION>
Amount of Shares and Nature of Beneficial Ownership
Name and Address Sole Voting Shared Voting and Total Percent of Total
----- ----------------
of Beneficial Owner and Investment Power Investment Power
- ------------------- -------------------- ----------------
<S> <C> <C> <C> <C>
Arthur S. Wolcott (1) 32,844 30,444 (2) 63,288 31.6%
L. Jerome Wolcott, Sr. Trust --- 30,444 (3) 30,444 15.2
Southbury, Connecticut
Kurt C. Kayser 27,536 (4) --- 27,536 13.8
Sarasota, Florida
Susan W. Stuart 25,296 (5) --- 25,296 12.6
Fairfield, Connecticut
Bruce S. Wolcott 25,296 (5) --- 25,296 12.6
Canandaigua, New York
Grace W. Wadell 25,292 (5) --- 25,292 12.6
Bala Cynwyd, Pennsylvania
Mark S. Wolcott 25,292 (5) --- 25,292 12.6
10% Series A Preferred Stock
Amount of Shares and Nature of Beneficial Ownership
Name and Address Sole Voting Shared Voting and Total Percent of Total
----- ----------------
of Beneficial Owner and Investment Power Investment Power
- ------------------- -------------------- ----------------
Arthur S. Wolcott 212,840 (6) --- 212,840 52.3%
Kraig H. Kayser (7) 32,168 141,644 (8) 173,812 42.7
Hannelore Wolcott 20,588 --- 20,588 5.1
Penn Yan, New York
10% Series B Preferred Stock
Amount of Shares and Nature of Beneficial Ownership
Name and Address Sole Voting Shared Voting and Total Percent of Total
----- ----------------
of Beneficial Owner and Investment Power Investment Power
- ------------------- -------------------- ----------------
Arthur S. Wolcott 212,200 (9) --- 212,200 53.0%
Kraig H. Kayser --- 165,080 (10) 165,080 41.3
Hannelore Wolcott 22,720 --- 22,720 5.7
<PAGE>
Class B Common Stock
Amount of Shares and Nature of Beneficial Ownership
Name and Address Sole Voting Shared Voting and Total Percent of Total
----- ----------------
of Beneficial Owner and Investment Power Investment Power
- ------------------- -------------------- ----------------
Edwin S. Marks (11) (12) 145,000 335,088 480,088 17.2%
Kraig H. Kayser 53,628 224,701 (13) 278,329 10.0
Arthur S. Wolcott 114,889 149,745 (14) 264,634 9.5
CMCO, Inc. (15) 232,568 --- 232,568 8.3
Susan W. Stuart 57,266 134,467 (16) 191,733 6.9
Hansen Fruit & Cold Storage 170,500 --- 170,500 6.1
Co., Inc. (17)
</TABLE>
<TABLE>
Class A Common Stock
<CAPTION>
Amount of Shares and Nature of Beneficial Ownership
Name and Address Sole Voting Shared Voting and Total Percent of Total
----- ----------------
of Beneficial Owner and Investment Power Investment Power
Prior to After Prior to After Prior to After Prior to After
Offering Offering Offering Offering Offering Offering Offering Offering
- ------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edwin S. Marks (11)(18) 145,000 145,000 343,088 343,088 488,088 488,088 15.3% 7.1%
Great Neck, New York
The Pillsbury Company --- --- 346,570 346,570 346,570 346,570 10.9 5.0
Grand Metropolitan plc
Minneapolis, Minnesota (19)
Kraig H. Kayser (20) 51,928 51,928 218,001 218,001 269,929 269,929 8.5 3.9
Arthur S. Wolcott (21) 89,316 89,316 163,233 163,233 252,549 252,549 7.9 3.7
CMCO, Inc. (15) 232,568 232,568 --- --- 232,568 232,568 7.3 3.4
New York, New York
Susan W. Stuart (22) 55,874 55,874 130,277 130,217 186,151 186,151 5.8 2.7
Hansen Fruit & Cold Storage 170,500 170,500 --- --- 170,500 170,500 5.3 2.5
Co., Inc. (17)
Yakima, Washington
Carl Marks Strategic --- 2,750,000 --- --- --- 2,750,000 --- 40.1
Investments, L.P.
New York, New York
Carl Marks Strategic --- 825,000 --- --- --- 825,000 --- 12.0
Investments II, L.P.
New York, New York
Uranus Fund, Ltd. --- 91,667 --- --- --- 91,667 --- 1.3
New York, New York
<PAGE>
<FN>
(1) Business address: Suite 1010, 1605 Main Street, Sarasota, Florida 34236.
(2) See note 13 to the table under the heading "--Ownership by Management"
and note 3 below.
(3) The L. Jerome Wolcott, Sr. Trust does not have voting power but has
other attributes of beneficial ownership with respect to these shares,
which are also included in Arthur S. Wolcott's shares (see note 2
above).
(4) These shares are included in the shares described in note 5 to the
table under the heading "--Ownership by Management."
(5) These shares are included in the shares described in note 13 to the
table under the heading "--Ownership by Management."
(6) See note 14 to the table under the heading "--Ownership by Management."
(7) Business address: 1162 Pittsford-Victor Road, Pittsford, New York 14534.
(8) See note 6 to the table under the heading "--Ownership by Management."
(9) See note 15 to the table under the heading "--Ownership by Management."
(10) See note 7 to the table under the heading "--Ownership by Management."
(11) Based on a statement on Schedule 13D filed by Edwin S. Marks with the
Commission (as most recently amended in July 1998). See also note 15
below.
(12) Edwin S. Marks shares voting and dispositive power with respect to
102,520 of these shares with his wife. He disclaims beneficial
ownership of his wife's shares. The balance of the shares in this
column are owned by CMCO, Inc. See notes 11 above and 15 below.
(13) See note 4 to the table under the heading "--Ownership by Management."
(14) See note 12 to the table under the heading "--Ownership by Management."
(15) Based on a statement on Schedule 13D filed by CMCO, Inc. with the
Commission (as most recently amended in July 1998). CMCO, Inc. is a
private holding company of which Edwin S. Marks is the President and a
shareholder. See also notes 11 and 12 above and note 18 below.
(16) See note 10 to the table under the heading "--Ownership by Management."
(17) Based on a statement on Schedule 13D filed with the Commission by
Hansen Fruit & Cold Storage Co., Inc. ("Hansen Fruit") in November
1988. According to the Schedule 13D, Gary Hansen, the President and a
director of Hansen Fruit, has sole voting and dispositive power over
the indicated shares.
(18) Edwin S. Marks shares voting and dispositive power with respect to
110,520 of these shares with his wife and his daughters. He disclaims
beneficial ownership of these shares. The balance of the shares in this
column are owned by CMCO, Inc. See also note 15 above.
(19) Based on a statement on Schedule 13D filed by Pillsbury and Grand
Metropolitan with the Commission in March 1996.
(20) See note 3 to the table under the heading "--Ownership by Management."
(21) See note 11 to the table under the heading "--Ownership by Management."
(22) See note 9 to the table under the heading "--Ownership by Management."
</FN>
</TABLE>
- 65 -
<PAGE>
LEGAL MATTERS
Jaeckle Fleischmann & Mugel, LLP, Buffalo, New York will pass upon certain
legal matters for the Company with respect to the shares offered hereby.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule included in this Prospectus as of March 31, 1998
and 1997 and for each of the three years in the period March 31, 1998 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are included herein, and have been so included in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report..............................................F-2
Consolidated Statements of Net Earnings for the years ended March 31,
1998, 1997 and 1996..................................................F-3
Consolidated Balance Sheets as of March 31, 1998 and 1997.................F-4
Consolidated Statements of Cash Flows for the years ended March 31, 1998,
1997 and 1996........................................................F-5
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 1998, 1997 and 1996 .......................................F-6
Notes to Consolidated Financial Statements................................F-7
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of
Seneca Foods Corporation
Pittsford, New York
We have audited the accompanying consolidated balance sheets of Seneca Foods
Corporation and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of net earnings, stockholders' equity, and cash flows
for each of the three years in the period ended March 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Seneca Foods Corporation and
subsidiaries as of March 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1998 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Rochester, New York
May 22, 1998 (June 16, 1998 as to Note 4)
F-2
<PAGE>
<TABLE>
Consolidated Statements of Net Earnings
Seneca Foods Corporation and Subsidiaries
(In thousands of dollars, except share amounts)
<CAPTION>
Years ended March 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Net sales $ 703,220 $ 730,135 $ 507,988
Other income -- 8,308 4,271
------- ------- -------
703,220 738,443 512,259
Costs and expenses:
Cost of product sold 649,841 669,261 452,584
Selling, general, and administrative expense 35,056 28,609 31,640
Interest expense, net of interest income of $109, $185, and
$180, respectively 26,780 28,827 28,157
Non-recurring charge -- -- 15,078
------- ------- -------
711,677 726,697 527,459
- ----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (8,457) 11,746 (15,200)
Income taxes (3,313) 4,215 (5,053)
----------------------------------------------
Net earnings (loss) $ (5,144) $ 7,531 $ (10,147)
==========================================================================================================================
Basic earnings (loss) per common share $ (.87) $ 1.27 $ (1.81)
==========================================================================================================================
Diluted earnings (loss) per common share $ (.87) $ 1.25 $ (1.81)
==========================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
Consolidated Balance Sheets
Seneca Foods Corporation and Subsidiaries
(In thousands)
<CAPTION>
March 31, 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Current Assets:
Cash and short-term investments $ 4,077 $ 1,584
Accounts receivable, less allowance for doubtful accounts
of $207 and $200, respectively 48,647 36,477
Inventories:
Finished products 118,067 90,414
In process 25,440 25,357
Raw materials and supplies 50,537 42,426
Refundable income taxes 1,576 --
Deferred tax asset 3,870 6,156
Prepaid expenses 1,680 4,432
-----------------------------------------
Total Current Assets 253,894 206,846
- ---------------------------------------------------------------------------------------------------------------------------------
Other Assets 2,624 1,738
- ---------------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
Land 6,117 5,449
Building 99,708 88,959
Equipment 287,899 261,444
-----------------------------------------
393,724 355,852
Less accumulated depreciation and amortization 175,316 148,413
-----------------------------------------
Net Property, Plant, and Equipment 218,408 207,439
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 474,926 $ 416,023
=================================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 62,270 $ 18,000
Accounts payable 46,540 24,435
Accrued expenses 21,210 21,996
Current portion of long-term debt and capital lease obligations 11,575 9,465
Income taxes -- 599
--------------------------------------
Total Current Liabilities 141,595 74,495
Long-Term Debt 219,023 214,848
Capital Lease Obligations 8,835 9,280
Deferred Gain and Other Liabilities 8,750 7,867
Deferred Income Taxes 7,598 15,797
Commitments (Note 5) -- --
-----------------------------------------
Total Liabilities 385,801 322,287
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock 70 70
Common stock 2,666 2,666
-----------------------------------------
Total Capital Stock 2,736 2,736
Additional paid-in capital 5,913 5,913
Net unrealized gain on available-for-sale securities 1,026 435
Retained earnings 79,450 84,652
-----------------------------------------
Total Stockholders' Equity 89,125 93,736
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 474,926 $ 416,023
=================================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Seneca Foods Corporation and Subsidiaries
(In thousands)
<CAPTION>
Years ended March 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (5,144) $ 7,531 $ (10,147)
Adjustments to reconcile net earnings (loss) to
net cash provided (used) by operations:
Depreciation and amortization 28,849 26,338 23,563
Deferred income taxes (6,231) (1,868) (2,215)
Gain on the sale of assets -- (8,308) (4,271)
Changes in operating assets and liabilities:
Accounts receivable (8,083) 14,641 (18,517)
Inventories (7,154) 71,562 (91,646)
Prepaid expenses 2,907 (3,391) (240)
Accounts payable, accrued expenses and other liabilities 18,679 (23,327) 21,376
Income taxes (2,175) 6,653 (3,985)
-------- ------ --------
Net cash provided by (used in) operations 21,648 89,831 (86,082)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisitions (53,672) -- --
Additions to property, plant, and equipment (15,693) (11,650) (67,897)
Disposals of property, plant, and equipment 135 699 876
Proceeds from sale of common stock of Moog Inc. -- 12,863 --
Proceeds from the sale of assets -- 4,643 8,904
------- ------ ------
Net cash provided by (used in) investing activities (69,230) 6,555 (58,117)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net (payments) borrowings on notes payable 44,270 (95,000) 113,000
Proceeds from issuance of long-term debt and
sale and leaseback 15,106 1,343 9,258
Payments of long-term debt and capital lease obligations (9,266) (2,572) (3,068)
Dividends paid (58) -- (12)
Other assets 23 130 (220)
------ ------ --------
Net cash provided by (used in) financing activities 50,075 (96,099) 118,958
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments 2,493 287 (25,241)
Cash and short-term investments, beginning of year 1,584 1,297 26,538
----- ----- ------
Cash and short-term investments, end of year $ 4,077 $ 1,584 $ 1,297
====================================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest $ 28,042 $ 28,751 $ 26,480
Income taxes 5,092 (570) 1,147
Supplemental information of noncash investing and financing activities:
In 1997 an additional $7,558 was added to the secured nonrecourse
subordinated note in conjunction with the acquisition of additional assets.
In 1996 the Company reached an agreement with Pillsbury to convert $6,000
of its subordinated note into the Company's Class A Common Stock.
===============================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
Seneca Foods Corporation and Subsidiaries
(In thousands, except share amounts)
<CAPTION>
Preferred Stock
--------------------------------
6% Class A 10%
Cumulative Par Cumulative Par Net Unrealized
Value $.25 Value $.025 Class A Class B Additional Gain (Loss) on
Callable at Par Convertible Common Stock Common Stock Paid-In Available-For- Retained
Voting Voting Par Value $.25 Par Value $.25 Capital Sale Securities Earnings
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares authorized 200,000 1,400,000 10,000,000 10,000,000
===========================================================================================
Shares issued and outstanding:
March 31, 1996 200,000 807,240 3,143,125 2,796,555
============================================================================================
March 31, 1997 200,000 807,240 3,143,125 2,796,555
============================================================================================
March 31, 1998 200,000 807,240 3,143,125 2,796,555
============================================================================================
Balance March 31, 1995 $50 $ 20 $ -- $ 1,880 $ -- $ 892 $ 87,979
Net loss -- -- -- -- -- -- (10,147)
Cash dividends paid
on preferred stock -- -- -- -- -- -- (12)
Debt to equity conversion -- -- 87 -- 5,913 -- --
Stock split in the form of
a dividend -- -- 699 -- -- -- (699)
Net unrealized gain change -- -- -- -- -- 4,277 --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1996 50 20 786 1,880 5,913 5,169 77,121
Net earnings -- -- -- -- -- -- 7,531
Net unrealized gain change -- -- -- -- -- (4,734) --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1997 50 20 786 1,880 5,913 435 84,652
Net loss -- -- -- -- -- -- (5,144)
Cash dividends paid
on preferred stock -- -- -- -- -- -- (58)
Net unrealized gain change -- -- -- -- -- 591 --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance March 31, 1998 $50 $ 20 $ 786 $ 1,880 $5,913 $1,026 $ 79,450
===================================================================================================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
F-6
<PAGE>
Notes to Consolidated Financial Statements
Seneca Foods Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Nature of Operations - The Company conducts its business almost entirely in food
processing, operating 31 plants and warehouses in eight states. The Company
markets branded and private label processed foods to retail customers and
institutional food distributors.
Principles of Consolidation - The consolidated financial statements include the
accounts for the parent Company and all of its wholly-owned subsidiaries after
elimination of intercompany transactions, profits, and balances.
Revenue Recognition - Sales and related cost of product sold are recognized
primarily upon shipment of products. When customers, under the terms of specific
orders, request that the Company invoice goods and hold the goods for future
shipment, the Company recognizes revenue when legal title to the finished goods
inventory passes to the purchaser. Generally, the Company receives cash from the
purchaser when legal title passes.
Concentration of Credit Risk - Financial instruments that potentially subject
the Company to credit risk consist of trade receivables and interest-bearing
investments. With the exception of the relationship with Pillsbury, wholesale
and retail food distributors comprise a significant portion of the trade
receivables; collateral is not required. The risk associated with the
concentration is limited due to the large number of wholesalers and retailers
and their geographic dispersion. The Company places substantially all its
interest-bearing investments with financial institutions and monitors credit
exposure.
Cash and Short-Term Investments - The Company considers all highly liquid
instruments purchased with a maturity of three months or less as short-term
investments.
Inventories - Inventories are stated at lower of cost; first-in, first-out
(FIFO); or market.
Income Taxes - The provision for income taxes includes federal, foreign, and
state income taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities.
Earnings per Common Share - Basic earnings per share are calculated on the basis
of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which the Company adopted in the fourth quarter of 1998. Earnings per
common share amounts of all prior years have been restated. The additional
shares and dividends were not considered in the diluted calculation below since
diluting a loss is not allowed under SFAS No. 128.
F-7
<PAGE>
Notes to Consolidated Financial Statements (continued)
A reconciliation of basic earnings per share with diluted earnings per share
follows:
<TABLE>
<CAPTION>
Years ended March 31 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C>
Basic
- -----
Net earnings (loss) $ (5,144) $ 7,531 $ (10,147)
Deduct preferred stock dividends paid 58 -- 12
-------- ------- -------
Basic net earnings (loss) $ (5,202) $ 7,531 $ (10,159)
====================================================================================================================================
Weighted average common shares outstanding 5,940 5,940 5,622
====================================================================================================================================
Basic earnings (loss) per share $ (.87) $ 1.27 $ (1.81)
====================================================================================================================================
Diluted
- -------
Basic net earnings (loss) $ (5,202) $ 7,531 $ (10,159)
Add dividends on convertible preferred stock -- -- --
----- ----- -----
Net earnings applicable to common stock on $ (5,202) $ 7,531 $ (10,159)
a diluted basis
====================================================================================================================================
Shares used in calculating basic earnings
per share above 5,940 5,940 5,622
Additional shares to be issued under full
conversion of preferred stock -- 68 --
----- ------ -----
Total shares for diluted 5,940 6,008 5,622
====================================================================================================================================
Diluted earings (loss) per share $ (.87) $ 1.27 $ (1.81)
====================================================================================================================================
</TABLE>
Depreciation - Property, plant, and equipment is stated at cost or, in the case
of capital leases, the present value of future lease payments. For financial
reporting, the Company provides for depreciation and capital lease amortization
on the straight-line method at rates based upon the estimated useful lives of
the various assets. Impairment losses are recognized when the carrying value of
an asset exceeds its fair value. The Company regularly assesses all of its
long-lived assets for impairment and determined that no impairment loss need be
recognized in 1998 and 1997.
Use of Estimates in the Preparation of Financial Statements - The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as the related
revenues and expenses during the reporting period. Actual amounts could differ
from those estimated.
New Accounting Pronouncements: In June 1997, the Financial Accounting Standards
Board issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." In
February 1998, SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" was issued. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components. SFAS No. 131
establishes standards for reporting information about operating segments and
related disclosures about products and services, geographic areas and major
customers. SFAS No. 132 revises current disclosure requirements for employers'
pensions and other retiree benefits. These standards are effective for the
Company during 1999. These standards expand or modify current disclosures and,
accordingly, will have no impact on the Company's reported financial position,
results of operations and cash flows. The Company is assessing the impact of
these standards.
Reclassifications - Certain previously reported amounts have been reclassified
to conform to the current period classification.
<PAGE>
F-8
Notes to Consolidated Financial Statements (continued)
2. Common Stock of Moog Inc.
Other assets includes the Company's investment in the Class B Common Stock of
Moog Inc., which is carried at fair value. There was a realized gain on the sale
of Class A Common Stock of Moog Inc. of $7,501,000 before income taxes in 1997.
There were no realized gains or losses in 1998 and 1996, and gross unrealized
holding gains were $1,604,000, $695,000 and $7,832,000, at March 31, 1998, 1997
and 1996, respectively.
3. Lines of Credit
The Company obtains required short-term funds through bank borrowings. At March
31, 1998, the Company had $3,835,963 outstanding for letters of credit and an
unsecured revolving line of credit totaling $130,000,000. The line is renewable
in 1999 and provides for loans of varying maturities at rate options based on
Prime, Eurodollar, or Money Market. This unsecured revolving line of credit
provides for various financial covenants. The Company was not in compliance with
certain of these financial covenants at March 31, 1998 and is in the process of
obtaining waivers from the lending institutions.
As of March 31, 1998 and 1997, the amounts borrowed under the revolving line of
credit were $62,270,000 and $18,000,000, respectively. The weighted average
interest rate on the amounts borrowed during these periods were 7.88% and 7.94%,
respectively.
4. Long-Term Debt
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Note payable to insurance company, 10.78%, due through 2005 $ 69,000 $ 75,000
Secured nonrecourse subordinated promissory note, 8.00%, due through 2009 71,583 74,583
Note payable to insurance company, 10.81%, due through 2009 50,000 50,000
Note payable to insurance company, 9.17%, due through 2004 10,000 --
Note payable to bank, 9.17%, due through 2004 5,000 --
Industrial Revenue Develoment Bonds, variable rate, due through 2028 22,630 22,630
Other 1,944 1,738
-------- --------
230,147 223,951
Less current portion 11,134 9,103
-------- -------
$ 219,023 $ 214,848
================================
</TABLE>
Certain debt agreements provide various financial covenants including a
provision that the Company may pay dividends on any class of stock only from
consolidated net earnings available for distribution. There were no earnings
available for distribution as of March 31, 1998. The Company was not in
compliance with certain of these financial covenants relating to a portion of
its Long-Term Debt at March 31, 1998. On June 16, 1998, the Company obtained
unconditional waivers from the lending institutions. In addition, the lending
institutions have amended, or in one instance agreed to amend, certain financial
covenants for 1999 based on the Company's projections, which, if achieved, will
permit the Company to be in compliance.
The Company has four Industrial Revenue Bonds ("IRB's") totaling $22,630,000
which are backed by direct pay letters of credit.
F-9
<PAGE>
Notes to Consolidated Financial Statements (continued)
Debt repayment requirements for the next five fiscal years are:
(In thousands)
1999 $11,134
2000 15,773
2001 18,781
2002 20,750
2003 23,746
5. Leases
The Company leases a portion of its equipment and buildings. Capitalized leases
consist primarily of industrial development agency financing instruments and
limited obligation special revenue bonds which bear interest rates from 3.55% to
6.75%. Other leases include non-cancelable operating leases expiring at various
dates through 2007.
During 1996, the Company entered into a sale and leaseback transaction whereby
three of its wastewater facilities in New York State were sold for $9,258,000
and leased back under a 20-year lease agreement. This transaction produced a
gain of $4,178,000 which was deferred and is being amortized over the 20-year
lease period.
Leased assets under capital leases consist of the following:
(In thousands)
1998 1997
- -----------------------------------------------------------------------------
Land $ 160 $ 160
Buildings 1,792 1,792
Equipment 10,359 10,385
----------------------------------------------------
12,311 12,337
Less accumulated amortization 4,510 3,519
----------------------------------------------------
$ 7,801 $ 8,818
=============================================================================
The following is a schedule by year of minimum payments due under leases as of
March 31, 1998:
Operating Capital
- -----------------------------------------------------------------------------
(In thousands)
Year ending March 31:
1999 $4,490 $ 841
2000 3,466 843
2001 2,901 843
2002 1,863 842
2003 1,406 844
2004-2014 3,017 8,803
-------- -------
Total minimum payment required $17,143 $13,016
===============================================
Less interest 3,740
Present value of minimum lease payments 9,276
Amount due within one year 441
-------
Long-term capital lease obligations 8,835
=============================================================================
Aggregate rental expense in 1998, 1997, and 1996 was $10,057,000, $7,881,000,
and $7,076,000, respectively.
F-10
<PAGE>
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
The Company files a consolidated income tax return. The provision for income
taxes includes the following:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Current:
Federal $ (485) $3,438 $ (3,282)
State 170 116 762
------ ------- -------
(315) 3,554 (2,520)
Deferred:
Federal (2,509) 465 (1,961)
State (489) 196 572
-------- ------- -------
(2,998) 661 (2,533)
-------- ------- -------
Total Income taxes $ (3,313) $ 4,215 $ (5,053)
========= ======= =========
</TABLE>
At March 31, 1998, the Company has Alternative Minimum Tax Credits in the amount
of $5,658,000 to offset future years' regular tax expense, and Research and
Development Credits carryforwards in the amount of $298,000, expiring as
follows:
Year Credit
---- ------
2007 $125,000
2008 36,000
2009 50,000
2010 51,000
2011 51,000
2012 5,000
--------
$298,000
========
The Company has a Federal regular tax net operating loss carryforward of
$6,939,000, expiring March 31, 2013, which is available to offset future taxable
income. State net operating loss carryforwards of approximately $21,000,000,
expiring March 31, 1999, through March 31, 2013, are available to offset future
state tax expense.
During 1998, the Internal Revenue Service completed an audit of 1994, 1995, and
1996. Audit adjustments related primarily to changes in the timing of deductions
for income tax purposes. There was no material impact on the Company's statement
of net earnings for 1998.
A reconciliation of the expected U.S. statutory rate to the effective rate
follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed (expected tax rate) (34.0)% 34.0% (34.0)%
State income taxes (net of federal tax benefit) (5.0) 1.5 0.8
Other (0.2) 0.4 --
- ------------------------------------------------------------------------------------------------------------------------
Effective tax rate (39.2)% 35.9% (33.2)%
========================================================================================================================
</TABLE>
F-11
<PAGE>
Notes to Consolidated Financial Statements (continued)
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of March 31, 1998 and 1997:
1998 1997
- ----------------------------------------------------------------------------
(In thousands)
Deferred tax liabilities:
Basis and depreciation difference $ 20,035 $ 15,916
Inventory valuation 2,172 2,590
Moog investment 577 260
State taxes -- --
------- -------
22,784 19,825
---------------------------------
Deferred tax assets:
Inventory valuation 2,818 2,974
Future tax credits 6,035 2,357
Net operating loss carry-forwards 3,711 --
Employee benefits 1,775 1,229
Pension 1,805 1,231
Insurance 1,370 703
Deferred gain on sale/leaseback 1,382 1,437
Other 160 253
------- -------
19,056 10,184
---------------------------------
Net deferred tax liability $ 3,728 $ 9,641
===========================================================================
Net current deferred tax assets of $3,870,000 as of March 31, 1998 and
$6,156,000 as of March 31, 1997 are recognized in the Consolidated Balance
Sheets. Also recognized are net non-current deferred tax liabilities of
$7,598,000 and $15,797,000 at March 31, 1998 and 1997, respectively.
7. Stockholders' Equity
Preferred Stock - The outstanding 10% cumulative, convertible, voting preferred
stock consists of 407,240 Series A shares, convertible at the rate of one common
share of Class A and Class B for every twenty preferred shares, and 400,000
Series B shares, which carry a one for thirty conversion rate. The Series A and
B shares have a $.25 stated value and a $.025 par value. There are 2,600,000
shares authorized of Class A $.025 par value stock which are unissued and
undesignated. In addition there are 30,000 shares of no par stock which are also
unissued and undesignated.
Common Stock - During 1996 an amendment to the Company's Certificate of
Incorporation, which effected a recapitalization of the Company by creating a
second class of common stock (which was distributed to all common shareholders
as a stock split in the form of a dividend), was adopted. This recapitalization
amendment (i) reclassified the existing Common Stock as Class B Common Stock,
(ii) authorized a new class of 10,000,000 shares designated as Class A Common
Stock and (iii) established the express terms of the Class A Common Stock and
the Class B Common Stock. The Class A Common Stock and the Class B Common Stock
have substantially identical rights with respect to any dividends or
distributions of cash or property declared on shares of common stock and rank
equally as to the right to receive proceeds on liquidation or dissolution of the
Company after payment of the Company's indebtedness and liquidation right to the
holders of preferred shares. However, holders of Class B Common Stock retain a
full vote per share whereas the holders of Class A Common Stock have voting
rights of 1/20th of one vote per share on all matters as to which shareholders
of the Company are entitled to vote.
F-12
<PAGE>
Notes to Consolidated Financial Statements (continued)
In 1996, the Company reached an agreement with Pillsbury to convert $6,000,000
of its subordinated note into 346,570 shares of the Company's Class A Common
Stock.
Unissued shares of common stock reserved for conversion privileges were 33,695
of Class A and Class B at March 31, 1998 and 1997.
8. Retirement Plan
The Company has a noncontributory defined benefit pension plan covering all
employees who meet certain age entry requirements and work a stated minimum
number of hours per year. Annual contributions are made to the Plan sufficient
to satisfy legal funding requirements.
Pension expense includes the following:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Service cost for benefits earned during the period $ 1,741 $ 1,565 $ 1,336
Interest cost on projected benefit obligation 1,573 1,329 1,210
Actual return on plan assets (6,268) (2,660) (2,372)
Net deferral of actuarial gains 4,272 1,027 860
Amortization of net unrecognized gain at August 1, 1987 (276) (276) (276)
Amortization of prior service cost 94 94 94
- --------------------------------------------------------------------------------------------------------------------------------
Pension expense $ 1,136 $ 1,079 $ 852
================================================================================================================================
</TABLE>
The following table summarizes the funded status and related amounts that are
recognized in the consolidated balance sheets:
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested $ 17,948 $ 13,524
Nonvested 688 823
--------- --------
Total $ 18,636 $ 14,347
=================================================================================================================================
Plan assets at fair market value, primarily listed stocks and fixed income securities $ 26,881 $ 21,545
Projected benefit obligation 24,031 19,004
-------------------------------------------------
Plan assets in excess of projected benefit obligaion 2,850 2,541
Unrecognized gain at transition (3,819) (4,095)
Unrecognized prior service cost 406 500
Unrecognized net gain (4,192) (2,565)
---------- ----------
Accrued pension liability $ (4,755) $ (3,619)
=================================================================================================================================
</TABLE>
F-13
<PAGE>
Notes to Consolidated Financial Statements (continued)
The projected benefit obligation was determined using an assumed discount rate
of 7.4% (8% in 1997 and 1996) and an assumed long-term salary increase rate of
5%. The assumed long-term rate of return on plan assets was 9.5% (8.5% in 1997
and 1996). The Plan holds the Company's common stock with a fair market value of
$2,658,000.
The Company has an Employees' Savings Plan (401(k)) covering all employees who
meet certain age entry requirements and work a stated minimum number of hours
per year. Participants may make contributions up to the legal limit. The
Company's matching contributions are discretionary. Costs charged to operations
for the Company's matching contributions during 1998 amounted to $811,000 for
the year and in 1997 amounted to $211,000, which represents four months of the
year.
9. Fair Value of Financial Instruments
The carrying amounts and the estimated fair values of the Company's financial
instruments, as determined under SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Long-term debt, including current portion $230,157 $241,405 $ 223,951 $ 225,112
Notes payable 62,270 62,270 18,000 18,000
Class B Common Stock of Moog Inc. 2,320 2,320 1,411 1,411
<FN>
The estimated fair values were determined as follows:
Long-term debt - The quoted market prices for similar debt or current rates
offered to the Company for debt with the same maturities.
Notes payable - The carrying amount approximates fair value due to the
short-term maturity of these instruments.
Class B Common Stock of Moog Inc. - Based on quoted market prices.
</FN>
</TABLE>
10. Acquisitions
In 1998 the Company completed two acquisitions. The first was the acquisition of
Aunt Nellie's Farm Kitchen from The Pillsbury Company, a subsidiary of Grand
Metropolitan Incorporated, for approximately $24 million. Aunt Nellie's Farm
Kitchen produces, markets, and sells fruit and vegetable products from plants in
the Midwest and its sales were approximately $50 million. The Company purchased
the plants, inventories, accounts receivable, and trademarks of the business.
This acquisition was funded primarily out of working capital.
The second acquisition was the Comstock canned private label vegetable business
from Curtice Burns Foods, a wholly-owned subsidiary of Pro-Fac Cooperative,
along with the Blue Boy branded canned vegetable business. The Company purchased
two New York plants, related inventories, and certain trademarks. The companies
also formed a long-term strategic alliance, combining their New York
agricultural departments into one organization. The sales were approximately $40
million in 1996. The purchase price was approximately $29 million, which was
funded primarily out of working capital.
Both acquisitions were accounted for under the purchase method and, accordingly,
the operating results of the acquired have been included in the consolidated
operating results since the dates of acquisition. The following is a summary of
proforma results as if the acquisitions were made at the beginning of the
periods presented:
1998 1997
- ------------------------------------------------------------------------
(Unaudited)
(In thousands except per share amounts)
Net Sales $710,137 $829,870
Net Earnings (loss) (5,150) 4,533
Basic Earnings (loss) per
common share (.88) .76
F-14
<PAGE>
11. Other Income
Other income in 1997 consisted of the following: 1) a gain on the sale of the
Moog, Inc. Class A Common Stock of $7,501,000, 2) a gain on the sale of the
Clifton Park, New York warehouse of $1,640,000, and 3) a loss on the sale of Eau
Claire, Michigan plant of $833,000.
Other income in 1996 consisted of the gain on the sale of the Peabody,
Massachusetts warehouse totaling $4,271,000.
12. Non-Recurring Charge
The 1996 operating results include a non-recurring charge of $15,078,000, before
income tax benefit, due to a combination of start-up costs related to the
Pillsbury Alliance and severe drought conditions in New York State throughout
the entire summer. The Company undertook an ambitious capital expenditure
program related to the Pillsbury Alliance. In the relatively short time between
the February 1995 closing of the Pillsbury Alliance and the beginning of the
1995 vegetable pack, 37 separate major capital projects needed to be completed.
There were some unforeseen problems related to a few of these projects, mostly
in the New York plants. Some of the used equipment transferred from the closed
plants had operating difficulties and were not always easily repaired, thus
causing downtime. Throughput and yields were poor at some plants resulting in
unfavorable manufacturing variances. The problems were magnified when the
drought and the hot weather conditions forced the uneven timing of maturities of
vegetables.
13. Sales Information
The Company has an Alliance Agreement with Pillsbury whereby the Company
processes canned and frozen vegetables for Pillsbury under the Green Giant brand
name. Pillsbury continues to be responsible for all of the sales, marketing and
customer service functions for the Green Giant products. During 1998, 1997 and
1996, the Company sold $48,872,000, $205,633,000 and $167,994,000, respectively,
of canned and frozen vegetables to Pillsbury, which represented 7%, 28% and 33%,
respectively, of net sales. Sales of Green Giant vegetables to purchasers
unrelated to Pillsbury in 1998 and 1997 were $228,208,000 and $186,091,000, or
32% and 26% of net sales, respectively. Total net sales in 1998 and 1997 of
Green Giant vegetables were $277,080,000 and $391,724,000, or 40% and 54% of net
sales, respectively.
F-15
<PAGE>
Appendix A
STOCK PURCHASE AGREEMENT
BY AND AMONG
SENECA FOODS CORPORATION,
CARL MARKS STRATEGIC INVESTMENTS, L.P.,
CARL MARKS STRATEGIC INVESTMENTS II, L.P.
