June 16, 1995
Dear Shareholder:
You are cordially invited to attend a Meeting of the Shareholders of Seneca
Foods Corporation, a New York corporation (the "Company"), to be held at 9:00
a.m., local time on August 5, 1995 at the Company's facility in Dundee, New
York.
At this important Meeting you will be asked to vote for the election of three
directors and to ratify appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's accountants for the current fiscal year ending March
31, 1996. In addition to those matters, which are presented to shareholders
each year, you will be asked to vote on two special proposals.
The first additional proposal is a proposed amendment to the Company's
Certificate of Incorporation which will effect a recapitalization of the Company
by creating a second class of Common Stock which will be distributed as a stock
dividend to all common shareholders. This very significant proposal is
discussed further in the following paragraphs. The second special proposal will
amend the by-laws to permit the annual shareholders meeting to be held earlier
in the year than is currently permitted by the by-laws; this by-law amendment is
needed because the Company has changed its fiscal year-end from July 31st to
March 31st and the period provided for annual meetings in the existing by-laws
would not be timely in relation to the new fiscal year-end.
The proposed recapitalization amendment would (i) reclassify the existing Common
Stock ("Existing Common Stock" as Class B Common Stock (the "Class B Common
Stock"), (ii) authorize a new class of 10,000,000 shares to be designated Class
A Common Stock (the "Class A Common Stock") and (iii) establish the express
terms of the Class A Common Stock and the Class B Common Stock (the "Proposed
Amendment"). The Class A Common Stock and the Class B Common Stock would 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 rights to holders of
preferred shares. However, holders of Class B Common Stock would retain their
full vote per share whereas the holders of Class A Common Stock would 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.
If the Proposed Amendment is approved by the shareholders, the Board of
Directors intends to prepare and file a certificate to that effect with the
Secretary of State of New York. The Existing Common Stock would be reclassified
as Class B Common Stock. As soon as practical after filing the Proposed
Amendment, the Company will distribute (the "Distribution") one share of Class A
Common Stock for each share of Class B Common Stock outstanding on the record
date for the distribution. The record date for the Distribution will be the
date of the Annual Meeting of Shareholders.
Shareholders should retain their current share certificates because, upon
reclassification, such certificates will represent Class B Common Stock without
any need for exchange. At the time of the Distribution, new certificates would
be issued for Class A Common Stock only.
Upon reclassification, the Class B Common Stock would continue to have its
express terms, except to the extent voting rights with regard to those shares
would be affected by the Class A Special Rights provision. See "Description of
Class A Common Stock and Class B Common Stock - Class A Special Rights". As
more fully described below, the new Class A Common Stock would have certain
special characteristics as compared to the Class B Common Stock, of which the
most significant is the reduction of voting power to 1/20th of a vote per share
of Class A Common Stock. On certain matters where required by law, the Class A
Common Stock would be entitled to vote as a class, so that the separate approval
of the Class A Common Stock would be required to authorize certain actions. In
particular, the holders of Class A Common Stock as such would not be entitled to
vote on any matters except as otherwise provided or required by law. There
would be no change in the relative voting power or equity of any shareholder of
the Company as a result of the Distribution because the Distribution would be
made to all shareholders in proportion to the number of shares of Existing
Common Stock owned by them on the record date for the Distribution.
Following the reclassification, the Company's Class B Common Stock will continue
to be listed for trading on the NASDAQ National Market System ("NASDAQ/NMS"),
the electronic inter-dealer quotation system operated by NASDAQ, Inc. Upon
issuance by the Company, the Class A Common Stock will also be listed for
trading on NASDAQ/NMS.
The Company's Board of Directors recommends shareholder approval of the Proposed
Amendment. The Board of Directors believes that the enhanced flexibility the
reclassification affords the Company in future financings, acquisitions and
employee benefit plans outweighs any of the potential disadvantages described in
the accompanying Proxy Statement and, therefore, solicits your proxy in favor of
approval of the Proposed Amendment. The affirmative vote of the holders of a
majority of the outstanding shares of the Company's Existing Common Stock
represented (in person or by proxy) at the Meeting is required to approve the
Amendment. The Company has been advised that the Company's Chairman and a
director, Arthur S. Wolcott, Kraig H. Kayser, its President, Chief Executive
Officer and a director, and Susan W. Stuart, who is a director and a daughter of
Arthur S. Wolcott, have in the aggregate sole or shared voting power over 35% of
the total voting shares of the Company by reason of their personal ownerships of
voting securities of the Company and their sole or shared voting power as
fiduciaries with respect to other shares. The beneficial ownership of Messrs.
Wolcott and Kayser is sufficient to give them voting control with respect to the
Company.
The Board of Directors urges you to complete, date and sign the enclosed proxy
card and to return it without delay in the postage paid envelope provided
herewith so that your shares may be represented at the Meeting. If you attend
the Meeting in person, you may, if you wish, vote personally on all matters
brought before the Meeting whether or not you have previously submitted a proxy
card.
The accompanying Proxy Statement which is being furnished in connection with the
solicitation of your proxy by the Company's Board of Directors, describes the
proposed transactions in detail and provides certain additional information
regarding the Company. The information in this letter which is condensed for
your convenience, is subject to the more complete discussion in the proxy
statement and the specific language of the Proposed Amendment which is an
exhibit to the Proxy Statement. Please read the Proxy Statement carefully.
Sincerely,
SENECA FOODS CORPORATION
Kraig H. Kayser
President and Chief Executive Officer
SENECA FOODS CORPORATION
1162 Pittsford-Victor Road
Pittsford, New York 14534
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of SENECA
FOODS CORPORATION will be held at 74 Seneca Street, Dundee, New York, on
Saturday, August 5, 1995, at 9:00 a.m., Dundee time, for the following purposes:
1. To elect two directors to serve until the annual meeting of
shareholders in 1998 and one director to serve until the annual meeting in 1996,
and until their successors are duly elected and shall qualify.
2. To consider and act upon a management proposal to amend the Company's
Certificate of Incorporation.
3. To consider and act upon a management proposal to amend the Company's By-
Laws.
4. To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as independent auditors for the fiscal year ending March 31, 1996.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Accompanying this notice is a Proxy and Proxy Statement. If you are unable to
be present in person, please sign the enclosed form of Proxy and return it in
the enclosed envelope. If you attend the meeting and vote personally, the Proxy
will not be used. Only shareholders of record at the close of business on June
16, 1995, will be entitled to vote at the meeting. The prompt return of your
Proxy will save the expense of further communications.
A copy of the Annual Report for the year ended March 31, 1995 also accompanies
this Notice.
By order of the Board of Directors,
JEFFREY L. VAN RIPER
Secretary
DATED: Pittsford, New York
June 16, 1995
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS OF
SENECA FOODS CORPORATION
_______________________________
Date of Mailing: June 23, 1995
Annual Meeting of Shareholders: August 5, 1995
The enclosed Proxy is solicited by the Board of Directors of Seneca Foods
Corporation (hereinafter called the "Company"). Any Proxy given pursuant to
such solicitation may be revoked by the shareholder at any time prior to the
voting of the Proxy. The signing of the form of Proxy will not preclude the
shareholder from attending the meeting and voting in person. Shares represented
by this Proxy Statement will be voted in accordance with the directions of the
shareholder. The directors of the Company know of no matters to come before the
meeting other than those set forth in this Proxy Statement. In the event any
other matter may properly be brought before the meeting, the Proxy holders will
vote the Proxies in their discretion on such matter.
All of the expenses involved in preparing and mailing this Proxy Statement and
the material enclosed herewith will be paid by the Company. The Company will
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for expenses reasonably incurred by them in sending proxy material to beneficial
owners of stock.
Only record holders of the voting stock at the close of business on June 16,
1995 are entitled to vote at the meeting. On that day the following shares were
issued and outstanding: (i) 2,796,555 shares of Common Stock, $.25 par value per
share ("Common Stock"); (ii) 200,000 shares of 6% Cumulative Voting Preferred
Stock, $.25 par value per share ("6% Preferred Stock"); (iii) 407,240 shares of
10% Cumulative Convertible Voting Preferred Stock - Series A, $.25 stated value
per share ("10% Series A Preferred Stock"); and (iv) 400,000 shares of 10%
Cumulative Convertible Voting Preferred Stock - Series B, $.25 stated value per
share ("10% Series B Preferred Stock"). Each such share is entitled to one vote
at the meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Under the By-Laws of the Company, its Board of Directors is divided into three
classes, as equal in number as possible, having staggered terms of three years
each. At this annual meeting two directors will be elected to serve until the
annual meeting in 1998 and one will be elected to serve until the annual meeting
in 1996 and until their successors are duly elected and shall qualify. Unless
authority to vote for the election of directors is withheld or the Proxy is
marked to the contrary as provided therein, the enclosed Proxy will be voted for
the election of the three nominees listed below, each of whom is presently a
director of the Company.
Although the directors do not contemplate that any of the nominees will be
unable to serve, should such a situation arise, the Proxy may be voted for the
election of other persons as directors. Each nominee, to be elected as a
director, must receive the affirmative vote of a majority of the shares present
and entitled to vote at the meeting. Broker non-votes will be counted under the
Company's By-Laws in determining the shares present at the Annual Meeting, but
will not represent a vote in favor of election and, therefore, will have the
same effect as a vote to withhold authority for election.
The following table sets forth certain information with respect to the
nominees for election as directors and directors whose terms continue beyond the
meeting:
Served as
Director
Director Principal Occupation for Past Five Years (1) Age Since
Directors Standing for Election
(a) To serve until the annual meeting of shareholders in 1998 and until their
successors are duly elected and shall qualify:
David L. Call (2) Dean of the College of Agriculture and Life Sciences, 63 1985
Cornell University, Ithaca, New York.
Susan W. Stuart (3) Marketing Consultant, Fairfield, Connecticut. 39 1986
(b) To serve until the annual meeting of shareholders in 1996 and until his
successor is duly elected and shall qualify:
Michael A. Schaeffer Vice President-Production, Pillsbury Brands of Grand 47 1995
Metropolitan, PLC, Minneapolis, Minnesota
(manufacturer of food products) since 1995 and Vice
President-Production, Green Giant Brands until 1995.
Directors Whose Terms Expire in 1996
Robert T. Brady President and Chief Executive Officer of Moog Inc., 54 1989
East Aurora, New York (manufacturer of control
systems).(4)
Arthur S. Wolcott (3) Chairman of the Company. (5) 69 1949
Directors Whose Terms Expire in 1997
Edward O. Gaylord President of Gaylord & Company, Houston, Texas 63 1975
(venture capital) and the Chairman of EOTT Energy
Corporation, Houston, Texas (oil trading and
transportation). (6)
G. Brymer Humphreys President, Humphreys Farm Inc., New Hartford, New York. 54 1983
Kraig H. Kayser President and Chief Executive Officer of the Company 34 1985
since 1993 and Vice President, Secretary and Chief
Financial Officer of the Company from 1991 to 1993;
Vice President of J.P. Morgan Investment Management,
Inc., New York, New York until 1991.
(1) Unless otherwise indicated, each nominee has had the same principal
occupation for at least the past five years.