AND URANUS FUND, LTD.
Dated as of June 22, 1998
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS..........................................................3
2. CLOSING.............................................................13
2.1 Time and Place of the Closing............................13
2.2 Transactions at the Closing..............................14
3. CONDITIONS TO THE CLOSING...........................................15
3.1 Conditions Precedent to the Obligations of the
Purchaser...............................................15
3.1.1 Compliance by the Company.........................15
3.1.2 Shareholder Approval..............................16
3.1.3 Rights Offering...................................16
3.1.4 Amendment to Certificate of Incorporation.........16
3.1.5 Board of Directors................................16
3.1.6 Consents..........................................17
3.1.7 Hart-Scott-Rodino.................................18
3.1.8 Absence of Material Adverse Effect................18
3.1.9 Nasdaq Listing....................................18
3.1.10 Stock Price.......................................18
3.1.11 Legal Opinions....................................18
3.1.12 Exemption from Special Voting Requirements........18
3.1.13 Officer's Certificate.............................19
3.1.14 Secretary's Certificate...........................19
3.1.15 No Injunction.....................................19
3.1.16 Change of Control.................................20
3.2 Conditions Precedent to Obligations of the Company.......20
3.2.1 Compliance by the Purchaser.......................20
3.2.2 Shareholder Approval..............................20
3.2.3 Consents..........................................20
3.2.4 Hart-Scott-Rodino.................................21
3.2.5 Nasdaq Listing....................................21
3.2.6 No Injunction.....................................21
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................21
4.1 Corporate Existence and Power............................21
4.2 Power and Authority......................................22
4.3 Affiliate Transactions...................................23
<PAGE>
4.4 No Contravention, Conflict, Breach, Etc..................24
4.5 Consents.................................................24
4.6 Capitalization of the Company............................25
4.7 No Rights Plan...........................................27
4.8 Registration Rights......................................27
4.9 Subsidiaries.............................................27
4.10 SEC Documents............................................29
4.11 Financial Statements.....................................31
4.12 No Existing Violation, Default, Etc......................32
4.13 Licenses and Permits.....................................34
4.14 Title to Properties......................................35
4.15 Intellectual Property....................................35
4.16 Environmental Matters....................................38
4.17 Taxes....................................................39
4.18 Litigation...............................................42
4.19 Labor Matters............................................42
4.20 Employee Benefits........................................43
4.21 Contracts................................................45
4.22 Contingent Liabilities...................................46
4.23 No Material Adverse Effect...............................46
4.24 Finder's Fees............................................48
4.25 Investment Company.......................................48
4.26 Exemption from Registration; Restrictions on Offer
and Sale of Same or Similar Securities.................48
4.27 Use of Proceeds..........................................49
4.28 Full Disclosure..........................................49
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................49
5.1 Partnership Existence and Power..........................49
5.2 Power and Authority......................................50
5.3 No Contravention, Conflict, Breach, Etc..................50
5.4 Consents.................................................51
5.5 Acquisition for Own Account..............................51
5.6 Third Party Agreements...................................52
5.7 Finder's Fee.............................................52
5.8 Ownership of Common Stock................................53
5.9 Full Disclosure..........................................53
6. COVENANTS OF THE PARTIES............................................53
6.1 Shareholder Meeting; Proxy Material; Certificate
of Amendment...........................................53
6.2 Rights Offering..........................................54
6.3 Rights Offering Registration Statement...................55
6.4 Pre-Closing Activities...................................58
<PAGE>
6.5 Option Shares............................................62
6.6 Hart-Scott-Rodino........................................63
6.7 Access to Information....................................63
6.8 Publicity................................................64
6.9 Certificates for Shares To Bear Legends..................64
6.10 Reservation of Shares....................................65
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS...........................................................65
8. INDEMNIFICATION.................................... ................66
8.1 Indemnification by the Company...........................66
8.2 Notification.............................................67
8.3 Registration Rights Agreement............................69
9. TERMINATION.........................................................70
9.1 Termination..............................................70
9.2 Expenses.................................................71
9.3 Effect of Termination....................................71
10. MISCELLANEOUS.......................................................72
10.1 Performance; Waiver......................................72
10.2 Extension or Modification of Rights Offering.............72
10.3 Successors and Assigns...................................73
10.4 Notices..................................................73
10.5 Governing Law............................................74
10.6 Severability.............................................74
10.7 Headings; Interpretation.................................75
10.8 Entire Agreement.........................................75
10.9 No Third Party Rights....................................75
10.10 Counterparts.............................................75
EXHIBITS
A Pillsbury Letter Agreement
B Certificate of Amendment
C Registration Rights Agreement
D Rights Offering Registration Statement
E Shareholders Agreement
F Jaeckle Fleischmann & Mugel, LLP Opinion
G Chamberlain, D'Amanda, Oppenheimer & Greenfield Opinion
SCHEDULES
I Shares Purchased
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of June 22,
1998, by and among Seneca Foods Corporation, a New York corporation (the
"Company"), Carl Marks Strategic Investments, L.P., a Delaware limited
partnership ("CMSI"), Carl Marks Strategic Investments II, L.P., a Delaware
limited partnership ("CMSI II"), Uranus Fund, Ltd., a Cayman Islands corporation
("Uranus" and, together with CMSI and CMSI II, the "Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase, an aggregate of 1,166,667 shares of
Convertible Participating Preferred Stock, par value $.025 per share, of the
Company (the "Preferred Stock"), at a purchase price equal to $12.00 per Share
(the "Purchase Price Per Share") (or $14,000,004 in the aggregate) upon the
terms and subject to the conditions set forth herein;
WHEREAS, each share of Preferred Stock may be converted at any
time by the holder thereof into one share of Class A Common Stock, par value
$.25 per share, of the Company (the "Class A Common Stock");
WHEREAS, the Company proposes, as soon as practicable after
the Rights Offering Registration Statement (as defined herein) becomes
effective, to distribute to holders of its Class A Common Stock and Class B
common stock, par value $.25 per share, of the Company (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Common Stock")
transferable rights (the "Rights") to subscribe for and purchase up to an
aggregate of 3,000,000 shares of the Preferred Stock at a subscription price
equal to the Purchase Price Per Share;
<PAGE>
WHEREAS, pursuant to the Rights Offering (as defined herein),
stockholders of record will receive one-half of a Right for each share of Common
Stock held by them as of the applicable record date, and each whole Right will
entitle the holder to purchase one share of Preferred Stock at the Purchase
Price Per Share;
WHEREAS, the Company desires to assure the sale of at least
2,500,000 of the shares of Preferred Stock as a result of the Rights Offering in
order to realize proceeds of not less than $30,000,000 (the "Minimum Proceeds");
WHEREAS, Arthur S. Wolcott (Individually and as Trustee),
Audrey S. Wolcott (as Trustee), Susan W. Stuart (Individually and as Trustee for
Alexius Lyle Wadell and Kyle Aaron Wadell), Donald Stuart, Kraig H. Kayser
(Individually and as Trustee for certain Kayser family trusts), Kurt Kayser,
Karl Kayser, Marilyn W. Kayser, Robert Oppenheimer (as Trustee of certain Kayser
family trusts), Mark S. Wolcott (Individually and as Trustee for Erin Lorraine
Wolcott and Cassandra Jean Wolcott), Kari Wolcott, Bruce S. Wolcott
(Individually and as Trustee for Kaitlin Kerr Wolcott, Michael Stanton Wolcott
and Paige Strode Wolcott), Constance Wolcott, Grace W. Wadell (Individually and
as Trustee for Sara Elizabeth Stuart, Jennifer Grace Stuart and Donald Arthur
Stuart), Aaron Wadell and The Pillsbury Company ("Pillsbury") (collectively, the
"Existing Shareholders"), the owners of approximately 30.4% of the outstanding
Class A Common Stock and approximately 23.8% of the outstanding Class B Common
Stock, have advised the
<PAGE>
Company that, pursuant to the terms of the Shareholders Agreement (as defined
herein) and a letter agreement, dated as of June 9, 1998, between Pillsbury and
the Company and attached as Exhibit A hereto, respectively, they will not
exercise any of their Rights;
WHEREAS, in lieu thereof, and to assist the Company in its
efforts to assure realization of the Minimum Proceeds, the Purchasers have
offered to purchase from the Company, and the Company is willing to sell to the
Purchasers at the Purchase Price Per Share, up to 2,500,000 shares of Preferred
Stock that otherwise would have been available for purchase by the shareholders
of the Company pursuant to the Rights Offering; and
WHEREAS, if less than 2,500,000 shares of Preferred Stock
become available for purchase by the Purchasers following the Rights Offering,
the Purchasers may require the Company to issue and sell to them additional
shares of Preferred Stock so as to permit them to acquire up to 2,500,000 shares
of Preferred Stock (subject to certain limitations).
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements and conditions
contained herein, the Company and the Purchasers agree as follows:
<PAGE>
4
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following
meanings for all purposes of this Agreement:
"Act" means the Securities Act of 1933, as amended, or any
superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect from time to time. References to
a particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such superseding Federal
statute.
An "Affiliate" of, or a person "affiliated" with, a specified
Person, means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified. The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract, or otherwise.
"Alliance Agreement" has the meaning set forth in Section 4.12.
"Annual Report" means the Company's Annual Report on Form 10-K
for the year ended March 31, 1997, as filed with the SEC (including all exhibits
and schedules thereto and documents incorporated by reference therein).
"Benefit Plans" has the meaning set forth in Section 4.20.
<PAGE>
5
"Blank Check Preferred Stock" means preferred stock, Class A,
par value $0.025 per share, of the Company.
"Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
"Business Day" shall mean any day that is not a Saturday,
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"By-Laws" means the By-laws of the Company, as amended through
the date hereof.
"Certificate of Amendment" means the Certificate of Amendment
of the Certificate of Incorporation to be filed for recording by the Company
with the Department of State of the State of New York on or prior to the date
and time of the Closing, in the form attached as Exhibit B hereto.
"Certificate of Incorporation" means the Restated Certificate
of Incorporation of the Company, as filed for recording with the Department of
State of the State of New York, as amended through the date hereof.
"Change of Control" means the acquisition by any Person or 13D
Group (other than the parties to the Shareholders Agreement and their
Affiliates) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of the outstanding Voting Securities representing 25% or more of
the voting power of the Company.
<PAGE>
6
"Class A Common Stock" has the meaning set forth in the preamble to
this Agreement.
"Class B Common Stock" has the meaning set forth in the preamble to
this Agreement.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"CMSI" has the meaning set forth in the preamble to this Agreement.
"CMSI II" has the meaning set forth in the preamble to this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in the preamble to this
Agreement.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Conversion Shares" means the shares of Class A Common Stock
issuable upon conversion of the Preferred Stock pursuant to the terms of the
Certificate of Amendment.
"Credit Agreement" has the meaning set forth in Section 4.12.
"Disclosure Letter" has the meaning set forth in Article 4.
"Draft Form 10-K" means the draft of the Company's Annual Report
<PAGE>
7
on Form 10-K for the year ended March 31, 1998, dated June 12, 1998 (excluding
all exhibits and schedules thereto and documents incorporated by reference
therein), and the draft of the Company's annual report for the year ended March
31, 1998, dated June 16, 1998, each in the form previously delivered to the
Purchasers.
"Encumbrance" means any mortgage, pledge, lien, security
interest, restriction upon voting or transfer, claim or other encumbrance of any
kind.
"Environmental Laws" means all federal, state, local and
foreign laws, principles of common law, regulations, codes and ordinances, as
well as orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder relating to pollution, protection of the environment, or
health and safety, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601 et
--
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.,
- --- ------
the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et seq., the Federal Water
------
Pollution Control Act, 33 U.S.C. Sec. 1251 et seq., the Clean Air Act, 42 U.S.C.
------
Sec. 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
------
U.S.C. Sec. 121 et seq., the Occupational Safety and Health Act, 29 U.S.C. Sec.
------
651 et seq., the Asbestos Hazard Emergency Response Act, 15 U.S.C. Sec. 2601 et
------ --
seq., the Safe Drinking Water Act, 42 U.S.C. Sec. 300f et seq., the Oil
- ---- ------
Pollution Act of 1990, 33 U.S.C. Sec. 2701 et seq., and analogous state acts.
------
<PAGE>
8
"ERISA" has the meaning set forth in Section 4.20.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any superseding Federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of such
superseding Federal statute.
"Existing Shareholders" has the meaning set forth in the preamble to
this Agreement.
"Governmental Authority" means the government of any nation or
state, or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Intellectual Property" has the meaning set forth in Section 4.15(A).
"Investment Proposal" has the meaning set forth in Section 6.1.
"IP Licenses" has the meaning set forth in Section 4.15(B).
"Knowledge of the Company" means the actual knowledge of (i) the
executive officers of the Company named in the Annual Report and (ii) each of
the Presidents of the Company's processed food groups, in each case, after
reasonable inquiry.
<PAGE>
9
"Law" means any law, treaty, rule or regulation of a
Governmental Authority or judgment, order, writ, injunction or determination of
an arbitrator or a court or other Governmental Authority.
"Liabilities" has the meaning set forth in Section 8.1.
"Licenses" means any certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
Governmental Authorities.
"Material Adverse Effect" means a material adverse effect on
(i) the assets, results of operations, business, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
and (ii) the ability of the Company to consummate the transactions contemplated
by this Agreement, the Registration Rights Agreement and the Shareholders
Agreement, or to perform its obligations under such agreements.
"Minimum Proceeds" has the meaning set forth in the preamble to this
Agreement.
"Most Recent Balance Sheet" means the balance sheet contained
within the unaudited consolidated and consolidating balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for the months ended December 27, 1997.
"Most Recent Fiscal Month End" means December 27, 1997.
<PAGE>
10
"Nasdaq" means the Nasdaq National Market.
"1997 Note Agreement" has the meaning set forth in Section 4.12.
"No Par Preferred Stock" has the meaning set forth in Section 4.6.
"Option Closing Date" has the meaning set forth in Section 6.3.
"Option Shares" has the meaning set forth in Section 6.3.
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Pillsbury" has the meaning set forth in the preamble to this
Agreement.
"Preferred Stock" has the meaning set forth in the preamble to this
Agreement.
"Proxy Statement" means the proxy statement of the Company on
Schedule 14A to be filed with the SEC in connection with the Stockholder
Meeting, as amended or supplemented (including all exhibits and schedules
thereto and documents incorporated by reference therein).
"Purchase Price Per Share" has the meaning set forth in the
first recital of this Agreement.
<PAGE>
11
"Purchasers" has the meaning set forth in the preamble to this
Agreement.
"Purchaser Designees" has the meaning set forth in Section 3.1.4.
"Quarterly Reports" means the Company's Quarterly Report on
Form 10-Q for the quarter ended June 28, 1997, the Company's Quarterly Report on
Form 10-Q for the quarter ended September 27, 1997 and the Company's Quarterly
Report on Form 10-Q for the quarter ended December 27, 1997, each as filed with
the SEC.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and the Purchasers,
substantially in the form attached as Exhibit C hereto, as amended, supplemented
and modified from time to time in accordance with the terms thereof.
"Representatives" shall mean the employees, counsel,
accountants and other authorized representatives of the Purchasers.
"Rights" has the meaning set forth in the preamble to this Agreement.
"Rights Offering" means the offering of Rights, shares of Preferred
Stock and Class A Common Stock pursuant to the Rights Offering Registration
Statement, with the material terms described in Exhibit D hereto.
"Rights Offering Expiration Date" shall mean the date on which
the subscription period (as the same may be extended for up to 30 days by the
Company
<PAGE>
12
at the request or with the prior consent of the Purchasers) under the Rights
Offering expires.
"Rights Offering Prospectus" shall mean the final prospectus
included in the Rights Offering Registration Statement for use in connection
with the issuance of the Rights (including, without limitation, any prospectus
filed pursuant to Rule 424(b) under the Act).
"Rights Offering Registration Statement" shall mean the
Company's Registration Statement on Form S-1 under the Act or such other
appropriate form under the Act, pursuant to which the Rights, the underlying
shares of Preferred Stock and shares of Class A Common Stock will be registered
pursuant to the Act, with the material terms described in Exhibit D.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means the Annual Reports and all documents
(including any Annual Reports) filed by the Company with the SEC (including all
exhibits and schedules thereto and documents incorporated by reference therein)
since January 1, 1997, but shall not include any portion of any document which
is not deemed to be filed under applicable SEC rules and regulations.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens
<PAGE>
13
and liens securing rental payments under capital lease arrangements, and (d)
other liens arising in the ordinary course of business (consistent with past
custom and practice) and not incurred in connection with the borrowing of money.
"Series A Preferred Stock" has the meaning set forth in Section 4.6.
"Series B Preferred Stock" has the meaning set forth in Section 4.6.
"6% Preferred Stock" has the meaning set forth in Section 4.6.
"Shareholders Agreement" means the Shareholders Agreement, dated as
of the date hereof, by and among the Company, the persons listed therein and the
Purchasers, substantially in the form attached as Exhibit E hereto, as amended,
supplemented and modified from time to time in accordance with the terms
thereof.
"Shares" means the shares of Preferred Stock to be purchased by the
Purchasers pursuant to Section 2.2.
"Standby Commitment Amount" has the meaning set forth in
Section 2.2(B).
"Stockholder Meeting" has the meaning set forth in Section 6.1.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, joint venture, association, limited liability
company or partnership, joint stock company, trust, unincorporated organization,
or other entity analogous to any of the foregoing of which 50% or more of the
equity ownership (whether voting stock or comparable interest) is, at the time,
owned, directly or
<PAGE>
14
indirectly by such Person.
"Tax" or "Taxes" means all requisite federal, state, county,
local, foreign and other taxes (including income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production transfer, withholding, employment, unemployment
compensation, payroll related and property taxes, import duties and other
governmental charges and assessments), whether or not measured in whole or in
part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustment related to any of the foregoing.
"13D Group" means any partnership, limited partnership,
syndicate or other "group" (as such term is used in Section 13(d)(3) of the
Exchange Act).
"Time of Mailing" means the commencement of the mailing of
certificates representing the Rights to the shareholders of the Common Stock.
"Uranus" has the meaning set forth in the preamble to this Agreement.
"Voting Securities" means any securities of the Company entitled to
vote generally in the election of directors, or securities convertible into or
exercisable or exchangeable for such securities.
"Year 2000 Data" has the meaning set forth in 4.15(I).
<PAGE>
15
2. CLOSING.
2.1 Time and Place of the Closing. Subject to the terms and
------------------------------
conditions of this Agreement, the closing of the sale and purchase of the shares
of Preferred Stock (including shares purchased upon the expiration of Rights)
contemplated hereby (the "Closing") shall take place at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New
York 10019-6064, at 10:00 A.M., New York time, three Business Days after the
Rights Offering Expiration Date, or at such other date as may be agreed to by
the parties hereto, assuming that all of the conditions to Closing in Section 3
shall have been satisfied or waived. The "Closing Date" shall be the date the
Closing occurs.
2.2 Transactions at the Closing. At the Closing, subject to
---------------------------
the terms and conditions of this Agreement:
(A) The Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase, such number of shares of Preferred Stock as
are set forth opposite such Purchaser's name on Schedule I at the Purchase Price
Per Share.
(B) The Company shall issue and sell to the
Purchasers and the Purchasers shall purchase from the Company, at the Purchase
Price Per Share, a number of shares of Preferred Stock equal to the Standby
Commitment Amount. The "Standby Commitment Amount" is an amount equal to the
number of shares of Preferred Stock that are not purchased by shareholders
pursuant to the exercise of
<PAGE>
16
Rights in the Rights Offering plus the difference between (i) 3,000,000 and (ii)
the number of shares of Preferred Stock purchased pursuant to the exercise of
Rights in the Rights Offering (up to a maximum amount of 2,500,000 shares of
Preferred Stock). Notwithstanding the foregoing, under no circumstance shall the
Company be required to issue shares pursuant to this Section 2.2, Sections 6.2
and 6.5 of this Agreement with an aggregate purchase price of more than
$50,000,004. It is understood and agreed that, if and to the extent that the
Purchasers are required to purchase shares of Preferred Stock pursuant to this
Section 2.2(B), such shares shall be so purchased by each of the Purchasers,
severally and not jointly, equal to the product of (i) the aggregate number of
shares of Preferred Stock to be purchased pursuant to this Section 2.2(B) and
(ii) the percentage set forth opposite such Purchaser's name on Schedule I (to
be adjusted by the Purchasers to eliminate fractional shares).
(C) The Company shall deliver to each Purchaser a
certificate representing such number of shares of Preferred Stock as determined
pursuant to Sections 2.2(A) and (B), each registered in the name of such
Purchaser or its nominees, against payment of the Purchase Price Per Share, with
respect thereto by wire transfer of immediately available funds to an account or
accounts previously designated by the Company.
<PAGE>
17
3. CONDITIONS TO THE CLOSING.
3.1 Conditions Precedent to the Obligations of the Purchaser.
---------------------------------------------------------
The obligations of the Purchasers to be discharged under this Agreement on or
prior to the Closing are subject to satisfaction of the following conditions at
or prior to the Closing (unless expressly waived in writing by each of the
Purchasers at or prior to the Closing):
3.1.1 Compliance by the Company. All of the terms,
-------------------------
covenants and conditions of this Agreement and the Shareholders Agreement to be
complied with and performed by the Company and the Existing Shareholders at or
prior to the Closing shall have been complied with and performed by such parties
in all material respects, and the representations and warranties made by the
Company in this Agreement shall be true and correct at and as of the Closing,
with the same force and effect as though such representations and warranties had
been made at and as of the Closing, except for representations and warranties
that are made as of a specific time, which shall be true and correct only as of
such time.
3.1.2 Shareholder Approval. The sale of the Shares (and the
--------------------
Conversion Shares) to the Purchasers pursuant to this Agreement shall have been
duly approved by the holders of the Common Stock and other Voting Securities of
the Company entitled to vote thereon at the Stockholder Meeting.
3.1.3 Rights Offering. The Rights Offering Registration
---------------
Statement shall have become effective; no stop order suspending the
effectiveness of
<PAGE>
18
the Rights Offering Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending, or
shall be contemplated by the SEC, and any request on the part of the SEC for
additional information shall have been complied with. The Rights Offering
Expiration Date shall have occurred.
3.1.4 Amendment to Certificate of Incorporation. At the
-----------------------------------------
Stockholder Meeting, the holders of the Common Stock and other Voting Securities
of the Company entitled to vote thereon shall have duly approved the amendments
in the Certificate of Amendment, such amendment shall have been filed with the
Department of State of the State of New York and such amendment shall be in full
force and effect.
3.1.5 Board of Directors. The Board of Directors shall
------------------
increase the size of the Board of Directors from seven members to nine members
and shall elect two new members who shall take office effective upon the Closing
and be designated by the Purchasers (the "Purchaser Designees"). The other seven
directors of the Company upon the Closing shall be the existing Board of
Directors. At the next annual meeting of shareholders of the Company, the Board
of Directors shall nominate the two Purchaser Designees (or any other Person or
Persons) in accordance with the Shareholders Agreement for election as directors
with terms expiring in 2000 and 2001. Effective upon the Closing, the Board of
Directors shall include a number
<PAGE>
19
of Purchaser Designees on any committee of that Board of Directors equal to the
product of 22% and the total number of directors on such committee (rounded up
to the next whole number). Within 20 days of the date of this Agreement, the
Purchasers shall deliver a written notice to the Company designating the two
Purchaser Designees and shall cause such Purchase Designees to provide to the
Company all information required to be disclosed in the Proxy Statement with
respect to such designees.
3.1.6 Consents. All consents, approvals, authorizations,
--------
orders, registrations, filings and qualifications of or with any (A)
Governmental Authority, (B) Nasdaq or any stock exchange on which the securities
of the Company are traded and (C) other Persons (whether acting in an
individual, fiduciary or other capacity) necessary or required to be made or
obtained by the Company, any of its Subsidiaries or the Existing Shareholders
for the consummation of the transactions contemplated by this Agreement, the
Certificate of Amendment, the Shareholders Agreement, the Rights Offering
Registration Statement or the Registration Rights Agreement, shall have been
made or obtained, as the case may be, and shall be in full force and effect, and
the Purchasers shall have been furnished with appropriate evidence thereof.
3.1.7 Hart-Scott-Rodino. The waiting period under the Hart-
-----------------
Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or been
<PAGE>
20
terminated, to the extent applicable.
3.1.8 Absence of Material Adverse Effect. No event or
--------------------------------------
events shall have occurred after March 31, 1997 that individually or in the
aggregate has had or would reasonably be expected to have a Material Adverse
Effect (other than any event specifically disclosed in a Quarterly Report or the
Draft Form 10-K).
3.1.9 Nasdaq Listing. The Conversion Shares shall have been
--------------
approved for quotation on the Nasdaq by the Nasdaq Stock Market, Inc.
3.1.10 Stock Price. For any five consecutive trading day period
-----------
after the date hereof, the five consecutive trading day average of the closing
price of the Class A Common Stock (as reported in the Wall Street Journal) shall
not be $12.00 per share or lower.
3.1.11 Legal Opinions. The Company shall have furnished to
--------------
the Purchasers on the Closing Date the opinions of Jaeckle Fleischmann & Mugel,
LLP, special counsel for the Company, and Chamberlain, D'Amanda, Oppenheimer &
Greenfield, counsel to Robert Oppenheimer, as Trustee, each dated the Closing
Date, and each substantially in the forms attached hereto of Exhibits F and G,
respectively.
3.1.12 Exemption from Special Voting Requirements. The
------------------------------------------
Board of Directors shall have irrevocably taken all action necessary under
Section 912 of the New York Business Corporation Law to exempt the transactions
contemplated
<PAGE>
21
by this Agreement, the Registration Rights Agreement and the Shareholders
Agreement and any future transactions between the Company and its Subsidiaries,
on the one hand, and the Purchasers and their "affiliates" and "associates"
(each as defined in such Section 912), on the other hand, from the provisions of
such Section 912 and the Purchasers shall have received evidence reasonably
satisfactory to it that such action shall have been taken.
3.1.13 Officer's Certificate. The Purchasers shall have
---------------------
received a certificate, dated the Closing Date and signed by the Chairman of the
Board of Directors or the President of the Company, certifying that the
conditions set forth in this Section 3.1 have been satisfied on and as of such
date.
3.1.14 Secretary's Certificate. The Purchasers shall have
-----------------------
received a certificate, dated the Closing Date and signed by the secretary or an
assistant secretary of the Company, certifying the truth and correctness of
attached copies of the Certificate of Incorporation (including amendments
thereto), the By-Laws (including amendments thereto), and resolutions of the
Board of Directors and the holders of the Common Stock approving the sale of the
Shares to the Purchasers, the Rights Offering and the other transactions
contemplated hereby (including the execution and delivery of the Shareholders
Agreement and the Registration Rights Agreement).
3.1.15 No Injunction. There shall be no judgment, injunction,
-------------
<PAGE>
22
order or decree enjoining the Company or the Purchaser from consummating the
transactions contemplated by this Agreement, the Shareholders Agreement, the
Rights Offering Registration Statement or the Registration Rights Agreement to
be consummated at or before the Closing.
3.1.16 Change of Control. No Change of Control shall have
-----------------
occurred on or after the date of this Agreement and on or prior to the Closing.
3.2 Conditions Precedent to Obligations of the Company. The
--------------------------------------------------
obligations of the Company to be discharged under this Agreement on or prior to
the Closing are subject to satisfaction of the following conditions at or prior
to the Closing (unless expressly waived in writing by the Company at or prior to
the Closing):
3.2.1 Compliance by the Purchaser. All of the terms,
---------------------------
covenants and conditions of this Agreement to be complied with and performed by
the Purchasers in all material respects at or prior to the Closing, shall have
been complied with and performed by the Purchasers and the representations and
warranties made by the Purchasers in this Agreement, shall be true and correct
at and as of the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the Closing, except
for changes contemplated by this Agreement.
3.2.2 Shareholder Approval. The sale of the Shares to the
--------------------
Purchasers pursuant to this Agreement and the Certificate of Amendment shall
have
<PAGE>
23
been duly approved by the holders of the Common Stock and other Voting
Securities of the Company entitled to vote thereon at the Stockholder Meeting.
3.2.3 Consents. All consents, approvals, authorizations,
--------
orders, registrations, filings and qualifications of or with any (A)
Governmental Authority and (B) other Persons (whether acting in an individual,
fiduciary or other capacity) necessary or required to be made or obtained by the
Purchasers for the consummation of the transactions contemplated by this
Agreement, the Rights Offering Registration Statement or the Registration Rights
Agreement, shall have been made or obtained, as the case may be, and shall be in
full force and effect, and the Company shall have been furnished with
appropriate evidence thereof.
3.2.4 Hart-Scott-Rodino. The waiting period under the Hart-
-----------------
Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or been
terminated, to the extent applicable.
3.2.5 Nasdaq Listing. The Conversion Shares shall have been
--------------
approved for quotation on the Nasdaq by the Nasdaq Stock Market, Inc.
3.2.6 No Injunction. There shall be no judgment, injunction,
-------------
order or decree enjoining the Company or the Purchasers from consummating the
transactions contemplated by this Agreement to be consummated at or before the
Closing.
<PAGE>
24
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchasers
that, except as disclosed in writing by the Company to the Purchasers in a
letter specifically with respect to this Article 4 (the "Disclosure Letter")
delivered to the Purchasers on or prior to the date hereof:
4.1 Corporate Existence and Power. (A) The Company is a
--------------------------------
corporation duly organized, validly existing and subsisting under the laws of
the State of New York. The Company has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
SEC Documents and the Draft Form 10-K, and as currently conducted. The Company
is duly qualified to transact business as a foreign corporation and is in good
standing (if applicable) in each jurisdiction in which the conduct of its
business or its ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or in good standing as
would not singly or in the aggregate with all such other failures reasonably be
expected to have a Material Adverse Effect.
(B) True and complete copies of the Certificate of
Incorporation and the By-Laws as in effect on the date hereof have been provided
by the Company to the Purchasers. The minute books of the Company contain in all
material respects true and complete records of all meetings and consents in lieu
of meetings of the Board of Directors (and any committees thereof) and of the
shareholders of the Company.
<PAGE>
25
4.2 Power and Authority. The Company has the full corporate
--------------------
power and authority to execute and deliver this Agreement, the Certificate of
Amendment, the Shareholders Agreement, the Rights and the Registration Rights
Agreement and to perform its obligations under this Agreement, the Certificate
of Amendment, the Shareholders Agreement, the Rights and the Registration Rights
Agreement. The execution, delivery and performance by the Company of this
Agreement, the Certificate of Amendment, the Shareholders Agreement, the Rights
and the Registration Rights Agreement and the consummation by the Company of the
transactions contemplated hereby and thereby (including the Rights Offering)
have been duly authorized and approved by the Board of Directors and no further
corporate action on the part of the Company or the holders of its securities
(other than the actions described in Sections 3.1.2 and 3.1.4, the filing of the
Certificate of Amendment under the New York Business Corporation Law and the
effectiveness of the Rights Offering Registration Statement pursuant to the Act)
is necessary to authorize the execution, delivery and performance by the Company
of such agreements or the consummation by the Company of the transactions
contemplated hereby and thereby (including the Rights Offering). Subject to
shareholder approval, the Board of Directors has duly adopted the Certificate of
Amendment. The foregoing authorization and approval by the Board of Directors
constitutes prior approval by the Board of Directors of the transaction which
resulted in the Purchasers
<PAGE>
26
becoming "interested shareholders" within the meaning of Section 912 of the New
York Business Corporation Law. As of the Closing Date, future transactions
between the Company and its Subsidiaries, on the one hand, and the Purchasers
and their "affiliates" and "associates" (each as defined in such Section 912),
on the other hand, shall be exempted from the provisions of such Section 912.
Each of this Agreement, the Shareholders Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Company and is a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
4.3 Affiliate Transactions. Except as disclosed in any SEC
-----------------------
Document filed prior to the date hereof, in the Draft Form 10-K or in the
Disclosure Letter, the Company and its Subsidiaries have not entered into any
transaction or series of transactions with any shareholder, director, officer,
employee or Affiliate of the Company other than any transaction (or series of
related transactions) not involving amounts in excess of $60,000 and conducted
on an arms'-length basis in the ordinary course of business of the Company.
4.4 No Contravention, Conflict, Breach, Etc. The execution,
-------------------------------------------
delivery and performance of each of this Agreement, the Certificate of
Amendment, the Shareholders Agreement, the Rights and the Registration Rights
Agreement by the Company and the Existing Shareholders, the issuance of the
Rights and the shares of Preferred Stock upon the exercise thereof by the
Company and the consummation of
<PAGE>
27
the transactions contemplated hereby and thereby (including the Rights Offering)
will not conflict with, contravene or result in a breach or violation of any of
the terms and provisions of, or constitute a default under (or permit any party
to terminate all or any provisions of), or result in the creation or imposition
of any Encumbrance upon any assets or properties of the Company or of any of its
Subsidiaries or cause the Company or any of its Subsidiaries to be required to
redeem, repurchase or offer to repurchase any of their respective indebtedness
under (A) the certificate of incorporation, the by-laws or other organizational
documents of the Company or any of its Subsidiaries, (B) any Law of any
Governmental Authority having jurisdiction over the Company, any of its
Subsidiaries or any of their respective assets, properties or operations or (C)
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, permit, license or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound or to which any of the assets, properties or
operations of the Company or any of its Subsidiaries is subject.
4.5 Consents. No consent, approval, authorization, order,
--------
registration, filing or qualification of or with any (A) Governmental Authority,
(B) Nasdaq or any stock exchange on which the securities of the Company are
traded or (C) other Person (whether acting in an individual, fiduciary or other
capacity) is
<PAGE>
28
required to be made or obtained by the Company or any of its Subsidiaries for
the execution, delivery and performance by the Company and the Existing
Shareholders of this Agreement, the Certificate of Amendment, the Shareholders
Agreement, the Rights and the Registration Rights Agreement and the consummation
of the transactions contemplated hereby, except the actions described in
Sections 3.1.2, 3.1.4 and 3.1.7 and such approvals as may be required under the
Act and state securities laws in connection with the performance by the Company
of its obligations under the Registration Rights Agreement.
4.6 Capitalization of the Company. As of the date hereof, the
-----------------------------
authorized capital stock of the Company consists of: (A) 10,000,000 shares of
Class A Common Stock, par value $0.25 per share, of which 3,143,125 shares are
outstanding; (B) 10,000,000 shares of Class B Common Stock, par value $0.25 per
share, of which 2,796,555 shares are outstanding; (C) 200,000 shares of six
percent (6%) Voting Cumulative Preferred Stock, par value $0.25 per share ("6%
Preferred Stock"), of which 200,000 shares are outstanding; (D) 30,000 shares of
Preferred Stock, no par value ("No Par Preferred Stock"), of which no shares are
outstanding; (E) 1,000,000 shares of 10% Cumulative Convertible Voting Preferred
Stock-Series A, par value $0.025 per share ("Series A Preferred Stock"), of
which 407,240 shares are outstanding; (F) 400,000 shares of 10% Cumulative
Convertible Voting Preferred Stock - Series B, par value $0.025 per share
("Series B Preferred Stock"),
<PAGE>
29
of which 400,000 shares are outstanding; and (G) 2,600,000 shares of Blank Check
Preferred Stock, of which no shares are outstanding. At the Closing (after
giving effect to the Certificate of Amendment), the authorized capital stock of
the Company will consist of 20,000,000 shares of Class A Common Stock, those
securities described in clauses (B) through (F) of the preceding sentence,
2,633,333 shares of Blank Check Preferred Stock, of which no shares will be
outstanding, and 4,166,667 shares of Preferred Stock, of which 4,166,667 shares
will be outstanding (assuming the exercise of all Rights). No other class of
capital stock of the Company is, or at the Closing will be, authorized or
issued. From the date hereof until the Closing, except for the conversion of
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Class B Common Stock in accordance with their terms, the Company will not issue
any shares of its capital stock. All outstanding shares of capital stock of the
Company have been duly authorized, are validly issued, fully paid and
nonassessable and have been issued in compliance with applicable federal and
state securities laws. At the Closing, all of the Shares will be duly authorized
and, when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable. The Rights and the shares of Preferred Stock
issuable upon exercise of the Rights have been duly authorized and, when issued
and paid for, will be validly issued, fully paid and nonassessable. The
Conversion Shares are duly authorized and reserved for issuance upon conversion
of the Shares and, when issued in accordance
<PAGE>
30
with the Certificate of Amendment, will be validly issued, fully paid and
nonassessable. The shareholders of the Company have no preemptive or similar
rights with respect to the securities of the Company or which will enable them
to subscribe for the Shares. Except as set forth in the Disclosure Letter, there
are no outstanding (i) securities or obligations of the Company convertible into
or exchangeable for any capital stock of the Company, (ii) warrants, rights or
options to subscribe for or purchase from the Company any such capital stock or
any such convertible or exchangeable securities or obligations or (iii)
obligations of the Company to issue such shares, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or options.
4.7 No Rights Plan. Except for the rights set forth in Article
--------------
4(a)(C)(ii) of the Certificate of Incorporation, the Company has not adopted a
shareholders rights plan, poison pill or similar arrangement.
4.8 Registration Rights. Except as set forth in the Disclosure
-------------------
Letter, neither the Company nor any of its Subsidiaries has previously entered
into any agreement granting any registration rights to any Person, whether
consistent or inconsistent with the rights to be granted to the Purchasers in
the Registration Rights Agreement.
4.9 Subsidiaries. The Disclosure Letter sets forth a complete and
------------
accurate list of all of the Subsidiaries of the Company together with their
respective
<PAGE>
31
jurisdictions of incorporation or organization. Except for its Subsidiaries and
except as disclosed in any SEC Document filed prior to the date hereof or in the
Draft Form 10-K, the Company holds no equity, partnership, joint venture or
other interest in any Person. True and complete copies of the certificate of
incorporation, by-laws and other organizational documents of the Subsidiaries of
the Company as in effect on the date hereof have been provided by the Company to
the Purchasers. Each Subsidiary of the Company has been duly incorporated or
organized and is validly existing as a corporation or other legal entity in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the corporate or other power and authority to own, lease and
operate its properties and to conduct its business as currently conducted and is
duly qualified to transact business as a foreign corporation or other legal
entity and is in good standing (if applicable) in each jurisdiction in which the
conduct of its business or its ownership, leasing or operation of property
requires such qualification, other than any failure to be so qualified or in
good standing as would not singly or in the aggregate with all such other
failures reasonably be expected to have a Material Adverse Effect. All of the
outstanding capital stock of each Subsidiary of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through other Subsidiaries of the Company, free and
clear of any Encumbrance (other than such transfer restrictions as may exist
under federal and state securities laws or any
<PAGE>
32
Encumbrances between or among the Company and/or any Subsidiary of the Company),
and there are no rights granted to or in favor of any third party (whether
acting in an individual, fiduciary or other capacity), other than the Company or
any Subsidiary of the Company, to acquire any such capital stock, any additional
capital stock or any other securities of any such Subsidiary. There exists no
restriction, other than those pursuant to applicable law or regulation, on the
payment of cash dividends by any Subsidiary.
4.10 SEC Documents.
-------------
(A) The Company has delivered true and complete copies of
all SEC Documents to the Purchasers except for schedules and exhibits thereto
and documents incorporated by reference therein.
(B) As of its filing date, each SEC Document filed, and
each SEC Document that will be filed by the Company prior to the Closing Date,
as amended or supplemented prior to the Closing Date, if applicable, pursuant to
the Exchange Act (i) complied or will comply in all material respects with the
applicable requirements of the Exchange Act (except as set forth in the
Disclosure Letter) and (ii) did not or will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(C) Each final registration statement filed with the
SEC, and
<PAGE>
33
each final registration statement that will be filed with the SEC by the Company
prior to the Closing Date, as amended or supplemented prior to the Closing Date,
if applicable, pursuant to the Act, as of the date such statement or amendment
became or will become effective (i) complied or will comply in all material
respects with the applicable requirements of the Act and (ii) did not or will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of any prospectus, in light of the
circumstances under which they were made).
(D) At the time the Proxy Statement is first mailed
to the shareholders of the Company, and at the time such shareholders vote on
approval of the transactions contemplated hereby, the Proxy Statement, as then
amended or supplemented, will comply in all material respects with the Exchange
Act and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of circumstances under which they were made, not misleading; provided that
the Company makes no representation or warranty with respect to (i) any
statement or omissions included in the Proxy Statement based upon information
furnished in writing to the Company by the Purchasers specifically for use
therein or (ii) any portion thereof which is not deemed to be filed under
applicable SEC rules and regulations.
<PAGE>
34
(E) At the time the Rights Offering Registration Statement
becomes effective, the Rights Offering Registration Statement, as then amended,
will comply in all material respects with the requirements of the Act and will
not contain an untrue statement of a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Rights Offering
Prospectus, at the time the Rights Offering Registration Statement becomes
effective and at the Closing Date, will not include an untrue statement or a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the representations and
warranties in this Section 4.10(E) shall not apply to statements in or omissions
from the Rights Offering Registration Statement or the Rights Offering
Prospectus made in reliance upon or in conformity with the information furnished
to the Company in writing by the Purchasers specifically for use in the Rights
Offering Registration Statement or in the Rights Offering Prospectus.
4.11 Financial Statements. The audited consolidated financial
--------------------
statements and related schedules and notes included in the SEC Documents and the
Draft Form 10-K (including, without limitation, the Rights Offering Registration
Statement) comply in all material respects with the requirements of the Exchange
Act and the Act and the rules and regulations of the SEC thereunder, were
prepared in accordance with generally accepted accounting principles
consistently applied
<PAGE>
35
throughout the period involved and fairly present in all material respects the
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company and its Subsidiaries (and in the case of the
financial statements of net assets to be acquired of the Curtice Burns Vegetable
Processing Plant and Food Storage Warehouse and Aunt Nellie's Farm Kitchens, the
financial condition, results of operation and cash flows of such assets) at the
dates and for the periods presented. The unaudited quarterly consolidated
financial statements and the related notes included in the SEC Documents and in
the Draft Form 10-K (including, without limitation, the Rights Offering
Registration Statement) fairly present in all material respects the financial
condition, results of operations and cash flows of the Company and its
Subsidiaries (and in the case of the financial statements of net assets to be
acquired of the Curtice Burns Vegetable Processing Plant and Food Storage
Warehouse and Aunt Nellie's Farm Kitchens, the financial condition, results of
operation and cash flows of such assets) at the dates and for the periods to
which they relate, subject to year-end adjustments (consisting only of normal
recurring accruals), and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis except as otherwise
stated therein and have been prepared on a basis consistent with that of the
audited financial statements referred to above except as otherwise stated
therein.
4.12 No Existing Violation, Default, Etc. Neither the Company nor
------------------------------------
<PAGE>
36
any of its Subsidiaries is (A) in violation of any provision of its certificate
of incorporation, by-laws or other organizational documents or (B) in violation
of any applicable Law, stock exchange rule or regulation, which violation has or
would reasonably be expected to have a Material Adverse Effect. Except as set
forth in the Disclosure Letter, no breach, event of default, event that, but for
the giving of notice or the lapse of time or both, would constitute an event of
default or breach that would result in the loss of a benefit under or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any of its Subsidiaries exists under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
permit, license or other agreement to which the Company or any of its
Subsidiaries is a party or by which the Company or any such Subsidiary is bound
or to which any of the properties, assets or operations of the Company or any
such Subsidiary is subject, which breach, event of default, or event that has or
would reasonably be expected to have a Material Adverse Effect. Except as set
forth in the Disclosure Letter, (i) no event of default, (ii) no event that, but
for the giving of notice or the lapse of time or both, would constitute an event
of default, and (iii) no event that would require the Company to prepay, redeem,
repurchase or offer to repurchase any of its indebtedness exists and (iv) no
breach that would result
<PAGE>
37
in the loss of a benefit under or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any of its
Subsidiaries exists under (a) the Amended and Restated Credit Agreement, dated
as of September 24, 1997, among the Company, the Banks signatory thereto and The
Chase Manhattan Bank, as Agent (the "Credit Agreement"), (b) the Note Agreement,
dated as of February 23, 1995, among the Company and The Prudential Insurance
Company of America and John Hancock Mutual Life Insurance Company, as
Purchasers, relating to a $75 million 10.78% Series A Senior Note and a $50
million 10.81% Series B Senior Note, (c) the Note Agreement, dated as of
September 26, 1997, among the Company, Signature 1A (Cayman), Ltd., by John
Hancock Mutual Life Insurance Company, Portfolio Advisor, Mellon Bank, N.A. as
Trustee for the Long-Term Investment Trust, Mellon Bank, N.A. as Trustee for
NYNEX Master Pension Trust, and CoBank, ACB, as Purchasers, relating to $15
million 9.17% Senior Notes (the "1997 Note Agreement"), (d) the 8% Secured
Nonrecourse Subordinated Promissory Note, dated as of February 1, 1995, issued
by the Company to Pillsbury, as Payee, and (e) the Master Reimbursement
Agreement, dated as of September 15, 1997, between the Company, as borrower, and
General Electric Capital Corporation, as lender. No event of default, no event
that, but for the giving of notice or the lapse of time or both, would
constitute an event of default and no breach that would result in the loss
<PAGE>
38
of a benefit under or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any of its Subsidiaries
exists under the First Amended and Restated Alliance Agreement by and among the
Company, Pillsbury and Grand Metropolitan Incorporated, dated December 8, 1994,
as amended February 10, 1995 (the "Alliance Agreement"), or the First Amended
and Restated Asset Purchase Agreement by and between the Company and Pillsbury,
dated December 8, 1994, as amended February 10, 1995.
4.13 Licenses and Permits. The Company and its Subsidiaries
--------------------
have such Licenses as are necessary to own, lease or operate their properties
and to conduct their businesses in the manner described in the SEC Documents and
the Draft Form 10-K, and as currently owned or leased and conducted, and all
such Licenses are valid and in full force and effect except such Licenses that
the failure to have or to be in full force and effect individually or in the
aggregate has not had, and would not reasonably be expected to have, a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has received any
written notice that any violations are being or have been alleged in respect of
any such License and no proceeding is pending or, to the Knowledge of the
Company, threatened, to suspend, revoke or limit any such License the effect of
which would reasonably be expected to have a Material Adverse Effect. The
Company and its Subsidiaries are in compliance with
<PAGE>
39
their respective obligations under such Licenses, with such exceptions as
individually or in the aggregate have not had, and would not reasonably be
expected to have, a Material Adverse Effect, and no event has occurred that
allows, or after notice or lapse of time would allow, revocation, suspension,
limitation or termination of such Licenses, except such events as have not had,
or would not reasonably be expected to have, a Material Adverse Effect.
4.14 Title to Properties. Except as set forth in the
---------------------
Disclosure Letter, the Company and its Subsidiaries have sufficient title to all
material properties (real and personal) owned by the Company and any such
Subsidiary that are necessary for the conduct of the business of the Company and
any such Subsidiary as described in the SEC Documents and the Draft Form 10-K
and as currently conducted, free and clear of any Encumbrance that may
reasonably be expected to materially interfere with the conduct of its business
taken as a whole, and all material properties held under lease by the Company
and the Subsidiaries are held under valid, subsisting and enforceable leases
except for such leases the loss of which would not reasonably be expected to
have a Material Adverse Effect.
4.15 Intellectual Property. (A) The Company and each of its
----------------------
Subsidiaries own or are licensed to use all (i) patents, trademarks, trade
names, service marks, copyrights and any applications therefor and (ii) trade
secrets, know-how, computer software programs and proprietary information, in
each case, that are
<PAGE>
40
material to the conduct of the business of the Company and the Subsidiaries as
described in the SEC Documents and the Draft Form 10-K and as currently
conducted (collectively, the "Intellectual Property") free and clear of any
material Encumbrance, except for any Encumbrances set forth in the Disclosure
Letter.
(B) The Disclosure Letter lists (i) all Intellectual Property
described in Section 4.15(A)(i) owned by the Company and any of its Subsidiaries
and that has been registered or for which an application for registration has
been filed with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, or any similar office in any other
country, specifying as to each item, as applicable: (a) the category of
Intellectual Property, (b) the jurisdictions in which the item is recognized or
registered, or in which any application for registration has been filed,
including the registration or application number; and (c) with respect to any
trademarks or service marks, the type of goods or services on which such mark is
or is intended to be used; and (ii) all material licenses, sublicenses and other
agreements ("IP Licenses") under which the Company or any of its Subsidiaries is
either a licensor or licensee of any Intellectual Property. A true and complete
list of all material documents evidencing Intellectual Property as in effect on
the date hereof has been delivered by the Company to the Purchasers.
(C) None of the Company, any of its Subsidiaries or, to the
Knowledge of the Company, any other party is in breach of or default under
any IP
<PAGE>
41
License. Each IP License is now, and immediately following the consummation of
the transactions herein contemplated will be, valid and in full force and
effect.
(D) No litigation is pending or, to the Knowledge of the
Company, threatened, that challenges the validity, enforceability or ownership
of, or right to use or license, any Intellectual Property.
(E) No item of Intellectual Property is subject to any
outstanding order, ruling, judgment, decree or written agreement restricting the
use thereof by the Company or its Subsidiaries except for agreements made in the
ordinary course of business of the Company or its Subsidiaries. None of the
Company or any Subsidiary has agreed to indemnify any person against any charge
of infringement or other violation with respect to any Intellectual Property
owned or used by the Company or any Subsidiary except in the ordinary course of
business.
(F) To the Knowledge of the Company, none of the
Company or its Subsidiaries has infringed upon or otherwise violated the
intellectual property rights of third parties which would reasonably be expected
to have a Material Adverse Effect. Neither the Company nor its Subsidiaries has
received any complaint or notice alleging any such infringement or other
violation.
(G) To the Knowledge of the Company, no third party is
infringing upon or otherwise violating the Intellectual Property rights of the
Company or any Subsidiary.
<PAGE>
42
(H) All material patents and registered trademarks and
registered copyrights held by the Company or any Subsidiary are valid and
subsisting. The Company and its Subsidiaries have taken all necessary action to
maintain and protect the Intellectual Property that they own or use other than
such actions taken in the ordinary course of business of the Company and its
Subsidiaries that would not reasonably be expected to have a material adverse
effect on the Intellectual Property.
(I) The Company has (i) issued purchase orders to upgrade
certain material computer software programs and systems (accounts payable,
general ledger and payroll) and (ii) initiated the reprogramming of certain
other material computer software programs (order processing systems) (items (i)
and (ii) being collectively referred to as "Programs and Systems"), all of which
are used by the Company and any Subsidiary so that such Programs and Systems
will operate during and after calendar year 2000 A.D. to accurately process date
data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, including
leap-year calculations (the "Year 2000 Data"). The Company expects to have the
Programs and Systems installed, fully tested and operational at March 31, 1999.
To the Knowledge of the Company, the computer programs and systems of its major
customer, Pillsbury, will be capable of accurately processing the Year 2000
Data. The Company has not finished inquiring of its major customers, suppliers
and vendors as to whether such persons' computer
<PAGE>
43
systems and programs will be capable of accurately processing the Year 2000
Data. Except for Pillsbury, the Company does not believe that any failure by any
single customer, supplier or vendor to accurately process the Year 2000 Data
will have a Material Adverse Effect on the Company.
4.16 Environmental Matters. Subject to such disclosures as are
---------------------
contained in the SEC Documents and the Draft Form 10-K:
(A) The Company and its Subsidiaries and their respective
operations and properties, are and have been in compliance with all applicable
Environmental Laws except for such failures which, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect.
(B) There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to their knowledge, threatened
against the Company or any of its Subsidiaries pursuant to Environmental Laws
which could reasonably be expected to result in a fine, penalty or other
obligation, cost or expense, except such obligations, costs or expenses which,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect.
<PAGE>
44
(C) There are no past or present events, conditions,
circumstances, activities, practices, incidents, agreements, actions or plans
which may prevent compliance by the Company or its Subsidiaries with, or which
have given rise to, or will give rise to, material liability to the Company or
any of its Subsidiaries under Environmental Laws, except any such events,
conditions, circumstances, activities, practices, incidents, agreements, actions
or plans which, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect.
4.17 Taxes.
-----
(A) Each of the Company and its Subsidiaries has
filed all returns, reports and other forms related to Taxes with
respect to the business, activities or assets of the Company or its
Subsidiaries (collectively, "Tax Returns") required to be filed. All
such Tax Returns were correct and complete in all material respects.
All Taxes owed by any of the Company and its Subsidiaries (whether or
not shown on any Tax Return) have been paid. None of the Company and
its Subsidiaries currently is the beneficiary of any extension of time
within which to file any Tax Return. Except as set forth in the
Disclosure Letter, no claim has ever been made by an authority in a
jurisdiction where any of the Company and its Subsidiaries does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
any of the Company and its
<PAGE>
45
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(B) Each of the Company and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder, or other third party.
(C) The Disclosure Letter sets forth all federal,
state, county, local and foreign Tax elections under the Code
and other applicable provisions of law that are in effect with
respect to the Company and its Subsidiaries for the fiscal year ended
March 31, 1998, and the fiscal year beginning April 1, 1998.
(D) The Disclosure Letter sets forth the status of
state, county, local and foreign Tax audits of the Tax Returns of the
Company and its Subsidiaries for each fiscal year for which the statute
of limitations has not expired, including the amounts of any
deficiencies or additions to Tax, interest and penalties that have been
made or proposed, and the amounts of any payments made by the Company
or any of its Subsidiaries with respect thereto. Each state, county,
local and foreign Tax Return filed by or with respect to the Company or
any of its Subsidiaries for which the state, county, local or foreign
Tax audit has not been completed accurately reflects the
<PAGE>
46
amount of its liability for Taxes thereunder and makes all disclosures
required by applicable provisions of law.
(E) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(F) None of the Company and its Subsidiaries has
filed a consent under Code Section 341(f) concerning collapsible
corporations. None of the Company and its Subsidiaries has been a
United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the Company
and its Subsidiaries (A) has been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company) or (B) has any liability for
the Taxes of any Person (other than any of the Company and its
Subsidiaries) under Reg. Sec. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(G) The Disclosure Letter sets forth, as of the most
recent practicable date, the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or
excess charitable
<PAGE>
47
contribution allocable to the Company or Subsidiary.
(H) Based upon preliminary estimates which are
subject to adjustment or verification, the unpaid Taxes of the Company
and its Subsidiaries (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns. Such adjustments may be
material to the reserve for Tax liability but would not have a Material
Adverse Effect on the Company's operating results.
4.18 Litigation. Except as set forth in the Disclosure Letter
----------
in SEC Documents filed with the SEC prior to the date of this Agreement or in
the Draft Form 10-K, there are no pending actions, suits, proceedings,
arbitrations or investigations against or affecting the Company, any of its
Subsidiaries or any of their respective properties, assets or operations, or
with respect to which the Company or any such Subsidiary is responsible by way
of indemnity or otherwise, that are required under the Exchange Act to be
described in such SEC Documents or the Draft Form 10-K (as if it were filed
under applicable SEC rules and regulations), that
<PAGE>
48
questions the validity of this Agreement, the Shareholders Agreement, the Rights
or the Registration Rights Agreement, or that could singly, or in the aggregate,
with all such other actions, suits, investigations or proceedings, reasonably be
expected to have a Material Adverse Effect and, to the Knowledge of the Company,
no such actions, suits, proceedings or investigations are threatened.
4.19 Labor Matters. Except as set forth in the Disclosure
--------------
Letter, no labor disturbance by the employees of the Company or any of its
Subsidiaries that has had or that could reasonably be expected to have a
Material Adverse Effect exists or, to the Knowledge of the Company, is
threatened.
4.20 Employee Benefits. (A) Except for the plans set forth in
-----------------
the Disclosure Letter (the "Benefit Plans"), there are no employee benefit plans
or arrangements of any type (including, without limitation, plans described in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
and the regulations thereunder ("ERISA")), under which the Company or any of its
Subsidiaries has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of Code Sections 414(b), (c), (m)
and (o)), any material liability with respect to any current or former employee
of the Company, any of its Subsidiaries or any Commonly Controlled Entity.
Except as set forth in the Disclosure Letter, no such Benefit Plan is a
"multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)).
<PAGE>
49
(B) With respect to each Benefit Plan that is not a
multiemployer plan, the Company has delivered or made available to the
Purchasers complete and accurate copies of (i) all plan texts and agreements (as
amended or modified to date), (ii) all summary plan descriptions and similar
material employee communications, (iii) the most recent annual report (Form 5500
including, if applicable, Schedule B thereto), (iv) the most recent annual and
periodic accounting of plan assets, (v) the most recent determination letter
received from the Internal Revenue Service and (vi) the most recent actuarial
valuation.
(C) With respect to each Benefit Plan that is not a
multiemployer plan: (i) such Benefit Plan has been maintained and administered
at all times in material compliance with its terms and applicable law and
regulation; (ii) to the Knowledge of the Company, no event has occurred and
there exists no circumstance under which the Company or any of its Subsidiaries
could directly, or indirectly through a Commonly Controlled Entity, incur any
material liability under ERISA, the Code or otherwise (other than routine claims
for benefits and other liabilities arising in the ordinary course pursuant to
the normal operation of such Benefit Plan); (iii) there are no actions, suits or
claims (other than routine claims for benefits) pending or, to the Knowledge of
the Company, threatened, with respect to any Benefit Plan or against the assets
of any Benefit Plan with respect to which suits the Company or any of its
Subsidiaries could incur any material liability; (iv) all
<PAGE>
50
contributions and premiums due and owing to any Benefit Plan have been made or
paid on a timely basis and no "accumulated funding deficiency", as defined in
Code Section 412, has been incurred, whether or not waived; (v) all
contributions made under any Benefit Plan have met the requirements for
deductibility under the Code, and all contributions that have not been made have
been properly recorded on the books of the Company, or a Commonly Controlled
Entity thereof in accordance with generally accepted accounting principles; (vi)
if such Benefit Plan is intended to be qualified under Code Section 401(a), such
Benefit Plan has been determined to be so qualified and each trust created under
such Benefit Plan has been determined to be exempt from tax under Code Section
501(a) and no event has occurred since the date of such determinations,
including effective changes in laws or regulations or modifications to the
Benefit Plans, that would adversely affect such qualification or tax exempt
status; and (vii) as of the most recent valuation date, the value of assets
under any Benefit Plan subject to Title IV of ERISA exceeded the liabilities of
such plan on a projected benefit obligation basis determined using the
assumptions used to fund such Plan.
(D) The Accumulated Postretirement Benefit Obligation (as defined in
Statement of Financial Accounting Standards No. 106) in respect of post-
retirement health and medical benefits for current and former employees of the
Company and its Subsidiaries, calculated as of March 31, 1997 on the basis of
<PAGE>
51
reasonable actuarial assumptions in accordance with generally accepted
accounting principles, does not exceed $1,000,000. No condition exists that
would prevent the Company or any of its Subsidiaries from amending or
terminating any plan providing health or medical benefits in respect of current
or former employees of the Company or its Subsidiaries.
(E) There is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of the Company or its
Subsidiaries that, individually or collectively, could give rise to the payment
by the Company or its Subsidiaries of any amount that would not be deductible
pursuant to the terms of Code Section 280G.
(F) No employee or former employee of the Company or its
Subsidiaries will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including acceleration of
vesting or exercise of an incentive award) as a result of the transactions
contemplated hereby.
4.21 Contracts. All of the material contracts of the Company
---------
or any of its Subsidiaries that are required to be described in the SEC
Documents and the Draft Form 10-K (as if it were filed under applicable SEC
rules or regulations) (including, without limitation, the Rights Offering
Registration Statement) or to be filed as exhibits thereto are (or will be, as
applicable) described in the SEC Documents or the Draft Form 10-K or filed as
exhibits thereto and are (or will be, as
<PAGE>
52
applicable) in full force and effect. True and complete copies of all such
material contracts have been delivered by the Company to the Purchasers. Neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the Company,
any other party is in breach of or in default under any such contract except for
such breaches and defaults as in the aggregate have not had, and would not
reasonably be expected to, have a Material Adverse Effect.
4.22 Contingent Liabilities. Except as fully reflected or
-----------------------
reserved against in the audited financial statements included in the Annual
Report or the financial statements included in the Draft Form 10-K, or disclosed
in the footnotes contained in such financial statements, the Company and its
Subsidiaries had no liabilities (including tax liabilities) at the date of such
financial statements, absolute or contingent, that were material either
individually or in the aggregate to the Company and its Subsidiaries taken as a
whole.
4.23 No Material Adverse Effect. Since March 31, 1997: (A) the
--------------------------
Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would reasonably be expected to result in a Material Adverse
Effect; (B) the Company and its Subsidiaries have not sustained any loss or
interference with its business or properties from fire, flood, windstorm,
accident or other calamity (whether or not
<PAGE>
53
covered by insurance) that has had or that would reasonably be expected to have
a Material Adverse Effect; (C) except for seasonal changes in outstanding
indebtedness under the Credit Agreement and the requirement to reduce all
indebtedness under the Credit Agreement to an aggregate amount not in excess of
$30 million for a period of 30 consecutive days, there has been no material
change in the indebtedness of the Company and its Subsidiaries except for the
$15 million increase in long-term indebtedness pursuant to the 1997 Note
Agreement, and no change in the capital stock of the Company except for the
conversion of outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Class B Common Stock in accordance with their terms; (D) except for
(i) the aggregate payment of semiannual dividends in the amount of $11,590.50 on
its outstanding shares of 6% Preferred Stock, Series A Preferred Stock and
Series B Preferred Stock, and (ii) the aggregate payment of accumulated
dividends in the amount of $34,771.50 on such 6% Preferred Stock, Series A
Preferred Stock and Series B Preferred Stock that initially accrued on January 1
and July 1, 1996, and January 1, 1997, there has been no dividend or
distribution of any kind declared, paid or made by the Company or any of its
Subsidiaries on any class of its capital stock; (E) neither the Company nor any
of its Subsidiaries has made (nor does it propose to make) (i) any material
change in its accounting methods or practices or (ii) any material change in the
depreciation or amortization policies or rates adopted by it, in either case,
except as may be required
<PAGE>
54
by law or applicable accounting standards; and (F) there has been no event
causing a Material Adverse Effect, nor any development that would, singly or in
the aggregate, reasonably be expected to result in a Material Adverse Effect
(other than an event or development specifically disclosed in any Quarterly
Report or the Draft Form 10-K).
4.24 Finder's Fees. No broker, finder or other party is
--------------
entitled to receive from the Company or any of its Subsidiaries any brokerage or
finder's fee for the transactions contemplated by this Agreement as a result of
the actions of the Company, any of its Subsidiaries, or any of its Affiliates.
4.25 Investment Company. Neither the Company nor any of its
-------------------
Subsidiaries is or, after giving effect to the Closing, will be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.26 Exemption from Registration; Restrictions on Offer and
---------------------------------------------------------
Sale of Same or Similar Securities. Assuming the representations and warranties
- ----------------------------------
of the Purchasers set forth in Section 5.5 hereof are true and correct in all
material respects, the offer and sale of the Shares and the Conversion Shares
made pursuant to this Agreement will be exempt from the registration
requirements of the Act. Neither the Company nor any Person acting on its behalf
has, in connection with the offering of the Shares, engaged in (A) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 502(c) under the Act), (B) any action involving a public
offering within the meaning of Section 4(2) of the Act, or (C) any
<PAGE>
55
action that would require the registration under the Act of the offering and
sale of the Shares and the Conversion Shares pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws. The Company has
not made and will not prior to the Closing make, directly or indirectly, any
offer or sale of Shares or Conversion Shares or of securities of the same or a
similar class as the Shares or Conversion Shares if as a result the offer and
sale of the Shares and Conversion Shares contemplated hereby could fail to be
entitled to exemption from the registration requirements of the Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(3)
of the Act.
4.27 Use of Proceeds. The net proceeds of the sale of the
----------------
Shares will be used by the Company and its Subsidiaries to reduce currently
outstanding indebtedness under the Credit Agreement.
4.28 Full Disclosure. To the Knowledge of the Company, no
----------------
statement by the Company contained in this Agreement, the Disclosure Letter, the
SEC Documents, the Draft Form 10-K (including, without limitation, the Rights
Offering Registration Statement) or any other documents listed in the Disclosure
Letter or on any certificates, notices or consents delivered to the Purchasers
in connection with the purchase and sale of the Shares at or prior to the
Closing, taken as a whole, in light of the circumstances in which made, contains
(or will contain) an untrue statement of a material fact or omits (or will omit)
to state a material fact
<PAGE>
56
required to be stated therein or necessary to make the statements made, in light
of the circumstances in which made, not materially false or misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchasers hereby represent and warrant to the Company that:
5.1 Partnership Existence and Power. Each Purchaser (other
-------------------------------
than Uranus) is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware. Uranus is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Cayman Islands. Each Purchaser has all requisite power and authority to own,
lease and operate its properties and to conduct its business as currently
conducted.
5.2 Power and Authority. Each Purchaser has the full
--------------------
corporate or partnership power and authority to execute and deliver this
Agreement, the Shareholders Agreement and the Registration Rights Agreement and
to perform its obligations under this Agreement, the Shareholders Agreement and
the Registration Rights Agreement. The execution, delivery and performance by
each Purchaser of this Agreement, the Shareholders Agreement and the
Registration Rights Agreement and the consummation by each Purchaser of the
transactions contemplated hereby have been duly authorized. Each of this
Agreement, the Shareholders Agreement and the Registration Rights Agreement has
been duly executed and delivered by each Purchaser and is a valid and binding
agreement of each Purchaser, enforceable against
<PAGE>
57
such Purchaser in accordance with their respective terms.
5.3 No Contravention, Conflict, Breach, Etc. The execution,
-------------------------------------------
delivery and performance of each of this Agreement, the Shareholders Agreement
and the Registration Rights Agreement by the Purchasers and the consummation of
the transactions contemplated hereby will not conflict with, contravene or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (A) the certificate of incorporation, by-laws,
partnership agreement or other organizational documents of the Purchasers, (B)
any Law of any Governmental Authority having jurisdiction over any Purchaser or
(iii) any agreement to which any Purchasers is a party.
5.4 Consents. No consent, approval, authorization, order,
--------
registration, filing, or qualification of or with any (A) Governmental Authority
or (B) other Person (whether acting in an individual, fiduciary or other
capacity) is required to be made or obtained by the Purchasers for the
consummation of the transactions contemplated hereby except for compliance with
any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
5.5 Acquisition for Own Account. The Shares and the Conversion
---------------------------
Shares to be acquired by the Purchasers pursuant to this Agreement are being
acquired by them for their own account for investment purposes and with no
intention of distributing or reselling the Shares and the Conversion Shares in
any transaction
<PAGE>
58
that would be in violation of the Act or the securities laws of any state,
without prejudice, however, to the rights of the Purchasers at all times to sell
or otherwise dispose of all or any part of the Shares or the Conversion Shares
under an effective registration statement under the Act, under an exemption from
such registration available under the Act, and subject, nevertheless, to the
disposition of the Purchasers' property being at all times within their control,
except as otherwise provided by this Agreement. Each of the Purchasers is an
"accredited investor" within the definition of Rule 501(a) of Regulation D under
the Act. Each Purchaser (A) has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Shares, (B) fully understands the nature, scope
and duration of the limitations on transfer contained in this Agreement and (C)
can bear the economic risk of an investment in the Shares and the Conversion
Shares and can afford a complete loss of such investment. Each Purchaser
acknowledges receipt of the SEC Documents, the Draft Form 10-K, the Disclosure
Letter and all documents delivered in accordance therewith and that it has been
afforded the opportunity to ask such questions as it deemed necessary, and to
receive answers from, representatives of the Company concerning the merits and
risks of investing in the Shares and to obtain such additional information that
the Company possesses or can acquire that is necessary to verify the accuracy
and completeness of the information contained in the SEC
<PAGE>
59
Documents and the Draft Form 10-K. Notwithstanding the foregoing, nothing
contained in this Section 5.5 shall affect or be deemed to modify any
representation or warranty made by the Company.
5.6 Third Party Agreements. None of the Purchasers has any
-----------------------
contract, arrangement, understanding or agreement with any other Person with
respect to any securities of the Company, including but not limited to the
transfer or voting of securities or the giving of proxies, and has no current
plans or proposals or any contract, arrangement, understanding or agreement with
any Person which relate to or would result in a major corporate transaction,
including but not limited to the types of transactions described in Item 4 of
Schedule 13D of the Exchange Act, except as provided for in this Agreement, the
Registration Rights Agreement and the Shareholders Agreement and except as
disclosed in writing to the Company prior to the execution of this Agreement.
5.7 Finder's Fee. No broker, finder or other party is entitled
------------
to receive from the Company or any of its Subsidiaries any brokerage or finder's
fee for the transactions contemplated by this Agreement as a result of the
actions of the Purchaser.
5.8 Ownership of Common Stock. Except as otherwise disclosed in
-------------------------
writing to the Company prior to the execution of this Agreement, the Purchasers
do not own beneficially (within the meaning of Rule 13d-3 of the Exchange Act)
any
<PAGE>
60
shares of Common Stock or other Voting Securities of the Company.
5.9 Full Disclosure. To the knowledge of the Purchasers, none
---------------
of the written information provided to the Company by the Purchasers or their
Representatives expressly for use in connection with the Proxy Statement and the
Rights Offering Registration Statement, taken as a whole, in light of the
circumstances in which made, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which made,
not materially false or misleading.