(2) Mr. Call is also a director of Stop & Shop Companies, Inc., Braintree,
Massachusetts (supermarket chain).
(3) Arthur S. Wolcott and Susan W. Stuart are father and daughter.
(4) Mr. Brady is also a director of Acme Electric Corporation, East Aurora,
New York (manufacturer of electronic power supplies), Astronics Corporation,
Orchard Park, New York (manufacturer of specialty niche products), First
Empire State Corporation, Buffalo, New York (bank holding company), and
National Fuel Gas Corp, Buffalo, New York (integrated natural gas company).
(5) Mr. Wolcott is also a director of Moog Inc., East Aurora, New York
(manufacturer of control systems).
(6) Mr. Gaylord is also a director of Stant Corporation, Richmond, Indiana
(designer, manufacturer and distributor of automotive tools and accessories) and
Imperial Holly Corporation, Sugarland, Texas (sugar manufacturer).
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
Arthur S. Wolcott See table under "Election of Directors". 69 1949
Kraig H. Kayser See table under "Election of Directors". 34 1991
Alvin L. Gauvin Senior Vice President, Branded Sales and 46 1987
Marketing of the Company since 1995,
Senior Vice President, Sales and Marketing
of the Company from 1992 to 1995 and Senior
Vice President, Sales until 1992.
Ricke A. Kress Senior Vice President, Operations of the 43 1984
Company since 1993, Vice President,
Technical Services from 1991 to 1993 and
Vice President, Research and Development
until 1991.
Devra A. Bevona Treasurer of the Company. 44 1988
Jeffrey L. Van Riper Secretary since 1993 and Controller 38 1986
since 1986 of the Company.
(1) Unless otherwise indicated, each officer has had the same principal
occupation for at least the past five years.
OWNERSHIP OF SECURITIES
Ownership by Management. The following table sets forth certain information
with respect to beneficial ownership of the Company's outstanding Common Stock,
6% Preferred Stock, 10% Series A Preferred Stock and 10% Series B Preferred
Stock by each nominee and director and by all directors, nominees and officers
as a group as of April 1, 1995 ("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
or investment power):
Shares (1)
Beneficially Percent
Nominees for Election Title of Class Owned of Class
David L. Call Common Stock 600 -% (2)
Susan W. Stuart Common Stock 205,194 (3) 7.3
6% Preferred Stock 25,296 12.6
Directors Whose Terms
do not Expire
Edward O. Gaylord Common Stock 4,544 0.2
G. Brymer Humphreys Common Stock 1,200 - (2)
Kraig H. Kayser Common Stock 297,654 (4) 10.6
6% Preferred Stock 8,000 (5) 4.0
10% Series A Preferred Stock 173,812 (6) 42.7
10% Series B Preferred Stock 165,080 (7) 41.3
Arthur S. Wolcott Common Stock 310,302 (8) 11.1
6% Preferred Stock 63,288 (9) 31.7
10% Series A Preferred Stock 212,840(10) 52.2
10% Series B Preferred Stock 212,200(11) 53.0
All directors, nominees Common Stock 542,430(13) 19.4
and officers as a group (12) 6% Preferred Stock 96,584(14) 48.3
10% Series A Preferred Stock 386,652(15) 94.9
10% Series B Preferred Stock 377,280(16) 94.3
(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 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 Common Stock
on the basis of 20 and 30 preferred shares, respectively, for each share of
Common Stock.
(2) Less than 0.1%.
(3) The shares in the table include (i) 10,182 shares of Common Stock held by
Ms. Stuart's husband, (ii) 1,500 shares owned by her sister's son, of
which Ms. Stuart is the trustee, (iii) 34,942 shares held by the
Company's Tax Credit Employee Stock Ownership Plan Trust (the "PAYSOP"),
of which Ms. Stuart is a trustee, (iv) 78,188 shares held by the Seneca
Foods Corporation Employees' Pension Benefit Plan (the "Pension Plan"), of
which Ms. Stuart is a trustee and (v) 25,602 shares held by the Seneca
Foods Foundation (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.
(4) Mr. Kayser has sole voting and investment power over 49,628 shares of 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. 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)
34,942 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)
25,602 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 or (ii) 19,000 shares held in trust for Mr. Kayser's mother. 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.
(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 also the
table in "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 4
above. The total 173,812 shares of 10% Series A Preferred Stock are
convertible into 8,690 shares of 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 note 4
above. These shares are convertible into 5,502 shares of Common Stock.
(8) The shares in the table include (i) 56,672 shares of Common Stock held by
Mr. Wolcott's wife, (ii) 34,942 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) 25,602 shares held by the Foundation, of which Mr.
Wolcott is a director. The shares in the table do not include 271,848 shares of
Common Stock held directly by Mr. and Mrs. Wolcott's offspring and their
spouses (including Susan W. Stuart). 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 offspring and their spouses and his wife.
(9) 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.
(10)These shares are convertible into 10,642 shares of Common Stock.
(11) These shares are convertible into 7,073 shares of Common Stock.
(12)Does not include 300 shares of Common Stock owned by Mr. Brady's children as
to which Mr. Brady disclaims beneficial ownership.
(13) See notes 3, 4 and 8 above.
(14) See notes 5 and 9 above.
(15) See notes 6 and 10 above.
(16) See notes 7 and 11 above.
Principal Owners of Voting Stock. The following table sets forth, as of April
1, 1995, 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 entitled
to vote at the meeting ("beneficial ownership" for these purposes is determined
in accordance with applicable SEC rules and includes shares over which a person
has sole or shared voting 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 are
currently convertible into Common Stock on the basis of 20 and 30 preferred
shares, respectively, for each common share.
Amount of Shares and Nature
of Beneficial Ownership
---------------------------------------------------
Sole Voting/ Shared Voting/
Name and Address of Investment Investment Percent
Title of Class Beneficial Owner Power Power Total of Class
6% Preferred Stock Arthur S. Wolcott(1) 32,844 30,444(2) 63,288 31.7%
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
Pittsford, New York
10% Series A Arthur S. Wolcott 212,840(6) - 212,840 52.2
Preferred Stock
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 Arthur S. Wolcott 212,200(9) - 212,200 53.0
Preferred Stock
Kraig H. Kayser - 165,080(10) 165,080 41.3
Hannelore Wolcott 22,720 - 22,720 5.7
Amount of Shares and Nature
of Beneficial Ownership
--------------------------------------------------------
Sole Voting/ Shared Voting/
Name and Address of Investment Investment Percent
Title of Class Beneficial Owner Power Power Total of Class
Common Stock Arthur S. Wolcott 114,898 195,404(11) 310,302 11.1%
Kraig H. Kayser 49,628 248,026(12) 297,654 10.6
CMCO, Inc.(13) 263,868 - 263,868 9.4
New York, New York
Edwin S. Marks (14) 132,500 94,520(15) 227,020 8.1
Great Neck, New York
Susan W. Stuart 54,780 150,414(16) 205,194 7.3
Hansen Fruit & Cold 170,500 - 170,500 6.1
Storage Co., Inc. (17)
Yakima, Washington
___________________________
(1) Business address: Suite 1010, 1605 Main Street, Sarasota, Florida 34236.
(2) See note 9 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 9 to the table
under the heading "Ownership by Management".
(6) See note 10 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 11 to the table under the heading "Ownership by Management".
(10)See note 7 to the table under the heading "Ownership by Management".
(11)See note 8 to the table under the heading "Ownership by Management".
(12)See note 4 to the table under the heading "Ownership by Management".
(13)Based on a statement on Schedule 13D filed by CMCO, Inc. with the SEC (as
most recently amended in April, 1991). CMCO, Inc. is a private holding
company of which Edwin S. Marks is the President and a shareholder.
(14)Based on a statement on Schedule 13D filed by Edwin S. Marks with the SEC
(as most recently amended in April, 1991). See also note 13 above.
(15)Edwin S. Marks shares voting and dispositive power with respect to these
shares with his wife.
(16) See note 3 to the table under the heading "Ownership by Management".
(17) Based on a statement on Schedule 13D filed with the SEC 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.
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 for services rendered in all capacities to
the Company and its subsidiaries during the fiscal years ended March 31, 1995
(which consists of eight months by reason of a change in accounting periods),
and July 31, 1994 and 1993.
Name of Individual and Fiscal Annual Compensation
Principal Position Year Salary Bonus
Arthur S. Wolcott 1995 $216,000(1) $ -
Chairman and Director 1994 326,500 81,625
1993 326,500 -
Kraig H. Kayser 1995 190,167(1) -
President, Chief Executive 1994 262,333 68,250
Officer and Director(2) 1993 145,000 -
Alvin L. Gauvin 1995 77,517(1) -
Senior Vice President, 1994 113,025 28,325
Branded Sales and Marketing 1993 110,000 -
Ricke A. Kress 1995 77,183(1) -
Senior Vice President, 1994 110,000 27,500
Operations 1993 84,500 -
(1) Represents compensation from August 1994 through March 1995.
(2) Mr. Kayser became the Chief Executive Officer in June 1993; prior to that
he was the Chief Financial Officer.
Pension Benefits
The executive officers of the Company are entitled to participate in the
Company's 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 improved 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 retirement income under
either formula is $120,000
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, 1995):
Five Highest
Consecutive ANNUAL BENEFITS
Years' Earnings 15 Years 25 Years 35 Years
$90,000 $ 14,000 $ 23,300 $32,700
120,000 21,200 32,300 45,300
150,000 28,700 41,300 57,900
180,000 36,200 50,300 70,500
210,000 or higher 39,500 54,400 76,100
Under the Plan, Arthur S. Wolcott, Kraig H. Kayser, Alvin L. Gauvin and Ricke
A. Kress have 46 years, 3 years, 8 years and 13 years of credited service,
respectively. Their compensation during fiscal 1995 covered by the Plan was
$216,000 for Mr. Wolcott, $190,167 for Mr. Kayser, $77,517 for Mr. Gauvin and
$77,183 for Mr. Kress. The Internal Revenue Code limits the amount of
compensation that can be taken into account in calculating retirement benefits
(for 1995 the limit is $150,000).
Directors' Fees
During fiscal year 1995, directors were paid a fee of $1,000 per month. Any
director who is also an officer of the Company receives no director fee.
Stock Options
No options were granted or exercised in the period from August 1, 1994 to the
date of this Proxy Statement, nor were any unexpired options held at the latter
date by any officer or director of the Company.
Profit Sharing Plan
The Company has a profit sharing plan for the officers and certain key
employees of the Company. Under the plan, each Category One Employee, Category
Two Employee and Category Three Employee (described below) receives a cash bonus
equal to fifteen percent, twenty percent and twenty five percent, respectively,
of his annual base salary (the "Bonus Amount") if the Pre-Tax Profit (as
defined) of the Company for that year equals or exceeds the sum of (i) the total
Bonus Amounts of all plan participants plus (ii) ten percent of the consolidated
net worth of the Company as of the end of the prior fiscal year (subject to pro
rata adjustment to reflect significant sales or acquisitions of assets during
the year). The Category Three Employees consist of the individuals who are
named in the executive compensation table above who are directors of the Company
and certain senior executive officers; the Category Two Employees consist of the
other executive officers and other senior management officials; the Category One
Employees consist of various other management-level personnel.