6. COVENANTS OF THE PARTIES.
6.1 Shareholder Meeting; Proxy Material; Certificate of
---------------------------------------------------------
Amendment. The Company shall cause a meeting of its shareholders to be duly
- ---------
called and held as soon as practicable, subject to the Company's right to
adjourn such meeting at any time or from time to time if in the Board of
Directors' good faith judgment such action is desirable to effectuate the
transactions contemplated hereunder, for the purpose of voting on (A) the
approval of the purchase of the Shares by the Purchasers pursuant to the terms
of this Agreement (the "Investment Proposal"), (B) the approval of each of the
amendments of the Certificate of Amendment and (C) transacting such other
business as may properly come before the meeting or any adjournment thereof (the
"Stockholder Meeting"). The Board of
<PAGE>
61
Directors shall recommend approval and adoption of the Investment Proposal and
the Certificate of Amendment. In connection with the Stockholder Meeting, the
Company: (A) shall promptly prepare and file with the SEC in accordance with the
Exchange Act the Proxy Statement, shall use its best efforts to have the Proxy
Statement and/or any amendment or supplement thereto cleared by the SEC and
shall thereafter mail to its shareholders as promptly as practicable the Proxy
Statement; (B) shall use all best efforts to obtain the necessary approvals by
its shareholders of the Investment Proposal and the Certificate of Amendment;
and (C) shall otherwise comply with all legal requirements applicable to such
meeting. The Company shall make available to the Purchasers prior to the filing
thereof with the SEC copies of the preliminary Proxy Statement and any
amendments or supplements thereto, shall make any changes therein reasonably
requested by the Purchasers insofar as such changes relate to any matters
relating to the Purchasers or the description of the transactions contemplated
by this Agreement, the Rights Offering, the Certificate of Amendment, the
Shareholders Agreement and the Registration Rights Agreement and shall not file
any such Proxy Statement or amendments or supplements thereto as to which the
Purchaser shall reasonably object.
6.2 Rights Offering. Under the terms of the Rights Offering,
----------------
the Company shall offer to holders of its Common Stock of record at the Record
Date the right to purchase shares of Preferred Stock at the Purchase Price Per
Share on the
<PAGE>
62
basis of one right to purchase one-half share of Preferred Stock for every share
of Class A Common Stock or Class B Common Stock held. The Company shall, or
shall cause its transfer agent to, mail certificates representing the Rights to
such holders of Common Stock as promptly as practicable after the Rights
Offering Registration Statement becomes effective, and in any event will
complete such mailing not later than midnight on the day next succeeding the
effective date of the Rights Offering Registration Statement, unless the
Purchasers shall consent to a later time in writing. At the Time of Mailing, the
Company shall notify each of the Purchasers of such mailing, and the Company
shall advise each of the Purchasers daily during the period of such offer of the
subscriptions received and of sales. Not later than 10:00 a.m., New York City
time, on the first full Business Day following the Rights Offering Expiration
Date, the Company will notify each Purchaser by telephone of the total number of
shares of Preferred Stock subscribed for by holders of certificates representing
the Rights and the resulting amount of unsubscribed shares of Preferred Stock
and will continue to confirm such notice as to the amount of unsubscribed shares
of Preferred Stock to be purchased by them in accordance with Section 2.2(B)
hereto.
6.3 Rights Offering Registration Statement.
--------------------------------------
(A) The Company shall promptly prepare and file the Rights
Offering Registration Statement. Notwithstanding the foregoing, the Company
shall
<PAGE>
63
not at any time, whether before or after the Rights Offering Registration
Statement shall have become effective, file or make any amendment or supplement
to the Rights Offering Registration Statement or Rights Offering Prospectus of
which the Purchasers have not previously been advised and furnished a copy, or
to which the Purchasers shall reasonably object in writing.
(B) The Company will use its best efforts to cause the
Rights Offering Registration Statement to become effective and will advise the
Purchasers immediately, and confirm the advice in writing (i) when the Rights
Offering Registration Statement, or any post-effective amendment to the Rights
Offering Registration Statement, shall have become effective, or any supplement
to the Rights Offering Prospectus or any amended Rights Offering Prospectus
shall have been filed, (ii) of the necessity of amending or supplementing the
Rights Offering Prospectus or any amended Rights Offering Prospectus in order to
then meet the requirements of the Act, (iii) of any request of the SEC for
amendment or supplementation of the Rights Offering Registration Statement or
Rights Offering Prospectus or the additional information and (iv) of the
issuance by the SEC of any stop order suspending the effectiveness of the Rights
Offering Registration Statement or of any order preventing or suspending the use
of any preliminary or amended preliminary prospectus, or of the suspension or
the qualification of the Rights, the Preferred Stock and the Class A Common
Stock for offering for sale in any
<PAGE>
64
jurisdiction, or of the institution of any proceeding for any of such purposes.
The Company will use its best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending such use and to obtain the
lifting thereof as soon as possible, if issued.
(C) The Company will deliver to the Purchasers, without
charge from time to time until the effective date of the Rights Offering
Registration Statement and thereafter from time to time as requested, as many
copies of each preliminary or amended preliminary prospectus and the Rights
Offering Prospectus (as supplemented or amended, if the Company shall have made
any supplements or amendments to the Rights Offering Prospectus) as the
Purchasers may reasonably request. The Company has furnished or will furnish to
the Purchasers two copies of the Rights Offering Registration Statement as
originally filed and of all amendments thereto, whether filed before or after
the Rights Offering Registration Statement becomes effective, and two copies of
all exhibits filed therewith or incorporated therein by reference.
(D) The Company will use its best efforts to comply with
the Act and the Exchange Act and the rules and regulations thereunder so as to
permit the continuance of sales of, and dealings in, the Rights, the Preferred
Stock and the Class A Common Stock in the Rights Offering under the Act and the
Exchange Act. Subject to the provisions of subsection (A) of this Section 6.3,
if at any time when a
<PAGE>
65
Rights Offering Prospectus is required to be delivered under the Act (i) an
event shall have occurred as a result of which it is necessary to amend or
supplement the Rights Offering Prospectus in order to make the statements
therein not untrue or misleading or to make the Rights Offering Prospectus
comply with the Act or (ii) the proposed offering of the Shares makes it
necessary to amend or supplement the Rights Offering Prospectus, the Company
promptly will amend or supplement the Rights Offering Prospectus (and if a
post-effective amendment to the Rights Offering Registration Statement is
necessary in connection therewith, will promptly prepare and file the same) and
will use its best efforts to cause the same to become effective as necessary to
permit the lawful use of the Rights Offering Prospectus in connection with the
distribution of the Preferred Stock.
(E) The Company will take the necessary action to qualify
the Rights, the Preferred Stock and the Class A Common Stock in connection with
the offer and sale thereof by the Company in the Rights Offering, under the laws
of such jurisdictions as may be deemed advisable by the Company in respect of
the offer to the holders of its Common Stock. The Company, however, shall not be
obligated to qualify as a foreign corporation or file any general consent to
service of process under the laws of any such jurisdiction or subject itself to
taxation as doing business in any such jurisdiction. The Company will use its
best efforts to comply with state securities and blue sky laws so as to permit
the continuance of sales of and dealings in
<PAGE>
66
the Rights, the Preferred Stock and the Class A Common Stock in the Rights
Offering.
6.4 Pre-Closing Activities. From and after the date of this
-----------------------
Agreement until the Closing, each of the Company and the Purchasers shall act
with good faith towards, and shall use its best efforts to consummate, the
transactions contemplated by this Agreement, and neither the Company nor the
Purchasers will take any action that would prohibit or impair its ability to
consummate the transactions contemplated by this Agreement. From the date hereof
until the Closing, the Company shall conduct the business of it and its
Subsidiaries in the ordinary course and shall use its best efforts to preserve
intact its business organizations and relationships with third parties and to
keep available the services of the present directors, officers and key
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing, except as contemplated by this Agreement, without the
Purchasers' prior written consent:
(A) the Company shall not adopt or propose (or agree to
commit to) any change in the Certificate of Incorporation or its By-Laws (except
for the Certificate of Amendment) or any shareholders rights plan, poison pill
or similar arrangement;
(B) the Company shall not, and shall cause each of its
Subsidiaries not to, (i) enter into any loan agreement or other financing
agreement
<PAGE>
67
(other than any such agreement among the Company and its wholly owned
Subsidiaries or among the Company's wholly owned Subsidiaries), (ii) amend or
terminate any such existing agreement (except as set forth in the Disclosure
Letter), (iii) incur any indebtedness other than (a) seasonal borrowings under
the Credit Agreement, (b) other indebtedness incurred in the ordinary course of
business consistent with past practice in an aggregate amount not to exceed
$1,000,000 and (c) such indebtedness as is set forth in the Disclosure Letter,
(iv) amend or terminate the Alliance Agreement or any agreement entered into or
related to such alliance with Pillsbury (except in the manner contemplated in
the Disclosure Letter), (v) issue stock or any other shares of capital
securities except pursuant to the operation of the Seneca Foods Corporation
Employees' Savings Plan, as in effect on the date hereof, or (vi) initiate,
solicit or encourage any inquiries or proposals or offers to purchase any of its
securities by any third party;
(C) the Company shall not, and shall cause each of
its Subsidiaries not to, enter into any other material agreements, commitments
or contracts other than in the ordinary course of business consistent with past
practice, or otherwise make any material change in any existing agreement,
commitment or arrangement other than in the ordinary course of business
consistent with past practice;
(D) the Company shall not, and shall cause each of
its
<PAGE>
68
Subsidiaries not to, merge, consolidate or otherwise combine with any Person or
sell or otherwise transfer any of the assets of the Company or such Subsidiaries
(or the securities of entities holding the same) in one transaction or a series
of related transactions other than immaterial asset sales in the ordinary course
of business of the Company consistent with past practice;
(E) the Company shall not, and shall cause each of
its Subsidiaries not to, acquire any assets of any other Person or Persons
(other than in the ordinary course of business of the Company consistent with
past practice) or acquire any equity, partnership or other interests in any
other Person or Persons, in one transaction or series of related transactions
other than any transactions or series of related transactions in an aggregate
amount not to exceed $500,000;
(F) except for repayments of seasonal borrowings
under the Credit Agreement and scheduled payments of indebtedness, the Company
shall not, and shall cause each of its Subsidiaries not to, repay, redeem or
repurchase any indebtedness of the Company or any of the Subsidiaries or any
shares of capital stock of the Company or to declare or pay any dividends on any
shares of capital stock except for aggregate semiannual dividends of $11,590.50
on the outstanding shares of the 6% Preferred Stock, Series A Preferred Stock
and Series B Preferred Stock;
(G) except as set forth in the Disclosure Letter,
the Company shall not, and shall cause each of its Subsidiaries not to, enter
into any
<PAGE>
69
transaction with any director, executive officer or Affiliate (other than any
transaction among the Company and its wholly-owned Subsidiaries or among any
wholly-owned Subsidiaries of the Company) of the Company other than any
transaction (or series of related transactions) not involving amounts in excess
of $60,000 and conducted on an arm's-length basis in the ordinary course of
business of the Company;
(H) the Company shall not, and shall cause each of
its Subsidiaries not to, (i) grant to any employee, officer or director, any
option, warrant or other subscription or purchase right with respect to shares
of capital stock other than pursuant to the Seneca Foods Corporation Employees'
Savings Plan in effect on the date hereof; (ii) grant to any employee any
increase in salary or other remuneration not consistent with past practices,
grant to any officer or director any increase in salary, bonus incentive
compensation, service award or other remuneration or grant to any employee,
officer or director any increase in severance or termination pay; (iii) enter
into any employment contract or severance arrangement with any officer or
director; or (iv) adopt or amend in any respect any of its employee benefit
plans except as required by law;
(I) the Company shall, and shall cause each of its
Subsidiaries to, not take or agree to commit to take any action that would make
any representation or warranty of the Company hereunder required to be true at
and as of the Closing as a condition to the Purchasers' obligations to
consummate the
<PAGE>
70
transactions contemplated hereby, inaccurate at the Closing;
(J) except as permitted by the Credit Agreement and
consistent with the Company's operating budget existing on the date hereof, the
Company shall not, and shall cause its Subsidiaries not to, agree to expend,
commit or otherwise obligate itself to make any capital expenditures; and
(K) the Company shall not, and shall cause each of its
Subsidiaries not to, (i) agree or commit to do any of the foregoing or (ii)
solicit or encourage any proposals from third parties, or enter into any
negotiations with any third party or parties, to do any of the foregoing actions
described in clauses (B)(iv), (B)(v), (D), (E) and (F).
6.5 Option Shares. The Company hereby grants to each Purchaser
-------------
the right to purchase prior to the Closing at its election the number of shares
of Preferred Stock (the "Option Shares") set forth opposite its name on Schedule
I at the Purchase Price Per Share. Any such election to purchase the Option
Shares may be exercised by the Purchasers by written notice to the Company
setting forth the aggregate number of Option Shares to be purchased and the date
of purchase of such shares (which must be prior to the Closing and no earlier
than 15 business days after the date of such notice (the "Option Closing
Date")). On the Option Closing Date, the Company shall issue and sell to the
Purchasers exercising such option, and such Purchasers shall purchase, the
number of Option Shares for which such option has
<PAGE>
71
been exercised. The Company shall take all actions necessary to effect such sale
(including, without limitation, filing a certificate of designation for the
Option Shares that is reasonably acceptable to the Purchasers). At such closing,
the Company shall deliver to each of the Purchasers exercising such option
certificates representing the number of Option Shares for which such Purchaser
has exercised its option, each registered in the name of such Purchaser or its
nominees, against payment of the Purchase Price Per Share with respect thereto
by wire transfer of immediately available funds to an account or accounts
previously designated by the Company. Upon the purchase of such Option Shares,
the number of Shares to be purchased by each Purchaser hereunder shall be
reduced automatically by an amount equal to the Option Shares purchased by such
Purchaser under this Section 6.5. The option granted under this Section 6.5
shall expire immediately prior to the Closing.
6.6 Hart-Scott-Rodino. To the extent applicable, whether made
-----------------
prior to or after the Closing, the Company and the Purchasers shall make all
filings and furnish all information required with respect to the transactions
contemplated by this Agreement by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and shall use their best efforts to obtain the early termination of
the waiting period thereunder.
6.7 Access to Information. Upon reasonable notice prior
---------------------
to the Closing, the Company shall (and shall cause each of its Subsidiaries to)
afford the
<PAGE>
72
Purchasers and their Representatives reasonable access during normal business
hours to its properties, books, contracts and records and personnel and advisors
(who will be instructed by the Company to cooperate), and the Company shall (and
shall cause each of the Subsidiaries to) furnish promptly to the Purchasers all
information concerning its business, properties and personnel as the Purchasers
or their Representatives may reasonably request, provided that any review will
be conducted in a way that will not interfere unreasonably with the conduct of
the Company's business, and provided, further, that no review pursuant to this
Section 6.7 shall affect or be deemed to modify any representation or warranty
made by the Company.
6.8 Publicity. Except as required by law, regulation or stock
---------
exchange requirements, neither (A) the Company nor any of its Affiliates nor (B)
the Purchasers or any of their respective Affiliates shall, without the consent
of the other, make any public announcement or issue any press release with
respect to the transactions contemplated by this Agreement. In the event that
either (i) the Company or any of its Affiliates or (ii) the Purchasers or any of
their respective Affiliates are required by law, regulation or stock exchange
requirements to make any public announcement or issue any press release, such
party or parties agree to consult with the other party or parties, to the extent
feasible, as to the content of such public announcement or press release.
6.9 Certificates for Shares To Bear Legends.
---------------------------------------
<PAGE>
73
(A) So long as the Shares or Conversion Shares are not sold
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under the Act, the Shares or the Conversion Shares shall bear the
following legend by which each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER."
(B) If (i) any of the Shares or Conversion Shares are sold
pursuant to an effective Registration Statement or Rule 144 promulgated under
the Act, or (ii) the Shares or Conversion Shares may be sold pursuant to Rule
144(k) promulgated under the Act, the Company shall, upon the written request of
the holders of the Shares or Conversion Shares and receipt by the Company of
evidence reasonably satisfactory to it that such requirement has terminated
(including a written opinion of outside counsel with respect to clause (ii)
above), issue certificates for such Shares or Conversion Shares that do not bear
all or part of the legend described in Section 6.9(A).
6.10 Reservation of Shares. The Company shall at all
---------------------
times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of
<PAGE>
74
effecting the conversion of the Preferred Stock, such number of shares of Class
A Common Stock as shall from time to time be sufficient to effect the conversion
of all shares of Preferred Stock from time to time.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.
Notwithstanding any investigation by the Purchasers, the
representations, warranties, covenants and agreements contained herein shall
survive the execution and delivery of this Agreement and the Closing hereunder;
provided that, the representations and warranties of the parties in Section 4
and Section 5 (other than the representations and warranties set forth in
Sections 4.1, 4.2, 4.6, 4.16, 4.17 and 4.20) shall survive only for a period of
three years after the Closing Date.
8. INDEMNIFICATION.
8.1 Indemnification by the Company. In addition to all other
------------------------------
sums due hereunder or provided for in this Agreement, the Company agrees to
indemnify and hold harmless the Purchasers, their partners or stockholders and
their respective Affiliates and the respective officers, directors, agents,
employees, subsidiaries, partners, advisors, representatives and controlling
Persons of each of the foregoing (each, an "indemnified party") to the fullest
extent permitted by law from and against any and all losses, claims, damages,
expenses (including reasonable fees, disbursements and other charges of counsel)
or other liabilities ("Liabilities") resulting
<PAGE>
75
from any legal, administrative or other actions brought by any Person or entity
(including actions brought by the Company or any equity or debtholders of the
Company or derivative actions brought by any Person claiming through the Company
or in the Company's name), proceedings or investigations (whether formal or
informal), or written threats thereof, based upon, relating to or arising out of
this Agreement, the transactions contemplated hereby, or any indemnified party's
role therein or in the transactions contemplated hereby (including Liabilities
to which an indemnified party may become subject under the Act, the Exchange Act
or other federal or state statutory law or regulation, at common law, or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based on any untrue statement or alleged untrue statement of a material
fact contained in the Proxy Statement, any preliminary prospectus, the Rights
Offering Registration Statement or the Rights Offering Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading, provided, however, that the Company will
not be liable to the extent that such Liability is based on an untrue statement
or omission or alleged untrue statement or omission made in reliance on and in
conformity with information furnished in writing to the Company by or on behalf
of the Purchasers expressly for use in such document); provided, however, that
the Company shall not be liable under this Section 8.1 to an
<PAGE>
76
indemnified party to the extent (i) that it is finally judicially determined
that such Liabilities resulted primarily from the willful malfeasance of such
indemnified party or (ii) any Liability arising out of the failure of the
parties to make any filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 prior to the Closing; and provided, further, that if and to the
extent that such indemnification is unenforceable for any reason other than the
immediately preceding proviso, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified Liabilities that shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for Liabilities as set forth above, the Company further
agrees to reimburse each indemnified party for all such expenses (including
reasonable fees, disbursements and other charges of counsel) as they are
incurred by such indemnified party.
8.2 Notification. Each indemnified party under this Section 8
------------
will, promptly after the receipt of notice of the commencement of any action or
other proceeding against such indemnified party in respect of which indemnity
may be sought from the Company under Section 8, notify the Company in writing of
the commencement thereof. The omission of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any liability that
it may have to such indemnified party unless the Company is materially
prejudiced thereby. In case any such action or other proceeding shall be brought
against any
<PAGE>
77
indemnified party and it shall notify the Company of the commencement thereof,
the Company shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that any indemnified party may, at
-------- -------
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the opinion of counsel to such indemnified party, (i) there are or may be
legal defenses available to such indemnified party or to other indemnified
parties that are different from or additional to those available to the Company
or (ii) any conflict or potential conflict exists between the Company and such
indemnified party that would make such separate representation advisable;
provided, however, that in no event shall the Company be required to pay fees
- -------- -------
and expenses under this Article 8 for more than one firm of attorneys
representing the indemnified parties (together, if appropriate, with one firm of
local counsel per jurisdiction) in any one legal action or group of related
legal actions. The Company shall not be liable for any settlement of such action
or proceeding effected without its prior written consent, not to be unreasonably
withheld. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested the
<PAGE>
78
Company to reimburse the indemnified party for fees and expenses of counsel as
contemplated by this Section 8, the Company agrees that it shall be liable for
any settlement of any proceeding effected without the Company's written consent
if (i) such settlement is entered into more than 30 days after receipt by the
Company of the aforesaid request, and (ii) the Company shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement. The Company agrees that the Company will not, without the prior
written consent of the Purchaser, not to be unreasonably withheld, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to any matter subject to indemnification
hereunder unless such settlement, compromise or consent includes an
unconditional release of the Purchasers and each other indemnified party from
all liability arising or that may arise out of such claim, action or proceeding
and the Purchasers and each other indemnified party are not obligated to take or
forego taking any action, including the payment of money, thereunder. The rights
accorded to indemnified parties hereunder shall be in addition to any rights
that any indemnified party may have at common law, under federal and state
securities laws, by separate agreement or otherwise.
8.3 Registration Rights Agreement. Notwithstanding anything to the
-----------------------------
contrary in this Section 8, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
<PAGE>
79
registration statements filed pursuant thereto or sales made thereunder.
9. TERMINATION.
9.1 Termination. Subject to Section 9.2, this Agreement may be
-----------
terminated at any time prior to the Closing:
(A) by the Purchasers if (i) the Board of Directors
determines not to give, withdraws, modifies or changes its approval or
recommendation of the sale of the Shares to the Purchasers or any of the other
matters contemplated by Sections 3.1.2 and 3.1.4, (ii) a Change of Control
occurs or (iii) the Stockholder Meeting is held to consider the transactions
contemplated hereby and the shareholders fail to approve the sale of the Shares
to the Purchasers or any of the other matters contemplated by Sections 3.1.2 and
3.1.4;
(B) by the Purchasers if there has been a material breach of
any representation, warranty, covenant or agreement of the Company contained in
this Agreement, which breach is incurable or has not been cured by the Company
within 30 days after written notice from the Purchasers;
(C) by the Company if there has been a material breach of
any representation, warranty, covenant or agreement of the Purchasers contained
in this Agreement, which breach is incurable or has not been cured by the
Purchasers within 30 days after written notice from the Company;
(D) by the Purchasers if any one or more of the conditions
to the obligation of the Purchasers to close has not been fulfilled as of the
scheduled Closing Date;
<PAGE>
80
(E) by the Company if any one or more of the conditions to
the obligation of the Company to close has not been fulfilled as of the
scheduled Closing Date;
(F) by the Company or the Purchasers, if the Closing shall
not have occurred on or before October 30, 1998; provided, however, that the
right to terminate this Agreement under this Section 9.1(F) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date;
(G) by the Company or the Purchasers, if any judgment,
injunction, order or decree enjoining the Company or the Purchasers from
consummating the transactions contemplated by this Agreement is entered and such
judgment, injunction, order or decree becomes final and nonappealable; provided,
however, that the party seeking to terminate this Agreement must use all
reasonable efforts to remove such judgment, injunction, order or decree; and
(H) by mutual written consent of the Company and the
Purchasers.
9.2 Expenses. Except as otherwise provided in the Registration
--------
Rights Agreement, each party hereto shall bear its own expenses arising out of
the drafting, negotiation and execution of this Agreement, the Shareholders
Agreement, the Rights Offering Registration Statement and the Registration
Rights Agreement and the transactions contemplated herein and therein.
9.3 Effect of Termination. If this Agreement is terminated
----------------------
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on
<PAGE>
81
the part of any party hereto, except (A) to the extent such termination results
from the breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement and (B) that the
representation contained in Section 4.24 and the covenants and agreements
contained in Sections 6.8, 8.1, 8.2, 9.2, 9.3 and 10 (except Section 10.2) shall
survive the termination hereof.
10. MISCELLANEOUS.
10.1 Performance; Waiver. The provisions of this Agreement may
-------------------
be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given by written instrument executed and
delivered by the Company and the Purchasers. The failure at any time to require
performance of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter (unless performance thereof has
been waived in accordance with the terms hereof for all purposes and at all
times by the parties to whom the benefit of such performance is to be rendered).
The waiver by any party to this Agreement of a breach of any provision hereof
shall not be taken or held to be a waiver of any succeeding breach of such
provision of any other provision or as a waiver of the provision itself.
10.2 Extension or Modification of Rights Offering. Without the
--------------------------------------------
prior written consent of the Purchasers, the Company will not permit the Rights
Offering Expiration Date to be extended or any of the other terms or conditions
of the Rights, the Preferred Stock or the offering of the Preferred Stock for
subscription as described in the Rights Offering Prospectus to be amended,
modified or terminated in
<PAGE>
82
any material respect, except that, without such consent, the Company may waive
irregularities in the manner of exercise of the Rights to the extent that such
waiver does not materially adversely affect the interests of the Purchasers. At
the request of the Purchasers, the Company will extend the Rights Offering
Expiration Date, but in no event shall any such extension (i) be made other than
with the consent or at the request of the Purchasers or (ii) postpone the Rights
Offering Expiration Date to a date more than 30 days later than the date set
forth in the Rights Offering Prospectus.
10.3 Successors and Assigns. All covenants and agreements
-----------------------
contained in this Agreement by or on behalf of the parties hereto shall bind,
and inure the benefit of, the respective successors and assigns of the parties
hereto; provided, however, that the rights and obligations of either party
hereto may not be assigned without the prior written consent of the other
parties, except that prior to the Closing, the Purchasers may assign, with the
prior written consent of the Company, not to be unreasonably withheld, all or a
portion of their rights and obligations hereunder to an Affiliate of any of the
Purchasers or to any Person for whom Carl Marks Management Company, L.P. acts as
investment advisor, in which event the Purchasers will be relieved of their
obligations hereunder to the extent so assumed by such Affiliate or Affiliates
and such Affiliate or Affiliates shall be considered to be included within the
term "Purchaser" for all purposes of this Agreement.
10.4 Notices. All notices or other communications given or
-------
made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt
<PAGE>
83
requested, postage prepaid, or sent by a reputable overnight courier to, the
following addresses (and shall be deemed effective at the time of receipt
thereof).
If to the Company:
Seneca Foods Corporation
1162 Pittsford-Victor Road
Pittsford, New York 14534
Telecopy: (716) 385-4249
Attention: Kraig H. Kayser, President and
Chief Executive Officer
with a copy to:
Jaeckle Fleischmann & Mugel, LLP
Fleet Bank Building
Twelve Fountain Plaza
Buffalo, New York 14202-2292
Telecopy: (716) 856-0432
Attention: William I. Schapiro, Esq.
If to the Purchasers:
Carl Marks Strategic Investments, L.P.
Carl Marks Strategic Investments II, L.P.
Uranus Fund, Ltd.
c/o Carl Marks Management Company, L.P.
135 East 57th Street
New York, New York 10022
Telecopy: (212) 980-2631
Attention: Andrew M. Boas
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: John C. Kennedy, Esq.
<PAGE>
84
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
10.5 Governing Law. THIS AGREEMENT HAS BEEN NEGOTIATED,
--------------
EXECUTED AND DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
10.6 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of the Company and the Purchasers direct
that such court interpret and apply the remainder of this Agreement in the
manner that it determines most closely effectuates their intent in entering into
this Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
10.7 Headings; Interpretation. The index and section headings
-------------------------
herein are for convenience only and shall not affect the construction hereof.
References to sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean this Agreement.
10.8 Entire Agreement. This Agreement embodies the entire
-----------------
agreement between the parties relating to the subject matter hereof and
supersedes any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchasers, or
between or among any agents,
<PAGE>
85
representatives, parents, Subsidiaries, Affiliates, predecessors in interest or
successors in interest, with respect to the subject matter hereof.
10.9 No Third Party Rights. Except for the indemnified
------------------------
parties, directors and officers described in Article 8 and the rights of such
Persons expressly created under Article 8, this Agreement is intended solely for
the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any Person (including, without
limitation, any shareholder or debtholder of the Company) other than the parties
hereto.
10.10 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
<PAGE>
86
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement.
SENECA FOODS CORPORATION
By: /s/Kraig H. Kayser
--------------------------------
Name: Kraig H. Kayser
Title: President and Chief Executive Officer
CARL MARKS STRATEGIC INVESTMENTS, L.P.
By: Carl Marks Management Company, L.P.,
its general partner
By:/s/Andrew M. Boas
---------------------------------
Name: Andrew M. Boas
Title: General Partner
CARL MARKS STRATEGIC INVESTMENTS II, L.P.
By: Carl Marks Management Company, L.P.,
its general partner
By: /s/Andrew M. Boas
-------------------------
Name: Andrew M. Boas
Title: General Partner
<PAGE>
87
URANUS FUND, LTD.
By: Carl Marks Offshore Management, Inc.,
its Investment Manager
By: /s/Andrew M. Boas
------------------------
Name: Andrew M. Boas
Title: President
<PAGE>
<PAGE>
Appendix B
SHAREHOLDERS AGREEMENT
BY AND AMONG
SENECA FOODS CORPORATION
AND
THE PARTIES LISTED HEREIN
Dated as of June 22, 1998
Doc#:DS4:313595.8
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINED TERMS.........................................2
ARTICLE II LIMITATIONS ON TRANSFER...............................7
2.1 General Restrictions on Transfer......................7
2.2 Certain Permitted Transfers...........................8
2.3 Tag-Along Right.......................................9
ARTICLE III RIGHT TO PARTICIPATE IN CERTAIN ISSUANCES OF
CAPITAL STOCK .....................................12
3.1 Right to Participate in New Issuance.................12
3.2 Exercise of Right....................................12
3.3 Closing..............................................13
ARTICLE IV AGREEMENT OF THE SHAREHOLDERS TO ACT IN
FAVOR OF THE STOCK PURCHASE AGREEMENT
TRANSACTIONS.........................................13
4.1 Vote in Favor of the Stock Purchase Agreement
Transactions........................................13
4.2 Renounce and Cease from Transferring the
Rights.............................................14
ARTICLE V CORPORATE GOVERNANCE AND CERTAIN OTHER
ACTIONS..............................................14
5.1 General..............................................14
5.2 Election of Directors................................14
5.3 Removal and Replacement..............................14
ARTICLE VI AFTER-ACQUIRED SECURITIES............................15
ARTICLE VII STOCK CERTIFICATE RESTRICTIONS.......................16
7.1 Beneficial Ownership.................................16
7.2 Liquidated Damages...................................16
ARTICLE VIII MISCELLANEOUS........................................16
8.1 Notices..............................................16
8.2 Authority and Effect of Agreement....................19
8.3 Action By Written Consent............................20
8.4 Amendment and Waiver.................................20
8.5 Specific Performance.................................21
8.6 Headings.............................................21
8.7 Severability.........................................21
8.8 Entire Agreement.....................................21
8.9 Term of Agreement....................................21
8.10 GOVERNING LAW........................................22
8.11 Further Assurances ..................................22
8.12 Successors and Assigns; Power of Certain
Representatives....................................22
8.13 Counterparts.........................................22
i
<PAGE>
SCHEDULES
SCHEDULE 8.2 Ownership of Shares
ii
<PAGE>
SHAREHOLDERS AGREEMENT
----------------------
SHAREHOLDERS AGREEMENT, dated as of June 22, 1998 (this
"Agreement") by and among the persons listed on the signature pages hereto as
---------
Investor Shareholders (the "Investor Shareholders"), the persons listed on the
----------------------
signature pages hereto as Existing Marks Shareholders (the "Existing Marks
---------------
Shareholders"), the persons listed on the signature pages hereto as Existing
- ------------
Shareholders (the "Existing Shareholders") and Seneca Foods Corporation, a New
----------------------
York corporation (the "Company"). The Investor Shareholders, the Existing Marks
-------
Shareholders and the Existing Shareholders are hereinafter referred to,
collectively, as the "Shareholders."
------------
WHEREAS, the Company proposes, as soon as practicable after
the Rights Offering Registration Statement (as defined herein) becomes
effective, to distribute to holders of its Class A common stock, par value $.25
per share, of the Company (the "Class A Common Stock") and Class B common stock,
--------------------
par value $.25 per share, of the Company (the "Class B Common Stock") rights
---------------------
(the "Rights") to subscribe for and purchase up to an aggregate of 3,000,000
------
shares of the Company's Convertible Participating Preferred Stock, par value
$.025 per share (the "Preferred Stock"), at a subscription price (the
-----------------
"Subscription Price") of $12.00 per share (the "Rights Offering");
------------------ ---------------
WHEREAS, the Investor Shareholders and the Company are parties
to a Stock Purchase Agreement, dated as of June 22, 1998 (as amended,
supplemented or otherwise modified, the "Stock Purchase Agreement"), which
--------------------------
provides for: (i) the sale by the Company to the Investor Shareholders of an
aggregate of 1,166,667 shares of the Preferred Stock at an aggregate price of
$14,000,004 ($12.00 per share of Preferred Stock) and (ii) the purchase by the
Investor Shareholders upon the expiration of the Rights Offering of up to
2,500,000 shares of Preferred Stock, at the Subscription Price, to the extent
provided for in the Stock Purchase Agreement; and
WHEREAS, a condition to the execution and delivery of the
Stock Purchase Agreement was the execution and delivery by the Shareholders and
the Company of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
-------------
As used in this Agreement, the following terms shall have the meanings
<PAGE>
set forth below:
"Adjusted Tangible Assets" means all assets of the Company and
------------------------
its subsidiaries on a consolidated basis except (i) patents, copyrights,
trademarks, trade names, franchises, goodwill, and other similar intangibles,
(ii) unamortized debt discount and expense, (iii) accounts, notes and other
receivables due from Affiliates, and (iv) write-ups in the book value of any
fixed asset resulting from a revaluation thereof effective after the Closing.
"Adjusted Tangible Net Worth" means (i) the net book value
------------------------------
(after deducting related depreciation, obsolescence, amortization, valuation,
and other proper reserves, which reserves will be determined in accordance with
generally accepted accounting principles) at which the Adjusted Tangible Assets
are shown on the latest available consolidated balance sheet of the Company on
such date minus (ii) the amount at which the liabilities of the Company and its
subsidiaries are shown on such consolidated balance sheet (including as
liabilities all reserves for contingencies and other potential liabilities as
shown on such consolidated balance sheet).
"Affiliate" of any Person means any other Person directly or
---------
indirectly controlling, controlled by or under common control with such Person.
The term "control" means, with respect to any Person, the power to direct or
-------
cause the direction of the management or policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
----------- ----------
correlative to the foregoing.
"Agreement" has the meaning set forth in the preamble to this
---------
Agreement.
"Board of Directors" means the Board of Directors of the
--------------------
Company.
"Business Day" means any day other than a Saturday, Sunday or
------------
day on which the Company's principal offices are not open generally for
business.
"Charter Documents" means the Certificate of Incorporation and
-----------------
the Bylaws of the Company, as amended through the date hereof.
"Class A Common Stock" has the meaning set forth in the
-----------------------
preamble to this Agreement.
2
<PAGE>
"Class B Common Stock" has the meaning set forth in the
-----------------------
preamble to this Agreement.