The bonuses earned by the Company's executive officers for the 1995 fiscal
year are included in the executive compensation table above.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely of
outside directors. The Committee is responsible for providing overall guidance
with respect to the Company's executive compensation programs. The goal of the
Committee is to maintain a competitive compensation program in order to attract
and retain well qualified management, to provide management with the incentive
to accomplish the Company's financial and operating objectives and to link the
interest of the Company's executive officers and management to the interests of
its stockholders through bonuses tied to financial performance. The Committee
is composed of three members and meets annually to review the Company's
compensation programs, including executive salary administration and the profit
sharing plan.
The Committee believes that the Company's executives should be rewarded for
their contributions to the Company's attaining annual financial goals, as set
forth in the annual budget which is subject to revision during the year, and
their attaining annual individual objectives. The Company pays its executive
officers two principal types of compensation: base salary and profit sharing
plan, each of which is more fully described below.
Base Salary - The Company has historically established the base salary of its
executive officers on the basis of each executive officer's scope of
responsibility, experience, individual performance and accountability within the
Company. In that regard the Company reviews comparable salary and other
compensation arrangements in similar businesses and companies of similar size to
determine appropriate levels necessary to attract and retain top quality
management.
Profit Sharing Plan - To further align the interests of executive officers
with those of the Company's shareholders, a significant component of an
executive officer's total compensation arrangement is participation in the
annual profit sharing plan. An executive is rewarded with a cash bonus equal to
a percentage of the executive's base salary if the Pre-Tax Profit of the Company
for that year equals or exceeds the sum of the total Bonus Amounts of all plan
participants plus ten percent of the consolidated net worth of the Company as of
the end of the prior fiscal year.
Performance Review - The general policies described above for the compensation
of executive officers also apply to the compensation level approved by the
Compensation Committee with respect to the 1995 compensation for the Chief
Executive Officer. Based on the criteria outlined above, the Compensation
Committee awarded to Kraig H. Kayser the amounts shown in the Executive
Compensation Table. The Committee recognized Mr. Kayser's leadership role in
guiding the overall performance of the Company towards its desired strategic
direction as well as managing costs while growing the business. This effort was
an essential element in the Company achieving its net earnings for the year.
Summary
The Committee is committed to attracting, motivating and retaining executives
who will help the Company meet the increasing challenges of the food processing
industry. The Committee recognizes its responsibility to the Company's
shareholders and intends to continue to establish and implement compensation
policies that are consistent with competitive practice and are based on the
Company's and the executives' performance.
This report has been submitted by the Compensation Committee of the
Corporation's Board of Directors:
David L. Call Edward O. Gaylord Susan W. Stuart
Compensation Committee Interlocks and Insider Participation
Mr. Wolcott (Chairman) serves as a member of the Compensation Committee of
Moog Inc. and a director on its Board. Mr. Brady, who is the President and
Chief Executive Officer of Moog Inc., serves as a director on the Company's
Board.
Transactions with The Pillsbury Company
Michael A. Schaeffer was elected to the Board of Directors by the Board on May
2, 1995. He is Vice President-Production, Pillsbury Brands of Grand
Metropolitan, PLC.
On February 10, 1995, prior to Mr. Schaeffer's election to the Company's
Board, the Company consummated significant agreements with The Pillsbury Company
("Pillsbury") and Grand Metropolitan Incorporated, the parent of Pillsbury and a
wholly-owned subsidiary of Grand Metropolitan, PLC. The Company acquired from
Pillsbury a substantial percentage of tangible assets used by Pillsbury for the
production of its Green Giantr (a registered trademark of The Pillsbury Company)
brand of shelf-stable and frozen vegetable products, including six plants
located in the midwestern and northwestern United States. Five Green Giant
production plants were retained by Pillsbury with the intention to close them.
The purchase price for the acquired assets was $73,025,000, in payment of which
the Company issued to Pillsbury its 8% Secured Nonrecourse Subordinated
Promissory Note due September 30, 2009 (the "Pillsbury Note") in that amount.
The Company has agreed to acquire additional Green Giant assets from Pillsbury
in 1996, and, as a result, the Pillsbury Note will be increased to approximately
$74,913,000. The Pillsbury Note requires the Company to pay annual installments
of principal and a final major principal payment on September 30, 2009.
Concurrently with the acquisition of the Green Giant assets, the Company
entered into an Alliance Agreement with Pillsbury and its parent, Grand
Metropolitan Incorporated (the "Alliance Agreement"). Pursuant to the Alliance
Agreement, the Company will process and sell to Pillsbury cases of shelf-stable
vegetables, primarily in cans, for a price which will be purchased by Pillsbury
on a "cost-plus" basis pursuant to cost-determination procedures set forth in
the Alliance Agreement. The Company will also process certain frozen vegetables
and asparagus for Pillsbury, but, unlike the canned vegetables, some of these
products will not necessarily be processed by the Company through the final
packing stages. Most of the production for Green Giant products is expected to
occur in the plants acquired from Pillsbury (the "Alliance Plants"), but
production will also occur in the Company's existing vegetable processing plants
in Minnesota, Wisconsin and New York. The Company is making substantial capital
improvements in the Alliance Plants and its existing vegetable plants to more
efficiently process Green Giant products for sale to Pillsbury and (subject to
certain production priorities for Pillsbury products in the Alliance Plants)
vegetable products for sale by the Company under its existing brand names or
private label brand names to purchasers such as supermarket chains. The Company
will sell Green Giant products only to Pillsbury. Pillsbury has retained the
ownership of its trademarks such as Green Giant and other intellectual property
and goodwill of its Green Giant brand, as well as the marketing and distribution
assets associated with its Green Giant business.
The Alliance Agreement contains detailed provisions for determining fixed and
variable manufacturing costs (including amortization of certain capital
expenditures mutually agreed upon), warehousing costs, and costs of ancillary
and special services requested by Pillsbury. It also contains provisions
requiring the Company to operate and maintain the Alliance Plants and produce
Green Giant products at high quality standards.
In addition to purchases of products and services, Pillsbury will pay Seneca a
management fee which will be modified from time to time by the parties. The
parties intend that the result of all payments made each fiscal year by
Pillsbury to the Company, exclusive of incentive payments described below, will
result in the Company's having realized a recovery of its allowed costs, plus a
profit on its sales to Pillsbury. The Company and Pillsbury have not publicly
disclosed the profit targets, as they believe that disclosure would give
competitors an unfair advantage. For the periods through March 31, 2000,
Pillsbury will pay certain annual incentive payments which constitute a
specified portion of any cost savings achieved by the Company and passed on to
Pillsbury over targeted cost savings fixed by the parties for each such year.
Pillsbury will submit to Seneca each year its purchase requirements for the
forthcoming pack year, subject to certain subsequent modifications. Except as
it submits to the Company its annual purchase requirements, Pillsbury has no
obligation to purchase any minimum quantity of product throughout the Alliance
Agreement. Inasmuch as Pillsbury will have sold to the Company or closed all
its Green Giant production facilities and hopes to benefit under the Alliance
Agreement paying lower product costs than it might otherwise incur, both parties
expect the Company to be a major supplier of Green Giant vegetable products to
Pillsbury.
Based upon Pillsbury's recent sales volume for the Green Giant products to be
supplied by the Company and the Company's recent sales volume, the Company
expects that in the Company's fiscal year ending March 31, 1996, and in the
foreseeable future while the Alliance Agreement remains in effect, Pillsbury
will be the Company's largest customer.
The Alliance Agreement has an initial term ending December 31, 2014, and will
be automatically extended for additional five year terms unless terminated in
accordance with the next sentence. Either party may terminate the Alliance
Agreement without cause on at least 12 months' notice prior to the end of the
then-current term. Either party may terminate for a substantial and continuing
material breach of the other party on 60 days' prior notice. Other events
permitting one or the other party to terminate the Alliance Agreement are set
forth in that agreement, and include Pillsbury's right to terminate upon a
"change in control" of Seneca as defined in the Alliance Agreement (see
"Amendment to the Company's Certificate of Incorporation-Background of the
Proposal"). Under virtually all the causes of termination enumerated in the
Alliance Agreement, legal title to the Alliance Plants and the other assets
which Seneca acquired from Pillsbury and various financial adjustments between
the parties will occur. 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 property of the Company, to satisfy its claims
under the Pillsbury Note (except for damages in certain circumstances such as
the Company's fraud or intentional misconduct or its failure to turn over
insurance or condemnation proceeds of the secured property or turn over the
property as required by the Pillsbury Note or comply with the termination
provisions of the Alliance Agreement). The Pillsbury Note has extensive
provisions defining the relative rights and remedies against the Company of
Pillsbury and of the Company's long-term insurance lenders and revolving credit
bank lenders in certain circumstances such as default by the Company.
The Alliance Agreement provides for (1) an Alliance Review Board ("ARB")
consisting of one employee each of the Company and Pillsbury which meets
quarterly or more often if the members desire to resolve operational issues, and
(2) a Strategic Review Board ("SRB"), to be composed of two or four members
equally divided between the Company and Pillsbury who are at a higher managerial
level than the ARB members. The SRB will attempt to resolve disputes between
the parties, any resolution being binding upon the parties. The SRB shall also
approve any proposed capital expenditures by the Company in addition to the
initial capital restructuring program which was approved by the parties. If the
SRB cannot resolve a dispute, the dispute will next be submitted to mediation.
Mr. Schaeffer is the Pillsbury employee on the ARB.
Termination of the Alliance Agreement will entitle the Company's principal
lenders, including long-term insurance lenders and revolving credit bank lenders
(and other bank lenders whose loan agreements incorporated the default
provisions of the Company's long-term debt agreements) 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. See "Amendment to the
Company's Certificate of Incorporation-Background of the Proposal". Unless the
Company were to enter into a new substantial supply relationship with Pillsbury
or another major vegetable marketer and were able to acquire substantial
production capacity to replace the Alliance Plants, any such termination would
substantially reduce its sales. If termination were to occur while substantial
indebtedness of the Company to its insurance and revolving credit bank lenders
were outstanding, a restructuring of the debt payment terms might be necessary
to avoid a payment default.
The foregoing summary is not a complete description of the Alliance Agreement
and the other agreements entered into between the Company and Pillsbury, copies
of which (with confidential information deleted) are attached to the Company's
Report on Form 8-K dated February 24, 1995 filed with the Securities and
Exchange Commission.
The Alliance Agreement permits Pillsbury to have a representative present as
an observer at meetings of Seneca's Board of Directors and committees of the
Board. It does not require the Company to elect Mr. Schaeffer or any other
representative of Pillsbury or any of its affiliates to the Company's Board.
The Directors elected Mr. Schaeffer to the Company's Board because they believe
his knowledge and experience in the vegetable industry will make him a valuable
contributor to the Board as a Director.
Common Stock Performance Graph
The following graph shows the cumulative, five-year total return for the
Company's Common Stock compared with the NASDAQ Market Index (which includes the
Company) and a peer group of companies (described below).
Performance data assumes that $100.00 was invested on March 31, 1990 in the
Company's Common Stock, the NASDAQ Market, and the peer group. The data assumes
the reinvestment of all cash dividends and the cash value of other
distributions. Stock price performance shown in the graph is not necessarily
indicative of future stock price performance.
Comparison of Five Year Cumulative Total Return of
Seneca Foods Corporation
NASDAQ Market Group and Peer Group
SENECA PEER NASDAQ
1990 100.00 100.00 100.00
1991 106.17 128.67 110.28
1992 79.01 127.90 116.23
1993 75.31 134.09 130.08
1994 96.30 118.97 150.33
1995 169.14 139.80 159.48
The companies in the peer group are: H.J. Heinz Company, Odwalla Inc., J.M.
Smucker Company, Stokely USA, Inc. and Vacu Dry Company.
INFORMATION CONCERNING THE OPERATION OF THE BOARD OF DIRECTORS
In order to facilitate the handling of various functions of the Board of
Directors, the Board has appointed several committees including an Audit
Committee, a Compensation Committee and a Nominating Committee.
The members of the Audit Committee are Edward O. Gaylord (Chairman), Robert T.
Brady, David L. Call and G. Brymer Humphreys. The Audit Committee recommends to
the full Board of Directors the engagement of independent auditors, reviews with
the auditors the scope and results of the audit, reviews with the corporate
management the scope and results of the Company's internal auditing procedures,
reviews the independence of the auditors and any non-audit services provided by
the auditors, reviews with the auditors and management the adequacy of the
Company's system of internal accounting controls and makes inquiries into other
matters within the scope of its duties.
The Nominating Committee consists of Arthur S. Wolcott (Chairman), Robert T.
Brady and G. Brymer Humphreys. This Committee screens and selects nominees for
vacancies in the Board of Directors as they occur. Consideration will be given
to serious candidates for director which are recommended by shareholders of the
Company. (Shareholder recommendations must be in writing and addressed to the
Chairman of the Nominating Committee, c/o Corporate Secretary, 1162
Pittsford-Victor Road, Pittsford, New York 14534, and should include a statement
setting forth the qualifications and experience of the proposed candidates and
basis for nomination.)
The Compensation Committee consists of David L. Call (Chairman), Edward O.
Gaylord and Susan W. Stuart. This Committee establishes the level of
compensation on an annual basis for all executive officers.
During the year ended March 31, 1995, the Board of Directors had three
meetings, the Audit Committee had three meetings, the Nominating Committee had
one meeting and the Compensation Committee had one meeting. All directors
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and the total number of meetings held by any committee of the
Board on which he or she served.
CERTAIN TRANSACTIONS
During fiscal 1995, the Company purchased raw products from Humphreys Farm
Inc., of which G. Brymer Humphreys is President and a 24% shareholder,
totaling $96,755.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
General Description
At the Annual Meeting, the shareholders will be asked to consider and vote
upon a proposal (the "Proposal") to adopt an Amendment to the Company's
Certificate of Incorporation (the "Proposed Amendment") to (i) reclassify the
existing Common Stock of the Company (the "Existing Common Stock") as Class B
Common Stock (the "Class B Common Stock"), (ii) authorize a new class of
10,000,000 shares to be designated Class A Common Stock (the "Class A Common
Stock"), and (iii) establish the express terms of the Class A Common Stock and
the Class B Common Stock.
Each share of Class A Common Stock would rank substantially equal to each
share of Class B Common Stock with respect to receipt of any dividends or
distributions declared on shares of common stock and the right to receive
proceeds on liquidation or dissolution of the Company after payment of the
Company's indebtedness and liquidation preference payments to holders of
preferred shares. However, holders of Class A Common Stock will have 1/20th of
one vote per share on all matters requiring a shareholder vote, while holders of
Class B Common Stock will retain their full vote per share.
If the Proposed Amendment is approved by the shareholders, the Board of
Directors intends to prepare and file a certificate to that effect with the
Secretary of State of New York. The Existing Common Stock would be reclassified
as Class B Common Stock. As soon as practical after filing of the Proposed
Amendment, the Company will distribute (the "Distribution") one share of Class A
Common Stock for each share of Class B Common Stock outstanding on the record
date for the Distribution. The record date for the Distribution will be the
date of the Annual Meeting of Shareholders.
Shareholders should retain their current share certificates because, upon
reclassification, those certificates then would represent Class B Common Stock
without any need for exchange. At the time of the Distribution, new
certificates would be issued for Class A Common Stock only.
Upon reclassification, the Class B Common Stock would continue to have its
express terms, except to the extent voting rights with regard to those shares
would be affected by the Class A Special Rights provision. See "Description of
Class A Common Stock and Class B Common Stock - Class A Special Rights". As
more fully described below, the new Class A Common Stock would have certain
special characteristics as compared to the Class B Common Stock, of which the
most significant is the reduction of voting power to 1/20th of a vote per share
of Class A Common Stock. Where required by law, the Class A Common Stock would
be entitled to vote as a class, so that the separate approval of the holders of
Class A Common Stock would be required to authorize certain actions on certain
matters. See "Description of Class A Common Stock and Class B Common Stock -
Voting". There would be no change in the relative voting power or equity of any
shareholder of the Company as a result of the Distribution because the
Distribution would be made to all shareholders in proportion to the number of
shares of Existing Common Stock owned by them on the record date for the
Distribution.
Background of the Proposal
Background Arthur S. Wolcott, the Company's Chairman and a director, Kraig
H. Kayser, its President and Chief Executive Officer and a director, and Susan
W. Stuart, who is a director and daughter of Mr. Wolcott, have in the aggregate
sole or shared voting power over 35% of the total voting shares of the Company
by reason of their personal ownerships of voting securities of the Company and
their sole or shared voting power as fiduciaries with respect to other shares.
The total beneficial stock ownership of Messrs. Wolcott and Kayser and members
of their families is set forth above. See "Ownership of Securities - Principal
Owners of Voting Stock".
The beneficial ownership of Messrs. Wolcott and Kayser is sufficient to give
them voting control with respect to the Company. For ease of reference, this
discussion of the Proposal will refer from time to time to the stock ownership
or voting power of the "Wolcott and Kayser Families," which phrase includes
certain (i) persons and entities identified in the table, including footnotes to
the table, set forth under "Principal Owners of Voting Stock" as having family
relationships to Mr. Wolcott or Mr. Kayser and (ii) entities which are
shareholders of the Company and with respect to which Mr. Wolcott or Mr. Kayser,
or both, serve as fiduciaries and hold sole or shared voting power of shares of
the Company owned by such entities. Reference herein to the Wolcott and Kayser
Families is not intended to designate the family members as a "group" for the
purpose of acquiring, holding or disposing of securities of the Company.
The Board of Directors of the Company has concluded that it would be in the
best interests of the Company to have substantial number of shares of common
stock available for any valid corporate purpose, such as a sale for cash to
increase equity capital or reduce outstanding debt or as consideration in any
future acquisition of assets by the Company instead of using cash or incurring
debt to pay for the acquisition, or, if the Company were to adopt a plan to
facilitate employee stock ownership, for allocation to such a plan. See
"Reasons for the Proposal, Recommendation of the Board of Directors - Financing
Flexibility".
The directors have also unanimously concluded that the best interest of the
Company also require that no material diminution occur in the relative voting
power of the Wolcott and Kayser Families. Consequently, the Company's Existing
Common Stock would not be an appropriate vehicle for financing, acquisition or
employee stock ownership plan purposes, as such use may materially diminish the
present voting power of the Wolcott and Kayser Families.
As a means of ensuring the availability of shares for future financing and
other corporate purposes, a number of publicly-held companies with majority or
controlling ownership by any one person or group of persons have adopted
dual-class capital structures. In reviewing the Company's capital structure and
possible alternatives for the future, the Company's management determined that
such a structure offered the Company a solution that would permit growth of the
Company through sale or issuance of common stock without changing control.
The Company submitted the Proposal to the National Association of Securities
Dealers' National Market System ("NASDAQ/NMS") for review under the NASDAQ/NMS
rules governing common stocks with disproportionate voting rights. The Existing
Common Stock is currently traded on NASDAQ/NMS and provided the Proposal is
approved, NASDAQ/NMS has advised the Company that the Class A Common Stock and
Class B Common Stock will be traded on NASDAQ/NMS. See "Certain Effects of the
Proposal - NASDAQ/NMS Requirements".
An important factor in the directors' consideration was the Company's
acquisition in February 1995 of a substantial percentage of the tangible assets
of the Green Giant Division of Pillsbury in exchange for the Pillsbury Note and
the execution of the Alliance Agreement. See "ELECTION OF DIRECTORS -
Transactions with The Pillsbury Company".
To finance capital expenditures which the Company believes are necessary or
appropriate for operation under the Alliance Agreement and for anticipated
capital investment in other operations of the Company, the Company has borrowed
on a long-term basis $75 million from the Prudential Insurance Company of
America ("Prudential"), of which $26.6 million was used to prepay existing
indebtedness to Prudential and $50 million from John Hancock Mutual Life
Insurance Company ("Hancock"). To finance its working capital requirements,
which have increased substantially by reason of the Alliance Agreement
operations, the Company has obtained a commitment for a revolving line of credit
of $150 million from a group of eleven banks for which The Chase Manhattan
Bank, N.A. ("Chase") is agent and one of the eleven lenders.
The foregoing transactions have resulted in a substantial increase in the
Company's debt at March 31, 1995, the close of the Company's last fiscal year
(consisting of only eight months by reason of a change in accounting periods),
the Company's outstanding indebtedness was $________ as compared to $57,800,000
its indebtedness on July 31, 1994, the previous fiscal year close; total assets
on the respective dates were $________ as compared to $200,600,000; and the
ratio of debt to total assets on the respective dates was ___% as compared to
29%.
Moreover, the Note Agreement dated February 23, 1995, between the Company and
Prudential and Hancock (the "Note Agreement") and the Credit Agreement dated
February 23, 1995, between the Company and the eleven lending banks (the "Credit
Agreement") pursuant to which the Company's borrowings were effected, contain
financial covenants which limit the discretion of the Company to incur future
additional debt. The limitations on the Company's borrowing ability contained
in these agreements create an additional incentive to the Company to have the
option of issuing stock to increase its equity for acquisitions or additional
capital investments.
During the negotiations culminating in the Alliance Agreement, Note Agreement
and Credit Agreement, the respective parties other than the Company expressed to
the Company their concerns if there were a change in control of the Company.
Consequently, those agreements contain provisions which, although differing in
specific provisions and terms, permit the other party to take action adverse to
the Company under circumstances involving a "Change of Control" of the Company
(as defined in the particular agreement) or accumulation of a specified
percentage of total voting power by a person or
group or certain substantial changes in the composition of the Company's Board
of Directors. If a Change of Control event as defined in the relevant agreement
were to occur, Pillsbury would be entitled to declare a default by the Company
and terminate the Alliance Agreement, and the lenders would be entitled to
demand immediate payment of the Company's indebtedness to them. The agreements
also contain cross-default provisions; that is, a default by the Company under
one agreement may entitle the other party under another agreement to declare the
Company in default. These provisions are more specifically described below.