"Closing" means the closing of the sale and purchase of the
-------
shares of Preferred Stock (including shares purchased upon the expiration of
Rights) as contemplated by the Stock Purchase Agreement.
"Common Stock" means and includes: (i) the Class A Common
-------------
Stock, (ii) the Class B Common Stock and (iii) each other class of capital stock
of the Company that does not have a preference over any other class of capital
stock of the Company as to dividends or upon liquidation, dissolution or winding
up of the Company and, in each case, shall include any other class of capital
stock of the Company into which such stock is reclassified or reconstituted.
"Common Stock Weighted Average Sale Price" means, when applied
----------------------------------------
to a Proposed Sale, the price obtained by dividing (i) the aggregate
consideration to be received from the sale of any shares of Common Stock and any
Voting Securities convertible into or exercisable or exchangeable for shares of
Common Stock in the Proposed Sale by (ii) the sum of (a) the number of shares of
Common Stock to be sold in such Proposed Sale and (b) the number of shares of
Common Stock to be received upon conversion, exercise or exchange of any Voting
Securities described in clause (i) in accordance with the terms of such Voting
Securities.
"Company" has the meaning set forth in the preamble to this
-------
Agreement.
"Company Special Meeting" means an annual or special meeting
-------------------------
of the shareholders of the Company, called for the purpose of voting on (i) the
approval of the purchase of the shares of Preferred Stock by the Investor
Shareholders pursuant to the terms of the Stock Purchase Agreement, (ii) the
approval of the Certificate of Amendment (as defined in the Stock Purchase
Agreement) and (iii) transacting such other business as may properly come before
the meeting or any adjournment thereof.
"Existing Marks Shareholders" has the meaning set forth in the
---------------------------
preamble to this Agreement.
"Existing Shareholders" has the meaning set forth in the
----------------------
preamble to this Agreement.
3
<PAGE>
"Individual Permitted Transferee" means, with respect to an
---------------------------------
Existing Shareholder who is an individual or which is a trustee, a Person to
whom any of the following Transfers is made:
(i) Transfer upon the death of such Existing
Shareholder or the death of the beneficiary of such trust to such
Existing Shareholder's or beneficiary's spouse or descendants
(including adopted children and stepchildren, if any), parents,
siblings or descendants of siblings (including adopted children and
stepchildren, if any), or to such Existing Shareholder's or
beneficiary's executor, administrator or testamentary or inter vivos
-----------
trustee;
(ii) a Transfer to such Existing Shareholder's
spouse or descendants (including adopted children and stepchildren, if
any), or a trust, the sole income beneficiaries of which, or a
corporation, partnership or limited liability company, the sole
stockholders, limited and/or general partners or members, as the
case may be, of which, include only such Existing Shareholder, such
Existing Shareholder's spouse and/or such Existing Shareholder's
descendants (including adopted children and stepchildren, if any); or
(iii) a Transfer to the legal guardian of such
Existing Shareholder, if such Existing Shareholder shall be or become
disabled;
provided that, in the event of death or disability of any Person to whom a
- --------
Transfer is to be made pursuant to clause (i), (ii) or (iii) above, the term
"Individual Permitted Transferee" shall include:
-------------------------------
(x) in the case of such Person's death, such Person's
spouse or descendants (including adopted children and stepchildren, if
any), or such Person's executor, administrator or testamentary or inter
-----
vivos trustee; and
-----
(y) in the case of such Person's disability, such
Person's legal guardian.
"Investor Designees" is defined in Section 5.2.
------------------
"Investor Shareholder" has the meaning set forth in the
---------------------
preamble to this Agreement.
4
<PAGE>
"Line of Business" means food processing, packaging,
-------------------
distribution and canning of fruits and vegetables and other business operations
complementary or incidental thereto.
"Liquidated Damages Breach" is defined in Section 7.2.
-------------------------
"Market Price" means, per share of Class A Common Stock, on
-------------
any date specified herein: (a) the closing price per share of the Class A Common
Stock on such date published in The Wall Street Journal or, if no such closing
price on such date is published in The Wall Street Journal, the average of the
closing bid and asked prices on such date, as officially reported on the
principal national securities exchange on which the Class A Common Stock is then
listed or admitted to trading; or (b) if the Class A Common Stock is not then
listed or admitted to trading on any national securities exchange but is
designated as a national market system security by the NASD, the last trading
price of the Class A Common Stock on such date; or (c) if there shall have been
no trading on such date or if the Class A Common Stock is not so designated, the
average of the reported closing bid and asked prices of the Class A Common
Stock, on such date as shown by the Nasdaq National Market or other
over-the-counter market and reported by any member firm of the New York Stock
Exchange selected by the Company; or (d) if none of (a), (b) or (c) is
applicable, a market price per share determined at the Company's expense by a
nationally recognized appraiser chosen by the Investor Shareholders and approved
by the Company, which approval shall not be unreasonably withheld. If no such
appraiser is so chosen more than 20 Business Days after notice of the necessity
of such calculation shall have been delivered by the Company to the Investor
Shareholders, then the appraiser shall be chosen by the Company.
"NASD" means the National Association of Securities Dealers, Inc.
----
"New Issuance" is defined in Section 3.1.
------------
"Participating Tag-Along Shareholder" is defined in Section
-------------------------------------
2.3(b).
"Participating Tag-Along Shares" is defined in Section 2.3(b).
------------------------------
"Permitted Transferee" means, with respect to any Existing
---------------------
Shareholder, a Person to whom or to which such Existing Shareholder is permitted
to Transfer Shares pursuant to Section 2.2(a)(i) or (ii).
5
<PAGE>
"Person" means any individual, firm, corporation, partnership,
------
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.
"Preferred Stock" has the meaning set forth in the preamble to
---------------
this Agreement.
"Proposed Sale" is defined in Section 2.3(a).
-------------
"Proposed Sale Price" is defined in Section 2.3(a).
-------------------
"Proposed Sale Shares" is defined in Section 2.3(a).
--------------------
"Public Offering" means any offer for sale of Shares pursuant
----------------
to an effective Registration Statement filed under the Securities Act in which
any one Person or 13D Group does not acquire more than 5% of any class of Voting
Securities.
"Registration Statement" means a registration statement filed
-----------------------
pursuant to the Securities Act.
"Rights" has the meaning set forth in the preamble to this
------
Agreement.
"Rights Offering" has the meaning set forth in the preamble to
---------------
this Agreement.
"Rights Offering Registration Statement" means the
----------------------------------------------
Registration Statement on Form S-1 under the Securities Act or such other
appropriate form under the Securities Act, pursuant to which the Rights, the
underlying shares of Preferred Stock and shares of Class A Common Stock will be
registered pursuant to the Securities Act.
"Rule 144" means Rule 144 under the Securities Act, or any
--------
successor rule.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations of the SEC thereunder.
6
<PAGE>
"Selling Shareholder" is defined in Section 2.3(a).
-------------------
"Shareholders" has the meaning set forth in the preamble to
------------
this Agreement.
"Shares" means, with respect to any Shareholder, all
------
outstanding shares of Common Stock, Preferred Stock and other Voting Securities
of the Company, in each case, owned by such Shareholder, whether now owned or
hereafter acquired.
"Stock Purchase Agreement" has the meaning set forth in the
--------------------------
preamble to this Agreement.
"Subscription Price" has the meaning set forth in the preamble
------------------
to this Agreement.
"Tag-Along Notice" is defined in Section 2.3(a).
----------------
"Tag-Along Notice Period" is defined in Section 2.3(b).
-----------------------
"Tag-Along Price" is defined in Section 2.3(a).
---------------
"Tag-Along Shareholders" is defined in Section 2.3(a).
----------------------
"Tag-Along Shares" is defined in Section 2.3(b).
----------------
"Third Party Purchaser" is defined in Section 2.3(a).
---------------------
"13D Group" means any partnership, limited partnership,
----------
syndicate or other "group" (as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended).
"Transfer" is defined in Section 2.1.
--------
"Transfer Restriction Period" means the period beginning on
-----------------------------
the date hereof and ending on (and including) the date which is the second
anniversary of the Closing.
"Voting Securities" means the Common Stock, any other
-----------------
securities of
7
<PAGE>
the Company entitled to vote generally in the election of directors (including,
without limitation, the Six Percent (6%) Voting Cumulative Preferred Stock, par
value $0.25 per share, 10% Cumulative Convertible Voting Preferred Stock-Series
A, par value $0.025 per share, and 10% Cumulative Convertible Voting Preferred
Stock-Series B, par value $0.025 per share), or any securities convertible into
or exercisable or exchangeable for such securities (including the Preferred
Stock).
"Voting Securities Weighted Average Sale Price" means, when
-----------------------------------------------
applied to a Proposed Sale, the price obtained by dividing (a) the aggregate
consideration to be received from the sale of any Voting Securities in the
Proposed Sale by (b) the sum of (i) the number of shares of Common Stock to be
sold in the Proposed Sale, (ii) the number of shares of Common Stock to be
received upon conversion, exercise or exchange of any Voting Securities to be
sold in the Proposed Sale in accordance with the terms of such Voting Securities
and (iii) the number of shares of Voting Securities that are not convertible
into, exercisable for or exchangeable for shares of Common Stock to be sold in
the Proposed Sale.
ARTICLE II
LIMITATIONS ON TRANSFER
-----------------------
2.1 General Restrictions on Transfer. (a) Each Existing
-----------------------------------
Shareholder agrees that such Existing Shareholder shall not, either directly or
indirectly, offer, sell, transfer, assign, mortgage, hypothecate, pledge, create
a security interest in or lien upon, encumber, donate, contribute, place in
trust, or otherwise voluntarily or involuntarily dispose of (any of the
foregoing actions, to "Transfer" and, any offer, sale, transfer, assignment,
mortgage, hypothecation, pledge, security interest or lien, encumbrance,
donation, contribution, placing in trust or other disposition, a "Transfer") any
Shares, or any interest therein, except in a transaction that is specifically
permitted by this Agreement.
(b) Any attempt to Transfer any Shares, or any interest
therein, which is not in compliance with this Agreement shall be null and void
ab initio. The Company shall not permit, and shall cause any transfer agent not
- ---------
to permit, any Transfer of Shares in violation of this Agreement. Neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted Transfer.
8
<PAGE>
(c) Notwithstanding any other provision of this Agreement,
no Transfer may be made pursuant to this Agreement unless:
(i) such Transfer complies in all respects with
the applicable provisions of this Agreement and applicable federal and
state securities laws, including, without limitation, the Securities
Act;
(ii) except in the case of a Transfer pursuant to
Section 2.2(a)(iv), 2.2(a)(v) or 2.2(c), the Transferee agrees in
writing with the Company and the other Shareholders to be bound by the
terms and conditions of this Agreement with respect to the Shares
Transferred to such Transferee to the same extent as the Existing
Shareholder who originally held such Shares is or was bound hereby
(whereupon such Transferee shall be entitled to the same rights as such
Existing Shareholder who originally held such Shares had with respect
to such Shares and shall be deemed to be an Existing Shareholder for
all purposes hereunder with respect to such Shares).
2.2 Certain Permitted Transfers. (a) Subject to Sections 2.1(c) and
---------------------------
2.2(b), after the Closing each Existing Shareholder may Transfer Shares:
(i) if such Existing Shareholder is a trust or
individual, to an Individual Permitted Transferee;
(ii) with the prior written consent of each of the
Investor Shareholders;
(iii) after the Transfer Restriction Period, to a
Third Party Purchaser in accordance with Section 2.3;
(iv) after the Transfer Restriction Period, in
an arm's length transaction pursuant to a Public Offering or Rule 144;
provided that the aggregate gross proceeds from all Transfers under
this clause (iv) shall not exceed the amounts described in clauses
(x) and (y):
(x) as to each Existing Shareholder, the amount of
proceeds realized from sales of securities from time to time pursuant
to Rule 144 and subject to the limitation as to amount of securities
sold specified in paragraph (e) of Rule 144, as in effect on the date
hereof, and
(y) the aggregate gross proceeds from all Public
Offerings shall not exceed an amount calculated on the date of such
Public Offering equal to the product of $2,000,000 and an amount equal
to (i) the
9
<PAGE>
then Market Price of a share of Class A Common Stock divided by (ii)
the Market Price of a share of Class A Common Stock on the date hereof;
and
(v) to pay estate taxes if (1) any Existing
Shareholder, (2) any Individual Permitted Transferee which becomes a
shareholder of the Company, (3) any beneficiary of a trust which is an
Existing Shareholder, or (4) any Individual Permitted Transferee which
is the beneficiary of a trust or estate which becomes a shareholder of
the Company dies and estate taxes become due (provided that the
aggregate gross proceeds from all Transfers under this clause (v)
relating to the death of one individual shall not exceed an amount
calculated on the date of Transfer equal to the product of (a)
$5,000,000 and (b) an amount equal to (x) the then Market Price of a
share of Class A Common Stock divided by (y) the Market Price of a
share of Class A Common Stock on the date hereof).
(b) In the event that any Existing Shareholder wishes to
Transfer Shares in a transaction permitted by Section 2.2(a) (other than in
clause (iii)), such Existing Shareholder shall give written notice to the
Company and the other Shareholders of its intention to make such Transfer not
less than 10 days prior to effecting such Transfer, which notice shall state the
proposed timing of the Transfer, the name and address of each Permitted
Transferee to whom such Transfer is proposed (or in the case of Section
2.2(a)(iv), the aggregate gross proceeds from all prior Transfers pursuant to
Section 2.2(a)(iv) and the aggregate gross proceeds expected to be received from
the proposed Transfer) and the number and type of Shares proposed to be
Transferred.
(c) Notwithstanding anything contained in this Agreement,
(i) the Seneca Foods Corporation Employees' Pension Benefit Plan may Transfer
any Shares and (ii) the Seneca Foods Corporation Employees' Savings Plan may
Transfer any Shares in the ordinary course of business consistent with past
practice.
2.3 Tag-Along Right. (a) After the Transfer Restriction
----------------
Period, if any Existing Shareholder or Shareholders (each a "Selling Shareholder
and, collectively, the "Selling Shareholders") shall desire to sell any Shares
to any Person other than a Permitted Transferee (a "Third Party Purchaser") of
such Selling Shareholders (a "Proposed Sale"), then, such Selling Shareholders
shall offer the Investor Shareholders and the Existing Marks Shareholders (the
"Tag-Along Shareholders") the right to participate in the Proposed Sale with
-----------------------
respect to a number of Shares determined as provided in this Section 2.3 by
sending written notice (the
10
<PAGE>
"Tag-Along Notice") to the Company and the Tag-Along Shareholders, which notice
----------------
shall (i) state the number and type of Shares proposed to be sold in such
Proposed Sale by such Selling Shareholders (the "Proposed Sale Shares"), (ii)
--------------------
state the proposed purchase price per Proposed Sale Share for each type of
Proposed Sale Share (each, "a Proposed Sale Price") and all other material terms
---------------------
and conditions of such Proposed Sale and (iii) if applicable, be accompanied by
any written offer from the Third Party Purchaser. The "Tag Along Price" shall
---------------
mean the higher of the Common Stock Weighted Average Sale Price and the Voting
Securities Weighted Average Sale Price.
(b) Each Tag-Along Shareholder shall have the right to
require the Selling Shareholder to cause the Third Party Purchaser to purchase
from such Tag-Along Shareholder at the Tag-Along Price (and otherwise upon the
same terms and conditions as those set forth in the Tag-Along Notice) a number
of Shares that are Common Stock and/or Preferred Stock owned by such Tag-Along
Shareholder determined in accordance with this Section 2.3(b) (such Tag-Along
Shareholder's "Tag-Along Shares"); provided that if any Tag-Along Shares are
-----------------
Preferred Stock, the Tag-Along Price for such Shares shall be appropriately
adjusted by multiplying the Tag-Along Price by the number of shares of Common
Stock receivable upon conversion of one share of Preferred Stock. Each Tag-Along
Shareholder may sell a number of shares of Preferred Stock and/or Common Stock
which represents on a fully diluted basis a number of shares of Common Stock not
in excess of the product of (i) the total number of Proposed Sale Shares times
(ii) a fraction, the numerator of which is the total number of Shares of Common
Stock owned by such Tag-Along Shareholder (assuming the conversion of all shares
of Preferred Stock owned by such Tag-Along Shareholder into shares of Class A
Common Stock) and the denominator of which is the total number of Shares of
Common Stock owned by the Selling Shareholders and the Tag-Along Shareholders
(assuming the conversion of all shares of Preferred Stock owned by all Tag-Along
Shareholders into Shares of Class A Common Stock). Such right of each Tag-Along
Shareholder shall be exercisable by written notice to the Selling Shareholders
with copies to the Company given within 10 Business Days after receipt of the
Tag-Along Notice (the "Tag-Along Notice Period"), which notice shall state the
------------------------
number and type of Tag-Along Shares that such Tag-Along Shareholder elects to
sell in the Proposed Sale, if less than the maximum number of such Tag-Along
Shareholder's Tag-Along Shares that it is permitted to sell under this Section
2.3(b); provided that, if such notice shall not state a number of Tag-Along
--------
Shares, then such Tag-Along Shareholder will be deemed to have elected to sell
the maximum number of such Tag-Along Shareholder's Tag-Along Shares. Failure by
a Tag-Along Shareholder to
11
<PAGE>
respond within the Tag-Along Notice Period shall be regarded as a rejection of
the offer made pursuant to the Tag-Along Notice. Each Tag-Along Shareholder that
elects to sell any or all of such Tag-Along Shareholder's Tag-Along Shares is
referred to in this Section 2.3 as a "Participating Tag-Along Shareholder" and
-------------------------------------
the number of Tag-Along Shares elected, or deemed to be elected, by such
Tag-Along Shareholder to be sold as provided above is referred to in this
Section 2.3 as such Tag-Along Shareholder's "Participating Tag-Along Shares."
-------------------------------
The number of Shares to be sold by the Selling Shareholders in the Proposed Sale
shall be reduced by the aggregate number of Participating Tag-Along Shares to be
sold pursuant to this Section 2.3 (assuming the conversion of any such
Participating Tag-Along Shares that are Preferred Stock into shares of Class A
Common Stock) by all Participating Tag-Along Shareholders.
(c) At the request of the Selling Shareholders made not less
than two Business Days prior to the proposed Transfer, a Participating Tag-Along
Shareholder shall deliver to the Selling Shareholders certificates representing
such Participating Tag-Along Shareholder's Participating Tag-Along Shares, duly
endorsed, in proper form for Transfer, together with a limited power-of-attorney
authorizing the Selling Shareholders to transfer such Participating Tag-Along
Shares to the Tag-Along Purchaser and to execute all other documents required to
be executed in connection with such transaction.
(d) If no Transfer of the Tag-Along Shares in accordance
with the provisions of this Section 2.3 shall have been completed within 100
days of the date of the Tag-Along Notice, then the Selling Shareholders shall
promptly return to the Participating Tag-Along Shareholder, in proper form, all
certificates representing such Participating Tag-Along Shareholder's
Participating Tag-Along Shares and the limited power-of-attorney previously
delivered by such Participating Tag-Along Shareholder to the Selling
Shareholders.
(e) The closing of the sale of the Participating Tag-Along
Shares by the Participating Tag-Along Shareholders shall be held at the same
place and time as the closing of the sale by the Selling Shareholders in the
Proposed Sale. Promptly after the consummation of the Transfer of the
Participating Tag-Along Shares pursuant to this Section 2.3, each Participating
Tag-Along Shareholder shall receive (i) the consideration with respect to the
Participating Tag-Along Shares so Transferred and (ii) such other evidence of
the completion of such Transfer and the terms and conditions (if any) thereof as
may reasonably be requested by such Participating Tag-Along Shareholder.
12
<PAGE>
(f) The provisions of this Section 2.3 shall remain in effect,
notwithstanding any return to any Participating Tag-Along Shareholder of
Participating Tag-Along Shares as provided in Section 2.3(d).
(g) Notwithstanding anything to the contrary in this
Agreement, the provisions of this Section 2.3 shall not be applicable to any
Transfer proposed to be made by a Selling Shareholder pursuant to Sections
2.2(a)(i), 2.2(a)(ii), 2.2(a)(iv), or 2.2(a)(v).
ARTICLE III
RIGHT TO PARTICIPATE IN CERTAIN
ISSUANCES OF CAPITAL STOCK
-------------------------------
3.1 Right to Participate in New Issuance. If the Company determines to
---------------------------------------
issue any Voting Securities (other than capital stock to be issued (i) in
connection with an employee stock option plan or other bona fide employment
compensation arrangement that is approved by the Company's Board of Directors,
(ii) pursuant to a stock split or stock dividend, (iii) pursuant to the exercise
of any option, warrant or convertible security theretofore issued, (iv) as
consideration in connection with a bona fide acquisition by the Company or any
of its subsidiaries, or (v) pursuant to the Rights Offering (each such issuance
not excluded by the immediately preceding parenthetical being herein referred to
as a "New Issuance")), then the Company shall notify each Investor Shareholder
and each Existing Marks Shareholder of the proposed New Issuance. Such notice
shall specify the number and class of securities to be issued, the rights, terms
and privileges thereof and the estimated price at which such securities will be
issued.
3.2 Exercise of Right. By written notice to the Company given within
------------------
15 days of being notified of such New Issuance, each Investor Shareholder and
each Existing Marks Shareholder shall be entitled to purchase that percentage of
the New Issuance determined by dividing (a) the total number of outstanding
shares of Class A Common Stock owned by such Investor Shareholder or Existing
Marks Shareholder (assuming the conversion of all shares of the Preferred Stock
owned by such Investor Shareholder or Existing Marks Shareholder into Class A
Common Stock) by (b) the total number of outstanding shares of Class A Common
Stock (assuming the conversion of all shares of the Preferred Stock into Class A
Common Stock). If any such Investor Shareholder or Existing Marks Shareholder
does not fully subscribe for the number or amount of Voting Securities that it
is entitled to
13
<PAGE>
purchase pursuant to this Article III, the Company shall notify the Investor
Shareholders of the same and each Investor Shareholder and Existing Marks
Shareholder participating in such purchase to the full extent provided for in
the preceding sentence shall have the right to purchase that percentage of the
New Issuance not so subscribed for, based on a fraction, the numerator of which
is the total number of shares of Class A Common Stock then owned by such fully
participating Investor Shareholder or Existing Marks Shareholder (assuming the
conversion of all shares of the Preferred Stock owned by such Investor
Shareholder or Existing Marks Shareholder into Class A Common Stock) and the
denominator of which is the total number of shares of Class A Common Stock then
owned by all fully participating Investor Shareholders and Existing Marks
Shareholders who elect to purchase such unsubscribed securities (assuming the
conversion of all shares of the Preferred Stock owned by all such Investor
Shareholders and Existing Marks Shareholders into Class A Common Stock). Such
right shall be exercisable within 15 days following the receipt of the notice
delivered pursuant to the previous sentence. To the extent the Investor
Shareholders and Existing Marks Shareholders do not elect to purchase all of the
securities proposed to be offered and sold in the New Issuance, the Company may
issue those securities not so subscribed for, provided that such sales are
--------
consummated within 120 days after the rights of the Investor Shareholders and
the Existing Marks Shareholders hereunder have expired or been waived.
3.3 Closing. The closing of the New Issuance shall be held at such time as
-------
the Company shall designate in writing to the Investor Shareholders and the
Existing Marks Shareholders that elect to purchase securities in the New
Issuance pursuant to this Article III not fewer than five Business Days prior to
the date of such closing, at the Company's principal offices, or at another
place designated by the Company in writing to such Investor Shareholders in such
notice.
14
<PAGE>
ARTICLE IV
AGREEMENT OF THE SHAREHOLDERS
TO ACT IN FAVOR OF THE STOCK
PURCHASE AGREEMENT TRANSACTIONS
-------------------------------
4.1 Vote in Favor of the Stock Purchase Agreement Transactions.
------------------------------------------------------------------
The Existing Shareholders hereby irrevocably and unconditionally agree to vote,
or to cause to be voted, all of their Shares at the Company Special Meeting and
at any other annual or special meeting of shareholders of the Company where the
following matters arise: (a) in favor of the approval and adoption of the Stock
Purchase Agreement and the transactions contemplated by the Stock Purchase
Agreement, this Agreement and the Registration Rights Agreement (as defined in
the Stock Purchase Agreement) (including, without limitation, the approval of
the purchase of shares of Preferred Stock by the Investor Stockholders), (b) the
approval of the Certificate of Amendment and (c) against approval of any
proposal made in opposition to the matters set forth in clause (a) (which may
include (i) any merger, consolidation, sale of assets, business combination,
share exchange, reorganization or recapitalization of the Company or any of its
subsidiaries, with or involving any party, (ii) any liquidation or winding up of
the Company, (iii) any extraordinary dividend by the Company, (iv) any change in
the capital structure of the Company (other than pursuant to the Stock Purchase
Agreement and the Certificate of Amendment) and (v) any other action that may
reasonably be expected to impede, interfere with, delay, postpone or attempt to
discourage the transactions contemplated by the Stock Purchase Agreement, this
Agreement and the Registration Rights Agreement or result in a breach of any of
the covenants, representations, warranties or other obligations or agreements of
the Company under the Stock Purchase Agreement, this Agreement and the
Registration Rights Agreement) which would materially and adversely affect the
Company or its ability to consummate the transactions contemplated by the Stock
Purchase Agreement, this Agreement and the Registration Rights Agreement.
4.2 Renounce and Cease from Transferring the Rights. The Existing
--------------------------------------------------
Shareholders hereby irrevocably and unconditionally agree not to exercise, in
whole or in part, any of the Rights granted to such Existing Shareholder
pursuant to the terms of the Rights Offering, to subscribe for any shares of
Preferred Stock pursuant to the terms of any such Rights or to Transfer any of
such Rights (or any interest therein) to any Person.
15
<PAGE>
ARTICLE V
CORPORATE GOVERNANCE
AND CERTAIN OTHER ACTIONS
-------------------------
5.1 General. Each Existing Shareholder and each Existing Marks Shareholder
-------
shall vote its Shares at any regular or special meeting of shareholders of the
Company, or in any written consent executed in lieu of such a meeting of
shareholders, and shall take all other actions necessary, to give effect to the
provisions of this Agreement (including, without limitation, Section 5.2
hereof), and to ensure that the Charter Documents do not, at any time hereafter,
conflict in any respect with the provisions of this Agreement.
5.2 Election of Directors. After the Closing, the Existing Shareholders
----------------------
and the Existing Marks Shareholders agree that, except as they may otherwise
agree in writing, the number of directors constituting the entire Board of
Directors shall be no more than nine and shall include at all times two
individuals designated by the Investor Shareholders (the "Investor Designees").
The initial individuals designated by the Investor Shareholders shall be
designated in accordance with Section 3.1.3 of the Stock Purchase Agreement.
During the term of this Agreement, the Board of Directors shall nominate a
number of individuals designated by the Investor Shareholders for election as
directors at each annual meeting such that after such annual meeting (assuming
such individuals are elected) at least two individuals on the Board of Directors
shall have been designated for election as a director by the Investor
Shareholders in accordance with this Section 5.2. After the Closing, any
committee of the Board of Directors shall include at all times a number of
Investor Designees equal to the product of 22% and the total number of directors
on such committee (rounded up to the next whole number).
5.3 Removal and Replacement. (a) The Investor Shareholders shall be
------------------------
entitled at any time and for any reason (or for no reason) to designate any or
all of the Investor Designees on the Board of Directors for removal or to inform
the Company that such designees should not be re-nominated for election pursuant
to Section 5.2. In such a case, the Board of Directors shall not re-nominate any
such director and shall take any action reasonably requested by the Investor
Shareholders to effect any requested removal of such a director. Notwithstanding
the foregoing, the Board of Directors shall not be obligated to: (i) remove any
director if such removal is not permitted by the Charter Documents or (ii) call
a special meeting of shareholders to remove such a director.
(b) If at any time a vacancy is created on the Board of
16
<PAGE>
Directors by reason of the death, removal or resignation of any Investor
Designee, then the Investor Shareholders shall, as soon as practicable
thereafter, designate a replacement director and, as soon as practicable
thereafter, each of the Existing Shareholders, the Existing Marks Shareholders
and the existing Board of Directors shall take action (including, if necessary,
the voting of any Shares by the Existing Shareholders and the Existing Marks
Shareholders) to elect or cause the election of such replacement director in
accordance with Section 5.2.
(c) If at any time a vacancy is created on the Board of
Directors by reason of the death, removal or resignation of any of the Investor
Designees, then the Board of Directors shall not conduct any business (other
than business incident to the designation and election of a replacement director
in accordance with this Section 5.3) until a replacement director has been
designated by the Investor Shareholders in accordance with Section 5.2; provided
that the foregoing restriction on the transaction of business shall terminate on
the earlier to occur of (i) the 20th day after the creation of such vacancy and
(ii) the day after the date (following such vacancy) on which the Company has
notified the Investor Shareholders in writing that the directors must take
action in order to fulfill their fiduciary duties, in each case, if no such
replacement director has been designated.
ARTICLE VI
AFTER-ACQUIRED SECURITIES
-------------------------
Except as otherwise provided in Section 8.9(b), all of the provisions of
this Agreement shall apply to all of the Shares now owned or that may be issued
or transferred hereafter to a Shareholder in consequence of any additional
issuance, purchase, conversion, exchange or reclassification of any of the
Preferred Stock, Common Stock or other Voting Securities (including without
limitation, upon the exercise of any option or warrant), corporate
reorganization, or any other form of recapitalization, consolidation, merger,
share split or share dividend, or that are acquired by a Shareholder in any
other manner, and, in the case of any such event, appropriate adjustment shall
be made to any number of Voting Securities hereunder to take account of such
event. The provisions of the immediately preceding sentence shall be effective
with respect to such Shares without action by any person or entity immediately
upon the acquisition by the Shareholder of beneficial ownership of such
additional Shares.
17
<PAGE>
ARTICLE VII
STOCK CERTIFICATE RESTRICTIONS
------------------------------
7.1 Beneficial Ownership. Each Existing Shareholder agrees to hold
---------------------
as the owner of record any Voting Securities now or hereafter beneficially owned
by such Existing Shareholder.
7.2 Liquidated Damages. The Investor Shareholders and the Existing
-------------------
Shareholders agree that it would be extremely difficult to calculate the damage
to be caused to the Investor Shareholders should any Existing Shareholder breach
this Agreement by Transferring any Shares in violation of this Agreement (a
"Liquidated Damages Breach"). Accordingly, the Investor Shareholders and the
--------------------------
Existing Shareholders have made a good faith effort to preestimate the damages,
costs, losses and injuries the Investor Shareholders will sustain by reason of
such Liquidated Damages Breach. Accordingly, to the extent that the Investor
Shareholders do not seek damages or specific performance in accordance with
Section 8.5, the Existing Shareholders agree to pay to the Investor Shareholders
100% of the proceeds received by each Existing Shareholder from any third party
as a result of any Transfer constituting any such Liquidated Damages Breach.
The Existing Shareholders acknowledge that the liquidated damages
provided for herein are not a penalty and are not unreasonable or
disproportionate to the probable loss to be suffered by the Investor
Shareholders in the event of a Liquidated Damages Breach.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally, telecopied
or sent by certified, registered or express mail or, if mailed, five days after
the date of deposit in the United States mail, as follows:
18
<PAGE>
If to the Company:
-----------------
Seneca Foods Corporation
1162 Pittsford-Victor Road
Pittsford, New York 14534
Telecopy: (716) 385-4249
Attention: Kraig H. Kayser
with a copy to:
Jaeckle Fleischmann & Mugel, LLP
Fleet Bank Building
Twelve Fountain Plaza
Buffalo, New York 14202-2292
Telecopy: (716) 856-0432
Attention: William I. Schapiro, Esq.
If to the Investor Shareholders:
-------------------------------
Carl Marks Strategic Investments, L.P.
Carl Marks Strategic Investments II, L.P.
Uranus Fund, Ltd.
c/o Carl Marks Management Company, L.P.
135 East 57th Street
New York, New York 10022
Telecopy: (212) 980-2631
Attention: Andrew M. Boas
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: John C. Kennedy, Esq.
If to the Existing Marks Shareholders:
-------------------------------------
CMCO, Inc.
Edwin S. Marks
19
<PAGE>
Nancy Marks
Marjorie Boas
135 East 57th Street
New York, New York 10022
Telecopy: (212) 985-2630
Attention: Chief Operating Officer of CMCO, Inc.
If to the Existing Shareholders:
-------------------------------
Arthur S. Wolcott
1605 Main Street, Suite 1010
Sarasota, Florida 34236
Telecopy: (941) 954-7508
Audrey S. Wolcott
1605 Main Street, Suite 1010
Sarasota, Florida 34236
Telecopy: (941) 954-7508
Kraig H. Kayser
1162 Pittsford-Victor Road
Pittsford, New York 14534
Telecopy: (716) 385-4249
Susan W. Stuart
192 Mulberry Hill Road
Fairfield, Connecticut 06430
Telecopy: (203) 761-0660
Donald Stuart
192 Mulberry Hill Road
Fairfield, Connecticut 06430
Telecopy: (203) 761-0660
Kurt Kayser
374 Chartley Court South
Sarasota, Florida 34232
Telecopy: (941) 755-6379
20
<PAGE>
Karl Kayser
68 Van Woert Road
Spencer, New York 14883
Marilyn W. Kayser
3543 Fair Oaks Lane
Longboat Key, Florida 34228
Telecopy: (716) 381-4515
Robert Oppenheimer, as Trustee of certain Kayser family trusts
Chamberlain, D'Amanda, Oppenheimer & Greenfield
1600 Crossroads Building
2 State Street
Rochester, New York 14614
Telecopy: (716) 232-3882
Mark S. Wolcott
6 Mile Post Lane
Pittsford, New York 14534
Kari Wolcott
6 Mile Post Lane
Pittsford, New York 14534
Bruce S. Wolcott
36 Scotland Road
Canandaigua, New York 14424
Telecopy: (716) 385-4249
Constance Wolcott
36 Scotland Road
Canandaigua, New York 14424
Telecopy: (716) 385-4249
Grace W. Wadell
320 Kent Road
Bala Cynwyd, Pennsylvania 19004
21
<PAGE>
Aaron Wadell
320 Kent Road
Bala Cynwyd, Pennsylvania 19004
Any party may, by notice given in accordance with this Section 8.1, designate
another address or person for receipt of notices hereunder.
8.2 Authority and Effect of Agreement. (a) Each Shareholder represents
---------------------------------
and warrants to the other parties hereto as follows: (i) such party has all
requisite power, authority and legal capacity to enter into this Agreement and
perform such party's obligations hereunder; (ii) if such party is a corporation
or partnership, the execution and delivery of this Agreement by such party and
the performance of such party's obligations hereunder have been duly authorized
by all necessary corporate or partnership action, as the case may be, on the
part of such party; (iii) as of the date hereof, if such party is a trustee,
such Shareholder as trustee owns the number and type of shares set forth on
Schedule 8.2 hereto; (iv) as of the date hereof, such Shareholder beneficially
owns or is the beneficiary of a trust which owns the number and type of Shares
set forth on Schedule 8.2 hereto; and (v) this Agreement has been duly executed
and delivered by and (assuming this Agreement constitutes a valid and binding
agreement of the other parties) constitutes a valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to or affecting creditors' rights
generally.