The Alliance Agreement states that it may be terminated by Pillsbury at any
time within 30 days of receiving notice from the Company that a Change of
Control of the Company has occurred, which such Change of Control will be deemed
to have occurred if any person who is not, as of the date of the Alliance
Agreement, the beneficial owner of 30% or more of the combined voting power of
the Company's then outstanding voting securities becomes such a beneficial
owner, or the shareholders of the Company approve certain specified business
transactions, including consolidation or merger, sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company, or liquidation or dissolution of
the Company.
In connection with the acquisition of the assets of Green Giant, the Company,
Prudential and Hancock are parties to the Note Agreement whereby the Company
authorized the issuance of a $75,000,000, 10.78% Series A Senior Notes Due 2005
and a $50,000,000, 10.81% Series B Senior Notes Due 2009 (the "Notes"). The
Note Agreement provides that if within 30 Business Days of the date on which
either Prudential or Hancock or any other holder of at least 10% of the
aggregate principal amount of the Notes has knowledge that a Change of Control
event has occurred, any such holder may require the Company to prepay in full
within 10 business days the principal and accrued interest on the Notes held by
the holder plus an additional sum which is calculated as a Yield Maintenance
Amount in the Note Agreement. Prudential has relinquished its right to demand
such prepayment. Prudential's relinquishment is ineffective as to any
subsequent holder and will become ineffective as to Prudential if any other
holder demands prepayment because of a Change of Control.
For purposes of the Note Agreement, a Change of Control Event occurs when (i)
the beneficial ownership or acquisition by any Person or group of affiliated
Persons (other than directly or indirectly through the Wolcott or Kayser
Families) in any transaction or series of related transactions of shares of the
Company representing more than 50% of the voting control of the Company; and
(ii) the Wolcott and Kayser Families shall cease to own, directly or indirectly,
at least 25% of the outstanding voting capital stock of the Company.
The Company and Chase, as Agent for the lender banks, entered into a Credit
Agreement dated as of February 23, 1995. The Credit Agreement states that an
Event of Default occurs if (i) any Person or Persons acting in concert acquire,
other than the Wolcott or Kayser Families, beneficial ownership of 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 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. If this Event of Default occurs, Chase may
declare the outstanding principal and interest of the Notes immediately due and
payable.
At its regular meeting on March 10, 1995, which was adjourned to May 2, 1995,
the Board of Directors of the Company discussed generally with management and
the Company's legal and financial advisors the features of the Proposal and
other possible actions that had been considered by management in arriving at the
Proposal.
Reasons for the Proposal; Recommendation of the Board of Directors
The Board of Directors unanimously recommends that shareholders vote FOR the
adoption of the Proposed Amendment.
After discussions among the Directors concerning the Proposal, the Board of
Directors, including the Company's independent outside directors, unanimously
determined to recommend that the shareholders approve of the Proposed Amendment.
In connection with its adoption of the Proposed Amendment, the Board also
(i) authorized the filing of definitive proxy materials relating to the Proposal
with the Securities and Exchange Commission, and (ii) declared the dividend in
Class A Common Stock, subject to shareholder approval of the Proposed Amendment,
setting August 5, 1995, the date of the Annual Meeting of Shareholders, as the
record date for such dividend.
The Company's Board of Directors believes that a capital structure having two
classes of common stock offers a number of potential benefits, as described
below, and that adoption of the Proposal is in the best interests of the Company
and all of its shareholders.
Financing Flexibility Implementation of the Proposal would provide the
Company with increased flexibility in the future to issue common equity or to
issue senior equity securities convertible into common stock to reduce the
Company's outstanding debt or for other corporate purposes, including financing
acquisitions and other future growth and funding of employee benefit stock plans
without diluting the voting power of the Company's existing shareholders,
including the Wolcott and Kayser Families.
The Company is considering the feasibility of a public offering of common
stock for cash in the near future, but it has no definitive plans to do so. If
the Company were to engage in any such financing, it is more likely to offer
Class A Common Stock. The Company does not now have under consideration any
other proposals for issuance of any class of common stock.
Shareholder Flexibility The Proposal would protect shareholders, including
the Wolcott and Kayser Families, against dilution of their relative voting power
in the event of future issuances of equity securities by the Company as the
Company currently intends that the Class B Common Stock ordinarily will not be
used for such purposes.
In addition, present shareholders would have increased flexibility to dispose
of a portion of their equity interest in the Company without substantially
diminishing their relative voting power. Under the Proposal, such shareholders
could sell or otherwise dispose of a significant portion of their equity
interest in the Company by disposing of Class A Common Stock and retaining Class
B Common Stock. Disposition of Class A Common Stock would result in a loss of
voting power equal to only 5% of the loss of voting power which would result
from the disposition of the same number of shares of Class B Common Stock. The
Company is not aware of any present intention by members of the Wolcott and
Kayser Families to dispose of any portion of their equity interests in the
Company. However, if in time some members of the Wolcott and Kayser Families
elect to dispose of some of their shares for diversification, liquidity and
estate planning reasons, the Company believes that, if the Proposal is approved,
they would be more likely to dispose of shares of Class A Common Stock rather
than shares of Class B Common Stock.
Continuity Because implementation of the Proposal would allow the Wolcott and
Kayser Families to continue to exercise control over a majority of the Company's
voting power even if its total equity position is significantly reduced, the
adoption of the Proposal would reduce the risk of a disruption in the continuity
of the Company's long-term plans and objectives that could otherwise result if
members of the Wolcott and Kayser Families should find it necessary to sell a
significant block of equity stock for diversification, estate tax obligations or
other reasons. Implementation of the Proposal will allow management to focus its
attention and the Company's resources on maximizing long-term corporate growth
and profitability without concern for the possibility of an unexpected or
unwanted change in control of the Company.
Business Relationships As stated above, the Company's Alliance Agreement with
Pillsbury and its Note Agreement with long-term lenders and Credit Agreement
with lending banks contain provisions which could permit the other parties to
declare the Company in default and terminate the Alliance Agreement or
accelerate indebtedness under the Note Agreement or the Credit Agreement if
certain events were to occur which constituted a "Change of Control" under the
respective provisions of those agreements. Adoption of the Proposal should
decrease the risk of any such Change of Control as defined
in the respective agreements and may reassure any of the Company's other
customers, suppliers, licensors or lenders who may have concerns about the
possibility of a Change of Control if the voting power of the Wolcott and Kayser
Families were substantially diluted.
Key Employees The Proposal should allow all employees to continue to
concentrate on their responsibilities without undue concern that the future of
the Company could be affected by real or perceived succession of ownership
issues or an unwanted takeover or a default under the agreement referred to in
the preceding paragraph that could otherwise be triggered by any substantial
divestiture by the Wolcott and Kayser Families in the future. In addition, as
discussed above, the ability to issue Class A Common Stock would increase the
Company's flexibility in structuring compensation so that key employees may
participate in the growth of the Company.
Liquidity Implementation of the Proposal would double the number of shares of
the Company's common stock, and may improve the liquidity of an investment in
the Company. See "Certain Effects of the Proposal - Effect on Trading Market".
Such an improvement in liquidity could result in increased investment in the
Company by large institutional investors. But see "Certain Potential
Disadvantages of the Proposal - Investment by Institutions". Moreover, future
issuances of Class A Common Stock after the Distribution should further enhance
the liquidity of an investment in shares of that class over the long term.
Description of Class A Common Stock and Class B Common Stock
The express terms of the Class A Common Stock and the Class B Common Stock are
set forth in full in Article Third of the Proposed Amendment. The text of the
changes to the current Certificate of Incorporation that would be effected by
adoption of the Proposed Amendment are set forth as Exhibit A to this proxy
statement and incorporated herein by reference. The following summary should be
read in conjunction with, and is qualified in its entirety by reference to
Exhibit A.
Voting Under the Company's current Certificate of Incorporation, the holders
of Existing 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.
Each holder is entitled to cast one full vote per share. Cumulative voting is
not authorized.
Subject to the Class A Special Rights, each share of Class B Common Stock
would continue to entitle the holder thereof to one full vote on all matters on
which shareholders currently are entitled to vote, including the election of
directors. Each share of Class A Common Stock would entitle the holder thereof
to one-twentieth (1/20) of one vote on all matters on which shareholders are
entitled to vote, including the election of directors. The Proposal would
result in the reclassification of the Existing Common Stock into Class B Common
Stock but would not affect the relative voting power of the holders of the
Existing Common Stock.
The Proposed Amendment also entitles the holders of Class A Common Stock to
vote as a separate class on any proposal to amend the Certificate of
Incorporation 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 shares of Class B Common Stock and an equivalent stock dividend of
shares of Class A Common Stock will be effected concurrently with respect to
shares of Class A Common Stock.
In addition, Section 804 of the Business Corporation Law of New York confers
on the holders of Class A Common Stock the right to vote as a class on any
amendment to the Certificate of Incorporation which would (1) 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; (2) change
the shares of Class A Common Stock by (a) reducing the par value, (b) changing
the shares into a different number 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 (3) subordinate their
rights by authorizing shares having preferences which would be in any respect
superior to their rights. Other provisions of the New York Business Corporation
Law 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.
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 of
Class B Common Stock will be 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 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 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 a share 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
themselves. Thus the surviving entity in any such transaction could have a
dual-class capital structure like that of the Company under the Proposed
Amendment and could upon consummation of the merger or consolidation give
full voting shares to the holders of Class B Common Stock and 1/20th voting
shares to the holders of Class A Common Stock.
Class A Special Rights The Proposal has been designed with the intention that
the holders of Class A Common Stock will not be unfairly treated in the event
that a person attempts to acquire control of or to take over the Company. The
Proposed Amendment includes accordingly a two-pronged "Class A Special Rights"
provision.
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. Anyone who acquires
more than 15% of the outstanding Class B Common Stock after the date of the
shareholder meeting, August 5, 1995 (the "threshold date") and does not acquire
a percentage of the Class A Common Stock outstanding at least equal to the
percentage of Class B Common Stock that the person acquired above the 15%
threshold 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 Existing Common Stock 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
acquisitions of Class B Common Stock and only acquisitions of Class A Common
Stock after the Distribution 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
under the Proposed Amendment 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. The Proposed Amendment provides 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 NASDAQ/NMS 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 period 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 and 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 would
be 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" shall include 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 to (a) a merger, reorganization or
liquidation of the Company or a sale of a material amount of its assets, (b) 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, (c) a material change in the business or corporate structure
of the Company, or (d) 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"
shall 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 shall be 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 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, (iii) Acquisitions of Class B Common Stock (1)
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, (2) by bequest
or inheritance or by operation of law upon the death or incompetency of any
individual, and (3) 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 a 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 Internal Revenue Code of 1986 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 who are related to the donor
by blood or marriage or which is a tax-qualified charitable organization or both
shall 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 will not apply to any increase in a holder's
percentage ownership of Class B Common Stock resulting solely 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. 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 will be convertible into Class A
Common Stock at any time on a share-for-share basis. The Class A Common Stock
will not be so convertible unless at any time the number of shares of
outstanding 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 will be converted automatically into Class B Common Stock on a
share-for-share basis. For purposes of this provision, Class B Common Stock or
Class A Common Stock repurchased by the Company and not reissued would not be
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 by the Proposed Amendment will be deemed to be
Class B Common Stock.