(b) Each Existing Shareholder has full legal power, authority
and right to vote all of the Shares owned by it on the date hereof in the manner
set forth in Articles IV and V hereof, without the consent or approval of, or
any other action on the part of, any other person or entity. Without limiting
the generality of the foregoing, except for this Agreement, and as disclosed on
Schedule 8.2, each Existing Shareholder is not a party to any voting agreement
with any Person with respect to any of the Shares owned by it on the date
hereof, granted any Person any proxy (revocable or irrevocable) or power of
attorney with respect to any of such Shares, deposited any of such Shares in a
voting trust or entered into any arrangement or agreement with any person or
entity limiting or affecting any of its legal power, authority or right to vote
such Shares in the manner set forth in Articles IV and V hereof. From and after
the date hereof, the Existing Shareholders will not commit any act that could
restrict or otherwise affect such legal power, authority and right to vote the
Shares owned by them in the manner set forth in Articles IV and V hereof.
Without limiting the generality of the foregoing, from and after the date
hereof, the Existing Shareholders will not enter into any voting agreement with
any person or
22
<PAGE>
entity with respect to any of the Shares owned by them, grant any person or
entity any proxy (revocable or irrevocable) or power of attorney with respect to
any of such Shares, deposit any of such Shares into a voting trust or otherwise
enter into any agreement or arrangement limiting or affecting their legal power,
authority or right to vote such Shares in the manner set forth in Articles IV
and V hereof.
8.3 Action By Written Consent. If, in lieu of any annual or special
-------------------------
shareholder meeting of the Company, action is taken by written consent, the
provisions of this Agreement imposing obligations in respect of or in connection
with such shareholder meeting shall apply mutatis mutandis to such action by
written consent.
8.4 Amendment and Waiver.(a) Any amendment, supplement or modification
--------------------
of or to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective:
(i) only if it is made or given in writing and signed
by each of the Shareholders; and
(ii) only in the specific instance and for the
specific purpose for which it was made or given.
(b) No failure or delay on the part of any party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the parties
hereto at law, in equity or otherwise.
8.5 Specific Performance. The parties hereto intend that each of
---------------------
the parties has the right to seek damages or specific performance in the event
that any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
8.6 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
23
<PAGE>
8.7 Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
8.8 Entire Agreement. This Agreement supersedes any other agreement,
----------------
whether written or oral, that may have been made or entered into between the
parties hereto, and constitutes the entire agreement by the parties hereto,
related to the matters specified herein.
8.9 Term of Agreement. (a) This Agreement shall become effective
------------------
upon the execution hereof and shall terminate on the earlier of: (i) the date on
which the Stock Purchase Agreement is terminated pursuant to Section 9 of the
Stock Purchase Agreement, (ii) after the Closing, the date on which the Investor
Shareholders cease to own in the aggregate at least 10% of the outstanding Class
A Common Stock (assuming conversion of all shares of Preferred Stock into Class
A Common Stock) or (iii) such earlier date as the Shareholders shall unanimously
agree in writing to terminate this Agreement.
(b) Notwithstanding Section 8.9(a), this Agreement shall
terminate permanently as to any Shareholder at such time as such Shareholder no
longer owns any Shares.
8.10 GOVERNING LAW. THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED
-------------
AND DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
8.11 Further Assurances. Each of the parties shall, and shall cause
-------------------
their respective Affiliates to, execute such instruments and take such
action as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
8.12 Successors and Assigns; Power of Certain Representatives.
--------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
24
<PAGE>
the parties and their respective successors and permitted assigns. This
Agreement is not assignable except in connection with a transfer of Shares in
accordance with this Agreement.
(b) For the purpose of any notice, consent, waiver, approval
or action given or taken hereunder, Carl Marks Management Company, L.P. shall be
deemed to be the representative of the Investor Shareholders and any such
notice, consent, waiver, approval or action so given or made shall be binding
upon the Investor Shareholders.
8.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed and
delivered this Agreement as of the date first above written.
COMPANY:
-------
SENECA FOODS CORPORATION
By:/s/Kraig H. Kayser
---------------------------
Name: Kraig H. Kayser
Title: President and Chief Executive
Officer
INVESTOR SHAREHOLDERS:
---------------------
CARL MARKS STRATEGIC INVESTMENTS,
L.P.
By: Carl Marks Management Company,
L.P.; its general partner
By:/s/Andrew M. Boas
--------------------------
Name: Andrew M. Boas
Title: General Partner
CARL MARKS STRATEGIC
INVESTMENTS II, L.P.
By: Carl Marks Management Company,
L.P., its general partner
By:/s/Andrew M. Boas
----------------------
Name: Andrew M. Boas
Title: General Partner
S-1
<PAGE>
URANUS FUND, LTD.
By: Carl Marks Offshore Management, Inc.,
its Investment Manager
By:/s/Andrew M. Boas
-----------------------------
Name: Andrew M. Boas
Title:President
EXISTING MARKS SHAREHOLDERS:
CMCO, INC.
By:/s/Mark Claster
---------------------------
Name: Mark Claster
Title: Managing Director
------------------------------
Edwin S. Marks
------------------------------
Nancy Marks
------------------------------
Marjorie Boas
EXISTING SHAREHOLDERS:
------------------------------
Arthur S. Wolcott, Individually and
as Trustee
S-2
<PAGE>
------------------------------
Audrey S. Wolcott, as Trustee
------------------------------
Kraig H. Kayser, Individually and as
Trustee for certain Kayser family
trusts
------------------------------
Susan W. Stuart, Individually and as
Trustee for Alexius Lyle Wadell and
Kyle Aaron Wadell
------------------------------
Donald Stuart
------------------------------
Kurt Kayser
------------------------------
Karl Kayser
------------------------------
Marilyn W. Kayser
------------------------------
Robert Oppenheimer, as Trustee of
certain Kayser family trusts
------------------------------
Mark S. Wolcott, Individually and as
Trustee for Erin Lorraine Wolcott
and Cassandra Jean Wolcott
S-3
<PAGE>
------------------------------
Kari Wolcott
------------------------------
Bruce S. Wolcott, Individually and
as Trustee for Kaitlin Kerr Wolcott,
Michael Stanton Wolcott and Paige
Strode Wolcott
------------------------------
Constance Wolcott
------------------------------
Grace W. Waddell, Individually and
as Trustee for Sara Elizabeth
Stuart, Jennifer Grace Stuart and
Donald Arthur Stuart
------------------------------
Aaron Waddell
S-4
Appendix C
REGISTRATION RIGHTS AGREEMENT
among
Seneca Foods Corporation,
Carl Marks Strategic Investments, L.P.,
Carl Marks Strategic Investments II, L.P.,
Uranus Fund, Ltd.,
Edwin S. Marks,
Nancy Marks,
Marjorie Boas and
CMCO, Inc.
---------------------------------------
Dated as of June 22, 1998
---------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. Background................................................................1
2. Registration Under Securities Act, etc..............................1
2.1 Registration on Request....................................1
2.2 Incidental Registration....................................4
2.3 Registration Procedures....................................5
2.4 Underwritten Offerings.....................................9
2.5 Preparation; Reasonable Investigation.....................10
2.6 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants..............................10
2.7 Indemnification...........................................11
3. Definitions........................................................14
4. Rule 144...........................................................17
5. Amendments and Waivers.............................................17
6. Nominees for Beneficial Owners.....................................18
7. Notices............................................................18
8. Assignment.........................................................19
9. Calculation of Percentage Interests in Registrable Securities......19
10. No Inconsistent Agreements.........................................19
11. Remedies...........................................................19
12. Severability.......................................................19
13. Entire Agreement...................................................20
14. Headings...........................................................20
15. Governing Law......................................................20
16. Counterparts.......................................................20
17. Termination........................................................20
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of June 22, 1998,
among Seneca Foods Corporation, a New York corporation (the "Company"), Carl
Marks Strategic Investments, L.P., a Delaware limited partnership ("CMSI"), Carl
Marks Strategic Investments II, L.P., a Delaware limited partnership ("CMSI
II"), Uranus Fund, Ltd., a Cayman Islands corporation ("Uranus" and, together
with CMSI and CMSI II, the "Purchasers"), Edwin S. Marks, Nancy Marks, Marjorie
Boas and CMCO, Inc. ("CMCO" and, together with Edwin Marks, Nancy Marks and
Marjorie Boas, the "Existing Shareholders").
The parties hereby agree as follows:
1. Background. The Company proposes, as soon as practicable
----------
after the Rights Offering Registration Statement becomes effective, to
distribute to holders of its Class A Common Stock, par value $.25 per share, of
the Company (the "Class A Common Stock") and Class B Common Stock, par value
$.25 per share, of the Company (the "Class B Common Stock") rights (the
"Rights") to subscribe for and purchase up to an aggregate of 3,000,000 shares
of the Company's Convertible Participating Preferred Stock, par value $.025 per
share (the "Preferred Stock"), at a subscription price (the "Subscription
Price") of $12.00 per share (the "Rights Offering").
Pursuant to a Stock Purchase Agreement, dated as of June 22,
1998, among the Company and the Purchasers (as amended, supplemented or
otherwise modified, the "Purchase Agreement"), the Purchasers have agreed to
purchase from the Company, and the Company has agreed to issue and sell to the
Purchasers: (i) an aggregate of 1,166,667 shares of the Preferred Stock at an
aggregate price of $14,000,004 ($12.00 per share of Preferred Stock) and (ii)
upon the expiration of the Rights Offering, up to 2,500,000 shares of Preferred
Stock, at the Subscription Price, to the extent provided for in the Purchase
Agreement ((i) and (ii), collectively, referred to as the "Shares"). The
Purchasers would not enter into the Purchase Agreement unless this Registration
Rights Agreement were being simultaneously entered into by the Company.
Capitalized terms used herein but not otherwise defined shall have the meanings
given them in Section 3.
2. Registration Under Securities Act, etc.
---------------------------------------
2.1 Registration on Request.
------------------------
(a) Request. At any time after the first anniversary of
-------
the closing of the purchase of the Shares under the Purchase Agreement, upon the
written request of one or more holders (the "Initiating Holders") of Registrable
Securities holding at least 10% of the Registrable Securities (assuming the
conversion of the Shares of any Registrable Securities that are Class B Common
Stock into Class A Common Stock) that the Company effect the registration under
the Securities Act of all or part of such Initiating Holders' Registrable
Securities, the Company promptly
<PAGE>
will give written notice of such requested registration to all registered
holders of Registrable Securities, and thereupon the Company will use its best
efforts to effect, at the earliest possible date, the registration under the
Securities Act, of
(i) the Registrable Securities which the
Company has been so requested to register by such Initiating Holders, and
(ii) all other Registrable Securities
which the Company has been requested to register by the holders thereof
(such holders together with the Initiating Holders hereinafter are
referred to as the "Selling Holders") by written request given to the
Company within 30 days after the giving of such written notice by the
Company, all to the extent necessary to permit the disposition of the
Registrable Securities so to be registered.
(b) Registration of Other Securities. Whenever the
--------------------------------
Company shall effect a registration pursuant to this Section 2.1, no securities
other than Registrable Securities shall be included among the securities covered
by such registration unless the Selling Holders of not less than 66-2/3% of all
Registrable Securities to be covered by such registration (assuming the
conversion of any Registrable Securities that are Class B Common Stock into
Class A Common Stock) shall have consented in writing to the inclusion of such
other securities.
(c) Registration Statement Form. Registrations under
---------------------------
this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be reasonably selected by the Company.
(d) Effective Registration Statement. A registration
--------------------------------
requested pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective
and remained effective in compliance with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
registration statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement (unless
the failure to so dispose of such Registrable Securities shall be caused solely
by reason of a failure on the part of the Selling Holders); provided, that such
period need not exceed 135 days, (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason not attributable solely to the Selling Holders, or (iii) if the
conditions
<PAGE>
to closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived, other than solely
by reason of a failure on the part of the Selling Holders.
(e) Selection of Underwriters. The underwriter or
-------------------------
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Selling Holders of more than 50% of the
Registrable Securities to be included in such registration (assuming the
conversion of the Shares of any Registrable Securities that are Class B Common
Stock into Class A Common Stock) and shall be reasonably acceptable to the
Company.
(f) Priority in Requested Registration. If the
----------------------------------
managing underwriter of any underwritten offering shall advise the Company (and
the Company shall so advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Selling Holders of 66-2/3% of the Registrable Securities requested to be
included in such registration (assuming the conversion of any Registrable
Securities that are Class B Common Stock into Class A Common Stock), the
Company, except as provided in the following sentence, will include in such
registration, to the extent of the number and type which the Company is so
advised can be sold in such offering, first, Registrable Securities requested to
be included in such registration, pro rata (based on the number of Registrable
Securities held by each of the Selling Holders) among the Selling Holders
requesting such registration, second, all securities proposed to be sold by the
------
Company for its own account, and third, any Third Party Securities requested to
-----
be included in such registration. Notwithstanding the foregoing, if the total
number of Registrable Securities requested to be included in any registration
cannot be included, holders of Registrable Securities requesting registration
thereof pursuant to Section 2.1, representing not less than 50% of the
Registrable Securities with respect to which registration has been requested
(assuming the conversion of any Registrable Securities that are Class B Common
Stock into Class A Common Stock), shall have the right to withdraw the request
for registration of all such Registrable Securities by giving written notice to
the Company within 20 days after receipt of the notice from the managing
underwriter described above by the Company and, in the event of such withdrawal,
such request for all Registrable Securities shall not be counted for purposes of
the requests for registration to which holders of Registrable Securities are
entitled pursuant to Section 2.1 hereof.
(g) Limitations on Registration Requests.
------------------------------------
Notwithstanding anything in this Section 2.1 to the contrary, in no event will
the
<PAGE>
Company be required to (i) effect a registration pursuant to this Section 2.1
within the six-month period occurring immediately subsequent to the
effectiveness (within the meaning of Section 2.1(d)) of a registration statement
filed pursuant to this Section 2.1, unless a majority of the Disinterested
Directors determines that effecting a second registration within the six-month
period would not have a material adverse effect on the market price of the
Common Stock, or (ii) effect a registration with respect to any class of
Registrable Securities pursuant to Section 2.1 covering less than such number of
Registrable Securities having an estimated Market Price at the time of such
request of at least $5,000,000.
(h) Expenses. The Selling Holders will pay all
--------
Registration Expenses in connection with any registrations requested pursuant to
this Section 2.1, allocated pro rata (based on the number and type of
Registrable Securities of each of the Selling Holders included in the
registration under this Section 2.1) and the Company will pay all other fees and
expenses, if any, incident to the Company's performance of or compliance with
Section 2.1; provided, however, that if a registration is withdrawn under
Section 2.1(f) or 2.6, then the Company will pay all expenses related to such
registration incident to its performance of or compliance with Section 2.1
(including all Registration Expenses); and provided further, that if a
registration under Section 2.1 includes any securities other than the
Registrable Securities, the Company will pay all expenses related to such
registration incident to its performance of or compliance with this Section 2.1
(including all Registration Expenses other than Fee Expenses) and the Selling
Holders will pay all Fee Expenses allocated pro rata (based on the number and
type of Registrable Securities of each of the Selling Holders included in the
registration under this Section 2.1).
2.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the
---------------------------------------
Company at any time proposes to register any of its Common Stock or any other
class of Registrable Securities or other securities convertible into or
exchangeable for shares of its Common Stock or any other class of Registrable
Securities under the Securities Act by registration on any form other than Forms
S-4 or S-8 (or any successor forms), whether or not for sale for its own
account, it will each such time give prompt written notice to all registered
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.2. Upon the written request of any such holder (a
"Requesting Holder") made as promptly as practicable and in any event within 30
days after the receipt of any such notice from the Company (which request shall
specify the Registrable Securities intended to be disposed of by such Requesting
Holder), the Company will use its best efforts to
<PAGE>
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Requesting Holders
thereof; provided, that prior to the effective date of the registration
--------
statement filed in connection with such registration, immediately upon
notification to the Company from the managing underwriter of the price at which
such securities are to be sold, if such price is below the price which any
Requesting Holder shall have indicated to be acceptable to such Requesting
Holder, the Company shall so advise such Requesting Holder of such price, and
such Requesting Holder shall then have the right to withdraw its request to have
its Registrable Securities included in such registration statement; provided,
--------
further, however, that if, at any time after giving written notice of its
- ------- -------
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder of Registrable Securities and (x) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration,
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to cause such registration to be
effected as a registration under Section 2.1, and (y) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2.1.
(b) Priority in Incidental Registrations. If the
------------------------------------
managing underwriter of any underwritten offering shall inform the Company by
letter of its opinion that the number or type of Registrable Securities and
Third Party Securities requested to be included in such registration would
materially adversely affect such offering, and the Company has so advised the
Requesting Holders in writing, then the Company will include in such
registration, to the extent of the number and type which the Company is so
advised can be sold in (or during the time of) such offering, first, all
securities proposed by the Company to be sold for its own account, second, such
Registrable Securities requested to be included in such registration pursuant to
this Agreement, pro rata (based on the number of Registrable Securities
requested to be included therein by each Selling Holder) among such Selling
Holders and third, any Third Party Securities.
(c) Expenses. The Company will pay all fees and
--------
expenses incident to its performance of or compliance with this Section 2.2
(other than Fee Expenses) and the Requesting Holders will pay all Fee Expenses,
allocated
<PAGE>
pro rata (based on the number and type of Registrable Securities of each of the
Requesting Holders included in the registration under this Section 2.2);
provided, however, that if any Registrable Securities are withdrawn from a
registration pursuant to Section 2.2(a) or (b), then the Company shall pay all
Fee Expenses related to such Registrable Securities.
(d) Pillsbury Registration. Notwithstanding anything
----------------------
contained herein to the contrary, the Purchasers shall have no rights to
participate in any registration of the Company's securities occurring at the
request of The Pillsbury Company ("Pillsbury") pursuant to the terms of the
Purchase and Registration Rights Agreement, dated as of March 15, 1996, as
amended, between the Company and Pillsbury.
2.3 Registration Procedures. If and whenever the Company
-----------------------
is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Sections 2.1 and
2.2, the Company will, as expeditiously as possible:
(i) prepare and (within 90 days after the end
of the period within which requests for registration may be given to
the Company) file with the Commission the requisite registration
statement to effect such registration and thereafter use its best
efforts to cause such registration statement to become effective;
provided, however, that the Company may discontinue any registration of
its securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(b), Registrable Securities) at
any time prior to the effective date of the registration statement
relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective in accordance with Section
2.1(d)(i) hereof and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
covered by such registration statement until such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided, that except with
respect to any such registration statement filed pursuant to Rule 415
under the Securities Act, such period need not exceed 135 days;
<PAGE>
(iii) furnish to each seller of Registrable
Securities covered by such registration statement, such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request;
(iv) use its best efforts (x) to register or qualify
all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such States of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration statement shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such
registration statement remains in effect and (z) to take any other
action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the
securities to be sold by such sellers, except that the Company shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to
be so qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with
or approved by such other federal or state governmental agencies or
authorities as may be necessary in the reasonable opinion of counsel to
the Company and counsel to the seller or sellers of Registrable
Securities to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish at the effective date of such
registration statement to each seller of Registrable Securities, and
each such seller's underwriters, if any, a signed counterpart of:
(x) an opinion of counsel for the Company,
dated the effective date of such registration
statement and, if applicable, the date of the
closing under the underwriting agreement, and
<PAGE>
(y) a "comfort" letter signed by the independent
public accountants who have certified the
Company's financial statements included or
incorporated by reference in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' comfort
letters delivered to the underwriters in underwritten public offerings
of securities and, in the case of the accountants' comfort letter, such
other financial matters, and, in the case of the legal opinion, such
other legal matters, as the underwriters may reasonably request;
(vii) notify each seller of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of any
such seller promptly prepare and furnish to it a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the Purchaser of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable
(but not more than eighteen months after the effective date of such
registration statement), an earnings statement covering the period of
at least twelve months beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;
(ix) provide and cause to be maintained a
<PAGE>
transfer agent and registrar (which, in each case, may be the Company)
for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration;
(x) use its best efforts to cause all Registrable
Securities covered by such registration statement either (a) to be
listed on any national securities exchange on which Registrable
Securities of the same class covered by such registration statement are
then listed or (b) to be approved for quotation on the NASDAQ National
Market or any other over the counter market on Registrable Securities
of the same class covered by any such registration statement are then
quoted, and, if no such Registrable Securities are so listed or quoted,
either (x) on any national securities exchange on which the Common
Stock is then listed or (y) approved for quotation on the NASDAQ
National Market or any other over the counter market on which the
Common Stock is then quoted.
(xi) cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company (i) such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and (ii) if requested by the
Company, an executed custody agreement and power of attorney in form and
substance reasonably satisfactory to the Company with respect to the Registrable
Securities to be registered pursuant to this Agreement.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
<PAGE>
2.4 Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested
--------------------------------
by the underwriters for any underwritten offering by holders of Registrable
Securities pursuant to a registration requested under Section 2.1, the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to be reasonably satisfactory in substance and form to
each such holder and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of that type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.7 or such other indemnities as
are customarily received by underwriters in public offerings of similar
securities. The holders of the Registrable Securities proposed to be sold by
such underwriters will reasonably cooperate with the Company in the negotiation
of the underwriting agreement. Such holders of Registrable Securities to be sold
by such underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. No
holder of Registrable Securities shall be required to make any representations
or warranties to or agreements with the Company other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution or any other
representations required by applicable law.
(b) Incidental Underwritten Offerings. If the
---------------------------------
Company proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
Requesting Holder of Registrable Securities, use its best efforts to arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Requesting Holder among the securities of the Company to be
distributed by such underwriters, subject to the provisions of Section 2.2(b).
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting
<PAGE>
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Any such Requesting Holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such Requesting Holder, such Requesting Holder's
Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by applicable law.
2.5 Preparation; Reasonable Investigation. In connection with
-------------------------------------
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of Registrable
Securities to be registered under such registration statement, their
underwriters, if any, and their respective counsel the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such reasonable access to its
books and records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 Limitations, Conditions and Qualifications to Obligations
---------------------------------------------------------
under Registration Covenants. The Company shall be entitled to postpone for a
- ------------------------------
reasonable period of time (but not exceeding 90 days) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant to Section 2.1 if the Company determines, in its reasonable judgment,
that such registration and offering would interfere with any financing,
acquisition, corporate reorganization or other material transaction involving
the Company and promptly gives the holders of Registrable Securities requesting
registration thereof pursuant to Section 2.1 written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. If the Company shall
so postpone the filing of a registration statement, holders of Registrable
Securities requesting registration thereof pursuant to Section 2.1, representing
not less than 50% of the Registrable Securities with respect to which
registration has been requested, shall have the right to withdraw the request
for registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 2.1
hereof.
<PAGE>
2.7 Indemnification.
---------------
(a) Indemnification by the Company. The Company
------------------------------
will, and hereby does, indemnify and hold harmless, in the case of any
registration statement filed pursuant to Section 2.1 or 2.2, each seller of any
Registrable Securities covered by such registration statement and each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act or the Exchange Act, and
their respective directors, officers, partners, agents and affiliates, against
any losses, claims, damages or liabilities, joint or several, to which such
seller or underwriter or any such director, officer, partner, agent, affiliate
or controlling person may become subject under the Securities Act or otherwise,
including, without limitation, the reasonable fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such seller or
underwriter and each such director, officer, partner, agent, affiliate and
controlling Person for any reasonable legal or any other expenses incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall not
-------- -------
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof; provided,
--------
further, that the Company shall not be liable in any such case to the extent
- -------
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, preliminary prospectus, final
prospectus or summary prospectus contained therein or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading in a prospectus or prospectus supplement, if such untrue statement or
<PAGE>
omission is completely corrected in an amendment or supplement to such
prospectus or prospectus supplement, the seller of the Registrable Securities
has an obligation under the Securities Act to deliver a prospectus or prospectus
supplement in connection with such sale of Registrable Securities and the seller
of Registrable Securities thereafter fails to deliver such prospectus or
prospectus supplement as so amended or supplemented prior to or concurrently
with the sale of Registrable Securities to the person asserting such loss,
claim, damage or liability after the Company has furnished such seller with a
sufficient number of copies of the same. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or underwriter or any such director, officer, partner, agent, affiliate
or controlling person and shall survive the transfer of such securities by such
seller or underwriter.
(b) Indemnification by the Sellers. As a condition to
------------------------------
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
2.7(a)) the Company, and each director of the Company, each officer of the
Company and each other Person, if any, who participates as an underwriter in the
offering or sale of such securities and each other Person who controls the
Company or any such underwriter within the meaning of the Securities Act or the
Exchange Act, with respect to any statement or alleged statement in or omission
or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such indemnifying party
-------- -------
under this Section 2.7(b) shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by
----------------------
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in Section 2.7(a) or (b), such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
give written
<PAGE>
notice to the latter of the commencement of such action; provided, however, that
-------- -------
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 2.7, except to the extent that the indemnifying
party is actually and materially prejudiced by such failure to give notice. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that any indemnified party may, at
-------- -------
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the opinion of counsel to such indemnified party, (a) there are or may be
legal defenses available to such indemnified party or to other indemnified
parties that are different from or additional to those available to the Company
or (b) any conflict or potential conflict exists between the Company and such
indemnified party that would make such separate representation advisable;
provided, however, that in no event shall the Company be required to pay fees
- -------- -------
and expenses under this Section 2.7 for more than one firm of attorneys
representing the indemnified parties (together, if appropriate, with one firm of
local counsel per jurisdiction) in any one legal action or group of related
legal actions. No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested the indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by this Section 2.7, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without the indemnifying party's
written consent if (i) such settlement is entered into more than thirty (30)
days after receipt by the indemnifying party of the aforesaid request, and (ii)
the indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the consent of the indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided for
------------
<PAGE>
in this Section 2.7 shall for any reason be held by a court to be unavailable to
an indemnified party under Section 2.7(a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 2.7(a) or (b), the indemnified party
and the indemnifying party under Section 2.7(a) or (b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the sellers or prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such sellers or
prospective sellers from the offering of the securities covered by such
registration statement, provided, that for purposes of this Section 2.7(d), the
--------
amounts required to be contributed by the sellers or prospective sellers of
Registrable Securities shall not exceed the amount of proceeds received by such
sellers or prospective sellers. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Such sellers or prospective sellers' obligations to
contribute as provided in this Section 2.7(d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint.
(e) Indemnification Payments. The indemnification
------------------------
and contribution required by this Section 2.7 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
3. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
----------
any other federal agency at the time administering the Securities Act.
"Class A Common Stock" is defined in Section 1.
--------------------
"Class B Common Stock"is defined in Section 1.
--------------------
<PAGE>
"Common Stock" shall mean and include: (i) the Class A common
------------
stock, par value $.25 per share, of the Company, (ii) the Class B common stock,
par value $.25 per share, of the Company, and (iii) each other class of capital
stock of the Company that does not have a preference over any other class of
capital stock of the Company as to dividends or upon liquidation, dissolution or
winding up of the Company and, in each case, shall include any other class of
capital stock of the Company into which such stock is reclassified or
reconstituted.
"Disinterested Director" means, with respect to any
------------------------
transaction or series of related transactions, a member of the board of
directors of the Company who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of related
transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, or any superseding Federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of any
such superseding Federal statute.
"Fee Expenses" means, with respect to any Registrable
-------------
Securities included in a registration, all registration and filing fees with the
Commission, all filing fees of the New York Stock Exchange, Inc., other national
securities exchanges or the National Association of Securities Dealers, Inc.,
and all filing fees to comply with securities or blue sky laws which relate
solely to such Registrable Securities.
"Initiating Holder" is defined in Section 2.1.
-----------------
"Market Price" means, per share of Class A Common Stock, on
-------------
any date specified herein: (a) the closing price per share of the Class A Common
Stock on such date published in The Wall Street Journal or, if no such closing
price on such date is published in The Wall Street Journal, the average of the
closing bid and asked prices on such date, as officially reported on the
principal national securities exchange on which the Class A Common Stock is then
listed or admitted to trading; or (b) if the Class A Common Stock is not then
listed or admitted to trading on any national securities exchange but is
designated as a national market system security by the NASD, the last trading
price of the Class A Common Stock on such date; or (c) if there shall have been
no trading on such date or if the Class A Common Stock is not so designated, the
average of the reported closing bid and asked prices of the Class A Common
Stock, on such date as shown by the Nasdaq National Market or other
over-the-counter market and reported by any member firm of the New York Stock
<PAGE>
Exchange selected by the Company; or (d) if none of (a), (b) or (c) is
applicable, a market price per share determined at the Company's expense by a
nationally recognized appraiser chosen by the Purchasers and approved by the
Company, which approval shall not be unreasonably withheld. If no such appraiser
is so chosen more than 20 days after notice of the necessity of such calculation
shall have been delivered by the Company to the Purchasers, then the appraiser
shall be chosen by the Company.
"NASD" means National Association of Securities Dealers, Inc.
----
"Person" means any individual, firm, corporation, partnership,
------
limited liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind and shall include any
successor (by merger or otherwise) of such entity.
"Pillsbury" is defined in Section 2.2(d).
---------
"Preferred Stock" is defined in Section 1.
---------------
"Purchase Agreement" is defined in Section 1.
------------------
"Registrable Securities" means (i) any Shares, (ii) any shares
----------------------
of Common Stock issuable upon conversion of the Shares, (iii) any other shares
of Common Stock or Voting Securities beneficially owned by any Purchaser or
Existing Shareholder (whether owned on the date hereof or hereafter acquired)
and (iv) any securities of the Company issued or issuable with respect to any of
the securities described in clauses (i), (ii) or (iii) by way of a dividend or
stock split or in connection with a combination of shares, recapitalization,
reclassification, merger, consolidation, reconstitution or other reorganization
or otherwise. As to any particular Registrable Securities, once issued, such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been sold
as permitted by Rule 144 (or any successor provision) under the Securities Act,
(c) they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by the
Company and subsequent public distribution of them shall not require
registration of such distribution under the Securities Act or (d) they shall
have ceased to be outstanding. All references to percentages of Registrable
Securities shall be
<PAGE>
calculated pursuant to Section 9.
"Registration Expenses" means with respect to any registration
---------------------
under Section 2, all Fee Expenses with respect to Registrable Securities
included in such registration, all reasonable printing, messenger and delivery
expenses incurred in such registration, the reasonable fees and disbursements of
counsel for the Company and of its independent public accountants incurred in
such registration, including the reasonable expenses of "comfort" letters
required by or incident to such performance and compliance, any reasonable fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities (excluding any underwriting discounts or commissions with respect to
the Registrable Securities) and the reasonable fees and expenses of one counsel
to the Selling Holders incurred in such registration (selected by Selling
Holders representing at least 50% of the Registrable Securities covered by such
registration).
"Requesting Holder" is defined in Section 2.2.
-----------------
"Rights" is defined in Section 1.
------
"Rights Offering" is defined in Section 1.
---------------
"Rights Offering Registration Statement" means the
----------------------------------------------
Registration Statement on Form S-1 under the Securities Act or such other
appropriate form under the Securities Act, pursuant to which the Rights, the
underlying shares of Preferred Stock and shares of Class A Common Stock will be
registered pursuant to the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
--------------
or any superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such superseding Federal
statute.
"Selling Holder" is defined in Section 2.1.
--------------
"Shares" is defined in Section 1.
------
"Subscription Price" is defined in Section 1.
------------------
"Third Party Securities" means any securities included in a
-----------------------
registration statement requested under Section 2.1 or 2.2, other than (i)
Registrable Securities,
<PAGE>
and (ii) securities to be sold by the Company for its own account.
"Voting Securities" means any securities of the Company
------------------
entitled to vote generally in the election of directors, or securities
convertible into or exercisable or exchangeable for such securities.
4. Rule 144. The Company shall take all actions reasonably
--------
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
provisions of (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rules or regulations hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended with
----------------------
the consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of the holder or holders of at least 66-2/3% of the
Registrable Securities (assuming conversion of the Shares of any Registrable
Securities that are Class B Common Stock into Class A Common Stock) affected by
such amendment, action or omission to act. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be bound by any consent
authorized by this Section 5, whether or not such Registrable Securities shall
have been marked to indicate such consent. If the Securities Act is amended or
new regulations are adopted thereunder, to permit company registration such that
the Company would not be able to grant the holders of Registrable Securities the
right to register and resell their Registrable Securities in the manner
contemplated under this Agreement on the date of its execution, then the parties
hereto agree to negotiate in good faith to amend this Agreement to grant such
holders of Registrable Securities substantially equivalent rights to those that
were provided on the date of this Agreement.
6. Nominees for Beneficial Owners. In the event that any
---------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the
<PAGE>
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. All notices, demands and other communications
-------
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to any Purchaser, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as they shall have
furnished to the Company in writing in the manner set forth herein;
(b) if to any other holder of Registrable Securities, at the
address that such holder shall have furnished to the Company in writing in the
manner set forth herein, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company; or
(c) if to the Company, addressed to it in the manner set
forth in the Purchase Agreement, or at such other address as the Company shall
have furnished to each holder of Registrable Securities at the time outstanding
in the manner set forth herein.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by a courier, if delivered by overnight courier service; three business days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is acknowledged, if telecopied.
8. Assignment. This Agreement shall be binding upon and inure
----------
to the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and permitted assigns and, with respect
to the Purchaser, any holder of any Registrable Securities, subject to the
provisions respecting the minimum amount of Registrable Securities required in
order to be entitled to certain rights, or take certain actions, contained
herein. Except by operation of law, this Agreement may not be assigned by the
Company without the prior written consent of the holders of 66-2/3% of the
Registrable Securities outstanding at the time such consent is requested.
<PAGE>
9. Calculation of Percentage Interests in Registrable Securities.
-------------------------------------------------------------
For purposes of this Agreement, all references to a percentage of the
Registrable Securities shall be calculated based upon the number of Registrable
Securities outstanding at the time such calculation is made. If there is more
than one class of Registrable Securities, then each reference to a percentage of
the Registrable Securities shall mean a percentage of each class of the
Registrable Securities.
10. No Inconsistent Agreements. The Company will not hereafter
--------------------------
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement. Without limiting the generality of the foregoing, the Company will
not hereafter enter into any agreement with respect to its securities which
grants, or modify any existing agreement with respect to its securities to
grant, to the holder of its securities in connection with an incidental
registration of such securities equal or higher priority to the rights granted
to the Purchaser under this Section 2.
11. Remedies. Each holder of Registrable Securities, in
--------
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
12. Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.
13. Entire Agreement. This Agreement, together with the
-----------------
Purchase Agreement (including the exhibits and schedules thereto), is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Purchase Agreement (including the exhibits and schedules thereto) supersede all
prior agreements and understandings between the parties with respect to such
subject matter.
<PAGE>
14. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
15. Governing Law. This Agreement has been negotiated,
--------------
executed and delivered in the State of New York and shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
16. Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
17. Termination. Upon termination of the Purchase Agreement in
-----------
accordance with Section 9 thereof, this Agreement shall terminate automatically.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective representatives
hereunto duly authorized as of the date first above written.
SENECA FOODS CORPORATION
By: /s/ Kraig H. Kayser
--------------------------
Name: Kraig H. Kayser
Title: President and Chief Executive Officer
CARL MARKS STRATEGIC INVESTMENTS, L.P.
By: Carl Marks Management Company, L.P.,
its general partner
By: /s/Andrew M. Boas
---------------------------
Name: Andrew M. Boas
Title: General Partner
CARL MARKS STRATEGIC INVESTMENTS II, L.P.
By: Carl Marks Management Company, L.P.,
its general partner
By: /s/Andrew M. Boas
----------------------------
Name: Andrew M. Boas
Title: General Partner
URANUS FUND, LTD.
By: Carl Marks Offshore Management Company, L.P.,
its Investment Manager
By: /s/Andrew M. Boas
---------------------------
Name: Andrew M. Boas
Title: President
<PAGE>
/s/Edwin S. Marks
--------------------------
Edwin S. Marks
/s/Nancy Marks
--------------------------
Nancy Marks
/s/Marjorie Boas
--------------------------
Marjorie Boas
CMCO, INC.
By: /s/Mark Claster
--------------------
Name: Mark Claster
Title: Managing Director
Appendix D
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SENECA FOODS CORPORATION
----------------------------------------------
Under Section 805 of the
Business Corporation Law
----------------------------------------------
We, the undersigned, being the President and Secretary of
SENECA FOODS CORPORATION, do hereby certify as follows:
FIRST: The name of the Corporation is SENECA FOODS CORPORATION. The
name under which the Corporation was formed is SENECA GRAPE JUICE
CORPORATION.
SECOND: The certificate of incorporation of the Corporation was filed
by the Department of State on August 17, 1949.
THIRD: The certificate of incorporation of the Corporation hereby is
amended to:
(a) Increase the number of authorized shares of Class A Common
Stock, $0.25 par value per share from ten million (10,000,000) shares to twenty
million (20,000,000) shares; and
(b) Increase the number of authorized shares of Preferred
Stock with $.025 par value, Class A from four million (4,000,000) shares to
eight million two hundred thousand (8,200,000) shares.
To accomplish this, Article 3 of the certificate of
incorporation, hereby is amended to read in its entirety as follows:
(a) The Capital Stock of the Corporation shall consist of
twenty million (20,000,000) shares of Class A Common Stock of the par value of
$0.25 each; ten million (10,000,000) shares of Class B Common Stock of the par
value of $0.25 each; two hundred thousand (200,000) shares of Six Percent (6%)
Voting Cumulative Preferred Stock of the par value of $0.25 each; thirty
thousand (30,000) shares of Preferred Stock Without Par Value, to be issued in
series by the Board of Directors, pursuant to the provisions of Article 4,
Section (c) hereof, subject to the limitations prescribed by law; and eight
million two hundred thousand (8,200,000) shares of Preferred Stock with $.025
par value, Class A, to be issued in series by the Board of Directors pursuant to
the provisions of Article 4, Section (d) hereof, subject to the limitations
prescribed by law.
FOURTH: Article 4, paragraph (a)(C) of the certificate of incorporation
of the Corporation hereby is amended as follows:
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(a) The definition of "Person" in paragraph (a)(C)(ii) hereby
is amended to read in its entirety as follows:
As used in this Article 4(a)(C), "Person" shall include one or
more persons or entities who act or agree to act in concert with respect to the
acquisition or disposition of Class B Common Stock or with respect to proposing
or effecting a plan or proposal to (a) a merger, reorganization or liquidation
of the Corporation or a sale of a material amount of its assets, (b) a change in
the Corporation's Board of Directors or management, including any plans or
proposal to fill vacancies on the Board of Directors or change the number or
term of Directors, (c) a material change in the business or corporate structure
of the Corporation, or (d) any material change in the capitalization or dividend
policy of the Corporation. As used in the preceding sentence, "act or agree to
act in concert" shall not include acts or agreements to act by persons pursuant
to their official capacities as Directors or officers of the Corporation or
because they are related by blood or marriage; it being determined for purposes
of this paragraph that the agreements dated as of June 22, 1998 made with
respect to capitalization and management changes between the Corporation,
certain of its directors and officers and various shareholders, including
certain shareholders related to said directors and officers and the Investors
(as defined in paragraph (a)(C)(iii) of this Article 4), as they may be amended
from time to time, were "acts or agreements to act by persons pursuant to their
official capacities as Directors or officers of the Corporation or because they
are related by blood or marriage."
(b) The following new paragraph (a)(C)(iii) hereby is added to
Article 4:
"(iii) For purposes of Article 4(a)(C)(ii), any shares of Participating
Preferred Stock (as defined in paragraph (d)(F) of this Article 4) held by Carl
Marks Strategic Investments, L.P., Carl Marks Strategic Investments, II, L.P.,
Uranus Fund, Ltd., or any of their Affiliates (as defined in paragraph (d)(F) of
this Article 4) (the "Investors") shall be deemed to have been converted into
shares of Class A Common Stock that are acquired after the Threshold Date. Any
such shares of Class A Common Stock deemed to be held by the Investors or their
Affiliates pursuant to the preceding sentence or any shares of Class A Common
Stock issued upon conversion of the Convertible Participating Preferred Stock
and held by the Investors shall be deemed to have been acquired for an
"equitable price" for purposes of Article 4(a)(C)(ii)."
(c) The existing paragraph (a)(C)(iii) hereby is renumbered as
paragraph (a)(C)(iv).
FIFTH: The certificate of incorporation of the Corporation is amended to
permit the Board of Directors to provide for additional or participating
distributions to holders of shares of Preferred Stock with $.025 Par Value,
Class A.
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<PAGE>
To accomplish this, Article 4, paragraph (d)(C) hereby is
amended to read in its entirety as follows:
(C) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the
holders of shares of each series of Class A Preferred Stock
then outstanding shall be entitled to receive out of the
assets of the Corporation, before any distribution or payment
shall be made to the holders of any class of common stock, an
amount equal to the stated value of the stock plus, in respect
of each share with respect to which dividends are cumulative,
a sum computed at the dividend rate or dividend amount
provided for in the certificate of incorporation from and
after the date on which dividends on such shares became
cumulative to and including the date fixed for such payment,
less the aggregate of the dividends theretofore paid thereon,
but computed without interest. If the amounts payable on
liquidation in respect to the shares of all series of Class A
Preferred Stock are not paid in full, the shares of all series
of such class shall share ratably in any distribution of
assets other than by way of dividends in accordance with the
sums which would be payable in such distribution if all sums
payable were discharged in full. If such payment shall have
been made in full to the holders of all shares of Class A
Preferred Stock on voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the remaining
assets of the Corporation shall, except as otherwise provided
herein, be distributed among the holders of each class of
common stock pro rata in accordance with their respective
holdings. For the purpose of this paragraph, a consolidation
or merger of the Corporation with one or more other
corporations shall not be deemed to be a liquidation or
winding up of the Corporation. In addition to the above-stated
distributions to holders of preferred stock, the Board of
Directors is authorized, in the rights, preferences and other
provisions with respect to any one or more series of Class A
Preferred Stock, to provide for additional or participating
distributions to holders of shares of such series on
liquidation, dissolution or winding up of the Corporation.
SIXTH: The certificate of incorporation of the Corporation hereby is
amended to authorize a third series of Class A Preferred Stock to be designated
Convertible Participating Preferred Stock.
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<PAGE>
To accomplish this, the following new Article 4(d)(F) hereby
is added to the certificate of incorporation:
"(F) Third Series of Class A Preferred Stock. The third series
of 4,166,667 shares of Class A Preferred Stock shall be designated Convertible
Participating Preferred Stock (hereinafter "Participating Preferred Stock"), and
shall have the following rights, preferences and limitations:
(i) Stated Value. The stated value for each share of Participating
Preferred Stock shall be $12 (the "Stated Value").
(ii) Dividends and Distributions. At any time after the Issue Date,
the holders of each share of Participating Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, but out of funds
legally available therefor, a dividend or distribution in cash, evidences of
indebtedness of the Corporation or another issuer, options, warrants or rights
to acquire securities or other property (including, without limitation, rights
issued pursuant to a shareholder rights plan, "poison pill" or similar plan or
arrangement and options or rights granted to each holder of Class A Common
Stock), securities of the Corporation or another issuer (excluding securities
for which adjustment is made under paragraph (vii)(d)(1) or paragraph
(vii)(d)(2)) or other property or assets, including, without limitation, any
such distribution made in connection with a consolidation or merger in which the
Corporation is the resulting or surviving corporation), at a rate per share (and
in the type of property) equal to the amount of any dividend or distribution
(and in the same type of property) as that declared or made on any shares
(including, without limitation, Class A Common Stock) into which one share of
Participating Preferred Stock may be converted pursuant to paragraph (vii) below
on the record date for such dividend or distribution. Any such dividend or
distribution shall be paid to the holders of shares of Participating Preferred
Stock at the same time such dividend or distribution is made to the holders of
the shares of Class A Common Stock. No dividend or distribution shall be
declared or made on any shares of Class A Common Stock unless any dividend or
distribution required to be declared or made under the first sentence of this
paragraph is previously or simultaneously declared or made. Dividends and
distributions shall be cumulative from and after the date of issuance of such
shares of Participating Preferred Stock, but any arrearage in payment shall not
pay interest.
(iii) Voting Rights. (a) Except as otherwise required by law or as
set forth in paragraph (b), the holders of shares of Participating Preferred
Stock shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the shareholders of the Corporation.
(b) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Participating Preferred Stock, voting
separately as a single class, in person or by proxy, at a special or annual
meeting of shareholders called for the purpose,
4
<PAGE>
shall be necessary to (i) authorize the issuance after the Issue Date of any
class of capital stock that will rank as to payment of dividends or rights on
liquidation, dissolution or winding up of the Corporation senior to the
Participating Preferred Stock, (ii) authorize, adopt or approve an amendment to
the certificate of incorporation that would increase or decrease the par value
of the shares of Participating Preferred Stock, (iii) amend, alter or repeal the
certificate of incorporation so as to affect the shares of Participating
Preferred Stock adversely or (iv) effect the voluntary liquidation, dissolution,
winding up, recapitalization or reorganization of the Corporation, or the
consolidation or merger of the Corporation with or into any other Person, or the
sale or other distribution to another Person of all or substantially all of the
assets of the Corporation; provided, however, that no separate vote of the
holders of Participating Preferred Stock shall be required to effect any of the
transactions described in clause (iv) above unless such transaction would either
require a class vote pursuant to clause (i), (ii) or (iii) above or would
require a vote by any shareholders of the Corporation.
(iv) Redemption. The shares of Participating Preferred Stock shall
not be redeemed or subject to redemption, whether at the option of the
Corporation or any holder thereof, or otherwise.
(v) Acquired Shares. Any shares of Participating Preferred Stock
converted, exchanged, redeemed, purchased or otherwise acquired by the
Corporation or any of its subsidiaries in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares of
Participating Preferred Stock shall upon their cancellation become authorized
but unissued shares of Class A Preferred Stock and, upon the filing of an
appropriate certificate with the Department of State of the State of New York,
may be reissued as part of another series of Class A Preferred Stock subject to
the conditions or restrictions on issuance set forth herein, but in any event
may not be reissued as shares of Participating Preferred Stock unless all of the
shares of Participating Preferred Stock issued on the Issue Date shall have
already been converted or exchanged.
(vi) Participating Distribution upon Liquidation of the Corporation.
In addition to the preferential distribution payable to holders of Participating
Preferred Stock equal to the Stated Value (the "Preferential Distribution") as
provided for under Article 4(d)(C) of this certificate of incorporation, an
additional participating distribution shall be payable to holders of
Participating Preferred Stock upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (the "Participating Distribution")
with the effect that the total distribution to holders of the Participating
Preferred Stock shall be the greater of (a) the Preferential Distribution or (b)
the total distribution which holders of Participating Preferred Stock would have
received if all outstanding shares of Participating Preferred Stock were
converted into shares of common stock immediately prior to the date for
calculating the total distribution available to holders of preferred stocks and
common stocks. To achieve the distribution required by the preceding sentence,
the following calculation shall be made:
5
<PAGE>
(1) Calculate the sum of (a) the total
amounts available for distribution
to holders of all classes of common
stock after payment of all
preferential distributions to all
classes of preferred stocks of the
Corporation, including the
Preferential Distribution to
Participating Preferred Stock, plus
(b) the total amount of the
Preferential Distribution to holders
of all outstanding shares of
Participating Preferred Stock.
(2) Divide the sum calculated in
subparagraph (1) by the total number
of shares of common stock into which
the Participating Preferred Stock is
convertible and of all classes of
common stock deemed outstanding for
purposes of calculating the
distribution on liquidation,
dissolution or winding up of the
Corporation. The product of this
calculation is the "Per Share
Distribution on Assumed Conversion."
(3) The excess, if any, of the Per Share
Distribution on Assumed Conversion
over the Preferential Distribution
to each share of Participating
Preferred Stock shall be distributed
as a Participating Distribution to
the holders of the Participating
Preferred Stock upon liquidation,
dissolution or winding up of the
Corporation.
(vii) Conversion. (a) Any holder of Participating Preferred Stock
shall have the right, as its option, at any time (but subject to the provisions
of paragraph (vii)(b)) to convert, subject to the terms and provisions of this
paragraph (vii), any or all of such holder's shares of Participating Preferred
Stock into such number of fully paid and nonassessable shares of Class A Common
Stock as is equal to the product of the number of shares of Participating
Preferred Stock being so converted multiplied by the quotient of (i) the Stated
Value divided by (ii) the conversion price of $12.00 per share, subject to
adjustment as provided in paragraph (vii)(d) (the "Conversion Price"), then in
effect. Such conversion right shall be exercised by the surrender of the shares
of Participating Preferred Stock to be converted to the Corporation at any time
during usual business hours at its principal place of business to be maintained
by it, accompanied by written notice that the holder elects to convert such
shares and specifying the name or names (with addresses) in which a certificate
or certificates for shares of Class A Common Stock are to be issued and (if so
required by the Corporation) by a written instrument or instruments of transfer
in form reasonably satisfactory to the Corporation duly executed by the holder
or its duly authorized legal representative and transfer tax stamps or funds
therefor, if required pursuant to paragraph (vii)(k). All shares of
Participating Preferred Stock surrendered for conversion shall be delivered to
the Corporation for cancellation and canceled by it and no shares shall be
issued in lieu thereof.
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<PAGE>
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Participating Preferred Stock for conversion pursuant
to paragraph (vii)(a), the Corporation shall deliver to or upon the written
order of the holder of the shares so surrendered a certificate or certificates
representing the number of fully paid non-assessable shares of Class A Common
Stock into which such shares may be or have been converted in accordance with
the provisions of this paragraph (vii). Subject to the following provisions of
this paragraph and of paragraph (vii)(d), such conversion shall be deemed to
have been made immediately prior to the close of business on the date that such
shares shall have been surrendered in satisfactory form for conversion, and the
Person or Persons entitled to receive the Class A Common Stock deliverable upon
conversion of such shares shall be treated for all purposes as having become the
record holder or holders of such Class A Common Stock at such time.
(c) To the extent permitted by law, when shares of
Participating Preferred Stock are converted, all unpaid dividends (whether or
not currently payable) on the Participating Preferred Stock so converted to the
date of conversion shall be immediately due and payable and must accompany the
shares of the Class A Common Stock issued upon such conversion.
(d) The Conversion Price shall be subject to adjustment as
follows:
(1) In case the Corporation shall at any time or from
time to time (A) pay a dividend or make a distribution on the outstanding shares
of Class A Common Stock in Class A Common Stock, (B) sub-divide the outstanding
shares of Class A Common Stock into a larger number of shares, (C) combine the
outstanding shares of Class A Common Stock into a smaller number of shares or
(D) issue any shares of its capital stock in a reclassification of the Class A
Common Stock, then, and in each such case, the Conversion Price in effect
immediately prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the Corporation) so that the holder of any share of
Participating Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Class A Common Stock or other
capital stock of the Corporation that such holder would have owned or would have
been entitled to receive upon or by reason of any of the events described above,
had such share of Participating Preferred Stock been converted immediately prior
to the occurrence of such event. An adjustment made pursuant to this paragraph
(vii)(d)(1) shall become effective retroactively (A) in the case of any such
dividend or distribution, to the opening of business on the day immediately
following the close of business on the record date for the determination of
holders of Class A Common Stock entitled to receive such dividend or
distribution or (B) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
(2) In case the Corporation shall at any time or from
time to time issue or sell shares of Class A Common Stock or Class B Common
Stock (or
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<PAGE>
securities convertible into or exchangeable for shares of Class A Common Stock
or Class B Common Stock), or any options, warrants or other rights to acquire
shares of Class A Common Stock or Class B Common Stock (other than (x) options
granted to any employee or director of the Corporation pursuant to a stock
option plan approved by the shareholders of the Corporation, (y) options,
warrants or rights granted to each holder of Class A Common Stock or (z) rights
issued pursuant to a shareholder right plans, "poison pill" or similar
arrangement that complies with paragraph (vii)(j)) for a consideration per share
less than the Current Market Price at the record date or issuance date, as the
case may be (the "Date"), referred to in the following sentence (treating the
price per share of any security convertible or exchangeable or exercisable into
Class A Common Stock and/or Class B Common Stock as equal to (A) the sum of the
price for such security convertible, exchangeable or exercisable into Class A
Common Stock and/or Class B Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Class A Common Stock and/or Class B
Common Stock divided by (B) the number of shares of Class A Common Stock and/or
Class B Common Stock initially underlying such convertible, exchangeable or
exercisable security), other than issuances or sales for which an adjustment is
made pursuant to another paragraph of this paragraph (vii)(d), then, and in each
case, the Conversion Price then in effect shall be adjusted by dividing the
Conversion Price in effect on the day immediately prior to the Date by a
fraction (x) the numerator of which shall be the sum of the numbers of shares of
Class A Common Stock and Class B Common Stock outstanding immediately prior to
the Date plus the number of additional shares of Class A Common Stock and Class
B Common Stock issued or to be issued (or the maximum number into which such
convertible or exchangeable securities initially may convert or exchange or for
which such options, warrants or other right initially may be exercised) and (y)
the denominator of which shall be the sum of the number of shares of Class A
Common Stock and Class B Common Stock outstanding immediately prior to the Date
plus the number of shares of Class A Common Stock and Class B Common Stock that
the aggregate consideration (if any of such aggregate consideration is other
than cash, as valued by the Board of Directors including a majority of the
directors who are not officers or employees of the Corporation or any of its
subsidiaries, which determination shall be conclusive and described in a
resolution of the Board of Directors) for the total number of such additional
shares of Class A Common Stock and/or Class B Common Stock so issued (or into
which such convertible or exchangeable securities may convert or exchange for
which such options, warrants or other rights may be exercised plus the aggregate
amount of any additional consideration initially payable upon conversion,
exchange or exercise of such security) would purchase at the Current Market
Price. Such adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective retroactively to
a date immediately following the close of business (i) in the case of issuance
to shareholders of the Corporation, as such, on the record date for the
determination of shareholders entitled to receive such shares, securities,
options, warrants or other rights and (ii) in all other cases, on the date (the
"Issuance Date") of such issuance; provided, however, that the determination as
to whether an adjustment is required to be made pursuant to this paragraph
(vii)(d)(2) shall only be made upon the issuance of such shares or such
convertible
8
<PAGE>
or exchangeable securities, options, warrants or other rights, and not upon the
issuance of the security into which such convertible or exchangeable security
converts or exchanges, or the security underlying such options, warrants or
other right.
(3) In case the Corporation or any subsidiary thereof
shall, at any time or from time to time while any of the Participating Preferred
Stock is outstanding, make a Pro Rata Repurchase, the Conversion Price shall be
adjusted by dividing the Conversion Price in effect immediately prior to such
action by a fraction (which in no event shall be less than one), the numerator
of which shall be the product of (i) the number of shares of Class A Common
Stock and Class B Common Stock outstanding immediately before such Pro Rata
Repurchase minus the number of shares of Class A Common Stock and Class B Common
Stock repurchased in such Pro Rata Repurchase and (ii) the Current Modified
Market Price as of the day immediately preceding the first public announcement
by the Corporation of the intent to effect such Pro Rata Repurchase, and the
denominator of which shall be (i) the product of (x) the number of shares of
Class A Common Stock and Class B Common Stock outstanding immediately before
such Pro Rata Repurchase and (y) the Current Modified Market Price as of the day
immediately preceding the first public announcement by the Corporation of the
intent to effect such Pro Rata Repurchase minus (ii) the aggregate purchase
price of the Pro Rata Repurchase.
(4) In case the Corporation at any time or from time
to time shall take any action affecting its Class A Common Stock, other than an
action described in any of paragraph (vii)(d)(1) through paragraph (vii)(d)(3),
inclusive, or paragraph (vii)(g), then, the Conversion Price shall be adjusted
in such manner and at such time as the Board of Directors of the Corporation in
good faith determines to be equitable in the circumstances (such determinations
to be evidenced in a resolution, a certified copy of which shall be mailed to
the holders of the Participating Preferred Stock).
(5) The Corporation may make such reductions in the
Conversion Price, in addition to those required by subparagraphs (1) through (4)
of this paragraph (vii)(d), as the Board of Directors considers to be advisable
in order to avoid or to diminish any income tax to holders of Class A Common
Stock or rights to purchase Class A Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes.
(6) Notwithstanding anything herein to the contrary,
no adjustment of the Conversion Price shall be required pursuant to this
paragraph (vi)(d) by reason of the initial issuance or sale of any of the
4,166,667 authorized shares of Participating Preferred Stock.
(7) Notwithstanding anything herein to the contrary,
no adjustment under this paragraph (vii)(d) need to be made to the Conversion
Price unless such adjustment would require an increase or decrease of at least
1% of the Conversion Price then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time
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<PAGE>
of and together with the next subsequent adjustment, which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 1% of such Conversion Price. Any adjustment to the
Conversion Price carried forward and not theretofore made shall be made
immediately prior to the conversion of any shares of Participating Preferred
Stock pursuant hereto; provided, however, that any such adjustment shall in any
event be made no later than one year after the occurrence of the event giving
rise to such adjustment.
(e) Upon any increase or decrease in the Conversion Price,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Participating Preferred Stock at least ten Business Days
prior to effecting any of the foregoing transactions a certificate, signed by
the President or a Vice President and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(f) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares of Participating
Preferred Stock. If more than one share of Participating Preferred Stock shall
be surrendered for conversion at one time by the same holder, the number of full
shares of Class A Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate Stated Value of the shares of
Participating Preferred Stock so surrendered. If the conversion of any share or
shares of Participating Preferred Stock results in a fraction, an amount equal
to such fraction multiplied by the Current Market Price of the Class A Common
Stock on the Business Day preceding the day of conversion shall be paid to such
holder in cash by the Corporation on the date of issuance of the certificates
representing the shares by the Corporation upon such conversion.
(g) In case of any capital reorganization or reclassification or
other change of outstanding shares of Class A Common Stock, or in case of any
consolidation or merger of the Corporation with or into another Person (other
than a consolidation or merger in which the Corporation is the resulting or
surviving Person and which does not result in any reclassification or change of
outstanding Class A Common Stock), or in case of any sale or other disposition
to another Person of all or substantially all of the assets of the Corporation
(any of the foregoing, a "Transaction"), the Corporation, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each holder
of Participating Preferred Stock at least ten Business Days prior to effecting
any of the foregoing Transactions a certificate that the holder of each share of
Participating Preferred Stock then outstanding shall have the right hereafter to
convert such share of Participating Preferred Stock into the kind and amount of
shares of stock or other securities (of such Corporation or another issuer) or
property or cash receivable upon such Transaction by a holder of the number of
shares of Class A Common Stock into which such share of Participating Preferred
Stock could have been converted immediately prior to such
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<PAGE>
transaction. Such certificate shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
paragraph (vii). If, in the case of any such Transaction, the stock, other
securities, cash or property receivable thereupon by a holder of Class A Common
Stock includes shares of stock or other securities of a Person other than the
successor or purchasing Person and other than the Corporation, which controls or
is controlled by the successor or purchasing Person or which, in connection with
such Transaction, issues, stock securities, other property or cash to holders of
Class A Common Stock, then such certificate also shall be executed by such
Person, and such Person shall, in such certificate, specifically acknowledge the
obligations of such successor or purchasing Person and acknowledge its
obligations to issue such stock, securities, other property or cash to the
holders of the Participating Preferred Stock upon conversion of the shares of
Participating Preferred Stock as provided above. The provisions of this
paragraph (vii) and any equivalent thereof in any such certificate similarly
shall apply to successive Transactions.
(h) In case at any time or from time to time:
(1) the Corporation shall authorize the granting to the
holders of its Class A Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or warrants;
(2) there shall be any reclassification of the Class A
Common Stock (other than a subdivision or combination of the outstanding Class A
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or any consolidation or merger to which the
Corporation is a party and for which approval of any shareholders of the
Corporation is required, or any sale or other disposition of all or
substantially all of the assets of the Corporation; or
(3) the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Participating
Preferred Stock at such holder's address as it appears on the transfer books of
the Corporation, at least 20 days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such rights or warrants or, if a record is not to be taken, the
date as of which the holders of Class A Common Stock of record to be entitled to
such rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective. Such notice also
shall specify the date as of which it is expected that holders of Class A Common
Stock of record shall be entitled to exchange their Class A Common Stock for
shares of stock or other securities or property or cash deliverable upon such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
11
<PAGE>
(i) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Participating Preferred Stock,
such number of its authorized but unissued shares of Class A Common Stock as
will from time to time be sufficient to permit the conversion of all outstanding
shares of Participating Preferred Stock.
(j) The Corporation shall not adopt a shareholder rights
plan, "poison pill" or similar arrangement unless such plan or arrangement shall
provide that each holder of a share of Participating Preferred Stock shall be
entitled to receive thereunder rights for each share of Class A Common Stock
that may be issued upon conversion of such share of Participating Preferred
Stock in an amount equal to the amount of rights issued with respect to each
outstanding share of Class A Common Stock pursuant to such plan.
(k) The issuance or delivery of certificates for Class A
Common Stock upon the conversion of shares of Participating Preferred Stock
shall be made without charge to the converting holder of shares of Participating
Preferred Stock for such certificates or for any tax in respect of the issuance
or delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the respective names of, or in such
names as may be directed by, the holders of the shares of Participating
Preferred Stock converted; provided, however, that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the holder of the shares of Participating Preferred Stock converted, and the
Corporation shall not be required to issue or deliver such certificates unless
or until the Person or Persons requesting the issuance or delivery thereof shall
have paid to the Corporation the amount of such tax or shall have established to
the reasonable satisfaction of the Corporation that such tax has been paid.
(l) To the extent that pursuant to the terms of this
paragraph (vii), the Participating Preferred Stock is convertible into any
securities or property other than Class A Common Stock, then for purposes of
this Article 4(d)(F), references to Class A Common Stock shall be deemed
appropriately amended to refer to such other securities or property.
(viii) Definitions. As used in this Article 4(d)(F), the
following terms shall have the meanings indicated:
(a) An "Affiliate" of, or a person "affiliated" with a
specified Person, means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified. The term "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
12
<PAGE>
(b) "Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law or executive order to close.
(c) "Current Market Price" per share shall mean, on any
date specified herein for the determination thereof, (A) the average daily
Market Price of the Class A Common Stock for those days during the period
commencing not more than 30 days before, and ending not later than such date, on
which the national securities exchanges were open for trading or the Class A
Common Stock was quoted in the over-the-counter market, and (B) if the Class A
Common Stock is not then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Market Price
on such date.
(d) "Current Modified Market Price" per share shall mean,
on any date specified herein for the determination thereof, (A) the average
daily Modified Market Price of the Class A Common Stock for those days during
the period commencing not more than 30 days before, and ending not later than
such date, on which the national securities exchanges were open for trading or
the Class A Common Stock was quoted in the over-the-counter market, and (B) if
the Class A Common Stock is not then listed or admitted to trading on any
national securities exchange or quoted in the over-the-counter market, the
Modified Market Price on such date.
(e) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Securities and
Exchange Commission thereunder.
(f) "Fair Market Value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length transaction.
(g) "Issue Date" shall mean the first date on which
shares of Participating Preferred Stock are issued.
(h) "Market Price" shall mean, per share of Class A
Common Stock, on any date specified herein: (a) the closing price per share of
the Class A Common Stock on such date published in The Wall Street Journal or,
if no such closing price on such date is published in The Wall Street Journal,
the closing bid price on such date, as officially reported on the principal
national securities exchange on which the Class A Common Stock is then listed or
admitted to trading; or (b) if the Class A Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of the Class
A Common Stock on such date; or (c) if there shall have been no trading on such
date or if the Class A Common Stock is not so designated, the reported closing
bid price of the Class A Common Stock, on such date as shown by the Nasdaq
National Market or other over-the-counter market and reported by any member firm
of the New York Stock Exchange selected
13
<PAGE>
by the Corporation; or (d) if none of (a), (b) or (c) is applicable, a market
price per share determined at the Corporation's expense by a nationally
recognized appraiser chosen by the holders of a majority of the shares of
Participating Preferred Stock and approved by the Corporation, which approval
shall not be unreasonably withheld. If no such appraiser is chosen more than 20
Business Days after notice of the necessity of such calculation shall have been
delivered by the Corporation to the holders of Participating Preferred Stock,
then the appraiser shall be chosen by the Corporation.
(i) "Modified Market Price" shall mean, per share of Class
A Common Stock, on any date specified herein: (a) the closing price per share of
the Class A Common Stock on such date published in The Wall Street Journal or,
if no such closing price on such date is published in The Wall Street Journal,
the closing asked price on such date, as officially reported on the principal
national securities exchange on which the Class A Common Stock is then listed or
admitted to trading; or (b) if the Class A Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of the Class
A Common Stock on such date; or (c) if there shall have been no trading on such
date or if the Class A Common Stock is not so designated, the reported closing
asked price of the Class A Common Stock on such date as shown by the Nasdaq
National Market or other over-the-counter market and reported by any member firm
of the New York Stock Exchange selected by the Corporation; or (d) if none of
(a), (b) or (c) is applicable, a market price per share determined at the
Corporation's expense by a nationally recognized appraiser chosen by the holders
of a majority of the shares of Participating Preferred Stock and approved by the
Corporation, which approval shall not be unreasonably withheld. If no such
appraiser is chosen more than 20 Business Days after notice of the necessity of
such calculation shall have been delivered by the Corporation to the holders of
Participating Preferred Stock, then the appraiser shall be chosen by the
Corporation.
(j) "NASD" shall mean the National Association of
Securities Dealers, Inc.
(k) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, government (or
any agency or political subdivision thereof) or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
(l) "Pro Rata Repurchase" shall mean any purchase of
shares of Class A Common Stock or Class B Common Stock by the Corporation or by
any of its subsidiaries whether for cash, shares of capital stock of the
Corporation, other securities of the Corporation, evidences of indebtedness of
the Corporation or any other Person or any other property (including, without
limitation, shares of capital stock, other securities or evidences of
indebtedness of a subsidiary of the Corporation), or any combination thereof,
effected while any of the shares of Participating Preferred Stock are
outstanding, which
14
<PAGE>
purchase is subject to Section 13(e) of the Exchange Act or is made pursuant to
an offer made available to all holders of Class A Common Stock or Class B Common
Stock.
SEVENTH: The certificate of incorporation of the Corporation is hereby amended
to require unanimous approval of the Corporation's Board of Directors for
certain major corporate actions.
To accomplish this, the following new Article 10 hereby is
added to the certificate of incorporation:
10. Until such time as the Investors and any permitted assignees under
the Shareholders Agreement shall own, in the aggregate, 15% or less of
the outstanding Class A Common Stock (assuming conversion of all shares
of Participating Preferred Stock into Class A Common Stock):
(a) All of the directors of the Corporation shall be present
at any meeting of the directors in order to constitute a quorum for the
transaction of any Major Corporate Actions (as defined in subparagraph (b))
below; and
(b) Each of the following actions (the "Major Corporate
Actions") shall require the unanimous approval of all of the Corporation's
directors voting thereon (excluding directors who abstain from voting):
(i) any amendment or modification of the Corporation's
Restated Certificate of Incorporation, as amended, or ByLaws;
(ii) any merger, consolidation, amalgamation,
recapitalization or other form of business combination (other that any
acquisition that would be permitted under paragraph (d) below)
involving the Corporation or any subsidiary of the Corporation;
(iii) any sale, conveyance, lease, transfer or other
disposition of all or substantially all of the assets of the
Corporation;
(iv) any single acquisition or disposition or series
of related acquisitions or disposition of assets, including stock
(whether by purchase, merger or otherwise), in the Principal Line of
Business (as hereinafter defined) of the Corporation involving gross
consideration in excess of $15 million;
(v) any change in the line of business (food
processing, packaging, distribution and canning of fruits and
vegetables and other business operations complementary or incidental
thereto) of the Corporation and its subsidiaries (the "Principal Line
of Business"), whether by acquisition of assets or otherwise; provided,
that the Corporation and its subsidiaries may
15
<PAGE>
change or dispose of any existing business or acquire any business
that, in each case, is not within their Principal Line of Business, if
the consolidated net sales from all such business engaged in (or
proposed to be engaged in) by the Corporation and its subsidiaries do
not exceed in the aggregate 2% of the consolidated net sales of the
Corporation and its subsidiaries (determined by reference to the latest
annual or quarterly period in the latest available consolidated
financial statements of the Corporation and any business proposed to be
acquired);
(vi) any issuance of or agreement to issue, or any
repurchase, redemption or other acquisition or agreement to repurchase,
redeem or otherwise acquire, any shares of capital stock of the
Corporation or any of its subsidiaries or rights of any kind
convertible into or exercisable or exchangeable for, any shares of
capital stock of the Corporation or any of its subsidiaries, or any
option, warrant or other subscription or purchase right with respect to
shares of capital stock except for (i) any stock buybacks not to exceed
$100,000 in any one transaction or $1 million in the aggregate and (ii)
any issuances of shares of Class A Common Stock pursuant to the terms
of Seneca Foods Corporation Employees' Savings Plan in effect on the
date hereof;
(vii) any change in the Corporation's certified
public accountants from Deloitte & Touche LLP, or any successor of
Deloitte & Touche LLP;
(viii) the settlement of any litigation to which the
Corporation or any of its subsidiaries is a party involving the payment
by the Corporation or its subsidiaries of an aggregate amount greater
than 5% of the Company's Adjusted Tangible Net Worth, or involving the
consent to any injunctive or similar relief; and
(ix) the commencement by the Corporation or any of
its subsidiaries or proceedings under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the making by
the Corporation or any of its subsidiaries of a general assignment for
the benefit of its creditors.