Preemptive Rights Neither the Class A Common Stock nor the Class B Common
Stock will 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 Like the Existing Common Stock, the Class A
Common Stock and the Class B Common Stock will be freely transferable. The
Company is filing applications with the NASDAQ/NMS with respect to both the
Class A Common Stock and the Class B Common Stock and it is expected that both
such classes will be listed for trading on the NASDAQ/NMS.
Increase In Authorized Common Stock If approved, the Proposed Amendment will
increase the Company's authorized common stock from 10,000,000 shares of
Existing Common Stock to 10,000,000 shares of Class A Common Stock and
10,000,000 shares of Class B Common Stock. Immediately after implementation of
the Proposal, approximately 2,796,555 million shares of Class A Common Stock and
2,796,555 million shares of Class B Common Stock will be issued and outstanding.
An additional 33,695 shares of Class A Common Stock and 33,695 of Class B Common
Stock will be reserved for issuance in the event of conversion of the Company's
Class A Preferred Stock, as to which an equal number of shares of Existing
Common Stock are currently reserved. Accordingly, approximately
7,169,750 shares of Class A Common Stock and 7,169,750 shares of Class B Common
Stock will be available for issuance in the future for any proper corporate
purpose, including, public or private sale, acquisitions, employee incentive
plans and stock dividends. Generally, those issuances may be authorized by the
board of directors without shareholder approval, except that under New York law
a plan to issue stock options or rights to employees, officers or directors must
be authorized by shareholder vote, and the rules of NASDAQ/NMS applicable to
companies listed thereon ordinarily require shareholder approval of a stock
issuance transaction other than a public offering for cash if, among other
things, the number of shares to be issued is or will be 20% or more of common
stock outstanding before the issuance.
The Company currently intends to issue Class A Common Stock rather than Class
B Common Stock for future corporate purposes, such as equity financing,
acquisitions and employee benefit stock plans. The Company has no current
understandings or agreements with respect to any such financings, acquisitions
or benefit plans. The Company does not have any current plans to issue any
additional shares of Class B Common Stock, but it has reserved shares of Class B
Common Stock for any conversion of outstanding Class A Preferred Stock.
Shareholder Information The Company will deliver to holders of Class A Common
Stock the same proxy statements, annual reports and other information and
reports as it will deliver to holders of Class B Common Stock. The Company does
not propose to change its present practices with respect to issuance of reports
and information to shareholders.
Certain Effects of the Proposal
Effects on Relative Ownership Interest and Voting Power The relative
ownership interest and voting power of each holder of Existing Common Stock
would be the same immediately after effectiveness of the Proposed Amendment and
the Distribution as it was immediately prior thereto. The Proposed Amendment
provides that each share of Existing Common Stock will be reclassified and
changed into one share of Class B Common Stock, and the Distribution of one
share of Class A Common Stock will be made to all shareholders in proportion to
the number of shares of Class B Common Stock owned on the record date for the
Distribution by each shareholder.
Under the Proposal, shareholders who sell Class B Common Stock after the
Distribution will lose a greater amount of voting control in proportion to their
common stock equity than they would have had prior to the Distribution.
Conversely, shareholders who sell shares of Class A Common Stock after the
Distribution will retain a greater amount of voting control in proportion to
equity.
Effect on Market Price The market price of Class A Common Stock and Class B
Common Stock after the Distribution will depend, as before the adoption of the
Proposed Amendment, on many factors including, among others, the future
performance of the Company, general market conditions, and conditions relating
to other companies in the food industry. Accordingly, the Company cannot
predict the prices at which the Class A Common Stock and the Class B Common
Stock will trade following the adoption of the Proposed Amendment and the
Distribution, just as the Company could not predict the prices at which the
Existing Common Stock would trade absent the Proposal and the Distribution. It
is expected, however, that the market price will reflect the effect of a
two-for-one split. Absent other factors, the Class A Common Stock and the
Class B Common Stock are therefore expected to trade at approximately one-half
the price of the Existing Common Stock prior to implementation of the
Proposal. On ________________, 1995, the closing price for the Existing
Common Stock on NASDAQ/NMS as reported in The Wall Street Journal was
$____________ .
Under certain circumstances the Class B Common Stock could trade at a premium
compared to the Class A Common Stock. The Board of Directors has included the
Class A Special Rights feature which may help to reduce or eliminate the
economic reasons for the Class B Common Stock to trade at a premium compared to
the Class A Common Stock. The Proposed Amendment expressly permits the Board to
authorize the purchase of shares of any one class or any combination of classes
without regard to differences among them in price and other terms under which
such shares may be purchased. Thus, the Board could authorize the Company to
purchase Class B Common Stock even if the consideration which would be paid by
purchasing Class A Common Stock would be less.
Since the market price of the Class B Common Stock is expected to be
approximately half of the price of the Existing Common Stock, it will be
possible to acquire more voting shares for a given amount of consideration after
the Distribution. Therefore, subject to the requirement of the Class A Special
Rights feature that Class A Common Stock be purchased as well, the Proposal
would permit shareholders to increase their relative voting power at a lower
cost.
Effect of Class B Voting Requirement for Certain Transactions Under the
Proposed Amendment, the holders of the Class B Common Stock will receive the
same consideration per share as the holders of Class A Common Stock in the event
of liquidation or dissolution of the Company. This provision of the Proposed
Amendment would not prevent a holder of a significant amount of the Existing
Common Stock, such as certain members of the Wolcott and Kayser Families, from
selling their shareholdings (including all their Class A Common Stock and Class
B Common Stock) in the Company for a premium to a buyer who intends to operate
the Company following such purchase without acquiring the remaining equity in
the Company, assuming that the buyer observes the Equitable Price provisions of
the Class A Special Rights to the extent the buyer's purchases of Class B Common
Stock exceeds the 15% threshold. See "Description of Class A Common Stock and
Class B Common Stock - Class A Special Rights".
Effect on Trading Market As of the date of this Proxy Statement, 2,796,555
shares of Existing Common Stock are issued and outstanding. Implementation of
the Proposal will result in no change in the number of shares of Existing Common
Stock (redesignated Class B Common Stock) outstanding and will immediately
create an equal number of shares of Class A Common Stock. The increased number
of total outstanding shares may increase the liquidity in the market for the
Company's common stock, although there can be no assurance that this will occur.
The Company currently intends that in the future it will issue Class A Common
Stock rather than Class B Common Stock in any sale of common stock to the public
or in any use of common stock for acquisitions or employee benefit stock plans.
Moreover, the Company expects that if members of the Wolcott and Kayser Families
sell any shares in the future (the Company knows of no current plan to do so),
it is more likely that they will sell shares of Class A Common Stock than shares
of Class B Common Stock. Any such issuances of additional shares of Class A
Common Stock by the Company or sales of shares of Class A Common Stock by the
Wolcott and Kayser Families or other major shareholders may serve to further
increase market activity in the Class A Common Stock relative to the Class B
Common Stock.
Effect on Book Value and Earnings Per Share Although the interest of each
shareholder in the total equity of the Company will remain unchanged as a result
of the Distribution, the issuance of the Class A Common Stock pursuant to the
Distribution will cause the book value and earnings per share of the Company to
be adjusted to reflect the increased number of shares outstanding. Although
effected in the form of a dividend, for accounting purposes the Distribution
will have the same effect as a two-for-one stock split.
Effect on Retained Earnings and Capital Stock Accounts Although the interest
of each shareholder in the total equity of the Company will remain unchanged,
the Distribution of the Class A Common Stock on a share-for-share basis for each
share of Class B Common Stock outstanding will be accounted for as a stock
dividend. Consequently, the Stockholders' Equity Account of the Company will be
adjusted to increase the Common Stock account by $699,000, the total par value
of the Class A Common Stock to be issued in the Distribution, and to decrease
retained earnings by an equal amount. If the Distribution had occurred as at
March 31, 1995, the Distribution would have resulted in a total Common Stock
account of $2,579,000 as compared to $1,880,000 without the Distribution, and
the retained earnings of the Company would have been $ as
compared to $ without the Distribution.
Federal Income Tax Consequences The following description of certain federal
income tax consequences concerning the Proposal is based upon current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), applicable
Treasury Regulations, and judicial and administrative interpretations thereof.
This description does not, however, address any aspects of state, local or
foreign taxation relating to the Proposal.
The Company believes that, in general, for federal income tax purposes
(i) neither the reclassification of Existing Common Stock into Class B Common
Stock nor the Distribution of Class A Common Stock will be taxable to a
shareholder of the Company, (ii) neither the Class B Common Stock nor the Class
A Common Stock will constitute "Section 306 stock" within the meaning of Section
306(c) of the Internal Revenue Code of 1986, as amended, (iii) the cost basis of
each share of Existing Common Stock will be apportioned between the share of
Class B Common Stock into which it is reclassified and the Class A Common Stock
issued with regard to it in proportion to the fair market value of the shares of
each class on the date of the Distribution, (iv) the holding period for each
share of Class B Common Stock and Class A Common Stock will include the
shareholder's holding period for the Existing Common Stock with respect to which
they were distributed, and (v) no gain or loss will be recognized on any
subsequent conversion of Class A Common Stock into a share of Class B Common
Stock. Gain or loss will be recognized, however, on the subsequent sale of a
share of Class B Common Stock and a share of Class A Common Stock. Shareholders
are urged to seek the advice of their own tax counsel on this matter and on
state or foreign income tax matters.
Conversion of Class A Preferred Stock The Company presently has outstanding
807,240 shares of 10% Cumulative Par Value $.025 Convertible Voting Preferred
Stock ("Class A Preferred Stock"), currently convertible in the aggregate into
33,695 shares of Existing Common Stock. The terms of the Class A Preferred
Stock provide for adjustment of conversion rights in the event of a
recapitalization so as to permit the holders of Class A Preferred Stock to
acquire on conversion securities equivalent to those which they could have
acquired prior to the recapitalization. Consequently, upon the effectiveness of
the Proposed Amendment and the Distribution, the outstanding Class A Preferred
Stock will then be convertible in the aggregate into 33,695 shares of Class A
Common Stock and 33,695 shares of Class B Common Stock.
Securities Act of 1933 The Company is not required to register and has not
registered under the Securities Act of 1933 the issuance of Class B Common Stock
upon reclassification of the Existing Common Stock or the issuance of the Class
A Common Stock in the Distribution. To the extent that any shareholder holds
any Existing Common Stock as restricted securities under Rule 144 under the
Securities Act of 1933, both the Class B Common Stock issued upon the
reclassification of the Existing Common Stock and the Class A Common Stock
issued in the Distribution will be restricted securities. Any affiliate of the
Company under Rule 144 will be subject to the same restrictions in disposing of
Class A Common Stock and Class B Common Stock as the affiliate presently is with
respect to the Existing Common Stock.
NASDAQ/NMS Requirements The Existing Common Stock currently is traded on
NASDAQ/NMS, and application is being made to trade the Class A Common Stock and
the Class B Common Stock on NASDAQ/NMS as well. The Proposal is intended to
comply with the requirements of Section 6(j) of Schedule D of the By-laws of the
National Association of Securities Dealers, which prohibits the listing on
NASDAQ/NMS of equity securities of an issuer which issues a class of security or
takes other corporate action with the effect of nullifying, restricting or
disparately reducing the per share voting rights of holders of an outstanding
class of common stock. The Company has reviewed the proposal with NASDAQ/NMS
and has been advised by NASDAQ/NMS that on issuance, the Class A Common Stock
will be traded on NASDAQ/NMS. Future issuance of a new class of common stock
having proportionately greater voting power than Class A Common Stock or Class B
Common Stock may be subject to the limitations of Section 6(j) of Schedule D,
and NASDAQ/NMS approval may be required in connection with any such future
issuance; the Company has no plans to issue any such new class of common stock.