16
<PAGE>
To the extent that the above-referenced Board approval is not obtained with
respect to any Major Corporate Action, the Corporation may not take or perform
such Major Corporate Action. For purposes of paragraph (h) above, the
Corporation's "Adjusted Tangible Net Worth" shall mean (i) the net book value
(after deducting related depreciation, obsolescence, amortization, valuation and
other proper reserves, which reserves will be determined in accordance with
generally accepted accounting principles) at which the assets of the Corporation
and its subsidiaries on a consolidated basis (except (w) patents, copyrights,
trademarks, trade names, franchises, goodwill and other similar intangibles, (x)
unamortized debt discount and expense, (y) accounts, notes and other receivables
due from any person directly or indirectly controlling, controlled by or under
common control with the Corporation, and (z) write-ups in the book value of any
fixed asset resulting from a revaluation thereof effective after June 22, 1998)
are shown on the latest available consolidated balance sheet of the Corporation
on such date minus (ii) the amount at which the liabilities of the Corporation
and its subsidiaries are shown on such consolidated balance sheet (including as
liabilities all reserves for contingencies and other potential liabilities as
shown on such consolidated balance sheet).
EIGHTH: The manner in which shares of the Corporation shall be changed hereby
upon the filing of this certificate by the Department of State is as follows:
<TABLE>
<CAPTION>
Shares Changed Hereby Shares Resulting From Change
<S> <C>
Class A Common Stock with a par value of Class A Common Stock with a par value of
$0.25 per share: $0.25 per share:
3,143,125 issued shares 3,143,125 issued shares
6,856,875 unissued shares 16,856,875 unissued shares
Preferred Stock with $.025 par value per Preferred Stock with $.025 par value per
share, Class A: share, Class A:
807,240 issued shares 807,240 issued shares
3,192,760 unissued shares 7,392,760 unissued shares
</TABLE>
NINTH: The foregoing amendments of the certificate of incorporation were
authorized at a meeting of the Board of Directors, followed by the votes cast in
person or by proxy of the holders of record of a majority of the outstanding
shares entitled to vote at a special shareholders meeting of the Corporation
with respect to the remaining amendments set forth in this Certificate.
17
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Certificate of Amendment to be executed this _____ day of _____________ 1998,
and affirm that the statements made herein are true under penalty of perjury.
SENECA FOODS CORPORATION
By:___________________________
Name: Kraig H. Kayser
Title: President
By:___________________________
Name: Jeffrey L. Van Riper
Title: Secretary
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a list of the expenses the Registrant expects to pay
in connection with the issuance and distribution of the shares registered
hereby. The Company will be responsible for the payment of these expenses.
Commission Filing and Registration Fees.................. $14,750.00
Nasdaq Listing Fees**.................................... $17,500.00
Blue Sky Fees and Expenses .............................. $ 5,000.00
Legal Fees and Expenses*................................. $200,000.00
Subscription Agent Fees and Expenses*......................$ ---
Printing Expenses*....................................... $40,000.00
Accounting Fees and Expenses*............................ $20,000.00
Miscellaneous Expenses*....................................$12,750.00
Total................................................$310,000.00
- ----------------
* Estimated
** To be paid upon conversion of the first share of New Preferred Stock.
Item 15. Indemnification of Directors and Officers.
The Company's Restated Certificate of Incorporation, as amended,
provides that the Company is required to indemnify each and every officer or
director of the Company, even those whose term has expired, for any and all
expenses actually and necessarily incurred by such director or officer in
connection with the defense of any action, suit or proceeding in which he is
made a party by reason of being or having been a director or officer of the
Company. The Company is not required to indemnify a director or officer for
matters as to which such officer or director is adjudged to be liable for
neglect or misconduct in the performance of his duties as director or officer.
Further, the rights of the officers or directors to indemnification are not
exclusive of any other rights to which an officer or director of the Company is
entitled.
Under the Company's Bylaws, the Company has the authority to indemnify
its directors and officers to the fullest extent permitted by the New York
Business Corporation Law (Sections 721-726) (the "BCL"). The Bylaws, reflecting
New York law, extend such protection to any person made or threatened to be made
a party to any action or proceeding,
II-1
<PAGE>
including an action by or in the right of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, which any
director, officer or employee of the Company served in any capacity at the
request of the Company, by reason of the fact that such director or officer, his
testator or intestate, is or was a director or officer of the Company or is or
was serving such enterprise at the request of the Company. The Bylaws provide
that such indemnification may be authorized pursuant to the terms and conditions
of (i) a resolution of shareholders; (ii) a resolution of the Board of
Directors; (iii) an agreement providing for such indemnification or (iv) any
judicial or other legal authority which entitles the director, officer or
employee to such indemnification.
The BCL provides that, if successful on the merits or otherwise, an
officer or director is entitled to indemnification by the Company against
amounts paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred in connection with the defense of such action
or proceeding, or any appeal therein, if such director or officer acted in good
faith, for a purpose which he reasonably believed to be in, or at least not
opposed to, the best interests of the Company. The termination of any action or
proceeding by judgment, settlement, conviction or plea of nolo contendere, or
its equivalent, does not itself create the presumption that such director or
officer did not act, in good faith, for a purpose which he reasonably believed
to be in, or not opposed to, the best interests of the Company or that he had
reasonable cause to believe that his conduct was unlawful.
If a corporation fails to provide indemnification to its directors or
officers, the BCL provides that despite any contrary resolution of the board of
directors or shareholders, indemnification may be awarded by application to the
appropriate judicial authority. Application for such court-ordered
indemnification may be made either in the civil action or proceeding in which
the expenses were incurred or other amounts were paid or to the supreme court in
a separate proceeding.
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<PAGE>
Item 16. Exhibits.
Exhibit
Number Description
- ------- -----------
2(a) The Stock Purchase Agreement dated as of June 22, 1998 (incorporated by
reference to Exhibit 2(a) to the Company's Current Report on Form 8-K
filed July 2, 1998)
(b) The Shareholders Agreement dated as of June 22, 1998 (incorporated by
reference to Exhibit 2(b) to the Company's Current Report on Form 8-K
filed July 2, 1998)
(c) The Registration Rights Agreement dated as of June 22, 1998
(incorporated by reference to Exhibit 2(c) to the Company's Current
Report on Form 8-K filed July 2, 1998)
3(a)(1) The Company's Restated Certificate of Incorporation, as
amended (incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q/A filed August 1995
for the quarter ended July 1, 1995)
3(a)(2) An amendment to the Company's Restated Certificate of
Incorporation, as amended (incorporated by reference to
Exhibit 3 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996)
3(a)(3) Form of Certificate of Amendment to the Company's Restated
Certificate of Incorporation, as amended setting forth the
terms of the New Preferred Stock (incorporated by reference to Exhibit
3(i) to the Company's Current Report on Form 8-K filed July 2, 1998)
(b) The Company's Bylaws, as amended (incorporated by reference to
Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q/A
filed August, 1995)
4(a) Note Agreement related to the $75,000,000 note with The
Prudential Insurance Company of America (incorporated by
reference to Exhibit 99 to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 28, 1995) as amended by Exhibit
4 to the Company's Annual Report on Form 10-K for the year ended March
31, 1996.
(b) Note Agreement related to the $50,000,000 note with John Hancock
Mutual Life Insurance Company (incorporated by reference to
Exhibit 99 to the Company's Quarterly Report on Form 10-Q for
the quarter ended January 28, 1995)
5 Opinion of Jaeckle Fleischmann & Mugel, LLP (filed herewith)
8 Opinion of Jaeckle Fleischmann & Mugel, LLP with respect to tax
matters (filed herewith)
10(a) Asset Purchase Agreement related to the transaction with the Green
Giant(R) Division of Pillsbury (incorporated by reference to Exhibit
2(A) to the Company's Current Report on Form 8-K dated February 24,
1995)
II-3
<PAGE>
(b)(i) Alliance Agreement related to the transaction with the Green
Giant(R) Division of Pillsbury (incorporated by reference to
Exhibit 2(B) to the Company's Current Report on Form 8-K dated
February 24, 1995)
(ii) Amendment No. 1 to Alliance Agreement dated February 25, 1997
(filed herewith)
(iii) Amendment No. 2 to Alliance Agreement dated July 1, 1998
(filed herewith)
(c) Secured Nonrecourse Subordinated Promissory Note related to
the transaction with the Green Giant(R) Division of Pillsbury
(incorporated by reference to Exhibit 2(C) to the Company's
Current Report on Form 8-K dated February 24, 1995)
12 Statement regarding computation of ratios (filed herewith at
pages F-7 and F-8 )
21 Subsidiaries of the Company (filed herewith)
23(a) Consent of Deloitte & Touche LLP (filed herewith)
(b) Consent of Jaeckle Fleischmann & Mugel, LLP (contained in
Exhibit 5 above)
24 Power of Attorney (incorporated by reference to Exhibit 24 of
the Company's Registration Statement on Form S-1
(No.333-58739) filed July 9, 1998).
27 Financial Data Schedule (filed herewith)
99(a) Subscription Certificate for the shares of Convertible
Participating Preferred Stock (filed herewith)
(b) Notice of Guaranteed Delivery for Subscription Certificates
issued by the Company (filed herewith)
(c) Instructions to Shareholders as to Use of the Company's
Subscription Certificates (filed herewith)
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate
II-4
<PAGE>
offering price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Sections 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
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<PAGE>
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment
to be signed on its behalf by the undersigned, thereunto duly
authorized in Pittsford, New York, on August 7, 1998.
SENECA FOODS CORPORATION
By: /s/ Kraig H. Kayser
-----------------------
Kraig H. Kayser, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment
Statement has been signed below by the following persons in the capacities
indicated on August 7, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
Arthur S. Wolcott Chairman and Director )
)
Kraig H. Kayser President, Chief Executive )
Officer and Director )
Philip G. Paras Vice President-Finance )
)
Jeffrey L. Van Riper Controller and Secretary ) /s/Kraig H. Kayser
(Principal Accounting Officer) ) ------------------
Robert T. Brady Director ) Kraig H. Kayser
)
David L. Call Director )
)
Edward O. Gaylord Director )
)
G. Brymer Humphreys Director )
)
Susan W. Stuart Director )
</TABLE>
II-8
<PAGE>
Exhibit 5
JAECKLE FLEISCHMANN & MUGEL, LLP
A T T O R N E Y S A T L A W
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292
TEL (716) 856-0600 FAX (716) 856-0432
August 7, 1998
Seneca Foods Corporation
1162 Pittsford-Victor Road
Pittsford, New York 14534
Re: Registration Statement on Form S-1 under the
Securities Act of 1933, No. 333-58739 (the
"Registration Statement"); Issuance and
Sale of up to 4,166,667 shares of Convertible Participating
Preferred Stock, with $0.025 par value per share
("New Preferred Stock")
Ladies and Gentlemen:
As your counsel we have examined the Registration Statement
dated August 7, 1998 and we are familiar with the documents referred to therein,
as well as the Certificate of Incorporation and By-Laws of Seneca Foods
Corporation (the "Company"), each as amended to date, such records of
proceedings of the Company as we deemed material, and such other proceedings of
the Company as we deemed necessary for the purpose of this opinion.
We have examined the proceedings heretofore taken and we are
informed as to the procedures proposed to be followed by the Company in
connection with the authorization, issuance and sale of the shares of New
Preferred Stock. In our opinion the shares of New Preferred Stock to be issued
by the Company will be, when issued and paid for pursuant to the Registration
Statement dated August 7, 1998 and the exhibits thereto, duly authorized for
issuance by all necessary corporate action and, upon the issuance thereof in
accordance with their terms, the shares of New Preferred Stock will be legally
issued, fully paid and non-assessable.
We consent to the incorporation by reference of this opinion
letter as an exhibit to the Registration Statement and to its attachment as an
exhibit to the Prospectus contained therein.
Very truly yours,
JAECKLE FLEISCHMANN
& MUGEL, LLP
Buffalo, New York Rochester, New York
Exhibit 8
JAECKLE FLEISCHMANN & MUGEL, LLP
A T T O R N E Y S A T L A W
FLEET BANK BUILDING TWELVE FOUNTAIN PLAZA BUFFALO, NEW YORK 14202-2292 USA
TEL (716) 856-0600 FAX (716) 856-0432
August 7, 1998
Seneca Foods Corporation
1162 Pittsford-Victor Road
Pittsford, New York 14534
Re: Seneca Foods Corporation; Issuance of 5,939,680 Rights to
Acquire Shares of Convertible Participating Preferred
Stock
Ladies and Gentlemen:
We are legal counsel to Seneca Foods Corporation, a New York
corporation (the"Company"), and have represented the Company in connection with
the preparation of its Registration Statement on Form S-1 (No. 333-58739)(the
"Registration Statement") and in connection with its distribution of the
Company's Rights("Rights") to acquire shares of Convertible Participating
Preferred Stock with $0.025 par value per share ("New Preferred Stock"). We are
furnishing this opinion at the request of the Company. Capitalized words and
phrases not otherwise defined in this letter will have the same meanings and
definitions as they have in the Registration Statement.
In rendering our opinions, we have reviewed (i) the
Registration Statement;(ii) the Prospectus;(iii) the Company's Restated
Certificate of Incorporation, as amended; (iv) the Certificate of Amendment to
the Company's Restated Certificate of Incorporation, as amended setting forth
the terms of the New Preferred Stock; (v) the Company's By-laws; (vi) the Stock
Purchase Agreement; (vii) the Shareholders Agreement; and (viii) the
Registration Rights Agreement.
In rendering our opinions, we have considered the
applicable provisions of the Internal Revenue Code of 1986, as amended ("Code"),
Treasury Regulations, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service and such other authorities as we have considered
necessary and relevant. We have assumed that the shares of Common Stock to which
the Rights Offering relates are held as capital assets by the shareholders.
Based upon the foregoing, we are of the opinion that:
(i) for federal income tax purposes, the Rights Offering will be treated as a
distribution of the stock of the Company with respect to its stock, and,
pursuant to Section 305(a) of the Code, no gain or loss will be recognized by
either the Company or its shareholders from the issuance or receipt of the
Rights; (ii) a shareholder will not recognize any gain or loss upon the exercise
of Rights received in the Rights Offering; (iii) a shareholder will not
recognize any gain or loss upon the lapse of Rights received in the Rights
Offering; (iv) a shareholder who converts New Preferred Stock into Class A
Common Stock will not recognize any gain or loss upon such conversion; and (v)
the federal income tax treatment described in the Prospectus under the caption
"Certain Federal Income Tax Consequences" is accurate.
Except as set forth above, we express no opinion as to the tax
consequences, whether Federal, State, local or foreign, of any other
transactions contemplated or described in the Prospectus. This opinion is being
furnished to you in connection with the Prospectus and may not be used or relied
upon for any other purpose. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement and to its attachment as an exhibit to
the Prospectus contained therein.
Very truly yours,
JAECKLE FLEISCHMANN & MUGEL, LLP
Exhibit 10(b)(ii)
AMENDMENT NO. 1
TO
FIRST AMENDED AND RESTATED
ALLIANCE AGREEMENT
This Amendment (the "Amendment") is entered into as of the
25th day of February 1997, by and among THE PILLSBURY COMPANY, having its
principal offices at Pillsbury Center, 200 South Sixth Street, Minneapolis,
Minnesota 55402 ("Pillsbury"), SENECA FOODS CORPORATION, having its principal
offices at 1162 Pittsford-Victor Road, Pittsford, New York 14534 ("Seneca") and,
solely for the purposes set forth in Section 23.8 of the Alliance Agreement as
hereinafter defined, GRAND METROPOLITAN INCORPORATED, having its principal
offices at Pillsbury Center, 200 South Sixth Street, Minneapolis, Minnesota
55402 ("GMI") and GRAND METROPOLITAN PUBLIC LIMITED COMPANY, having its
principal offices in London, England, United Kingdom ("GrandMet").
W I T N E S S E T H
WHEREAS, Pillsbury and Seneca are parties to a FIRST AMENDED
AND RESTATED ALLIANCE AGREEMENT entered into December 8, 1994 (the "Agreement"),
and GMI is a party to that Agreement solely for the purposes set forth in
Section 23.8 thereof, and
WHEREAS, to meet the requirements of the lenders which finance
Seneca's production of goods and other operations under the Agreement,
Pillsbury, Seneca, GMI and GrandMet desire to amend Section 23.8 of the
Agreement to provide that GrandMet will assume certain obligations and be
entitled to certain rights, as specified in said Section.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree as follows:
1. The following definition shall be added, in
alphabetical placement, to the part of the Agreement designated DEFINITIONS.
<PAGE>
"GrandMet" means Grand Metropolitan Public Limited
Company, a United Kingdom limited company."
2. Section 23.8 of the Agreement is hereby amended to read in
its entirety as follows:
"23.8 GrandMet, the ultimate parent company
of Pillsbury, hereby agrees, during the term
of this Agreement, to be obligated, to the
same degree and in the same manner as
Pillsbury, to make all payments due to
Seneca under Sections 3.6, 4.3, 6.2, 6.3,
7.4, 8.1 and 19.2 of this Agreement, and to
be entitled to the same rights as Pillsbury
under such Sections."
3. All other provisions of the Agreement are hereby affirmed.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers or representatives.
SENECA FOODS CORPORATION THE PILLSBURY COMPANY
By: ________________________ By: ________________________
ADDRESS FOR NOTICES:
Seneca Foods Corporation The Pillsbury Company
1162 Pittsford-Victor Road Pillsbury Center
Pittsford, New York 14534 200 South Sixth Street
Minneapolis, Minnesota 55402
with a copy to:
The Pillsbury Company
200 South Sixth Street
Minneapolis, Minnesota 55402
Attn: General Counsel
GRAND METROPOLITAN GRAND METROPOLITAN
PUBLIC LIMITED COMPANY INCORPORATED
By: ________________________ By: ________________________
ADDRESS FOR NOTICES:
Grand Metropolitan PLC Grand Metropolitan Incorporated
8 Henrietta Place c/o The Pillsbury Company
London W1M 9AG Pillsbury Center
England 200 South Sixth Street
Minneapolis, Minnesota 55402
Attn: General Counsel
- 2 -
<PAGE>
Exhibit 10(b)(iii)
Amendment No. 2
To First Amended And Restated Alliance Agreement.
This Agreement is entered into effective as of the 1st day of July, 1998 by and
among The Pillsbury Company having its principal offices at Pillsbury Center,
200 South Sixth Street, Minneapolis, Minnesota 55402 ("Pillsbury"), and Seneca
Foods Corporation having its principal offices at 1162 Pittsford-Victor Road,
Pittsford, New York 14534 ("Seneca").
W I T N E S S E T H
WHEREAS, Pillsbury and Seneca are parties to a First Amended and Restated
Alliance Agreement entered into December 8, 1994 as amended on February 10, 1995
(The "Agreement"), and
WHEREAS, to improve the overall working arrangement between the parties for the
remainder of the term of the Agreement, the parties agree to make the following
changes to the Agreement for their mutual benefit:
1. The seventh Whereas clause is amended in its entirety to read as follows:
"WHEREAS, following such sale, Seneca intends to provide
Pillsbury with such long-term, strategic alliance supply from Seneca
Plants and the Sold Plants under this Agreement. As identified on
Exhibit A hereto, the Seneca Plants and the Sold Plants located in the
Midwest and Northwest and two plants located in the state of New York
are collectively referred to herein as the "Central Division Plants,"
the Seneca Plants located in the Northeast (other than the two New York
plants referred to above) which will be producing Products under the
terms of this Agreement, if any, are collectively referred to herein as
the "Eastern Division Plants", and the Central Division Plants and the
Eastern Division Plants are collectively referred to herein as the
Alliance Plants";
2. The following definitions are hereby amended and replaced in their entirely:
"Agreement" means this Alliance Agreement as amended from time to time.
"Central Division Plants" means, collectively, the Seneca Plants and
the Sold Plants located in the Midwest, Northwest and in the state of New York
which are identified on Exhibit A hereto.
"Continuous Improvement Program Team" means a team of employees of
Seneca and, initially, Pillsbury who are charged with developing and
implementing cost reduction projects at the Central Division Plants under this
Alliance Agreement.
"Cost Reduction Project" means a cost saving initiative proposed or
implemented by the Continuous Improvement Program Team.
"Eastern Division Plants" means, collectively, the Seneca Plants
located in the Northeast, if any, which will be producing Products under the
terms of this Agreement.
"Seneca" means Seneca Foods Corporation, a New York corporation.
3. The following sentences are added at the end of Section 3.2 (Central Division
Transfer Prices):
"The parties may agree from time to time in writing without further
need to amend this Agreement to add additional plants to the Central
Division Plants, either for a given Product or Fiscal Year. In the
event such plants are added, they will be accounted for based upon the
percentage of the plant's production which is sold to Pillsbury."
4. Section 3.3 of the Agreement titled Eastern Division Transfer Prices in
hereby amended in its entirety as follows:
3.3 Eastern Division Transfer Prices.
Confidential Information Has Been Omitted and
Filed Separately with the Commission
5. A New Subsection 3.6(g) is added as follows:
3.6 Payment Terms.
Confidential Information Has Been Omitted and
Filed Separately with the Commission
6. A New Section is added as follows:
Confidential Information Has Been Omitted and
Filed Separately with the Commission
7. ARTICLE VIII titled "COST REDUCTIONS" shall be replaced in its entirety with
the following:
Confidential Information Has Been Omitted and
Filed Separately with the Commission
8. Exhibit A is amended in its entirety as follows:
EXHIBIT A
Vegetable Division Plants
Buhl, Idaho
Blue Earth, Minnesota
Cumberland, Wisconsin
Dayton, Washington
Geneva, New York
Glencoe, Minnesota
Janesville, Wisconsin
Marion, New York
Mayville, Wisconsin
Montgomery, Minnesota
Rochester, Minnesota
9. A new Exhibit J-1 is added as follows:
EXHIBIT J-1
Cost Improvement Process Guiding Principles
Confidential Information Has Been Omitted and
Filed Separately with the Commission
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to be executed by their duly authorized officers or representatives.
SENECA FOODS CORPORATION THE PILLSBURY COMPANY
By: ________________________ By: ________________________
Its: ________________________ Its: ________________________
Exhibit 21
Name Jurisdiction
SSP Company, Inc. Massachusetts
Marion Foods, Inc. New York
Seneca Foods International, Ltd. New York
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-58739 of Seneca Foods Corporation on Form S-1 of our report dated May 22,
1998 (June 16, 1998 as to Note 4), appearing in the Prospectus, which is a part
of this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
Our audits of the consolidated financial statements referred to in our
aforementioned report also include the consolidated financial statement schedule
of Seneca Foods Corporation, appearing on page F-16. This consolidated financial
statement schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche
Deloitte & Touche LLP
Rochester, New York
August 7, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4077
<SECURITIES> 0
<RECEIVABLES> 48854
<ALLOWANCES> 207
<INVENTORY> 194044
<CURRENT-ASSETS> 253894
<PP&E> 393724
<DEPRECIATION> 175316
<TOTAL-ASSETS> 474926
<CURRENT-LIABILITIES> 141595
<BONDS> 227858
0
70
<COMMON> 2666
<OTHER-SE> 96389
<TOTAL-LIABILITY-AND-EQUITY> 474926
<SALES> 703220
<TOTAL-REVENUES> 703220
<CGS> 649841
<TOTAL-COSTS> 649841
<OTHER-EXPENSES> 35056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26780
<INCOME-PRETAX> (8457)
<INCOME-TAX> (3313)
<INCOME-CONTINUING> (5144)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5144)
<EPS-PRIMARY> (.87)
<EPS-DILUTED> (.87)
</TABLE>
SENECA LETTERHEAD
SENECA FOODS CORPORATION
1162 Pittsford-Victor Road
Pittsford NY 14534
VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT BEFORE 5:00 P.M.
EASTERN STANDARD TIME ON AUGUST 27, 1998
Shareholder Name & Address: ________________________
________________________
________________________
________________________
-----------------
SENECA FOODS CORPORATION
RIGHTS FOR CONVERTIBLE PARTICIPATING PREFERRED STOCK
Dear Shareholder:
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST COMPLETE THE INFORMATION SET FORTH
BELOW.
As the registered owner of this Subscription Certificate, you are entitled to
subscribe for the number of shares of Convertible Participating Preferred Stock
with $0.025 par value per share (the "New Preferred Stock") of Seneca Foods
Corporation shown above. You may subscribe for such shares at the Subscription
Price of $12.00 per share.
THIS SUBSCRIPTION RIGHT IS TRANSFERABLE
VOID IF NOT RECEIVED BY THE SUBSCRIPTION AGENT
BEFORE 5:00 P.M., EASTERN STANDARD TIME, ON
AUGUST 27, 1998, THE EXPIRATION DATE
Control No. __________ Rights Represented by this Subscription Certificate _____
Account No. _________ Number of Shares of New Preferred Stock:__________
SENECA FOODS CORPORATION
SUBSCRIPTION RIGHTS FOR CONVERTIBLE PARTICIPATING PREFERRED STOCK
(Complete appropriate section of this certificate)
The registered owner of this Subscription Certificate, named below, or his or
her assigns, is entitled to the number of Rights to subscribe for the
Convertible Participating Preferred Stock of Seneca Foods Corporation (the
"Company") shown above, in the ratio of one-half share of Convertible
Participating Preferred Stock for each Right, pursuant to and upon the terms and
conditions and at the Subscription Price for each share of Convertible
Participating Preferred Stock specified in the Prospectus relating thereto.
Stock certificates for the shares subscribed for will be delivered as soon as
practicable after full payment for the shares subscribed for has been received
and cleared. Any refund in connection with subscriptions will be delivered as
soon as practicable thereafter. The Subscription Certificate may be transferred,
in the same manner and with the same effect as in the case of a negotiable
instrument payable to specific persons, by duly completing and signing the
assignment set forth herein.
TO SUBSCRIBE, TWO RIGHTS AND FULL PAYMENT OF THE SUBSCRIPTION PRICE ARE REQUIRED
FOR EACH SHARE OF CONVERTIBLE PARTICIPATING PREFERRED STOCK.
If the aggregate Subscription Price paid by a Rights Holder is insufficient to
purchase the aggregate number of shares subscribed for, then such Rights Holder
will be deemed to have exercised the Subscription Privilege to the full extent
of the payment tendered. If the total Subscription Price paid by a Rights Holder
exceeds the amount necessary to purchase the number of shares for which the
Rights Holder has indicated an intention to subscribe, then the excess payment
tendered will be refunded to the Rights Holder as soon as practicable
thereafter. Capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Prospectus enclosed herewith.
STOCK CERTIFICATES FOR THE SHARES SUBSCRIBED TO PURSUANT TO THE SUBSCRIPTION
PRIVILEGE WILL BE DELIVERED AS SOON AS PRACTICABLE AFTER FULL PAYMENT FOR THE
SHARES SUBSCRIBED FOR HAS BEEN RECEIVED AND CLEARED. ANY REFUND IN CONNECTION
WITH YOUR SUBSCRIPTION WILL BE DELIVERED AS SOON AS PRACTICABLE THEREAFTER.
FULL PAYMENT FOR THE SHARES OF CONVERTIBLE PARTICIPATING PREFERRED STOCK MUST
ACCOMPANY THIS FORM AND MUST BE MADE PAYABLE IN UNITED STATES DOLLARS IN A CHECK
OR BANK DRAFT DRAWN UPON A U.S. BANK OR POSTAL, TELEGRAPHIC OR EXPRESS MONEY
ORDER AND PAYABLE TO SENECA FOODS CORPORATION, AS SUBSCRIPTION AGENT.
ALTERNATIVELY, A NOTICE OF GUARANTEED DELIVERY MUST ACCOMPANY THE EXERCISE FORM.
PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY.
PLEASE FILL IN ALL APPLICABLE INFORMATION AND SEND BY TELEGRAM, FACSIMILE
TRANSMISSION OR MAIL TO:
SENECA FOODS CORPORATION
1605 Main Street, Suite 1010
Sarasota, Florida 34236
Attn.: Sarah S. Mortensen
Telecopier: (941) 954-7508
- --------------------------------------------------------------------------------
IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT OF RIGHTS SHARES OR A PORTION
THEREOF
I apply for ___________________ X $12.00 = $_________________________
(No. of new shares) (Amount Enclosed)
- --------------------------------------------------------------------------------
<PAGE>
TO SUBSCRIBE: I hereby irrevocably subscribe for the face amount of Convertible
Participating Preferred Stock indicated above, hereon upon the terms and
conditions specified in the Prospectus relating thereto, receipt of which is
hereby acknowledged. I hereby agree that if I fail to pay for the shares of
Convertible Participating Preferred Stock for which I have subscribed, the
Company may exercise any of the remedies set forth in the Prospectus.
- --------------------------------------------- -------------------------
Social Security Number
- --------------------------------------------- --------------------------
Signature(s) of Subscriber(s) Social Security Number
- ---------------------------------------------
Address for delivery of shares if other
than shown above
If permanent change of address, check here [ ]
Please give your telephone number:
( )
TO TRANSFER RIGHTS: For value received, _____ of the Rights represented by the
Subscription Certificates are assigned to:
- ----------------------------------------------
(Print Full Name of Assignee)
- ---------------------------------------------
(Print Full Address)
- ---------------------------------------------
Signature(s) of Assignor(s)
IMPORTANT: The Signature(s) must correspond in every particular, without
alteration, with the name(s) as printed on the top of this Subscription
Certificate. Your Signature must be guaranteed by: (a) a commercial bank or
trust company or (b) a member firm of a domestic stock exchange, (c) a savings
or credit union.
Signature:______________________________________________________
(Name of Bank or Firm)
By:___________________________________________________________
(Signature of Officer and Title)
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR SUBSCRIPTION
CERTIFICATES ISSUED BY SENECA FOODS CORPORATION
<PAGE>
- 5 -
Capitalized terms used but not defined herein shall have the meaning ascribed to
such terms in the Prospectus enclosed herewith.
Dear Sir or Madam:
The undersigned hereby represents that he or she is the holder of
Subscription Certificate(s) representing ____________ Rights and that such
Subscription Certificate(s) cannot be delivered to the Subscription Agent at or
before 5:00 p.m., Eastern daylight time, on the Expiration Date, August 27,
1998. Upon the terms and subject to the conditions set forth in the Prospectus,
receipt of which is hereby acknowledged, the undersigned hereby elects to
exercise (i) the Subscription Privilege to subscribe for one-half share of New
Preferred Stock per Right with respect to each of ____________ Rights
represented by such Subscription Certificate. The undersigned understands that
payment of the Subscription Price of $12.00 per share for each share of
Convertible Participating Preferred Stock subscribed for pursuant to the
subscription privilege must be received by the Subscription Agent on or before
5:00 p.m., Eastern daylight time, on the Expiration Date and represents that
such payment, in the aggregate amount of $________________, either (check
appropriate box):
[ ] is delivered herein [ ] was delivered separately, in each case in a manner
consistent with the Prospectus.
Signature(s)__________________________ Name(s)____________________________
Please type or print
__________________________
Address:______________________________
______________________________
Tel. No(s). ( )
Account Number_______________________________
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SUBSCRIPTION CERTIFICATE SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or correspondent in the United States,
guarantees that the undersigned will deliver to the Subscription Agent the
certificates representing the Rights being exercised hereby, with any required
signature guarantees and any other required documents, all within five New York
Stock Exchange, Inc. trading days after the date hereof.
Dated:________________________________________, 1998
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
(Address)
- --------------------------------------------------
(Area Code and Telephone Number)
- --------------------------------------------------
(Name of Firm)
- --------------------------------------------------
(Authorized Signature)
The institution which completes this form must communicate the
guarantee to the Subscription Agent and must deliver the Subscription
Certificate(s) to the Subscription Agent within the time period shown herein.
Failure to do so could result in a financial loss to such institution. Such form
must be delivered by hand or sent by telegram, facsimile transmittal or mail to
the Subscription Agent, and must be received by the Subscription Agent on or
prior to the Expiration Date. For your convenience, we have enclosed a prepaid,
self-addressed envelope addressed to the Subscription Agent. Any other
transmittals shall be forwarded to the Subscription Agent at the following
address and/or facsimile number:
Sarah S. Mortensen
c/o Seneca Foods Corporation
1605 Main Street, Suite 1010
Sarasota, Florida 34236
Facsimile No.: (941) 954-7508
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
INSTRUCTIONS TO SHAREHOLDERS AS TO USE OF
SENECA FOODS CORPORATION SUBSCRIPTION CERTIFICATES
<PAGE>
The enclosed Subscription Certificate represents the number of Rights, as
set forth on the Subscription Certificate, held by the registered holder thereof
(the "Holder"). The Holder is entitled to acquire one-half (1/2) share of
Convertible Participating Preferred Stock with $0.025 par value per share (the
"New Preferred Stock") of Seneca Foods Corporation (the "Company") for each
Right held.
To subscribe for shares of New Preferred Stock, the Rights Holder must
present to Sarah S. Mortensen (the "Subscription Agent"), prior to 5:00 p.m.,
Eastern daylight time, on August 27, 1998 (the "Expiration Date"), either:
(1) a properly completed and executed Subscription Certificate (with
signatures guaranteed) and a check or bank draft drawn upon a U.S. bank or
postal, telegraphic or express money order payable to Seneca Foods Corporation.
The amount of the check shall be the $12.00 (the "Subscription Price")
multiplied by the number of shares of New Preferred Stock for which the Rights
Holder intends to subscribe (the "Aggregate Subscription Price"); or
(2) a Notice of Guaranteed Delivery in the form enclosed along with (a) the
Aggregate Subscription Price (paid in the manner set forth above) and (b) a
properly completed and executed Subscription Certificate (with signatures
guaranteed) which must be received by the Subscription Agent within five New
York State Exchange, Inc. trading days following the date of the Notice of
Guaranteed Delivery relating thereto.
If either the number of Rights being exercised is not specified on a
Subscription Certificate, or the payment is not sufficient to pay the full
Aggregate Subscription Price for all shares of the New Preferred Stock stated to
be subscribed for, the Rights Holder will be deemed to have exercised the
maximum number of Rights that could be exercised for the amount of the payment
delivered by such Rights Holder. Any excess payment remaining after the
foregoing allocation will be returned to the Rights Holder as soon as
practicable by mail, without interest or deduction.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., EASTERN
DAYLIGHT TIME, ON AUGUST 27, 1998, THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY
URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK
OR MONEY ORDER.
The Subscription Certificate may be transferred, in the same manner and
with the same effect as in the case of a negotiable instrument payable to
specific persons, by duly completing and signing the assignment section of the
Subscription Certificate. Capitalized terms used but not defined in the
Subscription Certificate or herein shall have the meaning assigned to them in
the Prospectus, relating to the Rights delivered herewith.
Any questions regarding the Subscription Certificate and the Rights may be
directed to the Company's Information Agent, Philip G. Paras, at (716) 385-9500.