Subsequent Amendments Implementation of the Proposal will not prevent the
Company from taking any action, or otherwise affect the Company's ability to
adopt any future amendments to the Certificate of Incorporation for the purpose
of further changing the Company's capital structure or for any other lawful
purpose subject to the appropriate approval of the Company's Board of Directors
and shareholders and any listing requirements of any market or exchange on which
the Company's common stock is traded.
Certain Potential Disadvantages of the Proposal
While the Board of Directors has determined that implementation of the
Proposal is in the best interests of the Company and its shareholders, the Board
recognizes that it may result in certain disadvantages, including the following:
Antitakeover Effect Currently, in the opinion of the Board of Directors, no
person could succeed in a takeover of the Company without making an offer
acceptable to members of the Wolcott and Kayser Families, because of their
substantial ownership of voting stock. Implementation of the Proposal will not
materially change the voting power of the Wolcott and Kayser Families, but it
will give the Company more flexibility to issue common stock without substantial
diminution of the voting power of the existing shareholders, including the
Wolcott and Kayser Families, and it will give the Wolcott and Kayser Families
the ability to reduce their equity holdings in the Company (by sale of Class A
Common Stock) without materially reducing their voting power. See "Reasons for
the Proposal; Recommendation of the Board of Directors". If shareholders were
to reject the Proposal and if the Company were to sell a substantial amount of
Existing Common Stock or members of the Wolcott and Kayser Families were to sell
a substantial amount of Existing Common Stock, the chances of success might
improve for a tender offer or other takeover proposal or a proxy contest which
would remove incumbent directors notwithstanding the opposition of the Wolcott
and Kayser Families. On the foregoing assumptions, the Proposal might be said
to reduce the possibility of the shareholders receiving and accepting hostile
takeover bids, which are usually made at premiums over then-current market
prices of the target company's stock.
The Company does not believe, however, that it would be compelled to sell
additional shares of Existing Common Stock if the Proposal failed to gain
approval, nor is the Company aware of any present intention of members of the
Wolcott and Kayser Families to sell any Existing Common Stock or, if the
Proposal is implemented, to sell any shares of Class A Common Stock or Class B
Common Stock. Moreover, the Company's Certificate of Incorporation currently
provides for 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.
State Statutes Some state statutes contain provisions which, due to the
issuance of Class A Common Stock, may restrict an offering of equity securities
by the Company or the secondary-trading of its equity securities in those
states. However, due to exemptions or for other reasons, the Company does not
believe that such provisions will have a material adverse effect on the amount
of equity securities that the Company will be able to offer, or on the price
obtainable for such equity securities in such an offering, or in the secondary
trading market for the Company's equity securities.
Acquisition Accounting The Class A Common Stock may not be used to effect a
business combination intended to be accounted for using the "pooling of
interests" method. In order for such method to be used, the Company would be
required to issue Class B Common Stock as the consideration for the combination.
Brokerage Costs; Security for Credit As is typical in connection with any
stock split, brokerage charges and stock transfer taxes, if any, may be somewhat
higher with respect to purchases and sales of the Company's common stock after
the Distribution, assuming transactions in the same dollar amount, because of
the increased number of shares involved.
The Company does not expect that the adoption of the Proposed Amendment and
the Distribution will affect the ability of shareholders to use either the Class
A Common Stock or the Class B Common Stock as security for the extension of
credit by financial institutions, securities, brokers, or dealers.
Investment by Institutions Implementation of the Proposal may affect the
decision of certain institutional investors that would otherwise consider
investing in the Existing Common Stock but who object to the issuance of owner
shares with disproportionately reduced voting power.
Proposed Routine Amendments in the Certificate of Incorporation The issuance
of the new class of common stock as a share-for-share dividend on Class B Common
Stock pursuant to the Proposal requires a change in the conversion provisions of
the Class A Preferred Stock. The anti-dilution provisions of the preferred
stock conversion rights entitle the preferred shareholders to an equitable
adjustment to reflect the additional stock dividend on the shares of Class B
Common Stock which they are entitled to receive on conversion of the convertible
preferred stock. Accordingly the conversion provisions with respect to the
Class A Preferred Stock, Series A, which currently provide that each share is
convertible into one-twentieth of a share of common stock, will state that each
share of Class A Preferred Stock, Series A, is convertible into one-twentieth of
a share of Class A Common Stock and one-twentieth of a share of Class B Common
Stock. Similarly, the provisions respecting Class A Preferred Stock, Series B,
which currently provide that each share is convertible into one-thirtieth of a
share of common stock, will state each share of Class A Preferred Stock, Series
B, is convertible into one-thirtieth of share of Class A Common Stock and one-
thirtieth of a share of Class B Common Stock.
The amendments to the Certificate of Incorporation described in this Proxy
Statement will require the renumbering of various existing provisions of the
Certificate of Incorporation.
Interests of Certain Persons in the Proposal
As noted elsewhere in this proxy statement, members of the Wolcott and Kayser
Families hold approximately 50% of the voting power of the Company. See
"Background of the Proposal". That percentage will not be affected by the
Proposal or the Distribution. Members of the Wolcott and Kayser Families,
however, could sell some or all of the Class A Common Stock received by them in
the Distribution without any material reduction in their voting power, assuming
no other events occur that would affect voting power. Consequently, they have
an interest in implementation of the Proposal. Management is not aware of any
present intention on the part of any member of either family to dispose of
common stock.
Of the eight current members of the Board of Directors, three are Messrs.
Wolcott and Kayser and Ms. Stuart, who is a director and a daughter of Mr.
Wolcott. The remaining five members are neither members of the Wolcott or
Kayser families nor employees of the Company; one of the five, Mr. Brady, is
President and Chief Executive Officer of Moog Inc., in which the Company, the
Pension Plan and the Foundation own a 15.0% voting interest in Class A Common
Stock and a 4.5% voting interest in Class B Common Stock. The Board of
Directors suggests that each shareholder carefully read and review in detail the
portions of this proxy statement describing the Proposal and the Distribution
and discussing certain effects thereof.
Vote Required
The affirmative vote of the holders of a majority of the aggregate shares of
the Company's preferred stocks and Existing Common Stock represented at the
meeting is required for adoption of the Proposal. As noted above, the Board of
Directors recommends that the shareholders vote FOR the Proposal and the
adoption of the Proposed Amendment.
PROPOSAL 3
AMENDMENT TO THE COMPANY'S BY-LAWS
The Company's Board of Directors recommends that the shareholders approve an
amendment to the Company's By-Laws which would state that the Company's annual
meeting will be held on a date other than a legal holiday within six months
after the close of the Company's fiscal year or at a later date determined by
the Board of Directors. Currently the Company's Annual Meeting is permitted to
be held in November or December of each year. The Company has changed its
fiscal year to commence on April 1st of each year and end on the following March
31st. The change in fiscal year has been effected as of March 31, 1995, on
which date the Company closed its last fiscal year. The change in fiscal year
did not require shareholder approval.
It would be prudent and of greater benefit to shareholders to permit the
Annual Meeting of Shareholders to be held within six months after the end of the
fiscal year instead of in November or December, while giving the Board the
flexibility to select another date. Other changes in the amendment are proposed
to clarify the meaning of the existing language.
The proposed amendment is as follows: Effective with the annual meeting of
shareholders to be held in 1995, Article I, Section 1 of the By-Laws is hereby
amended by deleting the bracketed language and adding the language in bold type
set forth below:
Section 1
ANNUAL MEETINGS
The annual meeting of Stockholders for the election of Directors,
considering reports made to the shareholders [before the
meeting,] and the transaction of other business as may properly
come before [it] the meeting shall be held within or without the
State of New York at a specific place and [such] date that is not
a legal holiday each year within six months after the close of
the Corporation's fiscal year [during November or December] which
shall be [as is] determined by the Board of Directors or at such
later date as may be determined by the Board of Directors.
The Board of Directors unanimously recommends that shareholders vote FOR the
approval and adoption of the By-Law amendment. The affirmative vote of the
holders of two-thirds of the shares present and entitled to vote at the meeting
is required for such approval and adoption. Proxies will be voted for or
against the By-Law amendment in accordance with the specifications marked
thereon and will be voted in favor of approval and adoption if no specification
is made.
PROPOSAL 4
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors through its Audit Committee has selected Deloitte &
Touche LLP, independent public accountants, to act as auditors for the fiscal
year ending March 31, 1996. Deloitte & Touche has served as the Company's
independent auditors for many years.
It is anticipated that representatives of Deloitte & Touche will be present at
the annual meeting with the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
Management recommends a vote FOR its proposal to ratify the appointment of
Deloitte & Touche as independent auditors of the Company for the fiscal year
ending March 31, 1996. Unless marked otherwise, Proxies will be voted FOR this
purpose.
* * * * *
SHAREHOLDER PROPOSALS
Shareholder proposals must be received at the Company's offices no later than
February 23, 1996 in order to be considered for inclusion in the Company's proxy
materials for the 1996 Annual Meeting.
MISCELLANEOUS
To assure a quorum at the annual meeting (the holders of a majority of the
stock entitled to vote thereat constitute a quorum), shareholders are requested
to sign and return promptly the enclosed form of Proxy in the envelope provided.
A shareholder who has delivered a Proxy form may attend the meeting and, if he
or she desires, vote in person at the meeting.
By order of the Board of Directors,
JEFFREY L. VAN RIPER
Secretary
DATED: Pittsford, New York
June 16, 1995
EXHIBIT A
Text of Changes to the Company's Certificate of Incorporation
I. Article 3 of the Company's Certificate of Incorporation is amended to read,
in its entirety, as follows:
3. The Capital Stock of the Corporation shall consist of ten million
(10,000,000) 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 four million (4,000,000) shares of Preferred
Stock with $.025 par value, Class A, to be issued by the Board of
Directors pursuant to the provisions of Article 4, Section (d) hereof,
subject to the limitations prescribed by law. The stated capital of the
Corporation as determined pursuant to Section 506 of the Business
Corporation Law shall be increased by _______________________________
dollars ($______________________) and such increase shall be stated
capital in respect of the Corporation's $0.25 par value Class B Common
Stock.
II. Article 4 of the Company's Certificate of Incorporation is amended to
insert a new Section (a) which reads, in its entirety, as follows:
4. The designations, preferences, privileges and voting powers of the
shares of each class of stock which the Corporation is authorized to
issue, and the restrictions or qualifications thereof, shall be as
follows:
(a) Class A Common Stock and Class B Common Stock.
(A) Provisions Applicable to Class A Common Stock and Class B Common
Stock.
(i) The holders of record of Class A Common Stock and the
holders of record of Class B Common Stock shall have equal rights and
rank per share with respect to any and all dividends and distributions
declared on the common stock of the Corporation, and no dividend or
distribution shall be declared or made with respect to either Class A
Common Stock or Class B Common Stock unless that dividend or
distribution is declared and made with respect to both such classes;
except that (subject to conversion rights of any preferred stocks) a
dividend or distribution upon Class A Common Stock which will be paid in
shares of common stock of the Corporation shall be declared and made
only in shares of Class A Common Stock and a dividend or distribution
upon Class B Common Stock which will be paid in shares of common stock
of the Corporation shall be declared and made only in shares of Class B
Common Stock, and if a dividend or distribution is so declared and paid
in shares of one class of common stock to the holder of each share of
that class, a per-share dividend or distribution in an equal number of
shares of the other class of common stock shall be concurrently declared
and paid to the holder of each share of such other class, so that the
number of shares of Class A Common Stock paid as a dividend or
distribution on a share of Class A Common Stock shall be equal to the
number of shares of Class B Common Stock paid as a dividend or
distribution on a share of Class B Common Stock.
(ii) In the event of any voluntary or involuntary liquidation,
dissolution or any winding up of the Corporation, each share of Class A
Common Stock and Class B Common Stock shall rank equally with respect to
any distribution to be received by holders of common stock upon or with
respect to liquidation, dissolution or winding up.
(B) Provisions Applicable to Class A Common Stock.
(i) The holders of Class A Common Stock are entitled to one-
twentieth (1/20th) of one vote per share on all questions presented to
the stockholders. In all elections of directors of the Corporation,
each holder of Class A Common Stock shall have the right to vote in
person or by proxy one-twentieth (1/20th) of one vote for each share of
Class A Common Stock held by such holder for as many Persons as there
are directors to be elected. No cumulative voting for directors shall
be permitted.
The holders of Class A Common Stock are entitled to vote
as a separate class (i) on any proposal to amend the Corporation's
Certificate of Incorporation 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 shares of Class B Common
Stock and which conforms to the requirements set forth in this Article
with respect to payment of dividends in stock of this Corporation upon
shares of Class B Common Stock and Class A Common Stock and (ii) as
required by applicable law.
(ii) The Class A Common Stock is not convertible into shares
of Class B Common Stock, unless at any time 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. At
such time, all of the outstanding Class A Common Stock will be converted
automatically into shares of Class B Common Stock on a share-for-share
basis. For purposes of this Article 4(a)(B)(ii), "outstanding" shares
of Common Stock would not include shares of Class B Common Stock or
shares of Class A Common Stock repurchased by the Corporation and not
reissued.
(C) Provisions Applicable to Class B Common Stock.
(i) Except as provided in paragraph (C)(ii) of this Article
4(a), the holders of Class B Common Stock are entitled to one vote per
share on all questions presented to the stockholders. In all elections
of directors of the Corporation, each holder of Class B Common Stock
shall have the right to vote in person or by proxy the number of shares
of Class B Common Stock held by such holder for as many Persons as there
are directors to be elected. No cumulative voting for directors shall
be permitted. The holders of Class B Common Stock are entitled to vote
as a separate class where required by applicable law. If any share of
Class B Common Stock is ineligible to vote by reason of the limitations
contained in paragraph (c)(ii) of this Article 4(a), 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.
(ii) The voting rights of holders of shares of Class B Common
Stock are subject to the following restrictions: If a Person acquires
more than 15% (the "15% Threshold Amount") 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 acquired by that Person after the Threshold Date in excess of the
15% Threshold Amount, such Person will not be allowed to vote shares of
Class B Common Stock acquired after the Threshold Date in excess of the
15% Threshold Amount. The inability of the Person to vote the shares of
Class B Common Stock in excess of the 15% Threshold Amount will continue
until such time as a sufficient number of shares of Class A Common Stock
have been acquired by the Person.
For purposes of calculating the 15% Threshold Amount, the
following acquisitions and increases shall be 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 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 Corporation since the last date on which that holder
acquired Class B Common Stock, (iii) acquisitions of Class B Common
Stock (1) 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, (2) by bequest or inheritance, or by operation of
law upon the death or incompetency of any individual and (3) by any
other transfer made without valuable consideration, in good faith and
not for the purpose of circumventing the restrictions imposed by the 15%
Threshold Amount. 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 Internal Revenue Code of 1986 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 of the
following persons or entities:
(1) a person who is related to the donor by blood or marriage, or
(2) a charitable organization which is qualified under
Section 501(c)(3) as described above
shall be presumed to be made in good faith and not for purposes of
circumventing the restrictions imposed by the 15% Threshold Amount.
Acquisitions of Class A Common Stock so as to preclude the effect
of the voting restrictions contained in the preceding paragraph must be
made for an "equitable price." For purposes of this paragraph an
"equitable price" is deemed to have been paid only when the shares of Class
A Common Stock 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
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 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 principal trading market for
either class of Common Stock.
As used in this Article 4(a)(C)(ii):
"Person" shall include 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 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.
Each reference to acquiring or acquisition of
Class B Common Stock and Class A Common Stock shall include
direct and indirect acquisitions of such stock.
(iii) The holders of Class B Common Stock shall have the
right, at their option, to convert such shares into shares of Class A
Common Stock at any time after the issuance thereof, on a share-per-
share basis. The conversion rights in the preceding sentence shall
expire upon the occurrence of the automatic conversion of all
outstanding shares of Class A Common Stock into Class B Common Stock
pursuant to the provisions of paragraph (B)(ii) of this Article 4(a).
In order to convert shares of Class B Common Stock into shares of Class
A Common Stock, the holder thereof shall surrender at the office of the
Corporation the certificate or certificates therefor, duly endorsed to
the Corporation or in blank, and give written notice at such office that
he elects to convert such shares of Class B Common Stock which shall be
deemed to have been converted as of the date(hereinafter called the
"Class A Conversion Date") of the surrender of such shares for
conversion as provided above, and the person or persons entitled to
receive the shares of Class A Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of
such Class A Common Stock on such date. As soon as practicable on or
after the Class A Conversion Date, the Corporation will deliver at such
office a certificate or certificates for the number of shares of Class A
Common Stock issuable on such conversion.
III. Article 4(i)(D)(iv) of the Company's Certificate of Incorporation is
renumbered 4(d)(D)(iv) and is amended to read in its entirety, as follows:
(D) First Series of Class A Preferred Stock. The first series of
1,000,000 shares of Class A Preferred Stock shall be designated Ten Percent
(10%) Cumulative Convertible Voting Preferred Stock-Series A, $0.25 stated
value (hereinafter called "10% Voting Preferred Stock"), and shall have the
following rights, preferences and limitations:
* * * *
(iv) Conversion. The holders of 10% Voting Preferred Stock
shall have the right, at their option, to convert such shares into
shares of common stock, $0.25 par value, at any time after the issuance
thereof, on and subject to the following terms and conditions:
(a) The 10% Voting Preferred Stock shall be convertible, at the
office of the Corporation or at such other office or offices, if any, as
the Board of Directors may designate, into fully paid and non-assessable
shares of Class A Common Stock and Class B Common Stock (calculated as
to each conversion to the nearest 1/10 of a share) at the conversion
rate, determined as hereinafter provided, in effect at the time of
conversion. The conversion rate shall be one (l) share of Class A
Common Stock and one (1) share of Class B Common Stock for every twenty
(20) shares of 10% Voting Preferred Stock. . . .
IV. Article 4(i)(E)(iv) of the Company's Certificate of Incorporation is
renumbered 4(d)(E)(iv) and is amended to read as follows:
(E) Second Series of Class A Preferred Stock. The second series of
400,000 shares of Class A Preferred Stock shall be designated Ten Percent
(10%) Cumulative Convertible Voting Preferred Stock-Series B, $0.25 stated
value (hereinafter called "Series B Preferred Stock"), and shall have the
following rights, preferences and limitations:
* * *
(iv) Conversion. The holders of Series B Preferred Stock shall
have the right, at their option, to convert such shares into shares of
common stock, $0.25 par value, at any time after the issuance thereof, on
and subject to the following terms and conditions:
(a) The Series B Preferred Stock shall be convertible, at the office
of the Corporation or at such other office or offices, if any, as the Board
of Directors may designate, into fully paid and non-assessable shares of
Class A Common Stock and Class B Common Stock (calculated as to each
conversion to the nearest 1/10 of a share) at the conversion rate,
determined as hereinafter provided, in effect at the time of conversion.
The conversion rate shall be one (1) share of Class A Common Stock and one
(1) share of Class B Common Stock for every thirty (30) shares of Series B
Preferred Stock. . . .
V. Article 4 of the Company's Certificate of Incorporation will be further
amended by renumbering and reordering certain sections and by amending the
address to which notices of conversion are sent.
VI. Article 7 of the Company's Certificate of Incorporation is amended to read,
in its entirety, as follows:
7. The office of the Corporation shall be located in the Village of
Pittsford, County of Monroe, New York, and the address to which the
Secretary of State shall mail a copy of process in any action or proceeding
against the Corporation that may be served upon the Secretary of State is
1162 Pittsford- Victor Road, Pittsford, New York 14534.
SENECA FOODS CORPORATION
1162 Pittsford-Victor Rd.
Pittsford, New York 14534
PROXY
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 5, 1995
The undersigned shareholder of SENECA FOODS CORPORATION (the "Company")
hereby appoints and constitutes ARTHUR S. WOLCOTT and KRAIG H. KAYSER, and
either of them, the proxy or proxies of the undersigned, with full power of
substitution and revocation, for and in the name of the undersigned to
attend the annual meeting of shareholders of the Company to be held at 74
Seneca Street, Dundee, New York, on Saturday, August 5, 1995 at 9:00 a.m.,
Dundee time, and any and all adjournments thereof (the "Meeting"), and to
vote all shares of stock of the Company registered in the name of the
undersigned and entitled to vote at the Meeting upon the matters set forth
below:
MANAGEMENT RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, AND 4.
1.Election of Directors: Election of the two nominees listed below to
serve until the annual meeting of shareholders in 1998 and the one
nominee listed below to serve until the annual meeting of 1996 and until
their successors are duly elected and shall qualify:
__ FOR all nominees listed below (except as marked to
the contrary below);
__ WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through his or her name in the list below:
(a) To serve until the 1998 annual meeting: D.L. Call;
S.W.Stuart
(b) To serve until the 1996 annual meeting: M.A. Schaeffer
(Continued on back)
2. Management Proposal: Approval of certain amendments to the
Company's Certificate of Incorporation.
__ FOR __ AGAINST __ ABSTAIN
3. Management Proposal: Approval of certain amendments to the Company's
By-Laws.
__ FOR __ AGAINST __ ABSTAIN
4. Appointment of Auditors: Ratification of the appointment of Deloitte
& Touche LLP as independent auditors for the fiscal year ending March 31,
1996.
__ FOR __ AGAINST __ ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournment
thereof.
The shares represented by this Proxy will be voted as directed by the
shareholder. IF NO CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR
ITEMS 1, 2, 3 AND 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Signature: _____________________________________
Joint owners should each sign.
Executors, administrators, trustees,
guardians and corporate officers should
give their titles.
Dated: _______________________________, 1995
(PLEASE SIGN AND RETURN PROMPTLY)